Indosat enhances its performance

Indosat enhances its performance

JAKARTA (JP): As the primary provider of international
telecommunications services in Indonesia, PT Indonesian Satellite
Corporation (Indosat) is working to strengthen its market
leadership in the country while developing a global presence
through increased international initiatives.

Indosat was established in 1967 as a wholly-owned subsidiary
of American Cable & Radio Corporation (ACR), an affiliate of the
International Telephone and Telegraph Corporation (ITT) of the
United States. It was selected by the Indonesian government to
build, transfer and operate for a period of 20 years an Intelsat
earth station in the country to provide access to Intelsat's
satellites covering the Indian Ocean region. Intelsat is an
international consortium of global international satellite
communications organizations which owns and operates a number of
telecommunications satellites.

In 1980, ITT sold Indosat to the Indonesian government for
US$43.8 million and Indosat, since then, has become a state-owned
company providing international telecommunications services in
Indonesia.

Columnist Bondan Winarno, in his book The Transformation
Management of State-owned Enterprises, the Experience of Indosat
depicted the acquisition process in vivid retrospection.

On Sept. 19, 1980, Minister of Finance J.B. Sumarlin, on
behalf of the government, sent a letter to ACR's president,
informing him that Indonesia planned to buy Indosat. Indosat's
managing director, Jonathan L. Parapak, now secretary-general of
the Ministry of Tourism, Post and Telecommunications, acted as a
"go between" for the two parties.

The first round of negotiations was held on Oct. 13, 1980, in
Jakarta, followed by a second meeting in November 1980 and a
final session in December 1980.

Before agreeing on the $43.8-million price, ITT first offered
Indosat for $200 million. It later lowered the price to $150
million, then to $93 million, to $72 million and finally to $55
million. Meanwhile, Indonesia began bargaining at $30 million
before raising its offer to $40 million at the second meeting.

The final price agreed upon was $43.8 million.

Executives

According to Bondan, soon after the acquisition, Indosat was
getting solid under its three top executives -- the company's
president, Parapak, the director of operation, Cacuk Sudarijanto,
and the director of finance, Johannes Djajadi.

In early 1991, Indosat had Tjahjono Soerjodibroto as its new
president when Parapak was appointed secretary-general of the
Ministry of Tourism, Post and Telecommunications. Tjahjono, who
began his career at Indosat as a manager responsible for public
relations, marketing and personnel affairs, was just 39 when he
was appointed as Parapak's successor.

Since then, Indosat's management has been restructured several
times. In 1978, the company was led by a managing director, who
was assisted by a comptroller as well as a director for
operations and engineering. After restructuring in August 1982,
the company had a president assisted by two directors -- for
operations and finance.

Another restructuring was introduced in 1991, with the
establishment of four directorates in the areas of operations,
development, finance as well as administration & personnel. After
another restructuring in 1994, the company, in addition to the
president, retained its four directors, modifying their
responsibilities to cover commerce, technical, finance and
administration & personnel.

Indosat's annual shareholder meeting in April 1996 agreed to
retain Tjahjono as the company's president for the 1996-2001
period. Three former directors -- Herman Simandjuntak, Safwan
Natanagara and Bambang Sulistyo -- were reappointed with
responsibilities in finance & administration, business
development and commerce, respectively. Meanwhile, Achmad Rivai,
an Indosat executive who had been assigned to serve PT Satelindo,
was elected as the new director for operational & technical
affairs.

The meeting also agreed to allow Indosat's former finance
director, Johannes Djajadi, who started his career in the company
in 1973, to resign. Djajadi admitted that he first asked to
resign in 1991.

Throughout the restructuring programs, the management has
maintained the motto of Kretartha Karya Samuha (success through
teamwork).

Indosat reported a net profit of Rp 459.4 billion ($235
million) in 1995, a 59 percent increase over 1994. It reported
Wednesday an 8.62 percent increase in its net profit to Rp 114.6
billion in the first quarter of this year over the same period
last year.

Indosat, whose shares were floated on the New York and Jakarta
stock exchanges in October 1994, is now 65 percent owned by the
government, 32 percent by overseas investors and 3 percent by
domestic investors.

Indosat raised $799 million from the sales of 25 percent of
its ordinary shares on the New York Stock Exchange (NYSE) and
around Rp 650 billion (about $278 million) from the sales of
another 10 percent on the local capital market.

The government used the $799 million raised from the sale of
Indosat's shares on the NYSE to speed up the repayment of its
high-interest loans from the World Bank and the Asian Development
Bank.

The company's shares on the Jakarta Stock Exchange closed
yesterday at Rp 8,325, down by Rp 25.

Monopoly

Indosat enjoyed a monopoly in overseas calls until January
1993, when the government licensed another carrier, PT Satelindo,
a private firm, to also handle international telecommunications.
Both Indosat and Satelindo have been granted a monopoly over
international telecommunications services until 2005.

Indosat expects its only competitor to control no more than 5
percent of the market this year.

Indosat, whose shares are predicted by J.P. Morgan to be among
the best performing telecommunications stocks in Asia this year,
currently has several subsidiaries.

Among the leading subsidiaries are PT Telkomsel, an operator
of the Global System for Mobile (GSM) cellular telephones with
state-owned PT Telkom; PTT Telecom of the Netherlands and Setdco
Group, which began business in Jakarta in May; PT Aplikanusa
Lintasarta, which operates data communications; PT Patrakomindo,
a petroleum satellite communications provider; PT Mitra Global
Telekomunikasi Indonesia, the telecommunications concession
holder in Central Java; and PT Sisindosat, a value added
telecommunications provider.

Indosat also has several overseas affiliates, including
Camintel, which handles the rehabilitation, expansion, operation
and maintenance services of telecommunications networks in
Cambodia; Acasia, a Malaysian-based telecommunications operator
jointly established by telecommunications operators of the
members of the Associations of Southeast Asian Nations (ASEAN);
Astel, a Personal Handy-phone System operator in Japan; and I-CO
Global Communication, an operator of satellite-based
telecommunications services.

Indosat is currently considering setting up a joint venture in
Kazakstan with a local partner to provide telecommunications
services. Indosat plans to invests $5 million in this project
until 2000.

Indosat now links Indonesia with 243 other countries
worldwide. In addition to international calls, Indosat, which
plans to invest Rp 1.7 trillion in the 1996-2000 period,
currently serves facsimiles, telex, telegrams, private circuits
integrated system digital networks (ISDN), data communications,
telecasting and Inmarsat services, as well as the recently
launched Internet service.

Through its basic "1+3" strategy -- defined by a single core
business complemented by three strategic initiatives -- Indosat
will continue to expand and improve the scope and quality of its
international telecommunications services while seeking to
participate in domestic, regional and global
telecommunications. (icn)