PT Telkom wants to continue deals with KSO partners

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)