Idea of merging Telkom, Indosat hailed

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)