Banks still unable to tap telecom sector

Banks still unable to tap telecom sector

JAKARTA (JP): Local banks still lack the financing ability to
tap into the country's growing telecommunications sector, causing
most telecommunications projects to use large foreign loans, a
banking executive says.

A director of the central bank, Mukhlis Rasyid, said yesterday
the situation occurred because local banks were still in a
consolidation phase.

The lack of local lending in the telecommunication sector was
also partly because of the central bank's policy of limiting
their lending growth. They were also often short of the funds
needed for telecommunications projects, he said.

"Local banks are required to abide by the government's shrewd
fiscal and monetary policies because they are essential to
maintain macroeconomic stability," Mukhlis said.

"This is why local banks have not been able to play an active
role in project financing and servicing for this growing sector,"
Mukhlis said in a seminar yesterday.

The seminar, held by private telecommunications firm PT
Satelindo, discussed banking facilities for telecommunications
businesses in Indonesia.

Mukhlis said Bank Indonesia expected local banks to continue
to limit their credit growth to between 17 and 18 percent this
year to prevent the economy from overheating.

Despite the lending restrictions, Mukhlis said domestic banks
could, and should, consider giving more attention to the
telecommunications sector.

"In fact, the sector's bright, long-term prospects can help
improve a bank's soundness, as long as the bank adheres to sound
credit principles," Mukhlis said.

Most telecommunications projects were now funded by export
credits and offshore loans.

Mukhlis said local banks could participate in one of the large
banking syndications or consortium to finance a big
telecommunications project.

"Surely local banks can participate without violating
government-set guidelines and prudential banking practices," he
said.

Banks, which currently had difficulties in meeting their legal
lending limit because they were too focused on a single sector,
for instance, could join consortiums to disperse their credit
portfolios without creating extra risks, he said.

Satelindo's treasurer, Hadyat A. Hidayat, said yesterday local
banks should take the advantage of the country's growing
telecommunication sector.

"If these opportunities are not seized by Indonesian banks,
they will be taken by foreign financiers," he said.

He said that by participating in consortiums or bank
syndications, local banks would also gain more knowledge and
experience about telecommunications projects.

"It will also allow them to gain a better understanding of the
risks involved and the techniques used in such projects," Hidayat
said.

Satelindo's Financial Director Hessel Frensen, said Satelindo
had a debt-to-equity ratio of 2:3. Most of the company's debt
came from foreign loans, giving a ratio of domestic to foreign
loans of 7:25.

Frensen said Satelindo was planning to spend between US$150
million and $250 million on expansion this year.

Satelindo operates services in international telephone calls,
satellite transponder leasing and cellular telephones using the
global system for mobile communications. (pwn)