Did Telkom ring a wrong number?<\/p>\n
By Christiani Tumelap<\/p>\n
BATAM, Riau (JP): Joint operation schemes (KSO) between state-
\nowned telecommunications company PT Telkom and five partners have
\nbeen under fire since the signing of the memorandums of
\nunderstanding (MOU) in 1995.<\/p>\n
Much of the criticism has been leveled at the five partners:
\nPT Pramindo Ikat Nusantara, PT Ariawest International, PT Mitra
\nGlobal Telekomunikasi Indonesia (MGTI), PT Bukaka Singtel
\nInternational and PT Cable & Wireless Mitratel. Questions have
\ncentered on their performance in meeting terms of their contracts
\nand allocation of profits to Telkom.<\/p>\n
Indonesian Corruption Watch (ICW) recently panned the scheme,
\nsaying it was more advantageous to the partners.<\/p>\n
It also queried the government's decision to allow PT Telkom
\nto let private companies become involved in the
\ntelecommunications business in potentially lucrative areas such
\nas West Java.<\/p>\n
Telkom is mainly responsible for development and management of
\ntelecommunications in Jakarta.<\/p>\n
ICW also claimed the KSO partners opened their offices for
\nfree in buildings owned by Telkom because their contracts
\nexempted the partners from rental fees for their office space.
\nTelkom, ICW estimated, could suffer at least Rp 96.3 billion
\nannually in lost revenue from unpaid rental fees.<\/p>\n
The partners also have been lambasted for a perceived failure
\nto execute their tasks properly, particularly on installation
\ntargets.<\/p>\n
\"KSO partners demand a bigger share of the revenue sharing
\neven though they have never been able to meet the installation
\ntargets required under their first contract,\" a critic said.<\/p>\n
Pramindo's vice managing director Irawan Santoso bluntly
\nrejected the claim.<\/p>\n
\"We are actually acting as a buffer for Telkom. We brought in
\nfresh funds to support Telkom's operations. We bear the
\nobligations generated from the huge loans, not Telkom,\" he told
\njournalists during a recent site visit to Batam, Riau, part of
\nPramindo's development area of Sumatra.<\/p>\n
Partners pay their operational costs, compensate local Telkom
\nemployees hired to support the scheme and fulfill other
\nfinancial, investment and education responsibilities which are
\npart of the MOU, he said<\/p>\n
Ariawest president John Vondras said critics of the scheme did
\nnot grasp all it entailed.<\/p>\n
\"I don't think the people understand the purpose of the KSO.
\nNot many know about it, what it does and what it brings to
\nTelkom,\" he said.<\/p>\n
Head of Telkom Division I Sumatra Agus Utoyo said the most
\nrecognized benefit of the partnership was that Telkom was
\nlearning to run a professional, profit-oriented business.<\/p>\n
\"Now we are thinking a lot about how to make profits out of
\nit, in a proper way, of course,\" he said.<\/p>\n
Telkom appointed the five joint operation partners --
\nconsortia of foreign and local firms -- to finance, build and
\noperate two million telephone lines in five regions of Sumatra,
\nWest Java, Central Java and Yogyakarta, eastern Indonesia and
\nKalimantan under a revenue-sharing scheme through 2010.<\/p>\n
Ariawest is responsible for West Java, MGTI for Central Java
\nand Yogyakarta, Bukaka for eastern Indonesia and Cable & Wireless
\nfor Kalimantan.<\/p>\n
Under the 15-year agreement, the firms are required to pay
\nTelkom a three-monthly fixed amount known as Minimum Telkom
\nRevenue (MTR) and Distributable Telkom Revenue (DTR) based on
\ntheir revenue.<\/p>\n
The agreement at first required KSO partners to install a
\ntotal of two million of new access line units (ALU) across their
\nwork areas during a three-year construction period from 1996 to
\n1999.<\/p>\n
The government revised the target to 1.2 million ALU in
\nSeptember 1998 due to the economic crisis.<\/p>\n
KSO partners claim they exceeded the installation target with
\napproximately 1.37 million ALU installed across the five regions
\nas of March 31.<\/p>\n
Pramindo contributed 297,290 ALU, Ariawest 299,458, MGTI
\n403,500, Cable & Wireless Mitratel 120,000 and Bukaka Singtel
\n251,300.<\/p>\n
The partners opened service to about 1.03 million new
\ncustomers in their respective regions from the start of their
\noperations in early 1996, when the number of Telkom subscribers
\nreached about 1.54 million nationwide.<\/p>\n
During the same period, the partners made total investment of
\nabout $1.56 billion, of which $567 million was their own equity.<\/p>\n
The revenue-sharing scheme also was revised last year by the
\ngovernment, dividing the DTR into 10 percent for Telkom and 90
\npercent for the partners from the previous 30 percent for Telkom
\nand 70 percent for partners.<\/p>\n
Partners said they paid Telkom approximately 45 percent, or Rp
\n5.03 trillion, of the total revenue collected since early 1996 to
\nMarch this year.<\/p>\n
The partners claim they have been the losers, not Telkom,
\nunder the scheme.<\/p>\n
In response to the partners' complaints that their contracts
\nwere flawed and thwarted their competitive edge, the government
\nannounced in March its proposal to convert the KSO status from a
\njoint operation into a joint venture in a bid for improved
\nefficiency.<\/p>\n
The chairman of House Commission IV for telecommunications,
\ntourism and transportation, Burhanuddin Napitupulu, said a joint
\nventure arrangement also worked to Telkom's advantage.<\/p>\n
\"The joint venture scheme will make both Telkom and their
\npartners share fair and similar advantages and responsibilities.\"<\/p>\n
He said the joint operation arrangement was doomed to failure
\nbecause Telkom and its partners held different perspectives and
\ninterests, which inevitably undermined daily activities and led
\nto inefficiency.<\/p>\n
Vondras conceded that one of Ariawest's problems in conducting
\nits business was the lack of total control over operational
\nmatters, despite the MOU stipulation, due to frequent Telkom
\nintervention.<\/p>\n
He believed the joint venture scheme could work better in
\nestablishing cooperation.<\/p>\n
Irawan said the success of the joint venture would hinge on
\npreparation by the government, Telkom and KSO shareholders.<\/p>\n
\"Looking at it from investors' point of view, the joint
\nventure scheme may look more attractive due to its unlimited
\nperiod of cooperation. Guarantee of project continuation is very
\nimportant,\" he said.<\/p>\n
\"We are basically ready (to adopt the joint venture scheme),
\nbut it will depend on the business plan.\"<\/p>\n
Burhanuddin said the government must immediately cancel the
\njoint operation scheme before it proceeded with the discussion on
\nthe revision of the 1989 Communications Law, scheduled to be
\ndelivered to the House before the June elections.<\/p>\n
Cancellation of the partnerships, without substituting a new
\narrangement, before the completion of the contract term in 2010
\nwould force the government to pay Rp 4.2 trillion in compensation
\nto the partners.<\/p>",
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