Telkom resumes talks with Ariawest

Telkom resumes talks with Ariawest

Debbie A. Lubis, The Jakarta Post, Jakarta

State-owned telecommunications company PT Telkom said on
Monday that it had resumed negotiations with Ariawest
International and was hopeful of an out of court settlement in
the dispute over the buyout of Ariawest shares.

"We had held negotiations with the shareholders (of Ariawest)
while the arbitration process was still going on. We hope we can
achieve a solution before the arbitration process is finished,"
Telkom investor relations manager Setyawan Sulistyono told The
Jakarta Post.

AriaWest filed charges against Telkom with an international
arbitration panel in Geneva in May last year. The move had
blocked negotiation efforts to resolve dispute between the two
sides.

Ariawest is Telkom's former joint operation scheme (KSO)
partner to develop telecommunications networks in West Java and
Banten provinces (KSO III region) for a 15-year period. The
contract was signed in 1995.

But the KSO project was forced to end prematurely as a
consequence of the government plan to end Telkom's monopoly in
providing fixed-line services to help create a more competitive
atmosphere in the telecommunications industry.

The dispute started when Telkom failed to make a buyout of
Ariawest shares in the KSO due to differences over the share
value.

AriaWest is 52.5 percent owned by Indonesia's PT Artimas
Kencana Murni, 35 percent by U.S.-based MediaOne International
BV, of which American telecom AT&T is a part and 12.5 percent by
Hong Kong's Asian Infrastructure Fund.

Ariawest agreed last year to cut the value of its shares to
US$735 million from $1.3 billion, but Telkom still insisted on
further reducing the value to $260 million.

Ariawest said that Telkom's price offer was still very low
even when compared to the valuation made by ABN Amro and the
state-owned securities firm PT Danareksa at $673 million and $522
million respectively.

Ariawest is just one of Telkom's five KSO partners.

Telkom reached a $425 million buy out deal with its Sumatra
KSO partner PT Pramindo Ikat Nusantara in February after ten
months of negotiation.

Last year, Telkom also bought shares in PT Dayamitra
Telekomunikasi, its partner responsible for the development of
fixed-line telecommunications in Kalimantan, for $122 million.