Telkom's partners seek revision of KSO scheme

Telkom's partners seek revision of KSO scheme

JAKARTA (JP): The five private partners of state-owned PT
Telkom urged the telecommunications operator on Wednesday to
revise their current joint operations scheme, which they claimed
was "flawed".

Gatot S. Kahrmadji, the vice president of one of the partners,
PT Ariawest International, said under the current revenue-sharing
scheme, it was difficult for the five partners, who won 15-year
joint operation contracts from Telkom in 1995, to maintain and
improve their businesses.

"We need to create a different scheme that has more added
value. We could convert the contracts into some sort of joint
ventures, for example," Gatot said.

He said the current joint operation scheme, known by the
abbreviation KSO, had many shortcomings.

He said the KSO partners had no independence under the scheme,
adding that currently there was too much intervention in their
operations, resulting in many political decisions.

"This foster-father and foster-child scheme is no longer
suitable. Up to now, we have always acted on behalf of Telkom,"
he said.

By keeping a leash on its KSO partners, Telkom has made it
difficult for them to become competitive, he said.

For example, Telkom often placed incompetent staff with its
partners, and removed the ones who had received sufficient
training and schooling at the expense of the KSO partners, Gatot
said.

Under a revenue-sharing scheme, Telkom appointed the five
joint operation partners, a consortium of foreign and local
firms, in 1995 to finance, build and operate telephone lines in
five regions across the country until 2010.

Ariawest is responsible for installing 500,000 new lines in
West Java, PT Pramindo Ikat Nusantara 500,000 lines in Sumatra,
PT Mitra Global Telekomunikasi Indonesia 400,000 lines in Central
Java, PT Daya Mitra Malindo 237,000 lines in Kalimantan and PT
Bukaka Singtel 403,000 lines in eastern Indonesia.

Every three months, the KSO partners pay Telkom a Minimum
Telkom Revenue, which is a fixed amount, and they also make
Distributable Telkom Revenue payments based on their revenues.

The rupiah's collapse against the U.S. dollar in mid-1997
slowed down the KSO partners' projects and caused their foreign
debts to swell.

The government has hinted at plans to change the 15-year
contracts into joint ventures, but analysts are concerned that
the joint ventures would further burden Telkom, which would have
to bear the losses of the KSO partners and carry their foreign
debts.

Minister of Communications Giri Suseno Hadihardjono said last
week that the KSO's operations had not made any positive
contributions, forcing PT Telkom to raise telephone tariffs by an
average of 15 percent this month.

The vice managing director of Pramindo, Irawan Santoso, said
turning the contracts into joint ventures would strengthen the
partners' bargaining position with foreign investors.

"Investors would see added value in us if we were permanent
corporations instead of being mere contractors," he said.

Telkom said last week the KSO partners had installed 320,382
telephone lines in the five regions last year, totaling 2.56
million lines since 1995.

Telkom said its revenue from the KSO partners dropped to Rp
1.59 billion last year from Rp 1.64 billion in 1997. (das)