Iridium sets up shop in Iraq

Iridium Satellite said on Monday it has been granted the right to sell its services in Iraq, where conventional telephone services have been severely damaged as a result of the war.

The satellite phone company already has a significant presence in Iraq as a result of a deal with the U.S. Department of Defense initiated in 2000. Under that deal, renewed in December, the U.S. military pays $36 million a year for unlimited access to Iridium's network, which allows voice or data transmissions from almost anywhere in the world.

Satellite phones are seeing increasing government and commercial usage in areas where no conventional telecommunications infrastructure is available, partly due to drastic price cuts by operators. Iridium and competitors such as Globalstar target the government, forestry, maritime, oil and mining industries.

The U.S. military, which supplies 20,000 government workers with Iridium services, is still Iridium's largest customer, although the Arlington, Va.-based company said large civilian contracts are a growing part of its business.

Monday's authorization by the office of the Coalition Provisional Authority, which currently holds governing authority over Iraq, and the Ministry of Transportation and Communications means that Iridium can also sell its equipment and services commercially in the region.

"While Iridium has experienced great success with its Department of Defense usage within the region, we are extremely pleased to have received this authorization and to be able to provide the much-needed communications services that Iridium has to offer to the commercial sector," said Iridium chief executive, Gino Picasso, in a statement.

Iridium rival Globalstar, based in San Jose, Calif., has also offered satellite-phone service in Iraq since mid-April. It said it expects usage to rise dramatically with the end of fighting, as usage has done in Afghanistan, where combat ended in early 2002. Globalstar said that usage in Afghanistan and the surrounding regions is now more than double the average level of 2002.

Globalstar said it had 84,000 subscribers worldwide at the end of March, and said it now has more than 90,000.

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Both Globalstar and Iridium have gone through a bankruptcy process and emerged with more attractive service offerings, having cut call rates to below $1 per minute and reduced prices on handsets. Iridium's new owners took control of the company after its 1999 bankruptcy, and the Department of Defense deal was crucial in salvaging the carrier's finances.

Globalstar is in the midst of its own restructuring. ICO Global Communications, chaired by mobile industry billionaire Craig McCaw, earlier this year received U.K. court approval to take a majority stake in Globalstar in exchange for a $55 million investment. The deal is scheduled for completion this fall.

ZDNet UK's Matthew Broersma reported from London.