Thu, 12 Feb 2004

Telkom directors may face dismissal over audit

Rendi A. Witular, The Jakarta Post, Jakarta

The government is considering axing the board of directors and commissioners of state-owned telecommunications company PT Telekomunikasi Indonesia (Telkom) over a reaudit of the company's 2002 financial report that resulted in a negative adjustment.

State Minister of State Enterprises Laksamana Sukardi said on Wednesday that the government would include the management reshuffle in the agenda of an extraordinary shareholders meeting on March 10.

"We are planning to replace them to refresh the company, and because of the accounting problem," said Laksamana after meeting with House of Representatives Commission IX on financial affairs.

He also said public investors had the right to demand an accountability report from the management over the reaudit, which caused several negative adjustments in the publicly listed company's restated financial reports.

After more than seven months of uncertainty due to the reauditing, Telkom announced on Monday that the revised 2002 financial report incorporated a 3.7 percent decline in its consolidated net profit and negative adjustments to its 2002 and 2001 profits.

Telkom is the largest telecommunications company in Indonesia and the largest counter on the Jakarta Stock Exchange, with a 17 percent market capitalization.

At an investors meeting on Wednesday, Telkom president Kristiono said: "It is the shareholders' right to replace us. We will simply follow their decision."

The government owns 51 percent of Telkom, with the remaining 49 percent held by public investors.

Telkom shares dropped from its intraday high of Rp 7,750 and ended trading on Wednesday at Rp 7,600, unchanged from Tuesday's closing price.

Problems with Telkom's 2002 financial report emerged when the U.S. Securities and Exchange Commission (SEC) rejected an initial report audited by Indonesian accounting firm KAP Eddy Pianto, which is not approved by the SEC.

KAP was appointed by the Telkom audit committee, headed by independent commissioner Arief Arryman, following the sudden resignation of Ernst & Young in November 2002.

The SEC demanded that Telkom, listed on both the Jakarta and New York bourses, resubmit the 2002 accounts as soon as possible or risk being delisted from the New York Stock Exchange. Telkom appointed PricewaterhouseCoopers (PwC) in June for the reaudit.

However, the process took longer than expected, as PwC decided to reaudit Telkom's 2001 and 2000 financial reports as well.

During the investors meeting, Arief claimed that Telkom had no other choice but to appoint KAP because the remaining "big four" auditors PwC, Deloitte Touche Tohmatsu and KPMG could not audit Telkom's books due to a conflict of interest.

Eddy Pianto told The Jakarta Post that his firm planned to sue Telkom and the Capital Market Supervisory Agency for defamation.

As reported in several media, Eddy's lawyer Wawan Iriawan said his client would file for Rp 8.3 trillion in damages at the South Jakarta District Court.

Kristiono said Telkom had yet to receive the suit, but would be prepared to counter it.

Meanwhile, Laksamana commented: "This is a country based on law... Anyone can file a lawsuit, as long as it is rational. There is no problem."