Telkom's woes ravage stock index

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.