Indosat to expand outside of Java

Indosat to expand outside of Java

Rendi A. Witular, The Jakarta Post, Jakarta

Aiming to capitalize on the growing demand for cellular
services, publicly listed telecommunications company PT Indosat
plans to allocate a greater portion of its resources next year to
expand its cellular network to Sumatra, Kalimantan and Sulawesi.

Indosat cellular marketing director Hasnul Suhaimi said more
than 50 percent of its capital expenditure (capex) would be
channeled toward setting up new networks in areas outside Java,
which has a relatively low penetration of cellular phones.

"We plan to allocate a larger chunk of our capex next year for
improving and expanding our cellular services outside Java, which
currently accounts for only about 25 percent of our subscribers,"
said Hasnul on Monday.

He added that Indosat intended to invest US$650 million to
$700 million in the network expansion plan, with the funds coming
entirely from its internal cash flow.

Indosat has about 9 million cellular subscribers as of
September, up from 7.5 million in August. The company has three
cellular brands -- IM3, Matrix and Mentari -- and holds about 30
percent of the market.

Hasnul said Indosat's cellular subscribers were expected to
grow to about 9.5 million by the end of this year, up from 5.2
million at the end of 2003.

Indosat, the second largest phone company in the country, has
been trying to narrow the gap with its key rival PT Telkomsel,
which controls half of the domestic cellular market. Telkomsel is
run by state-owned telecommunications giant PT Telkom.

Indosat is 41.94 percent owned by Singapore Technologies
Telemedia, 15 percent by the government and the remainder by the
investing public.

At least 25 million users subscribe to cellular services
nationwide, a figure that is partly boosted by the low
availability of fixed-line telephones. Only about nine million of
the country's 220 million people have access to fixed-line
phones.

According to the Indonesian Association of Cellular Telephone
Operators, the number of cellular subscribers will grow to about
28 million by the end of the year, and up to 40 million next
year, spurred mainly by the wider availability of cellular
services and lower rates.

Meanwhile, Indosat finance director Wong Heang Tuck said sales
revenue in the first nine months of this year would probably
increase by about 30 percent compared to the same period last
year.

Tuck also said the company might issue bonds or seek bank
loans if the capex allocated for next year was deemed
insufficient to meet the higher demand for telecom services.

Elsewhere, Indosat fixed-line director Wahyu Wijayadi said the
company's market share of international services, which had been
its core business for decades, might possibly decline sharply in
coming years due to stiff competition in the sector.

"At present, we control 79 percent of the international call
service market. We have projected that the shares will decline to
about 50 percent in the next couple of years," he said.

The mushrooming of international call services utilizing voice
over Internet protocol (VOIP) had hit the company's market share
severely, said Wahyu.

Indosat shares ended higher on Monday by Rp 50 at Rp 4,275 on
the Jakarta Stock Exchange.