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Telkom signs $250m deal to make Internet traffic hub
State-owned telecommunication operator PT Telekomunikasi Indonesia (Telkom) signed on Thursday a consortium agreement between seven telecommunication firms to build a US$250 million-submarine cable system with the aim of making the country an Internet transit hub in the near future
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tate-owned telecommunication operator PT Telekomunikasi Indonesia (Telkom) signed on Thursday a consortium agreement between seven telecommunication firms to build a US$250 million-submarine cable system with the aim of making the country an Internet transit hub in the near future.
Internet traffic transit hubs for the Asia region are currently Singapore, Hong Kong, or Japan while the global hub is the US.
'With the system, we will have direct connection to the US and we can become a transit hub,' said Telkom president director Arief Yahya. Seventy percent of Indonesia's Internet traffic flows to the US.
The submarine cable system is set to be constructed by a consortium called the Southeast Asia ' United States (SEA-US), which consists of Telkom's subsidiary PT Telkom International (Telin), Globe Telecom, RAM Telecom International (RTI), Hawaiian Telcom, Teleguam Holdings (GTA), GTI Corporation and US-based Telkom subsidiary Telkom USA.
Telkom will soon negotiate with Australian telecommunication operator Telstra to join the consortium.
The company would become the major shareholder in the consortium with a contribution of 28.5 percent of total investment, or $71.25 million, according to Arief.
The cable system will connect five areas and territories, namely Manado, North Sulawesi; Davao, the Philippines; Piti, Guam; Oahu in Hawaii, US; and Los Angeles , US.
Construction of the cable system will commence this year and is expected to be completed in 2016.
Directly connecting Indonesia to the world and making it an Internet hub was a strategic move as the country had a huge amount of data traffic and the potential to grow, Arief explained.
Communications and Information Ministry data said 82 million people in Indonesia were connected to the Internet as of May, a surge from the 71.9 million throughout 2013.
Telkom will also construct a submarine a cable system connecting Southeast Asia, the Middle East and West Europe (SEA-ME-WE 5) as well as the Indonesia Global Gateway (IGG) in the near future, according to Arief.
- 70% Internet traffic in RI flowing into US, with transits in Singapore, Hong Kong, or Japan
- Project will allow traffic to flow directly from RI to US without transit
- Deal includes foreign firms, Telkom to contribute most
'For the SEA-US, SEA-ME-WE5 and IGG projects we will spend around $1 billion,' he said, adding that Telkom would independently carry out the IGG project.
IGG is the Internet traffic gateway that will be located in Indonesia, connecting all submarine cables in SEA-US and SEA-ME-WE5 lines.
Telkom would contribute 40 percent of cost the three projects, with source of funds from both internal cash and external funding, Arief said.
Telkom will spend around $75.75 million on the SEA-ME-WE5 project, $253 million on IGG and the remaining $71.25 on SEA-US.
Telkom has allocated about $2 billion for capital expenditure this year, of which 70 percent would be for the firm's cellular business, 20 percent for broadband and the remaining 10 percent for other infrastructure development, such as telecommunication towers.
Telkom shares, which are traded on the Indonesia Stock Exchange (IDX) under the code TLKM, closed Thursday's trading at Rp 2,720, down 0.55 percent from the previous day. The stocks have gained 26.5 percent so far this year compared with the benchmark stock index's 21.3 percent gain.
