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)