Indosat to pay 48% of profit as dividend

Tony Hotland, Jakarta

Telecommunications company PT Indonesian Satellite Corporation (Indosat) announced on Tuesday that it would allocate nearly half of its 2003 net profit as dividend.

The publicly listed company will give 48 percent of last year's Rp 1.57 trillion (about US$167 million) in net profit as dividends to investors (approximately Rp 145.5 per share).

Indosat, which is 41.94 percent owned by Singapore-based Temasek Holdings (via ST Telemedia), also plans to allocate 51 percent of the profit for re-investment and working capital, and 1 percent for reserve funds.

"Our planned capital expenditure for 2004 is up to $700 million. 80 percent of it will be used for our cellular business, and the rest for our fixed-line business and for building backbone," Indosat president director Widya Purnama said after the company's shareholders meeting.

Indosat's 2003 net profit of Rp 1.57 trillion is a 367 percent jump from Rp 336.3 billion in 2002. Its 2003 revenue amounted to Rp 8.23 trillion, up from Rp 6.76 trillion in 2002.

Widya said that 62.1 percent of the total revenue came from its cellular business. He said that Indosat expected up to three million additional subscribers by the end of this year to add to its 6.59 million subscribers.

Meanwhile, Indosat has cut prices of its IM3 cellular services to compete with rival PT Telekomunikasi Selular (Telkomsel), the country's dominant cellular operator, owned by PT Telkom.

"We have cut local call rates by as much as 67 percent and long distance call rates by some 75 percent," said Indosat cellular marketing director Hasnul Suhaimi.

He added that the rates were now up to 32 percent lower than Telkomsel's newly launched Kartu As.

Hasnul confirmed that the price-war between Indosat and Telkom, which has caused declining prices and frequent discounts for many telephone services, would not adversely affect Indosat's profit.

"We expect the price decrease to be balanced out by an increase in subscribers as we expect to increase our market share to 34 percent (from the current 32 percent)," he said, adding that Indosat plans to build 900 new cellular lines.

The shareholders also agreed to name Eva Riyanti Hutapea and Mohamad Ikhsan as the company's new independent commissioners.

They also installed Raymond Tan Kim Meng as the operational and quality improvement director. Raymond was a vice president at cellular operator PT Satelindo before the company was merged with Indosat in 2003.

Regarding its legal case with an employee cooperative at the State Ministry of Culture and Tourism, Widya said that Indosat had filed a judicial review at the Supreme Court.

The cooperative has filed the case with the Central Jakarta District court a seizure request over Indosat buildings, after the Supreme Court overturned Indosat's appeal and obliged the firm to pay the cooperative Rp 18.5 billion and an additional 6 percent interest accrued since 1998 when the dispute began.

The dispute centers on a disagreement between the two parties over the gap in the repayment of some $5.4 million borrowed by Indosat from the cooperative.