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Updated News August 26, 2010

Thu, 08/26/2010 - 16:31


In the News:





Government Relations & Economic Development

RI fast becoming favorite investment destination
The Jakarta Post, Jakarta – 26/08/2010

With its huge labor force and relatively stable political and social climates, Indonesia has been increasingly regarded as one of the best places to invest in labor-intensive industries, experts say.

The growing labor costs in China and Vietnam have made Indonesia the primary choice for many Asian industrial giants. Many Korean and Taiwanese shoe and electronics companies, for example, have considered relocating their factories from China to Indonesia.

“Many Taiwanese companies have decided to relocate factories to Indonesia. In China and Vietnam they have difficulty recruiting enough workers,” Bennet Chen, Taipei Economic and Trade Office (TETO) Indonesia deputy representative told The Jakarta Post on Wednesday.

Chen said many Taiwanese companies had chosen to build factories here not only because labor costs were more competitive, but also because of Indonesia’s political stability and huge domestic market.

According to the Indonesian Footwear Association (Aprisindo), six footwear companies from Taiwan and South Korea had relocated factories from China and Vietnam to Indonesia, with a total investment of US$550 million.

In its quarterly report, the Investment Coordinating Board (BKPM) said the realized foreign investments during the second quarter of this year reached Rp 35.6 trillion, a 52.7 percent increase from Rp 23.3 trillion in the April-June period of last year.

Data from the Central Statistics Agency (BPS) shows that in February this year Indonesia’s workforce totaled 171.02 million people, up from 168.26 million in the same period last year. However, only 92 percent (116 million) of these workers were employed.

Earlier, Trade Minister Mari Elka Pangestu said the workforce boom would last for the foreseeable future, “for 10 to 15 years ahead”, creating ideal momentum for businesses to establish a base in Indonesia to access the population and its growing purchasing power.

“We believe we will have no difficulty recruiting workers in Indonesia,” Chen said confidently.

Taiwan is among the 10 largest investors in Indonesia. As of 2009, Taiwan had invested $13.96 billion.

According to TETO, in 2009 the trade value between Indonesia and Taiwan reached $8.5 billion, down from $10.85 billion in 2008 because of the global financial crisis.

China and Vietnam were previously known as investment havens for many foreign investors, especially those involved in labor-intensive industries. However, rising salaries and an increasing number of labor strikes in recent years have made the two countries less appealing, leading many investors to turn to other countries to build their new factories.

The Beijing municipal government has, for example, increased minimum wages to $141, from $117 per month, starting from June this year. Up to 11 industrial areas in China also increased wages by up to one-third of previous levels. In May, the government of Vietnam increased minimum wages to $38 from $34 per month.

The minimum wage in Indonesia is around $90 per month, and TETO says this amount is still acceptable and competitive.

Chatib Basri, an economist at the University of Indonesia, said many foreign investors chose to set up industries in Indonesia not only because labor was cheaper here, but more because of the country’s stellar economic performance and political stability. “Indonesia’s economy has performed very well over the past few years. During the global financial downturn our economic growth still hit 4.5 percent in 2009,” he told the Post on Tuesday.

Indonesia’s large workforce and growing purchasing power were among factors making it attractive to investors, BKPM chairman Gita Wirjawan said.

In 2009, Indonesia’s per capita GDP reached $2,590, up from $2,269 a year earlier.

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Panasonic names RI hub for batteries, LED lamp production
The Jakarta Post, Jakarta – 26/08/2010

Celebrating the 50th anniversary of cooperation between Japanese electronics manufacturer Panasonic Corporation and the Gobel corporate family, PT Panasonic Gobel Indonesia (PGI) said it would contribute more to the Indonesian economy.

PGI chairman Rachmat Gobel said Wednesday that Panasonic Corporation chairman Fumio Othsubo had met with President Susilo Bambang Yudhoyono to discuss how Indonesia should develop its industry.

“Panasonic is committed to developing environmentally friendly industries, starting from raw materials to manufacturing processes to product outcomes,” he said at the Ritz-Carlton in Jakarta.

The company said it had cut carbon dioxide production by 30 percent in some areas in 2009, when compared to 2006 levels.

Rachmat said Panasonic had made Indonesia its global production base for several products, including batteries and light emitting diodes lamps.

“The latest relocation was a lithium coin battery factory from Japan to Indonesia, which we hope can start operation in November,” he said, adding that the new factory in Cibitung, West Java, will produce more than 350 million batteries a year and employ more than 400 people.

The company said its coin battery sales were 38 percent of the global market in 2009 would reach 43 percent this year.

Rachmat said PGI would continue to expand its business in Indonesia and demanded that the government ensure there was enough electricity to support the company’s activities.

Panasonic’s relationship with PGI dates back to 1960 when PT Transistor Radio Manufacturing, represented by the late Thayeb Moh. Gobel, and Matsushita Electric Industrial (now Panasonic Corporation) represented by Arataro Takahashi, signed a contract.

In 1970, a joint venture between PT Transistor Radio Manufacturing and Matsushita Electric Industrial was established under a new flag, PT National Gobel.

In 2004, the National brand was changed to Panasonic so the company name became Panasonic Gobel.

To celebrate the 50th anniversary of their cooperation, Panasonic and PGI donated US$100,000 to Darma Persada University in East Jakarta, Rp 500 million ($56,000) to the University of Indonesia’s medical school and $200,000 to the Indonesian Red Cross.

According to the Industry Ministry, Panasonic Corporation employs more than 320,000 people worldwide and more than 40,000 people in Indonesia.

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President hopes RI-Japan economic ties to improve further
ANTARA News, Jakarta – 25/08/2010

President Susilo Bambang Yudhoyono has expressed hope that Indonesia-Japan economic relations would continue to improve in the future.

"We hope economic relations between Indonesia and Japan will continue to improve in the future," President Yudhoyono said at his office here on Wednesday.

The head of state made the remark when receiving a delegation of PT Panasonic Gobel`s board of directors to whom he also said the Japanese company would become part of Indonesia`s economy.

The PT Panasonic Gobel delegation received by President Yudhoyono included the president of Panasonic Corporation, Fumio Ohtsubo, the maanaging director of Panasonic Asia Pacific Pte. Ltd, Ikuo Miyamoto, the president xommissioner of PT Panasonic Gobel Indonesia, Rachmat Gobel, and the presiden director of PT Panasonic Gobel Manufacturing Indonesia, Ichiro Suganuma, the chairman of Matsushita Gobel Foundation, Jusman Syafi`i Djamal, the vice president director of PT Panasonic Gobel, Rinaldi Sjarif, and the vice president director of PT Panasonic Manufacturing Indonesia, Heru Santoso.

On the occasion, President Yudhoyono was accompanied by Coordinating Minister for Economic Affairs Hatta Rajasa, Minister/State Secretary Sudi Silalahi, Industry Minister MS Hidayat, Cabinet Secretary Dipo Alam, f Capital Investment Coordinating Board (BKPM) Chief Gita SWirjawan, and presidential spokesman Julian A Pasha.

Before the meeting with President Yudhoyono, the PT Panasonic Gobel delegation also had a meeting with Vice President Boediono.

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Malaysian Top Companies in Indonesia
Heri Susanto. VIVANews, Jakarta – 26/08/2010

Indonesia and Malaysia are now amidst the escalating tension affecting the political relations of both countries. Malaysian Minister of Foreign Affairs is ready to issue a travel advisory for the citizens of Malaysia who are willing to visit Indonesia.

The conflict is triggered by the arrest of three officers from the Indonesian Fisheries and Maritime Affairs Agency by Malaysian sea patrol in Tanjung Berakit waters, Bintan, on August 13, 2010. The Indonesian officers were arrested soon after the Indonesian authorities detained seven Malaysian fishermen who allegedly entered into the Indonesian territories illegally.

Indonesia is furious upon the action. Protests are held everywhere in the country.

Yesterday, protesters demonstrated before the offices of two top Malaysian companies that are situated in Jakarta: Petronas and CIMB Bank.

In August of last year, the relations between the two countries heated up as Malaysia claimed of having a number of the Indonesian cultural heritage including the Pendet Dance of Bali.

However, the commercial cooperation of Indonesia and Malaysia is far more improved as Malaysia has expanded in various strategic sectors in Indonesia such as telecommunication, oil and gas, plantation, banking, aviation.

Here are some Malaysian companies that have broadened their businesses in Indonesia:

  1. XL Axiata Tbk, XL Axiata, known as XL, is the third top cellular operator in Indonesia after PT Telkomsel and PT Indosat. The majority of XL's shares is owned by Malaysia-based teleco company Telekom Malaysia (TM) International Berhad through Indocel Holding Sdn Bhd (83.8 percent) and Emirates Telecommunications Corporation (Etisalat) through Etisalat International Indonesia Ltd (16.0 percent).
  2. CIMB Niaga, CIMB Niaga is a joint bank as a result of the merger between Bank Lippo and Bank Niaga. The shareholders include CIMB Group Sdn Bhd at 56.1 percent; Santubong Ventures Sdn Bhd at 16.65 percent; Greatville Pte Ltd at 2.58 percent.
  3. Air Asia, Air Asia expands its business in Indonesia by providing flights on many strategic routes in Indonesia.
  4. Petronas, Petronas has been exploring oil and gas in Indonesia for quite some time. It has also developed a network of fuel sales through several fuel stations that it has.
  5. Kumpulan Guthrie Berhad, Kumpulan Guthrie has acquired hundreds of thousands of hectares of plantation in Sumatra belonging to Salim Group.

 

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Energy and Mining

Jakarta to get additional 600 MW power supply
Alfian. The Jakarta Post, Jakarta – 26/08/2010

The grid in the Greater Jakarta area will receive additional 600 megawatts (MW) by the end of this year as state utility company PT Perusahaan Listrik Negara (PLN) will start operating two of its power plants developed under the fast track program.

The two plants are the Indramayu power plant in West Java and the Lontar power plant in Teluk Naga, Banten, PLN’s president director Dahlan Iskan said Wednesday.

“The first unit of the Indramayu power plant with a capacity of 300 MW will be on stream in October at the latest.

The first unit of the Lontar power plant with a capacity also of 300 MW will be on stream by the end of the year,” Dahlan said.

He added the two power plants were parts of the 37 coal-fired power plants prepared under the government’s first 10,000 MW electricity fast track program.

The 300 MW Labuan power plant in Banten is the only one of the power plants built under the program that has begun commercial operation.

Dahlan said the power produced by the Indramayu and the Lontar power plants would be supplied to critical areas in Jakarta.

The power from the Indramayu power plant will be supplied to the Tanjung Priok distribution network, while the power from the Lontar power plant will be supplied to the Muara Karang distribution area.

At present, Greater Jakarta currently receives a power supply of as much as 5,500 MW. About 1,800 MW of the total is supplied by the Muara Karang and Tanjung Priok power plants, while the remaining capacity is supplied from PLN’s Java Bali power system.

Purnomo Willy, PLN’s general manager for the Greater Jakarta operation, said that the supply was actually enough, but the system did not have enough power buffer so the black out will occur any time the system faces technical problems.

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Asia Gasoline-Indonesia buys up to 1.2M bbls for Q4
Seng Li Peng. Reuters, Singapore – 25/08/2010

Indonesia's Pertamina has bought 600,000 barrels to 1.2 million barrels of 92-octane gasoline for fourth-quarter delivery, after skipping term purchases for the grade for July-September, traders said on Wednesday.

The state-owned refiner has made the purchase with an option to lift one or two 200,000-barrel cargoes a month at premiums of about $1.00 a barrel to Singapore quotes on a cost-and-freight (C&F) basis.

The premiums are marginally higher than the 80-90 cents a barrel premium C&F the state-owned firm had paid for second-quarter 92-octane supplies.

It was not immediately clear why Pertamina has decided to resume its quarterly purchases, "but its gasoline consumption has been increasing," said a Singapore-based trader.

It raised its August imports to 7 million barrels, from an initial target of nearly 6 million barrels.

Pertamina has a contract for up to 6 million barrels of the 88-octane grade each month for third-quarter delivery.

Despite robust demand, crack spreads -- premiums/losses obtained from refining Brent crude into naphtha -- remained weak at $3.92 a barrel premium on Tuesday due to ample supplies.

Cracks were at their highest this year in early February at nearly $12.00 a barrel premium.

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Indonesia's Tangguh LNG trains may hit 100% operating rate by Nov
Anita Nugraha. Platts Commodity News, Jakarta – 25/08/2010

The Indonesian unit of BP is expected to finally operate both trains at the Tangguh LNG project at full capacity by November, but the company's LNG shipment target for 2010 may not be met due to unscheduled maintenance that has lowered the run rate at train 2, senior officials said Wednesday.

"One of Tangguh's trains [train 1] is running normally with production at about 22,000 cubic meters a day, while the other train [train 2] is still unable to run normally due to maintenance," said R. Priyono, the chairman of Indonesia's upstream regulator BPMigas.

BPMigas' operation deputy chief Budi Indianto said train 2 is running at 80% of capacity currently and could reach 100% by November. "[The lower run rate at train 2] may mean BP's shipment target for this year may not be achieved," he added.

The 3.7 million mt/year train 1 began commercial operations in July last year. It was shut soon after on August 6 due to technical problems at the descrub column, dehydration unit dryers and mercury removal drum, and was restarted in October. Train 1 is currently operating at 100% of capacity.

The commissioning of the 3.7 million mt/year train 2 was delayed last year in anticipation of similar problems, and commercial operations at the unit finally began in October.

In January this year, both trains were running at 80% of capacity as they were still new, BP spokesman Ngurah Kresnawan said that month.

BP over January-April 2010 had delivered a total of 24 LNG cargoes, out of the 101 cargoes contracted for this year, BP Indonesia Head of Country Nico Kanter had said in May.

The company's total shipments for the first half of the year were not disclosed, but an official who declined to be named said BP ships about nine cargoes each month.

BPMigas had previously said that the Tangguh LNG project would likely supply a total of 116 cargoes in 2010 to meet contractual commitment to its buyers, comprising China's CNOOC with 28 cargoes, South Korean K-Power and Posco with 24 cargoes, US' Sempra with 55 cargoes and Japanese buyers including power company Tohoku Electric Power with nine cargoes.

For full year 2009, shipments were affected by the unexpected shutdown of both trains.

Tangguh has five long-term supply contracts. They are with China's CNOOC for 2.6 million mt/year for 25 years; Posco for 550,000 mt/year for 20 years; K-Power for 600,000 mt/year for 20 years; and Sempra for 3.7 million mt/year for 20 years. Tohoku Electric Power is expected to receive 125,000 mt/year under a 15-year agreement, starting 2010.

The Tangguh project's two liquefaction trains are at Bintuni Bay on Indonesia's far eastern Papua province. It is based on 14.4 Tcf of proven gas reserves across three neighboring production sharing contracts.

BP has a 37.16% interest in Tangguh. The other partners are CNOOC (13.90%), MI Berau BV (16.30%), Nippon Oil Exploration (12.23%), KG Companies (10%), LNG Japan (7.35%) and Talisman (3.06%).

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Indonesia To Seek Compensation From PTTEP For Oil Leak
Joko Hariyanto and Oranan Paweewun. Dow Jones – 25/08/2010

Indonesia will seek more than IDR10 trillion ($1.1 billion) in compensation from Thailand's PTT Exploration & Production PCL for alleged damage from an oil leak last year.

"It's more than (IDR10 trillion), the amount is big enough," Transportation Minister Freddy Numberi said late Wednesday.

Numberi, who is leading a government team in negotiations with the Thai company, said that the compensation claim is "backed by detailed data."

Numberi, however, was unable to give a definite figure, indicating that the government hasn't decided on the exact magnitude of the compensation.

The Jakarta Globe daily quoted un unnamed government source Thursday as saying that the claim would be about IDR20 trillion.

The two sides are meeting in Perth, Australia this week, and Indonesia is expected to propose its compensation claim.

PTT Exploration's Chief Executive Anon Sirisaengtaksin told Dow Jones Newswires that it hasn't received a compensation claim from the Indonesian government.

"The figure isn't an issue right now, we must set up a joint body to verify evidence whether there was any impact. We're ready to support them," Anon said.

Representatives from the Indonesian government are scheduled to meet with executives of unit PTT Australasia Thursday, he said.

The Montara oil leak was one of the worst in Australian history, with 400 barrels a day of crude escaping into the sea in a remote area between northern Australia and East Timor.

Anon said earlier this week that the company had discovered an oil slick along Indonesia's coast from a recent survey by satellite and aircraft, but that the slick hadn't impacted the ecosystem or the livelihoods of local fishermen.

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PT Bukit Asam out to become biggest coal producer
The Jakarta Globe, Jakarta – 25/08/2010

State-owned PT Batubara Bukit Asam Tbk intends to become the country's biggest coal producer in 2016 with production expected to reach 70 million tons a year, an official says.

Bukit Asam president director Sukrisno expressed his optimism on Wednesday the company would meet its target, which would enable it to beat PT Adaro Tbk.'s production of around 45 million tons a year.

"With the additional coal shipping railway infrastructure and coal collection port we are optimistic we will become the biggest national player," Sutrisno told Antara news agency at the signing of cooperation to develop a 270-kilometer long coal shipping railway from Tanjung Enim to Tanjung Api-Api.

Sukrisno said the company's present capacity is around 12 million tons a year but is expected to reach 15 million tons next year.

The coal railway line is expected to help Bukit Asam to boost production. The US$1.6 billion project is expected to operate in 2014 with a load capacity of 35 million tons a year.

Sukrisno said the railway project was expected to increase coal shipping capacity significantly.

"With the completion of several infrastructure projects our production is expected by 2014 to reach 50 million tons a year," he said.

The company has 6.5 billion tons in coal reserve.

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Krakatau Steel Revitalization Needs US$ 580 Million
Eka Utami Aprilia. Tempo Interactive, Jakarta – 25/08/2010

State-owned steel company, Krakatau Steel, needs around US$ 580 million for revitalization. Around US$ 220 would be used for the revitalization itself, and US$ 350-360 million would be used to build the technology supporting it, such as an iron ore processing machine.

“Funds are provided by European Banks and governments, such as from Germany, Austria and Italy,” said the Managing Director of Krakatau Steel, Fazwar Bujang, at the Department of Industry office Tuesday (24/8).

Krakatau Steel obtained European funds from Export Credit Agency (ECA) cooperation scheme. The German banks that are offering export credits are KfW Ipex and HVB (Hypo-Vereinsbank).

He said that the revitalization would be performed from upstream to downstream. The initial upstream revitalization is expected to be completed in April 2011, and the second one will be completed in 2012.

The activities to be conducted are revitalizing the iron maker machine to operate with lower gas consumption and better product output and revitalizing it to become a more energy efficient steel maker machine.

The downstream revitalization is expected to be completed in December 2010, including increasing the machine capacity from 2 million ton to 2.5 million tons production.

According to Fazwar, the revitalization is important to increase the quality of Krakatau Steel’s product.

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Transportation

Flying in Indonesia
The Jakarta Globe, Jakarta – 25/08/2010

It’s mid-afternoon and you’ve just landed in Jakarta’s Soekarno-Hatta International Airport. You’re at the tail end (or so you think) of a long, inter-continental journey including a plane-change en-route. You’re tired and in need of a shower.

You walk along the red-brick corridors, toward Immigration. On your left, you see a long, snake-like line of people by the counters. They are waiting to secure their visas-on-arrival.

Poor guys, you think. At least you don’t have to suffer such ignominies. Just then, your progress is abruptly halted. There seems to be a demonstration in front of you. The way ahead is clogged. Your heart sinks. Aduh! There are hundreds in front of you. Even Tanah Abang in the run-up to Lebaran isn’t so busy.

This is the point at which it pays to have developed an ability to be calm and almost disengaged from your surroundings.

With hundreds of people ahead of you, there’s no point getting tense or agitated. Everyone’s suffering similarly so why should you aggravate things. 

You need to submit to your fate and be patient.

Indeed, now is the moment to draw on your inner Javanese-ness, and assume a state of “nrimo” as you surrender to your surroundings and your destiny — much like the Javanese farmers as they wait patiently for their crops to ripen.

Flying in Indonesia demands a healthy reserve of nrimo. It’s an almost Zen-like ability to bear the hassles. You need to be mentally prepared for crowds, for delays and other unforeseen eventualities.

It’s something I’m used to from decades of traveling around here. But still, I remain a hopeless romantic when it comes to flying.

Despite the hundreds of hours hurtling across Asia, Europe and North America, and despite the occasional discomfort, I’ve never lost my childlike fascination with the world of aviation.

Travelling within Indonesia is an intensification of both the pleasures and the headaches. Indeed, over the past 10 years in Indonesia I’ve experienced both the best and worst of aviation. The latter is obvious.

On the one hand, nothing beats an early morning departure from Soekarno-Hatta Airport to either Surabaya or Denpasar.

Flying the length of Java through a cloudless sky with the mountainous core on your right is one of the world’s most spectacular shows.

Although I spend most of my time on the main trunk routes across the country, before boarding I often longingly watch the more exotic flights taking off.

Those departures to Natuna, Berau, Sampit, Meulaboh and Palu — who’s on them and why are they going there? Why are there over a dozen flights to Pangkal Pinang, where the tallest buildings are towers for swiftlets?

Planes offer the promise of the unexplored and unimagined. Indeed, experiencing Indonesia’s airports is an adventure in itself.

There are places that seem no bigger than private homes. Even a destination as busy as Yogyakarta’s Adisucipto International Airport is tiny compared to some foreign airports.

Travelers arriving from abroad often end up queuing up in the hot sun because the arrival hall is so small it’s more suited to the front room of a villa in Serpong.

As traffic mounts, month by month, the nation’s airports shudder under the volume of passengers.

Enormous crowds pour off planes at Juanda International Airport in Surabaya. In Medan’s Polonia International Airport the rough and tumble melee in the arrival hall has become a folk dance of sorts infused with a certain physicality that only the Bataks can muster.

The peak is during the Lebaran season, as many of Jakarta’s residents head to their hometowns. In 2009, Soekarno-Hatta Airport serviced 1.71 million passengers during Lebaran, up from 1.37 million the year before. This year, authorities estimate that 1.97 million Indonesians will take to the skies from the airport. And that’s just during the holiday season — Soekarno-Hatta Airport has seen some 36.5 million passengers in the last year. The phenomenon is not limited to Jakarta, either. In 2009 Juanda Airport was visited by 4,073 planes bearing 492,291 passengers.

These numbers can only increase as Indonesia’s population swells. So while Indonesia has always thought of itself as a maritime nation, I believe that air travel will soon become paramount.

Indeed, the notion of flying resonates with the Indonesian experience: It’s crushingly democratic and relentless.

No one escapes the downside though those with enough nrimo to endure can at least live through the experience in a state of subdued calm!

Karim Raslan is a columnist who divides his time between Malaysia and Indonesia.

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Infrastructure

Banten Offers Sunda Strait Bridge Project to Chinese Corporations
Wasiul Ulum. Tempo Interactive, Jakarta – 25/08/2010

The regional Government of Banten Province said it has offered the mega project to build the Sunda Strait Bridge which will close the 31 kilometer sea gap between Java and Sumatra to unnamed corporations in China.

Speaking after her visit to China last week, Governor Ratu Atut Chosiyah said today (25/8) the Sunda Strait Bridge Project is one of several big projects in her province she offered to businessmen in Zhejiang Province in the eastern coast of China.

The Banten Provincial Authorities brought the Serang – Labuan Toll road project, Panimbang Airport and Bojonegara Seaport projects, cement factory, and agriculture projects to the table worth a total of Rp62 trillion, and Ratu said the Chinese businessmen is yet to decide which of the projects are the most interesting deal to make.

Ratu said during the trip she struck several cooperation agreements with the Zhejiang province on education, investment and training that will see some dispatch of Banten provincial staffs to the Chinese province in the future to undergo different trainings.

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Information and Communications Technology

Telkom says to settle 1,000 tower deal this year
Fathiya Dahrul. Reuters, Jakarta – 25/08/2010

PT Telekomunikasi Indonesia , Indonesia's biggest phone firm, said on Wednesday it aims to reach a deal with Singapore Telecommunication for 1,000 out of 9,000 telephone towers.

Telkom is shifting its focus to data services to earn higher profits as subscriber growth in Southeast Asia's biggest economy slows. It also needs to invest heavily in telecoms infrastructure including towers.

"Negotiation with Singtel is still ongoing and we hope it will be finalised in stages," said Rinaldi Firmansyah, Telkom's president director.

"I expect we could settle at least 1,000 towers this year."

Earlier this year, Telkom said it would borrow nearly $400 million to buy out SingTel's interests in about 9,000 telecoms towers and put it into its wholly-owned PT Dayamitra Telekomunikasi (Mitratel).

The 9,000 towers are estimated to be worth about $1.2 billion.

The towers are owned by PT Telekomunikasi Selular (Telkomsel), Indonesia's biggest mobile phone operator. Telkom owns 65 percent of Telkomsel and SingTel owns the remaining 35 percent.

Firmansyah said on Wednesday that Telkom aims to list Dayamitra if it operates 3,000 to 5,000 towers in total.

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Indosat subscribers seen at 40 mln, mulls tower IPO
Janeman Latul. Reuters, Jakarta – 25/05/2010

The number of subscribers for PT Indosat, Indonesia's No. 2 mobile phone operator, may hit 40 million by year end, based on the firm's growth forecast, and putting it only just ahead of rival XL Axiata .

Indosat said on Wednesday it sees similar subscriber growth in the second half as in the first, which would put the year-end number at about 40 million, or up a fifth from 2009.

Indonesia, Southeast Asia's biggest economy, is one of the world's most crowded telecommunications markets with 11 operators fighting for customers in a population of 237 million.

Among the three main players in the mobile phone market, Indosat has 37.8 million subscribers, well behind PT Telkomsel, a subsidiary of PT Telekomunikasi Indonesia with 88 million, but ahead of PT XL Axiata with 35 million.

"I'm pretty sure 40 million is a reachable target (for) subscribers by the end of the year," said Harry Sasongko, Indosat's chief executive.

"We should have the same growth rate in the second half as in the first half in terms of subscribers."

Indosat's full-year net profit is forecast at 1.524 trillion rupiah, up 1.73 percent from 1.498 trillion rupiah in 2009, according to Thomson Reuters I/B/E/S.

Indosat, controlled by Doha-based Qatar Telecom , and XL are competing for second place, with XL recently giving full-year guidance for subscribers at 39 million.

Indosat, which has a market capitalisation of $2.8 billion, also expects revenue in the second half to grow at the same pace as in the first half, when revenue grew 5.8 percent.

XL said in July that it expects revenue growth of up to 18 percent in 2010.

Indosat's 2010 first-half profit fell 71.5 percent to 287 billion rupiah which it said was because of a stronger rupiah, depreciation, and an unrealised loss on its derivative position from hedging.

TOWER ASSET

Sasongko also told Reuters that Indosat is still considering whether to keep or sell its tower assets. "We're re-organising ourselves and we think the towers should be put in one unit, we're going to put it under one umbrella," Sasongko said.

When asked if Indosat would consider listing the unit in an initial public offering, he said that was one option.

"The possibility is always there, we need to look at the state of the tower business itself, also regulation and market situation," Sasongko said.

Indosat has 17,372 base transceiver station (BTS) towers as of the first half of 2010.

Based on an average construction cost of 1 billion rupiah, its entire tower portfolio would be worth an estimated 17.372 trillion rupiah ($1.94 billion).

Indosat stock closed up 0.54 percent on Wednesday at 4,650 rupiah. The stock has fallen 2.12 percent so far this year, underperforming the market <.JKSE>, which is up 23 percent.