Govt may launch massive reorganization of Telkom

Rendi A. Witular, The Jakarta Post, Jakarta

State-owned telecommunications company PT Telekomunikasi Indonesia (Telkom) will likely undergo massive reorganization, including a shakeup of the board of directors and a revision of the management structure.

While the reorganization is set to be decided during the company's annual shareholder meeting on Friday, sources at the Office of State Minister of State Enterprises implied that Telkom's current president director Kristiono would not likely survive the changes.

The reorganization plan was launched on the back of a recent probe by the government's inter-departmental corruption team, which discovered a number of irregularities at the publicly listed company, most of which may include massive losses to the state.

"The recent probe by the anticorruption team has forced the state minister's office to reconsider the position of a number of directors. But the final decision will made by the President," said a senior official at the state minister's office, who requested anonymity.

The government has a 51 percent stake in Telkom, the country's largest telecommunications company, while the remaining 49 percent is held by public investors.

The official said there were currently four candidates that could likely replace Kristiono, all of whom career were Telkom executives. Kristiono has led Telkom since mid 2002.

The official named Telkom's cellular subsidiary PT Telkomsel president director Kiskenda Suriahadja and former president director of Telkomsel Bajoe Narbito as top candidates.

Before serving as executives with Telkomsel, both Kiskenda and Bajoe had served as heads of Telkom's regional division for Greater Jakarta -- a strategic post for a Telkom executive since the division contributes between 40 percent and 50 percent of Telkom's operational revenues.

Two other strong candidates are Woeryanto Soeradji, Telkom's director for human resources and business support, and Garuda Sugardo, Telkom's former business development director and the creator of the Telkom Flexi service.

Telkom Flexi uses the code division multiple access (CDMA) technology.

The selection of candidates from Telkom's internal resources had been confirmed by State Minister of State Enterprises Sugiharto last week.

He said the government would prioritize candidates with a long career in Telkom since an outsider would be "inefficient" as he or she would have to adjust to Telkom's working environment.

"The candidates for the new directors will be taken from within the company. I think there is little chance for an outsider to make it," said Sugiharto, refusing to name the strongest candidates for the board of directors.

Aside from reorganizing the management, another source with the state minister's office said the government would also change the company's management structure by adding two directorates; the directorate for investment and the directorate for infrastructure.

But the government will scrap directorates for service business and network business and replace them with directorates for retail services and corporate accounts.

Sugiharto, however, refused to confirm the changes in the company's structure.

Reorganization at Telkom has long been a sensitive issue involving numerous vested interests as the firm contributes the largest amount of revenue to the state compared to other state companies.

Last year, Telkom recorded a net profit of Rp 6.12 trillion (US$637 million) from an operational revenue of Rp 33.94 trillion. In 2003, Telkom recorded a profit of Rp 6.08 trillion from an operational revenue of Rp 27.1 trillion.

The government also wants to be very careful in making changes in the company, since the company has a significant role in the Jakarta stock market -- with the largest market capitalization.

A serious problem in the company, such as corruption, will not just cause massive losses for the state and the public in general, but will also negatively affect the movement of the Jakarta Composite Index.

At present, Telkom has some 15 percent market capitalization in the domestic bourse, meaning that a decline in Telkom's share by a single digit would also drive the index down by 15 percent.