No merger for Telkom and Indosat: Minister

JAKARTA (JP): Minister of Communications Giri Suseno dismissed on Tuesday the possibility of merging state telecommunications operators PT Telkom and PT Indosat into a single business entity.

Giri said the move was not in accord with the country's long- term plans for the telecommunications sector.

"A merger (between the two firms) is definitely not discussed in the government's blueprint. The blueprint clearly regulates that Telkom and Indosat will exist as separate entities until 2011," he said on the sidelines of a seminar held by the Indonesian Telecommunications Society.

Giri was commenting on a recent suggestion raised by Telkom's operational director John Welly to merge Telkom and Indosat. Welly said the move would increase the country's telecommunications assets and fully integrated services prior to the opening of the telecommunications sector to foreign operators.

Giri said Telkom and Indosat could become more competitive and efficient without a merger.

"Let them exist as they are now. We're going to assist Telkom to expand to the international line services and Indosat to tee off in the local fixed line network, so that both will have equivalent products and services to compete in the future with each other or foreign players," he said.

He said the merging of Telkom and Indosat, each of which had different business plans and working cultures, would take too much time and energy. "It's not an effective strategy and surely would not generate an effective result."

Giri said that according to the action plan, the government would allow Indosat and new operators to enter the protected fixed line and wireline telecommunications network and services in 2010, and domestic long distance call services in 2005.

Telkom, and its five partners in the Joint Operation Scheme (KSO), currently hold exclusive rights to provide local fixed line and fixed wireless telecommunications services nationwide until 2010. Telkom also holds the right to provide domestic long distance services until 2005.

On the other hand, Telkom and new operators will only be allowed to enter the international long distance services market in 2004 when exclusive rights granted to Indosat and its joint venture PT Satelit Palapa Indonesia (Satelindo) for the service expire.

Director General of Telecommunications Sasmito Dirdjo said the government's plan was intended to give more leeway to existing local operators to improve their conditions and performances prior to the opening of the sector to foreign players.

"For the time being, we do not intend to invite any foreign operators to directly enter the sector... let them collaborate with the existing players first, at least until the latter finish their exclusive rights," he said.

The new Law No. 36/1999 on telecommunications, however, provides for early termination on the rights, subject to the agreement between Telkom or Indosat, the government and local or foreign players. The law stipulates that Telkom or Indosat must be compensated for any early termination. (cst)