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.