With the enormous potential market for telecommunications that exists in Latin America, especially in Brazil, Chile and Argentina, the battle between foreign multinationals to supply phone equipment to the Argentine government rages on. Unlike Europe where the demand is now mainly for enhancement services, South America, having reequipped itself in the 1970s, is still undergoing enormous industrial development. Pushing hardest for business are French-controlled Alcatel NV, Siemens AG of West Germany, and the Japanese Perez Compac-Nippon Electric Company, Pecom-NEC. Over the last 10 years the Argentine government has invested $2,000m in phone equipment in an attempt to improve the country’s infrastructure as it fights its economic crisis. The battle for the market started in 1979 with a competition run by the then military government. As a result of this 355,000 lines were awarded to Pecom-NEC and 155,000 each to ITT and Siemens, beating Fujitsu, Hitachi, Ericsson and Philips who also bid for the business. A duopoly was then created when ITT pulled out leaving its share to Siemens. With the Falklands War and the collapse of the government, the work was not completed until the mid-1980s. Argentina did manage to replace 600,000 electromechanical lines with digital ones, and development in Argentina of a basic electronic industry capable of providing 55% of the necessary components. The remaining 45% is made up of chips that are not manufactured in Argentina. To make worthwhile the investment from abroad that the project required, the government guaranteed consumer demand of 200,000 lines per year. In addition to this project, Entel also set up a public competition for a digital exchange circuit (DIGI I), which was won by Pecom-NEC a company that has invested about $80m in the installation of six fibre optic digital relay exchanges to prevent saturation of trunk lines between cities. But traffic has now outpaced capacity again and gridlock is forecast within two years, so the contract for a second project, DIGI II, has been awarded to a group led by Telefonica de Espana SA in partnership with Telettra SpA of Italy, which includes Siemens’ Argentine and Italian subsidiaries, the Italian-Argentine group Techint and Siemens’ Argentinian fibre optic subsidiary ICSI. The group aims to provide a second high-capacity digital trunk network at a cost of $400m. Under President Alfonsin, Entel also launched a project called Megatel. Building on previous telecommunications equipment projects, lines costing $1,500 each were installed. At the end of the first phase, however, official reports estimated that another 400,000 lines were needed to meet continuing demand. Franco-Argentine agreement In 1985 the French authorities offered 10,000 lines in exchange for a major participation in Megatel’s future. Alcatel, hoping to put competitors Pecom-NEC and Siemens out of the market, offered 400,000 lines (10,000 of which were to be donated) for a part in 357,000 future lines. The most recent arguments, however, are over a new competition which has been opened, even though Pecom-NEC still has 150,000 lines to install (depending on demand from the Argentine phone company Entel) from the 1979 competition, for another 40,000 replacement lines. The latest recommendation for these from the Argentine Directerio de Empresas Publicas (which handles tenders and has the power of veto) favours Alcatel’s offer. This judgement was made despite claims from the two traditional suppliers that their offers, ranging from $2m to $3m, undercut that from Alcatel. It seems that Alcatel’s entry into the market results from a Franco Argentine agreement similar to the one signed between Spain and Italy over Telettra’s part in DIGI II.
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