Singapore's Temasek to contest Indonesian ruling in anti-monopoly case
SINGAPORE (Thomson Financial) - Temasek Holdings, a Singapore state-linked investment company, said late Monday it is not guilty of violating Indonesia's anti-monopoly laws and will contest a decision by Indonesian competition watchdog KPPU.
The KPPU yesterday ruled that Temasek had breached competition laws due to cross-ownerships in two of Indonesia's largest mobile operators, PT Telkomsel and PT Indosat, and ordered Temasek to divest its interest in one of them within two years.
'Temasek will fight this decision ... the decision makes no sense. It ignores the facts,' said Simon Israel, executive director of Temasek, in a statement.
Temasek holds no direct stake in the two companies and plays no role in their business decisions and operations, Israel said.
Temasek's 56 percent-owned unit, Singapore Telecommunications Ltd (SingTel), owns 35 percent of Telkomsel while its wholly-owned ST Telemedia unit along with Qatar Telecom controls 41.9 percent of Indosat.
Telkomsel is the biggest cellular operator in Indonesia with a market share of 68.1 percent last year. Its combined market share with Indosat stood at 89.6 percent in 2006.
The KPPU said Temasek and its affiliates violated Article 27 of Indonesia's anti-monopoly law that prevents business entities from owning majority shares in several companies in the same market, if such ownership gives a single entity a market share of over 50 percent and several entities a market share of over 75 percent.
The commission said because of the cross-ownership in Indosat and Telkomsel, these operators enjoyed huge profits from the excessive tariffs they imposed on customers.
'It is inconceivable that the Indonesian government and the telecommunications regulator would allow the prices to be fixed or cause a loss to the consumer,' Israel countered, adding that Indonesia's telecom sector is regulated and that the Indonesian government itself controls Telkomsel.
Both SingTel and ST Telemedia have expressed their disappointment over the KPPU ruling.
SingTel said both it and unit SingTel Mobile were not accorded 'fundamental due process rights' in the case. The company said that SingTel Mobile is a minority shareholder of Telkomsel and that SingTel runs its operations independently of Temasek.
'We will review the official KPPU report and will take all necessary steps to protect our interests,' SingTel said.
ST Telemedia, on the other hand, vowed to challenge the KPPU decision.
'The KPPU decision calls into serious question the application of the rule of law and whether foreign investors can safely invest in Indonesia,' said Lee Theng Kiat, president and chief executive officer of ST Telemedia, in a separate announcement.
'ST Telemedia and its subsidiaries will challenge the findings of the KPPU and will vigorously defend our position,' Lee said.
Quite interesting, singapore-related because temasek holdings is being sued. They are actually quite smart to invest in different companies (Singtel and ST telemedia) which then owns part of other companies (Telkomsel and Indosat), end up making a lot of money from everywhere. Now, this is what you call diversification :)
-Faith
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