I

ndonesia’s second biggest telephone operator PT Indosat (ISAT) saw a rough second quarter this year as its change of approach to customers reduced subscribers and the weakening rupiah put pressure on its profits.

Indosat suffered Rp 148.5 billion (US$15.7 million) in net losses in the April-June period, a 161.7 percent slump from the same period last year, as it suffered a Rp 522.3 billion foreign currency hit in the second quarter, the company announced on Tuesday.

Subscribers did little to lift Indosat’s performance numbering 50.9 million at the end of June, up 8 percent from the same month last year but a drop of 2 percent compared with the first quarter.

“We’ve changed our way of doing business. We are reducing incentives for those buying starter packs and now concentrate on reloads, so that the number of active customers and ARPU [average revenue per user] can increase,” Indosat’s president director Harry Sasongko told a press briefing.

Indosat’s ARPU, which measures revenue generated per user, declined 6.8 percent in the second quarter this year to Rp 26,900 from a year ago, but rose 7.2 percent compared with the first quarter this year.

Overall revenue rose 4.5 percent to Rp 5.4 trillion in the April-June period this year from the same quarter in 2011, but that was not enough to offset the impact of foreign exchange (forex) deterioration on Indosat’s profits. “The forex loss came from US dollar loans” Harry said.

The rupiah has weakened about 4.3 percent against the US dollar so far this year to more than Rp 9,450, making it more expensive for US dollar borrowers to pay their obligations. Indosat had Rp 20.92 trillion net debt as of the end of June and Rp 4.87 trillion cash.

The company has allocated Rp 3.1 trillion for capital expenditure this year to aid its network expansion plans, pressuring its free cash flow downward to Rp 1.16 trillion.

In the next 12 months, Indosat will have to pay back Rp 3.53 trillion and $312.7 million of its debts, including bonds, to lenders ranging from locals BCA and Bank Mandiri to HSBC and Goldman Sachs International — further disrupting the company’s income potential.

“Our bonds will be used to pay rupiah debts, while proceeds from tower sales will reduce our US dollar debts,” Harry explained.

Indosat recently collected Rp 3 trillion from regular and sharia bond sales, and the company will soon conclude a $519 million tower sale with tower operator PT Tower Bersama Infrastructure (TBIG). Payment will be in cash and TBIG stock.

Shares in Indosat dropped 2.02 percent to Rp 4,850 apiece following the second quarter financial performance announcement.

Meanwhile, PT Bakrie Telecom (BTEL), the number one player in the nation’s fixed wireless telecommunication sector, booked increases in net revenue, ARPU and subscriber numbers in the second quarter of this year from the previous quarter.

Bakrie Telecom’s net revenue rose 12.5 percent, a comfortable level compared to the single-digit growth in the overall telecommunications industry, to Rp 592,3 billion in the second quarter from Rp 526.6 billion in the first quarter, as subscribers grew 2.6 percent and ARPU advanced 16.7 percent.

Bakrie Telecom’s subscribers rose to 11.5 million in the April-June period from 11.1 million from January to March. ARPU stood at Rp 21,000 versus Rp 18,000.