Bobby Gafur S. Umar was only 35 years old when he was appointed president director of Bakrie & Brothers in August, 2002. Despite his youth and the doubts of some senior board members, Bobby from the start was optimistic he would be able to put the ailing business group on the right track.

To consolidate the business group, which suffered serious cashflow problem due to the severe impact of the country's economic crisis in the late 1990s, was certainly not easy.

But Bobby's timing was certainly fortunate; he was appointed after the group's creditors, mostly overseas financial institutions, agreed in late 2001 to restructure its US$1.08 billion debt through a debt-to-equity swap arrangement.

Although the debt settlement caused the Bakrie family's ownership to dilute from about 60 percent to only 2.5 percent, it was considered the key factor in the group's survival.

"The debt restructuring was the most difficult task. With the debt restructuring program, the new management had the flexibility to carry out consolidation within the company," Bobby told The Jakarta Post in a recent interview.

With the touch of this young executive, Bakrie & Brothers, which was founded by Achmad Bakrie, the father of Coordinating Minister for the People's Welfare, Aburizal Bakrie, began to show positive results in early 2004.

In 2004, the company recorded an average 24 percent increase in sales turnover, and the trend continued in the following year. In 2005, sales revenues rose by about 125 percent to Rp 2.73 trillion, exceeding the company's initial target of Rp 2.5 trillion.

The balance sheet, which was still in the red in 2004 also went into the black in 2005, with total net income of about Rp 270 billion, a turnaround from the Rp 266 billion in losses the year before.

A major change has also taken place in the ownership of the company. The Bakrie family has managed to increase its ownership to an 18-percent stake in 2003 by taking the advantage of the buy-back option provided under the debt settlement program. The family further increased its ownership to 40 percent at the end of 2005, making it the single majority shareholder in the business group.

Following are excerpts from an interview with Bobby about how he successfully engineered a U-turn in the group's fortunes.

What was your main priority during the early years as president director?

I was elected as the president director in August 2002 with the main task of creating a blueprint for the restructuring of all companies under Bakrie & Brothers.

The first thing we improved was business efficiency and revitalization. The second was to strengthen the capital structure in all the business units. We also evaluated and assessed every business unit to determine their prospects.

After an intensive and comprehensive evaluation, we then came to a conclusion that we had to focus on three business sectors -- telecommunications, plantations and infrastructure support. We decided to divest business units that had no direct relations with these three sectors or those which were no longer prospective.

In 2004, we moved ahead and began the implementation of the program, and during the first semester of the year we have begun to see the positive impact as indicated in the steady increase in revenues.

Why was telecommunications chosen as one of the core businesses?

With the penetration rate of 20 percent in 2005 (for cellular phones), the business in Indonesia is quite promising. Compared to other countries with GDP similar to the level of Indonesia's, the penetration rate in Indonesia is very low. The penetration rate in the Philippines in 2004 reached 35 percent, while in Malaysia it was about 50 percent. We are sure that in five years from now the penetration rate in Indonesia will grow to more than 50 percent.

Telecommunications is a capital-intensive industry but its growth rate is very high, reaching 200 percent a year.

Bakrie & Brothers has long been involved in telecommunications long before the economic crisis hit Indonesia in late 1997. In order to meet the rising demand for multimedia communication, the company repositioned its services by entering the mobile telecommunications service through CDMA technology. Our expansion in the mobile sector was marked with the launch of a more affordable mobile service, Esia, at the end of 2004. The response to Esia has been encouraging. At the end of 2004, or less than a year after its launch, there were 130,000 Esia subscribers. By the end of 2005, the number had more than tripled to 408,000. This year, we are targeting 1.3 million. During the next five years, we are quite optimistic that the number will reach five million.

Why is Bakrie & Brothers also interested in the plantation sector?

We also believe this sector will contribute significantly to the business group. Although plantations offer a slow return, this business will provide a stable income for many years. A single plantation can produce for up to 25 years and we hope to double the size of our existing plantation areas in the medium term.

Bakrie & Brothers has been engaged in the plantation business for years through Bakrie Sumatra Plantations, which was listed on the Jakarta Stock Exchange in 1986. As a result of the debt restructuring program in 2001, Bakrie & Brothers lost its ownership of Bakrie Sumatra to creditors. However, at the end of 2004, we managed to again acquire the company, which operates rubber and palm oil plantations in North Sumatra. Now Bakrie & Brothers holds a 54 percent stake and the remaining 46 percent is held by the investing public.

What about infrastructure support?

Infrastructure development in Indonesia has been almost stagnant since the country's economic crisis. But we strongly believe that sooner or later the government will build more infrastructure facilities in order to revive the economy. This is also the reason why we have began a major consolidation program in this sector, including settling the larger part of our debts of our pipe manufacturing units.

At present, the utilization rate in our three pipe manufacturing units is about 50 percent. This means that we don't need more investment to expand our capacity if there is a surge in demand.

The most important thing now is to increase the firm's production rate to about 70 and 90 percent of total capacity. Besides producing pipes for oil and gas infrastructure, this division is also involved in the production of house-building materials and auto parts. All the business units in the infrastructure support division have begun to grow.