The decisive battle

A move to Russia may have been logical in industrial terms, but there is a sense that Lars Magnus did not set about it with pleasure. A turning point came in November 1900, coinciding with Lars Magnus Ericsson’s decision to resign from the management of the company.

The background lay in a competition for telephone concessions in five large Russian cities: St. Petersburg, Moscow, Warsaw, Odessa and Riga (Warsaw, Odessa and Riga belonged at the time to the Russian empire). The concessions were to apply for a period of 18 years and fierce competition was expected. Cedergren – who had formed alliances with Swedish and Danish businessmen and submitted bids for St. Petersburg, Moscow and Warsaw – was among the competitors.

The outcome of course would be of the greatest possible interest for Lars Magnus, who had invested a great deal in Russia and needed to win orders from the winners. Cedergren’s participation complicated things: if he were successful, L.M. Ericsson & Co. could expect no orders.

To qualify for the bidding, applicants first had to demonstrate their technical expertise in a trial, something Cedergren managed without difficulty. Then only one thing mattered: the cost in rubles of a standard subscription for one year, with a separate bid for each city.

The day of reckoning came on November 1 (according to the Julian calendar used in Russia, corresponding to November 13 in the Gregorian calendar used, for instance, in Sweden) at the premises of the St. Petersburg postal and telegraphic administration. The bids were submitted in sealed envelopes, which were opened immediately and read out. A large audience followed the bidding, among them leading figures from Ericsson’s St. Petersburg factory. Lars Magnus was in the city but remained at his hotel.

Johansson was there, and described the excitement as the bids were declared. The result was that Cedergren won in Moscow and Warsaw while the St. Petersburg Duma (local council) triumphed in St. Petersburg, and local consortia in Odessa and Riga. For Moscow, Cedergren had calculated a subscription of 80 rubles, and for Warsaw 70 rubles, but on the suggestion of his advisor Marcus Wallenberg (Senior) had at the last moment lowered them by one ruble to 79 and 69 rubles. This was the deciding factor.

Cedergren was greatly irritated, however, at not having won St. Petersburg as well; after all, it was by far the largest city. Johansson wrote:

“He took it for granted that Ericsson’s managers had heard with satisfaction that he had not won St. Petersburg, which, because of his competitive position to Ericsson, was indeed the case. When I went down to the telegraph office after the procedure had finished, to inform Boström in Stockholm, I ran into Cedergren there. He peevishly said to me: ‘I wager you a slap-up dinner at Hasselbacken that I will get St. Petersburg as well.’ He obviously assumed that the incredibly low subscription fee, 55 rubles, could not be maintained and that the concessionaire would be forced to surrender it to the runner-up: Cedergren’s company. But he did not yet know enough about the Russian mentality. The Duma was able to maneuver things one way or another so that they got higher tariffs than the bid.”

Author: Svenolof Karlsson & Anders Lugn

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