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. Last Updated: 07/27/2016

Phone System Rings The Changes at Last

Russia will launch the first phase of a $40-billion project to upgrade its antiquated phone system in early 1995, working with three Western companies -- U.S firm U.S.-West, Germany's Deutsche Telekom and France Telecom.

"We expect to sign a memorandum of intent with these three foreign partners on Oct. 10 in Moscow," First Deputy Minister for Telecommunications Alexander Krupnov said in an interview Monday.

He said the three Western telecom giants had already agreed to invest $600 million in the first phase of the project.

"The risks for Western investors are minimal," Krupnov said, adding that the Russian government had formally declared its support for the project.

The project has been dubbed "50 times 50" because it aims to connect 50 Russian cities with 50,000 kilometers of high-quality fiber optic cable.

It would give Russia an ultra-modern telecommunication network and allow the installation of 20 million new telephones within 10 years.

At present only a quarter of Russians have their own phone.

In hundreds of villages, residents share a single telephone or do without altogether.

The Telecommunications Ministry puts the project's total cost at about $40 billion. Russian officials expect Western investors to put up about $14 billion of this sum.

Krupnov said that in the first stage of the project Russia would invest "potentially $800 million."

This would provide fixed assets like buildings, cables and equipment and waive license fees from Western partners for entering Russia's communications market and using the existing Russian network. "We have no spare cash," said Krupnov.

He defended Russia's decision not to accept offers from other international companies, saying: "It's better that the project will start only with few big firms and then open up (in the second phase) to all big companies."

Krupnov said revenues from the new network would be shared according to a formula which has yet to be fixed by both sides, but the money should be reinvested. The share held by Western companies could eventually be 30 or 40 percent.

The installation of the first lines could start in mid-1995.