Indosat's Q1 net profit falls 57.4%

Rendi A. Witular, The Jakarta Post, Jakarta

State-owned telecommunications company PT Indonesian Satellite Corp. (Indosat) announced on Wednesday that its first quarter net profit declined by 57.4 percent to Rp 195.4 billion (US$21 million) from Rp 459.8 billion in the same period last year despite an increase in revenue.

The publicly-listed company said in a statement the profit decline was mainly due to deferred tax expenses of Rp 203.6 billion and amortization of goodwill at Rp 136.4 billion as a result of last year's transaction which ended its cross-ownership in several companies with another state-owned telecoms firm PT Telkom.

Indosat added that higher interest expenses of Rp 109.2 billion had contributed to the profit decline.

Indosat said that operating revenue during the period jumped by 99.7 percent to 1.54 trillion, while operating income increased to Rp 473.5 billion from Rp 385.1 billion.

The company used to be an international phone operator but now its biggest source of revenue is the cellular business, which contributed 45.3 percent of its total operating revenue, while international calls and MIDI (multimedia, datacom and Internet) contributed 33.9 percent and 19.0 percent respectively. The remaining 1.8 percent was contributed by other services.

Indosat has just increased its ownership in PT Satelindo, the country's second largest cellular operator with 1.9 million customers, to 100 percent from 75 percent previously.

As for international call, overall traffic declined 7.6 percent from 177.4 million minutes in the first quarter of 2001 to 163.8 million minutes in the same period of 2002. Meanwhile, overall outgoing international call traffic declined from 79.4 million to 74.3 million minutes, or a decrease of 6.4 percent.

The company also said it expected to spend between Rp 4 and 5 trillion this year, mostly in its cellular business, including funding the purchase of a 25 percent stake in Satelindo from Deutsche Telekom worth $325 million.

Moreover, the company is on the verge of injecting $75 million into Satelindo to finance the expansion of its customer base to 3 million.

Indosat shares ended 2.7 percent higher on Tuesday at Rp 13,200 after a drop earlier in the day following the announcement of the first quarter results.

Elsewhere, Indosat said it planned to issue up to 54.5 million new shares to raise cash to help fund its purchase of the 25 percent Satelindo stake.

"Indosat and Deutsche Telekom have signed a basic agreement dated May 15, 2002...both parties expect to execute a definitive agreement as soon as practicable," the company said.

"Source of funding for this transaction will be provided from a combination of internal cash, issuance of new shares of up to 54.5 million and exploring some debt instruments," it added.

The company will seek shareholders approval for the deal by the end of June 2002.

The total number of outstanding Indosat shares stands at 1.04 billion.

The government wants Indosat to increase its ownership in Satelindo to boost the former's value ahead of privatization to help cover the state budget deficit.