Wed, 05 Jan 2000

Telkom, Indosat asked to divest stake in same firms

JAKARTA (JP) The government has asked state-owned telecommunications providers Telkom and Indosat to divest their investments in companies they jointly own.

Director General of Post and Telecommunications Sasmito Dirdjo said on Tuesday divestment in such companies should become a priority in their restructuring programs.

If the two companies have a stake in the same company, one should withdraw to avoid a conflict of interest, he said without elaborating.

At present, Telkom and Indosat have currently invested in six similar companies: VSAT and banking network application provider Lintasarta, telecommunications consultant firm Bangtelindo, VSAT operator and maintenance provider for the oil industry Patrakomindo, personal communications network provider Primasel, mobile phone operator Telkomsel and another mobile phone operator which also provides an international direct dial service, Satelindo.

He said that the recommendation to not invest in the same companies was part of investment guidelines which are now being prepared for the two companies.

Telkom and Indosat have invested in so many companies, most of which operate in the country's telecommunications sector, because the existing law requires other companies to collaborate with especially Telkom if they were to enter the country's telecommunications industry.

The two companies are now so diversified, but many of their investments do not generate fair returns, he said.

Telkom currently has at least eight subsidiaries and 13 affiliates, and Indosat about 29 subsidiaries here and abroad operating in fixed line, mobile telecommunications, satellite transponder leasing, international telecommunications, value added services and other sectors.

Sasmito said Indosat and Telkom also asked for the government's approval to expand their businesses into mobile telecommunications services by strengthening their investments in the existing subsidiaries.

Indosat is currently negotiating to acquire a stake in the GSM mobile phone operator Excelcomindo Pratama, while Telkom is planning to strengthen its position in its subsidiary Telkomsel.

Telkom and Indosat acknowledged that some of their subsidiaries or affiliates had failed to contribute earnings to the companies' books.

However, Telkom said in the nine-month period of 1999 it received Rp 568 billion (US$81.1 million) in dividends from all of its subsidiaries, a figure which is higher than the Rp 358 billion gained in the same period in 1998.

The company also enjoyed a net gain in equity income of Rp 86 billion in the first nine months, compared to a net loss of Rp 27 billion it endured in the same period last year.

Meanwhile, Indosat said in the nine-month period of 1999 it received Rp 20.5 billion in dividends from affiliates, Rp 173 billion in net equity income from strategic subsidiaries and Rp 8.5 billion in interest earned from bonds issued by affiliates.

Telkom currently has an exclusive right to provide local fixed line service nationwide until 2010 and domestic long distance telecommunications services until 2005, while Indosat and its subsidiary, PT Satelindo, control international long distance services until 2004. (cst)