Rates uncertainty makes Telkom, Indosat unattractive

Rates uncertainty makes Telkom, Indosat unattractive

JAKARTA (JP): The government may not receive good offers for
the planned sale this year of between 10 percent and 14 percent
of its shares in state-owned telecommunications companies PT
Telkom and PT Indosat due to uncertainties over rates, a senior
analyst said.

"I think it would be difficult to obtain an optimum price this
year," PT Danareksa Sekuritas' vice president for research and
equity capital markets Agung Prabowo said on Monday.

He said the government's dallying with the telephone rate hike
this year had created uncertainties, which had prompted investors
to take a wait-and-see attitude.

The interest in the telecommunications sector is enormous,
Agung said, adding that this was especially true in the mobile
telecommunications sector.

"Our problem is that there is a regulatory standoff that had
made investors uncomfortable and which the government must
immediately resolve," he said on the sidelines of a discussion on
telephone rates at the Directorate General of Posts and
Telecommunications.

However, Agung admitted it would not be possible for the
government to postpone the sale of the two telecoms giants
because the government "was on cliff's edge" to finance the 2001
state budget deficit projected at 3.7 percent of gross domestic
product (GDP).

The government had hoped to sell between 10 percent and 14
percent of its shares in the publicly listed Telkom and Indosat
this year to help meet the Rp 6.5 trillion (US$760 million)
privatization target.

The government's privatization of state-owned companies this
year has so far not contributed to the target as the proceeds
from the recent sale of pharmaceutical companies PT Kimia Farma
and PT Indofarma were used for the companies' expansion programs.

The government owns 66.19 percent of Telkom and 65 percent of
Indosat. The remaining shares are held by the public.

"On the business side, an investor needs to be certain of the
volume (the number of telephone subscribers) and the rates to
determine how much revenue it could earn and the costs it would
incur," he said.

Agung said investors were baffled to see the telephone rate
hike postponed as it was what the government had promised them,
including to balance the cost of investment with the rates.

The government had initially planned to raise telephone rates
by 21.67 percent this year as part of its three-year plan to
raise the rates by 45.49 percent to attract investors to the
sector.

It was postponed after the House of Representatives (DPR)
called for a review of the proposed rate structure, which
according to experts is misleading.

The government said earlier its special rate team --
especially assigned to review the controversial rate structure --
had concluded that a flat rate hike of 21.67 percent was the most
reasonable.

The telephone rate hike is pending approval from the minister
of communications and the DPR. (tnt)