Alcatel awaits telecom reforms to unleash RI's potential

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)