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.