The case discusses the problems faced by Iridium after the launch of its mobile satellite services. These problems landed the company in deep financial trouble, which led Iridium to file for Chapter 11-bankruptcy protection in the US Bankruptcy Court. The case also talks about Dan Colussy's turnaround strategies aimed at resurrecting the company and the outcome.
In
August 1999, Iridium LLC1 (Iridium), the
world's largest provider of global mobile satellite
voice and data solutions, filed for Chapter 112
bankruptcy protection in the United States Bankruptcy
Court. The news did not come as a major surprise to
the global telecommunications industry since the company's
financial trouble was well known. It had defaulted on
US $1.55 bn in bank loans.
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 license 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.
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