Cellular industry to invest US$1b

Cellular industry to invest US$1b

Tantri Yuliandini, The Jakarta Post, Jakarta

The country's cellular phone operators will invest at least
US$1 billion this year to expand their networks to cope with
growing demand, the Association of Indonesian Cellular Operators
(ATSI) says.

The figure covers only the investment planned by the country's
top five operators, ATSI vice chairman Rudiantara told The
Jakarta Post over the weekend.

There are 16 cellular operators in the country, including the
top five of PT Telkomsel, PT Satelindo, PT Excelcomindo Pratama,
PT Natrindo of the Lippo Group and PT Indosat MultiMedia Mobile
(IM3), which is the newly established subsidiary of state-owned
telecommunications firm PT Indosat.

Rudiantara said the five operators invested approximately $900
million last year.

Of the total, some $700 million had been invested by
Telkomsel, Satelindo and Excelcomindo.

The other $200 million was invested by IM3 and Natrindo, which
operates in East Java.

"The $700 million was investments generated internally, while
$200 million was from the companies' shareholders," Rudiantara
said.

He said that if all went as planned this year -- including the
planned initial public offerings (IPOs) of Telkomsel and
Satelindo -- the expansions of the companies' cellular networks
may total more than $1 billion.

If Satelindo's IPO goes through it will likely invest $160
million this year, while Telkomsel may invest $500 million
following an IPO, Rudiantara said.

Rudiantara, who is also director of Excelcomindo, said that
the company would invest between $150 million and $175 million
this year, adding that IM3 planned to invest another $200
million.

"This means that this year we are looking at about 2.5 million
in added capacity from cellular operators, which would bring the
total number of subscribers to about 8.5 million," he said,
adding that he estimated there were six million subscribers at
the end of last year.

The total number of subscribers could well exceed the 8.5
million figure if investment cost per subscriber falls from its
current $400 per subscriber, Rudiantara said, quickly adding that
a higher number would not necessarily represent all productive
subscribers.

"They would probably include subscribers that only bring Rp
75,000 ($7.20) in revenue. Do companies want this kind of
subscriber?" he said. He was responding to reports that cellular
subscribers may reach 11 million this year.

Rudiantara also said that two interesting phenomena would
occur in the cellular business this year, one was that the number
of cellular subscribers in the country would exceed that of
fixed-line telephone subscribers, which were expected to increase
to 7.4 million this year compared to 6.66 million in 2000.

The other phenomenon was that revenue from cellular
subscribers would equal that of fixed-line telephones, whether
from domestic local, long distance or international calls, he
said.

"Last year, from a total of Rp 25 trillion in revenue from the
Indonesian telecommunications industry, some 40 percent was from
cellular services," Rudiantara said, adding that this year the
figure was expected to increase to Rp 30 trillion, of which 50
percent would come from cellular services.

In 2002, voice services would still dominate cellular usage,
despite the introduction of general packet radio service (GPRS)
that was expected to make data transmission faster and cheaper,
he said.

Of last year's Rp 10.5 trillion revenue from cellular
services, only 8 percent was generated from nonvoice services
such as short message service (SMS), Rudiantara said.

"This year we expect nonvoice to increase to about 12 percent,
of which only 1 percent would come from GPRS. Quite
insignificant," he said.