IRIDIUM
Dan Colussy's worst-case scenario isn't so bad: Operate existing Iridium satellites until the end of the decade, then let them crash and burn, earning investors a healthy return. Of course, the preferred plan - which includes introducing smaller phones and Net dialup in August - is to boost the ailing network of 66 low Earth orbit satellites to profitability by the end of next year.
That's a far cry from a fiery demise, which the once high-flying phone company faced before Colussy, a 69-year-old entrepreneur, rescued it from bankruptcy in December. Motorola, Iridium's largest creditor, was prepared to "decommission" the 3-year-old satellite network after the company defaulted on nearly $7 billion in debt.
"I was convinced there was value at the right price," says Colussy, a former Iridium user and ex-CEO of aircraft-component manufacturer UNC. He picked up Iridium's assets for less than half a cent on the dollar, tendering a paltry $6.5 million in cash and a promissory note for $18.5 million more. Two weeks after inking the deal, Colussy signed a two-year, $72 million contract with the Department of Defense. Under the agreement, Iridium will provide unlimited airtime to 20,000 government users. (One critic has dubbed the Leesburg, Virginia-based company the "CIA's private satellite system.")
Colussy, who serves as chair of the revamped company, has cut Iridium's monthly burn rate from about $80 million to $7 million. He has Boeing operating the network for less than $4 million per month. (Motorola, which developed the system, was charging $45 million monthly.) Colussy also dropped calling rates to $1.50 or less per minute, which is comparable to international cell phone charges. The result? Iridium needs only 60,000 subscribers, not a million, to break even. The company's DOD contract has already provided a third of them, and Colussy hopes to lure back Iridium's previous customers - some 27,000 users. By year's end, the outfit plans to deliver short-burst messaging capability, which would, for example, let a shipper track a container headed overseas.
"If Colussy can pull it off," says Sean Badding, VP of business development at the market research firm the Carmel Group, "it'll go down as the deal of the century."
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