Govt supports Indosat, Telkom ownership deals

Govt supports Indosat, Telkom ownership deals

JAKARTA (JP): The government has given its full support to the
US$1.5 billion transactions recently approved by state-owned
telecommunication companies PT Indosat and PT Telkom to end their
cross-ownership, despite resistance from the latter's employees.

Coordinating Minister for the Economy Rizal Ramli said here on
Wednesday that termination of the cross-ownership was essential
to allow the two companies to operate more independently.

"We have met with Pak Agum Gumelar (Minister of Transportation
and Telecommunication) and the related director general, and we
fully support the efforts toward making the two companies fully
fledged," Rizal was quoted as saying by Antara news agency.

Rizal said the government wanted the two companies to not only
provide fixed telephone services, but also operate mobile phone
and data transmission services.

Under the $1.5 billion package, Telkom agreed to acquire
Indosat's 35 percent interest in cellular company PT Telkomsel
for $945 million, and give Indosat an additional $346 million in
cash.

Indosat will in turn acquire Telkom's 22.5 percent interest in
cellular company PT Satelindo for $186 million, Telkom's 37.66
percent interest in PT Aplikanusa Lintasarta for $38 million, as
well as its Central Java and Yogyakarta operations for $375
million.

Both Telkom and Indosat will hold their annual shareholder
meetings on Thursday next week to approve the deal.

Telkom's sale of its Central Java and Yogyakarta operations to
Indosat have been encountering strong opposition from its
employees in the region, who fear the new management will
retrench many of them.

In a meeting with House of Representatives Speaker Akbar
Tanjung last month, the chairman of Telkom's Central Java and
Yogyakarta workers' union, Syahrul Akhyar, said the workers were
particularly concerned about the entry of foreign investors in
the region through Indosat.

He had said that foreign investors would only prioritize
corporate customers, while neglecting household costumers which
account for 80 percent of Central Java telephone subscribers.

At the time, Akbar said he would ask the government, as the
major shareholder in both Telkom and Indosat, to review
transactions before making a final decision.

The government owns a 66.19 percent stake in Telkom and 65
percent of Indosat. Both companies are listed on the Jakarta
Stock Exchange.

Telkom employees in Yogyakarta staged a protest on Tuesday
demanding an annulment of the transaction related to Telkom's
Central Java and Yogyakarta operations.

The protesters, grouped under the Telkom Workers Union, said
they would stage more protests until the acquisition was
canceled, and that they would raise the issue in a meeting with
Vice President Megawati Soekarnoputri scheduled for May 10.

Rizal stressed on Wednesday the need for Telkom and Indosat to
proceed with the transactions, saying that it would increase the
companies' economic value.

"International response to the transactions (between Telkom
and Indosat) is also very positive," he added.

Commission

He also said that the government was currently preparing the
establishment of an independent telecommunication commission to
formulate the country's long-term telecommunication policy.

The planned commission, which would function just like the
Federal Communication Committee in the United States, would
comprise representatives of the telecommunication society,
representatives of consumers and legislators, the minister said.
(tnt)