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Telkom proposes telephone tariff hike to be effective early next year. (Communication).

The state-owned telecommunications company PT Telkom has proposed a 33.33% hike in local telephone tariff and an increase of 31.10% in monthly fee to be effective early next year. On the other hand, PT Telkom proposed to the House of Representative a cut of 3.97% in long distance call tariff (SLJJ). At present the local call tariff is Rp 195 per pulse.

The legislators agreed to a tariff hike but asked the company to put off implementation. Until now the company has not fully meet its commitment to provide compensations for the tariff hike. Only one of the compensations namely expansion of networks has been implemented. The other three--improvement in successful call ratio, improvement of public telephone infrastructure and reducing troubles, networks.

Telkom, however, claimed that it has fully carried out its commitment pointing to development of 237,329 line units of fixed telephone by September 2002 exceeding the target figure of 225,000 line units. Successful call ratio has increased from 75.8% to 99.9% by September 2002 and completion of trouble and repair of infrastructure have improved fast from 84.7% to 95.7% and from 83% to 96.9% respectively.

The hike in the telephone tariff constitutes packet of an increase in three years to be made by phases. Therefore, the government no longer needs to ask for an approval of the legislators. An increase in one package is 45.49% including 21.67% in 2002, 15.6% in 2003 and 8.22% in 2004. The proposed increase was 33.33% for local calls and 31.10% for monthly fee. The two sectors contribute very little to the income of the company compared with the contribution of more than 50% from SLJJ.

SLJJ has also faced competition from voice over internet protocol in contribution to the company income, therefore, the present tariff structure is no longer valid as Telkom has been stripped off its monopoly in fixed telephone industry. VOPI business has changed the telephone tariff structure effective before and as a result a subsidy from SLJJ to local call will be eliminated.

Development of networks through T-21 Program

The plan to raise the telephone tariff is also aimed at attracting investors. With adequate tariff continuation of development of the sector will be better guaranteed. Telkom is required by the government to develop 1,211,311 new line units until 2004. So far the company has completed building 624,558 units or 62% of the target.

Telkom hopes to develop until 2006, 1 million line units under the Build, Operate and Transfer (BOT) scheme and 3 million units under the Build Operate and Own (BOO).

Telkom itself plans to develop networks in most commercial location called Zone 20 which consists of 20 to 40 potential cities. BOT will be built outside the zone. In area commercially not profitable the government will seek to build telephone under what called Universal Service Obligation (USO). Under the scheme all areas could be reached by telephone.

Through the T-21 Program, the government will build networks based on vendor partnership from 2002 to 2005 aimed at developing and expanding Telkom infrastructure networks. Development of the network through the T-21 program includes development of fix wireless access CDMA (Code division multiple access), public service telephone networks (PSTN) and two optic fiber transmission link between Banjarmasin-Samarinda and Makassar-Palu.

Under the T-21 Partnership Program, the scheme of pay-as-you-grow is adopted in which Telkom will pay the contractor only after, the net works have been linked to subscribers. Telkom is not required top pay for the part not yet linked to subscribers. With this concept idle capacity could be reduced to the minimum. The pay-as-you grow scheme is different from the old scheme in which vendors were filly paid if the project has been completed. Now under the new scheme investors are paid only 25% and the rest will be paid by installments to follow the number of line units sold to subscribers.

Telkom plans to develop networks under the BOT scheme in all of its operational areas under its regional divisions. Telkom has yet to finish buy out of Ada West International under its West Java regional division. In Central Java it failed to carry out cross transaction scheme with Indosat involving PT Mitra Golobal Telekomunikasi Indonesia.

The networks to be developed under the BOT scheme will use the fixed wireless technology of CDMA. Cooperation under the BOT system varies with a scale of minimally 10,000 unit of telephone lines for a project. The investment for fixed CDMA wireless is around USS 200 per line unit as the switching and BSC are to be built by Telkom.

Telkom has signed a cooperation contract for the development of 40,000 line units of wireless fixed telephone valued at US$ 14.7 million with Samsung. The contract includes development of 16 Base Transceiver Station (BTS). The project will use the CDAM 2000-1X technology at a frequency of 825-830 Mhz covering Base Subscriber Station (BSS) in Surabaya totaling 25,000 lines and 10 BTS, in Denpasar 10,000 line units with 4 BTS and in Balikpapan 5,000 line units with 2 BTS. In addition Telkom has signed contract with Ariane Space valued at USS 62.9 million for the launching of Telkom-2 telecommunications satellite scheduled in November 2004 or by the end of January 2005. In addition to Samsung, there are at least nine bidders all vendors. They have proposed to join the T-21 Program.
Scope of Telkom's T-21 Program

Type of project

Fixed Wireless Access - CDMA * Package-1 for reg. Div. I & II,
 Package 2 for reg. Div IV, V, VI & VII
 and NSS package selected the best from
 the winner of package 1 and 2

 * 1.6 million subscriber lines
 * National scope
 * CDMA 2000-IX system
Public Switched Telephone * Package-1 for Reg div I, II and
Network (PSTN) Package 2 for Reg div Vi., VI & VII
 * Covering Central, access network and
 regional junction

 * Central capacity and access networks
 to support additional new networks of
 1.06 million line unit.

 * To meet demand nationally until 2005

 * PSTN Switching system, optic and
 copper fiber access network and
 regional and metro optic fiber
 transmission networks

Optic Fiber Transmision * Two optic fiber transmission links -
 Banjarmasin-Samarinda (Package-l) and
 Makassar-Palu (Package-2.)

 * The length of the transmission routes
 is 1,000 km each

 * Transmission capacity is 2.5 Gbps each


Bidders proposed to take part in T-21 Program of Telkom

CDMA PSTN Transmision

Ericsson Consortium Alcatel Consortium Alcatel Consortium
Hyundai Corporation Ericsson Consortium Huawei Consortium
LT Consortium (Lucent) Huawei Consortium LT Consortium (Lucent)
Motorola, Inc LT Consortium (Lucent) NEC Consortium
Samsung Electronics NEC Consortium Siemens Consortium
ZTE Corporation Siemens Consortium
 ZTE Consortium

Source: Telkom/Data Consult
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Comment:Telkom proposes telephone tariff hike to be effective early next year. (Communication).
Publication:Indonesian Commercial Newsletter
Geographic Code:9INDO
Date:Dec 3, 2002
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