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Technology Stocks : INDONESIA'S PT TELECOM(TLK) -- Ignore unavailable to you. Want to Upgrade?

To: Jyoti sharma who wrote (218)	2/3/1998 1:37:00 PM
From: tom	Read Replies (2) \| Respond to of 947

1. Even if you value PT Telkom on peak earnings of 200 Rps per share then it still trades on 25x. 2. Penetration is very low but what proportion of the total population of 200m will need a phone in the next 10 years? If you look at the proportion of Indonesians who can actually afford a phone then it is less than 10-20m. With 5m lines already installed at the end of 1997 then this is a fairly high effective penetration rate. Everyone knows that Indonesia will, one day, need lots more phones but that doesn't mean you have to subsidize them putting those phones in. 3. Unless the tariffs are raised to account for the increased cost of capital equipment then PT Telkom should trade at a big discount to replacement cost because no one would build it in the first place as the returns would not cover the cost of capital. Replacement cost is only 1 side of the equation. 4. If they do raise tariffs to allow the KSO's to continue investing then this worsens the affordability and effective penetration calculations. At the moment it is not worth the KSOs investing with the return on capital so low. 5. How do you think the KSO negotiations will affect Telkom? I can't think that Telkom will win.

To: Jyoti sharma who wrote (218)	2/3/1998 1:54:00 PM
From: Rational	Read Replies (1) \| Respond to of 947

Jyoti: I agree with your assessment on the replacement value idea. At times, I was thinking that the Jakarta market participants could be simply stupid and bid down TLK; but, to the contrary, they (mostly from Singapore and HK) kept up buying Telekom because it is a real asset with a real value. In a globalized telecom industry, TLK will play an important role in the 4th largest country. I think today's heavy discount is related to Antara news releases in which Suharto does not want to name a VP (although he said that he did not set the criteria that pointed to Habbie as a cndidate) and he thinks Indonesia is lagging behind other countries in Aerospace which is Habbie's filed. Suharto may seem to be bidding up for supporting Habbie. He is at the same time stressing in these news clips that he would do everything necessary to bolster the confidence of finance markets. Given the dramatically better economic policies sponsored by IMF and active BI intervention, Rp has been holding steady. Will it hold steady tomorrow? Will Telekom remain at its current level in Jakarta? The ADR is 15% less than the exchanged value at Jakarta. I have seen many big buy orders today; but there are numerous small to moderate sell orders too. Is $8.75 a good price for a stock that at the current exchange rates should be 9.8? What do you think? The difference is slightly less than the bid-ask difference for Rp! Sankar