KPPU alleges price fixing by telco companies

The Jakarta Post , Jakarta | Tue, 10/23/2007 4:11 PM | Business

Andi Haswidi, The Jakarta Post

A final report issued by an investigation team on the Business Competition Supervisory Commission (KPPU) shows indications of price fixing practices in the mobile telecommunications industry involving Telkomsel, Indosat and Singapore's Temasek Holdings.

According to the report, obtained by The Jakarta Post on Monday, price-fixing practices were allegedly conducted by Indonesia's two largest mobile operators, Indosat and Telkomsel, under the influence of Temasek, which part-owns the two companies.

However, facts and data presented in the report do not prove the role of Temasek in influencing the pricing policy of Telkomsel and Indosat.

Temasek holds a 35 percent stake in Telkomsel through its subsidiary SingTel Group. Meanwhile, Temasek's wholly owned subsidiary Singapore Technologies Telemedia (STT) has 75 percent ownership in Asia Mobile Holdings, which owns 41.9 percent of Indosat.

Two Temasek officials have also been appointed to Singtel's top management, while two Singtel commissioners have also been named Telkomsel commissioners.

The cross-ownership and double positions, the anti-monopoly watchdog says, violate the 1999 Anti-Monopoly Law.

With the cross ownership, Temasek has been able to use its power to control tariffs in Indonesia's mobile telecommunication services through Telkomsel and Indosat, the report says.

According to the report, Telkomsel has exercised its market power by determining the interconnection tariff between operators and threatened to cut the connection if fails to follow suit.

Moreover, citing the testimony of an official from a competitor, the report says that Telkomsel has also forced other operators to use Telkomsel-assigned third parties in using the interconnection.

According to the KPPU, such practices have caused excessive pricing in the country's mobile telecommunications industry, which according to research by Morgan Stanley issued in February 2006 is the second most expensive in the Asia Pacific region after Australia.

If the KPPU team findings are true, then state-owned PT Telekomunikasi Indonesia (Telkom), which owns 65 percent of Telkomsel, would have given full consent to the alleged monopoly practices.

Meanwhile, the report says that Indosat, under the influence of STT, allegedly deliberately postponed network development in order to let Telkomsel continue to rule the market.

Telkomsel officials have not been available for clarification, while Indosat president director Johnny Siswandy Sywandi Sjam has denied the allegation that Temasek kept his company underdeveloped.

As for Temasek, it has repeatedly denied meddling in the policy-making of both Telkomsel and Indosat as the company favored competition.

According to KPPU chairman Muhammad Iqbal, investigators in the team differ in their final conclusions as to whether Temasek is guilty of violating the competition law, considering the many perspectives in the matter.

""Four out of five investigators consider Temasek guilty while one does not. To reach a final conclusion we have to wait for responses from Temasek and other parties related to the case on the final report of the investigators,"" Iqbal said.

He promised that a final decision on the matter would be made no later by the middle of next month.

""I think the final decision will not be very different to the investigators' final report,"" he concluded.

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