AriaWest sets May deadline for Telkom to settle buyout rift

AriaWest sets May deadline for Telkom to settle buyout rift

JAKARTA (JP): PT AriaWest International has set May as the
deadline for state telecommunication firm PT Telekommunikasi
Indonesia (Telkom) to find a solution to the lingering dispute
over the buyout price of AriaWest's shares.

AriaWest said on Sunday that if both parties found no solution
by the deadline, it would file arbitration proceedings against
the state company.

"I very much regret that unless a final settlement is reached
by next month, arbitration in Geneva appears to be the only way
forward," AriaWest's president John Vondras said in a statement.

Vondras earlier called on the government, as the majority
shareholder in Telkom, to pressurize the state company to
postpone its shareholders' meeting from May 10 to sometime in
June so that it and Telkom have enough time to find a final
solution to their dispute and the solution could be presented
during the shareholders' meeting for approval.

Unless the shareholders' meeting was postponed, Vondras said,
the dispute could drag on.

"Our shareholders are not willing to allow this dispute to
drag on beyond that," Vondras said.

Telkom's vice president for corporate communication D.
Amarudien said Telkom would stick to its initial schedule for the
shareholders' meeting and it was ready to face AriaWest in front
of the arbitration panel.

He said Telkom was optimistic that the arbitration panel would
rule in favor of Telkom.

Telkom's dispute with AriaWest centers around the amount of
compensation Telkom must pay for their partnership.

AriaWest is one of five firms that are units of foreign
telecommunication giants who signed joint-operating-schemes
(KSO). Telkom engaged in such schemes during the mid-nineties to
develop the country's telecommunication networks. AriaWest was
awarded the contract in West Java.

Under the KSO scheme, partners are required to invest in new
fixed lines and operate them under a profit-sharing-scheme with
PLN.

But the KSO scheme became financially unattractive, following
the government's plan to terminate Telkom's monopoly.

Telkom is thus seeking to buy out the shares of its KSO
partners, but so far it has only reached buyout deals with two
partners.

Amarudien said the solution to Telkom and AriaWest's dispute
was elusive given the wide gap between the price set by AriaWest
for its shares and the one set by Telkom.

According to Amarudien, AriaWest demanded US$1.3 billion in
compensation for its shares, while Telkom valued the shares at a
mere $260 million.

Vondras said that AriaWest had made "every effort" to settle
the dispute, including cutting the valuation of its shares to
$735 million from $1.3 billion.

He said the price of $260 million set by Telkom for its shares
was much lower compared to the valuations made by state-owned
securities house PT Danareksa and ABN-Amro Telecommunication
Research, which set the value of AriaWest's shares at $522
million and $673 million, respectively.

Minister of Transportation and Telecommunication Agum Gumelar
said the government has formed a special ministerial team to help
solve the dispute between Telkom and AriaWest.

"The team is aimed to facilitate their (AriaWest and Telkom)
separation. But it should be an amicable separation," Agum told
reporters on Thursday at the presidential office. (jsk)