Indon watchdog : Temasek 'may have broken law'

The Straits Times, May 25, 2007
By Salim Osman, INDONESIA CORRESPONDENT


Watchdog says it has evidence S'pore firm may have breached cross-ownership law

CONTROVERSIAL STAKE: Cellular operator Indosat is 41 per cent owned by Temasek subsidiary ST Telemedia.






JAKARTA - INDONESIA'S anti-monopoly watchdog says it has found evidence that Singapore's Temasek Holdings may have broken the country's law on business practices in the telecommunications industry.

Mr Mohammad Iqbal, chairman of the Business Competition Supervisory Commission (KPPU), told The Straits Times: 'We have evidence to show that Temasek may have breached the law through cross-ownership of Telkomsel and Indosat.'

He said that under the law, no company is allowed to hold majority shares in several companies engaged in the same line of business.

Temasek's stake in Telkomsel, Indonesia's largest mobile phone operator, is held through SingTel's 35 per cent ownership, acquired in 2001 and 2002.

Its subsidiary, ST Telemedia, has a 41 per cent stake in Indosat, Indonesia's second-largest mobile phone operator.

ST Telemedia bought the stake by paying 50 per cent more in premium in 2002 as part of the Megawati government's privatisation plan, although investor confidence then was extremely low amid the bleak economic outlook.

Besides allegations of crossownership, Temasek is being investigated for price-fixing and alleged monopolistic practices.

Said Mr Iqbal: 'We will now carry out a more detailed investigation into the complaint for the next 60 days. We will start summoning witnesses, perhaps next week.

'Representatives of Temasek will also be called up to defend the company.'

If the detailed investigation supports the evidence against Temasek, the case would be taken up to the highest body in the commission, which will issue a ruling, he said.

'Once the KPPU is able to prove the existence of monopolistic practices by Temasek, it will order the company to sell its entire stock in either one of the telecommunication companies,' he added.

A lawyer for Temasek, Mr Todung Mulya Lubis, said the firm would wait for official notification.

'Up until now, we have not received formal notice from the KPPU on the investigation,' he told The Straits Times.

He added that Temasek has always complied with the laws and regulations in doing business anywhere.

The inquiry into Temasek followed a complaint filed last October by the Federation of State- Owned Enterprises Employees' Union.

But the union withdrew the report on April 2, saying it could not prove its allegations that there was price-fixing and collusion between Telkomsel and Indosat, and that Temasek held a monopolistic position because the market was highly competitive due to new entrants from Malaysia.

Analysts say that if there had been price fixing, it seems peculiar that Indosat has lost its market share in the GSM market, compared with the other telecoms players, which have gained in market share.

Despite the withdrawal, the KPPU pressed ahead with its preliminary investigation into the allegations.

In another development yesterday, a non-governmental organisation, the Indonesian Developments Monitoring group, called on the authorities to investigate Mr Iqbal, the KPPU chairman. The group has alleged that he conspired with Mr Suharto, director of Altimo, a subsidiary of Russian conglomerate Alfa Group, to conduct a probe against Temasek for monopolistic practices.

'We have documentary evidence to show that there was communication between the KPPU and Altimo seeking money from the Russian group,' said its spokesman, Mr M. Romdhani.

It will file the complaint with President Susilo Bambang Yudhoyono, Parliament and the police this week.

There was news in recent weeks that the Russian group was interested in acquiring a stake in Indosat.

A document dubbed 'Project Indosat', unveiled recently, details a purported plan by the group to take over ST Telemedia's shares in Indosat through a campaign to discredit the Singapore company and pressure it into giving up its stake.