CHICAGO -- Overcoming widespread skepticism, Motorola Inc. has raised enough equity for a bold plan to encircle the earth with satellites, which will enable customers to use compact telephones from anywhere on the globe.
Iridium Inc., a company launched in 1990 by the Schaumburg, Ill.-based Motorola, has mustered start-up capital totaling $1.57 billion by rallying an eclectic consortium of around 15 or so worldwide companies. The successful equity financing puts Iridium far ahead of rivals and enables it to seek debt financing to round out the $3.37 billion needed for the project.
The effect of wireless, global phone systems will be far-reaching. The pocket-sized mobile phones will facilitate business and promote Third World development.
They could also give political dissidents the ability to bypass controls on traditional land-line and cellular phones and other forms of communication imposed by autocratic regimes, telecommunications experts say.
By 1997, Iridium says it plans to launch into low orbit the first of 66 satellites. It says it will begin service in 1998.
The signals from portable Iridium phones will bounce off the company's chain of satellites to other Iridium telephones or to Iridium ground stations. From the ground stations, signals will be shunted to land-lines or cellular phones. The Iridium system will handle all types of phone transmission: voice, facsimile, data and paging.
Although equity has come more easily than expected, Iridium must still overcome big obstacles. It faces strict regulatory requirements in dozens of countries and logistical challenges in operating the satellites, the experts say.
"To get licensed to operate in each and every country will be a monumental task," says Carol Ferrari Gerbetz, a senior analyst and telecommunications industry specialist at the Yankee Group Boston.
Iridium consortium members are responsible for securing regulatory approval in their home countries. But these members would not have made multimillion-dollar investments in Iridium had they thought an official go-ahead was unlikely, says John Windolph, an Iridium spokesman.
Even if the company successfully lays the bureaucratic and financial groundwork, it still must complete the arduous task of stringing its fleet of satellites in precise position more than 400 miles above the earth. "Launching the initial constellation of satellites and maintaining it over time is very expensive and risky," Ms. Gerbetz says.
The company has rallied a broad mix of know-how for its launches. The satellites will ride aboard the Delta 2 rockets of McDonnell Douglas Corp., the Proton rockets of Russia's Khrunichev Enterprises, and the Long March II rockets of the China Great Wall Industry Corporation.
The Iridium consortium also includes telecommunications and industrial firms from Japan, Thailand, Taiwan, South Korea, Saudi Arabia, Italy, Russia, Germany, Canada, Venezuela, and Brazil. In addition to Motorola, consortium members in the United States include Lockheed Corp., Raytheon Co. and Sprint Corp.
Iridium seeks to dominate a small but lucrative slice of the burgeoning market for wireless phone transmission. By 2000, the worldwide market is expected to balloon to $60 billion with 150 million customers, according to the US International Trade Commission. Of that, Iridium aims to serve 1 million voice telephone users and 600,000 global pager customers, Mr. Windolph says.
The vast majority of its customers will be international business travelers, who would gladly pay an average charge of $3 a minute for the convenience of placing and receiving phone calls anywhere, he says.
But the system also could benefit people in developing nations, Mr. Windolph says. Iridium has urged several developing countries to consider installing the company's telephones in solar-powered kiosks in villages neglected by the national, ground-based telephone system, Mr. Windolph says.