Indosat takes a beating in Alphanet fiasco

JAKARTA (JP): Indonesia's state-owned international telecommunications firm PT Indosat is likely to lose much of its C$50.75 million (US$40 million) investment in Canada's Alphanet Telecommunication Inc following the later's bankruptcy announcement on Monday.

Indosat president Tjahjono Soerjodibroto said on Tuesday that the final calculation of the realized loss would still have to wait for the sale of Alphanet's assets organized by PriceWaterhouseCoopers Inc as the trustees.

"There will certainly be an impact. But we can't calculate this yet as PriceWaterhouse is still working on selling off the assets," he told reporters at a press conference.

Once the assets were sold, he said, the proceeds would be first divided among creditors including Indosat which bought C$35 million in convertible bonds.

Indosat made the bond investment in August 1997 together with a C$15.75 million equity investment, purchasing 1.75 million shares (14.5 percent) of Alphanet.

The book value for the equity and bond investments totaled Rp 106 billion (US$40 million at the rate in August, 1997 or $12 million at the current rate), Tjahjono said.

Alphanet filed for bankruptcy due to the fact that the corporation had been unable to secure the necessary financing to enable it to continue operations.

Although Alphanet had received bids for its AlphaNet Hospitality Systems Inc, it was realized that the proceeds from this sale would not be sufficient to finance operations.

Tjahyono expected that Indosat's overseas investment loss would not be detrimental to its privatization process.

The publicly-listed company is one of the state-owned companies to be sold by the government this fiscal year ending in March.

Indosat, which went public in 1994 and is now both listed on the Jakarta and New York stock exchanges, is 65 percent controlled by the government.

The government plans to further divest 14 percent of its stake in the company to a foreign strategic investor.

Tjahjono said strategic investor candidates were expected to give their final bids early next month.

State Minister for the Empowerment of State Enterprises Tanri Abeng, however, said on Monday that the final bids were expected next week.

Tjahjono declined to name the candidates, but Tanri said that Australia's Telstra was among the serious contenders.

Tjahjono forecast a 3-9 percent growth in Indosat's 1999 traffic call volume, depending on the development in the country's economic and political situations.

He said the ratio between incoming call volume and outgoing call volume would remain the same as last year's 1.2 to 1.

The government raised international telecommunications rates by between 4 and 50 percent in November due to the sharp depreciation of the rupiah.

Tjahjono said he did not expect a further increase in the rates as long as the local unit remained stable.

Indosat announced last week that its net profit had soared to Rp 1.16 trillion in 1998, compared to Rp 640.8 billion in 1997, and its total revenue rose by 44 percent to Rp 2.1 trillion from Rp 1.45 trillion. (rei)