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Satellite telephony fails to take off

By Tony Hallett

Published: Friday 23 July 1999

Mobile satellite services such as Iridium, Globalstar and ICO Global Communications haven't had too much to shout about in recent months, even though they've successfully been carrying out some of the most ambitious commercial infrastructure projects ever undertaken.

At the start of the decade, these companies thought the future was theirs. With terrestrial phones still bulky, expensive and with large areas of poor network coverage, a go-anywhere service sounded appealing, and of course, billions of dollars poured into the consortia.

But in recent months, Iridium, to take the fastest-to-market example, has lost a CEO, haemorrhaged $440m in a single quarter, and seen its credibility slip away. It is now struggling to finance its long-term debt, and its largest shareholder, Motorola, has even warned that liquidation is not entirely out of the question.

Iridium's share price may have plummeted by 90 per cent in the past year, but Alex Nourouzi, senior telecoms consultant at Ovum, still thinks there's a market out there. "There's always a viable solution for satellite. Terrestrial mobile networks will never cover 100 per cent of the land mass of the world, but it's probably going to be more of a niche market than mainstream," he said.

Globalstar looks set to be the next to market, in spite of a major setback last year, when 12 of its satellites crashed to the earth in Kazakhstan after the launch rocket malfunctioned. It will be followed by ICO, which claims its selling point will be low tariffs.

But that still doesn't get away from the fact that investors are getting the serious jitters. And if the big three think they're ever going to be more than niche, they'll have to find that urgently-needed killer application.

* For more expert analysis on the satellite market, see today's video news bulletin.