Telkom's bid to merge with Indosat opposed

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)