The Rise and fall of Iridium

What is Iridium

Iridium was designed to be a satellite-based, wireless personal communications network that would
permit any type of telephone transmission, including voice, data, fax, and paging to reach its
destination at any time, at any location in the world, by using a satellite communication system
using 66 low-earth orbit satellites (LOS). It also offers a cellular roaming service featuring dual-
mode phones that can be switched to operate with terrestrial wireless services.
To build the satellite network, Iridium spent $5 billion. (This was raised from a combination of debt,
an Initial public offering (IPO), and equity investments by various corporate shareholders)
Motorola also served as the projects prime contractor.

Satellite Communications
A Satellite is something that goes around and around a large something, like the Earth or another
planet. Some satellites are natural, like the moon, which is a natural satellite of the earth. Others
satellites are made by scientists and technologists to go around the earth and do certain jobs.

Some satellites send and receive television signals. The signal is sent from a station on the earths
surface. The satellite receives the signal and rebroadcasts it to other place on the Earth.

Why Satellite
To avoid number of Repeater on the earths surface.
Avoiding line of sight propagation
High coverage area i.e. a single satellite covers 48 % of the Earths surface
To avoid obstacles like buildings, tree, mountains etc.
Instant communication.
To cover remote Areas.
Increase data transfer rates.

Classification of Orbits
 1. Geostationary(Geosynchronous) Earth Orbit(GEO)
2. Medium Earth Orbit (MEO)
3. Low Earth Orbit (LEO)
4. Highly Elliptical Orbit (HEO)

1. GEO

GEO Satellites have distance of almost 22,300 miles above the earths surface. And its Orbital Period
equals to earths rotational period (one day). So this appears motionless respect to earth.

GEO satellites can be built using as few as three such satellites. Satellites were expensive, costing
approximately $100 million apiece to build and another $10 million each to launch. In addition, the
distance from the earths surface to the satellite can cause a quarter of a second delay between
sending and receiving, which can be annoying to callers.
2. MEO
Known as Intermediate Circular Orbit (ICO)
Altitude is between 2,000 36,000 Km
Orbital Period ranges from 2 24 Hours

3. LEO
Extends from the Earths surface at sea level to an altitude of 2,000 Km
Orbit Times are much less than for many other forms of orbit.
 Some speed reduction may be experienced as a result of friction from gasses, especially at
lower altitudes.

Low-earth-orbit (the system utilized by Iridium) and medium-earth-orbit satellites did not have
a time-delay problem and were much less expensive to produce and launch. However, instead of
appearing stationary over a particular point on the earths surface, these satellites flew overhead at
speeds of more than 15,000 miles per hour. Tracking them from the ground and handing off calls
from satellite to satellite was complicated and expensive. The expected failure rate of such satellites
was around 10 percent and life expectancy ranged from five to seven years once the satellite was in
orbit.

Why Iridium?
The system, named Iridium, derived its name from the element Iridium, whose atomic number, 77,
matched the number of low-earth-orbit satellites that the company had originally intended to launch.
The Constellation of 66 active satellites has 6 orbital planes spaced 30 degrees apart, with 11 satellites
in each plane.

It is comprised of three Principal components

1. The satellite network
2. The ground network
3. Iridium subscriber products, including phones and data modems.

Iridium Network allows voice and data messages to be routed anywhere in the world.
Voice and Data calls are relayed from one satellite to another until they reach the satellite above the
Iridium handset or terminal and the signal is relayed back to Earth.
When an Iridium Customer places a call from a handset or terminal, it connects to satellite overhead,
and the signal is relayed among satellites around the globe to whatever satellite is above the
appropriate Earth gateways, which downlinks the call and transfers it to the global public voice
network or internet so that it reaches the recipient.

Ownership Structure
Iridium, Inc. was incorporated in June 1991 and operated as a wholly/entirely owned subsidiary of
Motorola. However, Motorola target was never to operate as a service provider. In July 1999 Iridium
privately sold shares of common stock to various U.S. and foreign investors. By 1994 Iridium had
$1.6 billion of equity financing in place. A further $315 million of equity was secured during the first
quarter of 1996. In June 1997 Iridium shares went public at $20, raising $225 million. Investor
demand for Iridium shares was strong.

Background on Motorola and Kyocera

In 1930 the company introduced the first practical and affordable car radio.
Motorola was composed of three business units: Integrated Electronic Systems,
Semiconductor Products, and the Communications Enterprise.
Kyocera introduced the worlds lightest CDMA cellular handset, the worlds smallest satellite
phone, and the worlds first wireless, handheld videophone with color display

Iridium Costs and Financing

The capital cost consisted of two components:

1. the Space System contract for the design, development, production, and delivery of the
satellites into orbit
2. The Terrestrial Network Development contract to design the gateway hardware and software.
The Canadian firm, COMDEV, was responsible for the antennas for intersatellite and gateway links.
Three suppliers from around the world were used to launch the satellites:

Iridium Service
Motorola eventually launched 66 satellites into low-earth-orbit.
Motorola developed an assembly line production process that allowed up to ten satellites to be under
assembly at one time. Each satellite carried its own phone switching system and the network used
complex satellite-to-satellite links that permitted phone calls to be switched in the sky.
Improved coverage and performance, the weight of the satellite increased very little because of
advances in electronics. Based on statistical analysis, the satellites were expected to last about six
years before they would Burn up in the earths atmosphere, although sufficient fuel was provided for
eight years.
The handsets were manufactured by Motorola and Kyocera and were seven inches long
(plusantenna), weighed approximately one pound (Iridium promotional material described the
handsets as small, lightweight, hand-held telephones), and retailed between $2,200 and $3,400
Service fees ranged from just under $2 per minute to as much as $7 per minute for some international
calls.
Level 1:- Process Success: - Success

Iridium was designed as a statistically based system in which a single satellite failure would not be a
catastrophic failure. We designed satellites with little redundancy and lowered the cost of building a
satellite by a factor of ten. We did not need space qualified parts, which were incredibly expensive
and not very reliable because of their low volumes.

Level 2:- Project Management Success: - Success

Based on the initial design, Motorola, as prime contractor, completed the project on time and on
budget and above specifications.

Level 3:- Product Success: - Failure

Because Iridiums technology depended on line-of-sight between the phone antenna and the
orbiting satellite, subscribers were unable to use the phone inside moving cars, inside
buildings, and in many urban areas. Moreover, even in open fields users had to align the
phone just right in order to get a good connection.
The cost of service was also prohibitive for many users
Iridium lacked adequate data capabilities, an increasingly important feature for business users.
Making matters worse were annoyances such as the fact that battery recharging in remote
areas required special solar-powered accessories. These limitations made the phone a tough
sell to Iridiums target market of high-level traveling businessmen.
The distance from the earths surface to the satellite can cause a quarter of a second delay
between sending and receiving, which can be annoying to callers.
The design of Iridiums phone also hampered adoption, the handset is big, the service is
expensive, and the customers havent really been identified.

Level 4:- Business Success: - Failure

 The estimated number of subscribers needed for Iridium to break even was 400,000, and Iridium
hoped to add 50,000 subscribers per month in 1999. But, a variety of problems plagued the company,
and by May 1999 Iridium had only 10,000 subscribers. In August 1999 Iridium defaulted on its debt
and filed for Chapter 11 bankruptcy protection. In March 2000, with only 50,000 subscribers, Iridium
terminated its services and announced that it would soon finalize a de orbiting plan for the sixty-six
satellites. Motorolas estimated financial exposure to the bankruptcy of Iridium was $2.2 billion.
Financial Impact of the Bankruptcy

Level 5:- Strategic Success: - Failure

Edward F. Staiano, Iridium LLC vice chairman and CEO. On his speech Iridium will open up the
world of business, commerce, disaster relief and humanitarian assistance with our first-of-its-kind
global communications service. . . . The potential use of Iridium products is boundless, continued
Staiano. Business people who travel the globe and want to stay in touch with home and office,
industries that operate in remote areas, disaster and relief organizations that require instant
communications in troubled areasall will find Iridium to be the answer to their communications
needs.

Initially Iridium was planned to be the Worlds Leading company in providing a satellite
communication throughout the World. Unfortunately Due to many Reasons the project was
unable to meet its objectives.

Conclusion
What is fascinating about studying cases like Iridium is that what look like seemingly
incomprehensible blunders are really windows into the world of managerial decision-making, warts
and all. In-depth examinations of strategy in action can highlight how such processes as escalating
commitment are real drivers of managerial action. When organizational stumble, observers often
wonder why the company, or the top management, did something so dumb. Much more challenging
is to start the analysis by assuming that management is both competent and intelligent and then ask,
why did they stumble? The answers one gets with this approach tend to be at once both more
interesting, and revealing. Students of strategy and organization can surely benefit from such a
probing analysis.