The brick wall faced by virtually all suppliers attempting to win modernisation contracts for city telephone exchanges in the larger cities of the Russian Federation seems to have been breached by the Slovenian firm IskraTEL. At the end of 1992 the company installed the first 1,000-number exchange in Ekaterinburg, which was assembled at the local Ural Electromechanical plant. The deal marked the culmination of years of negotiation with the city authorities. In the first months of 1993 the firm announced a string of other contracts in Siberia and the Urals. Recently a deal worth $2m was struck with the Nizhnevartovskneftegas (Nizhnevartovsk Oil & Gas) combine and the Sibneftepererabotka (Siberian oil processing) combine to supply telephone exchanges each with a capacity of 8,000 numbers. The installation is due to be completed this month. The company has also won a $6.2m contract with the Tyumen regional government to provide an intercity telephone exchange for the city. The capacity of the exchange will be 5,000 channels. According to Vladimir Smirnov, manager of the Tyumen intercity exchange, the installation of the new equipment was also due to be completed this month. The company will soon complete the installation of two local telephone exchanges in Tyumen (numbers 32.. and 33..) with a total capacity of 26,885 numbers in the city. IskraTEL specialists are currently laying optical fibre cables to connect the city’s exchanges. In stark contrast, at the end of 1989 NEC Corp signed a contract with the Ekaterinburg City Telephone Network for an exchange with a capacity of 30,000 numbers (costing $10,000) which was to be paid for by raw materials.

Wrangling

After years of wrangling, the contract was suspended in 1992. NEC has come across similar problems is Novosibirsk. In both cases the heads of the city telephone networks (Vladimir Panov in Ekaterinburg and Valentin Dolgoborodov in Novosibirsk) say the company would only take full payment in advance and insisted on using its own engineers on the projects. These issues eventually proved impossible to resolve. The main stumbling block for all suppliers like NEC is that few city networks have much hard currency to spend on new equipment, and since local rouble telephone charges are so low, no company can recoup the initial investment from tariff income. So far only IskraTEL seems to have got around this problem. Producing equipment based on old licences from Alcatel NV, the firm used to be a major telecommunications supplier to the former Eastern bloc. Though it now has few East European customers it has proved that with cheap, intermediate technology and a limitlessly flexible approach to business, it is possible to sell exchanges to Russian cities. IskraTEL’s exchanges are cheap, modular – they can be purchased in stages as funds become available, and compatible with most of the equipment already installed (much of it by IskraTEL). What the company has also been at pains to do it allow local input into its products. It was partly by successfully organising joint local production of its exchanges in Ekaterinburg that the firm succeeded at the expense of NEC.