Telecom industry 'needs $10b' in new investment
JAKARTA (JP): The telecommunications industry will need a new private investment injection of up to US$ 10 billion in the Seventh Five-Year Development Plan period which starts in April 1999, a senior official said here yesterday.
Ministry of Tourism, Post and Telecommunications' secretary- general Jonathan L. Parapak said at a PT Satelindo seminar on financing the industry, that the new investment had to come from the private sector.
"We need new investment in the Nusantara 21 information network project, world-class telecommunications operators and to implement the Personal Communications Network (PCN)," he said.
He said Indonesia should keep up with telecommunications industry changes.
"The major prime mover of change is the progress of technology. Digital technology creates convergence, cellular technology creates mobility, satellite technology creates instant global access."
"The global drive of deregulation, private sector participation, privatization and initial public offerings also causes change," he said.
He said that technological trends in the telecommunications industry were global superhighway infrastructure, telecommunications convergence with computers and broadcasting and the global mobile personal communications satellite systems.
Indonesia is developing Nusantara 21, a high-tech information and telecommunications network to connect the archipelago. It will develop multimedia technology in several big cities and wide-band super lanes by 2001.
It is also developing its other telecommunications networks and infrastructure -- including fiber optics, submarine cables, terrestrial gateways and satellites -- for both fixed telecommunications lines and cellular services.
The government has targeted having at least eight million phone lines, 6.7 million additional fixed-telephone lines and 1.3 cellular lines, in the Sixth Five-Year Development Plan period ending March 1999.
There are five private firms responsible for telecommunications network developments under joint operation concessions with state-owned PT Telkom.
Four new multimedia firms and satellite operators are due to start operating in the next few years.
Seven private mobile cellular telephone operators are running three systems in Indonesia. The government has awarded five new mobile cellular licenses to operate the Personal Handy-phone system and the Digital Cordless System 1800. And it will offer 11 new mobile cellular licenses for the same systems next year.
PT Danareksa Finance president, Edgar Ekaputra, said telecommunications operators could not survive in a liberalized market without advanced technology.
"To develop strong telecommunications systems and support them with advanced technology needs a huge amount of capital," Ekaputra said.
He said he thought Indonesia would add millions of fixed and cellular telephone lines and three satellites between 1997 and 1999 and would spend up to $23.7 billion to finance the projects until 2004.
Most private sector financing in the telecommunications industry was in the form of equity placements, debts, equipment vendor financing and equity funds, he said.
"Debt financing is not a popular alternative for telecommunications operators. This is because of the nature of telecommunications business which has high risks, huge capital requirements and is technology intensive."
Equipment vendor financing was now possible because the strong telecommunications industry growth allowed its equipment makers to strengthen their financing capabilities so they could offer favorable financing to telecommunications firms.
"The other alternative is equity or quasi equity from institutional investors or investment funds," he said. (icn)