PT Telkomunikasi Selular

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PT Telekomunikasi Indonesia, (TELKOM) was created from Perumtel in 1991 when the state-owned company changed its main corporate purpose from public service to a limited liability corporation. The company was granted 15-year exclusive rights to offer local (wire or wireless) telephone services and 10-year exclusive rights to provide domestic long distance services in 1995. The other state-owned incumbent telecom company, PT Indosat, was granted exclusive rights to provide international telephone services. The business activities of TELKOM were divided into three main areas: (i) primary businesses, (ii) related businesses and (iii) business support or corporate overhead services. The primary business were to provide local and domestic long distance telephone services. Related businesses included mobile cellular services, leased lines, telex, satellite transponder leasing, VSAT and certain value-added services. For the provision of local fixed line phone services, in 1995 the country was divided in seven regional areas which 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). PT Telkom kept the management and operators of the two most profitable regions (Jakarta and the surrounding area, 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 majority private KSO was treated as a division of PT Telkom and was managed and operated by the KSO consortium on behalf of TELKOM for 15 years staring in 1996. The related businesses, in turn, could be operated by TELKOM either directly or through joint venture companies in which Telkom had a direct or indirect interest. As part of the agreement, each KSO consortium had to give TELKOM three principal types of payments during the term of the KSO - an up-front fee for joining the KSO scheme; 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. Following the Indonesian financial crisis that began in mid-1997, certain KSO partners experienced difficulties in fulfilling their obligations to TELKOM leading to certain disputes. As a result, TELKOM had acquired or entered into agreements to acquire control of its KSO partners in regions I,III and VI. In 2001, TELKOM acquired 90.32% of the shares of its KSO partner for Regional Division VI, PT Dayamitra Telekomunikasi ("Dayamitra'') and purchased a call option and granted a put option with respect to the remaining shares of Dayamitra. In 2002, TELKOM entered into an agreement to acquire 100%of the shares of its KSO partner in Regional Division I, PT Pramindo Ikat Nusantara ("Pramindo''). In 2003, TELKOM acquired 100% of the shares of its KSO partner for Regional Division III, PT AriaWest International ("AriaWest'') and settled its arbitration proceeding with AriaWest. On January 20, 2004, TELKOM entered into an agreement to amend and restate the KSO Agreement with respect to Regional Division IV, whereby TELKOM was to assume all management responsibilities and pay the KSO partner a fixed monthly fee for the remainder of the contract period. TELKOM started to be partially divested in 1995 when the government sold a 19% stake for US$1,590 million through Initial Public Offering. Of that offering, a 12.5% stake was sold for US$1,040 million in the domestic market; while 6.5% was sold for US$540 million in the international market. Merrill Lynch, Goldman Sachs, SBC Warburg and Lehman Brothers were the four security houses which handled the offering from which the government initially expected US$2.5 billion. In 1999, PT Telkom sold an additional 9.62% of shares (898 million shares), earning a total amount of US$429 million. The government postponed an additional privatization of the company scheduled for the last quarter of 1997 because of unfavorable market conditions. But in December 2001, the Indonesian government sold US$300 million of TELKOM stock, causing the government's shareholding to drop from 66% to 54%. And in July 2002, another 312 million shares were sold, raising a total of US$125 million and reducing the government's holding to 51.19%. In 1999, the Government passed Telecommunications Law No.36 which became effective in September, 2000. The law provided key guidelines for industry reforms, including industry liberalization, facilitation of new entrants and enhanced competition. Under the prior telecommunications law, TELKOM and PT Indonesian Satellite Corporation ("Indosat'') maintained joint ownership in most telecommunications companies in Indonesia. The Governments reforms called for the progressive elimination of these joint shareholdings to promote competition. As a result, in 2001, TELKOM acquired Indosat's 35% interest in leading mobile operator Telkomsel, resulting in TELKOM owning 77.72% of the shares of Telkomsel. In exchange, Indosat acquired TELKOM's 22.5% interest in Satelindo and 37.7% interest in Lintasarta. In 2002, TELKOM sold 12.72% of Telkomsel to Singapore Telecom Mobile Pte Ltd ("SingTel Mobile"), resulting in TELKOM's ownership being reduced to 65% of the shares of Telkomsel. Pursuant to the Telecommunications Law, the Government as of August 1, 2001 terminated the exclusive rights of TELKOM to provide fixed-line services in Indonesia and Indosat to provide international direct dial services. TELKOM's exclusive right to provide domestic local service was terminated in August 2002 and TELKOM's exclusive right to provide domestic long-distance service was likewise terminated in August 2003. The full implementation of the termination of these exclusive rights is expected to result in TELKOM and Indosat providing new telecommunications services in competition with each other. In December 2002, TELKOM began offering a limited mobility (within a local area code) CDMA-based fixed wireless phone service under the brand name "TELKOM Flexi" for both fixed and portable handsets. TELKOM's rollout of this service began in the three cities of Surabaya, Denpasar and Balikpapan and, as of December 31, 2003, was available in 38 cities. By 2005, TELKOM was still the principal provider of fixed line services in Indonesia, serving in all Regional Divisions except VII. As of end 2005, TELKOM had about 4 million subscribers on its fixed wireless telephone service and about 8.7 million fixed wirelines. In December 2007, the Indonesian government ordered PT Telekomunikasi Indonesia to open up its DLD service by April 3, 2008 to its rival PT Indosat. Telkomsel, TELKOM's 65% owned mobile unit, reported a market leading 24.3 million subscribers (52% share) and covered 90% of the country by end 2005. Telkomsel provided its subscribers with the option of a prepaid service under the brand name "SimPATI Nusantara" or a postpaid service under the brand name "KartuHALO." Although majority owned by TELKOM, Telkomsel was considered a separate entity. http://www.telkom.co.id/english/