New bill won't affect Telkom and Indosat

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)