Telkom rejects joint venture mechanism with KSO partners

JAKARTA (JP): State-owned telecommunications firm PT Telkom rejected on Friday the proposal from its Joint Operation (KSO) partners to form a joint venture firm as an alternative solution to the existing flawed and full-of-conflict cooperation scheme.

Company president A.A. Nasution said Telkom would object to changing the existing cooperation formula to a joint venture scheme because it would only benefit the partners.

"No way. We will never form a joint venture. We will settle all the differences by only amending some stipulations in the contract."

He said the changes in the contract details would be made according to the situation faced by Telkom and its partners in their respective work areas.

According to the KSO partners, changing the cooperation pattern into joint venture mechanism is the most feasible solution to the dispute with Telkom.

The partners said the option was a win-win solution in which both Telkom and the KSO partners would not have to lose their investments but instead open the opportunity for new strategic investors to participate in forming a stronger cooperation.

Nasution said the option was not a win-win solution for Telkom.

"It will not benefit us. In fact, Telkom will have to be responsible for all the partners' debts by entering into the joint venture. The partners have been financing most of their activities with the debts," he said.

He warned that KSO partners were bound by the main contract to continue developing and marketing fixed line telephone services in Indonesia for Telkom until 2010.

"If they refuse to continue with the existing cooperation scheme, we will not be hesitant in declaring a default against them ... They had better leave if they refuse to cooperate," he added.

The KSO contract started in 1996 with the appointment of five consortia of local and foreign firms -- PT Ariawest International, PT Pramindo Ikat Nusantara, PT Mitral Global Telekomunikasi Indonesia, PT Cable & Wireless Mitratel and PT Bukaka Singtel -- to finance, build and operate domestic fixed lined telephone service across Indonesia under a revenue-sharing scheme until the year 2010.

Under the agreement, KSO partners are required to install, during a three-year construction period from 1996 to 1999, a total of two million new access line units (ALU), a figure that was then revised in September 1998, by the government, to only 1.2 million, due to the economic crisis.

The agreement also requires the partners to pay Telkom a tri- monthly fixed amount, known as Minimum Telkom Revenue (MTR) and Distributable Telkom Revenue (DTR), based on their revenue.

The government revised the revenue-sharing scheme last year, splitting the DTR from 30 percent into 10 percent for Telkom and from 70 percent to 90 percent for partners.

However, the scheme often causes confusion, not only relating to the amount of fixed line units each partner must install, but also in the management of the network.

Nasution said that starting from January next year, the revenue-sharing scheme would return to the initial agreement in which Telkom received 30 percent of the DTR.

He said Telkom and the KSO partners were scheduled to meet to discuss the matter within the next couple of days. (cst)