Government may approve Telkom buyback plan

Rendi A. Witular, The Jakarta Post, Jakarta

The government may approve a plan by the country's largest telecommunication company PT Telkom to buy back its shares from the Jakarta Stock Exchange (JSX) and New York Stock Exchange (NYSE), pending approval from its shareholders, since it will be beneficial for the country in the long run.

With the shares, the government's ownership in Telkom will increase and it will eventually receive higher proceeds from dividends paid by the company, State Minister of State Enterprises Sugiharto told The Jakarta Post recently.

"The government in principal supports the buy back plan since it will give us more advantage from higher dividends paid by the company in the future. The approval, however, will still be decided during the upcoming shareholders meeting (in November)," he said.

The government also believes that Telkom would have sufficient funds to buy back the shares, as well as receiving a higher return on the funds from higher proceeds the company might reap in the near future, he added.

Telkom will have huge prospects of recording higher profit since it operates in a market where less than 20 percent of the nation's 220 million people have mobile or fixed-line phones.

Since 1995, about 42 percent of Telkom's shares have been traded on the JSX, while 7 percent on the NYSE in the form of American depository receipts. The company's remaining 51 percent stake is still owned by the government.

The company's president director Arwin Rasyid said earlier that Telkom planned to spend Rp 3 trillion (US$$288 million) from its internal cash to partly withdraw its shares from the two bourses.

In a press statement on Monday, Arwin said the management of the company's capital was a strategic step to increase the company's value, with share buy back among several instruments explored by the company.

"To date, Telkom is still in the process of completing the plan and its implementation should strictly comply with the existing regulations and shareholder approval," he said.

The government, desperately in need of additional revenue from state enterprises to plug the state budget deficit this year and next year, will also require other listed state firms to reduce the shares held by the public.

Vice President Jusuf Kalla had earlier said that all strategic state firms should be entirely controlled by the state. Companies categorized as strategic include those in the telecommunication, natural resources and financial sector.