MGTI hopes to keep joint venture with Indosat

MGTI hopes to keep joint venture with Indosat

JAKARTA (JP): Telecommunications company PT Mitra Global
Telekomunikasi Indonesia (MGTI) is hoping to continue its
operation in Central Java and Yogyakarta in a joint venture with
state telecommunication company PT Indosat.

MGTI president Sutrisman told The Jakarta Post that all of the
company's shareholders would prefer to set up a joint venture
with Indosat than sell their shares to the state company and
abandon the provinces.

"They (shareholders) agreed that MGTI should keep providing
telecommunications services to the people of Central Java and
Yogyakarta but through a joint venture with Indosat," Sutrisman
said over the weekend.

MGTI is 32.5 percent owned by PT Widya Duta Infotel, 30
percent owned by Indosat, 20 percent owned by Australia's Telstra
Global Ltd., 15 percent owned by the United Kingdom's NTT Finance
Ltd, while Japan's Sumitomo Corp. and Itochu Corp. hold 1.25
percent each.

MGTI signed the joint operation (KSO) contract with state
owned telecommunications company PT Telkom in 1995 to build and
operate telecom services in Central Java and Yogyakarta

Indosat, however, acquired Telkom's rights and obligations in
the Central Java and Yogyakarta KSO operation in a US$1.5 billion
acquisition and asset swap deal in May.

Thus, in addition to having shares in MGTI, Indosat has now
become a KSO partner of MGTI.

MGTI proposed that the KSO scheme be abolished to allow it to
continue operating in the regions in a joint venture scheme with
Indosat.

Sutrisman said that MGTI's shareholders hoped that, with
Indosat as a joint venture partner, a clearer and more definite
commercial arrangement could be reached, particularly in relation
to infrastructure and profit sharing.

"Negotiations with Indosat are still underway.

"We are, however, not ruling out the option of Indosat buying
out MGTI," Sutrisman said.

He said that MGTI's independent financial advisor had valued
the company's assets and operations before presenting a buyout
price to Indosat. He declined to disclose the price, as the
proposal was still being negotiated.

As of March 30 this year, MGTI had invested more than $480
million in Central Java and Yogyakarta and will invest an
additional $3 million this year to improve telecommunications
networks in both provinces, Sutrisman said.

"We will not focus on adding more new lines in the regions,
but on improving the existing lines so that our quality of
service can be increased," he explained.

MGTI has established a total of 412,000 new telecommunications
lines in the two provinces and recorded some 570,000 lines in
service out of a maximum capacity of 720,000 lines.

MGTI is one of five companies originally commissioned to build
and operate telecommunications services in Indonesia for 15 years
under a KSO agreement with Telkom in 1995.

The other four companies are: PT Pramindo Ikat Nusantara,
responsible for telecommunications services in Sumatra; PT
AriaWest International, responsible for West Java and Banten; PT
Dayamitra Telekomunikasi, responsible for Kalimantan; and PT
Bukaka SingTel International, responsible for the eastern region
of Indonesia.

KSO partnerships became undesirable after the economic crisis
hit Indonesia in late 1997, which was followed by disputes over
the KSO operations between Telkom and the partners.

Late last year, Telkom and the KSO partners, with the help of
the government acting as mediator, agreed to several options,
including a buyout by Telkom, a joint venture with Telkom or
Indosat, and a continuation of the KSO contract with amendments.

Telkom has bought the shares of Dayamitra for $122 million, is
currently negotiating the buyout price of Pramindo and discussing
a continuation of the KSO contract with Bukaka SingTel.

Negotiations with AriaWest have so far been the most arduous,
resulting in the House of Representatives recently asking the
government to install an independent management team to
temporarily take over the operations in West Java and Banten
until the dispute between Telkom and AriaWest is resolved. (tnt)