Temasek appeal thrown out by Indonesian court

12 May 2008

Temasek Holdings, Singapore’s government-backed investment vehicle, has lost its appeal in the Indonesian courts to have an anti-trust ruling overturned, and must now sell its stake in either of the country’s largest mobile operators – Telkomsel and Indosat’s Satelindo unit – within a year. According to Bloomberg, an Indonesian court has ruled in favour of the country’s competition watchdog, the Business Competition Supervisory Commission (KPPU), which alleged that Temasek violated anti-trust laws by using indirect stakes in Telkomsel and Satelindo to ‘fix’ mobile call fees. On 19 November 2007 KPPU reported it had found evidence that Temasek Holdings had broken local competition law and ordered it to sell off either its Telkomsel or Indosat stake within two years. In addition, the KPPU said it was looking to fine Temasek Holdings and its telecoms units USD2.7 million each for breaching competition rules. It also says that anyone buying Temasek’s shares must not own more than 5% of the total shares on sale and must not have a link with the investment arm or other buyers. On 9 May the court cut the earlier fine to USD1.6 million and also offered Temasek 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,’ said presiding judge Andriani Nurdin. The court also overruled KPPU’s decision to ask Telkomsel to cut prices by 15%.

Temasek’s wholly owned ST Telemedia (STT) unit currently owns 75% of Asia Mobile Holdings, which itself has a 41.9% interest in Indosat, owner of mobile network operator Satelindo. STT acquired the stake in 2002 for USD634 million, but has seen the equity’s value soar to USD2.2 billion today. Temasek also holds 54.15% of Singapore Telecom which itself has a 35% interest in Telkomsel. Together, the two Indonesian companies currently control roughly 77% of the domestic mobile market.