Reviving Iridium

Background Note Contd...

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.

The agreements were expected to facilitate their cooperation in the company's efforts to secure global authorizations for the use of radio frequency spectrum⁵ through 'frequency-use plans.⁶' In the same year, it also managed to secure additional investment of US $315 million, bringing the total project capital to US $1.915 billion. Meanwhile, it also arranged for a credit of US $750 million from BZW and Chase banks.

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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.

5] It is considered a national asset and a scarce resource that had to be used keeping in mind the best interests of all
those organizations that use it.

6] The plan made for radio frequency bands and services in use or intended to be used in a particular frequency band.

Case Details

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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