PT Pramindo Ikat Nusantara

Cancelled

PT Pramindo Ikat International was granted a 15-year concession agreement for the provision of fixed local phone services in Sumatra (division I) in 1995. The company was one of the five international consortia that were granted such agreements when 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), and 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 starting 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 Pramindo Ikat International committed to install additional 516,487 lines. In addition, the company took over the management of 684,000 exiting fixed lines from PT Telekom in Sumatra 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$35 million for PT Pramindo Ikat International; 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. Pramindo Ikat was owned by France Telecom through its subsidiary France Cables et Radio SA (35%), P.T. Astratel Nusantara (40%), partially privatized Indosat (14%), Marubeni (8%), IFC (3%), and others (1%) by end 1998. The company secured financing in July 1996 when it signed US$400 million in loans to finance the development of its KSO telecommunications project. The company installed around 765,000 telephone lines between 1996 and 1998. The total project cost was estimated in US$635 million by end 1998. The company stopped installing lines by end 1998 due to a lack of demand following the financial crisis in the country. PT Pramindo Ikat was the only KSO company that did not face serious financial difficulties by the end of 1999. In addition, the company agreed to continue its KSO agreement with PT Telekom. On April 19, 2002, TELKOM entered into a Conditional Sale and Purchase Agreement to acquire 100% of the issued and paid up share capital of its KSO partner in Regional Division I, Pramindo. Under the terms of the agreement, TELKOM agreed to acquire the shares of Pramindo in three tranches: in August 2002 (30%), September 2003 (15%) and December 2004 (55%). TELKOM has provided US$384.4 million in its accounts as the aggregate consideration for this transaction. Of the US$384.4 million, TELKOM made an initial payment of US$9.3 million(Rp.82 billion)in August 2002 and issued promissory notes (series I and II)dated August 2002 for the remaining amount.