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Iridium delays service
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September 9, 1998: 12:14 p.m. ET
Motorola spin-off to evaluate improvements in wireless service
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NEW YORK (CNNfn) - Iridium LLC said Wednesday it is delaying the full rollout of commercial telephone service for its global communications system.
The company said it will launch a test program Sept. 23 to evaluate improvements designed to correct technical problems experienced in its satellite-based wireless network.
Iridium, a $5-billion project that was created by, and subsequently spun-off from, Motorola Inc., had planned full deployment of the service Sept. 23. Instead, the company will distribute 2,000 handsets to select individual, corporate and government customers to "refine system performance and quality."
Full commercial service, including messaging and paging, now is scheduled to begin Nov. 1.
Though the delay puts a public-relations blemish on the company, one analyst said it won't adversely affect Iridium's revenue stream or analysts' estimates.
"I think most people had it in their numbers already," said Ann Henry, an analyst at BankBoston Robertson Stephens. "If this came as a surprise to people, then they were asleep."
Henry also explained that a delay means Iridium can put off incurring one of the biggest expenses associated with the system. Iridium entered into a $2.8 billion deal to pay Motorola to operate and maintain the satellite network. The company doesn't begin payments, however, until the service is launched.
"The initial major expense is paired with the commercial launch," she said. "Ironically, (the delay) has no effect on anything in terms of revenues."
Nonetheless, Iridium's (IRIDF) stock has suffered in the last few months. After hitting a high of 72-3/16 in May, the company's shares were at 33-5/8, off 3/4, in late-morning Wednesday trading.
(Click here to see Iridium's year-to-date stock activity)
Iridium said the launch of five satellites Friday and two satellites in August replace satellites that "had experienced anomalies during the deployment phase of the constellation." Three of the seven satellites will replace defective satellites, while the other four will serve as spares.
"Service delivery, including voice quality, service registration, call establishment, call completion, dropped call, and other service measurements, are improving day-by-day, with ongoing operational and software improvements continually enhancing performance," Iridium said.
The Iridium system is a global, satellite-based communications network designed to let customers communicate using handheld telephones and pagers.
Motorola previously said it expects to boost fiscal 1999 revenues from the sale of phones and pagers it has developed for Iridium.
Motorola (MOT) shares rose 9/16 to 43-9/16 in late-morning trading. 
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