Jim Walz, president and CEO of Iridium North America, a private gateway operator that is still open for business to some non-commercial Iridium customers, recently sat down with Mobile Satellite News to discuss the current state as well as the future of Iridium specifically and the mobile satellite voice market in general and the challenges that lie ahead. Overall, Walz commented that when you have an engineering feat like Iridium, it is tough to let it go. He would not be surprised if one of the bail-out offers is accepted, if to preserve the technology alone. Here is what he had to say:

MOBILE SATELLITE NEWS: In your opinion, what went wrong?

Jim Walz: Well, I think you have to start with when Iridium was really put together – it was a number of years ago. And one of the unique things about the satellite business is that when you decide to get into it and you actually deploy, implement and execute your business plan, there’s a fairly large gap of time because of the technology, putting satellites up. To the space of Iridium, it was a very complex project because it was a global system that was really launching worldwide in one day, unlike other businesses that follow more of a stair-step approach where you open one market and then the next market and then the next market, so, it was a massive undertaking. And when you look at all the things that had to be done, I wouldn’t call it a failure. It was a venture that was shooting for the stars and hit the moon. And hitting the moon was no less a feat itself, because just to put the technology up there, and to gather these global investors and set up gateways worldwide, get licenses in 130 to 150 different countries, get approval for acceptance of handsets, making the handsets, building a worldwide billing system, on and on and on. Everything was from the ground up proprietary, something new, breaking new ground.

So I never look at Iridium as a failure, I look at Iridium as a business that when it was developed until it was implemented, the world went through a lot of changes and in the area of telecommunications, the best word to describe it is blur. I think the Iridium organization was set up not with that speed in mind.

MSN: Looking at the actions of Globalstar and the forthcoming venture of ICO, do you see these companies succeeding where Iridium failed, or do you think they are destined to suffer the same fate as Iridium?

JW: Well, my view, and again for what we did, we changed our business plan fairly quickly when we came into market in North America, we found that the satellite-voice market was more of a narrow market, a more of a boutique market in that surely the government in maritime in aeronautic, in construction, in gas, in oil, in media and transportation are really the user-bases we were going after – these seem to be the people that have a propensity, a strong need for information, exchange, and also have a strong need for doing, for traveling to remote areas. So I think there’s a business model out there. I think what is a daunting challenge for anybody – if they’re playing within the voice range, is really gathering up that ecclectic customers around the globe, and running on an operational expense that makes sense, and that’s really what it is. It’s the ability to run this business, which can produce good revenues and margins, but you have to build a foundation from the expense standpoint – operating costs, constellation costs, ongoing costs – that is affordable so you can make money in reasonable time and move towards a cash-flow positive mark, which I think the finance people are looking at now.

MSN: If someone does come and purchase the LLC and saves the satellites from coming out of orbit, do they have to now renegotiate contracts with each of the individual gateway owners around the world?

JW: Yes, they would not only have to purchase assets, but would have to get into negotiations with the various gateways.

MSN: How much it costs to keep the gateway running and how much it costs to keep the satellite system running?

JW: You know, I have a good idea, but I don’t think my investors would like to see that information released. As a private company, we’ve always been one to keep numbers of subscribers or financials guarded. We’re not a public company, so we’re not required to divulge that information.

MSN: From a comparative standpoint, how closely are you following the numbers released by Globalstar and how do they compare with the kind of activity you are doing?

JW: I haven’t seen any numbers released. I haven’t seen anything in the newspaper, so I’m not too up on anything that’s going on with them. Hopefully, they have enough time and the money behind the operation will allow enough time to readjust their business plans, whether that’s pricing or distribution or services or products. I have heard rumors that they are having some tough times, but again, satellite ventures are quite unique and it’s hard to change them overnight. Once you’ve got them going in a direction, it’s like a large ship or oil tanker. Once they’re going in the direction, to put the brakes on and change direction, you just can’t do it. It won’t turn on a spin and that’s the nature of the business, whereas I think there’s other communications environments out there where they can read the tea leaves a little bit quicker and make the moves. And so, based on that, you need a nice, long-term strategy. You need people who can deviate quickly from a new plan as need be, and you need to have positive support behind it for that motion to work.

MSN: I suppose that’s the advice you would give to the potential company that would save Iridium and keep the system running.

JW: My advice would be have enough money, have the money at access, so if you see that you have to reinvest money, or change business plans, that you have access to [it], without going back through the long process of borrowing money. I think you have to develop a business plan. I think you have to have two. I think you have to have a long- term strategy, which I consider a business strategy, and I think you have a short-term implementation execution which, in my view, should look no further than the beams of your headlights of your car. So I think the best way to run the business is you set short-term goals, that as long as you’re maintaining those short-term goals you’re successful, but short-term goals allow you to constantly reassess your strategy. If you lock and load into something and you blindly follow, I think you’ll get in trouble in the satellite business.