Telkomsel to invest US$500 million

Telkomsel to invest US$500 million

Tantri Yuliandini, The Jakarta Post, Jakarta

Indonesia's largest cellular operator PT Telkomsel is planning
to invest some US$500 million next year for the development of
its infrastructure, a senior executive said.

Telkomsel's director of finance Yusuf Kurnia said on Wednesday
that the company expects subscribers to increase to 5 million in
2002, compared to 3.05 million recorded in November this year,
and that infrastructure development was needed to maintain the
quality of services.

"We are targeting 5 million subscribers next year because we
see that the cellular market in Indonesia is still driven by
strong demand," he said, adding that total cellular subscribers
in the country are expected to reach 11 million next year
compared to 3.4 million in 2000.

The bulk of the investment would go to the construction of
base transceiver stations (BTS) to ensure a wide coverage and
clear transmission, he said, adding that to date Telkomsel has
erected more than 2,000 BTSs and had coverage in more than 380
cities across Indonesia.

Telkomsel is also planning to divest 10 percent of its shares
in an initial public offering (IPO) next year to help finance the
expansion, but the plan is pending the approval of the government
and its major stakeholder state-owned PT Telkom, Yusuf said.

"But again this is based on the assumption that SingTel's plan
to increase its ownership will be realized," he added.

Telkom, who owns 77.7 percent of Telkomsel, earlier said that
it and Singapore Telecommunications Ltd. (SingTel) were
negotiating the possible purchase of additional Telkomsel shares
to allow SingTel to increase its stake in Telkomsel.

SingTel had taken over the ownership of Dutch telco KPN NV's
22.3 percent shares in Telkomsel late in October for US$602
million.

Yusuf explained that the proceeds from the IPO would go to the
expansion of the company's cellular network and to increase its
cash flow.

He said that he was optimistic that the IPO would bring in the
needed funds as Telkomsel was considered the number five cellular
company in Asia after China, Korea, Taiwan, and Thailand, based
on number of customers and financial capability.

"Telkomsel's estimated value is between $3.2 billion and 3.4
billion, with average revenue of $17 per user per month, which is
close to China mobile's $17.8 per user," Yusuf said. He did not
disclose how much Telkomsel was expecting from the IPO.