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The View From Iridium Satellite
Year In Review
by Matt Desch, Chairman & CEO, Iridium Satellite LLC

For Iridium® Satellite LLC, 2007 has been a year of incredible growth and innovation, all in an effort to position the company as a mobile satellite services leader and the only provider of truly global satellite voice and data solutions.

“2007 has been a watershed year for Iridium,” said Matt Desch, CEO and Chairman of Iridium. “Thanks to the strong support of our growing partner ecosystem, superior performance and reliability of the Iridium network, exciting new applications and programs, and the launch of NEXT, Iridium has gained market share, revenue, and a strong leadership position in the industry.”

Highlights of 2007 include:

Iridium NEXT Launch
At SATELLITE 2007, the company announced plans for its new satellite constellation initiative, Iridium NEXT. NEXT will be an IP-based, broadband network taking into consideration the latest satellite and wireless technologies available to support powerful new devices and services for commercial and government users. Network design is already under development. Over the course of 2007 and 2008, Iridium will focus on the following program objectives:
  • Identifying and defining customer and system requirements,
  • Surveying the industry for new and innovative capabilities and technologies,
  • Developing the NEXT architecture, and
  • Selecting NEXT development and deployment partners.
Network Quality Guarantee
Iridium introduced a network quality guarantee program for new customers with a promise of 100 percent satisfaction with Iridium service. The “Iridium Network Quality Guarantee” promises credits of up to 100 minutes of airtime, as well as three months free subscription fees, if the Iridium network fails to complete properly initiated voice calls from customers’ new Iridium handsets. If a customer is dissatisfied with the quality of Iridium’s network service within the first 90 days of service activation, he or she may submit a claim through their participating Service Provider. To date Iridium has not had one customer report a claim against the guarantee.

Frost & Sullivan Study
Frost & Sullivan, an independent research and consulting firm, released an analysis that compared Iridium to another industry satellite phone service. The study revealed that while only 36.2 percent of a competitor’s calls were successfully connected and completed without being dropped during a three-minute period, 98.1 percent of those calls placed on the Iridium handsets were successfully connected and completed. Researchers placed more than one thousand phone calls using a variety of Iridium and non-Iridium satellite phones. The results clearly show that the Iridium network is the “go to service” for critical, time-sensitive applications in disaster recovery, and for first responders and public safety officials.

China Gateway
China Space Mobile Satellite Telecommunications Co. Ltd. (China Spacecom) announced the company is planning to open an Iridium gateway earth station. The gateway, which will be located in Beijing, will support Iridium voice and data services throughout China and could be operational by the end of 2007. China Spacecom expects significant demand for Iridium short-burst data links in water resources management, hydrological monitoring, weather data collection, fishing vessel tracking, heavy machinery automation, environmental protection and other industries, as well as voice and email communications with ships and aircraft on domestic and international routes.

New Earth Station in Svalbard, Norway
Iridium opened a new telemetry, tracking and command/control (TTAC) earth station in Norway. The facility is located in Svalbard, Norway under an agreement with Kongsberg Satellite Services (KSAT). KSAT, the owner and operator of the KSA Svalbard Satellite station (SvalSat), the world’s largest ground station dedicated to supporting polar orbiting satellites, is providing operations and maintenance support for the site.

Strong M2M Growth
Iridium saw continued strong growth for its global satellite communications services in the Machine-to-Machine (M2M) market, a sector the company estimates is worth $1.5 billion globally. As of the second quarter in 2007, Iridium experienced an increase of 216 percent in Short Burst Data (SBD) service revenues over the same period last year. This figure compares with a 98 percent increase in the same period from 2005 to 2006. Subscriber activations for SBD have increased 403 percent in 2007 versus 2006. These significant increases in service revenues and unit activations have occurred since Iridium launched its lower-cost 9601 SBD transceiver in December 2005. Iridium has more than 20,000 asset tracking devices deployed around the world. Average Revenue Per User (ARPU) remains strong at four times ARPU dollar amounts of Iridium’s closest competitors.

Aeronautical Market
In the second quarter, Iridium’s subscribers in the aeronautical sector increased 59 percent over the last year. The compound annual growth rate in aeronautical subscribers over the last four years was 134 percent. Iridium recently announced that the International Civil Aviation Organization (ICAO) Council has approved draft Standard and Recommended Practices (SARPs) covering the use of Iridium for Aeronautical Mobile Satellite (Route) Service, or AMS(R)S. The ICAO Aeronautical Communications Council recently approved Iridium’s Technical and Implementation Manuals and validated the draft SARP document. Full ICAO approval is expected in November, paving the way for rapid deployment of Iridium-based AMS(R)S platforms early next year to meet the anticipated demand for reliable, low-cost alternatives in safety communications for aircraft on high-latitude routes.

Maritime Market
Iridium’s maritime sector continues to show steady growth with the number of subscribers up 18 percent over the same time last year (second quarter). Maritime traffic through the satellite network is growing at an annual rate of 12 percent. The number of ships using Iridium’s prepaid Crew Calling service increased by 17 percent year over year, buoyed by the increasing number of ship owners and management companies that switched to Iridium last year.

Defense Market
Iridium’s military sector business continues to show outstanding growth with cumulative Department of Defense (DoD) subscribers reaching 31,000. Military traffic through Iridium’s satellite network is up more than nine percent (an increase of almost 10 percent over last year). This growth is 300 percent more than what Iridium had planned for this market segment at the outset of the year. DoD integration of Iridium’s SBD services has helped accelerate 2007 subscriber growth. In addition, the DoD is analyzing potential use of the Iridium satellite network as an enhancement to the Global Positioning System (GPS), which has become a vital tool for U.S. military operations. Use of Iridium’s constellation would give the system more satellites, greater signal strength and added precision.

Marketing Innovation
Iridium launched multiple innovative marketing programs in 2007 to continue to raise awareness about its offerings, in addition to competing aggressively on market pricing. Iridium launched “Test Your Satellite Phone Week” in May to coincide with the U.S. National Weather Service’s National Hurricane Preparedness Week. Iridium’s goal was to raise more awareness of what first responders and commanders can do to be better prepared prior to disasters and to increase satellite phone user knowledge. Iridium partners, such as Telenor, also embraced this effort by co-branding and distributing Test Your Satellite Phone Week materials, issuing press releases, and featuring the week in trade show booths and during conference panels.

Iridium announced a new North American Pricing Plan, providing prepaid packages that offered rates as low as $0.15 per minute for satellite phone calls with unrestricted roaming in North America. Through this offer, Iridium has been rewarding high-volume and mission critical users who are unhappy with other services and who demand the quality associated with Iridium.

Summing up 2007, Desch comments, “Last year at this time I talked about how excited I am to be at the helm as we unleash the full potential of our unique global network to become the world’s most robust, pervasive and fully-integrated global communications network. At this point I cannot understate how gratifying this year has been and how much I look forward to working with our partners, our customers and the industry to build on this success in 2008. This is only the beginning.”

Iridium Satellite and the Industry in 2008
2008 will be a year of many new product and service offerings for Iridium and other players, as well. Iridium is excited about the launch of its upcoming maritime broadband device. Plus, the company has several other new devices, which the company will discuss publicly in 2008 that will provide new features and cost savings for our customers. They will also provide Iridium opportunities for expanding its customer base. In addition, the company anticipates it will continue to see a major increase in the demand for short burst data (SBD) services in 2008. For example, Iridium recently saw the number of asset tracking devices using Iridium around the world top the 30,000 range. In its third quarter earnings release, Iridium announced a 226 percent growth in SBD subscribers over the same quarter 2006. In the same time period, SBD traffic increased 176 percent. This is because many enterprise organizations are seeing the value of global, two-way data communications to track their important assets. Iridium and its valued partners have worked hard to demonstrate the ease and low cost of implementing real-time, low-latency SBD hardware and services to meet those machine-to-machine (M2M) market needs.

Iridium and other MSS players will also continue to grab regional market share based on service offerings and a firm’s ability to perform. Iridium has recently experienced a tremendous upswing in North American traffic following a new pricing plan and churn from other satellite communications service providers. Canadian traffic alone nearly doubled by the third quarter of 2007, increasing 80 percent year-over-year. Likewise, usage in the U.S. surged by 77 percent. Traffic in the Asia/Pacific region was up nearly 48 percent over last year, and, in Australia, Iridium continued to win thousands of customers previously served by competing MSS providers. In South America, Iridium recently forged new partner relationships to further serve customers looking to switch from other service providers in the South American market. Strong results are expected in this region as well as in other regions where the demand is great and the company is focused.

Finally, Iridium is also moving forth in its effort to design and build “NEXT,” the company’s next generation satellite constellation. While many other MSS players are concentrating on their next generation constellation efforts as well, the Iridium differentiator will be that NEXT will well position the company to deliver services even beyond communications. The company recently issued an RFI for development partners for the NEXT network. Iridium had a very strong response from the RFI—more than 61 parties responded—and five or six are now competing to be the prime contractor. Iridium is reviewing the RFI responses and plans to make a selection in the first quarter of 2008.

The company is also pleased to have already been working in 2007 with some of the top players in the satellite sector to work on the early engineering stages of NEXT. These partners have played an important role in working with Iridium on systems engineering, requirements definition and architecture development. Iridium is working through cost analyses, as well as technology design requirements, and will be making more definitive announcements about cost and final capability hopefully around this time next year. Iridium is still comfortably on track to deploy NEXT in the 2013 – 2016 timeframe.

“Our partners have been the lifeblood for Iridium,” said Matt Desch, CEO and Chairman, Iridium Satellite. “Together we have built the industry’s leading global mobile satellite communications service and have earned a reputation for quality that is unmatched. We are grateful for the ongoing support and feedback they provide. Our success would not be possible without our strong partner network, unparalleled in the industry.”

There has also been significant interest within the industry for Iridium to host secondary payloads and, as such, the company is working on several opportunities that should come to fruition over the next 6 to 12 months. Having one or more secondary payload partners in place could afford Iridium the opportunity to substantially offset the infrastructure cost of NEXT.

Matt Desch has more than 27 years of experience in telecommunications management, and more than 16 years in the global wireless business. Mr. Desch joined Iridium in 2006 as Chairman and CEO of Iridium, and CEO of the parent company, Iridium Holdings LLC. Previously, he was CEO of Telcordia Technologies, a telecom software services provider. He spent 13 years at Nortel Networks, and before leaving in early 2000, was President for its fast growing Wireless Networks business and was responsible for its global carrier customers in Europe, The Middle East, Asia and Latin America. Mr. Desch has served on a number of boards including SAIC, Inc., Flarion Technologies, Starent Networks, and as the Chairman of Airspan Networks. He has a BS in Computer Science from The Ohio State University and an MBA from the University of Chicago.