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.