Telkom offers compromise to foreign partners

Telkom offers compromise to foreign partners

JAKARTA (JP): State telecoms company PT Telkom is willing to
offer concessions to its five foreign partners in the Joint
Cooperation Scheme (KSO) in a bid to save their five-year-old
business deal, a company official said.

"We're willing to compromise... But we expect them to also
show goodwill and understanding concerning our position," Telkom
director of operations and marketing Komarudin Sastrakoesoemah
told The Jakarta Post over the weekend.

He said Telkom was currently undertaking a thorough study with
the help of an independent financial advisor as part of its
effort to seek the most applicable resolution to its dispute with
the five partners.

He said it was most likely the company would come up with a
different settlement approach for each company.

The possible options to end the disagreement, he said, ranged
from changing the form of the contract into a joint venture, a
revenue-sharing base or a buyout of the partners' assets if both
parties failed to reach an agreement and call it quits.

However, Komarudin said to call the business cooperation off
would be the last resort."We don't want that to happen, really,"
he said.

Telkom and its five foreign partners have been engaged in
tough negotiations since November last year, trying to solve
their differences over the way each party manages and operates
the lucrative telephone business.

Telkom has criticized the partners for their poor performance
and inability to cope with the contract requirements. While the
foreign partners are complaining about Telkom's
overbearing intervention in the management and daily operations
in their respective working areas.

The five partners entered into a business contract with Telkom
in 1996 to build and operate domestic fixed line telephone
services across the country on behalf of Telkom under a revenue-
sharing scheme until 2010.

The five partners are PT Pramindo Ikat Nusantara, which
operates in Sumatra, PT AriaWest International in West Java, PT
Mitra Global Telekomunikasi Indonesia in Central Java, PT Cable &
Wireless Mitratel in Kalimantan and PT Bukaka Singtel
International in eastern Indonesia.

Director General of Post and Telecommunications Sasmito Dirdjo
said the government supported Telkom's efforts to reconcile with
the company's foreign partners to end their chronic affray over
each other's rights and responsibilities.

He said the government expected both parties to eventually
come to terms with their arguments so that they could continue
the business cooperation.

"It'll be a pity if it (the cooperation) ended before its
time. If possible, we'd like to see it continue with some
necessary changes and amendments to make it more favorable for
all," he told the Post on Saturday.

Sasmito warned that a forced break-off would only impair the
country's image before international investors.

World telecoms giants like France's Cable et Radio, America's
AT&T, Britain's Cable & Wireless Plc., Australian Telstra,
Japan's Marubeni Corp., Sumitomo Corp. and Itochu Corp,
Singapore's Telecom and Hong Kong's TM Communications are
currently involved as shareholders in the five joint venture
companies.

AriaWest's chief financial officer Stephen Dowling recently
said the foreign partners were starting to lose so much patience
due to Telkom's dawdling in the negotiations that they were
considering pulling out of the contract and demanding Telkom
reimburse all the investment they made.

If the five partners opted for break up, Telkom would have to
pay about US$5 billion in compensation to the five firms,
according to Dowling's estimation.

Komarudin, however, said he did not believe the five foreign
partners would opt to quit and also denied the accusation about
Telkom's lack of will in settling the problems.

"Dowling should not have spoken for all the partners. The
others may have a different stance," he said.

He said Telkom had been working hard to settle the differences
and had achieved some short-term agreements with the partners.

For instance, Telkom said it signed early last week the Good
Faith Interim Solution Agreement with AriaWest, with whom it had
endured the toughest negotiations.

The agreement contains several items, like the payment of
$204,430 in compensation to AriaWest for the delay in the return
of performance bonds, $1.84 million and Rp 9.83 billion as
reimbursement to AriaWest's operating capital expenditure and
another Rp 27 billion as settlement for some costs owed by Telkom
in the payment schedule of conducting a multimedia feasibility
study.

"That shows our goodwill to resolve the conflict. Now, we
expect them to show theirs," Komarudin said. (cst)