Telkom's bid to merge with Indosat opposed

JAKARTA (JP): Minister of Transportation and Telecommunications Agum Gumelar said on Tuesday that the government opposed a proposal to merge state-owned telecommunications companies PT Telkom and PT Indosat.

"It would be against the telecommunications law and the country's reform policies in the telecommunications sector," he said at a hearing with the House of Representative's Commission IV on infrastructure and transport on Tuesday.

Agum said that the government's blueprint for the development of telecommunications in Indonesia clearly stated that the sector would be directed towards freer competition between the two state-owned telecommunications companies.

Telkom holds the exclusive right to provide domestic telephone services while its affiliate PT Indosat provides international services.

The government will lift Telkom's monopoly in local calls in 2002 and domestic long distance call services in 2003, ahead of the original schedules of 2010 and 2005 respectively.

While Indosat's monopoly in the international telephone call market, which it shares with subsidiary PT Satelindo until 2004, will be lifted one year earlier in 2003.

Telkom has lobbied hard in the past for a merger with Indosat, arguing that the country needed a strong, major telecommunications company to be able to compete with both the local and foreign operators that would enter the market in the near future.

"An acquisition could be a way to solve some of the problems we may face at the beginning of free competition, but the government will continue to be consistent with its policy," Director General of Posts and Telecommunications Sasmito Dirdjo said during a break in the hearing with the House.

He said that as the government had agreed to build Telkom and Indosat into full service providers, it would not be in the government's best interests if one of them were to acquire the other.

Meanwhile, Agum said that the privatization of Telkom and Indosat should be done at the right time when the value of both companies was high.

The government plans to divest its shares in Telkom and Indosat, which are both listed on the domestic and overseas stock exchanges. The government has about a 65 percent stake in Indosat and Telkom respectively.

"Ways to increase the value of the companies include increasing management quality, granting new licenses, and a new telephone tariff policy," he said, adding that divestment should be done through strategic sales rather than an initial public offering.

Agum also said that the government was currently drafting the outlines of a new bill on information and technology.

He said that a joint team from Padjajaran University and the Bandung Institute of Technology was currently preparing a discussion paper which would address such problems as copyright, trademarks, defamation, and privacy to help in the drafting of a cyber law.

"Experts on IT are currently drafting an academic paper on the information and technology bill so that it can be presented to the House as soon as possible," Agum said. (tnt)