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ublicly listed telecommunications operator PT Indosat and its subsidiary PT Indosat Mega Media (IM2) have maintained their innocence despite the Attorney General’s Office’s (AGO) indictment of both companies for misuse of 3G broadband network services.

Lawyer Luhut Pangaribuan disputed the AGO’s claims, saying that the companies had not violated any laws when Indosat leased the 3G networks it acquired from the government to its subsidiary IM2.

“A subsidiary using its parent’s networks to provide these networks to end users is completely in line with the Telecommunications Law that the country implements. The AGO ruling is totally baseless and wrong,” Luhut said on Sunday.

“The ruling is also dangerous for the telecommunications industry because such practice has become commonplace in Indonesia. If business relations between Indosat and IM2 were pronounced illegal, other providers would be affected as well. That is going to be a serious blow both to the industry and the customers.”

He said the companies would send a letter to the AGO this week, seeking further explanation on the issue.

The issue rose to prominence early last year when the AGO said that IM2 had allegedly overstepped its authority by providing the public with the 2.1 GHz/3G broadband frequency following a deal with its parent company.

As a network provider, Indosat won broadband networks worth Rp 160 billion (US$16.64 million) through a government tender in 2006. Indosat forged cooperation with IM2 in providing the 2.1 GHz/3G broadband services to the public.

Indosat is 65 percent owned by Qatar Telecom (Qtel Asia) Pte. Ltd.; 14.29 percent owned by the Indonesian government; 5.62 percent by SKAGEN AS; and 15.09 percent by the public.

An NGO called Indonesian Telecommunication Consumer (KTI) reported the practices of Indosat and its subsidiary to the AGO’s West Java office. According to the AGO, the business deal violated the 1999 Telecommunications Law, the 2000 governmental decree on telecommunication providers and the 2006 Communications and Information Ministerial Regulation on the 2.1 GHz frequency band usage for mobile networks.

Under these provisions, mobile service providers should secure their own license to provide 3G services.

The AGO earlier charged former president director of IM2 Indar Atmanto and former president director of Indosat Johny Swandi Sjam under the Anticorruption Law for non-procedural use of the 3G frequency, which caused about Rp 3.8 trillion (US$396 million) in financial losses to the state. In total, the AGO has charged two individuals and two corporations in the case.

Indosat president director and CEO Alexander Rusli said that both the parent and subsidiary had yet to receive information from the AGO regarding the broadband case.

In line with the company’s lawyer, Alexander also denied the two companies’ involvement in the graft case, saying that both Indosat and IM2 did not break any laws in providing 3G network services.

“The collaboration between Indosat and IM2 is legal as stated by the telecommunications and information minister in his letter on Feb. 24, 2012. Through the letter, the minister also said that Indosat and IM2 had fulfilled all of their financial obligations to the state, including the broadband frequency deal,” Alexander said in a statement.

In addition, Communications and Information Ministry spokesman Gatot Dewa Broto said that the companies were not guilty.

“There is no violation or irregularity in the Indosat-IM2 network deal. But, if the AGO thought that there was something wrong in the case, we respect the AGO’s ruling.”

Indonesian Telematics Community (Mastel) executive director Eddy Thoyib said the AGO’s ruling would create an unhealthy environment for telecommunications investment.