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.