INDONESIA'S PT TELECOM(TLK) Message Board

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Technology Stocks : INDONESIA'S PT TELECOM(TLK)

TLK 21.10

-1.2%

Nov 20 3:59 PM EST

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To: Jyoti sharma who wrote (261)	2/6/1998 1:12:00 PM
From: tom	Read Replies (1) of 947

More info on Morgan Stanley downgrade of TLK - They have lowered their eps estimate for 1998 to 134 Rps and in 1999 to 181Rps per share - TLK will only get a 3.5% nominal tariff increase in 1998 (when inflation will be 30-50% in the best case scenario or even 20% if you believe Suharto) so real tariff rates will fall by ....30-50%-ish - 1997-2002 eps growth 5% at best - Telmex operating margins fell from 52% to 35% after the Mexican devaluation when they saw a 20% decline in real tariffs - KSO operators are in big, big trouble (heavy fx debt, declining real tariffs). They would need tariffs to rise by 60-90% to make up for the the fall in the Rupiah. They either need tariffs to rise or the MTR payments to TLK to be reduced. As these MTR payments are 50% of TLK's income it is reluctant to give them up. As the government is reluctant to see inflation skyrocket it is unwilling to raise tariffs! - Cellular is horrendous. TLK owns 43% of Telkomsel and 22.5% of Satelindo. Satelindo wrote off 30% OF ITS SUBSCRIBERS IN 4Q97 ALONE!!!! Its accounts receivable now stand at 365 days and 1/3 of these is uncollectable (and that's the company's view). Satelindo is also involved in the KSO projects and has debt of US$500m with US$200 due between march and August 1998. Nice! They also expect 50% of Telkomsel's subscriber base is deliquent. TLK is enjoying huge outperformance because of a flight to quality in the domestic market (like GG, ISAT, TINS etc). This will not last for ever. Tom

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