Telkom, Indosat break monopolies

The Jakarta Post, Jakarta

State-owned telephone companies PT Telkom and Indosat signed on Monday an interconnection agreement for the Jakarta area, allowing the latter to start its local call service in the city.

"With the signing of the agreement, Indosat can start operating its local call business in Jakarta," Telkom's president Kristiono told The Jakarta Post.

Indosat was officially allowed by the government to enter the local call market in August this year as part of the deregulation of the country's telecommunications sector. But, the company could only start operations after it signed agreements with Telkom on various aspects, including the interconnection fees and compensation packages.

Under the restructuring plan, Telkom, which has for decades monopolized local and long-distance calling, will be allowed next year to enter the international call business, which has been for decades an exclusive right of Indosat.

Radjamin Nasution, Indosat's spokesperson, said under the interconnection agreement, the interconnection fee for local phones has been set at Rp 57 per minute. This means Indosat will pay Telkom for any phone call made by the former's customer to the latter customer, and vice versa.

Indosat has installed facilities for 8,000 local telephone lines in Jakarta and another 5,000 local lines in Surabaya.

Telkom now has 6.5 million subscribers.

In order to start its service in Jakarta and Surabaya, Indosat has invested some Rp 170 billion (US$18.8 million) to develop the infrastructure, including receiver and transmitter stations

Indosat has also planned to provide local call service in 4,000 lines in Batam and 3,000 lines in Medan.

"By the end of this year, we will have 20,000 local fixed telephone lines," he said.

The government has set a target for Indosat of installing 1.4 million fixed access telephones by 2005.

Radjamin said that Telkom and Indosat were still working out compensation packages for both parties for losing their exclusive rights. Details of the compensation packages were expected to be released in November.

"We are still discussing the issue. Hopefully, it can be released soon," Radjamin remarked.

Kristiono said thus far Indosat's local call service was limited in Jakarta, but it could operate the service nationwide once Telkom and Indosat sign the agreement on compensation packages.

The government reasoned that, in theory, by lifting the monopoly on telecommunications the public could enjoy better services at lower prices.

However, many analysts doubted the plan would do either, saying Indosat would only fulfill demand which cannot be met by Telkom.