Watchdog needs to explain shift in stance, says Temasek

Parliament ruling cleared stakes in telcos. Lawyers ask: What has changed?

By Bryan Lee
The Straits Times, November 21, 2007

INDONESIA'S competition watchdog needs to explain why it is disregarding arguments made in a Government White Paper as recently as four years ago, Temasek Holdings' lawyers said yesterday.

Issues such as the independence of Temasek subsidiaries SingTel and Singapore Technologies (ST) Telemedia had been dealt with in the Paper.

Based on its recommendations, Indonesia's Parliament in 2003 approved the sale of a stake in telecommunications company Indonesian Satellite (Indosat) to ST Telemedia.

Now, all the findings supporting that decision had been summarily reversed, after Indonesia's competition watchdog, the Business Competition Supervisory Commission, or KPPU, on Monday found the Singapore investment company guilty of breaking its anti-monopoly laws.

'What has changed? There's been no explanation why the findings are so different between 2003 and now,' said senior counsel Davinder Singh, who has been engaged to help Temasek fight the ruling.

'The KPPU has an obligation, at the very least, to show there's been a fundamental change in the circumstances,' he said in a press conference yesterday.

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After a long-running investigation, the KPPU ruled that Temasek kept prices of mobile phone services higher than necessary through its indirect holdings in Indonesia's top two telcos.

Temasek and its units - SingTel and ST Telemedia - are effectively a single economic entity that own 'majority stakes' in market leader Telekomunikasi Selular (Telkomsel) and its closest rival, Indosat, according to the KPPU.

Indonesian law prohibits a business group from owning majority stakes in multiple companies within a sector that will have a combined market share above 50 per cent.

Quoting from the White Paper, Mr Singh said the Indonesian government had, in 2003, ruled that neither the Indosat stake that ST Telemedia was then buying nor SingTel's Telkomsel interest was a majority one.

But now, SingTel, with its 35 per cent stake in Telkomsel, and ST Telemedia, with an effective 31.5 per cent stake in Indosat, have been ruled to own de facto majority stakes by the KPPU.

Another key finding in the White Paper is that ST Telemedia and SingTel are independent operators in the telecommunications sector, said Mr Singh.

All these findings passed through the KPPU then and were key factors in the final approval of ST Telemedia's investment in Indosat.

Belgian-based competition law expert Frank Montag said while the KPPU cited European antitrust cases in its findings, he said the examples used were applied wrongly.

Dr Montag, a partner at international business law firm Freshfield Bruckhaus Deringer, also said it was unprecedented for pre-emptive cross-ownership laws, like the ones used by the KPPU now, to be applied after an investor has been given the go-ahead.