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)