Iridium Trips Motorola

A recent ruling by the Bombay High Court could seriously threaten the very
existence of telecom equipment major Motorola in the country. Considering that
Motorola India clocked Rs1210.3 crore in revenue in 2002-03 (according to Voice
& Data), this might sound like a bolt from the blue. But such pessimistic
prognosis would not be too wide off the mark, since the ruling directs Motorola
to deposit Rs 550 crore ($120.5 million) with the court as well as restricts it
from repatriating money it obtains from its clients in India.

The reason behind the adverse ruling is the judicial contention that $90
million invested by Iridium India Telecom. (IITL) into Motorola’s disastrous
Iridium satellite phone project between 1992 and 1997 was done on the basis of
fraud and misrepresentation perpetrated by Motorola. This serious allegation was
made by ITIL, a consortium comprising IDBI, ICICI, HDFC and IL&FS, which was
launched during the 90s. It was then supposed to be the world’s first
commercial wireless communication system using satellites and digital
technology, created and developed by Motorola.

Though Iridium enjoyed its fifteen minutes of fame especially during the
Kargil war, the project aimed at the international business traveler turned out
to be a total commercial failure. Subsequently ITIL filed for refund of its
entire investment in 1999 following which in 2002 it sued Motorola claiming
refund of its $90 million investments plus an interest of $30 million. It also
claimed Rs 377 crore as losses incurred on constructing the Indian gateway in
Pune as well as other operational costs.

Taking cognizance of ITIL’s complaints, the court has delivered its ruling
though as of now it has declined to pass any judgment on the Rs 377 crore
component.

On the face of it, this appears a logical argument, though ITIL has been
pointing out discrepancies like the Iridium handsets do not work in cars,
buildings or even trees obstructed signals. However, if the court ruling stays
Motorola’s India plans could end up in fiasco and that might in the long run
impact the Indian telecom scenario.

Rajneesh De in Mumbai