Indonesian legislation under the spotlight as Telkomsel declared ‘bankrupt’

21 Sep 2012

Reuters writes that an Indonesian court ruling that the country’s leading cellco by subscribers, PT Telkomsel, is ‘bankrupt’ for the non-payment of a disputed USD555,700 debt, has thrown into question a potentially flawed legal framework that invites ‘abuse and can trip up even highly profitable companies’ in the region’s largest economy. Although analysts, shareholders and industry watchers have greeted the decision as merely a ‘quirk of the country’s legal system’ and a ruling that will likely be overturned on appeal, the case has once again raised concerns that Indonesia’s bankruptcy laws are open to abuses – including forced settlements to disputes – posing ‘unnecessary risks’ for enterprises looking to invest in the country.

Telkomsel, a subsidiary of PT Telekomunikasi Indonesia (Telkom), was hauled into court by pre-paid phone voucher firm PT Prima Jaya, over the non-payment of a USD555,700 bill. The commercial court in Jakarta upheld the claim and ruled Telkomsel ‘bankrupt’ on 14 September – despite the cellco booking 1H12 net profits of USD770 million. The matter is expected to be resolved in the upper courts and to date, has had only a marginal impact on the group’s share price.

Indonesia, Telkomsel (Telekomunikasi Selular)