New Telkom management remains committed to KSO contracts

New Telkom management remains committed to KSO contracts

JAKARTA (JP): The new management of the state-owned telecom
company PT Telkom said on Monday that it remained committed to
its contract agreement with multinational partners in the Joint
Operation Scheme (KSO).

The company's new director of operations and marketing
Komarudin Sastrakoesoemah said that new management had no
intention of annulling or changing the contracts despite
disagreement with some of the provisions.

"The scheme will be continued until it expires in 2010. We are
going to stick to the original contract," he said.

He stated that Telkom intended to resolve demands made by KSO
partners to review the contract in order to make it more
financially and operationally feasible for both the KSO investors
and Telkom.

Komaruddin said that the new management would stick to the
government's existing guidelines in its relations with KSO
partners.

"The form of cooperation may well be changed from joint
cooperation into a joint venture partnership as initially
proposed by KSO partners," he said. But he added that the new
management had not yet discussed the matter with KSO partners.

Telkom and the KSO partners have been engaged in tough
negotiations since November, trying to solve their differences,
but haven't been able to reach an agreement thus far.

Telkom and its five KSO partners have been embroiled in a
dispute over the management and operation of Telkom's work areas.
They were put under the management of the partners in 1996.

Telkom appointed the partners in 1996 to finance, build and
operate domestic fixed line telephone services across the country
on behalf of Telkom under a revenue-sharing scheme through 2010.

The five KSO partners are 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.

Telkom controls the most profitable markets in Jakarta and
East Java.

Under the 1996 agreement, the KSO partners were required to
install a total of two million new access line units (ALU), from
1996 to 1999.

The government revised the figure to only 1.2 million in 1998
in the midst of the economic crisis. The partners, however, have
built 2.82 million lines-in-service as of Dec. 1999.

The agreement also required the partners to pay Telkom a
monthly fixed amount, known as minimum Telkom revenue (MTR), and
distributable Telkom revenue (DTR) amounting to 30 percent of
their total revenue.

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

The KSO partners have been demanding significant changes in
the contract provisions in order to make it more feasible for
foreign investment. They are also seeking a satisfactory
resolution to their differences on the partners' rights and
obligations.

Komarudin said the disagreement over the rights and
obligations of both parties was mainly due to both parties'
failure to consistently comply with the contract.

The partners have threatened to put their major investment and
development of new lines on hold until a mutual and significant
agreement is achieved with Telkom. (cst)