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Technology Stocks : INDONESIA'S PT TELECOM(TLK)
TLK 21.10-1.2%3:59 PM EST
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To: Jyoti sharma who wrote (258)2/5/1998 11:03:00 AM
From: tom  Read Replies (1) of 947
 
The reason that it will impact the stock is that the renegotiation could involve lowering the MTR payments that the KSOs make to TLK. This is a large part of TLK's income. As you know, TLK's regulatory environment is friendly but highly ambiguous and so it is difficult to guess how this will pan out.

HK Tel may well have grown its revenues and profits but that's not what I am concerned with. It has grown its equity faster than its earnings - ie it has become less profitable. One of the reasons is that cash now acounts for almost half of total assets and provides little return. Another is that it has already lost 30% of the international market which is its most profitable business.

I think that the management's proactive decision to give up its international licence is very encouraging (By the way, they have actually signed it - it is no longer speculation). By doing this, they extract value from an outdated licence that was being bypassed by call-back, VPNs etc. That is the good part.

The bad part is that post 2000 they will see their biggest source of income being even more rapidly eroded by competition (I'm based in the UK where the government has issued 45 IGF licences). If they try to offset this by raising local tariffs then they will attract competition into this previously unprofitable business.
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