Telkom, Indosat promise no rate hikes this year

JAKARTA (JP): State-owned listed domestic telecommunications firm PT Telkom and international direct dialing (IDD) operator PT Indosat said on Tuesday they would not endeavor to increase their rates this year.

The president of Telkom, A.A. Nasution, said the time was not right for Telkom to raise its rates because its customers would already be burdened by the planned increases in fuel prices and electricity rates, as announced recently by the government.

"It's enough for people to cope with the immediate increase in fuel prices and electricity rates. People will curse us if we also propose to raise telephone rates," he told journalists on the sidelines of a hearing with House of Representatives Commission IV for transportation and infrastructure.

Indosat director of marketing Bambang Susilo shared Nasution's view, adding that Indosat also considered the current IDD rates still profitable for the company.

"We think the current rates will remain profitable as long as the value of the rupiah stays between Rp 6,000 and Rp 9,000 per U.S. dollar," he told the same hearing.

Indosat would consider raising IDD rates only if the rupiah weakens to below 9,000 to the dollar, he said, adding it was possible the company would cut its rates if the rupiah strengthened to pass the 6,000 level.

Bambang said that pushing for an increase in IDD call charges at the moment could cause Indosat to lose customers.

He said Indosat saw a 9 percent decline in the volume of IDD calls early last year after the government raised IDD rates twice in November 1998 and March 1999.

Telkom's Nasution said the decision on whether or not to raise telephone rates for local, domestic long distance or international calls would, however, be made by the government.

The government, under a letter of intent signed in February with the International Monetary Fund, has agreed to introduce new rates beginning in April.

Merger

During the hearing with Commission IV, Nasution reiterated Telkom's offer to merge with Indosat, which apparently has shown no interest in the proposal.

"Telkom and Indosat must merge and form a giant company with bigger assets and better technology in anticipation of fiercer competition with giant foreign companies when the government fully opens up the industry in the coming years."

The government is expected to open up the country's telecommunications sector to local and foreign firms in 2011 when Telkom's exclusive right as local fixed line and fixed wireless telephony service provider expires.

Telkom currently holds the exclusive rights to provide local fixed line and fixed wireless telecommunications services nationwide until 2010 and domestic long distance services until 2005.

Indosat and its joint venture PT Satelit Palapa Indonesia (Satelindo) hold exclusive rights for overseas long distance services until 2004.

The new telecommunications law, which becomes effective in May this year, will allow early termination of the rights subject to agreement between Telkom or Indosat, the government and new local or foreign players.

Indosat president Indra Setiawan declined to say whether or not the company would agree to Telkom's merger proposal.

He said the company needed more time to study the proposition in order to make sure the choice would be the best for the company.

However, a source close to Indosat said the company did not particularly want to merge with Telkom because it would not be beneficial for Indosat.

"It would never work. It would be hard to merge two companies that have strikingly different working cultures, not to mention financial capability. For example, Telkom's management and operation are so inefficient," he said.

The deputy chairman of Commission IV, Rasyid Hidayat, said the government should immediately make a decision on the matter so that Indosat and Telkom could get on with business.

"The government must immediately decide on this so that foreign investors in both companies do not have to be confused about it," he said. (cst)