Indosat to launch Star One to challenge Telkom

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.