Crew, FYI....just to keep our eyes on the ball......
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Indonesia to Raise Top International Call Price by 50%
By Alistair Hammond at Bloomberg News
18 November 1998
Indonesia has approved an increase in international call rates to
help offset the decline in the rupiah, said international phone
company PT Indosat. While most countries are seeing small
increases or none, calls to most important destinations - such as
Hong Kong, Singapore, and the United States - will become about
50% more expensive.
"Obviously the impact on earnings is pretty material," said Neil
Juggins, regional telecommunications analyst at Paribas
Securities in Singapore. "To the extent that the scale of the
increase is pretty much what they'd been asking for, it's not a
surprise." Coming only a few weeks after the company told
analysts and investors that no such increase was imminent, the
timing is a surprise, though.
"The basic reason for these tariff adjustments was to improve the
country's telecommunications industry which has been negatively
influenced due to the high depreciation of the rupiah," Indosat said
in a release, adding that the tariff increase will take effect
November 25.
The rupiah has tumbled as much as 80% against the U.S. dollar in
the last year, which has made the cost of outgoing calls from
Indonesia cheaper in foreign currency terms. Indosat, which is
controlled by the government, has been lobbying for an increase to
prevent rising traffic of outgoing calls from exceeding that coming
in.
If a call linking Indonesia and a foreign party costs less when it's
initiated in Indonesia, more people will prefer to call out from
Indonesia than call in. That creates an imbalance, and a net
outflow of dollars from Indonesia, which hammers Indosat's
profits. Hence the increase.
Indosat pays foreign telecommunications companies in dollars for
completing calls originating in Indonesia, and receives dollars for
completing calls originating abroad. For telephone services, 55
countries will see an increase of between 4% and 34%, and tariffs
to 29 other countries will be raised by about 50%. The rest will be
unaffected. Telex rates are to rise by a flat 25% across the board.
In the final analysis, it's hard to determine the impact of the tariff
increases, because the rupiah's movements can make a nonsense
of forecasts in the space of an afternoon, analysts said.
The government plans to sell a 14% stake in Indosat this fiscal
year as part of its $1.5 billion privatization drive. Raising rates is
one of the options minister for state enterprises Tanri Abeng said
the government was considering to make Indosat more attractive
to investors. The company's shares rose 75 rupiah to close at 9,975.
More than 1.2 million shares changed hands, compared with the
stock's six-month average full-day trading of 671,000.
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