Telecommunication
References Networking Case (Last Item)
October 7, 1994
Representatives of the three Western companies in Moscow late Wednesday signed a memorandum of understanding to conduct a technical feasibility study and business plan for the project with Russia's long-distance phone company, Rostelekom, the country's local telephone companies, and the Russian communications ministry, US West officials said. The study, scheduled to take four months, is expected to lead to the Russian and Western companies forming a joint-stock company to try raising cash for the project, build the network, and run it.
The signing of the memorandum advances planning for the high-profile venture, the largest single telecommunications construction project in the world. But still unresolved is how, or even whether, the Russians will raise the vast sums involved. Russian ministry officials have said they expect the money to be raised gradually over the 10-year life of the project, from Western lending agencies, banks, investors and the three phone companies - as well as from the Russians, themselves. In the end, industry analysts say, only a fraction of the money may actually be found - but even that sum would yield significant telecommunications-equipment contracts to Western and Russian suppliers.
The project is dubbed 50x50, after the 50 long-distance telephone exchanges and 50,000 kilometers of long-distance cables that the Russian ministry initially envisioned when it started talking about the project last year. Since then, the project has grown to include more long-distance exchanges and cables - plus the installation of 20 million new local telephone lines around Russia, nearly doubling the number of local phone lines in the country.
Precise investment terms for the three Western phone companies aren't yet worked out. Victor Pavlenko, president of US West's Russian affiliate, said it envisions that the three Westerners will take equal shares in the planned joint-stock company that will run the new phone system-but that overall, the Russians will retain majority control of the company. The joint-stock company would get a license to operate the new network for at least 50 years. he said.