Corruption team intensifies investigation into Telkom

Corruption team intensifies investigation into Telkom

Rendi A. Witular, The Jakarta Post, Jakarta

The government-sponsored interdepartmental corruption eradication
team is intensifying its investigation into corruption
allegations at state telecommunication company PT Telkom,
following initial evidence of graft allegedly committed by the
company's management.

The team's coordinator and the Attorney General's deputy for
special crimes Hendarman Supandji said President Susilo Bambang
Yudhoyono had requested the team to seriously probe graft
indications in Telkom due to the potentially huge state losses.

"President Susilo asked about the progress in our
investigation into Telkom. I told him we would soon raise the
status of the investigation from inquiry to prosecution,"
Hendarman said after meeting the President on Monday.

The team is expected to name suspects next week after
gathering more information from witnesses.

"At present, we can't disclose the names of the suspects or
indicate the involvement of the board of directors ... But for
sure, there is early evidence of crimes committed by a number of
the company's officials," Hendarman said.

He hinted that his team has investigated graft involving an
amendment to the joint operating contract with PT Mitra Global
Telekomunikasi Indonesia (MGTI), which was conducted in January
last year.

Telkom took over the rights to build and operate the fixed
lines network for Yogyakarta and Central Java from MGTI. Under
the initial contract, MGTI was responsible to build, finance and
manage the telecommunications system in the two provinces.

With the change in the contract, Telkom was to take over
management, supervision and control of operations in the two
provinces starting in February last year until the joint contract
expires on Dec. 31, 2010.

However, under the new contract Telkom should pay an annual
payment to MGTI within the contract period totaling US$517
million, aside from assuming full responsibility to build and
finance new telecommunication facilities in the two provinces.

After the contract expires, Telkom will fully own MGTI.

Sources at the Office of the State Minister of State
Enterprises said the deal had put Telkom in an unfavorable
condition since the amount of the funds spent within the contract
period for taking over MGTI would be higher than buying the
company outright in the first place.

All MGTI shareholders, including Telkom's rival state
telecommunications firm PT Indonesian Satellite Corp. (Indosat),
Widya Duta Infotel, Telstra Global Ltd, NTT Finance and Sumitomo
Corporation agreed to sell their entire stake to PT Alberta
Telecommunication (Alberta) for a total of $266 million in
January last year.

Alberta is an investment company owned by PT Saratoga
Investama Sedaya, an investment firm partly owned by Edwin
Suryajaya -- the son of William Suryajaya, the founder of
automotive conglomerate PT Astra International -- and Sandiaga
Salahuddin Uno.

"Telkom should have paid some $266 million instead of Rp 517
million for the MGTI stake. They said they didn't have the funds
to buy back MGTI at that time, but they should have explored
other financing resources to buy the share at a lower price,"
said the source.

Telkom's head of investor relations, Rochiman Soekarno,
however, claimed the company was unaware of a corruption
investigation by the anticorruption team since no officials have
been summoned for questioning.

"As far as I know, there's no investigation into corruption
charges in Telkom. I read the story a few days ago in the
newspaper," he said.

Aside from the MGTI deal, the anticorruption team is also
probing allegations of kickbacks during the construction of
network infrastructure for Telkom's latest cellular technology
Telkom Flexi.