Indosat to launch Star One to challenge Telkom
Rendi A. Witular, The Jakarta Post, Jakarta
Telecommunications company PT Indonesian Satellite Corporation (Indosat) plans to launch a new fixed wireless service to challenge the dominance of PT Telekomunikasi Indonesia (Telkom) in the cellular business.
Indosat president Widya Purnama said the new facility would be called Star One, and was expected to be launched in the second quarter of this year with 300,000 units in the Greater Jakarta area and 200,000 in East Java.
"No company in this country can declare itself a dominator," said Widya after an extraordinary shareholders meeting on Monday.
He explained that in the first phase Indosat would spend around US$46 million -- 8 percent of the capital expenditure for this year -- in the project, with the funds to be taken from the company's cash reserves.
As for other regions such as West Java, Central Java, Sumatra and Kalimantan, the company plans to invite investors to build around 500 million units of the facility under a revenue sharing scheme, he said.
Widya declined to disclose the total cost for the project.
He did explain that set-up costs would reach $70 per line, which he claimed was cheaper than the cost of setting up the popular Telkom Flexi. Telkom Flexi provides cellular services but charges customers at fixed line rates.
Indosat has a lower cost per unit because it uses a fixed wireless network based on a code division multiple access, or CDMA, technology made in China.
Indosat has been aggressively trying to catch up with Telkom in luring cellular subscribers and has been focusing on its cellular services, which contributed approximately 60 percent of its Rp 8 trillion ($941.18 million) annual revenue in 2003.
Aside from the cellular sector, Telkom is also ahead of Indosat in the fixed wireless business with its Telkom Flexi service, which has 800,000 customers at present.
Telkom Flexi is seen as a threat by most cellular providers of global system for mobile communications (GSM) services, and has resulted in a price war that has seen subscription rates and GSM communication charges fall.
Separately, Indosat shareholders approved the company's proposed stock split. Under the plan, shareholders will receive five shares for each share they own when the split is implemented.
After the stock split, the company's shares on the bourse will increase to 5.17 billion shares, from its current 1.35 billion.
Widya said the stock split was aimed at making Indosat shares more liquid and affordable, a move that would expand the company's public investor base.
Indosat shares on Monday ended lower by Rp 250 at Rp 18,550.