Telkom will spend Rp 12b on capital next year

Telkom will spend Rp 12b on capital next year

Rendi A. Witular, The Jakarta Post/Jakarta

State-owned PT Telekomunikasi Indonesia (Telkom), the nation's
largest telecommunication company, plans to spend at least some
Rp 12 trillion (US$1.19 billion) for next year's expansions and
operations.

Telkom president director Arwin Rashid told The Jakarta Post
recently that more than 50 percent of the allocated capital
expenditure (capex) would be spent on expanding the company's
cellular business and adding new equipment.

"We have not come up with a definite figure yet, as it is
still being arranged. But we will certainly allocate some Rp 12
trillion for capex, which is more or less at the same amount as
this year's allocation," he said.

Arwin said this year's capex would be lower than the initial
allocation of Rp 13.7 trillion.

Telkom cellular subsidiary PT Telkomsel has engaged in an
aggressive expansion to take advantage of the country's untapped
mobile phone users, which are estimated to reach more than 50
million, or some 23 percent of the country's 220 million people.

At the end of March, the company had 17.9 million users, or 55
percent of the market share.

Telkom owns 65 percent of Telkomsel, while Singapore
Telecommunications Ltd. (SingTel), Southeast Asia's largest
telecommunication company holds the remainder.

"Growth in cellular business has outperformed other
telecommunication businesses. Telkom will remain focused on
expanding the cellular business, which is becoming more
competitive," Arwin said.

Telkomsel expects its users to grow by more than 50 percent
this year to around 25 million this year, and at least by about
30 percent next year. The company had around 16 million
subscribers last year.

Higher economic growth, which propelled stronger purchasing
power, is driving cellular demand in Indonesia and the country's
$258 billion a year economy is projected to grow by around 5.7
percent this year and 6.2 percent in 2006.

In the fixed-line business, Telkom is targeting users to reach
some 11 million this year, with at least 15 percent growth in new
users next year.

Currently, only about 4 percent of the country's population
have access to fixed telephones, including fixed-line and fixed
wireless phones. Telkom controls some 97 percent of the domestic
market.

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

Critics have said that the low penetration of fixed lines in
rural area is because Telkom is reluctant to implement its public
service obligations as mandated by the government. The business
is a high-investment one with lower returns than other sectors.