- The Washington Times - Wednesday, December 13, 2000

The successor to Iridium LLC, the defunct District-based satellite telephone company, will open as a leaner company and offer commercial service by March.

Iridium Satellites LLC took possession yesterday of the 66 primary and seven backup satellites, only a few months after it appeared investor and operator Motorola Corp. would program them to fly out of their orbit above the Earth and into the sea.

Daniel A. Colussy, in an exclusive interview with The Washington Times yesterday before a meeting with William Kennard, chairman of the Federal Communications Commission, said he pursued Iridium for more than six months even after New York investment banking firm Castle Harlan Inc., his original investment partner, lost interest in the deal because he thought a new Iridium could make money.

“At a certain point, I got very enthusiastic about [Iridium]. So I decided to go it alone and and find the money,” said Mr. Colussy, a 69-year old Maryland resident and the former president of Pan American World Airways.

Mr. Colussy, a client and investor in the defunct satellite phone company, said he is “fascinated with the whole concept of Iridium.”

Mr. Colussy said that of the estimated 35 companies he has bought, putting together a deal to buy Iridium was by far the most strenuous.

“It took longer, a lot longer, than I thought and was much more difficult than I thought. The good ones are always hard to close,” he said.

Mr. Colussy said the new business faces some of the same hurdles the failed company had but predicted Iridium Satellites LLC is more likely to succeed than its predecessor, which sank last year under the weight of $4.4 billion in debt.

Iridium Satellites paid $25 million $6.5 million in cash and $18.5 million in convertible securities for the satellites and the network operations center used to control the devices. The project was valued at an estimated $5 billion when Iridium started it with Motorola, which owned 19 percent of the company and operated the satellites on Iridium’s behalf.

“Obviously, we got a very good deal. But this project is not without risk, there’s never been a business project in my 45 years of managing companies where there wasn’t risk. There’s some risk here, but it’s a risk that all of the investors and myself feel is well within the acceptable range, and the rewards could be quite outstanding as well,” Mr. Colussy said.

He and his investment partners will try to rebuild Iridium Satellites by placing it on a new course. The company will market satellite phone service to companies in the aviation, oil and gas exploration, mining and forestry industries.

The Defense Department also will be a major customer. Last week, the Pentagon signed a $72 million service contract with the company, even before the new owners completed the deal to buy Iridium’s assets. That contract could be worth up to $252 million if the government exercises all the options in the pact, including subscribing to the service through 2007.

Iridium Satellites won’t market service to the cell-phone toting consumer crowd.

“We do not see this as a consumer service,” Mr. Colussy said.

Iridium Satellites also plans to offer Internet access.

Because of its limited push into commercial service, Iridium Satellites doesn’t expect to attract more than about 60,000 customers. The failed company had 63,000 subscribers when it filed for bankruptcy in August 1999. It began service in November 1998.

“We don’t have to be a huge company. We don’t need a million customers. Far from it,” Mr. Colussy said. “If we get in the vicinity of where Iridium was before it shut down, we will be at the break-even point.”

Iridium Satellites needs fewer customers because it will have monthly expenses of just $7 million, Mr. Colussy said.

Motorola, the Schaumburg, Ill.-based telecommunications company, said in a July 31 filing that it cost $10.3 million a month to keep the satellites in orbit.

Iridium Satellites will have 60 employees.

Despite plans for a smaller phone company, Iridium Satellites has plans to launch five new satellites in June to increase the amount of voice and data traffic its network of satellites can transmit. Two more satellites are to be launched at a later date.

In addition, the new company’s phone rates are expected to be a fraction of what Iridium LLC charged. Mr. Colussy said rates for commercial service will not exceed $1.50 a minute, and wholesale service will cost less than $1 a minute. The failed company charged as much as $7 per minute.

The only investor in the company identified yesterday was Syncom Management Co., a Silver Spring-based venture capital firm that invests in telecommunications companies. BET Holdings Inc. and Radio One Inc., the Lanham-based broadcasting company, are among its investments.

“I am particularly interested in the ability of the Iridium system to deliver service to Third World particularly those in Africa,” Syncom President Herbert P. Wilkins Sr. said.

Sources familiar with the transaction credited Mr. Colussy with saving the satellites by getting the Defense Department involved in the debate over whether to destroy them. After Motorola appeared ready to pull the satellites out of orbit, the company was told “it would be in the national interest to keep them up,” Mr. Colussy said.

Until that message got through, it was not clear whether Mr. Colussy and his fellow investors would have enough time to put together a deal and earn approval from U.S. Bankruptcy Court Judge Cornelius Blackshear. But final approval was granted Nov. 20.

“It was touch and go more than once,” Mr. Colussy said.

The investors’ coming through was no surprise to Randy Brouckman, Iridium’s former chief operating officer.

“Everything [Mr. Colussy] touches seems to turn out well,” Mr. Brouckman said. “He displayed an incredible amount of fortitude to pull this off. This is a man who doesn’t need to work, but he stuck with it.”

Mr. Colussy sold UNC Inc., an Annapolis company that refurbishes airplanes, to General Electric for $725 million in 1997.

Now he will lead the new company during its transition period. Mr. Colussy will take over as chief executive but he doesn’t expect to have daily control of the company for long.

“I don’t want to be a long-term CEO. I’ve made that clear,” he said.

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