Following its initial agreement to manufacture telephone handsets, and subsequent trials of a radio telephone system for sparsely populated rural areas, Telefonica de Espana SA is poised to become the major foreign telecommunications player in the Soviet Union – perhaps pioneering digital switching technology there at some stage in the future. On Friday, the company signed a long-term co-operation agreement that covers development and manufacture of public pay telephones and printed circuit boards for use in telecommunications equipment. The negotiations are now moving on to fibre optic equipment, transmitters for emergency buoys for shipping, and export of a part of the output of the manufacturing ventures. On switching equipment, the Spanish telephone company is currently closest to Alcatel NV, and it is possible that it will propose transfer of System 12 or the Alcatel E10 digital exchange technology to the Soviet Union. Such agreements need patience, and Telefonica has been talking for four years.