Iridium LLC Bankruptcy Team 2: Yusuf Akkoca Tom Bloom Karen Delton Shweta Hire Eric Johnson David Mahzonni Greg Roy April 12, 2012

What caused Iridium to fail: was it a bad strategy, bad execution, or bad luck? Bad strategy and bad execution played a part in the bankruptcy Bad strategy – Took big bang approach to greenfield technology instead of an organic and phased approach – No pilot program to test feasibility and gather consumer feedback – Phone is too large and too expensive – Logistical problems trying to distribute phones – No service inside buildings – Short satellite life in years Bad execution – Failure to analyze infrastructure needs and costs – Need to negotiate and finalize agreements with local service providers in 240 countries – Too much spending and not enough cost management and controls (debt to capital ratio of 60% is extremely high) – Advertising campaign began before phones were available for sale – Could not answer one million sales inquiries

Why did Motorola finance Iridium with project debt rather than corporate debt? Money is ‘cheaper’ through corporate debt – Loans guaranteed by Motorola: 1996: $750 million at prime rate (7.75%) 1998: $750 million at prime rate – Loans not guaranteed by Motorola: 1997: $800 million at 13% and 14% 1997: $300 million at 11.25% So why did Motorola choose project debt? – Risk management Non-recourse nature of project debt protects Motorola and their shareholders Motorola assets are $9.4 billion while Iridium was expected to cost $3.4 billion (36% of Motorola assets) Motorola received $3.2 billion from Iridium between 1995 and 1998; Motorola spent $100 million between 1990 and 1993 High threat to non-completion would have hurt Motorola’s balance sheet; failure would have dragged Motorola down

What lessons regarding large, greenfield projects do you draw from this case? Understand your market—for what is there a market? What demand and what price? Use an organic, phased approach to implementation—spread risks through time Hire good project managers Manage finances well and protect cash flow Be flexible with plans if problems arise

Where is Iridium now? Bought in 2000 and made into Iridium Satellite LLC Changed from a consumer-oriented business to a Commercial Business Service They currently have the largest commercial satellite network in the world Only satellite phone/data service that covers the complete globe Iridium OpenPort® is launched - the world’s first and only global voice and data service engineered for the maritime market, delivers up to three phone lines and features always-on data with speeds up to 128 Kbps on an all-IP backbone. Now called Iridium Communications Inc. and is a publically traded company. ture=related ture=related

Thank you! Team 2: Yusuf Akkoca Tom Bloom Karen Delton Shweta Hire Eric Johnson David Mahzonni