Reviving Iridium

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Case Details:

Case Code : BSTR031
Case Length : 11 Pages
Period : 1999 - 2001
Organization : Iridium LLC
Pub Date : 2002
Teaching Note : Available
Countries : USA
Industry : Telecommunication

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Background Note

The idea of Iridium was conceived in 1987 by three engineers-Ray Leopold, Ken Peterson and Bary Bertiger-who were working for the US-based electronics major Motorola.

They pioneered the concept of a satellite-based, wireless personal communications network that could be accessed from anywhere on earth. The engineers worked hard to bring to life the concept of satellite telephones. They launched gateways³ in 1988 to facilitate the proposed Iridium satellites to communicate with the existing terrestrial telephone systems throughout the world. In 1991, Motorola incorporated Iridium to develop and deploy the satellite network system. Besides Motorola, which held a 20.1% stake in the venture, some of the other major partners included Germany's Vebacom with 10%, Korea Mobile Telecommunications-4.4%, Sprint Corporation-4.4% and Italy's STET with-3.8% stakes respectively. In 1992, the US Government Federal Communications Commission (FCC) issued an experimental licence to Iridium.

In the same year, the World Administrative Radio Conference (WARC)⁴ decided to work towards establishing guidelines to regulate worldwide radio spectrum rights and facilitate the building of Iridium systems.

In 1992, Iridium also signed a US $3.37 billion contract with Motorola for construction, delivery and system development. This made Motorola the prime contractor for supplying satellites, gateways and communication products for Iridium.

By the end of 1993, the company had raised US $800 million as equity. After the second round of equity financing in 1994, Iridium's capital increased to US $1.6 billion. In 1995, the Federal Communication Department of the US government granted an operational license to Iridium. In 1996, Motorola launched the first Iridium satellite. In the same year, Iridium also entered into agreements with various mobile satellite service providers...

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3] Gateways interconnect a satellite constellation with public switched telephone networks, thus facilitating communication with handheld phones and any other telephone in the world.

4] WARC was held in 1992 at Torremolinos, Spain, on behalf of the Committee on Radio Astronomy Frequencies (CRAF). CRAF works on behalf of the European Science foundation that is responsible for coordinating the use of frequency bands so as to keep the frequency bands used by astronomers free from interference. It also discusses issues related to the use of radio frequencies by different government organizations as well as corporations.