Telkom and AriaWest reach initial deal

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)