STT gives its commitment to develop fixed lines

A'an Suryana, The Jakarta Post, Jakarta

Singapore Technologies Telemedia (STT) will not change state- owned telecommunications company PT Indosat's business plan to develop fixed telephone lines in the country, an official has said.

The Singapore telecommunications giant will also keep its promise to the Indonesian government to build additional fixed lines.

"We'll honor Indosat's commitment," said Gita Wiryawan, an official at Goldman Sachs, which advised STT in last week's purchase of a 41.9 percent stake in Indosat.

Although STT's entry into Indosat should help improve telecommunications-related services in the country, there are some who question the Singaporean firm's commitment in developing fixed lines here as the company is likely to focus on the more lucrative domestic cellular market.

Critics have said that Indonesians need more fixed lines rather than cellular lines.

STT was the winning bidder of the Indosat stake, paying out Rp 5.6 trillion (US$610 million) in the government's largest privatization program so far this year.

According to the sale and purchase agreement of the transaction, STT, through Indosat, is required to develop some 759,000 wireless fixed lines by 2010.

Meanwhile, Indosat also has a program to install 1.2 million fixed lines by 2005.

Indosat, Indonesia's second largest telecommunications firm, controls two cellular companies, namely PT Satelindo and PT Indosat Multi Media Mobile (IM3).

Together with PT Telkomsel, a subsidiary of the country's largest telecommunications company, PT Telkom, the three control about 80 percent of the domestic cellular market.

Another Singaporean firm called SingTel has a 35 percent stake in Telkomsel.

Both STT and SingTel are controlled by Temasek Holdings, the Singaporean government's investment arm.

This corporate structure has raised concerns that the purchase of the Indosat stake by STT could lead to a monopoly by Temasek in the domestic cellular market.

But STT president Lee Theng Kiat said in a media statement released on Tuesday that there would not be a monopoly because the pricing of service in the Indonesian cellular industry was still regulated by the government.

He added that the Indonesian government continued to hold a controlling 65 percent stake in Telkom.

Elsewhere, Gita said that STT started making payments for the Indosat stake on Tuesday.

Currency traders said earlier that the Indosat transaction would help strengthen the rupiah's exchange rate against the U.S. dollar this week as STT would have to purchase the local currency to pay for it.

Gita also said that STT officials would attend an Indosat shareholders meeting on Dec. 27. He promised that the Singaporean firm would not reshuffle management, but only create one or two new posts in the company, which would filled by STT employees.

He also ruled out the possibility that STT would soon purchase additional shares in Indosat, a publicly listed company, through the stock market.

"At this stage, STT has no intention of increasing shares at Indosat," he said.

Gita also said that STT would not sell its shares within three years after the deal, as the Singaporean firm was bound in a lock-up agreement with the Indonesian government.