Northern Sky Research

Iridium's Call to Consumers

Aug 10th, 2011 by Claude Rousseau   More from this Analyst | Profile

In NSR’s Mobile Satellite Services 7th Edition report, it was assumed that growth in the satellite handheld market would be fueled in the short-term by a new and ‘expanded’ version of Iridium’s handset “...with more capabilities (low-data rate, personal locator beacon).”

According to Iridium CEO Matthew Desch during the company’s Q211 earnings call, the handset may arrive in the coming quarter, with “...a broader mission to drive service revenues in ways we never have in the past...” Furthermore, he indicated that the device would be useful to “...check your e mail, update your Facebook status...“ 

NSR believes that a transition in MSS has been taking place for a few years now and that voice is giving way to data and ancillary services.  NSR views this diversification as a way to enter the mouth-watering “personal device” segment and as a way to sustain growth going forward in the face of increasing competition.   But, the twists and turns are many to widespread consumer adoption.

That said, Iridium continues to keep a controlling stake in the handheld market as they announced higher 2Q11 than 2Q10 commercial and government revenues. This growth comes while simultaneously offering the highest-priced handset in the market, and an unprecedented period of government spending cuts.  However, to maintain such growth figures going forward,  Iridium needs to target the consumer markets very carefully and look beyond the typical ‘voice handheld’ model.  With the upcoming InReach low-data rate personal locator beacon (PLB) set for release this fall, Iridium has started on this path and is no longer the company that steadfastly defended its traditional MSS focus.

PLBs represent a critical entry-point for MSS providers into consumer markets, with an already established user base.   Globalstar experienced the trials and tribulations of seeing devices sitting on the shelf while retail staffers were unaware that they had a new satellite product to sell.  Now, it has a leading foothold in consumer markets with over 157,000 SPOT units activated.  And, it is likely to add a new handheld in late 2012 or early 2013 that will have dual- and probably multi-mode connectivity, and could add two-way voice communications service to SPOT to expand its offering in the segment.  Thus, Iridium will have a steep climb ahead if it is to match the SPOT subscriber numbers and the more impressive 10,000 points of sale. 

Although there is definitely room for a consumer-oriented satellite play, questions remain if troops in the battlefield, or remote workers in harsh environments will be checking Facebook or sending Twitter updates.  Indeed, the core of the market is dead set on basic voice and low data rate services, period.

Bottom Line
The satellite handheld market is mimicking more and more the mobile phone business with various apps added to bring more revenues, as Iridium is planning to do.  But, there are big obstacles in reaching consumers markets, not the least of which is having the right sales channels, with the right device, at the right price.

Information for this article was extracted from NSR's report Mobile Satellite Services, 7th Edition.