Gov't dismisses demand to annul Indosat sale

Gov't dismisses demand to annul Indosat sale

Fitri Wulandari, The Jakarta Post, Jakarta

The government said on Friday it would not annul the recent
sale of its 41.9 percent stake in state-owned telecommunications
company PT Indosat despite heavy protests from thousands of
employees and politicians nationwide.

"The divestment will not be annulled," deputy of the Office of
State Minister of State Enterprises Mahmuddin Yasin said.

Singapore Technologies Telemedia (STT) earlier this month won
the Indosat stake for Rp 5.62 trillion (about US$634 million).
This is the government's largest privatization deal so far this
year. The proceeds will be used to help finance the 2002 state
budget deficit.

But there has been increased opposition since STT was
announced as the winning bidder last week. The protesters accused
the sale process of not being "transparent" and claimed it could
harm the local telecommunications industry. Some argued that the
purchase of Indosat would allow STT to become a monopoly in the
country's cellular market.

The House of Representatives on Friday sent a letter to the
government asking them to cancel the divestment deal.

"We want the government to delay the Indosat divestment due to
increasing opposition to the sale," the letter, which was signed
by the Deputy Speaker of the House AM Fatwa, as quoted by Dow
Jones.

Meanwhile, hundreds of Indosat employees staged a
demonstration on Friday in front of the company's headquarters,
blocking shareholders from attending a scheduled extraordinary
shareholders meeting.

The meeting which was scheduled for 2 p.m Jakarta time, but
was delayed for 4 hours because of the noisy rally.

The rally ended up in a brawl between the protesters and the
police, leaving five people injured after the police tried to
stop protesters from blocking shareholders from attending the
meeting, which had on its agenda a vote for the company's new
board of directors and commissioners following the entry of STT.

Indosat shareholders voted in favor of Peter Seah Tan Lim
Huat, who's currently chief executive of Singapore Technologies
Group, as Indosat's new president commissioner.

He replaces outgoing commissioner Wisnu Askari Marantika.

STT also placed four senior executives as Indosat directors:
Joseph Chan, Nicholas Tan, Ng Eng Ho and Raymond Tan King Men.

With the entrance of four senior Singaporean executives, the
board of directors now has nine members.

Indosat's current president Widya Purnama retains his
position.

In response to a government decision, secretary general of
Indosat workers union, Tris Budi Suroso said that the union
wanted to file a class action lawsuit against the government and
Indosat.

"We will find other ways to annul the divestment. Suing them
is one of the options," Tris told The Jakarta Post.

Tris said the union had been gathering support from other
interest groups.

The government has been facing strong opposition in carrying
out its crucial privatization program.

State Minister of State Enterprises Laksamana Sukardi has been
this week engaged in a war of words with Speaker of the People's
Consultative Assembly (MPR) Amien Rais, with Amien reportedly
accusing Laksamana of being "a foreign agent trying to sell the
country's precious assets cheaply to foreigners."

Laksamana on Friday formally filed a defamation complaint on
Friday with the police against Amien.

Indosat's profile

PT Indonesia Satellite Corporation (Indosat) was established in
1967 and began commercial operations in 1969. Initially, Indosat
was a subsidiary of U.S. telecommunications giant International
Telephone and Telegraph Corporation (ITT), which was deregulated
years ago, and was selected by the Indonesian government to
build, transfer and operate an Intelsat earth station in
Indonesia to enable access to satellites under the Intelsat's
Indian Ocean Region (IOR) for 20 years.

Intelsat is part of a worldwide consortium of global
international satellite communications organizations which owns
and operates a number of satellites.

In 1980, ITT sold Indosat to the government of Indonesia for
US$43.8 billion.

Indosat entered the international telephone business in 1993
when it introduced IDD (International Direct Dialing) which it
retains up until now.

In 1994, Indosat completed its initial public offering, and
listed its shares on the New York Stock Exchange and in the local
stock exchanges.

Currently, Indosat has developed into a full-service
telecommunications company. It has a wide array of businesses
including IDD, mobile satellite phones, private leased lines,
cellular phone operators, calling cards, an internet provider,
and VOIP (voice over internet protocol).

With the end of the monopoly in the telecommunications sector,
Indosat officially entered the fixed-line business which has long
been held solely by its competitor PT Telkom.

Following the recent sale of the government's 41.9 percent
stake in Indosat to Singapore Technologies Telemedia, the
government now just owns roughly 15 percent of the publicly
listed company, with the remaining shares in the hands of private
investors.