Govt urged to heed Telkom-AriaWest row

JAKARTA (JP): The government should pay greater attention to the lingering dispute between state PT Telkom and PT AriaWest International, as it could impact on Indonesia's position in the international forum, a senior government official said.

Director general for posts and telecommunications at the Ministry of Communications Djamhari Sirat said on Tuesday that the dispute between the two companies had become so complex and sensitive that the matter ought to be discussed by the Cabinet.

"If we take the wrong steps, what was once a dispute between AriaWest and Telkom could easily turn into a dispute with the government of Indonesia," he told reporters on the sidelines of a seminar here.

Djamhari made the statement following a move on Monday by Telkom to terminate its joint operation (KSO) contract with the subsidiary of the American telecoms giant AT&T.

Telkom said it had decided to unilaterally terminate the contract because it thought AriaWest had failed to honor it.

It remained unclear if the government was involved in the process leading to Telkom's decision to terminate the contract, but Djamhari said the termination was purely a corporate action by Telkom.

"What Telkom did was purely a corporate action, and it has its own consequences from a business point of view," Djamhari said.

Djamhari said Minister of Communications Budi Mulyawan Suyitno had been informed of the contract termination and promised to take the case to the Cabinet for discussion.

Djamhari stressed that the government was still poised to temporarily take over AriaWest's telecommunications operations in West Java and Banten, despite Telkom's move to terminate the contract.

"But first we shall see whether AriaWest will accept (the contract termination) or not (before making a concrete move)," he said, explaining that if AriaWest agreed with the contract termination, then the government would return telecoms services in the two provinces to Telkom.

In a related development, AriaWest lawyer Andrew I.Sriro said on Tuesday that the unilateral termination of the KSO was a very costly error on the part of Telkom

"The illegal move would simply strengthen our arbitration claim against Telkom which we filed with the headoffice of the International Chamber of Commerce in Paris in May," Sriro asserted.

Sriro said his company had tried hard to negotiate in good faith with Telkom but no any progress had so far been made.

According to the joint operation (KSO) contract signed in October, 1995, AriaWest was given the right to build, operate and manage telecommunications services in West Java and Banten for a period of 15 years.

Disputes between Telkom and AriaWest arose especially after the economic crisis hit Indonesia in 1997 and the melting of the rupiah upset many basic assumptions for investments under the KSO operations.

The dispute has resulted in the decline of telecoms services in West Java and AriaWest's inability to pay salaries for Telkom's employees after Telkom withheld funds from telephone subscribers from AriaWest.

The government, with the support of the House of Representatives, had agreed to temporarily take over the day-to- day operations of AriaWest in West Java to ensure the continuance of telecommunications services in the two provinces.

In a bid to end the protracted dispute, Telkom terminated the contract on Monday and agreed to pay AriaWest compensation based on the net book value of its assets.

AriaWest is 52.5 percent owned by Indonesia's PT Artimas Kencana Murni, 35 percent by the U.S.' MediaOne International BV, of which AT&T is a part, and 12.5 percent by Hong Kong's Asian Infrastructure Fund. (tnt)