Foreigners Are Flocking To Get To These Phones

Rupert A. Galliers-Pratt, chairman of Petersburg Long Distance Inc. (PLD), recalls the frustration of trying to phone home from his hotel room during a visit to St. Petersburg in May, 1992. A few months before, Galliers-Pratt had signed a deal to help modernize the Russian city's 1950s-era phone grid. But he couldn't get in touch with colleagues abroad to discuss the project. Phoning out "was almost impossible," he recalls. "The network was full."

That's no longer true. In the past year, PLD has poured $26 million into a joint venture with St. Petersburg's phone utility, snaking fiber-optic cables beneath streets and installing digital switches from Britain's GEC-Plessey Telecommunications and American Telephone & Telegraph Co. The Canadian company now expects to spend an additional $20 million over the next 18 months, giving the joint venture, dubbed PeterStar, 100,000 new lines.

Until 1992, Ottawa-based PLD was known as VenTech Healthcare Corp., and this is its first phone job. But its heady growth projections have gone down well on Wall Street. PLD's stock, which trades over the counter in the U.S., has nearly doubled since summer, to $12. No wonder: Given the eight-year waiting list for regular lines, PeterStar is having no trouble signing up foreign customers--who must pay dollars. British Petroleum, McKinsey & Co., and the Chicago law firm of Baker & McKenzie already are on the network. "We can call abroad with no problem," says Baker's local manager, Arthur George. "And because they have special equipment, quality within the country is better."

FAR TOO FAST? Some shareholders question whether PLD, with revenues in the first three quarters of just $50 million, may be growing too rapidly. "Demand has exceeded anything they were talking about," says Grace Pineda, portfolio manager of the Merrill Lynch Developing Capital Markets Fund. "Can they handle it?" Galliers-Pratt insists they can. Indeed, he recently signed a cellular-phone deal uith the government of oil-rich Kazakhstan, and now he is wondering whether PeterStar's system someday will carry cable television. Can home shopping channels be far behind?

Patricia Kranz in St. Petersburg and William Glasgall in New York