- The Washington Times - Wednesday, March 28, 2001

Daniel A. Colussy's space odyssey began four months ago when he started cobbling together Iridium Satellite LLC with parts salvaged from a company left in financial ruin.

In two days, Mr. Colussy will set out to prove his new company can do what its predecessor failed to do make money offering global telephone coverage through a network of satellites. On Friday, the new Iridium Satellite LLC will activate its 66 satellites and begin connecting commercial calls.

The satellites, silent since March 17, 2000, were days from being sent to their destruction last fall when Mr. Colussy convinced Motorola Corp., the Illinois company that owned 19 percent of Iridium LLC and controlled the devices, to support his purchase of the bankrupt company's assets.

With the satellites securely in orbit, Mr. Colussy and a skeleton staff of five other corporate executives have molded the remains of Iridium into a smaller company with a narrower focus, smaller phones and less-expensive service.

"There's been a lot of frenzied activity," Mr. Colussy, chairman and chief executive of Iridium Satellite, said at the company's Leesburg, Va., headquarters, where workers track the active and back-up satellites orbiting Earth. But "we're very much on plan."

Mr. Colussy, a 69-year-old Maryland resident and former Pan American World Airways executive, had a good head start. He earned court approval last Nov. 20 to pay a mere $6.5 million for Iridium, a company with $5 billion in assets and $4.4 billion in debt when it filed for Chapter 11 bankruptcy protection in August 1999.

Debt-heavy Iridium had monthly expenses of $80 million. Mr. Colussy said the leaner Iridium Satellite will have monthly expenses of just $7 million or $84 million annually, slightly more than Iridium's monthly costs.

While Iridium marketed phone service to a broad consumer audience, Iridium Satellite will market service to corporations including companies in the mining, shipping and aviation industries. Iridium Satellite will begin a 12-month, $9 million marketing campaign aimed at potential customers next week.

A group of 13 companies are beginning to market Iridium Satellite phones and service.

Mr. Colussy won't reveal how many customers the companies have signed up. But he says Iridium Satellite has generated interest because of its lower rates. Iridium sold satellite phone service for up to $7 a minute. Iridium Satellite service will be available for no more than an estimated $1.50 a minute.

When Iridium Satellite customers call other subscribers of the service, the company will charge just 50 cents a minute.

"I feel that with the interest we've gotten so far, Iridium will have the same amount of subscribers that the old company had within one year. I wish the other company had been able to generate this much interest," said Sam Romey, vice president of World Communications Center LP, a privately held company in Chandler, Ariz., that's marketing Iridium Satellite phones and service.

The failed company had 63,000 subscribers when it filed for bankruptcy in August 1999. It began service in November 1998.

Since its costs are lower, Iridium Satellite doesn't need a lot of subscribers to make a profit, Mr. Colussy said. That means it won't take long for the new company to make money.

"We feel it will take us at least a year to get to a break-even point," he said.

In addition, Mr. Colussy doesn't expect the new company to have to make major capital expenses because its satellites are expected to last another seven years.

Service providers like Mr. Romey also are optimistic about the potential to make money. That's because Iridium Satellite scrapped an exclusivity clause that limits where service providers can market service. World Communications can market Iridium Satellite phones and service anywhere. Under the former regime, his company could only sign up U.S. subscribers.

And Iridium Satellite has cut loose most of its worldwide network of 12 gateways, the privately owned ground stations Iridium contracted with to have subscribers' calls connected to telephone networks. Iridium's revenue was limited by an agreement to share revenue with the gateways.

Iridium Satellite ended its agreements with all gateways it didn't own, and now all commercial calls go through a Tempe, Ariz., gateway Iridium Satellite owns. Calls made by the U.S. Department of Defense go through a Hawaii gateway the company owns.

Two weeks after a bankruptcy judge approved the sale of Iridium's assets to Iridium Satellite, the Defense Department signed a $72 million contract for 20,000 satellite phones and service. The agreement could be worth $252 million if the agency exercises all the options in the contract.

Mr. Colussy said Iridium Satellite will buy a gateway in Europe later this year, but he declined to reveal the purchase price.

Iridium Satellite also expects new satellite phones to be available by August. The smaller phones, made by Motorola Corp., will cost an estimated $1,500.

Phones issued by the former company can be used on the new Iridium Satellite system as long as subscribers have new software installed in the phones, Mr. Colussy said.

The new company also plans to begin marketing a service in June to let subscribers get dial-up Internet access by hooking their satellite phone to a computer. It will transmit data at 2.4 kilobits per second. The company will also market an Internet service that transmits data at 10 kilobits per second.

"I feel data services will be bigger than voice on the new system," Mr. Romey said.

So while the new Iridium Satellite faces a huge challenge Friday proving it can use a new approach to succeed at a business that its predecessor failed at the company's research-and-development efforts indicate it's looking far beyond Friday's activation of phone service.


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