PT Bukaka Singtel International

cancelled

PT Bukaka Singtel International (BSI) was granted a 15-year agreement for the provision of fixed local phone services in East Indonesia (division VII) in 1995. The company was one of the five international consortia that were granted such agreements. For the provision of local phone services, the country was divided in seven regional areas in 1995. Those regions were Sumatra (division I), Jakarta and the surrounding area (division II), West Java (division III), Central Java (division IV), East Java including Surabaya (division V), Kalimantan (division VI), East Indonesia (division VII). The state-owned company PT Telkom kept the management and operators of the two most profitable regions (Jakarta and East Java). Each of the remaining five regions were awarded to one international consortia under joint operating scheme (Kerjasama Operasi or KSO) in 1995. Under the arrangement, each KSO was treated as a division of PT Telkom and was managed and operated by the KSO consortium on behalf of PT Telkom for 15 years staring in 1996. Collectively, the KSO investors were charged with the planning, engineering, financing, and construction of a minimum of 2 million lines by 1999. Of that amount, PT Bukaka Singtel committed to install an additional 403,000 lines. In addition, the company took over the management of the existing fixed lines from PT Telekom in East Indonesia in January 1996. At the end of the 15-year period, all lines constructed had to be transferred to PT Telkom for a nominal payment. As part of the agreement, each KSO consortium had to give PT Telkom three principal types of payments during the term of the KSO - an up-front fee for joining the KSO scheme, which was US$10 million for PT Bukaka Singtel; a monthly payment for the annuity-like "Minimum Telkom Revenues"; and an annual "Distributable Telkom Revenues" (a percentage of the KSO's unit revenues after deducting certain allowable operating expenses). The average annual payment was estimated around 30% of the total revenues. PT Bukaka Singtel was created as a joint venture between Singapore Telecom International (40%) and the local private PT Bukaka Telekomindo (60%). On January 27, 2004, Transpac Capital acquired an 8.5% ownership interest in Bukaka SingTel International from PT Bukaka Telekomindo. The estimated investment in the network expansion of 403,000 main lines was US$450 million. However, the company managed to meet only half of its targeted line installment by 1997. Among the reasons for the shortcoming were, the geographical condition of the scattered islands hampered the consortium's ability to meet target; and second, the Asia financial crisis deteriorated the financial situation of the company, just as it had the other KSO arrangements. The consortium owed Siemens several hundreds of millions of US dollars for a US$339.6 million equipment contract signed in 1996. Siemens A.G. in Jakarta hired Toronto Dominion Bank (TD) to assist it in negotiating a financing package for Bukaka Singtel International. Previously, Bukaka Sigtel had closed financing for US$19 million through PT Bukaka Utama Teknik in June 1996. Later, it borrowed US$250 million from a consortium of international banks. The lead arrangers were Carr Indosuez Asia and Kreditanstalt fur Weideraufbau. The company tried to renegotiate its contract with the government and restructure its foreign debt at the end of 1998. By the end of 1999, the company had agreed to continue its KSO agreement with PT Telekom. Following the financial crisis, fixed-line services continued to be provided through KSO joint venture arrangements only in Divisions IV and VII. On January 14, 2003, TELKOM and Bukaka SingTel entered into a Co-Operation Agreement on Fixed Wireless CDMA Facilities Construction in KSO Regional Division VII. Under the terms of the Co-Operation Agreement, TELKOM, through its Fixed Wireless Division, invested US$30.2 million for the construction of fixed wireless CDMA facilities for 146,700 line units in Denpasar, Makasar, Manado, Kupang and Mataram, which facilities were to be managed, operated and maintained by Bukaka SingTel. The new facilities were expected to be completed by 2006, with TELKOM and Bukaka SingTel sharing the revenues generated by these new facilities. In 2004, Bukaka SingTel invested in 150,000 flexi line units (SSF) in cities or towns in Bali and Sulawesi islands at a cost of US$45 million. By the end of 2005, Bukaka SingTel was serving about 841,000 customers and was in talks to sell its fixed phone line network in eastern Indonesia back to Telkom, but the deal had not yet been finalized. Telkom would have recovered all of the fixed line services it awarded to the five private KSOs that were supposed to run from 1996 until 2010 if it bought out Bukaka SingTel. In October 2006, PT TELKOM and PT Bukaka Singtel agreed to return management and operational reponsibility of Regional Division VII to PT TELKOM. Singtel sold its entire stake in a phone network back to its Indonesian partner. July 5 - State-owned telecommunications giant PT Telkom is finalizing the buyout of PT Bukaka SingTel, the last of its five joint operating partners.