Rift between Telkom, its KSO partners continues<\/p>\n
By Christiani S.A. Tumelap<\/p>\n
JAKARTA (JP): The rift between state-owned PT Telkom and its
\nfive partners in the joint cooperation scheme (KSO) continues as
\nthe deadline nears for a settlement of their differences.<\/p>\n
A source in the telecommunications industry said a compromise
\nwas very hard to reach since both Telkom and its partners have
\ncome up with strikingly different demands.<\/p>\n
"Telkom insists it only wants to make a slight adjustment to
\nmaintain its clout in the contract. While the partners have quite
\na lot of demands ... enough to overhaul the whole contract," he
\nsaid over the weekend.<\/p>\n
He said talks were running very slow because only two of the
\nfive partners had been contacted by Telkom with only six weeks
\nuntil the Dec. 31 deadline.<\/p>\n
The five KSO partners are PT Pramindo Ikat Nusantara, which
\noperates in Sumatra, PT Ariawest International in West Java, PT
\nMitra Global Telekomunikasi Indonesia in Central Java, PT Cable &
\nWireless Mitratel in Kalimantan and PT Bukaka Singtel
\nInternational in parts of Eastern Indonesia. Cable & Wireless
\nMitratel and Bukaka Singtel are now in negotiations with Telkom.<\/p>\n
The partners were appointed by Telkom in 1995 to finance,
\nbuild and operate domestic fixed line telephone service across
\nthe country on behalf of Telkom under a revenue-sharing scheme
\nthrough 2010.<\/p>\n
Telkom retains control over the most profitable markets of
\nJakarta and East Java.<\/p>\n
Under the existing contract agreement, KSO partners are
\nrequired to install, during a three-year construction period from
\n1996 to 1999, a total of two million new access line units (ALU).<\/p>\n
The government, however, revised the figure in September 1998
\nto only 1.2 million after the partners said the initial targets
\nwere impossible to meet amid the economic crisis.<\/p>\n
The Distributable Telkom Revenue (DTR), which is part of the
\nrevenue-sharing agreement, was also revised last year by the
\ngovernment from 30 percent to 10 percent for Telkom and from 70
\npercent to 90 percent for partners.<\/p>\n
According to the initial contract, KSO partners must pay
\nTelkom a monthly fixed amount known as a Minimum Telkom Revenue
\n(MTR) and DTR based on their total revenues.<\/p>\n
The revision in the contracts is valid for only one year until
\nDec. 31, but KSO partners have refused to return to the original
\nif some of the contract's terms are not amended.<\/p>\n
Performance<\/p>\n
An official in Telkom, who spoke under the condition of
\nanonymity, told The Jakarta Post on Saturday that one of the
\nimportant issues Telkom wanted to settle was a proper mechanism
\nto measure the partners' performance.<\/p>\n
"For example, there should be a strict guideline on the
\nprocedures and number of access line units (ALU) the partners
\nmust build so that they can never find an excuse to revise the
\nterms whenever they wish," he said.<\/p>\n
Stephen R. Dowling, director and chief financial officer of
\nAriaWest International, said the most important issue of the
\ncontract that the partners wanted to revise was the clarification
\nof who was in charge and in control of the daily management and
\noperational activities.<\/p>\n
"It has been like one boat with two captains. The contract
\nsays we are in charge of the financing, developing and operating
\nand the staff, too. But the reality shows that Telkom rules over
\nall," he said during the weekend.<\/p>\n
Separately, Philip W. Green, the president of Cable & Wireless
\nMitratel, one of the two partners which have started talks with
\nTelkom, said substantial adjustments to the contract were
\nnecessary to ensure the continuation of the investment the
\npartners had made in Indonesia's telecommunications industry.<\/p>\n
He, however, declined to reveal what kind of amendments his
\ncompany or Telkom had to offer.<\/p>\n
"I'm not prepared to talk about that. All I can say is that
\nthe talks are ongoing and that we have not reached any
\nagreements," he told the Post.<\/p>\n
Negotiations for the future KSO arrangement started last month
\nafter Telkom president A.A. Nasution said that Telkom would make
\nnecessary amendments to the KSO initial contract so that the
\ncooperation could continue until it finishes in 2010.<\/p>\n
He urged KSO partners to cooperate in the talks.<\/p>\n
"We are going to impose a penalty if they refuse to
\ncooperate," he said as he criticized the partners earlier
\nsuggestion to terminate the current scheme and replace it with a
\njoint venture.<\/p>\n
The partners recently proposed what they called a win-win
\nsolution to the dispute by replacing the KSO scheme with a joint
\nventure between Telkom, the partners, the government and Indosat,
\nanother state-run telecommunications firm, which owns a 30
\npercent stake in MGTI and 13 percent in Pramindo.<\/p>\n
Telkom's strong objection and the vague responses from the
\ngovernment and Indosat have apparently pushed KSO partners into a
\ncorner.<\/p>\n
The partners recently expressed their flexibility, saying that
\nthey were very much open to go into any form of negotiations and
\nany type of cooperation with Telkom.<\/p>\n
The KSO scheme has been under fire since its establishment in
\n1996 with much of the criticism leveled at the five partners,
\nquestioning their performance in meeting terms of contracts and
\nthe allocation of profits to Telkom.<\/p>\n
"KSO partners demand a bigger share of the revenue-sharing
\nagreement even though they have never been able to meet the
\ninstallation targets. They always ask the government to bail them
\nout whenever they fail to perform their tasks. And they (the
\nforeign partners in KSO) still call themselves world class
\noperators?" a critic said.<\/p>\n
Dowling said his company was considering to propose an
\nelimination of MTR and change the DTR share to 50-50 for Telkom
\nand its partners to ensure both share the equal risks and
\nprofits.<\/p>\n
"But other partners may have a different stance on this
\nrevenue-sharing matter," he said, suggesting Telkom accelerate
\nthe talks with a more comprehensive approach.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/rift-between-telkom-its-kso-partners-continues-1447893297",
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