S&P assigns B+ rating to Indosat
S&P assigns B+ rating to Indosat
The Jakarta Post
Jakarta
Global rating agency Standard & Poor's Ratings Services (S&P)
assigned a "B+" rating to the country's second largest
telecommunication company PT Indonesian Satellite Corp. (Indosat)
on Friday, amid a stable outlook in the telecommunications
industry.
In a press statement, S&P said that it had also assigned its
"B+" rating to Indosat's proposed seven-year US$200 million
senior unsecured notes maturing in 2010, issued by Indosat
subsidiary, Indosat Finance Company B.V., and guaranteed by
Indosat and its subsidiaries, P.T. Satelit Palapa Indonesia and
P.T. Indosat Multimedia Mobile.
S&P said the rating reflects material country risks, growing
competition in the wireless and international markets, regulatory
uncertainties and the risk of further rupiah depreciation.
However, these factors were offset by a degree of insulation
from sovereign debt risks, Indosat's position as one of the
leading telecom operators in Indonesia, and robust domestic
wireless growth prospects, the agency said.
"Cellular operators are now facing new competition from the
fixed wireless services, which have similar mobility and features
to local cellular services, but are offered at local call rates,"
said S&P's credit analyst Greg Pau, director in the Corporate and
Infrastructure Ratings Group.
"Although the rollout of fixed wireless service remains
limited, S&P is concerned about the potential degree of
cannibalization, given its low rates," he added.
As well as competition in the wireless sector, the country's
international call business is in transition as it is open for
limited competition between Indosat and state-owned incumbent
P.T. Telekomunikasi Indonesia (Telkom) following early
termination of their exclusive rights to operate in each other's
segments. The international call service is still controlled by
Indosat, while local and domestic long distance service is
controlled by Telkom.
Indosat is facing increasing competitive pressure with the
entry of Telkom into its international direct dialing market
expected by the end of 2003 or early 2004.
S&P expects pricing competition to be more intense as both
attempt to grab a market share.
The agency said that although the direction of
telecommunications policy in Indonesia was largely positive,
there were key regulatory issues to be resolved, particularly in
interconnection agreements and rate-setting mechanisms.
In addition, regulations on the range of use and service
pricing in fixed wireless would be the key issues determining the
service's future expansion and the competitive landscape of the
cellular market, it said.