Foreign firms still barred from fixed line telecom service
Foreign firms still barred from fixed line telecom service
By Christiani S.A. Tumelap
JAKARTA (JP): Foreign companies will still be barred from
directly providing fixed line telecommunications service in
Indonesia until the monopoly is lifted in 2010, according to the
newly launched Indonesian telecommunications blueprint.
Until then, foreign players may only enter fixed line service
by becoming strategic partners of state domestic
telecommunications provider PT Telkom.
Becoming strategic investors in the publicly listed state
telecommunications provider is quite possible because the
government will likely further divest its stake in the company.
Alternatively, they may enter mobile telecommunications,
paging, multimedia, satellite-based communications and other
value-added services as these sectors are declared fully open to
foreign participation by the blueprint.
The blueprint in telecommunications, approved by Minister of
Communications Giri Suseno in September, basically highlights the
government's plan and commitment for the development of
Indonesia's telecommunications sector until the year 2011.
The blueprint underlines the government's commitment to turn
the currently restricted telecommunications sector into an open
competitive sector gradually so that it will not cause any harm
to Telkom and Indosat, which at present enjoy government
protection in the form of exclusive rights.
Consequently, the government will allow Telkom to keep its
domination in local fixed line and fixed wireless
telecommunications services nationwide until 2010 and domestic
long distance services until 2005. Indosat will keep control of
international long distance service until 2004 together with its
joint venture PT Satelindo.
The blueprint also indicates the government's ambition to
reserve its clout in the sector, especially on fixed line network
facilities, through its plan to transform Telkom and Indosat from
their current status as fragmented service providers into fully
integrated telecommunications operators.
According to the plan, Telkom will be awarded with the license
to operate in the international line service as soon as Indosat
ends its exclusive rights in 2005. Indosat may have to wait until
the end of 2010, when Telkom finishes its exclusive rights, to
enter the promising fixed line network.
The government's strong intention to retain full support and
protection of the state firms was also confirmed by a high-
ranking official at the Ministry of Communications, who recently
said that the government had no intention in the near future to
invite any foreign operators to enter the fixed line sector,
which currently is the backbone facility for the country's
telecommunications network.
Instead, the government intends to promote a more active and
competitive environment in the currently open nonfixed line
telecommunications network and service sectors. Many companies
have showed interest in providing these services to benefit from
the relatively lower costs and investment compared to the fixed
line sector.
There are currently seven active operators of mobile
telecommunications services, at least four operators of data
communications services using the very small aperture satellite
(VSAT), three satellite transponder lessors and at least five
paging operators.
At present, foreign investors who are interested in entering
the nonfixed line telecommunications sector should form a joint
venture or acquire up to a 35 percent stake in existing
operators.
Direct participation by foreign companies is prohibited by a
law which categorizes telecommunications as a sector still closed
to full foreign participation.
Foreign companies are currently allowed to be involved in the
fixed line sector through the Joint Operation Scheme (KSO) with
Telkom.
There are currently five consortiums of foreign and local
firms -- PT Ariawest International, PT Pramindo Ikat Nusantara,
PT Mitral Global Telekomunikasi Indonesia (MGTI), PT Cable &
Wireless Mitratel and PT Bukaka Singtel (BSI) -- which were
appointed by the government in 1996 to finance, build and operate
domestic fixed line telephone service across the country on
behalf of Telkom under a revenue-sharing scheme through 2010.
Ariawest is responsible for West Java, Pramindo for Sumatra,
MGTI for Central Java, Cable & Wireless for Kalimantan and BSI
for eastern Indonesia.
Under the revenue-sharing scheme, partners pay Telkom a tri-
monthly fixed amount, known as Minimum Telkom Revenue (MTR) and
Distributable Telkom Revenue (DTR) based on their revenue.
Under the initial contracts, KSO partners were required to
install a total of two million new access line units (ALU) from
1996 to 1999. The figure was revised to only 1.2 million last
September due to the economic crisis.
Cooperation between Telkom and its partners has come under
fire since they signed the memorandums of understanding (MOU) in
1995.
Much of the criticism was leveled at the five partners, with
questions centered on their performance in meeting the terms of
their contracts and allocation of profits to Telkom.
In addition to the government's plan to fully open the
telecommunications sector after 2011, there is also an intention
to gradually release its current domination in regulating and
monitoring the sector and the players operating in it.
The blueprint says the government will in the future form a
stronger and more capable body to regulate and monitor the
sector. It says the body can include individuals from concerned
nongovernmental institutions, but they must not be related to
telecommunications operators in order to maintain its
objectivity.
Regulatory and supervisory functions are currently carried out
by the Directorate General of Telecommunications at the Ministry
of Communications.
Experts, vendors and operators, however, said they, as well as
customers, should also be involved in the body to ensure the
protection of every parties' rights and responsibilities and to
supervise the open and full competition among local and foreign
operators in the future.