Telkom eyes international market for expansion

The Jakarta Post, Jakarta

Indonesia's largest telecommunications company, PT Telkom, is considering an expansion of its business to the international market.

Telkom chief executive officer Arwin Rasyid said as his company's market capitalization was one of the highest in the region, making it worthwhile to consider elevating its market value by exposing itself to a bigger market.

"Telkom's market cap is bigger than companies in Malaysia and the Philippines, but it's far smaller than Singapore's SingTel," he said at a breakfast gathering with the media on Wednesday.

"Singapore, which has only four million in population, has a market cap almost triple that of Telkom. That is because SingTel has expanded its business worldwide."

Therefore, Arwin, who was appointed as the company's CEO in June, said Telkom should enter the international market to pursue the same achievements as SingTel.

He said his company was looking for possibilities to expand its business in Africa and South America.

"We have had conversations with the president of Gambia and also established contacts with Ecuador and Venezuela," said the former banker.

Arwin said as an international enterprise, Telkom should look for such opportunities, which proved to have increased the earnings of foreign telecom companies.

Telkom is listed on the New York and London stock exchanges, as well as in Jakarta and Surabaya.

He believes that the company has the ability to expand globally because its cash flow "remains excellent" and it has the technology.

"Telkom's earnings before interest, tax, depreciation and amortization look likely to increase to Rp 24 trillion (US$2.5 billion) this year, with an assumption of a profit margin of, at least, 60 percent of sales," he said. "The company also aims to triple its market capitalization of about Rp 115 trillion in five years."

Aside from financial ability, the Bandung-based firm also had solid technology infrastructure that could be a selling point for expansion, he said.

Telkom chief operating officer Garuda Sugardo said that in October it would launch a new satellite and install fiber optic cables from South Sulawesi to Papua.

"The operation of the new satellite and cables will accelerate our expansion to the eastern part of Indonesia," he said.

Arwin also said that the company's strategic partnership with SingTel had facilitated the transfer of knowledge that was vital for international expansion.

SingTel owns 35 percent of Telkomsel, a Telkom subsidiary that provides cellular services.

Garuda said that since Telkom was focused on developing content and application of cellular services, buying SingTel's shares back was not necessary.

"The content and application development is based in Singapore, Hong Kong and the United States, so SingTel's participation is still important. Anyway, with 65 percent of ownership, we dominate the decision-making," he asserted. (006)