The point has been reached when significant Western financiers no longer see Russian telecommunications as an unjustifiable long-term risk.
This month, Japanese and Italian firms made major loan commitments that will help Rostelekom, the Russian long distance and international carrier, upgrade domestic lines and form lucrative new international links. In June this year, the Overseas Private Investment Corporation, or OPIC, which partly operates using U.S. government funding, agreed to guarantee a $300 million Russian fund which will be used specifically for Russian infrastructure projects, in which telecommunications is likely to play a major part. SFMT, the co-owner of Sovintel and Sovam Teleport, has amassed $100 million in debt and equity for an ambitious Russia-wide telecommunications services plan. U.S. West says that through its Russian Telecommunications Development Corporation, or RTDC, it has raised $75 million for its various Russian projects.
At operator level, companies are also finding funding easier to come by. U.S.-Russian joint venture Rustel has between $25 million and $40 million to invest in providing telecommunications to rural and secondary urban areas in the next 18 to 24 months. Its rival BelCom claims to have equally impressive plans after receiving a cash injection from U.S. satellite giant Comsat last year.
So is Russia getting easier and safer? Not in the opinion of the companies spending the money. "By no means is our investment safe and certain nor is our return guaranteed," says Jim Hickman, director of Rustel. "There is always the danger that any number of political factors might arise to move the country in a different, less advantageous direction than it's going now."
As is becoming the case in the energy sector, anuncontrolled regulatory situation can force companies to choose China rather than Russia. "The Chinese are much more aggressive and orderly about what they are doing in terms of foreign investment," he says.
Henry Radzikowski of SFMT hol ds a similar opinion. He says raising money is a lot easier than turning it into profitable ventures: "In Russia you don't invest if you don't run the network -- and if you don't know how to run a network don't invest," he says.
What is changing, however, is the amount of money telecommunications businesses are now making. This improvement in the general business environment here has a number of causes. Capital, locked up for many years, is now being released into the economy giving customers more buying power. As evidence of this, one can look to Moscow's half a dozen mobile telephone networks.
On a more mundane level, high technology trade restrictions are no longer preventing the sale of switches, computer control systems, fiber optic cable and satellite equipment. The dissolution of the Coordinating Committee for Multilateral Export Control, or Cocom, on March 31 was the final step in an already accelerating process which stripped away virtually all remaining export controls. Trade restrictions were the biggest single barrier for Rostelekom's 50x50 plan, the principal state investment plan for Russia's national telecommunications infrastructure.
It also appears that Rostelekom is beginning to realize it does not need to own the entire telephone network in order to control and profit from it. Its own investment plan, the 50x50 project, has involved years of negotiations with foreign suppliers and Rostelekom is now becoming much more expert in understanding the position of Western companies and the demands of potential financiers.Perhaps most important of all, these developments would have been impossible were it not for the speed at which Russian organizations are maturing as businesses.
Local telecommunication companies are now taking on a greater degree of managerial and financial responsibility, which makes organizing true joint ventures more realistic.
"It was in part the growing number of Russians who have experience of the West, who have some training in non-Soviet management styles and are willing and interested in becoming part of an entrepreneurial venture, which led to the opportunity of Rustel," says Hickman.
Robert Farish is the editor of Computer Business Russia. Tel: 265-4214 / Internet e-mail: [email protected]
This month, Japanese and Italian firms made major loan commitments that will help Rostelekom, the Russian long distance and international carrier, upgrade domestic lines and form lucrative new international links. In June this year, the Overseas Private Investment Corporation, or OPIC, which partly operates using U.S. government funding, agreed to guarantee a $300 million Russian fund which will be used specifically for Russian infrastructure projects, in which telecommunications is likely to play a major part. SFMT, the co-owner of Sovintel and Sovam Teleport, has amassed $100 million in debt and equity for an ambitious Russia-wide telecommunications services plan. U.S. West says that through its Russian Telecommunications Development Corporation, or RTDC, it has raised $75 million for its various Russian projects.
At operator level, companies are also finding funding easier to come by. U.S.-Russian joint venture Rustel has between $25 million and $40 million to invest in providing telecommunications to rural and secondary urban areas in the next 18 to 24 months. Its rival BelCom claims to have equally impressive plans after receiving a cash injection from U.S. satellite giant Comsat last year.
So is Russia getting easier and safer? Not in the opinion of the companies spending the money. "By no means is our investment safe and certain nor is our return guaranteed," says Jim Hickman, director of Rustel. "There is always the danger that any number of political factors might arise to move the country in a different, less advantageous direction than it's going now."
As is becoming the case in the energy sector, anuncontrolled regulatory situation can force companies to choose China rather than Russia. "The Chinese are much more aggressive and orderly about what they are doing in terms of foreign investment," he says.
Henry Radzikowski of SFMT hol ds a similar opinion. He says raising money is a lot easier than turning it into profitable ventures: "In Russia you don't invest if you don't run the network -- and if you don't know how to run a network don't invest," he says.
What is changing, however, is the amount of money telecommunications businesses are now making. This improvement in the general business environment here has a number of causes. Capital, locked up for many years, is now being released into the economy giving customers more buying power. As evidence of this, one can look to Moscow's half a dozen mobile telephone networks.
On a more mundane level, high technology trade restrictions are no longer preventing the sale of switches, computer control systems, fiber optic cable and satellite equipment. The dissolution of the Coordinating Committee for Multilateral Export Control, or Cocom, on March 31 was the final step in an already accelerating process which stripped away virtually all remaining export controls. Trade restrictions were the biggest single barrier for Rostelekom's 50x50 plan, the principal state investment plan for Russia's national telecommunications infrastructure.
It also appears that Rostelekom is beginning to realize it does not need to own the entire telephone network in order to control and profit from it. Its own investment plan, the 50x50 project, has involved years of negotiations with foreign suppliers and Rostelekom is now becoming much more expert in understanding the position of Western companies and the demands of potential financiers.Perhaps most important of all, these developments would have been impossible were it not for the speed at which Russian organizations are maturing as businesses.
Local telecommunication companies are now taking on a greater degree of managerial and financial responsibility, which makes organizing true joint ventures more realistic.
"It was in part the growing number of Russians who have experience of the West, who have some training in non-Soviet management styles and are willing and interested in becoming part of an entrepreneurial venture, which led to the opportunity of Rustel," says Hickman.
Robert Farish is the editor of Computer Business Russia. Tel: 265-4214 / Internet e-mail: [email protected]
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