Alcatel awaits telecom reforms to unleash RI's potential

By Berni K. Moestafa

SINGAPORE (JP): French-based telecommunications company PT Alcatel Indonesia expects solid growth in the next two years after the Indonesian government completes its reform program in the telecommunications sector.

Alcatel president Mazen Hamadallah expressed optimism that the reform program would be able to boost the telecoms sector, which has been severely hurt by the country's crisis.

"All the ingredients for a quick recovery are there," Hamadallah told Asian journalists in Singapore last week. He added that the deregulation in the sector would enable Alcatel to regain its precrisis level of about US$400 million from local sales contracts in 1996.

In the letter of intent signed with the International Monetary Fund (IMF) recently, the government agreed to take a short-term program to speed up the liberalization of the country's telecommunications sector.

Among the programs is a plan to issue a regulation to implement the new telecommunications law, which has set a deadline for state telecommunications provider PT Telkom and international telecommunications operator PT Indosat to relinquish their exclusive rights in the industry.

The government is also committed to reducing Telkom's and Indosat's extensive cross-ownership in the sector and securing a win-win solution regarding the issues of the revenue-sharing contracts between Telkom and its joint operation scheme (KSO) partners.

"The reforms mainly concern telecoms operators, but they are nonetheless Alcatel's customers," Hamadallah said.

He said that seeking an amiable settlement to the KSO issue, raising rates and finalizing regulations for the new telecommunications law were key points in the reform program.

The new telecommunications law itself has been praised by the industry as providing open and fair competition in the market.

The law, which will be implemented in September, will open the telecoms industry to local and foreign companies, without having to collaborate with PT Telkom and PT Indosat.

Hamadallah explained that once the reforms had taken place, Indonesia would become a lucrative market for global telecoms players.

"We're quite confident that the market next year will be better than this year," he said.

He said that Indonesia's low teledensity, which measures the penetration of telephone lines in a country, indicated that a huge market had yet to be tapped by telecoms operators.

According to him, Indonesia, with a population of 210 million, has only 6.2 million fixed telephone lines, meaning a teledensity of only about 3 percent.

Whereas Indonesia's teledensity of mobile phone users, he said, had reached about 1 percent with some 2.4 million subscribers.

"France, for instance, has a teledensity of 60 percent for fixed lines and 28 percent for mobile," Hamadallah said.

He said if only 10 percent of Indonesia's total population could afford a telephone subscription, or about 20 million people, then the potential market available was already three times the current market size of 6.2 million subscribers.

However, he said, the slow process of implementing the telecoms reforms had made it difficult for operators to tap the market potential.

He said with the recent sharp depreciation of the rupiah, operators were unable to make serious investments that required foreign exchange.

"If revenue is limited by the present rates policy and investment increases in U.S. dollars while revenues are in rupiah, of course profitability decreases," he explained.

Under the IMF's initial reforms schedule, telecom rates should have been increased by last March.

Hamadallah further said this situation had forced Alcatel to cut its sales forecast by 20 percent down to 50 percent this year.

Hamadallah said that this year's growth rate would mainly be driven by sales of its new lines of mobile phones beginning next month.

At present, however, Alcatel's business infrastructure segment contributed some 90 percent of sales in Indonesia, he said.

Infrastructure development for Indonesian operators includes the first International Direct Dialing service of PT Indosat, the digital microwave networks of PT Telkom and the GSM cellular network for PT Satelindo, the company's profile says.

Alcatel has been operating in Indonesia for over 30 years and currently employs 250 people.

Meanwhile, Alcatel vice president for Asia Pacific Oliver Picard said that during talks with foreign operators, Indonesia had been mentioned as one of the most promising markets in Asia.

The Asia region itself, he said, currently accounted for 8 percent of Alcatel's global sales, which he expected would grow to 10 percent this year.

Alcatel is divided in five business segments, comprising networking, the Internet and fiber optics, the enterprise and consumer sectors, telecoms components and energy.

The networking business segment generated the most revenue last year, accounting for 30 percent of its total sales of 23 billion euros (about US$20.7 million)