Government urged to retain control of PT Telkom

JAKARTA (JP): The government should maintain its controlling ownership of domestic call operator PT Telkom despite its plan to make further divestment at the company in view of the strategic role of the telecommunications industry, Telkom president A.A. Nasution said on Sunday.

Nasution told reporters if foreign investors controlled Telkom they might emphasize short-term profits at the expense of the long-term future of Indonesia's telecommunication services.

"The government's majority ownership of Telkom is a guarantee for the long-term good of Telkom and the country's telecommunications industry in general," Nasution argued.

The cash-strapped government has planned to further divest its controlling ownership of Telkom to raise revenue for the state budget.

The privatization of state companies, including international call operator Indosat, has been tasked with raising almost Rp 6 trillion (US$833 million) or 3.3 percent of the total spending planned in the 2000 fiscal year beginning in April.

"One should also remember that Telkom has been a major source of revenue for the state budget. Last year, for example, Telkom paid Rp 400 billion in a dividend to the government," Nasution said.

The government sold 35 percent of Telkom through the Jakarta, London and New York stock exchanges in November 1995 and another 9.6 percent to foreign institutional investors through private placements in May 1999.

Nasution suggested that the upcoming sale of government shares in Telkom be made through the stock market and not through private placements.

Earlier, the Indonesian Telecommunications Society expressed opposition to foreign controlling ownership of Telkom.

"If allowing foreign control of Telkom is aimed at accelerating the liberalization of the telecommunications service in the country, that is completely ill-advised," chairman of the society Risa Bhinekawati said.

According to Nasution, Telkom will hold a general meeting of shareholders in early April to replace its boards of management and supervisors.

The government is strongly committed to further promoting private investment in telecommunications, as stipulated in the memorandum of economic and financial policies attached to its Jan. 20, 2000 Letter of Intent to the International Monetary Fund.

The government states in the memorandum that it will adopt a new rates policy by March, complete new network interconnection rules, finalize the implementation of regulations for the new Telecommunications Law by June and award new licenses to major operators.

It says it will also strive to reduce Telkom's and Indosat's extensive cross-ownership in the sector and to secure a mutually acceptable resolution of the issues concerning the revenue- sharing contracts between Telkom and its private partners.

"This resolution will be consistent with the new Telecommunications Law and promote competition by enabling both Telkom and Indosat to evolve into competing full-service providers," the memorandum says.