Local phone rates to rise by up to 28%

Local phone rates to rise by up to 28%

Dewi Santoso, The Jakarta Post, Jakarta

The government has allowed state-owned telecommunications
firms PT Telekomunikasi Indonesia (Telkom) and PT Indonesia
Satellite Corporation (Indosat) to raise local telephone rates by
up to 28 percent on condition that long-distance call fees are
lowered by at least 10 percent.

Both operators, however, refused to provide details on when
the new rates would be introduced, saying that they would need to
discuss the matter further with the government and the Indonesian
Telecommunications Regulatory Body (BRTI).

According to Minister of Communications Agum Gumelar, the
planned increase in telephone rates is a result of the BRTI's
calculations that telephone operators may have rebalancing rates
of 9 percent in 2004.

Rebalancing is a form of synchronization between rates for
local and long-distance calls.

"In order to promote healthy competition between operators, we
need to eliminate the cross-subsidy from long-distance calls to
local ones. That can be done by rebalancing the tariffs," Agum
said on Tuesday.

Telecoms operators will also be allowed to increase monthly
fees by up to 28 percent.

Currently, Telkom charges local calls at Rp 195 per 1.5
minutes, equivalent to Rp 132 (1.6 US cents) per minute. With an
increase of up to 28 percent, domestic call fees will stand at Rp
250 per 1.5 minutes, or Rp 168 per minute.

Telephone rates in Indonesia are relatively low as compared
with Singapore, where local calls stand at 2.5 Singapore cents
per 6 seconds, or 25 Singapore cents (15 US cents) per minute.

Nonetheless, Telkom enjoyed a handsome increase to Rp 7.12
trillion in revenue for its fixed-line business last year from Rp
6.23 trillion in 2002.

Telkom president Kristiono said that rate rebalancing would
contribute an additional 3 percent to his company's total
revenue.

As another consequence of the rebalancing, however, both
operators are required to build at least 10.7 million telephone
lines by the end of 2008. This year alone, both are obliged to
build at least 1.4 million lines.

Kristiono said Telkom was optimistic that the 1.4 million-line
target could be achieved as it has provided funds to build 1.2
million lines this year. The remaining 200,000 lines are expected
to be built by Indosat.

It costs US$200 to build a telephone line.

The phone rates hike also comes along with a new government
regulation on the duopoly arrangement in the fixed-line
telecommunications sector, in which Indosat has also been allowed
to operate.

Agum said that the government had decided to pay Rp 478
billion (US$56.23 million) in compensation to Telkom, whose
monopoly over the domestic fixed line business ended last year,
eight years earlier than the originally planned 2010.

However, Indosat, whose exclusive rights over international
call services ended two years earlier than the originally
scheduled 2005, is required to pay Rp 178 billion to the
government.

The termination of Telkom's and Indosat's exclusive rights is
part of the government's effort to liberalize the domestic
telecommunications industry.