Thu, 28 Sep 2000

PT Telkom, AriaWest end partnership

BANDUNG (JP): State-owned telecommunications company PT Telkom and its foreign partner, PT AriaWest International, have agreed to end their long-running conflict over the management of the telephone business in West Java with the termination of their Joint Cooperation Scheme (KSO) contract.

Telkom director of operations and marketing Komaruddin Sastrakoesoemah said the decision was made in an informal meeting with AriaWest on Tuesday night, and had the government's approval.

"(Just like) husbands and wives when they don't get along, they would be better off to separate peacefully," he said to The Jakarta Post by phone.

Komaruddin said that Telkom has plans to combine the West Java operations, previously handled by AriaWest, to its Jakarta operations, while AriaWest plans to shift its business to non- Public Switching Telephone Network (PSTN).

AriaWest executives were not available for comment.

Komaruddin said Telkom is ready to pay compensation to AriaWest for the early termination of the partnership, and that financial advisors from Telkom, AriaWest, and the government are currently assessing the value of the existing assets.

"We are aware that it means the KSO, which should have expired after another 10 years, would be terminated earlier. (AriaWest's) investments have not been fully recouped," Komaruddin said in Bandung.

The evaluation of the asset is expected to be completed by the middle of October, after which a Memorandum of Understanding (MoU) would be drawn up, he said.

The MoU would contain the amount of compensation to be paid by Telkom, options for payment, and Telkom's finalization process.

"Hopefully the MoU will be signed by the end of the year," Komaruddin said, adding that it was subject to the approval of Telkom shareholders.

In the meantime, Telkom would continue to install telephone lines for the West Java area, he said, adding that Telkom and AriaWest had invested Rp 4 billion to fulfill mounting demand for new lines.

The dispute between Telkom and AriaWest over the management and operation of the telephone business, has been going on since November last year.

AriaWest, and four other foreign joint venturers were appointed and authorized by Telkom in 1996 to finance, build and operate domestic fixed line telephone services separately across the country on behalf of Telkom under a revenue-sharing scheme until 2010.

The other four companies are PT Pramindo Ikat Nusantara, PT Mitra Global Telekomindo Indonesia, PT Cable & Wireless Mitratel and PT Bukaka Singtel.

World telecom giants like France Cable et Radio, American AT&T, Britain's Cable & Wireless Plc., Australian Telstra, Japan's Marubeni Corp., Sumitomo Corp., and Itochu Corp, Singapore Telecom and Hong Kong's TM Communications are involved as shareholders in the five companies. (10/25)