Space Exploration

Iridium recently underwent a strategy shift in the region, moving its focus from distribution partnerships to licence acquisitions. This, the US-based satellite mobile operator hopes, will finally cement its foothold in the Middle East after its high-profile emergence from bankruptcy in 2001.

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By  Richard Agnew Published  October 31, 2004

|~|iridium1.gif|~|Ayman Irshaid, regional director for the Middle East at Iridium|~|Iridium has turned its attention onto licence acquisitions in a bid to boost its Middle Eastern subscriber base. The US-based satellite mobile operator, 24% owned by Prince Khalid bin Abdullah bin Abdulrahman of Saudi Arabia, now claims to have around 40,000 users in the Middle East but has yet to secure sufficient territory in which to offer its services. Some of its thirteen service providers in the region are also not yet allowed to sell its devices in their home markets, and have instead teamed up with retailers abroad. Iridium’s regional division has therefore been handed a budget to go after licences and expand its geographical footprint, which currently includes Morocco, Iraq and Kuwait. “We were concentrating on acquiring service providers but they were not complemented by licences,” says Ayman Irshaid, regional director for the Middle East at Iridium. “We’re trying to align these now, in order to gain a much larger regional presence,” he adds. Both Iridium and its rivals are prospecting new opportunities as liberalisation gradually opens up satellite mobile markets across the region. Thuraya, for example, has just concluded an agreement to enter Libya. Iridium is also currently considering whether to participate in a satellite mobile licence tender now being run in Algeria, and along with Inmarsat, is shortly expected to join Thuraya and Globalstar as a licensed global mobile personal communications by satellite (GMPCS) provider in Egypt. According to Irshaid, it is also considering whether to apply for opportunities in Pakistan, Oman, Jordan, Yemen and Saudi Arabia, depending on the licences’ eventual cost. Nevertheless, the provider concedes that hurdles still need to be jumped in various markets if the expansion programme is to come to fruition. One is that GMPCS licences come in different shapes and sizes and don’t fall under an international framework, unlike those for very small aperture terminal (VSAT) service providers. For instance, the operator is trying to partner with international long distance (ILD) providers in order to qualify to enter Pakistan. “In countries like Saudi Arabia and Jordan, you have to acquire two licences — one for system operators and one for service providers. Often the service provider is paying more for them than the system operator. Also, in some countries you need to have a local presence whereas we want to work through local partners,” Irshaid adds. The operator also admits that, to some extent, it is still suffering from the after-effect of over-expectations fostered by the original Iridium service, which pumped US$5 billion into its satellite mobile operation but filed for bankruptcy in 1999. “Iridium I had licences in many countries in the Middle East, but these should be renewed with different terms and conditions,” says Irshaid. “With Iridium I, the service was very expensive and regulators were getting a lot of money from it. Regulators remember the old days and come up with high fees. But things are different now — when we go into a country, we’re not expecting to get huge numbers of subscribers. We’re very focused on niche markets and that’s why our fees should be minimal,” he adds. Iridium is therefore keen to dispel lingering doubts about the company’s business model since its high profile demise. To break-even, the original venture needed to sign up around one million users — not much short of the current total size of the satellite mobile market — but also charged US$7 per minute for airtime and US$3000 for phones. When it filed for bankruptcy, it was said to have secured only 10,000. By contrast, the new venture emerged from the restructuring free of debt and with a lower cost base, having acquired the assets of the original venture for US$25 million. The operator said earlier this year that it had attracted 100,000 subscribers, having reduced phone prices to US$1200 and minute rates to US$1. It also says that its network of 66 satellites and 13 spares — once expected to be left to burn up in space — is assured until 2014. “Like its rivals, Iridium has been able to leverage increasing demand for what it has to offer as a result of the situations in Afghanistan and Iraq,” adds Andrea Maléter, technical director of Futron Corporation, a US-based satellite industry analyst group. Importantly, the operator also seems to be managing user expectations more adeptly than its predecessor. “People expected Iridium to be a service you could use anywhere, but didn’t realise that it wasn’t exactly like a mobile phone. With any of these mobile satellite services you have to be outdoors and not inside a building, so there was an expectations gap. But many of the perception problems have now been addressed, and users know what they’re getting,” says Maléter. The operator also now seems to be more in touch with its own limitations, as well as its true market. “Iridium I was targeting business travelers but is focused now on vertical markets that actually need satellite communications. Our user base is not going to be like those of GSM and fixed operators, with millions of subscribers,” adds Irshaid.||**||

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