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August 20, 2008

Indonesian minister says Telcos still healthy despite price war
The Indonesian government is not concerned over the fierce tariff war in the crowded Indonesian mobile phone industry, as it has yet to lead to a compromise in service standards, reported local daily  the Jakarta Post.

Information and Communications Minister Muhammad Nuh was quoted as saying over the weekend that the intense competition had been relatively "healthy" and that his ministry would not interfere in such matters.

"We will not impose regulations to try to change things. It's actually the customers who have benefited the most," he said.

Over the past several years, operators have aggressively cut their tariffs to lure more customers amid a rapidly growing telecommunications sector.

Critics have argued that the sharp reductions, which mean less revenue for operators, coupled with a massive budget for advertising to promote their discounted rates, have eroded operator's spending on maintenance and network expansion, thus compromising their services to the public.

An ACNielsen survey shows that phone operators spent big on advertising to promote their reduced tariffs and new products.

In the first semester for instance, the survey found that PT Exelcomino Pratama (XL), the third largest operator, led the pack after spending 139 billion rupiah on ads -- approximately 219 percent higher than in the same period in 2007.

Bakrie Telecom, with its Esia brand, came in second with 131 billion rupiah -- a 57 percent increase from a year earlier. Then in third came IM3 owned by PT Indosat (the nation's second largest telecom firm) spending 119 billion rupiah, representing a 209 percent increase from the January-June period last year.

Nuh, however, insisted the tariffs were outside the government's domain and that it was unlikely to interfere.

Gatot S Dewa Broto, a spokesman for the post and telecommunications ministries, said the ministry could only monitor the situation and intervene if the tariff war showed signs of hurting the industry or customers.

Several operators have vowed that the low tariffs they were offering would not lead to a reduction in the quality of customer service.

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