From Government of Indonesia

Telkom May Spend $2b on Expansion

PT Telkom may spend as much as $2 billion this year to expand its networks and fend off competition, its president commissioner Tanri Abeng said.

The state company expects sales to rise more than 20% in 2007 with the addition of millions of users to its mobile network, Abeng said Monday (28/5/07) in an interview with Bloomberg on the sidelines of an Islamic conference in Kuala Lumpur. The company is also focusing on expanding its pay television, broadband and satellite businesses, he said.

"We are not in a hurry to expand regionally because of the tremendous opportunities for domestic growth," Abeng said. "We have to make sure all the domestic segments are captured by us. We are the leader and we have to maintain the leadership position."

"Everybody is pushing their capital expenditures," said Chandra Pasaribu, an analyst at PT Danareksa Sekuritas. "Competition is driving spending."

One rival, Mobile-8 Telecom, a cellular phone operator partly owned by Qualcomm, will start a low-cost service in the third quarter and expects its subscribers to increase to 4 million this year from 1.8 million in 2006. Excelcomindo Pratama, the country's third biggest mobile phone operator, plans to expand its cellular network.

Telkomís first-quarter profit dropped 12% because of increased costs to access rivals' networks and a foreign exchange loss, it said last month. Net income at the state-owned telecommunications company fell to Rp3.04 trillion ($347 million) in the three months that ended on March 31, from Rp3.46 trillion a year earlier.

The phone operator expects full-year earnings to increase by "double digits," even as profit gains may be limited by narrower margins, Abeng said, declining to give specific projections.

Meanwhile, Telkomís mobile phone unit, PT Telkomsel, said on Wednesday (30/5/07) its first-quarter net profit increased by 8% to Rp2.997 trillion ($340.2 million) from a year ago, Reuters reported.

Telkom also said on Thursday (31/5/07) that it plans to allocate up to Rp3.2 trillion ($362.2 million) to buy back a maximum of 1.58% of its shares.

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