Telkom directors may face dismissal over audit

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."