Telkom confident of Ariawest deal next week
Debbie A. Lubis The Jakarta Post Jakarta
State telecommunication firm PT Telkom said it was confident of securing a deal next week to buy out the West Java telephone operation from PT AriaWest International at a price of US$300 million or more.
Telkom finance director Mursyid Amal said on Wednesday Telkom and AriaWest's shareholders would meet in Singapore on Thursday next week.
"We are 100 percent sure we will reach a buyout deal for around US$300 million," he told The Jakarta Post, adding he did not rule out a higher price offer.
Telkom plans to buy out AriaWest's assets as compensation for ending their contracts to operate telephone fixed-lines in West Java.
But talks over the value of AriaWest's assets had gone sour, leading to a protracted dispute where both sides blamed each other for breach of contract.
At the peak of this, AriaWest filed an arbitration proceeding against Telkom last year, which the latter responded by annulling AriaWest's contract.
The arbitration panel should come out with a verdict this April, but Mursyid said AriaWest would likely drop the case if a deal was reached.
He said Telkom and Ariawest had returned to the negotiation table last month and were now close to a deal.
AriaWest is 52.5 percent owned by Indonesia's PT Artimas Kencana Murni, 35 percent by U.S.-based MediaOne International BV, of which AT&T is a part, and 12.5 percent by Hong Kong's Asian Infrastructure Fund.
AriaWest could not be reached for comment, but an AT&T official, who refused to be named, said Telkom's price offer ranged between $300 million and $400 million.
The official could not confirm whether a deal with Telkom was imminent, and what price AriaWest had demanded.
AriaWest initially asked for $1.3 billion but lowered its valuation to $735 million last year, while Telkom earlier insisted it would pay only $260 million.
In 1996, AriaWest landed a deal with Telkom to operate and manage fixed-line telecommunication facilities in West Java and Banten provinces under a joint operation scheme (KSO).
Pressure to open the country's telecommunication industry to foreigners forced Telkom to end its KSO deals.
Of its five KSO partners, Telkom has secured buyout deals with two partners.
They are PT Daymitra Telekomunikasi in Kalimantan, and PT Mitra Global Telekomunikasi Indonesia in Central Java.
Shares of publicly listed Telkom ended Wednesday trading up 1.2 percent at Rp 4,300.
In a move that may help raise funds for the buy out, Telkom sold on Wednesday a 12 percent stake in its cellular unit PT Telkomsel to Singapore Telecommunications Ltd (SingTel).
The deal is worth $429 million, according to Reuters, quoting a source close to the agreement.
Singtel already owns a 22.3 percent stake in Telkomsel, and will pay Telkom for the 12 percent in cash, the source said.
Telkomsel is the country's largest cellular phone operator.
Telkom further said it would issue Rp 1 trillion worth of local bonds and between $100 million and $150 million in international bonds later this year, Dow Jones reported.
Its deal with Singtel and the bond issue plan will bolster Telkom's against soon to be rival state owned international call operator PT Indosat.
Next August Telkom will loose its monopoly right over the fixed line industry, allowing Indosat to move in.