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. Last Updated: 07/27/2016

Slumping AT&T Stages Rally in CIS

It may never become the Ma Bell of Moscow, but AT&T is pushing hard to raise its profile in the rapidly emerging markets of Russia and the other former Soviet states.

It's not as if the company is a newcomer here. AT&T arrived in 1943 to set up the first international phone line between the United States and the Soviet Union.

But things have changed dramatically. Like the old Soviet behemoth, AT&T has been busy breaking up -- and the company sees advantages in both developments.

That was the essence of a first-class press tour -- including a chartered flight to St. Petersburg and rooms at the Nevsky Palace Hotel -- organized by the company last week.

The tour coincided with the first anniversary of AT&T's announcement that it would split itself into three parts. The main service provider is separating from its Lucent Technologies equipment-manufacturing division and its NCR computer businesses.

The move apparently was aimed at allowing AT&T to focus on its core service business amid increasingly cutthroat competition in the U.S. market where it once enjoyed a virtual monopoly.

Company officials concede that not everything has gone as well as they hoped. AT&T share prices in the United States took a tumble late last month when it emerged that company profits would be about 10 percent lower than analysts had anticipated for the third quarter -- with no immediate improvement in sight.

The free-for-all in the U.S. market has provided even more incentive for AT&T to chase big corporate customers into Europe, where deregulation is expected soon, and emerging markets like Russia.

The business performance of the three branches "simply was not as good as if they had been alone," said Arthur Braunstein, managing director of AT&T CIS Ltd.

Despite all the changes, the company is banking heavily on the cachet associated with the AT&T name as it steps up activities in Russia and other emerging markets.

"We have our name. Our business customers, and for those with operations based in the states -- that carried a lot of credibility in the Russian market," said Giovanna Mandato-Bushnaq, marketing director for AT&T CIS.

Just this year, she said, AT&T's customer list has grown "about 500 percent" from just a few companies at the end of 1995. Braunstein estimated that AT&T has invested about $100 million in former Soviet countries of the Commonwealth of Independent States, though he declined to predict the extent of future investments.

Through five joint ventures in Russia, AT&T offers long-distance and international operator services, credit and calling cards, mobile and satellite telephony, Internet access and consulting services for network designs -- in short, a sort of one-stop shopping for business customers.

"First of all, giant customers like PepsiCo are demanding integrated solutions, so part of this move [into Russia] is doing what your client asks," said telecommunications analyst Robert Morris of Goldman Sachs & Co. in London. "Otherwise, what they have are opportunities to exploit new markets."

Current operations in Moscow include Telmos, which began in 1993 as a project involving AT&T, MGTS and Rostelecom, Russia's telephone monopoly, to upgrade Moscow's network and increase the client base. Telmos over the next two years hopes to increase the number of lines in Moscow to 70,000 from 20,000. Another venture with Rosnet allows AT&T to offer data transfer, e-mail and other services.

In St. Petersburg, AT&T counts the local currency exchange among its customers and has teamed up with the Russian company Metrocom to lay a fiber-optic link for its ACCUNET service.

In Ukraine, AT&T has a 19.5 percent stake in Utel, which groups 14 state-owned telecommunications companies.