SINGAPORE (Thomson Financial) - Singapore state-linked investment firm
Temasek Holdings Pte. Ltd. said on Friday the Indonesia district court has found
it guilty of violating anti-monopoly regulations through its affiliates' cross
holdings in Indonesia's two largest telecom operators.
The Central Jakarta district court upheld the earlier ruling by the
Indonesian competition watchdog KPPU that Temasek must divest its stake in
either PT Telkomsel or PT Indosat and comply with the country's regulations on
cross-holdings within 12 months, or shorter than the two years set by the KPPU.
Temasek said it was "deeply disappointed by the verdict," and that it plans
to file an appeal with the Supreme Court.
"The facts are Temasek has no shares in Indosat and Telkomsel, and plays no
role in their business decisions and operations," said Temasek managing director
for strategic relations Goh Yong Siang in a statement.
Indosat is 41 percent owned by Asia Mobile Holdings (AMH), which is a 75
percent-held subsidiary of ST Telemedia. ST Telemedia is fully owned by
Temasek.
Temasek indirectly holds 35 percent of PT Telkomsel via its 56-percent owned
unit Singapore Telecommunications Ltd. (SingTel).
"Both Telkomsel and Indosat are regulated businesses, operating within the
guidelines of the Indonesian Telecommunications Regulatory Authority or Badan
Regulasi Telekomunikasi Indonesia (BRTI). It is therefore not possible for
Temasek to engage in any monopolistic or anti-competitive practices in the
Indonesia mobile telecommunications market," said Goh.
Adverse impact
The ruling against Temasek may have an adverse impact on foreign investments
in Indonesia.
"The decision is going to have a negative impact on the investment climate
here," Temasek lawyer Todung Mulya Lubis told Thomson Financial News.
UOB Kay Hian analyst David Chang agreed that the decision affirms the risk
of investing in Indonesia and may be negative for the telecommunications sector
in the long-term.
"You can have the best lawyers or the best arguments, that is of no use,"
Chang said. "By the time the case is taken to the Supreme Court, the whole
world will be watching. That's the highest court in Indonesia and it is the last
chance for not making an error."
The KPPU maintains it made the correct decision to protect consumers.
"It is good to hear that the court rejected their appeal. It means we made
the right decision," KPPU member Mohamad Iqbal told Thomson Financial.
He said it should not be a big problem for Temasek to accept the KPPU's
order to sell its stake in either Telkomsel or Indosat.
"They (Temasek) have done it with their investment in Indonesian banks," he
said.
Temasek recently sold its controlling stake in PT Bank Internasional
Indonesia (BII) to Malayan Banking Bhd, the largest bank in Malaysia. The sale
was to comply with a Bank Indonesia regulation disallowing an entity from
controlling more than one bank in Indonesia.
Temasek also holds a controlling stake in PT Bank Danamon.
In a separate statement, ST Telemedia denied any wrongdoing and said it will
"vigorously challenge" the Indonesian court's decision through all legal
channels.
SingTel said the court's ruling is without any basis.
"We will examine the court's ruling in depth before deciding on our appeal
to the Supreme Court," it said in separate statement.
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