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.