PT Indosat plans to offer domestic services by 2005
JATILUHUR, West Java (JP): State-owned international telecommunications provider PT Indosat plans to offer domestic call services in the next decade.
Company president Tjahjono Soerjodibroto said yesterday Indosat was planning to offer a long-distance service by 2005 and a local service by 2010.
He said this would let the company secure its business amid intensifying global competition.
"Indosat faces several major challenges including the free market and its regulations, rapid changing high technology, low- cost oriented tariffing and the unbalanced call tariffs between developed and developing nations," he told House Commission V for communications, transportation, public works and tourism.
Tjahjono said telecommunications regulations would be liberalized in line with the free trade trends set by the Asia Pacific Economic Cooperation (APEC) forum, World Trade Organization and regional trade arrangements such as the ASEAN Free Trade Area.
Tjahjono said Indosat, which relied heavily on its international telecommunications services, had the technology and human resources to take advantage of liberalization in the telecommunications industry.
He said existing regulations stopped Indosat, which is listed on the Jakarta and New York Stock exchanges, developing domestic services.
But he predicted the restrictions would be gradually eliminated, and that Indosat would be able to offer long-distance services by 2005 and local call services by 2010.
After it was reincorporated as a state-owned firm in 1980, the company enjoyed a monopoly on overseas calls until January 1993.
Under decree No. 6/102/1995, the government granted exclusive rights to run international telecommunications services until the year 2005 to Indosat and PT Satelindo.
In 1995, the government also granted a 10-year monopoly on long-distance calls to the state-owned domestic telecommunications provider PT Telkom. Long-distance calls are Telkom's largest source of income.
The decree on the international-call duopoly was released soon after Indosat floated its shares on the Jakarta, Surabaya and New York stock exchanges. The decree stipulates that the tariffs of international telecommunications services are determined by the minister of tourism, post and telecommunications. This applies to both Indosat and Satelindo so they can compete in terms of service rather than price.
The regulation on long-distance call services was released shortly before Telkom listed on capital markets in Jakarta, Surabaya, London and New York in October 1995.
There is no guarantee that Telkom, Indosat and Satelindo will continue to hold their service rights after these privileges expire in 2005.
Tjahjono said yesterday that through the basic "1+3" strategy -- defined by a single core business complemented by three strategic initiatives -- Indosat would continue to expand and improve the scope and quality of its international telecommunications services while seeking to participate in domestic, regional and global telecommunications.
He admitted that Indosat did not originally have any subscribers. "That's why we have to expand domestically, regionally and to diversify into businesses like multimedia and value-added services."
Indosat has stakes in 20 companies. Indosat's subsidiaries include PT Telkomsel which runs Global System for Mobile communications (GSM) cellular phones, which has 168,000 subscribers in 23 provinces.
Indosat also has stakes in PT Lintasarta, a data communications operator; PT Patrakomindo, a petroleum satellite communications provider; PT Mitra Global Telekomunikasi Indonesia, the telecommunications concession holder for Central Java; and PT Sisindosat, a value-added telecommunications provider.
Indosat is 65 percent owned by the government, 32 percent by overseas investors and 3 percent by domestic investors. The company's shares closed yesterday at Rp 6,200, down Rp 75, on the Jakarta Stock Exchange and at $26.75 per American depository share on the New York Stock Exchange on Thursday. (icn)