Telkom, Indosat annul $375 million deal
Fitri Wulandari, The Jakarta Post, Jakarta
State-owned telecommunications firms PT Telkom and PT Indosat officially declared that a US$375 million planned sale of the former's Central Java and Yogyakarta regional units to the latter has been annulled as conditions to legally seal the deal were not met by the deadline on Thursday.
"As agreed in the May 2001 shareholders meeting, the transaction ... would be annulled if conditions are not met," Indosat director Hari Kartana told a media briefing at Indosat's headquarters on Friday.
Separately, Telkom's director of operations and marketing Komaruddin Sastrakoesoemah also confirmed the annulment.
"By the deadline we could only meet one out of eight conditions, so the deal was automatically off," Komaruddin told The Jakarta Post.
The sale of Telkom's fixed-line assets in Yogyakarta and Central Java was part of a $1.5 billion deal to end the complex crossholdings between Telkom and Indosat in a number of telecommunication businesses. It was seen as a crucial step to allowing Telkom, the domestic call operator, and Indosat, the international call operator, to expand the range of their services before the government liberalizes the industry in 2003 to attract new investments.
Under the asset swap deal, Telkom would receive 35 percent interest in the country's biggest cellular phone operator, PT Telkomsel.
In return, Indosat would take over Telkom's fixed-line assets in Yogyakarta and Central Java, known as Divre (regional division) IV which is operated under a joint-operation scheme (KSO) with PT Mitra Global Telekomunikasi Indonesia (MGTI).
The eight required conditions for the transfer of the Divre IV assets include the completion of the Telkomsel and Satelindo transactions, the granting of licenses for local and long- distance phone services to Indosat by the government, execution of interconnection agreements and a letter of consent from MGTI.
Only the completion of Telkomsel and Satelindo transactions had been met by Thursday.
Due to the collapse of the deal, Telkom is required to pay the remaining crossownership payment of $375 million. Telkom had paid $177 million in July 2001.
Both Telkom and Indosat are still discussing the terms of payment.
Hari said that the money garnered from the failed deal would be invested in fixed-line business using wireless and fiber optic technology.
After losing the Yogyakarta and Central Java assets, Indosat is eying Jakarta and East Java as their base market since the regions are still managed solely by Telkom.
Elsewhere, Komaruddin said that Telkom would hold further discussions with MGTI, regarding their KSO scheme.
"We will discuss whether to continue the KSO, buy out or do a joint venture. But Telkom is committed to working with MGTI to boost services and expand business in Yogyakarta and Central Java," he said.
Meanwhile, in Semarang, Central Java, employees of Divre IV were overjoyed with the decision and decided to stop their four- day strike.
The workers oppose the sale of Divre IV for fear that they could be laid off.