snoozy

JAKARTA: Indonesia's anti-trust agency, KPPU, has fined Singapore's Temasek Holdings 25 billion rupiah (US$2.8 million) or some S$4 million for breaching Indonesia's competition law.

The watchdog has also ordered Temasek to sell its stakes in either PT Indosat or PT Telkomsel – two major Indonesian mobile phone companies – within two years.

And potential buyers can only buy up to 5 percent of the shares and must not have any links to Temasek Holdings.

Eight other Singapore companies linked to Temasek have also been fined S$4 million. The Singapore companies plan to appeal the decision in Indonesia's district court.

The five-member panel from Indonesia's anti-monopoly agency took more than three hours to read out its verdict on a case closely watched by foreign investors in the country.

The panel said Singapore investment firm Temasek Holdings and its subsidiaries were guilty of monopoly practices through their cross ownership of two of Indonesia's largest mobile phone companies – Telkomsel and Indosat.

Temasek owns 56 percent of SingTel, which has a 35 percent stake in Telkomsel.

And Singapore Technologies Telemedia, which Temasek fully owns, controls 75 percent of Asia Mobile Holdings (AMH). AMH, in turn, owns 40 percent of Indosat.

Indonesia's competition law stipulates that a foreign company or business group cannot have more than a 50 percent share in an Indonesian business outfit.

Temasek has argued that it does not directly hold majority shares in each of the Indonesian mobile phone companies.

But the panel is maintaining that Temasek had violated cross-ownership regulations and, as a result, dominates 80 percent of the market.

According to the panel, Temasek and its units have control over appointments of key posts and have access to sensitive information from the two companies. Therefore, they are able to dictate the market.

Temasek has maintained that the Indonesian government actually holds majority stakes in Telkomsel and a golden share in Indosat.

But the panel rejected this notion, saying the government is not a business entity and its shareholding is in the national interest.

Temasek’s lawyer said the decision has plunged Indonesia into a crisis of confidence in the country's legal system.

Lawyers from Temasek and ST Telemedia said the watchdog's decision is not final and they plan to file an appeal to the country's district court within two weeks.

In a statement, Temasek's executive director Simon Israel said the decision "makes no sense" and "ignored the facts".

He added that the charge is groundless because Temasek has no shares in Indosat and Telkomsel, and has played no role in business decisions and operations of both companies.

And as the Indonesian government controls Telkomsel and has a golden share in Indosat, Mr Israel said it is inconceivable that the government and telecomm regulator would allow prices to be fixed.

Channel NewsAsia spoke to a political analyst who believes the ruling sends caution and concern for all investors.

Simon Tay, Chairman of the Singapore Institute of International Affairs, said: "This kind of signal can be badly read by the international community.

"I think companies need to invest in political risk, invest in goodwill so it really benefits the Indonesian people or whichever country you're investing in, as well as the shareholders."


- CNA/so

Source : http://www.channelnewsasia.com/stori...312527/1/.html

blushing_guy

Temasek vows to fight guilty verdict by Indon watchdog
Tuesday • November 20, 2007

Christie Loh
christie@mediacorp.com.sg

It WAS a foregone conclusion that left political watchers, businessmen and international investors shaking their heads over the unpredictable nature of doing business in Indonesia.

Guilty as charged. A fine of 25 billion rupiah ($4 million), an order to sell all its shares in either one of the two telcos it has stakes in — Telkomsel and Indosat — within two years, and a directive to cut mobile phone tariffs by at least 15 per cent.

This was the verdict and sentence meted out by Indonesia's competition watchdog KPPU against Singapore's Temasek Holdings for allegedly monopolising and fixing prices in the country's telecommunications market. Temasek is fighting the decision.

The investment firm had some strong words to protest against the verdict of KPPU, also known as the Business Competition Supervisory Commission that had spoken publicly about Temasek's guilt a month ago.

"We are not guilty. The decision makes no sense. It ignores the facts," Mr Simon Israel, Temasek's executive director, said in a statement.

"The charge against Temasek is groundless ... Telkomsel is controlled by the Indonesian government which also has a golden share in Indosat. The telecommunications industry in Indonesia is regulated. It is inconceivable that the Indonesian government and the telecommunications regulator would allow the prices to be fixed or cause a loss to the consumer."

Temasek will lodge its appeal against the KPPU in Indonesia's courts within 14 days. The final verdict may be months or even years away if international arbitration is involved. "So, it's not the end of this story," former KPPU chairman Pande Radja Silalahi told Today.

Anticipating the verdict, nervous investors dumped Indonesian stocks. "I think foreign investors are liquidating their positions. I am afraid it has something to do with the ruling on Temasek," said Indo Premier Securities analyst Ferry Khusaeri, amid a selldown that pulled down the Jakarta Composite Index by 0.8 per cent at the close.

"It will be bad for Indonesia's image in the eyes of international investors. It shows that we don't know what we want to do. On the one hand, we are inviting (foreign) investors to come here. But after they get here, we beat them," said PT Danareksa chief economist Purbaya Sadewa.

The case started last year when a labour union complained to KPPU that Temasek's concurrent indirect ownership of Telkomsel (through SingTel's 35-per-cent stake) and Indosat (through ST Telemedia's 42-per-cent stake) violated Indonesia's investment laws. Even after the union withdrew its claim on lack of evidence, the watchdog pursued the investigation and concluded yesterday that Temasek, ST Telemedia and SingTel were all in the wrong and each had to pay a fine of 25 billion rupiah.

Mr Peter Fanning, chairman of the International Business Chamber in Jakarta, said after KPPU's verdict: "Investors continue to identify legal certainty as at the core of their needs, and the uncertain judiciary as their main concern."

ST Telemedia chief Lee Theng Kiat, vowing to challenge KPPU's findings, said: "The KPPU decision calls into serious questions the application of the rule of law and whether foreign investors can safely invest in Indonesia."

The law that KPPU is using to nail Temasek existed about three years before ST Telemedia's 2002 purchase of Indosat, which is eyed by several other foreign investors including Altimo, a Russian company portrayed in Indonesian and Russian media as responsible for KPPU's investigation.

"There could have been a monopoly allegation at the time already. So, why only now?" wondered Dr Agung Wicaksono, visiting associate at Singapore's Institute of Southeast Asian Studies.

Now, KPPU wants Temasek to divest the stakes within two years, but not to any "affiliate companies". Each buyer is allowed to buy no more than 5 per cent, ordered the commission.

Various high-profile controversies have dogged Temasek since it embarked on a plan to diversify its revenues such that overseas markets account for two-thirds of its portfolio. Temasek's woes in Indonesia go beyond the telecoms sector. It may have to merge PT Bank Internasional and PT Bank Danamon to comply with ownership rules for financial services companies, reported Bloomberg.

http://www.todayonline.com/pda/223046ag.htm

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