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Iridium, the global satellite phone company backed by Motorola (MOT), filed for bankruptcy in 1999, after the company had spent $5 billion to build and launch its infrastructure of satellites to provide worldwide wireless phone service. At the time, it was one of the 20 largest bankruptcies in US history. To work properly, the system needed 66 satellites. The creation of this enormous system forced the company to default on $1.5 billion of debt. The service had been such a failure that it only had 10,000 subscribers. This was, in part, due to technical difficulties with Iridium’s first handsets. According to a Dartmouth Tuck Business School case study on the history of Iridium in 1998, the company forecast that it would have 500,000 subscribers by the following year. But, the service was expensive for customers, and the cellular phone business had started to take hold as its infrastructure was built out in most of the large developed countries. An Iridium handset cost $3,000 and talk time was as much as $5 a minute. Cellular service was not as broadly available, but it was far less expensive.Technology difficulties also made the service unpopular. Because Iridium’s technology depended on line-of-sight between the phone antenna and the orbiting satellite, subscribers were unable to use the phone inside moving cars, inside buildings, and in many urban areas.
Douglas A. McIntyre
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