Telkom, KSO partners in search of win-win solution

Telkom, KSO partners in search of win-win solution

JAKARTA (JP): PT Telkom's five joint operation partners (KSO
partners) said on Friday that they hoped to settle their
differences with the state-owned telecommunications company this
month.

At a media conference with representatives of the five
partners, the president of PT Mitra Global Telekomunikasi
Indonesia (MGTI) Sutrisman said the partners hoped the ongoing
negotiations with Telkom will come up with a win-win solution.

The partners, Telkom and the government had appointed
financial advisors to evaluate the respective interests of Telkom
and the partners under the KSO contracts, he said.

"We have completed the valuation of our interests and are now
waiting for Telkom to conclude theirs," Sutrisman said without
disclosing the amount.

Managing director of PT Pramindo Ikat Nusantara Gilles
Vaillant said the valuation was made based not only on the
investment value, but also on the business and commercial value
of the contracts.

Since 1996, when the KSO arrangement started, the total
investment made by the five partners had amounted to a total of
$1.7 billion and approximately 1.5 million fixed telephone lines
had been installed.

Under the existing contracts, the five companies are required
to install at least two million telephone lines .

The joint operation contracts will end in 2010 but due to
ongoing conflicts between Telkom and its partners, the government
has agreed to a proposal to revise the existing collaboration
schemes.

Five options have been drawn up in recent negotiations with
Telkom along with the government, to determine the future of the
partnership arrangements.

The five options are; to continue the existing arrangements
with modifications to safeguard ongoing operations; to establish
a joint venture with Telkom; to establish a joint venture with
state-owned PT Indosat; to allow Telkom to buy out the interests
of the partners; or to allow the KSO partners to operate
independently in their existing areas of operation.

Sutrisman said that the last option had been ruled out by the
partners because it did not conform with their current situation.
He declined to explain further.

MGTI director Robin Russell said that it was also very
unlikely that the partners would agree to continue with the
existing KSO arrangement without major changes being made to it.

"We are not ruling out the possibility but it would depend on
the kind of modifications made," he said.

Russell claimed that the existing KSO scheme does not support
the government's objective of creating a constructive overall
investment climate.

He said the KSO scheme had been drawn up based on a
monopolistic environment at a time when both Telkom and Indosat
had exclusivity rights.

If the scheme were to be continued, it would be inconsistent
with the government's objective of engendering more open
competition, Russell said.

The five KSO partners are PT Pramindo Ikat Nusantara, which
operates in Sumatra, PT Mitra Global Telekomindo Indonesia in
Central Java, PT Airawest International in West Java, PT Cable &
Wireless Mitratel in Kalimantan and PT Bukaka Singtel in eastern
parts of Indonesia including Bali.

World telecom giants like France Cable et Radio, America's
AT&T, Britain's Cable & Wireless Plc., Australia's Telstra,
Japan's Marubeni Corp., Sumitomo Corp., and Itochu Corp,
Singapore Telecom and Hong Kong's TM Communications are involved
as shareholders in the five companies. (10)