KSO partners support telecoms reform plan

KSO partners support telecoms reform plan

JAKARTA (JP): Partners of state-owned telecommunications firm
PT Telkom in the joint operation scheme (KSO) have hailed the
government's commitment in its letter of intent to the
International Monetary Fund to reform the country's telecoms
sector.

KSO partners' spokeswoman Fifi Aleyda Yahya announced on
Monday the partners were particularly relieved to know that the
government was committed to providing a mutually acceptable
solution to the conflict involving KSO contracts.

She said the commitment had given the partners an opportunity
to achieve a win-win solution in their ongoing tough negotiations
with Telkom.

"Negotiations between KSO partners and Telkom have not been
productive so far because the existing contracts are a zero sum
game. If one party gains, the other must lose," she said.

According to the letter of intent signed last week, the
government's major agendas this year are to adopt a new tariff
policy by March this year, adopt a new network of interconnection
rules, finalize the implementation of regulations for the new
Telecommunications Law by June, finalize new licenses for major
operators and establish an agency to provide transparent and
predictable regulations.

The government also states in the letter of intent that it
will reduce Telkom and Indosat's extensive cross-ownership in the
sector and secure a mutually acceptable solution to the issues
concerning the revenue-sharing contracts between Telkom and its
KSO partners.

Telkom and its five KSO partners -- PT Pramindo Ikat
Nusantara, which operates in Sumatra; PT AriaWest International
in West Java; PT Mitra Global Telekomunikasi Indonesia in Central
Java; PT Cable & Wireless Mitratel in Kalimantan; and PT Bukaka
Singtel International in eastern Indonesia -- have been involved
in serious talks since November last year in order to find a
solution to their differences on the partners' rights and
obligations.

The KSO scheme has been under fire since its establishment in
1996, with much of the criticism leveled at the five partners,
questioning their performance in meeting terms of contracts and
the allocation of profits to Telkom.

The five partners were appointed in 1995 by Telkom to finance,
build and operate domestic fixed-line telephone services across
the country on behalf of Telkom under a revenue-sharing scheme
through 2010.

Under the agreement, KSO partners are required to install,
during a three-year construction period from 1996 to 1999, a
total of two million new access lines, a figure which was revised
downward to 1.2 million in 1998 by the government after the
partners said the initial figure had became impossible to meet
amid the prolonged economic crisis.

The agreement also requires the partners to pay Telkom a
monthly fixed amount known as minimum Telkom revenue (MTR) and
distributable Telkom revenue (DTR) based on their revenue.

The DTR figure was also revised in 1998 by the government from
30 percent to 10 percent for Telkom and from 70 percent to 90
percent for partners.

The partners said they had paid Telkom approximately 45
percent, or Rp 5.03 trillion (US$718 million), of the total
revenue collected since early 1996 to March 1999.

Yahya said the partners expected that the KSO scheme could be
attuned to the new business setting the government planned to
introduce in the country's telecoms sector in order to create an
environment conducive to renewed investment.

She said that since 1996 the five KSO partners had invested
$1.56 billion in telecommunications infrastructure to provide
1.39 million telephone lines across the country, except for
Jakarta and East Java.

"However, new investment has been at a virtual standstill
since 1998 because the crisis caused an imbalance in the market's
economic fundamentals," she said.

The partners said they needed to inject between $3 billion and
$5 billion to finance the development of between two million and
three million fixed lines within the next five years.

However, they said they would not make any major investment or
establish new lines until they had achieved a mutual and
significant agreement with Telkom. (cst)