Anti-monopoly law probe into Temasek yields no verdict

By Salim Osman, Indonesia Correspondent
The Straits Times, August 16, 2007


JAKARTA - INDONESIA'S anti-monopoly watchdog yesterday failed to reach a verdict on its controversial probe into Singapore's Temasek Holdings' alleged monopolistic practices in the telecommunication business.

Its 60-day period of investigation into the case ended yesterday without any conclusion whether Temasek breached Indonesia's anti-monopoly law by dominating the market and engaging in price-fixing.

Mr Nawir Messi, spokesman for the special investigating team of the Business Competition Supervisory Commission (KPPU), told The Straits Times that the investigation would continue for another 30 days before a report is presented to a council which will deliberate on the case for another month.

'We couldn't arrive at a verdict as we couldn't gather enough evidence. We still need to call key witnesses to help us in the investigation,' he said.

A key witness, PT Indosat, in which Temasek has an indirect stake, will also be called to give evidence. The KPPU started investigating Temasek in April based on a complaint filed last October by a labour union for state-owned companies.

The union later withdrew the complaint citing it did not have enough evidence to support the allegations but the KPPU went ahead with its probe.

After 30 days of preliminary investigation in May, it announced that Temasek might have broken the law and a more detailed investigation followed for another 60 days.

Temasek is suspected of breaking the law because the company indirectly holds shares in PT Telkomsel and PT Indosat, Indonesia's largest and second largest cellphone operators.

Under the anti-monopoly law, a business entity cannot own majority shares in several companies operating in the same sector and market, such that if there is cross-ownership, the company may dominate the market.

Temasek has an indirect stake in PT Telkomsel through SingTel's 35 per cent ownership of shares in the telco. The company also has an indirect stake in PT Indosat through its subsidiary ST Telemedia, which owns almost 42 per cent shares.

Temasek has denied the allegations, saying its subsidiaries have complied with Indonesian regulations.

The KPPU was also criticised for undertaking the probe despite the complaint being withdrawn.

Several economists said that if Temasek was found 'guilty' and made to sell its stakes in the telcos, it would raise fears among foreign investors in buying stakes in state-owned companies that were being divested.

They also doubt whether there is a case against Temasek as it does not own majority stakes in the two telcos.

Another question raised is why has the KPPU not included the Indonesian government as a co-defendant in the price-fixing charges against Indosat and Telkomsel.