Regional governments enter cellular business

Dewi Santoso, The Jakarta Post, Jakarta

Three provincial and five regental administrations have agreed to join telecommunications firm PT Indonesian Satellite Corporation (Indosat) to launch Star One, the company's new fixed wireless service, by the end of this year.

The provincial administrations are Bali, Central Java and Yogyakarta.

The regental administrations are Kulonprogo, Bantul, Gunungkidul, Sleman and the municipal administration of Yogyakarta.

Indosat president Widya Purnama said that the administrations above would invest in the construction of fixed wireless lines in their respective territories.

A total of 500,000 fixed wireless lines will be built in the provinces and regencies, with construction expected to be completed by the end of this year.

The ventures are based on a revenue-sharing scheme, but Widya declined to detail the amount of shares owned by each of the provinces and regencies in the ventures.

Under the project, each administration will be required to open an escrow account and deposit 25 percent of the total project costs as a "sign of each administration's commitment to the project".

Widya declined to disclose the total cost of the project. He did, however, explain earlier that setup costs would reach US$70 per line.

The project will complete Indosat's initial plan to establish at least one million fixed wireless lines, as the company announced on Tuesday that it would offer the first 500,000 lines by the end of May, including 300,000 in Greater Jakarta and 200,000 in East Java.

According to Widya, the projects in Greater Jakarta and East Java cost $40 million, with funding taken from the company's cash reserves.

He claimed that the cost was lower than that of Telkom Flexi, a popular brand from state-owned PT Telekomunikasi Indonesia (Telkom), as Indosat used a fixed wireless network, made in China, based on code division multiple access (CDMA) technology.

Indosat has been aggressively trying to focus on its cellular services, which accounted for approximately 60 percent of its Rp 8 trillion ($941.18 million) in annual revenue last year.

Telkom Flexi is seen as a threat by most cellular providers of global system for mobile communications (GSM) services, as it provides cellular services but charges customers at fixed-line rates.