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Indonesia's Telkom net meets forecasts--just

JAKARTA: Indonesian state-run telecoms monopoly PT Telkom posted an 86 percent leap in 1999 net profit on Thursday, but profits were at the lower end of market forecasts despite revenues slightly higher than expected.

Telkom said 1999 net profit was 2.17 trillion rupiah ($297 million) versus 1.17 trillion in 1998. The market had expected net profit of 2.15 to 2.8 trillion.

Revenues were 7.79 trillion rupiah, up from 6.60 trillion in 1998 and compared with expectations of 7.6 to 7.7 trillion.

The rise in revenues was fuelled by higher telephone tariffs -- call charges rose an average of 15 percent last year and the interconnection fee Telkom levies on international call operators rose 55 to 60 percent.

The firmer rupiah boosted the bottom line, which netted a foreign exchange gain of 280.2 billion rupiah versus a loss of 965.5 billion in 1998.

Operating expenses rose 21.2 percent, faster than operating revenues which were up 18 percent.

"Revenues were basically in line with my expectations, but operating income was 10 percent below my forecast of 3.27 trillion rupiah," said Laksono Widodo, head of Indonesia research at ING Barings Securities. Widodo said he wanted to dig deeper beneath the financial statements to find out why.

Telkom's shares ended morning trade up 25 rupiah at 4,050 ahead of the results announcement.

Many analysts remain bullish on Telkom, pointing out that it trades at a relatively cheap ratio of around 17 times prospective 2000 earnings. Reuters Securities 3000 shows other Asian telecom stocks mostly trade above 20 times prospective earnings.

But the company faces a critical year.

CRITICAL YEAR AHEAD

New tariff adjustments, a new agreement with its joint operating scheme (KSO) partners, which contribute about 22 percent of revenues, and the implementation of a new law on the industry will be key to Telkom's performance in the year ahead.

Government plans to cut its stake in Telkom this year from 66 percent will also be key. While the government has said it will cut its stake to below 50 percent, Telkom's management wants the government to retain a majority.

A new tariff structure is expected in March, although the impact of the adjustments would not be immediate.

Implementation details of the new telecoms law are expected to be announced by the government in June. They are expected to determine when and how an end to monopoly rights would affect Telkom and the other state-run telecom, PT Indosat Tbk, which handles international communications.

"We need to know how exactly Telkom would enter international services...is there a compensation fee involved, or can it simply acquire an international call services provider?" asked Setiatno Budiman of Vickers Ballas Tamara in Jakarta.

Under the law, Telkom's exclusive rights in providing domestic long-distance call services will end in 2005 and its monopoly in the local-call market in 2010. Indosat's monopoly in international call services will end in 2004.

Telkom and its KSO partners have been involved in talks since November to solve their differences.

The KSO scheme has been under fire since its establishment in 1996. The five partners have taken flak for their performance in meeting contract terms and over allocation of profits to Telkom.

A revised agreement expired at the end of 1999 and Telkom and its KSO partners are working on a new deal. In December, four of the five KSO partners agreed to some modifications to the agreement. Analysts expect a final deal soon.-Reuuters