Indosat considers pulling out from 'TPI': Executive

Indosat considers pulling out from 'TPI': Executive

JAKARTA (JP): Publicly listed telecommunications company PT
Indosat is considering withdrawing its investment in private
television station TPI, a company executive has said.

Indosat's director for corporate development Safwan Natanagara
said the investment, which was in the form of convertible bonds,
was no longer favorable due to TPI's plunging asset value.

"With the purchase of the five-year bonds, Indosat actually
has an option to own between 30 percent and 40 percent of TPI,"
he said during a media gathering held over the weekend.

"But, we are no longer enthusiastic about it because it will
never give us a quick return."

Indosat agreed on Oct. 2, 1997, to buy the convertible bonds
of TPI, one of Indonesia's five private television stations,
amounting to Rp 150 billion (US$21.4 million).

The bonds, which carry a 7 percent coupon, are convertible
into ordinary common shares of the company at par value any time
within a five-year term.

Safwan said Indosat wanted to request the TV station's
shareholders pay back Rp 150 billion after they failed to pay the
interest for 1999. The bonds will mature in 2002.

Financially troubled TPI issued the bonds in a bid to finance
the development of its relay stations, improvement of programs
and pay some of its liabilities.

TPI plans to float its shares on the domestic stock exchanges
in 2000, with about 35 percent of the broadcasting station's
shares to be sold to the public during the initial public
offering (IPO).

After the IPO and if Indosat retained its current stake, TPI
would be 30 percent owned by Indosat, 35 percent by the public
and the remaining 35 percent by Siti "Tutut" Hardiyanti Rukmana,
the eldest daughter of former president Soeharto.

At the time of the share flotation, TPI estimated its total
assets would reach Rp 700 billion, compared to about Rp 406
billion in 1997.

Safwan denied allegations that Indosat's purchase of the bonds
was connected to KKN, the local acronym for collusion, corruption
and nepotism.

He said the investment in TPI culminated a lengthy process of
evaluation of several local private television stations, which
Indosat conducted since 1995 in connection with the company's
business strategy of diversifying into multimedia business.

"The choice of TPI was made through a process of assessments,
which included Price Waterhouse to provide expert views on the
entertainment, media and communications industries, and PT Bahana
to give corporate financial advice. At that time, TPI was thought
to have the most promising future," he said.

Indosat was initially pitching for two other private
television stations, RCTI and SCTV, he said.

However, investment was not made in the two other stations
because they were considered past their peak, he added.

Safwan said Indosat's expansion into television broadcasting
was part of its plan to establish interactive multimedia
services.

He said Indosat wanted to switch its business focus from the
international direct dial service to multimedia by utilizing the
convergence of the fields of telecommunications, broadcasting and
computer.

Indosat has at least 26 subsidiaries and affiliated companies
here and abroad operating in sectors including fixed line, mobile
telecoms, Internet service provider, satellite transponder
leasing, international telecoms and value-added services.

In the first nine months of 1999, Indosat earned Rp 20.5
billion in dividends from affiliates, Rp 173 billion in net
equity income from strategic subsidiaries and Rp 8.5 billion in
interest from bonds issued by its affiliates. In overall, it
booked an unaudited consolidated net income of Rp 1.19 trillion.

Indosat is listed on the Jakarta and Surabaya stock exchanges,
and has American Depositary Shares floated on the New York Stock
Exchange. (cst)