Telkom seeks substantial market capitalization<\/p>\n
JAKARTA (JP): The planned initial public offering of PT
\nTelkom, the state-owned domestic telecommunication firm, will
\ncontribute substantially to the Jakarta Stock Exchange's (JSX)
\nmarket capitalization.<\/p>\n
Minister of Tourism, Post and Telecommunications Joop Ave said
\nlast week that with assets totaling four times those held by PT
\nIndosat, the state-owned international telecommunications firm,
\nTelkom is expected to generate more from the capital market than
\nIndosat.<\/p>\n
Telkom, which is expected to make its capital market debut in
\nthe near future, registered total assets of about Rp 7 trillion
\n(US$3.15 billion) as of last December and a net profit of Rp 418
\nbillion last year.<\/p>\n
With total assets of Rp 772.31 billion (US$340 million) at the
\nend of 1993, Indosat raised some US$800 million from the sale of
\n25 percent of its 1.03 billion ordinary shares through the New
\nYork Stock Exchange last October. It raised around Rp 650 billion
\nfrom the sale of another 10 percent through the domestic market.<\/p>\n
The shares sold in New York were mainly government shares,
\nwhile those sold at home were new shares.<\/p>\n
As of last July 31, the telecommunication sector, which is
\nrepresented only by Indosat, ranked sixth in market
\ncapitalization on the JSX with Rp 8.85 trillion. Total market
\ncapitalization on the JSX reached Rp 121.42 trillion as of last
\nJuly.<\/p>\n
The cigarette industry ranked first in market capitalization
\nwith Rp 17.37 trillion, followed by the customer goods and
\nbeverages sector with Rp 16.78 trillion, the banking, finance and
\ninsurance sector with Rp 15.03 trillion, the cement sector with
\nRp 11.8 trillion and the plywood, pulp and paper sector with Rp
\n11.13 trillion.<\/p>\n
With Telkom planning to enter the JSX, the telecommunication
\nsector could become the largest market capitalizer.<\/p>\n
There has been no official disclosure of how many shares
\nTelkom plans to float. However, as explained by Minister of
\nFinance Mar'ie Muhammad last June, the public offering scheme of
\nTelkom will be similar to Indosat's, including the divestment of
\ngovernment shares and the sale of new shares.<\/p>\n
Government officials, as well as private analysts, expect that
\nTelkom's planned cross-listing on the New York Stock Exchange and
\nthe JSX will follow the success story of Indosat's cross-listing
\ngiven Telkom's large-scale businesses.<\/p>\n
Telkom has a monopoly franchise over fixed telecommunications
\nin the key regions of Indonesia as well as equity interests in
\nall of the country's mobile telephone operators, including PT
\nSatelindo, PT Telkomsel and PT Telkomindo.<\/p>\n
Attractions<\/p>\n
"It can be seen that for investors, the Indonesian
\ntelecommunications industry has many attractions on the basis of
\nfundamentals alone," said a report on the Indonesian
\ntelecommunications industry, compiled by PT Jardine Fleming
\nNusantara, PT Bahana Securities, PT Danareksa Sekuritas and PT
\nMakindo -- all of which are prospective participants in Telkom's
\ndomestic offering.<\/p>\n
The government recently appointed three U.S. investment banks,
\nMerrill Lynch, Goldman Sachs and Lehmann, as well as S.G. Warburg
\nof Britain, as global coordinators for the overseas sales of
\nTelkom's shares.<\/p>\n
In addition to its own prospective business, the report said,
\nTelkom will also benefit from the joint operating scheme, locally
\nknown as KSO, between Telkom and various domestic and foreign
\nprivate telecommunications companies.<\/p>\n
Last June, Telkom entered into KSO agreements with five
\nconsortiums with a number of foreign partners such as Telstra,
\nNTT, France Telecom, US West, Telekom Malaysia and Singapore
\nTelecom.<\/p>\n
The five consortiums will take over the operations of
\napproximately 40 percent of Telkom's existing lines in Sumatra,
\nWest and Central Java, Kalimantan, Bali and East Indonesian
\nprovinces, where they will employ ex-Telkom personnel. Telkom
\nitself will concentrate its operations in Jakarta and East Java.<\/p>\n
To compensate Telkom for the use of existing and new lines,
\nthe investors will pay Telkom an initial payment plus a
\npredetermined minimum revenue and give a share of distributable
\nrevenues.<\/p>\n
"The scheme offers Telkom a riskless cashflow as well as
\naccess to the technology and know-how of the respective
\ninternational partners," said the report.<\/p>\n
The report added that the telecommunications industry has a
\nbright future because it is both an important contributor to, and
\na major beneficiary from, economic growth.<\/p>\n
"The shift in the Indonesian economy away from the
\ntraditionally dominant sectors of oil and agriculture towards the
\nservice sectors is clearly of significance for the
\ntelecommunications industry," the report said. (rid)<\/p>",
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