Private TV stations seek foreign investment

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.