Wednesday, November 21, 2007 Vincent Lingga, The Jakarta Post, Jakarta
The market may simply ignore the Business Competition Supervisory Commission (KPPU)'s ruling against Temasek, its subsidiaries and Telkomsel. It will most likely be business as usual for Telkomsel, which was found guilty of breaching the anti-monopoly law on Monday by a panel of KPPU judges.
The KPPU ruling that Temasek and its subsidiaries shall divest themselves entirely of their stake in either Indosat or Telkomsel will not either have an adverse impact on the shares of these two mobile operators.
After all the market has become too familiar with the many questionable or even absurd rulings of the Indonesian antitrust body. In fact many of the KPPU's previous decisions in high-profile cases, though seemingly constructed from well-documented evidence, have been overturned by appellate courts either on technical or procedural grounds.
We understood that some bizarre rulings were unavoidable during the first few years after its launch in 2000, as KPPU staff and commissioners were still learning the ropes of their jobs. But the KPPU should have by now built up an adequate body of expertise to competently judge anti-monopoly cases.
However, its latest verdict, on the high-profile antitrust case against the Temasek group and Telkomsel, which is majority-owned by government-controlled Telkom, raises a lot of questions not only about its technical competence but also the integrity of KPPU commissioners.
Certainly, Temasek will appeal to the district court and the Supreme Court, though entering the court system in the country may plunge the Singapore government-owned investment company into another imbroglio.
The problem is that, unlike in many developed countries, there are no specific district courts here assigned to handle antitrust cases, which usually involve complex business deals. Hence, there is not a single court which has enough judges with an adequate body of expertise to examine cases related to the law on business competition.
But simply paying the fines and divesting its indirect stake in either Indosat or Telkomsel means acknowledging it has committed business sins and such an admission will damage its reputation all over the world.
A ruined reputation would adversely affect Temasek investment operations overseas on which this government's investment holdings have relied increasingly for incomes.
The KPPU ruling indeed puts Temasek in a very delicate position.
Therefore there is no other alternative for Temasek but to fight it out up to the Supreme Court, even with all the uncertainty about the legal proceedings and final results.
Since the KPPU ruling also requires divestment, this case may also be eligible to be filed with the World Bank's arbitration body, the International Center for the Settlement of Investment Disputes (ICSID) in Washington. The question, though, is whether Temasek -- which in the perception of the Indonesian government and general public is synonymous with the Singapore government -- is willing to pursue such a lawsuit at the risk of causing severe strains on bilateral relations.
But the KPPU's decisions are also a rebuke to the Indonesian government, as they reveal how utterly incompetent it has been in appointing directors and commissioners (supervisors) to Indosat and Telkomsel.
The fact is the government-controlled Telkom owns 65 percent of Telkomsel and 14.5 percent of Indosat, while Temasek, through its subsidiaries, holds only around 19 percent of Telkomsel and around 31 percent of Indosat. In addition, the government also owns a golden share in Indosat that provides it with a veto right over major corporate actions.
How could the government-appointed directors and commissioners, which make up the majority of the boards at both mobile telecommunications companies, allow Temasek to collude with Telkomsel in abusing its market dominance and committing other monopolistic acts?
But all in all, we should give credit where credit is due. The KPPU should be commended for its ruling that each buyer of the stake Temasek and its subsidiaries will sell either in Indosat or Telkomsel cannot acquire more than five percent.
This ruling at least will kill the rumor that a big foreign investment company, eagerly looking for investment opportunities in telecommunication in Indonesia, was behind the KPPU move on Temasek.
However, national and foreign investors eying stakes in Indosat or Telkomsel should have patience because, based on the KPPU ruling, Temasek shall complete its divestment within two years after the KPPU rulings become final and binding. This means more than 27 months from now (after all of the appeal process is completed) or even much longer if Temasek brings the case to the ICSID in Washington.
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