The current edition of E&T is again mentioning Indonesia. It is about the Palapa Ring: the fibre-optic development project for eastern part of Indonesia. Only three companies remain from the initial seven-member consortium awarded the contract to lay 11,000 km of optical-fibre cables starting at Manado through to Ternate, Ambon, Kendari and Makassar. Telkom Indonesia (NYSE:TLK) is leading by investing US$90m, while lesser companies Indosat (NYSE:IIT) and Bakrie Telecom are putting in $30m each. Four other companies pulled out from the consortium due to lack of funds: Excelcomindo Pratama, Powertek Utama, Macca System and Infokom Elektrindo.

The construction should be completed in early 2011, providing over 70,000 villages with access to telecommunications services.

The initial plan for the project, to cost a massive $1.6bn, was to have the Palapa Ring project as the backbone of a network connecting 33 provinces and 440 cities across Indonesia via an estimated 35,280km of undersea cable and 21,807km of fibre-optic cable. It was to involve the construction of seven rings connecting Sumatra, Java, Kalimantan, Nusa Tenggara, Sulawesi, Maluku and Papua, with an eighth to connect them all. But financing has been a major issue. The project was first initiated in 1997 but on a smaller scale, then shelved due to the Asian financial crisis, which crippled Indonesia.

Telecommunications penetration in Indonesia currently stands at only 21.3 per cent with fixed line a mere 5.86 per cent. Inadequate backbone infrastructure has been widely regarded as crippling the country’s telecom sector. Many parts of Indonesia currently do not have access to basic communication and those that are connected have some of the world’s highest leased line and Internet prices.

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