Russia’s attempts to introduce large-scale competition into the Russian telephone industry got off to an encouraging start in late 1995 when a public offering of shares in Svyazinvest, the holding company representing the government’s 51% stake in 85 of Russia’s 87 regional operating companies, attracted the bids of several foreign investors. But a promising set of negotiations with the Italian state telephone company ended in an imbroglio at the year’s end, turning imminent success into sudden, dismal failure. Ever since, Svyazinvest has been widely considered an unattractive investment, and the failed negotiations prompted concerns that Russia was incapable of successfully bringing off a major international investment. Recently, the government has taken steps to consolidate the ownership of Svyazinvest with that of Rostelekom, the partially-privatized, primary long-distance and international service provider, leading many observers to believe that Russia will soon have a telecommunications monopoly the likes of Deutsche Telekom or France Telecom. Given Russia’s pro-competition communications policy, however, such an outcome seems unlikely.

 

Steven M. Chernoff*