Rebound in Telkom's shares pushes stock index higher

Rebound in Telkom's shares pushes stock index higher

Rendi A. Witular, The Jakarta Post, Jakarta

The Jakarta Composite Index closed 1.7 percent higher on
Friday as a rebound in the shares of state-owned
telecommunication company PT Telekomunikasi Indonesia (Telkom)
helped lift the overall market sentiment.

The index was 8.673 higher at 510.47 as compared to 501.80 on
Thursday, with Telkom shares rising by 4.6 percent, or Rp 200, to
Rp 4,550 apiece.

Among the stocks in the index, 115 were higher than their
previous close and 28 were lower. The gains recorded by Bank
Danamon of Rp 225 to Rp 1,525, PT Gudang Garam of Rp 200 to Rp
4,550 and PT Indosat of Rp 150 to Rp 9,300 also helped lift the
index higher.

Analysts said the rebound in Telkom shares was caused by the
decision of the United States Securities and Exchange Commission
(SEC) to resume Telkom trading at the New York Stock Exchange
(NYSE) after it was suspended on June 11.

Telkom was under fire from investors following its
announcement on Wednesday that the SEC might delist Telkom from
the NYSE due to the commission's finding that Telkom's financial
report contained "deficiencies".

The deficiencies are related to Telkom's auditing firm which
has no affiliation with any accounting company certified by the
SEC.

"Besides the positive decision by SEC, the Jakarta market sees
the problem in the NYSE as only procedural, and that any revision
in Telkom's 2002 audited financial report would not produce a
different result," said an analyst with a local brokerage firm.

The SEC ordered Telkom to revise its report using an auditor
affiliated with an accounting company registered with the SEC,
and to resubmit it to the commission by June 30. Should Telkom
fail to meet the deadline, the SEC will give another 15 days
before imposing sanctions on the firm.

Meanwhile, in a conference call on Friday, fund managers
requested Telkom to disclose the process for selecting an
auditor.

They claimed the process contained irregularities, but the
company steadfastly rejected the request. Telkom's current
auditor was not appointed through a tender.

Telkom said it would now focus on fulfilling SEC's demand
instead of looking back into the matter.

Telkom is now considering several audit firms, including the
world's four biggest PricewaterhouseCoopers, Deloitte Touche
Tohmatsu, Ernst & Young and KPMG LLP to audit its report.

During the call, Telkom's president Kristiono said that there
would be no revision of figures as it was seeking a second
auditing of its financial report.

Telkom's auditor questioned by the SEC was Eddy Pianto which
formerly worked as a local partner of Grant Thornton
International.

Grant Thornton is an SEC-registered auditor.

However, Eddy Pianto ended its partnership with Grant Thornton
on March 31 and formed a new accounting firm called KAP Jimmy
Budhi, which is affiliated to Moores Rowland International,
before the report was submitted to the SEC.

President director of Moores Rowland James Kallman denied that
Eddy Pianto had committed any misdeed when auditing the report
saying it had followed all the auditing rules in Indonesia and
the United States.

Kallman explained that the problem lay in refusal of Grant
Thornton to acknowledge Eddy Pianto as its affiliate.

"In our case we have applied to the SEC based on the
commission's standards, but unfortunately Grant Thornton itself
did not support us. We have been talking with the SEC since
December last year, explaining this whole situation," said
Kallman.

Kallman added that before signing the auditing contract,
Telkom knew that Eddy Pianto was affiliated with Grant Thornton
International.

Telkom is also said to have been aware that Eddy Pianto's
partnership with Grant Thornton would end in March.