House speaker asks for review of Telkom-Indosat transactions

House speaker asks for review of Telkom-Indosat transactions

JAKARTA (JP): House of Representatives Speaker Akbar Tanjung
urged the government on Tuesday to review the US$1.5 billion
transactions between state-owned telecommunications companies PT
Telkom and PT Indosat which would terminate their crossholdings.

Akbar warned that a final decision should not be made in haste
as it concerns the future of two giant companies and the state
which owns them.

The government owns 66.19 percent of the shares in Telkom and
65 percent in Indosat.

"We ask the government to review the transactions, and to
involve House Commission IV and Commission IX in the review, as
they concern the transfer of national assets," he said, outside a
meeting with Telkom's workers union, Sekar, at his office here.

Akbar said that he would ask the government, especially the
Minister of Transportation and Telecommunications, the Minister
of Finance, and the Coordinating Minister for the Economy, to a
meeting with the House to discuss the matter.

The two companies agreed in February on a series of
transactions amounting to $1.5 billion which would end their
crossholdings in telecommunications companies.

Telkom will acquire Indosat's 35 percent interest in cellular
company PT Telkomsel for $945 million and Indosat will pay $186
million for Telkom's 22.5 percent stake in another cellular
company, PT Satelindo.

Indosat will acquire Telkom's 37.66 percent interest in PT
Aplikanusa Lintasarta for $38 million as well as the assets of
the Central Java region joint cooperation scheme (KSO) run by PT
Mitra Global Telekomunikasi Indonesia (MGTI) for $375 million.

The transactions are subject to shareholder approval, and a
special shareholders' meeting is scheduled for May 10.

However, the asset turnover in the Central Java KSO has been
encountering strong opposition from Telkom's employees.

Telkom employees in the KSO threatened to go on strike if, on
May 10, the company went ahead with its plan to sell the assets
to Indosat.

"They (employees of Telkom's Central Java division) have the
support of all of Telkom's employees across Indonesia," Sekar
chairman Herry Kusaery said.

Chairman of the union's Central Java and Yogyakarta chapter,
Syahrul Akhyar, said that the workers were especially concerned
about the entry of foreign investors to the region through
Indosat.

"If the telecomms service in the region were to be controlled
by foreign investors, the company would only care about the
corporate customers which would only account for about 20 percent
of Central Java telephone subscribers," he said.

Syahrul also stressed the damage the transaction could inflict
to the company's liquidity and the workers' future welfare.

He explained to the House leaders that with the proposed
transactions Telkom still had to pay Indosat a cash amount of
$346 million, excluding tax obligations that were estimated to
reach Rp 1.3 trillion (about $124 million).

On top of that, Syahrul added, Telkom still had to buy back
the assets of its KSO partner in Kalimantan, PT Dayamitra
Telekomunikasi, valued at about $210 million, as well as its Rp
600 billion investment in its cellular project.

"In the meantime, Telkom's liquidity totals only approximately
Rp 7.5 trillion," he added.

Meanwhile, chairman of Indosat's workers union Bambang Irawan
said the transaction would also put Indosat at a disadvantage.

Indosat, which plans to become the major shareholder in
cellular operator Satelindo after acquiring Telkom's 22.5 percent
share in the company, would need to take over PT Bimagraha's 45
percent shareholding in Satelindo, he said.

"The transaction with Bimagraha will cost about $327 million,
and as Bimagraha is controlled by foreign investors, about 65.7
percent of the funds will leave the country," Bambang said.

The two unions proposed that the transactions be canceled and
that the government instead merge the two companies to prepare
them for global competition.

"After all, even after a merger of the two companies the
resultant company would be too small to compete with such giants
as AT&T, British Telecom, SingTel, and Telstra, which will soon
enter the country," Herry Kusaery said. (tnt)