Telkom asks government to stop meddling in its business

Telkom asks government to stop meddling in its business

BANDUNG (JP): The president of state-owned telecommunications
company PT Telkom Indonesia, A.A. Nasution, called on the
government on Thursday to stop interfering in the firm's business
relationships with its five joint operation (KSO) partners.

"Too much intervention will only give a negative impression to
our investors," he said.

Nasution said the government's decision last year to revise
the target of new phone lines to be installed by KSO partners and
the change in the revenue sharing scheme damaged Telkom's
credibility as a public company and caused a setback in its
performance.

KSO contracts began in 1996 when Telkom, under the
government's strong recommendation, appointed the five consortium
of foreign and local firms -- PT Ariawest International, PT
Pramindo Ikat Nusantara, PT Mitral Global Telekomunikasi
Indonesia, PT Cable & Wireless Mitratel and PT Bukaka Singtel --
to finance, build and operate domestic fixed lined telephone
service across the country under a revenue-sharing scheme in
effect through 2010.

Under the initial contracts, KSO partners were required to
install a total of two million new access line units from 1996 to
1999. The government revised the figure to 1.2 million in
September 1998 following partners' complaints over the severe
impact of the economic crisis on their operations.

The initial contracts also required the partners to pay Telkom
a fixed fee, known as Minimum Telkom Revenue (MTR) and
Distributable Telkom Revenue (DTR), every three months.

The government also revised the revenue-sharing scheme last
year, providing 10 percent of the DTR to Telkom and 90 percent
for the partners. Under the original scheme, Telkom received 30
percent and the partners the remainder.

Nasution said Telkom would evaluate the partners' work
performance as of Dec. 31 to determine if they were suitably
qualified to continue the performance.

He said Telkom would not hesitate to end their contracts if
the partners failed to meet the revised target.

Separately, Telkom's operational director John Welly told
journalists on the sidelines of a telecommunications seminar in
Jakarta that the state telecoms monopoly did not plan to change
the existing partnership scheme.

"We will continue with the KSO scheme until it ends in 2010.
it is still a feasible and profitable business plan for both
sides. So there's no need to terminate it or change it into
something else." KSO partners proposed recently the termination
of the existing scheme to create a new entity involving the
government and investors of Telkom, KSO partners, Indosat and new
strategic partners.

KSO partners said the option to create the new entity by
involving more strategic investors was in line with the spirit of
liberalization upheld by the new telecommunications law.

They contended the option was the best solution since both
Telkom and the partners would still keep the assets and
investments they injected in the current scheme in the form of
stake in the new entity.

John said the option was totally unacceptable.

"It's only their excuse... We are not going to create another
entity. We're only going to adjust several terms in the scheme,
especially the currency rate because it is no longer suitable
given the fluctuations, and move on with it until 2010," he
added. (43/cst)