A WORLD REPORT SPECIAL EDITION ON THE PACIFIC RIM : THE SOUTH RIM : Market Scene : Australia Firm Finds Niche in Asia Boom : Joining forces with Cambodia, a state-owned company forms Telstra and eases overseas communications.

As recently as 1990, making an overseas phone call in Cambodia was an adventure in frustration.

First, you went to the dilapidated, 1930s central post office, where ocher paint sagged off the walls and cockroaches scampered across the floor. At a small window, you filled out an application form for a call and then waited for as long as four hours in a sweltering hall for the call to come through on a faint connection via Moscow. And even then the line broke without notice.

All that changed in 1991, however, when it became possible to make overseas phone calls from a number of hotels. Suddenly, fax machines proliferated in downtown Phnom Penh and the former hermit state was connected to the world.

The change was brought about by a clever piece of niche marketing by OTC, Australia’s state-owned overseas Telecommunications firm, which has since merged with a Cambodian partner to become Telstra Corp. Ltd. Perhaps no other venture illustrates so clearly the determination of the Australian government to get Australian companies involved in the booming economies of Asia.

In the 1980s, the Communist nations of Indochina were still considered pariah states by the United States.

Other major powers such as France, Britain and Japan followed the U.S. lead and refused to trade with them. So Telstra began pilot projects, first with Vietnam in 1986 and then with Cambodia and Laos.

The deal was a masterstroke, reminiscent of the way the Gillette Razor Co. first marketed its products: Give the razors away and make your profits on the razor blades.

In Cambodia, Telstra entered into a 10-year cooperation agreement with the Phnom Penh government that provided for $16 million worth of satellite equipment to be installed in stages. In return, the Cambodians got to keep all the money earned in outgoing calls--it amounted to $20 million last year alone--and paid to the Australians only a percentage of the fees that foreign phone companies paid them for incoming calls.

“In the year 2000, the infrastructure becomes theirs,” explained Russell Stuart, Telstra’s representative in Phnom Penh. “They will have a network structured to meet current demands and operated by themselves.”

The arrangements with Vietnam and Laos are structured in similar ways.

At the time the deals were negotiated, Indochina was a huge risk: Cambodia, Vietnam and Laos had virtually no foreign currency, trade or tourists. But things were happening politically. Australian Foreign Minister Gareth Evans was instrumental in pushing for closer ties between Australia and the Indochinese nations, and took a leading role in the protracted Cambodian peace negotiations, raising the Australian profile in the region.

Telstra saw an opportunity and jumped in. With the benefit of hindsight, the markets look phenomenally lucrative in coming years. There are 68 million people in Vietnam, and there is less than one telephone for every 1,000 people.

Furthermore, there are many Vietnamese and Cambodians living in Australia, France and the United States, and they are eager to be able to phone their relatives in Indochina.

Phone traffic to and from Cambodia grew so fast that in December Telstra commissioned a huge new satellite dish capable of handling 5,000 calls and a state-of-the-art control center. A nation of nearly 10 million people, Cambodia still has only 4,600 phone lines and 9,400 mobile phones. Telstra has even installed 175 pay phones across the capital.

Now visitors to Phnom Penh can direct-dial their overseas homes from their hotel rooms, but prices are still exorbitant: usually $7 a minute to the United States.

Telstra’s Stuart, a former colonel in the Australian army who served in the U.N. peace force in Cambodia, said telephone usage increased 100% in the last four months.

“We will make a profit, there’s no doubt about that,” he said.

Charles L. Zoi, group managing director of Telstra in Sydney, said the company was hopeful that relationships with the Indochinese countries will continue to flourish even after the initial cooperation agreements expire.

But Zoi acknowledged that the competition will be tougher now that U.S., British and Singaporean telephone companies have entered the fray.

“Asia is working on improving its infrastructure, an issue we call tele-deserts,” said Zoi, an American recruited from Bell Atlantic. “Less than 1% of the people in Asia have telephones. They need help: capital, expertise, technology. We tell them that we wired up an entire continent: Australia.”

The pressure is on for companies such as Telstra to expand in Asia because the market has matured at home, where almost everyone already owns a phone.

Telstra had revenue of $12.6 billion last year, providing more than 2% of Australia’s gross domestic product and employing 60,000 people.