Nynex Corp., in its largest-ever international cellular venture, said it will become a 23 percent owner and the strategic operating partner in Excelcomindo, an international joint venture planning to provide Global System for Mobile communications cellular service in Indonesia starting next year.
Nynex spokeswoman Betsy Ricci said Excelcomindo plans to launch a nationwide network-covering 195 million potential subscribers-concentrating buildout initially in the nation’s more densely populated areas. Service is expected to begin in mid-1996 and reach large cities throughout Indonesia by 1998, she said.
As a nation with limited communications access and rapid economic growth, there has been “a dramatic increase in demand for telecommunications,” commented Frederic Salerno, Nynex vice chairman of finance and business development.
“The government of Indonesia has placed a high priority on the development of telecommunications in our country and has created a high level of competition to bring advanced services to the cellular market,” said Peter Sondakh, chairman of the board of PT Telekomindo. Currently only one landline telephone exists for every 122 people in Indonesia, home to more than 200 million people dispersed among 17,000 islands.
Excelcomindo plans to spend about $800 million on initial network buildout, said Ricci. She noted Nynex and the other foreign investors paid a combined $250 million for their holdings, but declined to comment on Nynex’s specific investment.
Anchoring the venture is Indonesian telecom company PT Telekomindo, with 42.5 percent ownership. Other partners include Mitsui, a Japanese trading firm, with a 4.2 percent stake; Asian Infrastructure Fund, an Asian investment firm, with 12.7 percent; Santana Telekomindo, with 10 percent; and holding the final 7.5 percent are Yayasan Kartika Eka Paksi and Yayasan Tridaya, retirement foundations for the Indonesian army and the attorney general’s office, respectively.
Indonesian conglomerate Rajawali Group owns 54 percent of PT Telekomindo, the Indonesian military pension fund owns 10 percent and PT Telkom-the nation’s national telecommunications operator-owns 30 percent, of which 20 percent is a direct share of PT Telkom’s pension fund.
Besides Excelcomindo, four analog and two GSM operators provide cellular in Indonesia, said Nynex, serving between 100,000 and 150,000 customers. PT Telkom holds a stake in both of the other GSM consortia.
PT Telkom and Indonesia satellite telecommunications company PT Indosat own PT Telkomsel, 51 percent and 49 percent respectively, which reportedly has about 3,000 subscribers.
Together the two companies own 30 percent of PT Satelit Palapa Indonesia, or Satelindo, the first consortium to offer GSM service in Indonesia. Deutsche Telekom recently purchased a 25 percent stake in the venture and the remaining shares-currently owned by Bambang Trihatmodjo, son of Indonesian President Suharto-are up for bids.
PT Telkom’s involvement in the three seemingly competitive GSM consortia could create some conflict, said one industry source.
Jonathan Dower, vice president of Cambridge, Mass.-based Pyramid Research Inc., looked one step further. Garnering foreign investors can make it possible for developing countries to afford building communications networks, he said. Moreover, building cellular networks in Indonesia-a country of islands-is more economically feasible than extending the public landline network. Also, noted Dower, licensing several cellular operators, as opposed to one, means network buildout will be rapid and subscriber costs likely will be lower.
The Asia-Pacific cellular market is expected to amass 30 million subscribers by 1998, according to Northern Business Information Inc., a New York research firm. Moreover, the firm indicated this region will claim a 23 percent share of the world cellular market.
