Telkomsel case causes jitters

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The recent verdict by the Jakarta Commercial Court that declared Indonesia’s biggest mobile provider PT Telekomunikasi Selular (Telkomsel) bankrupt, despite a strong financial performance, will ignite concerns of legal uncertainty in doing business.

The court’s decision had been based on the company’s unpaid debts worth a mere US$560,000.

Senior lawyer Todung Mulya Lubis said on Sunday that Law No. 37/2004 on bankruptcy and extension of debt maturity, which was used as the basis for the verdict, had a profound weakness that was prone to abuse and could endanger companies.

 “An article in the law says that a court may declare a company bankrupt if it finds that the company has two or more outstanding debts. It is too easy. There should be other things the justice system considers before delivering this verdict,” he said.

The company’s balance of debt and assets, reputation and accountability should have been the key in the decision, he added.

Telkomsel, which is 65 percent owned by state-run telecommunication company PT Telkom and 35 percent by Singapore’s SingTel, has total assets worth Rp 58.72 trillion ($6.2 billion), and net profits of Rp 12.82 trillion in 2011.

Todung insisted it was high time for the law to be revised again as it had taken a toll on several solvent high-profile companies.

Canadian life insurance firm PT Asuransi Jiwa Manulife Indonesia, was declared bankrupt by the same court in 2002 after the receiver of now defunct PT Dharmala Sakti Sejahtera, Manulife’s local partner, had filed a bankruptcy petition over alleged unpaid dividends in 1999. The Supreme Court then granted Manulife’s appeal.

Two years after the Manulife case, another life insurance company was brought to court. This time, in 2004, it was British-based PT Prudential Life Insurance which was declared bankrupt by the Jakarta Commercial Court because of an alleged debt to one of its agents. The Supreme Court later reversed the decision.

Following the controversies, the law was revised in 2004, but lawmakers refused to set a minimum limit of unpaid claims for any party to be able to sue a company for bankruptcy.

Lawmakers also declined to include an article that would require a company’s financial performance be taken into consideration by the court before taking the bankruptcy decision.

Senior lawyer Frans Hendra Winarta reaffirmed the importance of thorough assessment of companies’ assets and debts. He said he doubted that Telkomsel could not pay its debts as they were only a tiny fraction of its assets.

Moreover, according to Frans, the bankruptcy suit against Telkomsel must be treated differently as
Telkomsel is a subsidiary of Telkom.

“The law says that only the Finance Minister can file a bankruptcy petition against state-owned enterprises. The treatment becomes much more complicated because Telkom is a listed company. Its shares are owned by the public,” he said.

The commercial court declared Telkomsel bankrupt on Friday due to failure to pay debts amounting to Rp 5.3 billion to PT Prima Jaya Informatika, the mobile phone operator’s top-up voucher distributor.

Prima Jaya has a deal with Telkomsel to distribute prepaid credit and Subscriber Identity Module (SIM) cards. The agreement was signed in June 2011 and was to last for two years. However, according to Prima Jaya, Telkomsel unilaterally terminated the agreement, stopping delivery of cards in June, causing losses to the distributor.

Prima Jaya also proved that Telkomsel has other debts to PT Extent Media Indonesia amounting to around Rp 40 billion. According to the law, a company can be taken to a bankruptcy court if it has failed to pay matured debts to at least two firms.

Telkomsel’s lawyer Warakah Anhar said that the company would soon submit an appeal against the commercial court’s ruling.

Telkomsel spokesman Ricardo Indra said the company was willing to settle the problem objectively, and that services to customers would not be disrupted.

“During the settlement process, Telkomsel assures its customers that its services won’t be disturbed,”
he said. (tas)