Government forms team to handle Telkom-Ariawest dispute

Government forms team to handle Telkom-Ariawest dispute

JAKARTA (JP): The government said on Monday it would form an
inter-ministerial team to facilitate talks to end the dispute
between state telecommunication company PT Telkom Indonesia, and
PT Ariawest International.

"I have reported to Coordinating Minister for the Economy on
the establishment of a team that will facilitate a solution to
Telkom and AWI's (Ariawest) problem," Minister of Transportation
and Telecommunication Agum Gumelar was quoted as saying by
Antara.

He said the team would comprise officials from his ministry,
the Ministry of Finance, and from the office of Coordinating
Minister for the Economy, Rizal Ramli,

"In a short time, the coordinating minister will make a
decision," he said without elaborating further.

Telkom's dispute with Ariawest centers around the compensation
amount Telkom must pay to end a partnership agreement between
them.

Ariawest, a unit of the United States' telecommunication giant
AT&T, operates fixed telephone lines in West Java under a joint
operation scheme called KSO with Telkom.

The scheme, initiated in the mid-nineties, requires Telkom's
KSO partners to invest in new fixed lines, and operate them under
a profit-sharing scheme.

But as the government has since required Telkom to lose its
monopoly right in the fixed line industry, the KSO scheme has
become financially unattractive.

Telkom agreed to bail out the investment its five KSO partners
made in order to end the KSO scheme.

So far, Telkom has secured bail-out deals for two KSO
partners.

But despite lengthy negotiations, the state company was unable
to come to an agreement with Ariawest.

Agum said Ariawest demanded Telkom pay it US$700 million in
compensation, while the latter insisted on paying only $300
million.

He said that the team would work out how to settle the
difference in valuation of Ariawest's investment.

But with no immediate solution in sight, Ariawest has said it
was planning to commence arbitration proceedings against Telkom
to recoup its investment.

Ariawest also charged Telkom of failing to build extra phone
lines in West Java, as required under the KSO contract.

Telkom's inaction, prompted Ariawest to retain the
disbursement of Rp340 billion (about $31.4 million) in revenue
shares to Telkom.

Ariawest further complained of staff harassment at its Bandung
office by Telkom employees, and even of death threats issued
against some of its staff members.

Ariawest said last week that grave security concerns had
forced it to evacuate its staff from Bandung.

"We cannot take risks with the safety of our personnel," the
company's president John Vondras said in a statement last week.

Telkom has denied all charges against it.

The state company said it was prepared to face Ariawest in
front of an arbitration panel, for which it had already appointed
a team of lawyers.

Commenting on the accusations of death threats, Telkom's
investor relation's officer Dina Arifani described them as
"exaggerated and groundless".

Telkom's protracted dispute with Ariawest sheds more negative
publicity on Indonesia's already tarnished image among foreign
investors.

Its four other KSO partners are PT Mitra Global Telekomunikasi
Indonesia, PT Pramindo Ikat, PT Cable & Wireless Mitratel, PT
Bukaka Singtel.(bkm)