Windfall for telecommunications operators in RI

Windfall for telecommunications operators in RI

JAKARTA (JP): The telecommunications industry in Indonesia has
witnessed significant growth recently with the development of
various facilities, including networks, equipment, value added
services and other telecommunications related businesses.

In telephone facilities development the government has allowed
the participation of private firms in the establishment and
management of telephone lines in the country's five
telecommunications areas.

During the current Five Year Development Plan (Repelita VI)
period, the government has set itself the target of installing at
least five million new telephone lines, of which some 2.25
million are being offered to private companies, while the
remainder, located in the greater Jakarta area and East Java,
will be installed by the state-owned domestic telecommunications
company, PT Telekomunikasi Indonesia (Telkom).

A total of five consortia, comprising both foreign and
domestic companies and cooperatives, have been selected
to install the 2.25 million business lines in parts of the
country other than Jakarta and East Java. After the signing of
15-year concessions, popularly called KSOs, Telkom handed over
the projects to the five private firms earlier this year.

It's a long-awaited breakthrough for the country's
telecommunications industry. Many other countries in Asia,
including Singapore and Japan, still keep their basic
telecommunications business closed to foreign participation.
Before the KSO was introduced, Telkom had offered just profit-
sharing cooperation arrangements to private firms.

Leading world-class telecommunications operators involved in
the KSO projects include France Telecom, West Inc., Telstra of
Australia, NTT of Japan, Cable and Wireless of Britain and
Singapore Telecom.

"Welcome to the most open telecommunications industry in the
world," Minister of Tourism, Post and Telecommunications Joop Ave
said, referring to how Indonesia has been allowing foreign
investment in the telecommunications industry.

In the cellular mobile telephone business, Indonesia currently
has seven operators running three different systems. PT
Telekomindo, PT Metrosel and PT Komselindo run the advanced
mobile phone system (AMPS); PT Mobisel runs the Nordic mobile
telephones (NMT) system; and PT Satelindo, PT Telkomsel and PT
Excelcomindo run the Global System for Mobile Communications
(GSM).

Some of the cellular mobile telecommunications operators are
partly owned by foreign firms. Satelindo's partner is DeTeMobil
of Germany, Telkomsel is partly owned by PTT Telecom Netherlands
and Excelcomindo is linked to the American firm Nynex and Mitsui
of Japan.

Subscribers to cellular mobile telephones have also increased
rapidly, especially after the government eliminated the import
duty on certain handheld models in 1995. However the government
now imposes a Rp 400,000 duty for each handset when purchased.

In the meantime, both domestic and overseas firms are eying
chances to enter the new digital cellular telecommunications
projects. These include the Personal Communications Network
(PCN), the DCS-1800 and the Personal Handy-phone Service (PHS).
The new systems operate on 1,800 megahertz or 1,900 megahertz, a
higher operating frequency than the digital network and able to
support more subscribers per area. Its coverage includes
expressways and tunnels.

A number of overseas telecommunications operators including
Hutchison of Hong Kong, Singapore Telecom, and NTT of Japan have
expressed an interest in dealing with the prospective businesses.

Domestic telecommunications firms, Telkom, PT Indosat and PT
Inti, have also prepared themselves for the businesses as the
government is expected to license more than one firm to operate
the new digital cellular system.

The tender for the new digital cellular system is expected to
be opened later this year.

On a smaller scale, fixed radio telecommunications, the second
generation of cordless telecommunications system (CT2) and radio
paging/beeper services as one of the other wireless
telecommunications systems have also expanded widely.

Last year PT Ratelindo the country's only private operator of
fixed cellular digital radio telephones, introduced its project.
The system is offered particularly to areas in Jakarta which are
far away from telephone networks installed by Telkom. Ratelindo
is owned by Telkom and a joint venture company which is partly
controlled by PTT Telecom Netherlands.

In the meantime, PT Telepoint Nusantara, a private firm which
operates cordless telephones, is also running its CT2, a wireless
telephone service which is only able to make outgoing calls.
Several foreign firms intend to participate in the ownership of
Telepoint.

Many overseas companies are also participating in Indonesia's
radio-paging services. PT Dutasejahtera Komunikatama which runs
Starpage beeper service, is partly owned by Motorola of the
United States. Other radio paging providers which are partly
owned by overseas parties include PT Telematrixindo with the
EasyCall brand; PT SkyTelindo with Skytel; PT Indolink First
Pacific with Indolink and PT Buana Bintangbayu whose Telepage is
partly owned by a Japanese firm.

PT Raya Pertiwi Semesta with its Multipage beeper is
indirectly owned by NTT International Corporation of Japan, while
PT Hutchison Sewu, which runs Personal Beepers, is partly owned
by Hutchison Whampoa Ltd of Hong Kong.

Currently, Indonesia has three radio trunking system
providers. The firms operating radio phone services are
PT Mobilkom Telekomindo (partly owned by Jasmine of Thailand,
Goldman Sachs and International Wireless Communication of the
United States), PT Jastrindo Dinamika (partly owned by Telstra)
and PT Maesa Nusatama.

Two more firms, PT Indocall Rintis Buana and PT Prasarana
Lokapratama will soon start similar businesses, while the
government plans to license two more firms to provide
telecommunications through the radio trunking system, bringing
the total number of such operators to seven.

Besides the wireless telecommunications system, Indonesia will
also be operating, within the next two years, a sophisticated
digital mobile telecommunications project based on satellite
technology. The $1 billion project is being developed by PT Asia
Cellular Satellite System (ACeS) which is owned equally by
Indonesian, Thai and Philippine firms.

Satellites are playing a major role in the development of the
telecommunications industry, and will in turn accelerate the
growth of the country's economy and improve the well-being of the
population.

Currently the country has the third generation of
communications satellites called the Palapa-C1 and the Palapa-C2
which are operated by Satelindo.

The two satellites, one of which was launched from Kourou in
French Guiana yesterday, are invaluable both to broadcasters and
telephony service providers.

As a satellite operator, Satelindo plans to establish
partnerships in several global satellite telecommunications
projects.

There are currently several global satellite projects with
plans to launch satellite-based telecommunications systems. The
multi-billion dollar projects, including Iridium, Odyssey,
Globalstar, Teledesic and Inmarsat P, will begin operating within
the next five or six years.

Iridium, led by American Motorola, will operate 66 satellites
to be sent into orbit starting in 1998. The initial stage of the
global network will have the capacity to serve 1.5 million mobile
telephones and 500,000 international pagers. Another American
project, the Globalstar system, plans to launch 48 low-orbit
satellites to provide worldwide telephone and other digital
communication services.

Odyssey, a consortium established by TRW from the U.S. and
Canada's Teleglobe, also plans to operate 12 satellites in the
medium-earth orbit. The project is expected to commence by the
year 2000. The International Maritime Satellite (Inmarsat)
organization is planning a similar project, called Inmarsat P or
I-CO Global Communications, which will use 10 satellites.

Some of the projects have expressed their interest in entering
Indonesia which is considered one of the biggest potential
markets in Asia.

Inmarsat is the first of such companies to secure a place in
Indonesia as Indosat has set up a new subsidiary called PT
Indokomsat Lintas Dunia to provide services from I-CO Global in
the country after the project starts within the next two years.
Indosat spent $12.87 million to acquire a 1.41 percent stake in
I-CO. The system will permit mobile voice and data communications
through a hand-held telephone anywhere in the world.

Though the government has opened the telecommunications
industry door to overseas firms, the government still holds its
only key. Any basic telecommunications service must be operated
by state-owned companies.

The involvement of private operators in the Indonesian
telecommunications industry is permitted on the condition that
such firms cooperate with the state-owned companies under a
joint-operation, joint-venture or management agreement.

Therefore, based on the country's Telecommunications Law No.
3/1989, interested parties planning to enter the
telecommunications industry are required to set up partnerships
with either Telkom or Indosat or both.

-- I. Christianto