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)