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AT&T Wins $4 Billion Deal to Modernize Saudi Arabia’s Telephones

May 10, 1994

NEW YORK (AP) _ AT&T Corp. won a $4 billion, seven-year agreement to build an advanced digital communications network in Saudi Arabia, the company said Monday.

AT&T beat out several rivals for the deal, including Northern Telecom Ltd., Siemens AG and LM Ericsson Telephone Co.

Although terms are not yet final, the deal could increase the company’s annual sales by about $600 million through the year 2000. AT&T had revenue of $65 billion last year.

″We are delighted that AT&T was selected to partner with the Saudis in their telecommunications expansion project,″ AT&T Chairman Robert E. Allen said in a statement.

He also thanked President Clinton, who last month sent a letter to Saudi King Fahd urging that AT&T be chosen. Secretary of State Warren Christopher also mentioned it in a visit to the king.

Commerce Secretary Ron Brown, who made two trips to Saudi Arabia in the past year, said the contract ″commanded top priority″ at his department for the past eight months.

The AT&T executive in charge of the bid, Dan Hesse, said the company’s rivals received similar support from their governments.

The deal was announced in a letter of intent by the Saudi Arabian Ministry of Posts and Telecommunications. It is the largest international telecommunications equipment order ever, beating the $2 billion that Saudi Arabia spent in the late 1970s with Philips NV and Ericsson, AT&T said.

The contract is to double Saudi Arabia’s existing communications system capacity by 2000, creating 1.5 million digital lines as well as wireless systems. AT&T plans to deploy digital switches at more than 200 locations in the kingdom.

AT&T has been doing business in Saudi Arabia for 15 years.

While the deal is an important victory for AT&T, analysts said they could not immediately determine how profitable it would be for the company.

″The way I’d summarize it is it sure can’t hurt,″ said Tony Ferrugia, analyst at A.G. Edwards in St. Louis. ″It’s good business because you know the Saudis have the money to pay for it.″

AT&T’s stock closed Monday at $51.75, down 25 cents, on the New York Stock Exchange. The company announced the news after the market closed.