16 April 2009 Indosat Plans to Spend $360 Million on Networks

The Jakarta Post

Publicly listed PT Indonesian Satellite Corporation (Indosat), the country’s second larges telecommunications services provider, has set 60 percent of its full-year capital expenditure of US$600 million for network expansion and to boost its service quality amid the cutthroat competition within the industry.

“we wil use the $360 million budget to improve out bandwidth and networks as a whole,” president director Johnny Swandi Sjam told reporters at the State Ministry for State Enterprises on Wednesday.

“we have to prevent out existing users from switching to the competition,” he added. Indonesia is home to 11 mobile phone providers, operating both SGM and CDMA technologies.

The crowded industry has seen tight competition over the past years, with operators seemingly taking turn cutting their rates to lure customers, both new and existing users of rival firms.

The stiff competition helped cut Indosat’s net profit in 2008 by 8 percent, dragging it down to Rp 1.8 trillion (%151.2 million) from Rp2.04 trillion a year earlier.

More than two-thirds of Indosat’s annual revenue comes from its cellular business, with multimedia and fixed telephone businesses making up the others.

By the end of 2008, Indosat claimed to have a total of 36.5 million subscribers, second only to PT Telkomsel, which has more than 60 million users.

It also boasts more than 50 corporate customers, including local, national and international television and radio stations.

This year’s capital expenditure reflects a massive decline from a year earlier when the company allocated $1.4 billion, $220 million of which was spent on a satellite that will officially be launched in China.

“This year’s capex [capital expenditure] budget will be from the company’s budget will be from the company’s budget and bank loans,” Johny said, adding Indosat would seek the loans from national banks rather than international banks.

He added the amount of loans would not be higher than the internal cash.

Indosat is 65 percent owned by Middle East-based Qatar Telecommunications Co. (Qtel). (naf)