Government may buy back stake in Indosat from Singapore's firm

Rendi A. Witular, The Jakarta Post, Jakarta

The cash-strapped government is considering raising its stake in PT Indosat, the country's second-largest telecommunication firm, by buying back shares it sold in 2002 to Singapore Technologies Telemedia (STT).

Vice President Jusuf Kalla confirmed the plan on Thursday, saying it formed part of the efforts to boost the government's ownership of strategic state enterprises, including Indosat.

"I haven't heard any plans from STT to raise its stake in Indosat. On the contrary, the government is now calculating (its resources) should the foreign owner (STT) in the company sell its stake," said Kalla at his office.

"If there is such a possibility, the government expects to be able to enlarge its ownership in the company," he said.

Kalla, a wealthy businessman, is known for his pro-nationalist views on business ownership.

The plan may raise some eyebrows since the source of the funds for the buy-back is unclear, especially when the state budget is already overstretched.

With the higher cost of the fuel subsidy, it is estimated that the state budget deficit may jump to 1.3 percent of the gross domestic product (GDP) this year, or about Rp 35.2 trillion (US$36.2 billion).

Initial projections for the deficit stood at 0.8 percent of GDP or about 20.3 trillion.

However, Kalla remained upbeat about the plan, saying that "the government will explore several potential resources."

The previous administration under the leadership of Megawati Soekarnoputri, sold 42 percent of government's stake in Indosat to STT for about US$631 million in 2002.

The government now has about 14.6 percent in the company, with pubic investors holding the remaining 43.4 percent.

Early this month, STT president and chief executive officer Lee Theng Kiat reiterated, after a meeting with Kalla, the company's long-term investment commitment in Indosat, and vowed to continue to develop its networks here.

Indosat's operating revenue has grown by as much as 13.8 percent to Rp 2.87 trillion in the first quarter of this year, compared to Rp 2.52 trillion in the same period last year.

The company's net profit also jumped by nearly 39 percent to Rp 282.8 billion, excluding gains from asset sales in the corresponding period the year before.

Indosat shares ended unchanged at Rp 5,700 on Thursday.