$1 billion investment in base stations in 2007
2007 indosat network expansion plan

Strong growth in the second half of 2006 saw Indosat gain a cellular revenue growth of 15 per cent, a net profit margin of 57 per cent and a 21 per cent increase in subscriber numbers. Buoyed by these figures and by the expansion of its network to 94 per cent of Indonesian regencies and 64 per cent of districts during 2006, Indosat has been broadening its scope during 2007.

At the heart of this expansion is the projected minimum investment of $1 billion in capital expenditure by the end of the year. The money will be spent on the construction of 3,500 to 4,000 new base stations across the archipelago, an undertaking which will be funded internally and through the issue of Indosat conventional and shar’iah bonds.

“We are still on track. Penetration in Indonesia was around thirty per cent last June. We still have a lot of room to grow, but if we cannot invest and cannot expand our network, we might lose market share.

“We would like to invest $1 billion dollars this year. Over the next two or three years we still have to concentrate on the cellular business to improve our market share. It is our company’s vision to be the best and to provide a full range of network services,” comments president director Johnny Swandi Sjam.

For now, he adds, Indosat will focus on wireless. The wireless business in the country is growing quickly, according to Mr Sjam, and still has a lot of potential. Indosat is currently running broadband operations through its subsidiary companies, and Mr Sjam says that wireless and broadband are the focus for the future of the company.

As part of Indosat’s expansion portfolio, telecoms giant Alcatel-Lucent has been awarded the contract to deploy a GSM/EDGE network for the Indonesian company. The provision of Evolium Base Station Subsystem hardware and software in addition to professional management services, network optimisation and system support are designed to increase mobile accessibility in the wider Indonesian archipelago. In many areas, such as the four provinces of Kalimantan, the penetration rate is considerably lower than the national average.

“For Indosat the development of the country through investment is limited to our resource of funds, but through our partnership with STT we can access US dollar bonds more easily,” explains Mr Sjam. “We have also made an alliance with Star Hub, and with ten other Asian operators. That is the benefit of the partnership with STT; it gives us global connections and an international standard of corporate governance and operations. Telecommunications has to be based on relationships between operators and that is what we have managed to develop with, and through, our shareholder STT.”

Earlier this year Indosat implemented plans to expand the reach of its Metro Ethernet service, which currently serves 25 institutional customers. The company aims to attract up to 100 new clients to the service, which allows the use of data, voice and video applications simultaneously at a speed of up to 10 gigabytes per second. Current clients include ConocoPhillips, Chevron, Unilever, Bank Indonesia, ABN Amro, Bank Mandiri, BII and BNI.