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January 27, 1988

TELECOM’s TRANCHE 13: THORN-ERICSSON GETS 40% BUT GEC-PLESSEY TOLD TO THINK AGAIN

By CBR Staff Writer

Indications that GEC was indeed loss-leading on its System X supply business to British Telecom, undercutting Plessey on price per line as a way of bringing Plessey to the negotiating table in 1987 are emerging in the results of the latest round of digital switch ordering from British Telecom. Telecom has sent GEC and Plessey back with their tails between their legs on the first joint bid the companies have put together to supply System X to Telecom, saying that their combined bid is too expensive. Telecom’s official line is that the GEC-Plessey bid is inappropriate, while Plessey and GEC say that they are awaiting adjudication on their bid for Tranche 13. Many discussions take place between ourselves as suppliers and British Telecom, said a GEC spokesman. Meanwhile Thorn-Ericsson has announced that it has won an order worth over ?20m to supply 226,000 lines of its digital AXE switch, representing around 40% of the tranche 13 order. British Telecom orders between 2.5m and 3m lines of digital exchange equipment per year in a series of four tranches. Between 500,000 and 600,000 lines are ordered in each tranche and a Plessey spokesman believes that Tranche 13 could involve orders of up to 800,000 lines. Managing director of Thorn-Ericsson Duncan McDougall says that the Tranche 13 award, its first significant order in the UK for some time, maintains the company’s planned growth with sales set to double in the current financial year and ensures an order book topping 1m lines. It reaffirms confidence in our decision to increase production at our Scunthorpe factory to a level, which has enabled Thorn Ericsson so far to capture one third of the UK digital local exchange market. Thorn-Ericsson indicated that it did poorly in 1987 because it was caught in the crossfire of the price war between GEC and Plessey. Although Telecom director Douglas Perryman said in October 1987 that unless Thorn-Ericsson reduced price per line for its exchange, it would probably have to bring in a third switch supplier, the price per line for the AXE exchange in the UK is its lowest anywhere in the world.

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