Thu, 31 May 2007
From: The Jakarta Post
By Andi Haswidi, The Jakarta Post, Jakarta
The Post and Telecommunications Directorate General says it will follow up on the findings of the University of Indonesia's Institute for Economic and Social Research (LPEM-UI) on indications of price fixing involving Telkomsel and Indosat.

"We have been receiving reports indicating this for quite some time. However, this one is of greater weight as it comes from the LPEM-UI. We will take action on foot of the report," spokesman for the directorate general, Gatos S. Dewa Broto, told The Jakarta Post on Wednesday.

Gatot said that based on the findings, the directorate general would launch its own investigation into the allegations as soon as it had received all supporting arguments and facts from the LPEM-UI.

"We will, of course, impose sanctions if we find the allegations to be true," he said.

The LPEM-UI reported Tuesday that it had found firm indications that Indosat and Telkomsel, through their shareholders, Singapore's Temasek Holdings, had colluded to fix prices.

"We found indications that Indosat and Telkomsel had formed a tariff cartel," LPEM-UI research team head Nuzul Achjar told reporters during a press conference in Jakarta on Tuesday.

Temasek owns 56 percent of the SingTel Group, which in turn holds a 35 percent stake in Indonesia's biggest mobile telecoms operator, Telkomsel. Meanwhile, Singapore Technologies Telemedia (STT), which is wholly owned by Temasek, owns a 41.9 percent stake in Indosat.

Earlier this month, the Business Competition Supervisory Commission (KPPU), the country's antimonopoly watchdog, said it had uncovered prima facie evidence of monopoly practices by Temasek in Indonesia's telecoms industry. More witnesses would be summoned this week, the KPPU said.

Basing its findings on a study conducted in September, Nuzul explained to the Post that with Telkomsel controlling 63.1 percent of the mobile telecoms market and Indosat 26.8 percent, the two companies had the power to control tariffs and keep theirs higher than their competitors.

In September, Nuzul said, Telkomsel's earnings before interest, taxes, depreciation and amortization (EBITDA) were almost three times those of Indosat's, and about eight times those of Exelcomindo, the country's third largest market holder.

"This lack of tariff competition indicates that market mechanisms are not functioning properly. The lack of competition is especially pronounced in the case of post-paid services," he said.

A quantitative analysis conducted as part of the study also reveals similarities in the pricing of Telkomsel's and Indosat's products from time to time.

"But none of these findings proves that they are colluding. These are just preliminary findings that needed to be investigated by the regulators in the interests of consumers, who I think are being prejudiced the most," Nuzul said.

When asked to comment on LPEM-UI's finding, Indosat spokesperson Adita Irawati said that her company had never colluded with another cellular operator for the purpose of fixing prices.

"We compete, and we never collude on tariffs," she said.

Telkom executives were not available for comment.

Meanwhile, Temasek has repeatedly denied any involvement in determining the pricing policies of its subsidiaries, Indosat and Telkomsel.



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