New bill won't affect Telkom and Indosat

JAKARTA (JP): The bill on telecommunications currently deliberated at the House of Representatives will not affect the exclusive rights held by PT Telkom Indonesia and PT Indosat, a senior official has said.

Eman S. Sumantri, head of the telecommunications and information supervision department at the Ministry of Communications, said on Wednesday the two companies' rights to run the country's telecommunications sector would be maintained until the existing contract terms ended.

"The two companies are still allowed to exercise their rights even if the bill is passed by the House of Representatives without any changes," he said, adding that the guarantee for the upholding of the exclusive rights is stipulated in article 58 of the bill.

The bill, designed to further liberalize the telecommunications industry, will, among other things, ease restrictions imposed on newcomers entering the industry.

Under the present regulation, Telkom has exclusive rights to provide local fixed and fixed wireless telecommunications services nationwide until 2010 and domestic long distance telecommunications services until 2005.

Indosat and its joint venture PT Satelit Palapa Indonesia (Satelindo) hold exclusive rights for overseas long distance services until 2004.

Other parties, including cooperatives and private firms, may enter the country's telecommunications sector only under a joint operation scheme or profit-sharing scheme with Telkom or Indosat.

Eman stressed the rights would be abolished only after their current contracts expired.

The rights given to Telkom and Indosat were stated in the prospectuses of the two companies published before their initial public offerings in the early 1990s.

"The government is committed to fulfilling the promise as stated in the prospectuses," he said.

He said it would be possible to speed up the removal of the monopolistic practices in the country's telecommunications sector but it should be approved by PT Telkom and PT Indosat.

"Telkom and Indosat must first seek approvals from their shareholders before they make agreements to terminate their rights prior to the expiry date of the existing contracts," he said.

As a consequence, a newcomer who seeks a removal of their rights should pay compensation to PT Telkom and PT Indosat for the losses that might result from the early removal of the rights.

Eman said under the proposed new law any party could enter the telecommunications business without having to cooperate with Telkom.

"But, as long as Telkom, Indosat and Satelindo maintain their rights, new and existing players will not be able to enter specific sectors currently handled exclusively by the three companies," he said.

Other players, however, could propose through the government to enter the exclusive sector by offering a fee to the rights holder to compensate for the breach of the rights, he said.

"The amount of the compensation fee will be set by the rights holder subject to approvals from its shareholders," Eman said.

He said under the proposed new law Telkom and Indosat would have to follow the same procedures and regulations as other local or foreign players if they were to open new business in the telecommunications sectors other than the ones currently granted to them.

He said an independent regulatory body should be established immediately after the enactment of the new law to serve as a watchdog for the future free-competition era in the telecommunications sector.

"The body will consist of professional experts and representatives from all concerned parties. The body will be ideally installed by the House, and therefore responsible to it," he added. (cst)