Executive says Telkom, Indosat should merge to maintain dominance<\/p>\n
JAKARTA (JP): PT Telkom and PT Indosat should merge if they
\nwant to retain their dominance in the country's
\ntelecommunications sector, a Telkom executive said.<\/p>\n
Telkom's operational director John Welly said here over the
\nweekend that the merger of the companies would boost their
\nstrength and competitiveness to allow them to compete with
\nforeign telecom giants.<\/p>\n
\"As an individual entity, we are too small for those foreign
\noperators. We should join forces so that we can compete head-to-
\nhead with them,\" he told a seminar on the impact of
\nliberalization in the telecommunications sector on local
\noperators.<\/p>\n
Telkom currently holds exclusive rights to provide local fixed
\nline and fixed wireless telecommunications services nationwide
\nuntil 2010 and domestic long distance services until 2005.<\/p>\n
Indosat and its joint venture PT Satelit Palapa Indonesia
\n(Satelindo) hold exclusive rights for overseas long distance
\nservices until 2004.<\/p>\n
The new telecommunications law, which will be effective next
\nyear, allows early termination of the rights subject to
\nagreement between Telkom or Indosat, the government and the new
\nlocal or foreign players. The latter should compensate Telkom or
\nIndosat for the premature end to the agreement.<\/p>\n
John said the merger would be the most feasible alternative
\nfor Telkom and Indosat to survive in the era of free competition.<\/p>\n
\"Without forging a business alliance, Telkom and Indosat will
\nbe too small to compete with the world's telecom giants in the
\nera of free competition,\" he said.<\/p>\n
PT Telkom and PT Indosat respectively booked total assets of
\nRp 24 trillion (about US$2.8 trillion at the current exchange
\nrate) and Rp 4.8 trillion as of December 1998.<\/p>\n
Their assets are far lower than those of Singapore Telecom,
\nwhich has total assets of $17 billion, the Malaysian telecom with
\ntotal assets of $9 billion and the Philippine telecom with $4
\nbillion.<\/p>\n
Telkom has long been prepared to enter the era of free
\ncompetition, he said, noting that preparations were made to
\nenable the company to enter international markets.<\/p>\n
\"Expanding into overseas markets does not necessarily mean
\nthat we are certainly going to launch a direct expansion there.\"
\nHe said Telkom would prefer to use an \"indirect\" strategy to
\npenetrate overseas markets.<\/p>\n
Separately, general manager of investors relation for Indosat,
\nBudi Prasetyo, told The Jakarta Post on Saturday that Indosat had
\nstudied the cost and benefits from a merger with Telkom.<\/p>\n
However, he declined to reveal whether it was judged feasible.<\/p>\n
He said preparations for a merger would be more complicated
\nfor Indosat than for Telkom.<\/p>\n
\"Telkom is far more ready to either merge or compete by
\nitself. It has nothing to lose ... the situation is different for
\nus.\"<\/p>\n
He said Indosat submitted the report of the study to the
\ncompany's shareholders.<\/p>\n
\"Whether or not Indosat merges with Telkom will be decided by
\nour stakeholders,\" he said, adding that Indosat's next
\nshareholders meeting was set for Oct. 14.<\/p>\n
Concerning the company's strategy on open market competition,
\nBudi said that Indosat would concentrate on strengthening its
\nposition and competitiveness in the local market.<\/p>\n
\"It's impossible to go global and compete with those giant
\nglobal operators. We're too small.\" He believed the best way to
\npenetrate overseas markets was through strategic alliances with
\nforeign operators.(cst)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/executive-says-telkom-indosat-should-merge-to-maintain-dominance-1447893297",
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