PT Daya Mitra Telekomunikasi

Cancelled

PT Daya Mitro Telekomunikasi, formerly known as Daya Mitra Malindo, was granted a 15-year concession agreement for the provision of fixed local phone services in Kalimantan (division VI) 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 a 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 Daya Mitro Telekomunikasi committed to install an additional 237,000 lines by July 1999. In addition, the company took over the management of the existing fixed lines from PT Telekom in Kalimantan 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$20 million for PT Daya Mitro Telekomunikasi; 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 Daya Mitro Telekomunikas was owned by Cable & Wireless of the UK (25%), TM Communications of Hong Kong (9.7%), AIA (9.8%), Inditaya Sistelindo (29%), Alatief Nusakarya (24.2%) and local tea producer Koptihindo (2.45%) by 1998. The total cost of the expansion was estimated at US$250 million. The company received funds totaling US$155 million from a syndication of foreign banks. The syndication of foreign banks consisted of ABN Amro Bank, ING Bank, Sanwa Bank Limited and Commonwealth Development. However, due to the changes in the ownership (C&W replaced Telecom Malaysia) the operations were postponed. Following the Indonesian economic crisis that began in mid-1997, certain KSO partners, including Daya Mitra, experienced difficulties in fulfilling their obligations to Telkom. The company was unable to fulfill its obligation in investment by the end of 1998. The company, as the other KSO arrangements, were having serious financial difficulties and were unable to meet the deadline of March 1999 to finish its build out commitments. The company attempted to renegotiate its contract with the government and restructure its foreign debt by end of 1998. In order to assist the KSO partners in meeting their obligations and to maintain the continuity of the KSO Agreements, all of the KSO partners entered into a Memorandum of Understanding with TELKOM on June 5, 1998 which reduced the minimum line construction obligations of the KSO partners, decreased TELKOM's share of KSO revenues for 1998 and 1999 and cancelled TELKOM's option to purchase the assets of the KSO before the end of the KSO period. Beginning January 1, 2000, the parties reverted to the terms of the original KSO agreements with respect to MTR and DTR payments. In May 2001, TELKOM acquired 90.32% of the shares of its KSO partner for Regional Division VI, Dayamitra, for US$121.93 million and the company was consolidated under TELKOM. It also purchased a call option and granted a put option with respect to the 9.68% remaining shares of Dayamitra owned by TM Communications and subsequently, on December 14, 2004, exercised the call option to acquire such remaining shares.