Telecom dispute may hurt public interest

Telecom dispute may hurt public interest

The Jakarta Post, Jakarta

The likely collapse of the asset transfer deal between state
telecommunications giants PT Telkom Tbk and PT Indosat Tbk may
have scant impact on Indosat's expansion plan -- at the same
time, however, it could cause true damage to the interests of the
many people in Yogyakarta and Central Java in need of better
service, a noted analyst said.

According to Roy Suryo, residents of Yogyakarta and Central
Java have basically welcomed the deal, which would transfer
Telkom's assets in both provinces to Indosat, as they expect the
new operator to provide improved service.

"Indosat's plan to engage in fixed-line telephone business
will not end with the collapse of the deal; if the company fails
to take over Telkom's assets in Divre IV, it could set up its own
fixed-line networks.

"It's the Yogyakarta and Central Java people who will lose out
the most if this deal falls through, because it will deny them a
chance to get better service from a new operator," Roy told The
Jakarta Post on Friday.

Divre IV denotes Telkom's operations in the Yogyakarta and
Central Java provinces.

Roy was commenting on the intensive campaigns being waged by
Telkom's Divre IV workers to foil the deal that will transfer
Telkom's Divre IV assets to Indosat. Thousands of these workers
rallied in Jakarta on Thursday to protest the deal.

Telkom and Indosat signed a deal in May to end their cross-
ownership of the country's telecommunications industry.

Under the deal, Telkom will acquire Indosat's 35 percent stake
in the country's biggest cellular phone provider, PT
Telekommunikasi Indonesia (Telkomsel), while Indosat will get
Telkom's assets in Divre IV.

Indosat is one of two operators licensed by the government to
offer international calling services, while Telkom has been
holding a monopoly over the country's fixed-line phone service
now for decades.

The deal will pave the way for Indosat to enter other areas of
business besides the international phone business where it has
been facing stiff competition from Internet providers.

Through the deal, the government hopes to create two strong
telecommunications companies in anticipation of strong
competition when the government liberalizes the sector in 2003.

The deal set several stipulations -- notably including an
agreement on labor standards -- for Telkom and Indosat to meet by
the end of this month. If they fail to meet the deadline, the
deal will be considered void.

Given the strong opposition of the Divre IV workers to the
deal, Telkom and Indosat may not be able to strike an agreement
on labor matters, thus leaving the deal nullified.

Roy said he believed that Indosat and Telkom's top management
are still committed to executing the deal, as they are aware of
the benefits of the deal for both companies.

But, he voiced suspicions that the demonstration was covertly
sponsored by Telkom's local management in Divre IV which fears
losing their jobs, and the possibility of Indosat discovering
mismanagement practices during the audit process.

"The protesting Divre IV workers don't actually have support
-- even from Telkom's top management. So it's strange that
Minister of Communication Agum Gumelar seems to have given them
some sympathy. Does the minister really understand the
situation?" Roy wondered aloud.

He also expressed concerns over the actions of Divre IV
workers, which he referred to as "childish."

"For instance, they have threatened to will burn down all of
Telkom's facilities in Divre IV if it is transferred to Indosat;
that's criminal ... do they think that the assets belong to their
ancestors?" Roy asked.

Meanwhile, Indosat's finance director, Habimono Koesoetjono,
insisted that the potential failure to acquire the Divre IV will
not mean the end of Indosat's expansion plan into the fixed-line
phone business.

"Whether the deal goes through or not, Indosat has prepared
steps. We shall go ahead because, in August of 2002, we shall
enter the fixed-line business," Habimono told The Post, without
elaborating.

For Indosat, Roy said, it was cheaper to acquire the Divre IV
than to set up its own network, since it no longer needs to work
at developing networks and a customer base; therefore, it would
get quicker returns on its investment.

A failure to acquire Divre IV would not stop it from realizing
its expansion plan, but instead would only force it to invest
more in the development of its own network.