Phone rate hike unlikely: Official

JAKARTA (JP): The next government will most likely delay a planned increase of telephone tariffs in a bid to win the people's hearts, a senior government official said here on Thursday.

Director General of Post and Telecommunications Sasmito Dirdjo said that under the existing formula, telephone tariffs were set to increase in 2000 by up to 75 percent.

"But, I'm not sure whether the new government will have the guts to apply the rise. They probably won't do it because they don't want to make an unpopular policy that will harm their image as a new government," he said.

Sasmito acknowledged that the planned increase was too high, but insisted that the fare increase was necessary to offset higher investment and operational costs.

The country's telephone tariff is adjusted every year based on a formula set by the government.

According to a source in the telecommunications industry, the Forum for Telephone Tariff plans to propose to the government to cut the tariff increase from 75 percent to 30 percent. The forum groups officials of state local telecommunications operator PT Telkom and its Joint Venture (KSO) partners.

"The ideal rise, according to the real calculation based on the existing government's price cap, is about 75 percent. The amount was considered by forum members as being unrealistic, so they finally came up with 30 percent," said the source, who spoke under condition of anonymity.

Gatot S. Kahrmadji, vice president of Ariawest International, one of Telkom's five KSO partners, said the increase was necessary to enable Telkom and its partners to build new lines.

"We really need to build more new lines to meet the demand. But a new investment or a bank loan is just impossible at the moment. The rise is the only hope," he said.

Telkom's president A.A. Nasution claimed late September that his company was in good financial condition and suggested the government put off increasing the local phone call tariff in 2000.

"Based on the Activity Based Costing calculation, Telkom's rate of return in 2000 without any tariff rise will be 19 percent, meaning Telkom will still be able to fulfill its short and long-term obligations," Nasution stated in a letter to Minister of Communications Giri Suseno.

He added that given the low demand for new lines and the down turn in economic conditions following the prolonged crisis, a tariff increase should be avoided.

Sasmito acknowledged that raising the telephone tariff during the ongoing crisis would attract heavy criticism from the public.

He said however that the tariff increase was necessary, not only to help operators obtain more funds to support the improvement of facilities, but also to attract investors to re- enter the country's telecommunications industry.

"Tariffs are a very important factor taken into account by foreign investors when they intend to invest in (the telecommunications sector in) a country. How can we expect investors to come here if we offer them a low tariff, which is good for customers, but will not guarantee a rapid and easy return for foreign investment?" Sasmito said.

Telkom data reveals that the current rate of return for investment in the Indonesian telecommunications sector of about 11 years fails to compete with the six to seven year rate of return in many other countries.

The data also reveals that Indonesia's phone call tariff is the lowest in Asia. It charges 2.1 US cents per minute, compared to Singapore's 2.3 cents, Korea's 2.5 cents, Malaysia's 3.4 cents and Sri Lanka's 2.5 cents.

The monthly subscription fee in Indonesia is $2.88, compared to Thailand's $4.18, Singapore's $7.66 and the Philippines' $8.53. (cst)