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