Private TV stations seek foreign investment

By Brillianto K. Jaya

JAKARTA (JP): The five private television stations in Indonesia are in dire straits. The economic crisis since one and a half years ago has dealt a blow to their operations. Both internal and external problems are growing without a clear solution in sight.

Rationalization (lay-offs) as a justification of efficiency and restructuring in a company is an internal problem fraught with dilemmas for the television stations. Human resources in television are relatively limited. And just when national television started to grow, the crisis struck. The available human resources which were enjoying growth and developing their abilities in television finally had to face up to the problem of "rationalization."

Debts totaling over Rp 349.5 billion constitute a complex external problem. Settlement of these debts has so far not been carried out to the satisfaction of the creditors. As an example, the five national private television stations are behind in paying their compulsory contributions of 12.5 percent to TVRI the state TV company (compensation payable for their income from advertisements). The total outstanding is Rp 40 billion. Debts to production houses amount to Rp 300 billion while fees owing to the Ministry of Tourism, Post and Telecommunications for the rights to frequency use stand at Rp 9.5 billion.

The total debt of Rp 349.5 billion is certainly not an insignificant amount. Additionally, there is the debt in U.S. dollars to the distributors of imported films. It may be around Rp 500 billion due to the depreciation of the rupiah against the dollar. At the time of signing the contracts for the purchase of imported films before the crisis, one new film cost Rp 25 million based on US$10,000 against the exchange rate of Rp 2,500 per dollar. With the exchange rate increasing to around Rp 10,000, one foreign film could cost as much as Rp 100 million. Imagine if the five private television stations have deferred their payments on 100 imported films, how much will they have to spend at an exchange rate of e.g. Rp15,000 a dollar?

The accumulation of problems, both internal and external, has brought the business of national private television stations to the crossroads. The owners clearly do not want their audio-visual communication business to go bankrupt. The television business is different from other businesses. This business has a greater amount of trustworthiness, pride and other respectable characteristics. Indosiar demonstrates how a television business remains a business that must be maintained. Although in the economic crisis and the reform era the business empire of Soedono Salim (Liem Sioe Liong) is in a chaotic state, Indosiar stays on the air. The tycoon would rather "sacrifice" his other businesses like Indofood and Indomobil when the time comes to repay the Bank Indonesia Liquidity Support to the government.

However, the resistance of national private television stations to the economic crisis certainly has its limitations. It is very unlikely that television station owners will maintain their businesses if the crisis does not show any signs of abating. They certainly have to think hard to find strategies in defending their businesses. Apart from rationalization, another strategy is to look for foreign investors.

The choice of foreign investors as a means of solving problems stands to reason because no private businessman whose business is really healthy is interested in buying a company hugely in debt. Second, it is difficult for private television stations to sell their shares to the public considering that their condition does not allow them to qualify as businesses eligible to go public. The third reason is that a merger of private television stations is hard to realize, taking into account their different positioning. TPI and ANteve have such different positioning. The first is a dangdut station, the second is for a dynamic younger generation. There are also differences in the positioning of SCTV and Indosiar.

To find foreign investors is in fact one of the strategies of national private television station managers to solve their problems. However, they must also think about the extent of the involvement of foreign investors in the television business. A 100 percent transfer of ownership is certainly not possible. Articles 12 and 14 of the Broadcasting Law pertaining to private broadcasting institutes clearly contain the regulation on the prohibition of foreign investors from owning national private television stations. Article 12, paragraph 1, says: "A private broadcasting institute is established with capital fully owned by an Indonesian citizen or a corporate body the shares of which are owned by an Indonesian citizen". Article 14 says: "A private broadcasting institute is prohibited from receiving capital aid from foreigners".

The government as the fosterer of the television business wishes to ensure that national television remains on track in accordance with Pancasila and the 1945 Constitution. If the two articles did not exist or foreign investors were allowed to own 100 percent of shares in a national private television station, the state ideology Pancasila and the 1945 Constitution might be replaced by foreign ideologies of a contrary nature. However, it is regretted that in the Law on Broadcasting enacted during the New Order regime, the maximum number of shares that a foreign investor can own is not specified. Moreover, the law does not state either the extent of the responsibility and intervention of a foreign investor in national private television stations.

The weaknesses in the Law on Broadcasting pose a new dilemma for private television station managers. The steps they want to take may not be smooth even if they find foreign investors ready to finance them. They cannot take decisions as long as the Law on Broadcasting still has its weaknesses as mentioned above. It is hoped that the government will be able to insert the number of shares and the matter of intervention of foreign investors in to the articles of the Law on Broadcasting which is being revised now.

The writer works for a private television station.