RI telecom deregulation underway<\/p>\n
Tantri Yuliandini, The Jakarta Post, Jakarta<\/p>\n
Major adjustments in industry structure, shifts in business
\nfocus and serious disputes marked last year's developments in the
\ntelecommunications sector as the country braces for a more
\nliberalized industry.<\/p>\n
The government's plan to open up the telecommunications sector
\nbegan last year and the departure from a monopolistic structure
\nto one that is based on competition is being gradually
\nintroduced.<\/p>\n
The stripping of state-owned telecommunications companies PT
\nTelkom's and PT Indosat's exclusive rights, which began in 2000,
\nwas last year followed by readjustments to their cross ownerships
\nin several subsidiaries.<\/p>\n
A US$1.5 billion landmark deal was struck in May last year
\nleaving Telkom with a majority ownership in the country's largest
\ncellular operator, PT Telkomsel, and Indosat with the second
\nlargest, PT Satelindo.<\/p>\n
The consideration behind this was that if the two companies
\nwere to be allowed to compete against each other, there should be
\nno ties which could potentially inhibit them.<\/p>\n
It was also done to provide a level playing field, giving the
\ncompanies equal assets to start them off toward being full
\ntelecommunications service providers.<\/p>\n
The early termination of Telkom's local telephone services to
\n2002 from the initial 2010 schedule, however, had induced
\ndifficulties in the company's negotiations with its joint
\noperation partners.<\/p>\n
The early termination was seen by the partners as another
\nlosing point, a loss of opportunity, as the partnership's claim
\nof monopoly over local telephone services was cut short.<\/p>\n
KSO contracts, a partnership intended to last until 2010, was
\nforced to face major evaluations and alterations when the Asian
\neconomic crisis hit Indonesia in late 1997 and U.S. dollar-based
\noperational costs soared while rupiah earnings became
\ninsignificant.<\/p>\n
Of the five KSO partners only PT Bukaka SingTel International,
\noperating in the eastern regions of Indonesia, agreed to continue
\nthe contract with modifications.<\/p>\n
Mitra Global Telekomunikasi Indonesia's (MGTI) contract has
\nbeen transferred to Indosat as part of the $1.5 billion deal for
\nthe dissolution of the cross ownership, and another two -- PT
\nDayamitra Telekomunikasi operating in Kalimantan and PT Pramindo
\nIkat Nusantara, which operates the Central Java and Yogyakarta
\nareas -- have agreed to sell back their assets to Telkom.<\/p>\n
Telkom's partner for the West Java and Banten areas, PT
\nAriaWest International, however, was not so obliging.<\/p>\n
Adamantly refusing to compromise on its buy-out price, the
\ndispute between the two came to a head when Telkom finally
\nunilaterally announced the partnership was dissolved.<\/p>\n
Accusations flew back and forth and arbitration proceedings
\nwith the International Chamber of Commerce in Geneva were filed
\nby both parties.<\/p>\n
There seems to be no end in sight to the dispute in the near
\nfuture.<\/p>\n
In the meantime, the government was forced to consider
\nprivatization alternatives for the two state-owned companies as
\nthe country's Rp 6.5 trillion (about $619 million) privatization
\nprogram to finance the state budget deficit still yielded nothing
\nas the year drew to a close.<\/p>\n
State Minister for State Enterprises Laksamana Sukardi had
\nalways said that the telecommunications sector was the only
\nsector ready at the moment for privatization, saying that given
\nthe current economic slump investors have a relatively stronger
\nappetite for telcos.<\/p>\n
Besides that, foreign investor support was expected to again
\nkick start telecommunications developments across the country
\nafter a long period of stagnation beginning during the economic
\ncrisis.<\/p>\n
Desperately vying for foreign investment, the government
\npromised that it would hike telephone rates up to 45.49 percent
\nwithin three years, the first phase of the increase to begin lst
\nyear with 21.67 percent after delays in 2000.<\/p>\n
The current telephone rate is considered unattractive to
\nforeign investors as they could only expect a return on
\ninvestment after seven years.<\/p>\n
But yet again the voice of the House of Representatives and
\nthat of the Indonesian Consumers Foundation (YLKI) prevailed,
\nsaying that the public was not ready for such a steep increase.<\/p>\n
The House backed down from its initial support and said it
\nwould only accept an increase in 2002, although not at the 21.67
\npercentage increase originally stated.<\/p>\n
However, despite all that, last year was also one of the most
\nexciting for the development of the most lucrative business of
\nthe telecommunications sector, the cellular services.<\/p>\n
Indosat began its cellular service in the second half of this
\nyear with its Indosat Multi Media Mobile (IM3), which operates
\nusing the global system for mobile communications at 1800
\nMegahertz frequency (GSM-1800) and boasts higher transmission
\nspeeds and clearer voice.<\/p>\n
Also holding the GSM-1800 license, Telkom decided to integrate
\nits mobile service with that of its subsidiary Telkomsel.<\/p>\n
IM3 would need to prove its worth and gain a niche in a market
\nalready established by the three existing operators Telkomsel,
\nSatelindo and privately owned PT Excelcomindo Pratama.<\/p>\n
The three -- listed here in descending order according to the
\nnumber of subscribers -- have been building up a customer base
\nfor several years now and could now boast nationwide service
\ncoverage using the GSM-900.<\/p>\n
Adding to the excitement of the development of cellular
\nservices, traditional voice services was now complemented by
\nlimited data transmission with the introduction of the short
\nmessage service (SMS).<\/p>\n
Various services sprung up from the SMS platform such as the
\nmobile banking services and information services such as stock
\nprices and movie schedules, increasing traffic for the operators.<\/p>\n
The introduction of an inter-operator SMS service in May last
\nyear however was the rocket which brought SMS traffic sky high,
\nincreasing the number of subscribers and leading operators to
\nupgrade to the DCS-1800 technology.<\/p>\n
Telkomsel recorded 3.05 million subscribers as of November
\nlast year, surpassing its year end target of 3 million. Also for
\nthe same period, Satelindo recorded 1.5 million subscribers and
\nExcelcomindo recorded 1.08 million.<\/p>\n
This year, experts predict the number of subscribers to
\nskyrocket to 11 million, surpassing the number of fixed-line
\ntelephone subscribers.<\/p>\n
Telkom's director for planning and technology Kristiono said
\nthat the convergence and eventual overtaking of the mobile phone
\nsubscribers against fixed-line telephones was inevitable as
\nannual growth for mobile phones was more than 50 percent, while
\nfixed-line telephones only saw a growth of between 10 percent to
\n15 percent annually.<\/p>\n
However, he said the stunted growth of fixed-line subscribers
\nwas not because of lack of demand but rather a decrease in supply
\ncaused by, among others things, a lack of investment.<\/p>",
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"sponsor": "Okusi Associates",
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