Fri, 27 Jun 2003

Telkom appoints PwC to avoid delisting

The Jakarta Post, Jakarta

Publicly-listed telecommunications company PT Telkom announced on Thursday it had appointed PricewaterhouseCoopers (PwC) to audit its 2002 financial report in a bid to avoid the delisting of its shares in the U.S. stock market.

Telkom said in a press statement that PwC had accepted the task, but the audit process might take between 2 and 3 months.

This has raised concerns that Telkom would not be able to meet the July 15 deadline set by the U.S. Securities & Exchange Commission (SEC), sending the company's shares on the Jakarta Stock Exchange down by 0.6 percent at midday.

Telkom said it would ask for an extension of the deadline. Dow Jones said that the company has hired New York law firm Skadden, Arps, Slate, Meagher & Flom LLP to assist it in talks with the SEC.

The SEC has demanded that Telkom, whose shares are both listed in Jakarta and on the New York Stock Exchange, resubmit its 2002 accounts because the initial report was audited by an accounting firm which was not properly registered in the U.S. The U.S. market watchdog gave Telkom until June 30, extendible until July 15, or risk delisting

Telkom, which is 51 percent controlled by the government, has run up against difficulties in quickly fulfilling the SEC demand as many of the major international accounting firms cannot audit the Telkom accounts due to conflicts of interest.

Deloitte Touche Tohmatsu audited Telkom's 2001 results but left the company last year after a dispute with the government over the audit of another state-owned company.

At the time PwC was still auditing a Telkom joint venture, although it is no longer in that job now, making it free to work for Telkom.

According to the initial version of the 2002 finance report, Telkom made a net profit of Rp 8.34 trillion, nearly double the 2001 result.

Telkom's shares in Jakarta fell by 0.6 percent to Rp 4,350 in the first trading session on Wednesday as investors feared that the company would not be able to meet the SEC deadline. But late buying in the company lifted the shares by 1.1 percent to Rp 4,425 after investors came to believe that Telkom's success in finding an acceptable auditor was a positive step in resolving its problems with the SEC.

"It's good news for Telkom in the long run," Sjed Al Idid, a telecom analyst at ING in Singapore, was quoted by Dow Jones. "The news ended uncertainty about Telkom's ability to name an auditor that is in compliance with the SEC."