No merger for Telkom and Indosat: Minister

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)