Temasek faces price-fix probe in Indonesia

John Aglionby
Financial Times
24 May 07

Indonesia’s business competition authority on Wednesday accused Temasek, the investment arm of the Singapore government, of violating competition laws by using subsidiaries?shareholdings in the two largest mobile phone operators to fix prices.

Although Temasek has not been charged, the matter could further strain bilateral relations.

The two countries are in dispute over an extradition treaty, a defence co-operation agreement and Indonesia’s ban on sand exports to its neighbour.

It could also worsen Indonesia’s investment climate.

Muhammad Iqbal, head of the country’s KPPU competition commission, said an initial investigation had uncovered evidence of possible violations regarding agreements over prices.

“This evidence is sufficient to launch a supplementary investigation over the suspicion of Temasek’s cross ownership in two telecommunication companies, namely Indosat and Telkomsel”, he said.

Singapore Telecom, of which Temasek is the largest shareholder, owns 35 per cent of Telkomsel, Indonesia’s largest mobile phone operator. ST Telemedia, which is wholly owned by Temasek, owns 42 per cent of Indosat, Indonesia’s second largest mobile operator. Together, Telkomsel and Indosat control about 85 per cent of Indonesia’s mobile phone market.

Mr Iqbal said Telkomsel and Indosat tariffs had remained high while their competitors’ had lowered. “This is despite the two companies being large companies, so their tariffs should be cheaper,” he said.

“we’re concerned why the tariffs should be so high and customers have to suffer. This case is simple: it’s purely about competition.”

The next stage of the probe has to be completed within 60 days. If the allegations are upheld, the next step would be to file charges.

Ani Pudyastuti, KPPU communications director, said investigators had yet to decide who to question.

Temasek declined to comment on Wednesday.

ST Telemedia said it was not yet aware of the KPPU decision.

“Until we have more concrete information, we do not wish to speculate on the hearsay,” it said