Wed, 12 May 2010

From: The Jakarta Globe

By Ardian Wibisono
PT Bakrie Telecom is spending $100 million this year to fund its entry into the wireless broadband market through newly established subsidiary PT Bakrie Connectivity, an executive at the parent company said on Tuesday.

Jastiro Abi, finance director of Bakrie Telecom, said the expansion would be financed through $45 million in loans from Credit Suisse, Morgan Stanley and Bank of America Merril Lynch, with the rest from the company’s $250 million bond issue held at the end of April.

“We have invested $45 million since early this year for the expansion by setting up infrastructure in major cities in Indonesia, and we plan to disburse an additional $55 million over the rest of the year,” Jastiro said.

With high market saturation for voice and text message services, the company sees huge room for growth in wireless broadband. Penetration in Indonesia is low at 10 percent, compared with 70 percent in the US and 50 percent in China.

Rakhmat Junaidi, Bakrie Telecom’s corporate service director, said it was still plotting the strategy for the broadband wireless segment, which would be run by Bakrie Connectivity. He declined to give projections on how the new unit would contribute to this year’s revenue and profit, nor would he give details of the expected subscriber base.

Bakrie Telecom also established PT Bakrie Network in March to provide infrastructure such as fiber optic lines, which are crucial for broadband.

Chandra Pasaribu, a telecommunication analyst at PT Danareksa Sekuritas, said wireless broadband held great potential, but Bakrie Telecom should be careful to differentiate its strategy to stand out from rivals, which were also investing heavily in the business.

“Pricing and targeting market segments will be a key to success in the business,” Chandra said, adding that the unit would begin contributing to the company’s bottom line this year because it already had a head start in developing infrastructure for the venture.

Danareksa put a target price of Rp 200 for Bakrie Telecom stock by the end of the year on expectations of growing mobile phone subscribers. The company plans to increase its cellular customer base 32 percent this year to 14 million.

Bakrie Telecom shares fell 1.4 percent to Rp 140 on Tuesday.