S&P assigns BBB rating to Satelindo

S&P assigns BBB rating to Satelindo

MELBOURNE (Reuter): Standard and Poor's Corp said yesterday it
had assigned its BBB rating to PT Satelit Palapa Indonesia
(Satelindo).

It said the outlook was stable.

"The rating reflects the large growth potential for
telecommunication services in Indonesia, the diversity of
Satelindo's revenue stream, the relatively stable regulatory
environment, and the level of support shown by its shareholders,"
S&P said.

"Offsetting these positive factors are Satelindo's short
operating history, the need for Satelindo to increase gearing to
meet capital expenditure needs, a potential increase in mobile
competition and downward pressure on international call tariffs,"
the ratings agency said.

S&P said Indonesia has one of the lowest penetration rates in
the Asian region for both fixed line and cellular services.

"Given current and projected economic growth, relative per
capita gross domestic product, and government commitment towards
developing telecommunications infrastructure, the future for
telecommunications providers in Indonesia looks positive."

Satelindo owns licenses to provide satellite services, build
and operate a national digital cellular network and provide
international direct dialing services in Indonesia.

"These varied, though complementary services provide Satelindo
with a solid underlying revenue stream and significant potential
to grow its business base with telecommunications development in
Indonesia," the ratings agency said.

S&P said the company also operated in markets where the
Indonesian government clearly has defined the regulatory
environment, including a legislated duopoly for international
services until 2004.

"However, while Satelindo has significant growth potential in
the near term, the government's intention to introduce additional
mobile technologies, plus downward world trends in international
call tariffs, will moderate revenue growth over the medium term,"
it said.

"Further, the need to borrow in 1997 to fund additional
capital expansion will place increased pressure on Satelindo's
immature financial structure...", the ratings agency said.

S&P said it expected growth in Satelindo's cellular services
to drive much of the improvement in financial ratios in the
medium term from anticipated lows in 1997.

It said Satelindo may have an initial public offering in late
1997 or early 1998 to fund further expansion.