Zero degrees latitude, 154 degrees west is not a location that many people have ever heard of, let alone frequented.

Lying some 400-kilometres away from the Christmas islands, it stands in perfect isolation in the south Pacific. But in August, it is set to become the focus of attention for Middle East telecoms investors. For it will be from here that the Sea-Launch rocket will blast off, carrying in its payload the region's first mobile phone satellite system, Thuraya-1.

After five years of planning and an investment of over $1,000 million, news of the launch will be anxiously awaited by all those involved in Thuraya. Launch failures are an inherent risk, a point underlined in March, when the last Sea-Launch rocket, carrying a satellite for London-based ICO Global Communications, crashed into the Pacific just minutes after lift-off. That incident delayed Thuraya, which was originally scheduled for a May launch.

Rocket failures are not the only danger to mobile satellite network (MSN) companies. On 17 March, Iridium, the first global satellite phone and paging company, terminated commercial services after it failed to find a buyer for its network of 66 low-orbiting satellites. Delays in equipment delivery, poor reception and the high debt burden were cited as the main reasons for the spectacular failure of the $5,000 million project.

ICO has fared little better. It appeared destined to follow Iridium into corporate obscurity until a group of investors, led by telecommunications pioneer Craig McCaw, stepped in with a $1,200 million lifeline in early May.

Thuraya is well aware of the difficulties that have beset other mobile satellite ventures, but maintains that it is completely different to the Iridiums of this world. 'This is the only MSN company that has gone through the proper procedures, ' says chief executive Yousuf Abdulla al-Sayed. 'There are no manufacturers involved in this project. The people behind it are from a telecoms and not a satellite background. Our capability is on the ground, knowing the tariffs, the area and the customers.'

Thuraya has not been established to provide global coverage. Instead, it will offer blanket mobile coverage to over 100 countries spanning the Indian subcontinent, central Asia, north and central Africa, and Europe. It has the opportunity to widen the coverage, pushing further down into Africa, although the company will concentrate on its target audience first.

Being a regional player gives Thuraya some advantages. Its total costs, estimated at $1,020 million, are considerably lower than its global counterparts'. Consequently, its debt-financing is comparatively small at $520 million. Its satellite system also has a longer life span. Comprising two satellites - one in orbit with one as back-up - it is expected to last 12-15 years, compared with 5-7 years on some global networks, the company says.

Thuraya's shareholding draws heavily on the Middle East and North Africa, home to 16 of its 18 shareholders. It is a similar story with the 16 service provider agreements (SPAs) signed with partners over the past two years: they run from Algeria through to Pakistan.

The SPAs vary in content. Some call on service providers to supply everything from handsets through to billing and customer service; others only deal with legal and regulatory matters. Nevertheless, all are considered critical. 'They [SPAs] are a must for our entry into any market and are an essential component of our business. In fact, without them, there would be no business, ' Al-Sayed says. At the same time, Thuraya has signed more than 50 roaming agreements, a figure that is expected to increase to more than 100 after operations begin.

Thuraya is due to receive its first 1,000 handsets, manufactured by the US' Hughes Network Systems and Switzerland's Ascom, in time for the Thuraya-1 launch.

Deliveries will begin in earnest once the satellite network begins commercial operations. This is scheduled for December after four months of satellite and network tests.

Pricey proposition

Thuraya will sell the sets at $600 apiece to the distributors. 'There may be a fee on top, but we are encouraging everyone not to make money out of the handsets, since they are an enabler, not a barrier, to service, ' Al-Sayed explains. The cost of local calls is expected to be in the range of 50 cents to 70 cents a minute, rising to between $1 and $1.25 a minute for international calls. 'There will obviously be some regulatory issues in some markets, but we are planning to make charges more competitive. This is not our best and final price, ' he says.

Some 235,000 handsets will be supplied to Thuraya in the first six months of commercial operations. 'Handsets will be delivered in batches to the service providers and demand will be closely monitored to make sure there is no gap in deliveries, ' Al-Sayed says. By the end of 2001, the company aims to have 475,000 subscribers. After that, the subscriber base is expected to ramp up rapidly and is projected to reach 1.8 million, the total capacity of the Thuraya-1 satellite, by 2004. By that time, Thuraya-2 is scheduled to be in orbit.

Although essentially a back-up satellite, some of its capacity can be used for traffic if demand warrants.

Thuraya is setting great store by the handsets to achieve its growth targets. 'We have spent a considerable length of time looking at the prospective users and what they would accept, ' Al-Sayed explains. 'We decided that anything weighing above 250 grammes would not be acceptable. We also saw that no one wants to carry separate GSM [global system for mobiles] and satellite phones.'

Weighty issue

What Thuraya has come up with is a three-inone terminal, weighing just 212 grammes. It has a satellite component, with a GSM phone built-in, along with a global positioning satellite (GPS) system. As a result, the user can hook into the GSM network when coverage is available, and switch to the satellite service when it is not.

As on other networks, Thuraya's satellite service will not be available indoors.

However, the terminal will include a signal, which will alert users to incoming calls, so they can then go outdoors. Plans are also in motion to add other handset facilities, including wireless application protocol (WAP).

Thuraya does not envisage any problems with call quality on its satellite network. 'We have a tried and tested technology. Geo-synchronous satellites have been around for years, ' Al-Sayed says. 'It is also not a moving satellite, which means that once you make a call, the signal stays.'

Thuraya will face immediate competition from the Globalstar network, particularly in Saudi Arabia, where Saudi Globalstar is due to have a soft commercial launch of its mobile service in June and a main launch in midSeptember at the start of a regional roll-out programme. However, Al-Sayed believes that Globalstar will not harm Thuraya's prospects. 'Our market studies show that both of us together will not have enough hardware capacity to meet demand, ' he says.

Over the coming six months, Thuraya will face a challenging agenda and will be looking to avoid the mistakes that have proved so costly for other MSN companies such as Iridium. Al-Sayed recognises that Thuraya has to provide a full service, including voice, data, fax and all supporting GSM functions from day one of commercial operations. That means any technical and distribution glitches, whether in the satellite, at the primary gateway in Sharjah or in the handsets, will have to be ironed out well in advance. 'We have to put in the customer 's hands what we are promising, ' the chief executive says. 'We have to be sure what we say can be delivered.'

Thuraya Satellite Telecommunications Company: key facts

Founded: January 1997 Headquarters: Abu Dhabi Capital: $500 million Shareholders: Emirates Telecommunications Corporation (Etisalat); Abu Dhabi Investment Company; Arab Satellite Communications Organisation; Qatar Telecom; Al-Murjan Trading & Industrial Company (Saudi Arabia); Dubai Investments; General Post & Telecommunications Company (Libya); Hughes Space & Communications International (US); Mobile Telecommunications Company (Kuwait); Bahrain Telecommunications Company; Oman Telecommunications Company; Public Telecommunications Corporation (Yemen); Egypt Telecom; Maroc Telecom; Sudan Telecommunications Company; Tunisie Telecom; Deutsche Telepost Consulting Total cost: $1,020 million Turnkey contractor: Hughes Primary gateway: Sharjah Target satellite launch: August 2000

Target commercial operations: December 2000