Iridium boss claims the future is bright as problems pile up

By Keith Newman

Satellite network Iridium is under pressure after it failed to meet its revenue and subscriber targets, lost its chief executive just over a week ago and must now defend itself from investors seeking damages.

On March 29 Iridium disclosed it would not be able to meet secured credit conditions. The company's stock had plummeted 75 per cent since its May 1998 high, and satellite phones promised by key partners still had not made it to market.

There had been technical hitches with some equipment and claims the system had been poorly marketed.

Chief executive Edward Staiano, who was pivotal in the development of the system, resigned over marketing and financial issues.

In March those who had loaned money to get the network in the air granted a two month extension to meet growth targets of $US4 million in cash, $US30 million in accrued revenues and 52,000 customers.

But Carlton Jennings, the chief executive for Iridium Asia Pacific, believed there was a silver lining in the clouds over the firm.

He conceded it had been a case of expectations exceeding what was deliverable, but claimed the original targets could safely be met within eight months.

"Everything can go right now," Mr Jennings told the Business Herald.

"The board itself has invested over $US2.5 billion dollars into where the company is going and how to get there. There are 12 CEOs of our working companies around the world. The investors feel strongly we're going to get there."

He said the next six months would be crucial.

"Iridium is going to prevail. These bumps in the road are no different than those faced by any other carrier which is first to market with a large, expensive network. The only difference with Iridium is orders of magnitude - we're talking zillions of dollars and a global system," he said.

In October he made his projections for the Asia Pacific market to the end of 1999. "I'm confident we'll meet those targets." He would not disclose numbers, but said overall there were now 11,000 subscribers using the system.

Iridium, which launched in November last year, set targets of achieving 52,000 customers by March 31 - at the end of 1998 it had only 3000 and admitted it could not hit target.

Last Tuesday legal firm Weiss & Yourman filed a class action lawsuit in a United States district court on behalf of some stockholders who claimed Iridium, and Motorola which built the 66 satellite network, issued false and misleading statements about their ability to fully launch the system.

It is claimed they falsely reported achievable subscriber numbers and revenue figures and failed to disclose serious technical problems and delays in handset production.