One day in 1903, a gentleman who was anything but Swedish in appearance walked into Ericsson’s London office and asked for the manager. He was shown into Peder Hammarskjöld’s office, where he introduced himself as José Sitzenstatter and began a conversation in excellent Swedish.
Sitzenstatter was Hungarian, spoke a multitude of languages and had among other things – so he said – worked for Bell Telephone in 1878, when he had been involved in the assembly of the world’s first public telephone exchange. He had also worked for Bell in Sweden for 18 months: when Bell realized in 1884 what a tough competitor Stockholms Allmänna Telefon was, it sent Sitzenstatter to Stockholm to try to reverse developments there – but, as we have seen, without success.
Sitzenstatter now possessed a 30-year telephone concession for Mexico City and wanted a tender for a modern telephone exchange for the city. A tender was probably sent but nothing was heard from him until the following summer, 1904, when he invited Ericsson to take over the concession.
The Ericsson board was divided but it invited Sitzenstatter to come to Stockholm to negotiate. But if they failed to reach an agreement, he would have to pay the cost of his own travel.
NUMEROUS RISKS
After a great deal of discussion, and studies in Mexico itself, Ericsson took over the concession. There were numerous risks involved. Little was known about the country, and a Bell company was already running a telephone system there – with scant success, it was pointed out, “because of its injudicious tariff policy”. But the overriding problem was that Ericsson had no experience at all operating a telephone system.
The system in Mexico City began operations in 1907. Its cheap tariffs in comparison with the Bell company offered one advantage. The number of subscribers grew more rapidly than anyone had dared to believe, and it soon became clear that Ericsson’s first attempt to operate a telephone system was going well.
This success was due in no small part to Erik Östlund, a 34-year-old engineer who was appointed head of the Mexico business in 1909 and then spent 20 years in a position “in which at times his life was essentially at risk”, to quote Hemming Johansson.
For the entire period from 1910 to 1920, Mexico was torn by political unrest and civil war. Artillery and machine guns were used in the company’s immediate neighborhood; at times battles were fought in the streets outside its entrance. On one occasion, a patrol demanded entry to the telephone exchange. In their anger at being refused, they fired a fusillade through the main gate, killing one of the workers in the yard.
Östlund had sometimes to dismiss members of staff, and they would decide to seek revenge. On one occasion, letters were sent to the Ericsson management expressing severe criticism of Östlund; the company started its own inquiries, which revealed that the charges were unfounded. Moreover it was found that Sweden’s chargé d’affaires in Mexico City was abetting the malcontents: he had, for example, informed his superiors in Stockholm that a court warrant had been issued for the arrest of Östlund on criminal charges and that he was said to be hiding from the police.
IMMEDIATE ACTION
When Ericsson management asked the Foreign Affairs Department to ensure the Swedish diplomat would be unable to harm the company’s interests in Mexico, there was “immediate action”, in the words of Johansson. The Swedish consul in Chicago was ordered to travel to Mexico without delay to take over the diplomat’s post. Östlund was sent an extract from the minutes of an Ericsson board meeting at which he was thanked for his zeal and dexterity in these particularly trying circumstances.
What is remarkable, Johansson points out, is that all the companies offering public utilities in Mexico, such as the railways, lighting companies and even the Bell company, which ran a competing telephone system, were confiscated by the Mexican government for varying lengths of time – apart from the Ericsson company, which Östlund piloted through all these difficulties, making a profit every year.
Ericsson’s business in Mexico was to have a great impact, both as a bridgehead in the Americas and as proof that the company understood what being an operator involved.
Author: Svenolof Karlsson & Anders Lugn
