Govt to pay compensation to Telkom, Indosat

The Jakarta Post, Jakarta

The government has finally decided to pay cash compensation to state-owned telecommunications firms PT Telkom and PT Indosat for the early termination of their exclusive rights, Minister of Transportation Agum Gumelar said on Thursday.

Agum said that the government would pay Rp 478 billion (US$57.59 million) in compensation to Telkom, whose monopoly over the domestic fixed line business ended last year rather than 2010 as originally planned.

Speaking to reporters after a meeting with Minister of Finance Boediono, he said that the government would also provide Rp 178 billion in compensation to Indosat. The company's exclusive rights over international call services end this year, instead of 2005 as originally scheduled.

Agum said that the compensation would be paid out of the current state budget.

The termination of Telkom's and Indosat's exclusive rights is part of the government's liberalization drive in the domestic telecommunications industry. The program will open the way for Telkom to run international telecommunications services, and for Indosat to operate a fixed line business.

The publicly listed Indosat is now 41.9 percent controlled by Singapore Technologies Telemedia, which bought its stake last year.

The government owns around 15 percent of Indosat, but still has a controlling 51.2 percent stake in publicly listed Telkom.

The compensation package was supposed to have been announced last year, but was delayed as a result of a fierce debate over the size of the package. Indosat was unable to roll out its local fixed line business nationwide until the government provided the compensation package.