Government to decide on KSO contract scheme: Giri

Government to decide on KSO contract scheme: Giri

JAKARTA (JP): Minister of Communications Giri Suseno said on
Tuesday the government was studying whether to maintain the joint
operation scheme (KSO) in the country's telecommunications
industry.

As part of its study, his ministry is currently evaluating the
performance reports submitted by the five private companies which
entered into KSO contracts with state-owned telecommunications
company PT Telkom, Giri said.

"The final judgment, however, will be made by the office of
the State Minister of the Empowerment of State Enterprises who
has the authority to handle the management of Telkom, including
the business arrangement with the KSO partners," he said on the
sidelines of a meeting with House of Representatives' Commission
IV for telecommunications, tourism and transportation.

The meeting was held to debate the new telecommunications
bill.

Some analysts have urged the government to cancel the KSO
arrangement because they said the contract provided more benefits
to KSO partners than Telkom.

They said it should be changed into a joint venture scheme to
allow Telkom to obtain more profits from the joint operation
business.

KSO contracts began in 1996 when Telkom appointed the five
consortiums of foreign and local firms -- PT Ariawest
International, PT Pramindo Ikat Nusantara, PT Mitral Global
Telekomunikasi Indonesia (MGTI), PT Cable & Wireless Mitratel and
PT Bukaka Singtel (BSI) -- to finance, build and operate domestic
fixed lined telephone service across the country under a revenue-
sharing scheme through 2010.

Under the initial contracts, KSO partners were required to
install a total of two million new access line units (ALU) from
1996 to 1999.

The government revised the figure to only 1.2 million last
September due to the economic crisis.

The KSO contractors said in reports that they installed
approximately 1.37 million ALU as of March 31 this year, with
Pramindo building 297,290 ALU, Ariawest 299,458, MGTI 403,500,
Cable & Wireless Mitratel 120,000 and Bukaka Singtel 251,300.

Under the contracts, the companies were required to pay Telkom
a three-monthly fixed fee known as Minimum Telkom Revenue (MTR)
and Distributable Telkom Revenue (DTR).

The government revised the revenue-sharing scheme last year,
splitting the DTR into 10 percent for Telkom and 90 percent for
the partners. Under the previous scheme, Telkom received 30
percent and the partners 70 percent.

KSO companies said they paid Telkom approximately 45 percent,
or Rp 5.03 trillion, of the total revenue collected since early
1996 to March this year with total investment of about US$1.56
billion, of which $567 million was their own equity.

Director General of Post and Telecommunications Sasmito Dirdjo
said communications ministry found the reports from Telkom's
partners acceptable in principle.

"We consider the KSO partners' work performance to be quite
good. They met all the work requirements and some even performed
better than the required criteria," he said. (cst)