66 Satellites, One Phone Number

Last year, Iridium vice-chairman and CEO Edward Staiano bet an analyst that rival Globalstar would not launch its satellites in 1997. A top Globalstar executive took on the wager and laid down a hundred dollars. To cut short a long story, Staiano is now richer by ten crisp tenners in greenback.

The Motorola-led Iridium project is the first of a clutch of global mobile personal communication system (GMPCS) project scurrying towards completion. Using several satellites, such projects beam radio signals covering most of the earths land mass. Their target: users jetting their way round the globe with satphone handsets a little bigger than conventional cellular phones. The USP: a user can make and receive a call anywhere in the world.

 

The race to completion is critical to the projects since the first to pip the others to the post hogs a major share of the market. The do-or-die situation couldnt get more nerve-wracking for the companies involved, given the huge capital and never-deployed technology behind the projects. Iridium, for instance, has 66 low earth orbiting satellites circling the globe and costs an impressive $5 billion (almost Rs 20,000 crore).

Competitor Globalstar plans to send up 48 satellites, but is less expensive at $2.6 billion (some Rs 10,100 crore). ICO the 12-satellite consortium with participation from 44 countries has a projected cost of $3.24 billion (over Rs 12,600 crore). A fourth project (Odyssey, costing some $2.5 billion) in the same category has not taken off. The feverish pace of work at these projects is fuelled by other more-complex and more-expensive (with more attractive services on offer) systems like Teledesic and Celeste being planned.

For a hard-nosed competitive go-getter, Staiano is surprising conservative with market demand projections. The total addressable market is about 42 million by 2002; this does not include cellular users and roamers. Of this, we will have a 10 per cent market share (by 2002), he says. The Iridium user will use a satphone handset, which will allow communication on cellular networks and, if a compatible cellular service is unavailable, talk directly to an Iridium satellite.

Speak to Staiano and it is easy to believe that Iridium will scare the socks off the competition. Thirty-seven Iridium satellites are already in orbit, while the Loral and Qualcomm-owned Globalstar is just beginning to send up its birds in the sky. ICO will do so only in the fourth quarter of next year, giving Iridium what an industry source says a huge headstart. Iridium breaks even (starts making profits before depreciation) quickly: first quarter of 1999 with 6,00,000 users on-line. Net profit is projected by the third quarter of the same year. Not surprisingly, the service comes expensive: handset is to be priced at $3000 (almost Rs 1,20,000), rental of $50 a month and a usage charge of $1.75 a minute plus international charges, depending on where the call is being made from, or received.

And, how will he convince potential users to connect to the pricey Iridium service? Rifleshot marketing, shoots back Staiano. He plans to target the international roamer who will bring in 90-95 per cent revenues with heavy direct selling. The first class (air) travellers will be easy, but they are a small number. It is the business class traveller flying at least four times out of his country we will target, Staiano stresses. At just a 30 per cent premium to international calling rates, the cigar-chomping Staiano hopes the service will be lapped up in scores a wager he cannot afford to lose.

The total addressable market would be about 42 million by 2002; this does not include cellular users and roamers. Of this, we will have a 10 per cent market share (by 2002)

Iridium vice-chairman and CEO Edward Staiano