AriaWest International stops paying Telkom its revenue share

JAKARTA (JP): PT AriaWest International, a joint operating contractor of state telecommunications company PT Telkom, has decided not to disburse Rp 340 billion (US$32.8 million) in revenue shares due to the state company, citing the latter's alleged failure to meet its obligation.

AriaWest's chief financial officer and director Stephen R. Dowling said in a statement on Sunday that the company made the move because Telkom was not able to provide documentation proving it had delivered on its promise to build another 107,536 telephone lines in West Java.

AriaWest is one of five foreign firms that have signed the so- called joint operating contract with Telkom to develop the country's telephone networks.

The contracts, known locally as KSOs, committed the companies to build and operate telephone lines in five designated areas under a profit-sharing plan. Under the contract, Telkom receives a certain amount of revenue, which is called "minimum Telkom revenue" (MTR) under the KSO contract.

AriaWest, formed in 1995, is partly owned by American telecom giant AT&T.

Dowling said in 1995 Telkom promised it would contribute 474,000 telephone lines to the partnership and build another 107,536 by the end of 1997.

Based on the promise to build another 107,536 telephone lines, AriaWest paid an additional revenue share to Telkom since February 1996.

Dowling said AriaWest had paid a total of Rp 340 billion in additional revenue share to Telkom over the past four years despite the fact Telkom could not prove that it had built 107,536 telephone lines.

AriaWest thus decided to recover the overpayments by offsetting the amount on the revenue of the joint operating unit.

"Since February 1996, when AriaWest started paying MTR based Telkom's promise to build the additional 107,536 lines, the company has asked Telkom for legitimate evidence that the lines were actually being completed.

"At each request, Telkom failed to provide proof of its performance," Dowling said.

However, Telkom denied Dowling's allegation.

Telkom investor relations manager, Setiawan Sulistyono, said the company had already fulfilled all its obligations under the 1995 contract to transfer assets to Ariawest, including building the promised new lines.

"We have proof but they don't want to recognize it," he was quoted by Dow Jones news agency as saying on Monday.

Dowling however maintained that it had yet to receive any documents from Telkom proving that the state company had delivered on its promise.

He said the only time Telkom ever provided any document occurred on July 16, 1997, when Telkom hosted a ceremony and handed AriaWest's executives an Excell spreadsheet claiming the company had built some lines.

Telkom however could not provide further supporting documents to prove the claim, he said. (jsk)