SINGAPORE-A cloak of silence seems to have descended over Indonesia’s telecommunications industry following the May riots that killed more than 1,000 people.

The once-booming industry seems to have come to a virtual standstill as projects are shelved indefinitely and operators grapple with dwindling subscriber numbers. Industry observers say operators there still are trying to come to terms with the fact that demand for their services-now viewed as a luxury in the cash-strapped nation-has fallen dramatically in the last few months.

According to the latest data from PT Telkom, all but one cellular operator, PT Telkomsel, experienced a shrinking subscriber base as of the first quarter of this year.

One of the larger players, PT Satelindo, saw its subscriber base fall by about 22 percent-from 304,000 at the end of 1997 to 236,000 at the end of March. PT Mobisel posted the largest percentage drop in customer base; it now has 20,000 subscribers, compared with 30,000 at the end of last year.

In all, the total number of cellular subscribers has fallen by more than 100,000 to 815,577 at the end of March, according to PT Telkom.

Market observers say there will be a lot more pain before there is any gain.

Given such trying circumstances, it comes as no surprise that cellular operators and vendors alike are keeping mum about their plans for the struggling industry.

“The situation is getting quite bad now with many of the operators having cash-flow problems. Some are even defaulting on their bank loans,” said Singapore-based telecom analyst Ricardo Villanueva, at Paribas Asia Equity.

Ericsson Indonesia President Director Mats H. Olsson said the financial and economic crisis has seriously affected all sectors of Indonesia’s economy, including the telecommunications industry, with many projects being cancelled or postponed.

“Furthermore, many customers have problems to pay their suppliers due to the devaluation of the rupiah and consequent inflation,” he said. “Overall, we expect the telecom industry (in Indonesia) to shrink by more than 50 percent from 1997 to 1998.”

Olsson added that the drastic reduction in business prospects, especially after the May riots, has resulted in staff reductions-particularly foreign experts-at the company’s Indonesia office.

“This has, in fact, encouraged us to speed up the localization of many jobs beyond our previous plans,” he said.

Lucent Technologies Inc.’s Singapore spokeswoman Gina Wong added: “Business is really slow in Indonesia, but we are taking advantage of this by redeploying some of our technical staff there to other projects in other countries. But I must reiterate that we are in Indonesia for the long term and are not pulling out.”

Despite the bleak outlook, there still are the optimistic few who say they believe things will get better in Indonesia now that business dealings are becoming more “above-board.” They say corruption, which used to plague the industry, is slowly becoming less of a problem.

“A lot of our businesses used to be conducted through brown packages, but now, slowly, things are beginning to change,” said a top executive at a European-based telecommunications firm. “If they continue this way, we are confident the industry will start booming once again as investors start flocking back.”

Olsson noted that Ericsson’s long-term perception of the Indonesian telecom market is that it would be “one of the top four telecom markets in Asia early next century.”

On the other hand, those who haven’t yet invested in Indonesia say they remain fearful about the volatile situation in the country. They say they likely will remain on the sidelines and only will consider investing there when clear signs of political, social and economic stability are seen.


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