PT Telkom wants to continue deals with KSO partners

JAKARTA (JP): State telecommunication firm PT Telkom said on Thursday it preferred to continue the existing contracts with its five joint operation partners (KSO partners), and to offer them modifications to safeguard their ongoing operations.

Telkom president Muhammad Nazif said that the first option of continuing the contracts, was the most preferable among five options available in seeking a win-win solution with KSO partners.

"The first alternative is capable of accommodating the interests of all parties," Nazif said in a hearing with the House of Representatives' Commission IX, which oversees financial affairs.

He did not elaborate on the modifications Telkom would offer its KSO partners as compensation for continuing to work under the current contracts.

The four other options are to establish a joint venture with Telkom; to establish a joint venture with international call operator PT Indosat; to allow Telkom to buy out the interests of the partners; or to allow the KSO partners to operate independently in their existing areas of operation.

The last option would mean the termination of their contracts with Telkom.

"Actually, Telkom can afford a contract termination, but it has to be under reasonable pricings," he went on.

Telkom and its KSO partners have been at odds over their current joint operation contracts. Each party has demanded the government to change their existing business deals.

State domestic telecommunication operator said recently it was ready to terminate its contract with PT AriaWest, its KSP partner in West Java.

Both parties, however, are still in disagreement over the compensation Telkom must pay to AriaWest.

Nazif said that AriaWest demanded compensation amounting to US$1.3 billion for the loss of business opportunity resulting from the early termination of the contract, which would formally end in 2010.

He said the compensation of $1.3 billion assumed an accumulating raise in telephone rates of 52.5 percent until 2010.

But he said based on Telkom's own calculation, the required compensation would total only about $160 million.

Both companies appointed financial advisors to determine the value of AriaWest's assets, he continued.

Telkom further said that in finding a solution with its KSO partners, the company would not necessarily have to apply a single option to all the five partners.

"We might reach different solutions for each KSO partner," Telkom said.

According to Telkom, differences might led its foreign partners to file for international arbitration.

Telkom's five KSO partners are PT Pramindo Ikat Nusantara, PT Mitra Global Telekomindo Indonesia, PT Ariawest International, PT Cable & Wireless Mitratel and PT Bukaka Singtel.

During the meeting, Telkom also proposed Commission IX to allow it to raise telephone rates.

It proposed to raise rates by 21.9 percent next year, 15.6 percent by 2002, and another 8.22 percent by 2003. (bkm)