AriaWest rejects demand to set up transitional management

AriaWest rejects demand to set up transitional management

JAKARTA (JP): One of state-owned PT Telkom's joint cooperation
partner, PT AriaWest International, has rejected its workers'
demand for establishment of a transitional management team to run
its telecom services in West Java and Banten.

AriaWest vice president director Gatot S. Kahrmadji said here
on Friday that the establishment of a transitional management
team would breach the original contract with Telkom.

"The government can decide whatever it likes, but the original
contract should be honored," Gatot told The Jakarta Post and
Koran Tempo daily in an interview on Friday.

He was responding to threats from Telkom's workers in the
joint cooperation (KSO) region of West Java and Banten that they
would strike on Monday unless the government decided to set up a
transitional management team to ensure the continuation of
services in the region.

The drawn out dispute between AriaWest and Telkom has caused
telecommunications services in West Java and Banten to cease,
leaving some 90,000 new telephone applications and the billing of
hundreds of thousands of customers unprocessed.

Gatot said that the company would need to study the reasons
behind the transitional management proposition before it could be
considered.

"It is highly probable that the situation is being
politicized. There are problems, yes, but have they become so
critical that they require transitional management?" he argued.

The proposal received wide support from legislators in the
House of Representatives' Commission IV for infrastructure and
transportation affairs who visited the KSO region last week.

"If the threat is being made to further undermine the
company's position, then there is nothing we can do about it,"
Gatot said.

He emphasized that AriaWest had not and would not neglect its
duty of providing telecommunications services to the public, but
that the company was hampered by a lack of operating funds.

AriaWest claimed that it had no money to effectively operate
the KSO region as the funds, revenue collected from customers,
was withheld by Telkom in several bank accounts.

"These are not our accounts ... we have no right to withdraw
money from them, besides which the bank would not allow us to,"
AriaWest director of human resources and corporate development
Yap Tjay Hing maintained.

He said that, in the past, the KSO unit had operated with
whatever money Telkom was willing to disburse, but that it had
never been a problem until recently when disputes between the two
companies came to a head.

Under the joint cooperation agreement signed at the beginning
of the partnership in 1996, KSO partners are entitled to collect
revenues generated from all telephone lines in service within the
geographical KSO unit.

The partners are also responsible for all expenses directly
incurred by the KSO unit in its region.

However, in the case of AriaWest, the generated revenues were
kept in a collection account at several local banks under
Telkom's name, Gatot said.

Telkom has denied allegations that it was withholding funds,
saying that it was AriaWest who had refused to utilize the funds
collected from customers for its operational expenses.

Telkom vice president for corporate communications Dodi
Amarudien said earlier that, from the beginning, Telkom had
advised all partners to close the collection account under
Telkom's name and open new ones for their own units.

AriaWest filed an arbitration suit last month with the
International Chamber of Commerce (ICC) in Paris, claiming US$1.3
billion in losses and damages arising from Telkom's breaches of
the KSO contract.

Gatot said the arbitration case would only cover Telkom's
breach of contract and not determine the fate of the KSO contract
itself.

AriaWest maintained its stance to pull out of the partnership,
but has yet to agree with Telkom on the value of the buyout.

"Telkom rejected our offer (made before the arbitration claim)
of a settlement totaling $735 million. Now, with the arbitration
case, we have to reassess the price," Gatot said.

Telkom, meanwhile, only agreed to pay $280 million based on
its valuation of assets in West Java and Banten, Dodi said.(tnt)