Telkom and AriaWest reach initial deal

JAKARTA (JP): PT Telekomunikasi Indonesia (Telkom) and PT Ariawest International (AWI) have reached an initial agreement over the transfer of Telkom's operational funds and its employees' salaries, marking the first step to ending the two firms' lengthy dispute.

Assistant to the Coordinating Minister for the Economy, Dipo Alam, said on Wednesday that AWI agreed to transfer the funds to Telkom to cover expenses over the next eight weeks.

"This agreement will be signed tomorrow," Dipo told reporters in Bandung.

The deal will secure salary payments worth Rp 162 billion (about US$13.61 million) for around 4,000 Telkom employees in the West Java Divre III area.

It will also enable Telkom to serve its Divre III customers again, for whom Telkom could not provide normal service in March due to a shortage of operational funds.

Dipo, who heads a government team facilitating talks between Telkom and AWI, said Telkom's employees in the West Java area could expect their salaries to be paid on April 30.

"The consensus is that they (Telkom and AWI) agree to break up, but they must meet their short-term obligations first," he said.

The government formed Dipo's inter-ministerial team earlier this month, due to increasing pressure from foreign lenders to resolve the dispute.

Dipo said the team, which began its work this month, expected to reach a resolution of the dispute within six months.

Telkom's dispute with AWI centers around the compensation Telkom must pay to end a partnership agreement between them.

AWI has demanded Telkom pay it $700 million in compensation, while the latter insisted on paying only $300 million.

AWI, a subsidiary of the U.S.-based telecommunications giant AT&T, operates fixed telephone lines in West Java under a joint operation scheme known as a KSO, with Telkom.

KSO contracts, initiated in the mid-nineties, require Telkom's partners to invest in new fixed lines, and operate them under a profit-sharing scheme.

But as the government subsequently required Telkom to lose its monopoly rights in the fixed line industry, the KSO scheme became financially unattractive.

Telkom agreed to reimburse the investment its five KSO partners made in order to end the KSO scheme.

So far, Telkom has secured reimbursement deals with two KSO partners. AWI is not one of them.

The funds AWI owed to Telkom were revenue it had retained, as Telkom had failed to build extra phone lines as required under the KSO contract.

Dipo said the two companies had also agreed to end their confrontation in the media, realizing that it only made matters worse. (25/bkm)