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The government is desperately trying to get the long-delayed $700 million Palapa Ring telecommunications project back on track after PT Excelcomindo Pratama pulled out of the project consortium on Monday.

Officials worry that the latest hitch could deal another costly blow to the struggling project, which is supposed to provide nationwide Internet access at internationally competitive speeds.

“The government now is trying to find several solutions to help the rest of the consortium members keep the project afloat,” Communication and Information Technology Ministry spokesman Gatot S. Dewabroto told the Jakarta Globe on Tuesday.

“One of the solutions would be to use [government] funds … including those from the Universal Service Obligation program and funds that the government gets from fining errant telecommunications providers.”

“However,” Gatot added, “we can’t determine how much money the consortium will need until we meet with them again early next month.”

With Excel withdrawing from the project, further delays seem very likely.

In July 2007, seven Indonesian telecommunications operators agreed to collaborate on the project, but planning stalled after one firm pulled out in 2007 and two more withdrew in August and September of last year.

At the time, the companies said that they had quit because of the large amount of investment required and the great length of time before returns would be realized.

The government then set December 2008 as the next start-up date for the project, but the consortium said it was not ready and the work was delayed again.

Hasnul Suhaimi, president director of Excel, said that the company’s poor financial performance was the main reason it was pulling out of the Palapa Ring project.

“We cannot participate in the project this year … because we suffered Rp 15 billion [$1.5 million] in losses last year, and in the first quarter of 2009 we also lost about Rp 305 billion,” Hasnul said.

However, he added, the company had already asked the government to adjust the terms of its contract so it could re-join the consortium if its financial situation improved.

“We understand Excelcomindo’s decision in light of the global economic downturn,” Gatot said of the move. “However, we’re also a bit disappointed.”

The remaining consortium members are PT Telekomunikasi Indonesia, the country’s largest telecommunications company, with a $90 million investment; PT Indosat, the nation’s second-biggest cellular provider, with $30 million; and PT Bakrie Telecom, also with $30 million.