Telkom may start overseas expansion next year to help boost revenue

Telkom may start overseas expansion next year to help boost revenue

Rendi A. Witular, The Jakarta Post/Jakarta

Despite a huge untapped market domestically, PT Telkom plans
to expand its overseas market next year to help achieve greater
revenues.

Telkom president director Kristiono said the company might
acquire smaller telecommunications firms abroad next year, as it
could no longer expect higher revenue growth from the local
market due to stiff competition with other players in the sector.

"We cannot depend anymore on "organic growth" to support our
businesses. In order to grow by more than 25 percent, we need to
shift to non-organic growth by acquiring smaller firms overseas,"
said Kristiono at a media gathering on Monday.

Kristiono said the regional expansion would be centered in
countries that were still lagging behind in the cellular business
but had a potential market.

"We haven't decided the (size of) funds (needed) for the
expansion nor the firms that we are after. But we will certainly
target countries that lag behind in their cellular business
development," he said.

Telkom finance director Rinaldy Firmansyah said that the
company was currently eying two overseas firms for acquisition,
with the funds for the plan to be allocated from the company's
capital expenditures in next year's budget.

Publicly listed Telkom has previously said it would allocate
some Rp 14 trillion (US$1.55 billion) in capital expenditures for
2005, in which some 50 percent of the allocation would be spent
on expanding its cellular businesses.

Kristiono and Rinaldy, however, refused to elaborate further
on the plan, saying that the management was currently still
studying the targeted companies.

But Telkom president commissioner Tanri Abeng said the company
was currently in negotiations with the companies, which were
located outside Southeast Asia, possibly in India, China and
Latin America.

"There is indeed a plan for acquisition. Currently, the board
of management is still negotiating with several companies. But at
present, we cannot name the companies yet," said Tanri, who is a
close friend of Vice President Jusuf Kalla.

Telkom's plan for overseas expansion next year, would be
sooner than it had initially planned. In a previous report,
Kristiono said the company would have the capability to expand
abroad in 2007 after it had completed its major network expansion
in the domestic market.

Currently, only about 4 percent of the country's 220-million
population have access to fixed telephones, including fixed-line
and fixed wireless phones. Telkom controls some 97 percent of the
domestic fixed-line business this year, or about 9.5 million
users.

The government has urged local phone operators to build 10.7
million fixed telephone lines by the end of 2008. This year
alone, the operators are obliged to build at least 1.4 million
lines.

Critics have said that the low penetration of fixed lines,
mostly in rural areas, is primarily because Telkom is reluctant
to implement its public service obligation as mandated by the
government due to the low proceeds gained in the fixed-line
business, while the investment needed is quite large.

Next year, Telkom is obliged to install 400,000 fixed lines.

Telkom shares ended unchanged at Rp 5,000 on the Jakarta Stock
Exchange on Monday.