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SOE Minister calls for risk, profit recalculations in network sharing plan

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by November 24, 2016 General

The polemic over network sharing and interconnection policies in the nation’s telecommunications sector has entered into a new chapter as State-Owned Minister Rini Soemarno has rejected any measure that will financially harm PT Telekomunikasi Indonesia (Telkom), conflicting with the Communications and Information Minsitry

Rini called for a business-to-business (B-to-B) approach to be included in the revision drafts. The current draft, according to her, could bring the most benefits to private entities but at the same time leading to financial losses to the state-owned telecommunication firm.

“We are, indeed, questioning [the forthcoming revision]. Telkom must deal with the high risks when it first built [the network], but they did it anyway. Where were they [private entities]? And now when the traffic has highly increased, they demand a [share],” she said in Singapore on Tuesday night.

The Communications and Information Ministry has planned to require all telecommunication providers to share their networks and frequencies, hoping to save around 30 percent of the operator’s investment costs and accelerate the telecommunication network’s expansion nationwide.

The policy, which will be stipulated in the revision to government regulations 52 and 53 on telecommunications and frequency, is also expected to create a level playing field among all operators, according to the Communications and Information Ministry.

Rini further reiterated that the obligatory policy should not undermine the huge investments that Telkom had spent in the past for building its vast network.

She also warned of the bad precedence that might be indicated by such an unfair policy to the investment climate.

“In the future, let’s say foreign investors have been putting in their money for a high-risk business, but later they are ordered to share their infrastructure. What will they say? We have warned […] the [Communications and Information] Ministry [about this],” Rini said.

However, Rini refused to comment on the unusually short period provided for the public to assess the revision draft of the two government regulations. The Communication and Information Ministry only gave six days for a “public review”, starting from Nov. 14 to 20.

“I can only reiterate my point, and we have delivered our inputs on that [profit and losses recalculation],” she said.

Recapital Sekuritas Indonesia analyst Kiswoyo Adi also questioned the revision, which perceived the telecommunication network as if it was a public service obligation (PSO) while in fact not even a penny was disbursed from the state’s PSO budget to build the network.

“The government has no right to ‘overtake’ the network and share it to private entities. It works for build-operate-transfer projects, but not for Telkom’s telecommunication infrastructure. If the network sharing will be obliged, then it must be under a business-to-business mechanism,” he said.

Especially, he explained, Telkom still suffered a certain amount of losses from its base transceiver network (BTS) business in remote areas because of the weak market and low utilization. Meanwhile it had raised a fair amount of capital through bond issuances to build the network.

Kiswoyo worried that the government-driven measure on network sharing would only interfere with the telecommunication business that might lead to a slump in Telkom’s stock price in the near future. “As for Telkom’s competitors, they should be honest. Will they build a new network that will later be obliged to be shared to other telecommunication providers without a B-to-B deal?” he said.

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