Govt may launch massive reorganization of Telkom

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.