Telecommunications investors answer challenges<\/p>\n
Three years after the inauguration of the KSO Scheme in
\nIndonesia's fixed-line telecommunications business, the total
\nnumber of telephone lines has increased significantly, with more
\nthan one million new subscribers.<\/p>\n
Major foreign World Class Operators in Indonesia, known as KSO
\nInvestors or partners, have overcome the challenges to fulfill
\ntheir commitments by completing new telephone lines target by the
\ngovernment. This supports the state telecommunications company PT
\nTelkom in installing and managing the telecommunications network
\nas part of the country's basic infrastructure.<\/p>\n
Joint operations (KSO), which involve the private sector and
\nmultinational telecommunications companies, have changed the
\nbusiness map of Indonesia's telecommunications industry, given
\nthe fact that private and overseas companies are now involved in
\nthe fixed-line business. Previously, Telkom was the sole company
\nto build, manage and operate the country's domestic
\ntelecommunications network and services.<\/p>\n
Joint effort<\/p>\n
The KSO Scheme allows Telkom to obtain revenue from the one-
\ntime payment in U.S. dollars, income from Minimum Telkom Revenue
\n(MTR), and Distributable Telkom Revenue received from the KSO
\npartners.<\/p>\n
In 1995, the government, after a long open tender process
\ninvolving the World Bank, assigned five KSO partners: PT Pramindo
\nIkat Nusantara, PT Ariawest International, PT Mitra Global
\nTelekomunikasi Indonesia (MGTI), PT Daya Mitra Telekomunikasi
\n(Cable & Wireless Mitratel) and PT Bukaka Singtel International
\n(BSI), to provide some two million new telephone lines in
\nSumatra, West Java, Central Java, Kalimantan and Indonesia's
\neastern part within three years, starting in January 1996 and to
\nmanage the operation of the KSO Unit. The five companies were
\nawarded 15-year joint-operation contracts until 2010 to
\nsupervise, manage and improve telecommunications networks in the
\nconcession regions.<\/p>\n
The Scheme won international applause because the KSO partners
\ncomprise private and foreign telecommunications investors that
\nwere selected under a highly competitive, liberalized and
\ntransparent telecommunications regulatory environment. The
\ngovernment considers KSO partners as a strategic point in the
\nrestructure agenda of Indonesia's telecommunications sector.<\/p>\n
New Target<\/p>\n
Unfortunately, scores of telephone subscribers have
\ndisconnected their lines as a result of a tough economic
\nsituation. The economic crisis since mid-1997 had also made the
\ndemand for new lines decrease.<\/p>\n
That is why the government decided to cut the two-million-line
\ntarget to 1,268,000 lines.<\/p>\n
The deadline remained the same, the end of March 1999 and it
\nis important to note that the new target is still sufficient for
\nsupply within the next one to two years.<\/p>\n
The agreement was a solution for Telkom and the KSO partners
\nto rescue the continuation of development in that sector due to
\nthe economy crisis.<\/p>\n
Despite the revised target being a blessing or controversy,
\nthe five KSO partners have performed well in installing the
\nrequired figures. By the end of March, the realization reached
\n1,371,548 lines, 8.2 percent higher than the targeted figure.<\/p>\n
Increasing lines<\/p>\n
Pramindo has built 297,290 lines in Sumatra, exceeding the
\ntarget of 290,000 as of the end of March. Ariawest installed
\n324,325 lines in West Java, more than 290,000 as targeted. In
\nCentral Java, MGTI built 403,500 lines, higher than the target of
\n350,000. Mitratel constructed 120,000 lines in Kalimantan, above
\na target of 115,000, while BSI developed 251,300 lines in the
\neastern part of Indonesia, surpassing a target of 223,000.<\/p>\n
Representing the KSO Investors, D. Siregar of MGTI said that
\nin total, there are now 2,579,291 subscribers in the five
\nregions.<\/p>\n
\"We have seen over one million new subscribers compared to
\nsome 1.5 million subscribers before KSO started ,\" he said.<\/p>\n
Based on the contract, each of the KSO partners is also
\nrequired to provide telephone lines to 50 percent from all
\nvillages in each KSO region or spend 5 percent of investments on
\nUniversal Service Obligations (USO) KSO achievement target.<\/p>\n
Siregar said that in three years of existence, investments by
\nthe five KSO partners amounted US$1.56 billion, of which $568
\nmillion was cash equity.<\/p>\n
Of the total revenue collected across the five KSO partners in
\nthe last three years, a total of 45 percent (Rp 5.03 trillion)
\nwas paid directly to Telkom and the KSO partners received a total
\nof 20 percent, he added.<\/p>\n
Problem solving<\/p>\n
Problems do exist for the KSO partners. The ongoing crisis in
\nIndonesia remains a barrier for their expansion. When the KSO
\nAgreement was signed in 1995, the rupiah was trading at 2,250
\nagainst the U.S dollar. Now, the exchange rate is about 7,500. It
\nis a burden, since KSO partners have to provide payments in
\ndollars while the income is in rupiah.<\/p>\n
The government's policy regarding telephone tariffs is also
\nconsidered to be confusing. In addition, KSO partners have been
\ndisadvantaged as some banks have stopped their funding. The
\ngovernment decreased recently the annual rise of domestic
\ntelephone rates from 24 percent to 15 percent following
\nwidespread protests from the public.<\/p>\n
Due to the economic difficulties, hundreds of subscribers have
\nhad their telephone service disconnected, while purchasing powers
\nare potentially sluggish.<\/p>\n
Despite the problems, the five KSO partners have performed
\nwell by fulfilling their commitments. John G. Vondras of Ariawest
\nsaid that his company even planned to build more lines as the
\ndemand in West Java remained firm.<\/p>\n
Siregar said that, to date, the KSO partners have been
\nsuccessful in fulfilling the Government's objectives for
\ndeveloping Indonesia's telecommunications industry.<\/p>\n
\"The KSO Scheme has accelerated telecommunications development
\nin Indonesia. There were 1.4 million new lines constructed in the
\nlast three years. Foreign investments have been attracted,
\nenabling the Government to reduce its financial burden in loans
\nand guarantees as the KSO partners have arranged their own
\nloans,\" he said.<\/p>\n
Crisis management<\/p>\n
However, due to the economic crisis, certain changes need to
\noccur to be able to meet future development needs, he said.<\/p>\n
People in smaller towns must be patient waiting for telephone
\nlines, with several areas in the archipelago having the same
\nproblems in facing uncertainty or frustration in obtaining
\ntelephone lines.<\/p>\n
This can be a new challenge for the KSO partners: how to
\nprovide the people with telecommunications access sooner, while
\nthe rest of the world is already enjoying high-tech information
\nservices.<\/p>\n
The KSO Scheme was a brilliant strategy to develop Indonesia's
\ntelecommunications industry, but the KSO partners now need to
\nchange into a more solid structure to again accelerate the rate
\nof development for the future of Indonesia.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/telecommunications-investors-answer-challenges-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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