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Tuesday February 1 11:31 AM ET
US-Russian Firm Plans $350 Mln Internet-Cable Net
By Peter Henderson
MOSCOW (Reuters) - A new U.S.-Russian joint venture will risk $350 million to shed Russia's backward technology and propel it into the 21st century by building an Internet and cable television network in Moscow, officials said on Tuesday.
Andersen Group(NasdaqNM:ANDR - news), a U.S. holding, and COMCOR, a Moscow high-tech firm partially owned by the city government, are investing $33 million each in a joint venture which will take a $100 million loan and reinvest profits to build a cable system. Their joint venture, COMCOR TV, has a license to connect half of Europe's third largest city to a 2,000-km high-speed fiber optic network backbone which already snakes through the city and chiefly serves government offices.
Its officials expect a third of Moscow's 10 million residents to sign up within five years.
The first subscribers in Europe's largest city will join for good quality television, the company says, but Internet services will provide half of revenues within five years as a minority of subscribers begins to rely on a high-speed Internet hookup.
Yuri Pripachkin, COMCOR TV's interim chief, said Russia would move from bad television reception and scratchy modem connections to the highest tech and make the net a basic source of information.
``The problem with the Russian Internet now is that most of the resources are in the West. One of our goals is to make Russian resources accessible by Internet and to reorganize their representation on the market,' he told Reuters.
An army of engineers will link up to 1,000 apartments per day, promising COMCOR TV a profit in 22 months, he said.
Basic packages of local channels will cost the equivalent of $2 per month, so that 70 percent of the 1.5 million households it is licensed to serve will sign up. The firm expects to beat competitors on price and by offering Internet access.
Internet The Key
The Internet is critical to the firm, though five to eight percent of subscribers are expected to sign up in five years.
Russia will top Europe's computer sales growth rate this year and its Internet will expand at more than twice Europe's 50 percent rate, COMCOR TV estimated.
It will invest and co-operate with Russian portals and information providers, an underdeveloped market, and its basic level of Internet service will eventually focus on a closed network of Russian-language services.
Frank Baker, chairman of Andersen Group, said the potential was huge. He attributed recent company losses to Russian investments and said his group was cashing out of a Russian titanium maker at a loss to focus on COMCOR TV.
The market still considers Russia risky.
COMCOR TV, of which Andersen has 50 percent minus one share, was braced to pay a hefty LIBOR plus four percent interest rate -- or about 10 percent annually -- for the $100 million loan, he said.
ICE Securities, a brokerage which works heavily in Russia, said Internet entrepreneurs had great ideas but lacked cash.
``After Russia fell in foreign investors' order of priorities in August 1998, hardly anybody noticed the grassroots revolution in cyberspace, with Internet usage thriving at staggering rates,' ICE wrote in a recent survey. |
