Idea of merging Telkom, Indosat hailed

JAKARTA (JP): Legislators welcomed on Monday the idea of merging two state-owned telecommunications operators, PT Telkom and PT Indosat, as a strategy to survive the impending open market competition.

The outgoing chairman of House of Representatives Commission IV for telecommunications, tourism and transportation, Burhanuddin Napitupulu, said the merger would certainly enable local operators to preserve their position in the country's telecommunications sector.

"It's a good idea to merge Telkom and Indosat. If they are merged they will become a solid and strong operator," he told The Jakarta Post.

Another member of Commission IV, who is also the deputy chairman of the United Development Party (PPP), Ali Hardi Kiaidemak, told the Post that he also supported the merger, believing it was better to have one strong operator with fully integrated products and services than two operators with different fragmented operations.

He said, however, a thorough study and preparation process should be made before merging the two firms. "The terms of reference in the merger deal must equally benefit both parties," he said when asked to comment on the suggestion made by a Telkom top official.

Telkom operational director John Welly said on Saturday that the two state-owned telecommunications providers should be merged to improve their competitiveness in facing competition from international telecommunications giants.

The chairman of the Indonesian Telecom Society (Mastel), Sukarno Abdulrachman said, however, a merger between the two firms would be a setback.

"I am not in favor of the idea of merging Telkom and Indosat. Each company should stand alone as it is now," he said.

He said Telkom and Indosat should not be too concerned in facing the open market competition because they would still have time to prepare themselves before new players directly enter the market at the end of both companies' current exclusive rights.

Telkom currently holds the exclusive rights to provide local fixed line and fixed wireless telecommunications services nationwide until 2010 and domestic long distance services until 2005.

Indosat and its joint venture PT Satelit Palapa Indonesia (Satelindo) hold exclusive rights for overseas long distance services until 2004.

The new telecommunications law, which will be effective in May next year, however, allows an early termination of the rights subject to the agreement between Telkom or Indosat, the government and the new local or foreign players. The latter should compensate Telkom or Indosat for the premature ceasing.

Sukarno said the better way to strengthen Telkom and Indosat was to let each company invite foreign giant operators to be strategic partners.

"That way, we can still have both companies exist but with more capital and stronger service capability to compete against each other or new players," he said.

Separately, Minister of Communications Giri Suseno Hadihardjono told journalists in Bandung that the government would no longer intervene in Telkom's policy and handling of its business relationships with the private sector.

"The government no longer needs to intervene in Telkom's activities," he said.

Telkom president A.A. Nasution called on the government last week to stop interfering in his company's handling of its joint operation scheme (KSO) with five private local and foreign partners. (cst/43)