Telkom buys out Pramindo, eyes deal with AriaWest

Telkom buys out Pramindo, eyes deal with AriaWest

Debbie A. Lubis, The Jakarta Post, Jakarta

State-owned telecommunications company PT Telkom signed on
Monday a deal to buy out its joint operation scheme (KSO) partner
PT Pramindo Ikat Nusantara, allowing the former to take over all
fixed line operations across Sumatra island, a Telkom senior
official said.

Telkom's operational and marketing director Komarudin
Sastrakoesoemah refused to provide details on the Pramindo deal,
but Telkom's financial director Mursyid Amal earlier said it
would buy out Pramindo for US$425 million, including its $85
million debt.

Telkom will pay for the company in installments over two and a
half years.

Pramindo is owned by French firm France Telecom, Astratel, a
unit of local conglomerate Astra, and Japanese firm Marubeni.

Komarudin also said that Telkom had recently reached a
preliminary agreement with another KSO partner, PT AriaWest
International, which operates fixed phone line services in West
Java and Banten, raising prospects for both companies to soon end
their years-long dispute.

"We have reached an agreement. Now, it's just a matter of
legal procedures," he told The Jakarta Post, referring to the
agreement with AriaWest.

He did not provide details on the agreement with AriaWest, but
rumors in the industry say Telkom will buy out AriaWest for $300
million.

AriaWest is partly owned by American telecommunications giant
AT&T.

Komarudin said Telkom would report the Pramindo deal and the
agreement with AriaWest during a shareholders meeting scheduled
for mid-June.

The Pramindo Ikat buyout deal is the second for Telkom in its
efforts to settle its disputes with its five KSO partners, who
were given rights by the government in 1995 to develop fixed-line
services in the country up until 2010.

The KSO partners are no longer interested in continuing the
partnerships because, under the new telecommunications law passed
last year, Telkom will end its monopoly in the industry and
foreign investors will be free to set up business in the sector
in 2003.

Last year, Telkom bought out PT Dayamitra Telekomunikasi, its
KSO partner in Kalimantan, for $122 million.

Telkom is also negotiating to buy out another KSO partner, PT
Mitra Global Telekommunikasi Indonesia (MGTI), which operates in
Central Java and Yogyakarta.

MGTI said the negotiations started in February this year.

"Telkom has actually offered other alternative besides the
buyout option. But we prefer the buyout scheme," MGTI president
Sutrisman told the Post.

Sutrisman said MGTI hoped to soon conclude negotiations with
Telkom.

"We know that Telkom is very busy right now but we expect to
intensify our negotiations, especially on asset valuation,
perhaps next week or next month," Sutrisman said.

Komarudin said that currently Telkom was focusing on Pramindo
and AriaWest and that it would not have time to hold intensive
talks with MGTI on asset valuation until the general shareholders
meeting.

"It would be impossible to conclude a buyout with MGTI this
year since the shareholders meeting is so soon. But we will
intensify our discussion with MGTI on asset valuation after the
meeting," he said.

MGTI is owned by local firm PT Widya Duta Infotel, state
telecommunications company Indosat, Australia's Telstra Global
Ltd., the United Kingdom's NTT Finance Ltd, Japan's Sumitomo
Corp. and Itochu Corp.

Earlier, Telkom's assets in Central Java and Yogyakarta were
valued at $375 million.

With regard to the last KSO partner, PT Bukaka SingTel
International, which operates in the eastern part of Indonesia,
Komarudin said the KSO company had agreed to continue its
operations under a KSO-plus contract, which is a modification of
the existing KSO contract.

He did not provide further details on the KSO-plus contract.