Telkom shareholders approve controversial deal

Telkom shareholders approve controversial deal

JAKARTA (JP): Shareholders of state-owned telecommunications
company PT Telkom approved on Thursday the sale of some of the
company's assets to PT Indosat, despite protests from the
company's employees.

In an extra-ordinary shareholders meeting held in its office
on Jl. Gatot Subroto, South Jakarta, minority shareholders
representing 1.69 billion shares approved the proposed US$1.5
billion transaction to end the company's cross-ownership with
Indosat in several joint ventures.

Other minority shareholders holding 15.8 million shares
rejected the deal, while the shareholders of 1.14 million shares
abstained.

Although the government controls a majority 66.19 percent
stake in Telkom, the deal must be approved by independent
shareholders in order to prevent a conflict of interest.

Telkom chief commissioner Bacelius Ruru said that the
transaction was approved by only 50.1 percent of the total
independent shares but it would still be valid as the number of
minority shareholders attending the meeting exceeded the quorum

Telkom and Indosat agreed late in March to a series of
transactions worth $1.5 billion, designed to end their cross-
ownership of several companies.

However, the sale of Telkom's fixed telecommunication
operation in Central Java and Yogyakarta to Indosat has sparked
protests from its employees.

Under the deal, Indosat will take over Telkom's operation in
the region, which is currently jointly managed by PT Mitra Global
Telekomunikasi Indonesia under a joint operation scheme, or KSO.

Telkom's Central Java and Yogyakarta employees, as members of
the Telkom Workers Union (Sekar), rejected the deal and began a
four-day strike on Tuesday to protest the sale. They fear massive
layoffs will occur as a result of the transfer of assets to
Indosat.

About 2,000 of Telkom's employees from Central Java and
Yogyakarta staged massive protests near the venue of the
shareholders meeting on Thursday.

Telkom president Muhammad Nazif said after the shareholders
meeting that the shareholders' approval of the proposed
transaction would pave the way for the company to become a world-
class operator.

Regarding the dispute between the company and its Central Java
and Yogyakarta employees, Nazif said Sekar still have an
opportunity to change the outcome of the deal, through the
government, until the closing date of the transaction on Jan. 31,
2002.

"As long as the government holds the majority of shares in
Telkom, our friends in Sekar can voice their aspirations through
the government's voting rights," he said, explaining that, by
itself, the employees' vote in the company would not hold much
weight as they only held 0.24 percent shares.

Furthermore, the completion of the transaction involving the
Central Java and Yogyakarta operation was subject to several
prerequisites, Nazif said.

This includes the approval of Telkom's partner, Mitra Global,
and Indosat's satisfaction of all disputes relating to the
liabilities of Telkom in the Central Java and Yogyakarta
operation.

It is also subject to the government granting Indosat a
license to own and operate a fixed-line and fixed-wireless public
switched voice telecommunications network in the Central Java
region.

Indosat's shareholders, who held a similar meeting later in
the evening, also approved the company's plan to take over
Telkom's Central Java and Yogyakarta operation.

Telkom's shareholder meeting also approved the proposed
acquisition of 90.32 percent of shares in Telkom's Kalimantan KSO
operations run by PT Dayamitra Telekomunikasi, as the first step
towards finalizing the disputes between Telkom and its KSO
partners.

The shares were owned by PT Intidaya Sistelindomitra (38.71
percent), Cable and Wireless Plc. (25 percent), and PT Mitracipta
Sarananusa (26.61 percent).

Nazif said Telkom was currently negotiating purchase of the
remaining 9.68 percent of shares, held by TM Communications (HK)
Ltd (Tomen).

"The proposed acquisition of the KSO VI (Kalimantan) region
has been approved and will become the foundation for finalizing
the other KSO regions," he said.

Telkom's share price on the Jakarta Stock Exchange lost Rp 50
to close at Rp 2,425 despite the landmark approval of its
transactions with Indosat. (tnt)