Partnering in Saudi Arabia

When Ericsson-Philips won the order for AXE in Saudi Arabia in 1977, it was naturally a triumph for both companies, but above all a victory for all the employees at Ericsson and Televerket, the Swedish PTT, who had developed AXE. The new digital system had only been tested on a small scale in Södertälje, Sweden and Turku, Finland. Although AXE orders had been received from France and Australia, the build out of AXE in Saudi Arabia was to be the test of fire.

Network deployment was handled primarily by employees from Ericsson and Philips. A South Korean contractor was engaged to lay the cable network and to construct the stations. At the height of the project, more than 10,000 workers were employed in Saudi Arabia.

Finding skilled workers was important, since the project plan was tight. By December 1978, 75,000 lines, including the network cabling and switching stations, had to be in place, and just one year later, an additional 100,000 lines were to be added. Luckily, it was easy to recruit personnel from Sweden. The pay was good, and working on the Saudi Arabian project carried prestige, since this order was regarded as important for helping Sweden to recover from the prevailing recession. The order also had this effect.

Ericsson-Philips met the tight delivery schedule. This was due in part to the fact that the AXE systems digital components weighed significantly less than those of previous systems. It was therefore possible to transport them quickly by air, instead of by sea, as was previously common.

The unique modular design of the AXE system also saved considerable time, since switching stations could first be tested in a test installation in Sweden before being disassembled and shipped to Saudi Arabia for final assembly. Because testing had already been completed, switch installation proceeded rapidly and smoothly. Previously, switching stations could only be tested while they where being built, leading to the inevitable complications when faults were discovered.

Development of a modular system was due in large part to the fact that Ericsson had always been heavily dependent on export sales to countries with disparate requirements.

- Ericsson never had a large domestic market, relates Björn Svedberg, who was president of Ericsson when the Saudi Arabia order was delivered.

- It was therefore important to develop products that could be used by many different customers. Since it was not possible to produce a new system for every market, we were forced to design a modular system with different applications for each market.

The project went smoothly not only on the technical, but also on the personal level. Cultural clashes between East and West were noticeably absent, due perhaps to the fact that the Europeans lived by themselves. Ericsson-Philips built three large camps for employees and their families so that foreign contractors with lengthy assignments would not be forced to rent housing for their employees. At this time, there was a serious housing shortage in Saudi Arabia.

The partnership between Ericsson and Philips also functioned smoothly. The two companies shared the work equally and took responsibility for different regions of the country.

- We tried to be as fair as possible with just as much high technology as low technology for both sides, explains Olof Höstbeck, who was marketing manager for the Middle East at that time.

A prerequisite for enabling work in Saudi Arabia to flow as smoothly as it did was that contacts between the two companies' head offices were frequent and intensive.

- We were lucky that development of the telefax had advanced as far as it had by 1980. Otherwise, the project would hardly have been possible, says Ove Ericsson, who was manager for the X division for telephone switches at the time.

The order was profitable for both companies. Payment to Ericsson-Philips was made in the local currency, Saudi rials. When the contract was signed in 1978, the order was valued at SEK 10 billion, but by the time the work was completed in 1984, the project had been expanded considerably and the Saudi rial had increased sharply in value. The result was that Ericsson-Philips instead received payments on the order of SEK 30 billion.

- The budget that we established in the bid in 1977 was actually maintained over the entire project, relates Olof Höstbeck.

The establishment of AXE in Saudi Arabia resulted in the country purchasing a mobile telephone system based on NMT (Nordic Mobile Telephony), a standard adopted by Sweden, Norway, Denmark and Finland in which the AXE system was used. The Saudis were quick to act, and in September 1981, one month before Sweden, the country became the first in the world to use the NMT system.

Author: Mats Wickman

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