Telkom, Indosat launch new GSM operator
Telkom, Indosat launch new GSM operator
JAKARTA (JP): Indonesia's two state-owned telecommunications giants, PT Telkom and PT Indosat, launched a new company yesterday to participate in the Global System for Mobile Phones (GSM) cellular business.
"We expect the new firm, called PT Telkomsel, to be operating within the next seven months," the new company's President Director Kusmarihati Sugondo said at the launching ceremony at the Telkom building in South Jakarta yesterday.
Telkomsel, which currently runs GSM operations on Batam and Bintan islands in Riau, was formed with a basic capital of Rp 650 billion (about US$295 million). It is 51 percent owned by Telkom, which has a monopoly over the domestic telecommunications market, while the rest is owned by Indosat.
Indosat is listed on both the Jakarta Stock Exchange and on the New York Stock Exchange. Telkom is scheduled to follow suit by the end of this year, according to officials.
Kusmarihati, a former senior staff member at Telkom, also said yesterday that Telkomsel would soon look for a foreign investor "for the sake of technology transfer."
In Indonesian business circles there have been rumors that Nynex of the United States, France Telecom or PTT Netherlands are possible partners for Telkomsel.
Telkomsel is expecting to enter the GSM market in the Jakarta area by next year, Kusmarihati said.
Compete
This means that Telkomsel will compete directly with PT Satelit Palapa Indonesia (Satelindo), Indonesia's other existing GSM operator, which also offers international telecommunications services and controls the Palapa-C satellites.
To date Satelindo has controlled the GSM market for the greater Jakarta area and some of West Java. It has also secured a license to operate in Surabaya, East Java.
Satelindo, which started its GSM operations in September 1993, is 45 percent owned by a subsidiary of the Bimantara Group, a conglomerate chaired by one of President Soeharto's sons, 25 percent by DeTeMobil, a subsidiary of Deutsche Telekom of Germany, 22.5 percent by Telkom and 7.5 percent by Indosat.
The government has not yet stipulated limitations on the number of GSM operators in the industry. It has said only that all foreign investment in the telecommunications sector must involve either local partners or "the governing body", an expression usually understood to refer to Indosat and Telkom.
A foreign-investment consultant familiar with the GSM sector told The Jakarta Post yesterday that the government was seeking to lure multinational companies to invest in Indonesia.
"The extend of interest is incredible, although the regulations are still somewhat vague," said the consultant, who requested anonymity.
In the meantime, another informed source in the GSM sector told the Post yesterday that the government was processing the proposal of yet another private consortium seeking to enter the sector.
The source, who also requested anonymity, said the consortium was made up of U.S.-based Bell Atlantic and PT Rajasa Hazanah Perkasa, which is led by Hutomo Mandala Putra, President Soeharto's youngest son.
Despite the apparent surge in foreign interest, which is largely based on projections of economic growth and a fast pace of infrastructure development, the immediate prospects of GSM are unclear.
Analysts noted that the sales of GSM handsets could be hindered by their high prices, currently ranging between Rp 2 million and Rp 6 million in Jakarta.
The main reason for such high prices is the fact that all GSM handsets are imported. In addition, their prices in the Jakarta area are practically controlled by the sole operator, Satelindo.
The prices of GSM handsets in Batam and Bintan, which are located within a bonded area neighboring Singapore, are slightly cheaper because imports into those islands are exempted from duties and value-added tax.
Selling GSM handsets had proven more difficult than expected, Satelindo executives have revealed.
Raymond Chatab, Satelindo's marketing director, said in February that his company had failed to meet the target of selling 30,000 units by the end of last year.
Raymond said that Satelindo expected to net only 60,000 GSM subscribers this year, far lower than the initial target of 100,000.
In the meantime, Adi Rahman Adiwoso, Satelindo's commerce director, said recently that his firm would cease to control the prices of GSM handsets. Instead, it would allow the market to determine prices in order to increase the number of subscribers, he said. (hdj)