Telkom's woes ravage stock index
Rendi A. Witular, The Jakarta Post, Jakarta
The Jakarta Composite Index lost nearly 3 percent in Thursday trading, dragged down mostly by the possible delisting of state- owned telecommunications company PT Telekomunikasi Indonesia (Telkom) from the New York Stock Exchange.
The index ended nearly 14 points lower at 501.80, compared to Wednesday's close of 515.71. Telkom shares dropped by 7 percent, or 325, to close at 4,350.
Telkom shares make up 16 percent of the total market capitalization on the exchange. Thus, any fluctuation in Telkom's shares significantly affect the movement of the composite index.
Analysts said negative sentiment descended on the market after Telkom announced that the U.S. Securities and Exchange Commission (SEC) might impose stern sanctions on it following the commission's probe that Telkom's 2002 audited financial report contained "deficiencies".
However, stock analyst Adrian Rusmana from BNI Securities said the decline in Telkom's shares would probably just be temporary as "deficiencies" in the company's financial report was not categorized as fraud as was the case with energy giant Enron.
Adrian predicted that the index would likely be mixed in the coming days but the underlying sentiment remained positive.
The Jakarta Stock Exchange (JSX), along with the Capital Market Supervisory Agency (Bapepam) concluded on Thursday that they were not concerned with Telkom's financial statement as it had been audited in accordance with Indonesian auditing standards and the local capital market law.
JSX said that it would not suspend Telkom's trading unless there was a sharp fluctuation in the company's share movement in the coming days.
Telkom's corporate secretary Woeryanto Soeradji said in a press statement on Wednesday that Telkom had to revise its financial report previously submitted to the SEC by June 30. Should Telkom fail to meet the deadline, the SEC will give another 15 days for Telkom to revise its report, before imposing sanctions on the firm.
Woeryanto said that Telkom was unsure if it would be able to meet the deadline as it was not easy to find a new auditor which met SEC regulations in such a short time.
However, Telkom would try its best to revise the report to satisfy SEC rules.
Telkom said at this time it could not predict any punishment the SEC might take against the company, but could include fines, suspension of trading or delisting from the stock exchange.
Trading of Telkom shares on the NYSE was suspended effective June 11 in the U.S.
The company said that the delisting of Telkom's share by the SEC could result in the company's breaching promises to bank lenders and possibly defaulting.
Warning from SEC came after the commission found deficiencies in Telkom's financial report a couple of weeks ago. The deficiencies are focused on Telkom's auditing firm Eddy Pianto, which has no affiliation with an accounting firm certified by the SEC.
Eddy Pianto was formerly an affiliate of Grant Thornton International, but the relationship ended last year and the reason remains undisclosed, and Eddy later formed an accounting firm called KAP Jimmy Budhi.
Telkom, which is Indonesia's largest telecommunications company, appointed the local auditor shortly after Telkom's previous auditor, Ernst and Young, resigned in the wake of as yet unproven accusations. Several other respected auditors were considered "unsuitable" for the company.
Telkom's spokesman Eddy Praptono told The Jakarta Post that during the auditing process Telkom had no knowledge that Eddy Pianto was no longer affiliated with Grant Thornton International, until the SEC discovered it about a month ago.