Govt to proceed with plan to raise phone call rates

Govt to proceed with plan to raise phone call rates

JAKARTA (JP): Publicly listed domestic telecommunications
provider PT Telkom has to proceed with a plan to restructure
telephone call rates within Greater Jakarta since this was
promised to investors when the government floated shares of the
company on the stock exchange in 1995, according to Minister of
Communications Giri Suseno.

He said Telkom's rate restructuring plan was contained in a
prospectus issued by the company prior to its initial public
offering in November 1995.

The rate restructuring plan was in line with tourism, post and
telecommunications ministerial decree No. KM.104/PR.301/MPP-94,
which came into force on Jan. 1, 1995.

"Don't forget that the decree was issued because Telkom had to
fulfill certain conditions before going public. This can't be
canceled unilaterally. We have to honor this (the prospectus),"
Giri told reporters Friday after installing the new board of
directors at three state-owned transportation companies.

The decree stipulates that local rates apply only for calls
within a range of 30 kilometers. Calls made to areas more than 30
km away are classified as long distance, thereby subject to long
distance rates.

Giri said Telkom already applied such a rating system in areas
outside Greater Jakarta.

"It's Telkom's duty to socialize the tariff restructuring so
that the public can understand," he said.

The House of Representatives last month urged the government
to cancel the plan to restructure local telephone rates within
Greater Jakarta.

Telkom president Asman A. Nasution told House Commission IV
for transportation and communications that Greater Jakarta had
been exempt from the tariff restructuring measure because the
government wanted to give the area preferential treatment. He
also appealed for understanding that the company had been hurt by
the sharp depreciation of the rupiah against the U.S. dollar.

He pointed out that the company, which is listed on the
Jakarta Stock Exchange and New York Stock Exchange, suffered a
first quarter loss this year. He declined to provide a figure.

Telkom has raised its rates twice this year, in January and in
April, he said, adding that only the second revision incorporated
a new exchange rate which was based on Rp 5,000 to the dollar,
compared to Rp 2,400 in July during the precrisis period.

The rupiah hovered around Rp 13,000 last week.

Giri also said Telkom and five contractors had reached an
initial agreement to revise joint operation scheme (KSO)
contracts in installing two million fixed lines by the end of
1999 and managing them through 2010.

"They will meet again to finalize details of the revision," he
said, adding that among the changes would be the lowering of the
number of lines to be installed and the shared revenue fee for
Telkom.

Under the initial KSO contracts, five joint venture
telecommunications firms were to install new telephone lines
starting 1996 and manage them until 2010 in a revenue sharing
deal with Telkom.

The foreign KSO investors are France Cables & Radio (to
install lines in Sumatra), U.S. West International (West Java),
Telstra Global of Australia (Central Java), Cable & Wireless of
the UK (Kalimantan) and SingTel of Singapore (eastern part of
Indonesia).

The KSO operations contributed 28 percent to Telkom's
operating revenue in 1997.

The monetary crisis made it difficult for contractors to meet
the contract terms.

They claimed in April that 50.1 percent of the targeted lines
had been installed by the end of 1997, but Telkom's Asman said
only 25 percent had been installed.

Telkom is one of 12 state companies to be put on the
government's privatization list to help raise US$1.5 billion to
finance the 1998/1999 State Budget. The government, which at
present holds a 65 percent stake in the telecommunications
company, plans to make further divestments in its privatization
program.

The restructuring of the KSO contracts, however, has to be
completed first before selling more of the government's stake in
the company, officials said. (rei)