Indosat's advisers blamed for rumors on inside trading

Indosat's advisers blamed for rumors on inside trading

The Jakarta Post, Jakarta

The controversy surrounding the sale of PT Indosat shares
escalated on Thursday when Capital Market Supervisory Agency
(Bapepam) chairman Herwidayatmo accused the company's private
placement advisors for spreading rumors about insider trading in
the sale process.

Herwidayatmo said he suspected the advisers were attempting to
use the allegations of insider trading as an excuse for their
failure to meet the sales target for private placement of
Indosat's shares.

"If they're no good in the selling business just say so,
without making a mess and looking for a scapegoat," he said as
quoted by Antara.

The government's financial advisers for the private placement
of Indosat's shares were U.S. investment firm Credit Suisse First
Boston (CSFB) and local firm Danareksa Sekuritas.

The controversy over the sale of the Indosat shares began on
Wednesday when State Minister of State Enterprises Laksamana
Sukardi accused U.S. investment firm Merrill Lynch of possible
insider trading prior to last Friday's sale by the government of
8.1 percent of its stake in Indosat.

The state minister called on Bapepam to investigate the
matter.

Merrill Lynch is the financial adviser for Indosat's planned
rights issue later this year.

The allegations are believed to be based on the fact that
Merril Lynch was involved in the massive sell off of Indosat
shares last Thursday, which resulted in an almost 5 percent fall
in share value.

This prompted the Jakarta Stock Exchange to suspend trading of
the shares, pending further clarification from the government on
its planned sale.

On Saturday, or two days after the suspension of trade, the
government announced it had sold an 8.1 percent stake in the
company for US$110 million -- less than the initial sales target
of 11.32 percent. The shares were sold for Rp 12,000 each -- less
than the market price of Rp 12,600 when trade in Indosat shares
was suspended on Thursday.

Laksamana said there was a conflict of interest when an
appointed financial adviser, familiar with the company's value
and market trend, was involved in the major sell off of Indosat
shares.

Herwidayatmo said Bapepam had established a team to
investigate any possible insider trading.

However, he noted that the controversy would not have arisen
had Indosat's financial advisers not failed to meet the
government's target in the private placement.

Nevertheless, he went on, Bapepam would continue the
investigation into the allegations of insider trading in order to
maintain the market's confidence.

The sale marked the government's first privatization program
this year, from which it expects to raise Rp 6.5 trillion to
cover the gaping state budget deficit.

As for Indosat, the government plans to sell 45 percent of its
shares in the company this year, with the second phase of the
process, a strategic sale, expected to be completed in October.

Following last week's private placement, the government now
owns 56.9 percent of Indosat.

Indosat also plans a rights issue to help finance the $325
million buyout of Deutsche Telekom's 25 percent stake in its key
unit, PT Satelindo.

The buyout will give Indosat full control of Satelindo, the
country's second largest mobile phone firm.