Satellite phones were once like cellular phones large, bulky and expensive.
Satellite phone companies start with bold attempts to change mobile communication as we know it by offering a phone that works anywhere. Billions have been invested, but satellite phones are only used by a choice few. How many folks do you know that own a satellite phone?
One of the problems is the extreme cost it takes to put the satellites in the sky and the network on the ground. TerreStar is the latest victim of their $1.2 billion debt load. TerreStar launched its Genus phone last month and has also filed chapter 11. Not sure if the phone will sell enough at a price tag of $799.00 to keep them in business.
SkyTerra now called LightSquared also planned a hybrid terrestrial satellite network and just like TerreStar carries over a billion dollars in debt with an interest rate of 16%! LightSquared has been taken private and has been provided $2.9 billion to work with. Adding to their problems the satellite they launched in November has not been able to fully deploy its antenna meaning that part of the satellite network will not function. LightSquared will need to launch another satellite for their network to function.
ICO Global Communications filed for chapter 11 bankruptcy last May with a debt of $790 million.
Iridium was the first company with a bold plan launching 66 satellites providing a constellation that would give complete coverage everywhere on the planet. After launching in November of 1998 the company filed chapter 11 nine months later. Iridium runs up $3 billion in debt before it was over and never raising the money needed to keep the company going.
In 2001 private investors bought Iridium for only $25 million. They have grown the company and became profitable reporting 413,000 subscribers with an income of $12 million.
Globalstar also launched a large constellation at a great debt level. With not enough cash flow, like Iridium, Globalstar went into bankruptcy in 2002, but unlike Iridium continuing to operate emerging in 2004 with a new private owner. Globalstar is launching a new replacement constellation that is projected to be fully functional with 32 satellites by 2012.
These companies go bankrupt because of the extreme cost of building a satellite network. One satellite can cost $100 million to launch. Add that to the small satellite phone market which only includes customers like emergency rescue, utilities, government agencies and some recreational customers.
The cost to purchase satellite phones are high compared to cellular, from $495 to $1395.00 and 65 cents per call for the TerreStar to $1.50 per call with the Iridium.
One company that has been very successful and not gone through bankruptcy is Inmarsat. Inmarsat started as a government type owned company before becoming a private company in 1999. It established itself as “the” provider of satellite communications at sea which still stands today.
Who knows if satellite phones will follow the path of cellular and get cheaper with more competition only time will tell.