Smaller companies benefiting most from new interconnection costs

JAKARTA (JP): Smaller companies in the mobile phone industry such as Bakrie Telecom and PT Mobile-8 Telecom are likely to benefit the most from the new interconnection tariffs introduced by the government, analysts say.

"It will be the smaller ones most likely to benefit in the coming competition," said Felix Sindhunata, the head of equity research at Mega Capital Indonesia.

The government on Monday introduced a new formula for determining interconnection costs between operators, which will bring down tariffs from 20 to 20 percent.

Mobile operators have been told to revise their retail prices to reflect the changes in the interconnection costs and implement the new rates by April 1.

PT Bakrie Telecom trades under the Esia brand, a CDMA-based mobile phone service, while PT Mobile-8 Telecom provides CDMA-based Fren.

The number of Esia subscribers increased from 1.55 million in 2006 to 3.8 million in 2007. The company is targeting seven million subscribers by the end of this year.

Felix said shares in PT Telekomunikasi Indonesia (Telkom), the parent company of the biggest player in the mobile industry, PT Telkomunikasi Selular (Telkomsel), fell drastically after the Business Competition Supervisory Commission found the Singaporegovernment's investment arm, Temasek, and subsidiaries guilty of cross-ownership in Telkomsel and the second biggest market player, PT Indosat, which led to "unhealthy competition".

He predicted major players like Telkomsel and Indosat would experience sluggish growth due to the new competition.

Heru Sutadi from the Indonesian Telecommunications Regulatory Board predicted a much more "real" competitiveness following the changes to the interconnection tariffs.(lva)