Temasek loses appeal on Indonesian regulator ruling

May 9, 2008
Singapore Democrats

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Temasek Holdings' CEO. Ho Ching

Temasek Holdings’ CEO, Hi Ching

Wahyudi Soeriaatmadja & Andrea Tan
Bloomberg

Temasek Holdings Pte, Singapore’s state-owned investment company, lost its appeal on an Indonesian antitrust ruling and was ordered to sell its stake in either of the country’s two biggest mobile-phone operators within a year.

An Indonesian court today ruled in favor of the competition regulator, which said Temasek breached antitrust laws by using indirect stakes in PT Telekomunikasi Selular, known as Telkomsel, and PT Indosat to fix prices. Temasek was earlier asked to sell either stake within two years.

 

The decision today highlights Temasek’s antitrust challenges as it manages more than $100 billion in assets from Indonesia to India. A Temasek-led group in March sold its 56 percent stake in PT Bank Internasional Indonesia to Malayan Banking Bhd., helping meet the Indonesian central bank’s rules limiting investors’ ownership to one bank.

“Indonesia needs to show more commitment to investors,” said Christopher Wong, who helps to manage $40 billion of assets at Aberdeen Asset Management in Singapore, including shares in Singapore Telecommunications Ltd., Indosat and PT Telekomunikasi Indonesia, Telkomsel’s parent. “The ruling is sending the wrong signal.”

“Fair”

Indonesia’s regulator, known as KPPU, said Nov. 19 Temasek breached antitrust laws by using indirect stakes in Telkomsel and Indosat to fix mobile-phone calling prices. The court today cut an earlier fine to 15 billion rupiah ($1.6 million) from 25 billion rupiah. It also said Temasek has the option of cutting stakes in both companies by half.

“We consider that it is fair if they are given an option to reduce their shareholding in each of the companies,” Andriani Nurdin, the judge who presided over the hearing on the telecommunications assets today, said at the Central Jakarta District Court.

The court also overruled KPPU’s decision to ask Telkomsel to cut prices by 15 percent.

Temasek owns 54 percent of Singapore Telecom or SingTel, which holds 35 percent of Telkomsel, Indonesia’s largest mobile- phone operator.

Another unit, Singapore Technologies Telemedia Pte, controls 75 percent of Asia Mobile Holdings Pte, which in turn owns 40 percent of Indosat, Indonesia’s second-largest phone company. The Indonesian government has a stake in both operators.

Temasek is “deeply disappointed” with the decision and plans to appeal the ruling, it said in an e-mailed statement.

“Vigorously Challenge”

“We will vigorously challenge through all available legal channels the court decision that was based on the groundless allegations of the KPPU,” ST Telemedia Chief Executive Officer Lee Theng Kiat said in an e-mailed statement.

SingTel said it objects to the decision and is studying its options. “We will examine the court’s ruling in depth before deciding on our appeal to the Supreme Court,” it said in an e- mailed statement.

Under the Nov. 19 ruling by the competition regulator, Temasek isn’t allowed to sell its holdings to affiliate companies and each buyer is restricted to a maximum 10 percent stake, from 5 percent during the antitrust agency’s ruling.

Temasek, set up more than three decades ago to hold Singapore’s state-owned assets, also owns part of PT Bank Danamon Indonesia. The investment company also controls half of Singapore’s 10 biggest listed companies including SingTel and Singapore Airlines Ltd., the world’s second-largest airline by market value.

A union representing workers from Indonesia’s state-run enterprises filed a complaint against Temasek in December 2006, claiming the company was fixing call rates through its stakes in Telkomsel and Indosat. Although the union dropped its claim last April, without giving a reason, Indonesia’s competition regulator decided to continue the price-fixing probe.

Temasek and ST Telemedia have repeatedly said they don’t direct the operational decisions of Telkomsel and Indosat. Temasek, which denies the charges, has said it will take the case to international arbitration if Indonesia’s courts don’t rule in its favor.

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