INDONESIA'S PT TELECOM(TLK) Message Board

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Technology Stocks : INDONESIA'S PT TELECOM(TLK)

TLK 20.71

+0.1%

3:59 PM EST

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To: dppl who wrote (376)	2/20/1998 9:34:00 AM
From: tom	Read Replies (4) of 947

I don't know what everyone else thinks but I am getting tired of hearing whether or not Indo will have a currency board. The situation in the financial sector is now so bad that no matter what they do they have already gone beyond the point of no return. It is impossible for ANYONE to get credit in Indonesia and the economy has ground to a halt as we all know. I speak to people in Indonesia daily and I can tell you that the inflation is worse than you think (the price of an average basket of goods has gone up 4 TIMES in the last 2 weeks)and unemployment will be much, much worse than the consensus view. The risk of social implosion is rising by the day. The next few months will be the worst the country has seen in 30 years and I imagine it will be coming to you live on CNN. Will Suharto be able to contain the military? Maybe...Maybe not... We all know about the riots in Indonesia but these are starting to get more violent with the first deaths being reported. Will the army be able to/want to cope with further unrest? It is obvious what this means for TLK. Indo already has far too many phone lines for the level of incomes in the country. This oversupply will be worsened by the economic crisis. The KSO foreign JV partners are begging TLK to scale down their network build out forecasts as they know that they are completely unrealistic. TLK is a government tool not a private, profit maximising company and so it will make decisions based on the social policy objectives of its owner not on financial returns. I haven't really talked about the fact that its margins will be squeezed as they will not be able to raise tariffs to offset the the rise in inflation. All this and TLK is trading on 27x 1999 earnings (or 23x peak earnings if you want to be generous). You are paying US$4bn for the equity in a highly geared state run company in the worst economy in the world. TLK is not nearly as attractive as Telmex or Telecom Asia or Hong Kong Telecom yet it trades at a premium to them. The only thing it has going in its favour is that share price has fallen a lot. If you look at the share prices of companies in financial distress then the share price always collapses before it goes bankrupt. I know it will be bailed out by the government but will they want to bail out equity investors as well? I think not (just look at First Bangkok City Bank in Thailand - they wrote down the book value by 99%) Tom

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