STT commitment to develop fixed lines questioned

A'an Suryana and Fitri Wulandari, The Jakarta Post, Jakarta

The purchase of a 41.9 percent stake in state-owned telecommunications company PT Indosat by Singapore Technologies Telemedia (STT) may not necessarily provide benefits to local customers, as the Singapore giant was likely to focus more on the lucrative cellular business here, an industry expert said.

Telecommunications analyst Roy Suryo said on Monday the government must make sure that STT would honor its promise to build more fixed telephone lines in the country.

He said that the Indonesian people were in desperate need for more fixed lines rather than cellular lines.

STT was named the winning bidder for the government's Indosat stake on Sunday. The company, which beat out Telekom Malaysia, paid a total of Rp 5.6 trillion (about US$610 million) for the stake, which marks the government largest privatization deal so far this year.

The transaction is to be wrapped up before the end of the year.

The government still owns a 15 percent stake in the publicly- listed firm, while the remaining 43 percent is held by public investors.

There have been hopes that the entry of STT to Indosat would help the latter's ability to provide better telecommunication services in the country.

According to the sale and purchase agreement, STT will have to build 759,000 wireless fixed lines by 2010, but Roy said he that he had received indications that STT is more interested in the cellular business.

Indosat controls two cellular phone companies, PT Satelindo and PT Indosat Multi Media Mobile. Together with PT Telkomsel, the cellular unit of state-owned telecommunications company PT Telkom, the companies control 80 percent of the domestic cellular market.

SingTel, another Singapore telecom giant, owns a 35 percent stake in Telkomsel. According to a report, both SingTel and STT are controlled by Temasek Holdings.

Suryo said the commitment to build fixed lines was important as there were only 7.2 million fixed lines available today to serve the Indonesian population of over 210 million.

Indonesia has 9.2 million users of cellular phones.

"If the Singapore firm is not eager about building the fixed lines, the public demand for more fixed lines would not be met," he said.

The government had previously set targets for Indosat and Telkom to build 1.2 million and 1.9 million fixed lines, respectively, in year 2002.

The two companies, however, had requested the deadline be extended to year 2005, said Roy.

Separately, the Indonesian Internet Service Providers Association (APJII) hoped the entry of STT to Indosat would raise competition in the telecommunication industry.

APJII members depend much on Telkom in their business, as the company provides them connection lines to the Internet.

"So far, Indosat has not dared to challenge Telkom's firm footing in the local fixed lines business.

"We hope that the new owner will be brave enough to compete with Telkom in this business, so that we can get cheaper products," said Heru Nugroho, the secretary general of APJII.

Meanwhile, a monopoly watchdog said that it would monitor the Indosat privatization deal to see whether it breached the anti- monopoly law. "If we find it breaches the ruling, we would investigate the matter and hand down the appropriate sanctions," said Iqbal, an executive at the Business Competition Supervisory Commission (KPPU).

He was commenting on the fact that the deal would indirectly hand Temasek control over the domestic cellular market.