Case Studies and Management Resources
Asia's Most Popular Collection of Management Case Studies |
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Case Studies and Management Resources
Asia's Most Popular Collection of Management Case Studies |
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To attract customers, Iridium reduced the price to $1000. In September 1999, Iridium's main competitor, Globalstar launched its satellite telephone services with handsets initially priced at $1000 and later reduced to $700. This added to Iridium's problems. Iridium's initial service charges were $7 per minute, which was later reduced to $2 to $4 per minute depending on the location (depending on the country they were used in – for example, in Japan, users paid an initial fee of $77 and a monthly charge of $50, plus actual call charges that ranged from $2.67 per minute to $6.59 per minute).
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To address the criticisms of high service charges, Iridium slashed its call rates to $1.50 - 2.50 per minute for domestic phone calls, and $3 per minute for international calls in June 1999. However, these charges were still very higher than those for telephone calls made using terrestrial or cellular networks, which worked out to less than a dollar. |
Customers could not get the services according to the schedules announced by the company. The service costs and handsets were not the only problems. There were many technical glitches as well. The company's phones did not work indoors, because they could not catch the signals relayed by the satellites. This was very inconvenient for the users who had to go outdoors to answer an incoming call.
Moreover, Iridium did not offer any data services11 initially. All the above factors landed the company into deep financial problems. In the fourth quarter of 1998, Iridium posted a loss of $ 440 million and in the first quarter of 1999, Iridium reported a higher net loss of $505 million on revenues of only $1.45 million.
11] Facilities to connect to the Internet or a corporate network with the help of a satellite phone form anywhere on
earth. Using this, the customer can browse the Web, send/ receive email and transfer files.
Case Code : BSTR031
Themes: Turnaround Strategy
Case Length : 11 Pages
Period : 1999-2001
Organization : Iridium LLC
Pub Date : 2002
Teaching Note : Available
Countries : USA
Industry : Telecommunication
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