Tue, 31 Oct 2000

Government hopes to raise telecom rates 45.49% over three years

JAKARTA (JP): The government is seeking the approval of the House of Representatives to increase telephone rates 45.49 percent by 2002.

The director general of post and telecommunications, Sasmito Dirdjo, said on Monday the new rates would be imposed over three years, with a 21.67 percent hike in 2001, 15.60 percent in 2002 and another 8.22 percent in 2003.

He said he was hopeful the House would not object to the planned rate increase.

"Increasing the rates is necessary in order to improve the telephone services of the country, which is now far behind many other countries in terms of the telecommunications sector," he said during a hearing with House Commission IV for infrastructure and transportation.

Indonesia has around six million fixed telephone lines and a teledensity of 2.9 phone lines per 100 people. As a comparison, this figure is much lower than in Vietnam, which has a teledensity of four phone lines per 100 people, he said.

A teledensity of between 40 and 50 phone lines per 100 people is a good density, while anything under 10 indicates a poor density, he said.

Sasmito said both local and foreign investment was needed to improve the telecommunications sector in Indonesia, but current telephone rates were discouraging investors.

With the current telephone rates, the return on bank deposits is still much larger than the return on investments in the telecommunications sector, he said.

Increasing the rates by 45.49 percent over three years will make the telecommunications sector more attractive, he said.

"The internal rate of return (IRR) on investments at the current rate is minus 0.58 percent after eight years, meaning it will take a long time for investors to get their money back," he said, adding that increasing rates by 45.49 percent would raise the IRR to 9.55 percent after eight years.

If the telephone rates were adjusted according to the proposed hikes, the net income of state-owned PT Telkom would increase to approximately Rp 4.22 trillion (US$468.9 million) in 2003, and would bring in at least Rp 1.47 trillion in dividends to the government, he said.

PT Telkom booked a net income of Rp 1.2 trillion during the first semester of this year.

Sasmito said he hoped a decision would be made by the House before the end of the year.

Separately, Yoseph Umarhadi, a member of Commission IV, said the House would not agree to raise telephone rates before PT Telkom finalized its restructuring and privatization plans, and the problems with its joint operation partners.

"Besides, if the rates were hiked now it would cause a bigger social conflict that would overshadow the advantages of the hike," he said after the hearing. (10)