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

To: tom who wrote (405)	2/23/1998 7:29:00 AM
From: Susan Saline	Respond to of 947

Indonesia ID JAKARTA COMP 7:07 am 505.04 + 9.80 1.98%

To: tom who wrote (405)	2/23/1998 11:55:00 AM
From: Solon	1 Recommendation Respond to of 947

Right now, life at the KSOs is almost sickeningly bad. Of the five KSOs, four have come to a complete stop in their rollouts due to the failure of their loan syndications to provide the next stage of capital funding. These four are PT Aria West (JV with US West), PT Pramindo Utara (JV with France Telecom), PT Bukaka Singtel (JV with Singapore Telecom) and PT Daya Mitra Telekomunikasi (JV with Cable & Wireless). Of these, Aria West has been completely disemboweled, with all suppliers receiving "cease & desist" letters instructing them that no further works should be entered into on behalf of the KSO (on pain of non-payment). Bechtel Telecommunications, which had almost 400 staff servicing Aria West, have just scaled down to one (1) staff member - their country manager. The only KSO with a clear business case is PT Mitra Global Telekomunikasi Indonesia, the Central Java JV with Telstra Corporation of Australia and NTT of Japan. They have independent funding arrangements (having rejected the Telkom syndication model) and are fully funded and well on track with their rollout. They also have the luxury of the greatest degree of subscriber density of all the KSOs, so they will probably see out the crisis and do very well (perhaps the first international Telstra venture to do so). Intriguingly, at current (government-fixed) prices, there is an abundance of demand for basic PSTN connectivity in Indonesia, and so not an oversupply at all. In fact, my company makes a great deal of money (even now) selling premium comms services to multinationals in the mining & oil sectors who are prepared to pay US dollars. With the current level of PSTN charges set very low by the government, a basic telephone line remains as attractive for rural Indonesians as it was before, albeit falling real incomes make the cost of the bribes they have to pay to get one quite high. In answer to your other question, I believe that Telkom will be forced to renegotiate the terms of the KSO agreements, since the current line connection targets are mostly unrealisable. This is exacerbated still further by Telkom defining a line, for the purposes of universal service obligations, as not merely a connected RJ11 wall plug which a subscriber may connect at will, but a connected line WITH A PAYING SUBSCRIBER USING IT. On these definitions, the abject failure of all of the KSOs to meet rollout targets will be a major black eye for DepParPostel (the Department of Tourism, Posts & Communications). I suspect that the following major elements are now in discussion: 1. Increasing SLJJ (long distance) interconnect rates; 2. Extending the performance deadlines on USO rollouts; and 3. Telkom acting as underwriter for long-term KSO debt. Oh, and as an aside - there is no way in God's earth that the KSOs can make money with the Rupiah at present levels. ;-)