Competition or collusion?

Indonesia accusing Temasek of ‘collusion’. Now I have seen everything.

Anti-competitive complaint against Temasek-linked telco investments in Indonesia may spark probe

Thursday • December 14, 2006

Tor Ching Li
chingli@mediacorp.com.sg

TEMASEK Holdings’ growing pains strike again — this time not in the streets of Thailand over Shin Corp, but in Indonesia over its control of the two largest telecommunications companies there.

An official at the Indonesian Business Competition Supervisory Commission (KPPU) confirmed with Today that a complaint had been filed against Temasek and its linked companies, ST Telemedia and Singapore Telecommunications (SingTel) — they own stakes in PT Indosat and Telekomunikasi Selular (Telkomsel), respectively — on grounds of price-fixing and blocking a new entrant, Bakrie Telecom.

“We are still clarifying the complaint and finding evidence, so there is no case yet,” said the KPPU official. Should evidence of anti-competitive behaviour be found, further investigations spanning up to 150 days will commence before a decision by the KPPU is made.

In a related move, the Indonesian government yesterday granted Bakrie Telecom, which currently operates only in some cities on Java island, a licence to operate nationally, according to Reuters. Bakrie Telecom is controlled by the family of Indonesia’s chief social welfare minister Aburizal Bakrie, and has slightly over a million subscribers.

Until now, the new market player has been trying to expand in a telecommunications industry that has Telkomsel and Indosat enjoying 80 to 90 per cent of the cellular pie. Since 2002, ST Telemedia has gained a 42-per-cent stake in Indosat while SingTel holds 35 per cent of Telkomsel’s shares.

Asked to comment on the allegations, ST Telemedia’s spokesperson Melinda Tan said: “ST Telemedia is a firm advocate of open competition. Our operations in Indonesia, Singapore and elsewhere are a testimony of this business philosophy.”

She added that there is no Temasek management on the ST Telemedia board. Indosat’s board of commissioners and board of directors, who are responsible for matters such as setting tariffs, are elected by the shareholders. “As a listed company in Jakarta and New York, Indosat is required to comply with (those) Exchanges’ strict corporate governance and transparency guidelines, which will not allow such collusion as reported in the media,” said Ms Tan.

SingTel declined to comment on its overseas operations. But analysts think this latest episode could be just another bump in Temasek’s turbulent foray into the Indonesian telecommunications market.

When ST Telemedia’s deal with Indosat was concluded in 2002, staff of the company took to the streets in Jakarta, fearing a dominant Singaporean presence in Indonesia’s mobile phone market. A group of political dissenters who opposed President Megawati Sukarnoputri’s administration also sought to annul the sale.

Last July, Indonesian Vice-President Jusuf Kalla — who has pro-nationalist views on business ownership — was quoted as saying that the government was eyeing ST Telemedia’s stake to boost its ownership of strategic state enterprises. The Indonesian government now owns 15 per cent of Indosat and 65 per cent of Telkomsel.

CIMB-GK Research regional economist Song Seng Woon thinks that the issue is likely to blow over, but urged Temasek to be more cautious with its foreign investments and “pay more attention to the political risk factor”.

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About soci
Lived in Singapore for 6 wonderful years and has been blogging since 2003, under various names but always on Singaporean issues.

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