COPY DECISION The Case Number: 07/KPPU-L/2007 The Commission for the Supervision of Business Competition of the Republic of Indonesia hereinafter referred to as Commission that investigates the suspected infringement of the Law No.5/1999 on the Prohibition of Monopoly Practices and Unfair Business Competition, hereinafter referred to as the Law No.5/1999 conducted by: 1. Reported Party I: Temasek Holdings Pte. Ltd. Alamat: 60B Orchard Road, #06-18 Tower 2, The Atrium@Orchard, Singapore 238891; ------------------------------------------- 2. Reported Party II: Singapore Technologies Telemedia Pte. Ltd. Alamat: 51 Cuppage Road #10-11/17, StarHub Centre, Singapore 229469; ------------------------------------------ 3. Reported Party III: STT Communications Ltd.Alamat: 51 Cuppage Road #10-11/17, StarHub Centre, Singapore 229469; --------------------------------------------------------------- 4. Reported Party IV: Asia Mobile Holding Company Pte. Ltd. Alamat: 51 Cuppage Road #10-11/17, StarHub Centre, Singapore 229469; ------------------------------------------------ 5. Reported Party V: Asia Mobile Holdings Pte. Ltd. Alamat: 51 Cuppage Road #10- 11/17, StarHub Centre, Singapore 229469;------------------------------------------------------- 6. Reported Party VI: Indonesia Communications Limited. Alamat: Deutsche International Trust Corporation (Mauritius) Limited, 4th floor, Barkly Warhf East, Le Caudian Waterfront, Port Louis Mauritius;------------------------------------------------------- 7. Reported Party VII: Indonesia Communications Pte. Ltd. Alamat: 51 Cuppage Road #10-11/17, StarHub Centre, Singapore 229469; ------------------------------------------------- 8. Reported Party VIII: Singapore Telecommunications Ltd. Alamat: 31 Exeter Road Comcentre #28-00, Singapore 239732; ----------------------------------------------------------- 9. Reported Party IX: Singapore Telecom Mobile Pte. Ltd. Alamat: 31 Exeter Road Comcentre #28-00, Singapore 239732; ----------------------------------------------------------- 10. Reported Party X: PT. Telekomunikasi Selular. Alamat: Wisma Mulia lt. 15, Jl. Jend. Gatot Subroto No 42, Jakarta 12710;--------------------------------------------------------------
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DECISION The Case Number: 07/KPPU-L/2007 › docs › Putusan › putusan_temasek_eng.pdfSingapore Technologies Telemedia Pte. Ltd. Alamat: 51 Cuppage Road #10-11/17, StarHub Centre,
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COPY
DECISION
The Case Number: 07/KPPU-L/2007
The Commission for the Supervision of Business Competition of the Republic of Indonesia
hereinafter referred to as Commission that investigates the suspected infringement of the
Law No.5/1999 on the Prohibition of Monopoly Practices and Unfair Business
Competition, hereinafter referred to as the Law No.5/1999 conducted by:
9. Utility. In general, people are using PSTN telecommunication service, FWA and
cellular telecommunication5 much more than other network telecommunication
services. The cellular telecommunication, PSTN and FWA are provided to transfer
1 See Article 7 to 9 of the Law No. 36/1999 on Telecomunicación 2 Article 9.2 of the Government Regulation No. 52/ 2000 on Telecommunication Operating 3 The Ministrial Decree No. 35/2004 on the operating of fixed wireless access 4 Article 9 ayat (3) of Government Regulation No. 52/ 2000 on Telecommunication Operating 5 The Report of Directorate of Telecommunication-Director General of Posts and Telecommunications on the development of Fixed and Cell Phone (2004-2006)
COPYvoices and data so that they are no significant differences one to another. From the
point of view of utilities, therefore, PSTN, FWA, and cellular telecommunications
are classified as substitution products; ------------------------------------------------------
10. Characteristic. The significant characteristic differences of “cellular
telecommunication” between PSTN and FWA are their mobile abilities. The
operating service of PSTN is fixed while FWA is moveable but limited only to
one area code and cellular telecommunication is fully moveable. Technologically,
cellular telecommunication can be compatible under the platform of both Global
System for Mobile Communication (‘GSM”) and Code Division Multiple Access
(“CDMA”) as it works as well for FWA. The difference of technology between
GSM and CDMA does not distinguish their service characters. The character of
fixed service is determined by the license owned by cellular operator or FWA.
Therefore, PSTN and FWA are not substitutions of cellular telecommunication
cellular apart from the kind of technology implemented by the operators of FWA
and cellular telecommunication (GSM or CDMA); ---------------------------------------
11. Price. Regarding to the tariff, there is a tariff coverage between services provided
by PSTN and cellular telecommunication in which the tariff coverage of FWA is
similar to those of PSTN’s, while the tariff coverage of service provided by
cellular telecommunication is higher than both of them. Concerning the tariff,
therefore PSTN and FWA are not substitutions of cellular telecommunication; ------
12. Consumer survey conducted by KPPU to the cellular phone users indicates that
service provided by FWA and PSTN are not substitutions of cellular
26. In October 1996, PT. Excelcomindo Pratama (“XL”) began to enter cellular
market and to take part in enlivening the competition of cellular
telecommunication operator in Indonesia;--------------------------------------------------
27. In May 2001, PT. Indosat Multi Media Mobile (”IM3”) was founded by Indosat
and began to enter cellular market in August 2001 and to take part in enlivening
the competition of cellular telecommunication operator in Indonesia; -----------------
28. In 1999, the Law No. 36/1999 on Telecommunication was published aiming at
promoting telecommunications industry under the principles of fair competition as
it stated in Article 10 and its elucidation6; -------------------------------------------------
29. To follow up the Ministerial Decree No.72/1999, on 3 April 2001 PT Indosat and
PT Telkom agree to divest their ownership at Telkomsel, Satelindo and Lintas
Artha. Such an agreement has changed the ownership structures in Telkomsel and
Satelindo. Telkom gained additional shares in Telkomsel from Indosat as high as
6 Article 10 of the Law No 36/1999 :(1) In operating telecommunication business, it is not permitted to conduct activities which lead to monopoly practice and unfair fompetition among the operators (2) The prohibition as it mentioned in (1) is prescribed by the regulation. The elucidation of the Article is: the Article is made it possible to create fair competition among operators. The valid Law for this purpose is the Law. No. 5/1999 on the Prohibton of Monopoly Practice and unfair competition along with its implementation regulation.
COPY35%, while Indosat gained additional shares in Satelindo from Telkom as high as
30. Further, Indosat performs an acquisition of Bimagraha’s shares that owns as high
as 45% of Satelindo’s shares. In June 2002, Indosat gains 25% of Satelindo’s
additional shares that used to be owned by Detemobil. Since then, Indosat controls
100% of Satelindo’s shares -------------------------------------------------------------------
31. At the end of 2001, the shares of Telkomsel owned 17.28% by KPN Netherland
and 5% owned by Sedtco Megacell Asia are bought out by SingTel through
SingTel Mobile and followed then by the selling of 12.7% Telkomsel’s shares
owned by PT. Telkom to SingTel Mobile in 2002. Totally, the shares ownership of
SingTel Mobile in Telkomsel rises too 35%; ----------------------------------------------
32. In May 2002, the 8.1% shares of Government of Indonesia (GOI) in Indosat was
divested through global tender. Later, on 15 December 2002 the 41.9% shares of
the GOI in PT. Indosat was divested to Singapore Technologies Telemedia
(”STT”) and then owned by its subsidiary, Indonesia Communication Limited
(”ICL”), founded in Mauritius. Thereby, the shares of ownership structure of
Indosat are as follow:--------------------------------------------------------------------------
i. The GOI, 14.44%; -----------------------------------------------------------
ii. ICL, 41.9%;-------------------------------------------------------------------
iii. Public, 45.19%; --------------------------------------------------------------
33. Following the acquisition of STT, Indosat realized its plan to perform vertical
merger with its subsidiaries, Satelindo, Bimagraha and IM3 on 20 November
7 “The Blueprint [Transportation Ministrial Decree No. 72/1999] call for progressive elimination of these shareholdings to promote competition and avoid any actual or potential conflict of interest in more competitive telecommunication environment and the Proposed Transaction are consistent with this Blueprint…. Mobile phone service: Pursuant to the conditional SPA, the current joint-shareholdings by Telkom and the Company [Indosat] will be dissolved and the mobile market will be fully competitive as provided in the Blueprint, Indosat, 2000 Annual Report, Form 20-F, hal 41;
COPY2003. It aimed at focusing its business in cellular telecommunication service. By
now, Indosat is the second leading cellular telecommunication operator in
Indonesia and possesses 25.15% of market share in 2006; ------------------------------
5.2 The Structure of Telecommunication Industry; ------------------------------------
50. The list of maximum postpaid tariff regulation that is regulated by
Government in its two Decrees are available in the following table: -------------------
Komponen Biaya
Tarif (Rp.)
Satuan
A Biaya Aktivasi 200.000 /sambungan B Bulanan 65.000 /bulan C Air Time 325 /Menit D Biaya Jelajah 1000 / Panggilan
9 The tariff amount of telecommunication network and/or telecommunication service is fixed by the operators of telecommunication network and/or telecommunication service on the basis of formula that is stipulated by Government. 10 Article 6 of the Ministrial Decree 27/98:”On the amount of Service Tariff of Prepaid Mobile Phone Cellular is the maximum tariff as it stated in the Annex of this Decision.”
COPY
Biaya Pemakaian Langsung
Waktu Ekonomi: Pukul 22.00-08.00 dan Minggu dan Hari Raya Tarif Mobile-Mobile 2 x airtime Mobile-PSTN 1 x airtime PSTN-Mobile 1 x airtime TUK-Mobile 1 x airtime + 41 %
Waktu Bisnis: Pukul 08.00-22.00 Tarif Waktu Ekonomi x 125%
Cost Component
Tariff (Rp)
Unit
A Activation Cost 200,000 /Connection B Monthly 65,000 /Month C Air time 325 /Minute D Roaming 1000 / Call
Direct Using Cost
Business Hour: At 08.00-22.00 Economical Hour x 125%
51. The maximum Prepaid Tariff is 140% of the business hour tariff of valid postpaid
Halo Card Telkomsel 250 250 Pro XL Postpaid 250 500 Satelindo GSM Indosat 300 300 IM Bright 250
To XL 350 500
Valid in 2003
Operator SMS for Domestic Acces
SMS for International Access
Kartu Halo Telkomsel 250 250 Pro XL Postpaid 250 500 Satelindo GSM Indosat 300 300 IM Bright 250
To XL 350 250
Valid in 2004 Operator SMS for Domestic Access SMS for International Access Kartu Halo Telkomsel 250 500 Pro XL Postpaid 250 500 Matrix Indosat* 300 300 IM Bright 250
Ke XL 350 250
*Satelindo change its brand to Matrix
Valid in 2005 Operator SMS for Domestic Access SMS for International Access Kartu Halo Telkomsel 250 500 Pro XL Postpaid 250 500 Matrix Indosat* 300 300 IM Bright 250
To XL 350 350
Valid in 2006
COPYOperator SMS for Domestic Access SMS for International Access
Simpati Telkomsel* (off peak 23.00-07.00) (peak 07.00-23.00) Valid from 1 April 2002
700 910
1,200 1,500
IDR 910 IDR 1,600
Free for local zone Free for local zone 2500#, 3500## (neighboring zone) 3500#, 4000## (overseas zone)
Mentari ** Valid from 1 March 2002
1,013 1,499 1,713 Free
Pro XL** Valid from 15 July 2001
1,070 1,600 1,870 Free
IM3 Smart*** Valid from 2002
850 1,100 1,450 2500 (overseas zone)
*The tariff is included 10% added value tax, 1 unit = 30 second for local call and inter local call, 1 unit = 15 second for international call **Pre added value tax tariff, 1 unit = 30 second *** 10% Added value tax tariff, 1 unit = 30 second # off peak
The Year of 2002-2003 Operator To PSTN To the To the Entry Call
COPYSame Operators
Other Operators
Simpati Telkomsel* (off peak 23.00-07.00) (peak 07.00-23.00) Valid from 1 April 2002
700 910
1,200 1,500
IDR 910 IDR 1,600
Free for local zone Free for local zone 2500#, 3500## (neighboring zone) 3500#, 4000## (overseas zone)
* The tariff is included 10% added value tax, 1 unit = 30 second for local call and inter local call, 1 unit = 15 second for international call **Pre added value tax tariff, 1 unit = 30 second *** 10% Added value tax tariff, 1 unit = 30 second # off peak ##peak time
The year of 2004 (XL divides the prepaid services into two, called XL Bebas and Jempol)
Operator To PSTN
To the Same Operator
To the Other Operators
Entry Call
COPYSimpati Telkomsel* (off peak 23.00-07.00) (peak 07.00-23.00) Valid from 1 May 2004
700 950
1,200 1,500
IDR 1,300 IDR 1,600
Free
Mentari** Valid from 1 Juni 2004
850 1,500 1,710 Free
XL Bebas** XL Jempol** (off peak 22.00-06.00) (peak 06.00-22.00) Valid from 18 August 2004
875 399 699
1,600 999 1,299
1,750 1,299 1,599
Free
IM3 Smart*** (economical tariff 00.00-06.59) (economical tariff 07.00-23.59) Valid from 21 June 2004
600 900
500 1,000
1,300 1,550
Free
* The tariff is included 10% added value tax, 1 unit = 30 second for local call and inter local call, 1 unit = 15 second for international call **Pre added value tax tariff, 1 unit = 30 second *** 10% Added value tax tariff, 1 unit = 30 second. The local call is imposed 20% for a call performed in the outside of original area.
The year of 2004 – 2005
Operator To PSTN
To the Same Operator
To Other Operator
Entry Call
Simpati Telkomsel* (off peak 23.00-07.00) (peak 07.00-23.00) Valid from 1 February 2005 The Kartu As Telkomsel** Valid from 22 September 2004
700 950 700
300 1,500 1,000 (to similar card) 1200 (to Halo and Simpati Cards)
1,300 1600 1500
Free Free
Mentari*** Valid from 1 June 2004
850 1,500 1,710 Free
XL Regular Free **** XL Free for the area of Sumatra **** XL Free for the area of Kalimantan**** Valid from 1July 2005 XL Jempol*** (off peak 22.00-06.00) (peak 06.00-22.00) Valid from 18 August 2004
875 743 656 399 699
1,360 1,360 1,190 999 1,299
1,650 1,485 1,303 1,299 1,599
Free Free
IM3 Smart*** (economical tariff 00.00-06.59) (economical tariff 07.00-23.59) Valid from 21 June 2004
600 900
500 1,000
1,300 1,550
Free
COPY* The tariff is included 10% added value tax, 1 unit = 30 second for local call and inter local call, 1 unit = 15 second for international call **Pre added value tax tariff, 1 unit = 30 second *** 10% Added value tax tariff, 1 unit = 1 minute
The year of 2005 – 2006 (IM3 merges to Indosat)
Operator To PSTN Intraoperator Interoperator Entry
Call Simpati Telkomsel* (off peak 23.00-07.00) (peak 07.00-23.00) Valid from 1 February 2005 Kartu As Telkomsel** Valid from 11 April 2006
700 950 1800
300 1500 1200 (all products of Telkomsel)
1300 1600 2400
Free Free
Mentari*** Berlaku mulai 16 April 2006
900 1,500 freetalk*** 1,500 Free
XL Bebas Reguler**** Valid from 27 September 2006 XL Free for the area of Sumatra **** XL Free for the area of Kalimantan**** Valid from 1 July 2005 XL Jempol*** (off peak 22.00-06.00) (peak 06.00-22.00) Valid from 27 September 2006
837 743 656 399 699
1,248 1,360 1,190 500 1,000
1,537 485 1,303 1,299 1,500
Free Free Free
IM3 Indosat*** (economical tariff 00.00-06.59) (economical tariff 07.00-23.59) Valid from 21 June 2004
600 900
500 1,000
1,300 1,550
Free
* The tariff is included 10% added value tax, 1 unit = 30 second for local call and inter local call, 1 unit = 15 second for international call **Pre added value tax tariff, 1 unit = 1 second until December 2006
COPY***Pre added value tax tariff, 1 unit = 30 second. Free talk starts from 00.00-05.00 with IDR 25,000 for minimum pulse **** 10% Added value tax tariff, 1 unit = 1 minute
59. In 2002 to 2006 the prepaid SMS tariff of each operator can be seen in the
following tables: -----------------------------------------------------------------------------
Table of Prepaid SMS Tariff Valid from 2002 Operator SMS for Domestic Acces SMS for International Access Simpati Telkomsel 350 500 Pro XL Prepaid 350 500 Mentari Indosat 350 350 IM3 Smart 350 500
Valid from 2004 (in 2003 the tariff was not increased) Operator SMS for Domestic Acces SMS for International Access Simpati Telkomsel Kartu As*
350 300
600 1,000
XL Bebas** XL Jempol**
350 99 (to the similar operator) 299 (other operators)
500 499
Mentari Indosat 300 300 IM3 Smart 350 350
*The Telkomsel prepaid new brand **The Pro XL Prepaid new brand
Valid from 2005
Operator SMS for Domestic Acces SMS for International Access
Simpati Telkomsel Kartu As
350 150 (to similar As Card) 300 (to Telkomsel and other operators)
(44%), and PT Indosat (around 41%); ------------------------------------------------------
68. ST Telemedia was founded in 1994 and serves fully on information services,
telecommunication, and entertainment by applying fixed line, mobile, and internet.
The businesses of ST Telemedia are focused in two fields:------------------------------
a. Wireless telephony---------------------------------------------------------------
b. Global internet protocol (IP) services
69. Referring to SC 13D, a document submitted to US Securities and Exchange
Commission, ST Telemedia owns the whole shares of STT Communications Ltd.
and Indonesia Communication Ltd; ---------------------------------------------------------
70. On 15 December 2002, ST Telemedia through STT Communication and
Indonesian Communication Ltd. acquired the Indosat’s B-series shares for the
amount of 434,250,000 or 41.94 % of the total of B-series shares; --------------------
71. SingTel was founded in March 1992 and its initial public offering was in October
1993. SingTel provides voices and data service on fixed line, mobile and internet.
SingTel is a leading cellular telecommunication operator in Singapore by
controlling 43% of prepaid cellular telecommunication market; ------------------------
72. In 2001, SingTel performed a biggest acquisition to foreign company by buying
Optus, a second largest telecommunication operator in Australia, followed then by
buying Telkomsel (Indonesia), Bharti Group (India), Pacific Bangladesh Telecom
Ltd. (Bangladesh). SingTel also increased its share ownership at Globe Telecom
(Philipines). Since March 2006, SingTel and its affiliates had possed 85 million
cellular phone subscribers or the biggest Asian cellular operator outside China; -----
73. In 2005, Temasek investment portfolio in telecommunication sector developed
rapidly from four in 2004 to nine companies and in six of them, Temasek became
COPYa majority shareholder. Temasek is only a minority shareholders in some
companies but it empowered the investment in its own existing companies;----------
Table 14 Temasek Investment Portfolio in Telecommunication and Finance Service
(Year 2004)
Telecommunication The Portion of Share (%)
Finance Service The Portion of Share (%)
SingTel 65 DBS 28 ST Telemedia 10013 Bank Danamon 53 Media Corp 100 ICICI Bank 9 Telekom Malaysia 5 Bank Internasional
Indonesia (BII) 26
Hana Bank 4 Fullerton Fund Management 100
74. According to SingTel Annual Report 2005/2006, in acquiring Telkomsel, SingTel
used SingTel Mobile, a SingTel’s subsidiary in which its 100% of the shares are
owned by SingTel;-----------------------------------------------------------------------------
75. In 2006, Temasek sold his share in several telecommunications companies like
Telekom Malaysia and Equinix, as well as sold some of his shares available in the
StarHub company and SingTel. Through Alpen Holdings, Temasek had the share
to the telecommunications company of Shin Corp. In 2006 also, Temasek erected
Asian Financial Holdings, a company that held was full of the control of the
company and banking of the financial service that were had by Temasek; -----------
------------------------------------------------
Table 15 Temasek Portfolio Investment in Telecommunication and Finance Service Companies
(2005)
Telecommunication Companies
Portion of Share (%)
Finance Service Firms Portion of Share (%)
SingTel 63 DBS 28 ST Telemedia 100 Bank Danamon 56 Media Corp 100 ICICI Bank 9
13 Through Singapore Technologies Pte Ltd
COPYTelekom Malaysia 5 Bank Internasional Indonesia
(BII) 35
SingTel Optus 6314 Hana Bank 10 StarHub 6315 Fullerton Fund Management 100 Global Crossing 7116 Malaysian Plantations/Alliance
Bank 15
INDOSAT 4117 China Minsheng Banking Corporation
5
Equinix 3518 NDLC-IFIC Bank 25
Table 16 Temasek Portfolio Investment in Telecomunication and Finance Service (2006)
Telecommunication Companies
Portion of Share (%)
Finance Service Companies Portion of Share (%)
SingTel 56 DBS 28 ST Telemedia 100 Bank Danamon 59* Media Corp 100 ICICI Bank 8 StarHub 6319 Bank Internasional Indonesia
(BII) 35*
Global Crossing 7120 Hana Bank 10* INDOSAT 4121 Fullerton Fund Management 100 Shin Corporation 4422 China Construction Bank 6* E. Sun Financial Holding
Company 6*
Bank of China 5*
76. Regionally, Temasek controls most part of cellular telecommunication industry in
ASEAN region by possessing shares in many cellular telecommunication
companies of ASEAN countries. Totally, Temasek has more than 120 million
subscribers in India, Indonesia and Australia; ---------------------------------------------
14 Through SingTel 15 Through ST Telemedia and MediaCorp 16 Through ST Telemedia and MediaCorp 17 Through ST Telemedia and MediaCorp 18 Through ST Telemedia and MediaCorp 19 Through ST Telemedia and MediaCorp 20 Through ST Telemedia 21 Through ST Telemedia 22 Through Aspen Holdings * Asia Financial Holdings.
COPY77. The authorities of Temasek, SingTel, SingTel Mobile, STT, STTC, AMHC,
AMH, ICL and ICPL over their subsidiaries are stated in their own statutes as it
j. Under Article 60 (c), Article 98 and Article 99 of the STTC Statutes, STT as the
shareholder of STTC is authorized to appoint and to dismiss Board of Director of
STTC;
k. Under Article 60 (c), Article 98 and Article 99 of the STTC Statutes, AMH as the
shareholder of ICPL is authorized to appoint and to dismiss Board of Director of
ICPL ;
l. Under Article 60 (c), Article 98 and Article 99 of the AMH Statutes, AMHC as the
shareholder of AMH is authorized to appoint and to dismiss Board of Director of
AMH ; -----------------------------------------
COPYm. Under Article 60 (c), Article 98 and Article 99 of the ICPL Statutes, AMH as the
shareholder of ICPL is authorized to appoint and to dismiss Board of Director of
ICPL ;
n. Under Article 9 (a ) of the ICL Statutes, AMH as the shareholder of ICL is
authorized to appoint and to dismiss Board of Director of ICL; -------------------------
o. Under Article 10 (3) of the Statutes of Indosat, ICL and ICPL as the shareholders
of Indosat are authorized to appoint and to dismiss Board of Director of Indosat
and under Article 14 (2), to appoint and to dismiss Board of Commisioner;----------
78. With its authority, Temasek appoints managements of each company. The control
is in the Holding Company and in this matter is Temasek, that can be seen from
the double position in its companies, as it is seen in the following table: --------------
a. From Temasek to Telkomsel:
Temasek S. Dhanabalan (Chairman) Kua Hong Pak Kwa Chong Seng (Deputy Chairman) Sim Kee Boon Lim Siong Guan (Deputy Chairman) Teo Ming Kian
Goh Yew Lin Yong Siong Goh (Managing Director)
Ho Ching (CEO) Robert Lhong (Managing Director)
Simon Israel Vijay Parekh
Koh Boon Hwee Peter Seah (Advisory Panel)
Sing Tel Director Management
Chumpul NaLamlieng Chua Sock Koong
Graham John Bradley Francis Heng Hang Keong
Paul Chan Kwai Wah Lim Chuan Poh Chua Sock Koong Lim Eng Hee Sweng Keat Ng Yoke Weng Simon Israel Paul O'Sullivan Tommy Koh Lee Hsien Yang John Powell Morschell Kaikhushru Shiavax Nargolwala Deepak S Parekh
COPY
b. The table shows a double position in Temasek Group. There are:---------
i. Simon Israel is a member of both Temasek and member of
SingTel Board of Director; -----------------------------------------------
ii. Chua Sock Koong is in both SingTel and SingTel Mobile
managements;
iii. Lim Chuan Poh is in Singtel management as well as a
commisioner of Telkomsel; ----------------------------------------------
iv. Leong Shin Loong is a member of Singtel Board of Director as
well as a commissioner of Telkomsel; ----------------------------------
c. From Temasek to Indosat: ------------------------------------------------------
Temasek S. Dhanabalan (Chairman) Kua Hong Pak Kwa Chong Seng (Deputy Chairman) Sim Kee Boon Lim Siong Guan (Deputy Chairman) Teo Ming Kian Goh Yew Lin Yong Siong Goh (Managing Director) Ho Ching (CEO) Robert Lhong (Managing Director) Simon Israel Vijay Parekh Koh Boon Hwee Peter Seah (Advisory Panel)
STT Directors (BAP 2706)
Lee Theng Kiat Ho Ching (Executive Vice President) Lim Ming Seong George Chow Yew Tong (Senior VP) Vincente Perez Richard Lim (Senior VP) Justin Weaver Lilley Pek Siok Lan (Legal Counsel) Chang See Hiang Lian Mae Ai (Legal Counsel) Sir Michael Perry Chia Wen See (Legal Cunsel)
Nicky Tang Ng Kuang SingTel Mobile
Leong Shin Loong Chua Sock Koong Telkomsel
Komisaris Direksi
Rinaldy Firmansyah Kiskenda Suriahardja (Dirut)
Leong Shin Loong Triwahyusari
Lim Chuan Poh Bambang Riadhy Oemar
Losso Judianto Yuen Kuan Moon Arif Yahya Ho Boon Teck Alan
COPYPeter Seah Stephen Geoffrey Miller (CFO)
Sam Soon Lin (BAP 2706) Sio Tat Hiang (Executive Vice President)(website Indosat 25/09)
Tan Guong Ching STT Comm
Directors (BAP 2706) Lee Theng Kiat Ho Ching (Executive Vice President) Lim Ming Seong Stephen Geoffrey Miller (CFO) Vincente Perez Justin Weaver Lilley Chang See Hiang Sir Michael Perry Peter Seah Sam Soon Lin (BAP 2706) Tan Guong Ching
AMHC Directors
Lee Theng Kiat (BAP 2706) Stephen Geoffrey Miller (CFO) BAP 2706
Vincente Perez Pek Siok Lan (Company Secretary) Peter Seah Lian Mae Ai (Company Secretary) Tan Guong Ching (BAP 2706) Yap Boh Pin Edward Lee
AMH Directors
Lee Theng Kiat (BAP 2706) Pek Siok Lan (Company Secretary) Vincente Perez Lian Mae Ai (Company Secretary) Peter Seah Tan Guong Ching (BAP 2706) Yap Boh Pin Edward Lee Syekh Muhammed Nasser Marafih
ICL IC Pte. Ltd. Kek Soon Eng (Director) Kek Soon Eng Lee Theng Kiat Stephen Geoffrey Miller (CFO) Mark Sebastian Law Chia Wen See (Company Secretary)
Indosat Direksi Komisaris
Johnny Swandi Djam (President Director) Sum Soon Lin (BAP 2706) Kaizad B Herjee (Deputy President Director) Syeikh Mohammed Fadzri Sentosa (Jabodetabek & Corp Sales Director)
Lee Theng Kiat (BAP 2706)
Syakieb Sungkar (Regional Sales Director) Peter Seah Guntur S. Siboro (Marketing Director) Sio Tat Hiang Roy Kannan (IT Director) Setio Anggoro Dewo (Independen) Raymond Tan Kim Meng (Network Director) Roes Ariwidjaya
Lim Ah Doo (Indenpenden) Temasek S. Dhanabalan (Chairman) Kua Hong Pak Kwa Chong Seng (Deputy Chairman) Sim Kee Boon Lim Siong Guan (Deputy Chairman) Teo Ming Kian Goh Yew Lin Yong Siong Goh (Managing Director) Ho Ching (CEO) Robert Lhong (Managing Director) Simon Israel Vijay Parekh Koh Boon Hwee Peter Seah (Advisory Panel) STT Directors (BAP 2706) Lee Theng Kiat Ho Ching (Executive Vice President) Lim Ming Seong George Chow Yew Tong (Senior VP) Vincente Perez Richard Lim (Senior VP) Justin Weaver Lilley Pek Siok Lan (Legal Counsel) Chang See Hiang Lian Mae Ai (Legal Counsel) Sir Michael Perry Chia Wen See (Legal Cunsel) Peter Seah Stephen Geoffrey Miller (CFO)
Sam Soon Lin (BAP 2706) Sio Tat Hiang (Executive Vice President)(website Indosat 25/09)
Tan Guong Ching STT Comm Directors (BAP 2706) Lee Theng Kiat Ho Ching (Executive Vice President) Lim Ming Seong Stephen Geoffrey Miller (CFO) Vincente Perez Justin Weaver Lilley Chang See Hiang Sir Michael Perry Peter Seah Sam Soon Lin (BAP 2706) Tan Guong Ching AMHC Directors
Lee Theng Kiat (BAP 2706) Stephen Geoffrey Miller (CFO) BAP 2706
Vincente Perez Pek Siok Lan (Company Secretary) Peter Seah Lian Mae Ai (Company Secretary) Tan Guong Ching (BAP 2706) Yap Boh Pin Edward Lee AMH Directors Lee Theng Kiat (BAP 2706) Pek Siok Lan (Company Secretary)
COPYVincente Perez Lian Mae Ai (Company Secretary) Peter Seah Tan Guong Ching (BAP 2706) Yap Boh Pin Edward Lee Syekh Muhammed Nasser Marafih ICL IC Pte. Ltd. Kek Soon Eng (Director) Kek Soon Eng Lee Theng Kiat Stephen Geoffrey Miller (CFO) Mark Sebastian Law Chia Wen See (Company Secretary) Indosat Directors Commisioner Johnny Swandi Djam (President Director) Sum Soon Lin (BAP 2706) Kaizad B Herjee (Deputy President Director) Syeikh Mohammed Fadzri Sentosa (Jabodetabek & Corp Sales Director)
Lee Theng Kiat (BAP 2706)
Syakieb Sungkar (Regional Sales Director) Peter Seah Guntur S. Siboro (Marketing Director) Sio Tat Hiang Roy Kannan (IT Director) Setio Anggoro Dewo (Independent) Raymond Tan Kim Meng (Network Director) Roes Ariwidjaya Wong Heang Tuck (Finance Director) Soeprapto (Independen) Wahyu Wiijayadi (Corporate Services Director)
Setyanto P Santosa
Lim Ah Doo (Indenpenden)
d. The table shows the double position in Temasek Group. There are: ------
v. Ho Ching is a CEO of Temasek, Executive Vice President of
STT, and Executive Vice President of STTC; -------------------------
vi. Lee Theng Kiat is a Director of STT, STTC, AMHC, AMH,
and a commissioner of Indosat; ------------------------------------------
vii. Lim Ming Seong is a Director of STT and STTC;-------------------
viii. Vincente Perez is a Director of STT, STTC, AMHC, and AMH. -
ix. Justin Weaver Lilley is a Director of STT and STTC; -------------
x. Chang See Hiang is a Director of STT and STTC;------------------
xi. Sir Michael Perry is a Director of STT and STTC. -----------------
COPYxii. Peter Seah is an Temasek Advisory Panel and a Director of
STT, STTC, AMHC, AMH, as well as a Commissioner of
Indosat.
xiii. Sam Soon Lin is a Director of STT, STTC, AMHC, AMH, and
80. When KPN Netherlands purchased Telkomsel’s shares, the status of Telkomsel
was converted to be a Foreign Investment company in 1996 with the agreement of
BKPM on 11 March 1996 (Under the Notary Act of Sutjipto SH. No 194 dated 21
June 1996); -------------------------------------------------------------------------------------
COPY81. In 2001, SingTel took over PT. Telkomsel shares from KPN Netherlands
(17.28%) and Setdco Megacell Asia (5%). In the middle of 2002, SingTel
increased its ownership by buying 12.72% of PT. Telkom share, by now the shares
of SingTel are to 35%. The composition of Telkomsel shares can be seen in the
following table: --------------------------------------------------------------------------------
Table 18 The Composition of Telkomsel Shares
Shareholders Total of Shares Paid Up Capital (IDR)
%
PT Telekomunikasi Indonesia Plc. 118,677 118,677,000,000 65
Singapore Telcom Mobile Pte Ltd 63,893 63,893,000,000 35
Total 182,570 182,570,000,000 100
82. The main products of PT Telkomsel are: ---------------------------------------------------
a. Halo Card, a postpaid GSM card launched in 1995, has had 14.7 million
subscribers by 2005. It is a market leader in postpaid GSM card; ----------
b. Simpati, a first prepaid GSM card in Asia, was launched in 1997 and its
target market is middle class; ----------------------------------------------------
c. “As” card, a prepaid GSM card, was launched in 2004 and its target
market is low end; -----------------------------------------------------------------
83. The service coverage of PT Telkomsel is the largest in Indonesia. It covers the
whole districts (100% ) and 40% of sub districts in Indonesia;--------------------------
84. Under the Statutes of Telkomsel, the authorities of Shareholders General Meeting
(Shareholder meeting), Commissioners, Management and the procedures of
decision making of are as follows: ----------------------------------------------------------
COPYa. Under Article 1.3.a of Telkomsel’s Statutes, the deeds of Board of Director
that must be approved by Shareholder General Meeting are:--------------------- 1. To amend share rights; to approve and to amend any scheme
option for employee; to issue shares or other equities; or to give option, warrant or other rights to buy shares or other rights that can be converted into shares; consolidation, conversion of repurchase limited company’s shares; or to perform initial public offering/IPO (it includes the possibility that the IPO covers a second component and a number of shares that are about to be sold by shareholders in the IPO). ----------------------------------------
2. To determine dividend or reserve fund, if: ----------------------------
a. The total of dividends or allotments that determined or paid in a fiscal year before second anniversary on the date of the Statutes approved by shareholders will exceed thirty five percents (35%) of the company’s profits after tax the fiscal year; or------------------------
b. The total of dividends or allotments that determined or paid in a fiscal year after second anniversary on the date of the Statutes approved by shareholders will exceed thirty percents (30%) of the company’s profits after tax the fiscal year; or ----------------------------
c. Dividend or allotments are determined or paid except the retained revenues; ----------------------------------------------------------------------
3. To amend the Statutes; ----------------------------------------------------
4. To convert core business of the company or to alter the main condition in the communication license issued to the company; ----
5. To liquidate, to disincorporate, to merge, to consolidate or to join
the company; ---------------------------------------------------------------
6. To perform company’s transaction under 10% of the revenues or 12.5% of the shareholder equities and it shall be reported in the last audited financial statement of the company; ---------------------
7. To appoint and dismiss public accountant for the company; -------
8. To approve shareholders audited financial statement of the company;--------------------------------------------------------------------
9. To release the company’s interest in one of its subsidiaries;---------
10. To arrange the incentive, including severance pay, for the commissioner;--------------------------------------------------------------
COPY
b. Under Article 11.3.b of the Telkomsel’s Statutes, the deed of Board of Director must be approved by commissioners as long as there are 20% of company’s shares owned by shareholders: --------------------------------
1. To approve commissioner’s audited financial statement of the company;--------------------------------------------------------------------
2. To establish a subsidiary or joint venture; partnership or operational cooperation; and an acquisition of companies or capital investment;---------------------------------------------------------
3. To receive or to lend loans or guarantee separately or if in whole with other accepted loans or given guarantees in the common book year, that exceed US$ 5,000,000 (or its equivalent in other currencies) or giving exemption, guarantees, performance bond or release any bank securities by company that exceed one (1) year or lengthen commitment that exceed one (1) year that, in or if it is in whole, bigger than US$ 5,000,000 (or its equivalent in other currencies) in common book year in which exemption, guarantee, performance bond or bank security obtained or lengthened;
4. To approve amendment or performance inappropriately with the Statues of the company;---------------------------------------------------
5. To arrange the incentive, including severance pay, for the
c. Under Article 11.3.c of the Telkomsel’s Statutes, as long as there are 20% shares owned by shareholders, the authorities of the managements are: ---------------------------------------------------------------------------------
1. To establish, to renew, to amend or to terminate an agreement or company’s transactions, with shareholders, subsidiaries that become shareholders, companies related to shareholders or member of Management or Commissioners, (i) value at higher than US$ 5,000,000 (or its equivalent in other currencies) or (ii) value at lower than the total of the above mentioned but the transaction is not under commercial customary condition or in daily business activities of the company;-------------------------------
COPY2. To approve the management’s audited financial statement ;
3. To give loan or other prolongation of credits independently, or if it is jointly with other loans and other prolongation of credits by the company in the same year-end, value at higher than US$ 5,000,000 (or its equivalent in other currencies);----------------------
4. To amend accounting policies of the company; -----------------------
5. To arrange the incentive, including severance pay, for the management officer;-------------------------------------------------------
d. Under Article 10.1 of the Telkomsel’s Statutes, Telkom is entitled to dispose 3 personnel (President Director, Director of Finance, and Director for other positions while SingTel Mobile is entitled to dispose 2 personnel in the Telkomsel Board of Director of --------------------------
e. Under Article 11.6 of the Telkomsel’s Statutes, the allotment of tasks and authorities of each member of management are stated by Shareholders General Meeting, but it could be given to Commissioners; ------------------------------------------------------------------
f. Under Article 11.6 of the Telkomsel’s Statutes, the management meeting will be a quorum only if it is attended by four member of management and one member nominated by shareholders who had at least 10% of the company’s shares;--------------------------------------------
g. Under Article 12.6 of the Telkomsel’s Statutes, the decisions taken in management meeting are based on the agreement of the majority of the member of management attended in the meeting or those of represented. In case of the votes are even, then the decisions are determined in the commissioner meeting. If the decisions cannot be taken in the commissioner meeting because the votes are even, the decisions are determined in shareholders general meeting;-----------------
h. Under the Article 13 (3) of the Telkomsel’s Statutes, in the Board of Telkomsel commisioner, Telkom is entitled to dispose four personnel and two for SingTel Mobile;----------------------------------------------------
i. Under Article 22.1 (a) of the Telkomsel’s Statutes, the general meeting will be a quorum only if it is attended by at least 51% (fifty one) of the total shares and one represented shareholders that at least owned 10% (ten) of the shares issued by the company;------------------------------------
j. The decision of the commissioner meeting was taken based on the agreement of the majority of the commissioner's member that was present or was represented. In the matter of the same number of the
COPYvoice did not agree and agree then this matter will be decided in Shareholder meeting. --------------------------------------------------------
k. The decision of the commissioner of the meeting was taken was based
on the agreement of the majority of the commissioner's member that was present or was represented. In the matter of the voice did not agree and agree was the same the number then this matter will be decided in Shareholder meeting
l. Shareholder meeting achieved the quorum if being attended by
representative shareholders at least 51 (fifty-one) percent of the number of shares with legal voting rights that were dismissed by the company including one representative of shareholders who had at least 10 (ten) percent of the share that was dismissed by the company.(the Article 22 articles 1 letter a Telkomsel Statutes);
m. The Shareholder meeting decision was taken was based on the
conference to mufakat and in the matter of the decision of the conference to mufakat was not reached, the decision was taken with the voting was based on the voice that agreed at least 51% (fifty-one percent) from the voice that was dismissed legitimately in being in a meeting;
n. Shareholder meeting achieved the quorum in the matter decided matters
that were arranged in the article 11,3 (a) if was attended by at least 80 (eighty) percent of all over the share of the company that was dismissed and stored was full was present or was represented and these matters it was decided with the voice agreed by at least 80 (eighty) percent of all over the company's shareholders who were dismissed and stored fully;
o. The Shareholder meeting decision was legal if agree to by at least 85% (eighty-five percent) from the number of legal voices in being in a meeting (the Article 22 articles 8 Telkomsel statutes);
p. The change in the Statutes including changing the name, the company's
place of residence, extended the company's period, changed capital of the foundation by reducing or enlarging capital of the company, united or dispersed the company only could be carried out with the decision from this unusual Shareholder meeting. Rapat must be represented at least 85% (eighty-five percent) from the number of shares that was dismissed by the company and must agree to by at least 85% (eighty-five percent) the number of legal voices in being in a meeting (the Article 25 articles 1 Telkomsel Statutes);
85. The structure of the Organisation of the Telkomsel Management was as
follows: --------------
COPY
86. That since 2002 till at this time, the position of the director of the trade and
the director of the operation always dinominasikan by SingTel
Mobile.(Annual report 2002-2006 and BAP Telkomsel on May 2 2007)
87. That for the budget agreement was yearly related capital expenditure must
pass Capex Committee that had a membership of three people who
consisted of two people from Telcom, and one person from SingTel (BAP
SingTel on July 4 2007, BAP SingTel Mobile on July 4 2007, BAP
Telkomsel on July 11 2007). SingTel actively affected Capex Committee
through the staff who was assigned for this matter (BAP Telcom on July
24 2007) and Capex Committee could consult with the team that came
from SingTel, one of them of Mr. Widjaja Suki (BAP SingTel on July 4
2007);
88. Mr. Widjaja Suki helped Capex Committee in the matter to consider the
appropriateness of the proposal capex that was put forward. Mr. Widjaja
Suki in this matter carried out the evaluation towards the parameter that
was used in the proposal capex. In the matter of the mistake paramater was
PRESIDENT DIRECTOR
Directorate of Commerce
Directorate of Operations
Directorste of Finance
Directorate of Planning & Development
Corporate Planning
IT Operations & Services
IT Development
Technology & Business
Incubation
Procurement & Logistics
Synergy & Partnership
Corporate Account Management
Sales
Produk & Mobile Data Service
Marketing & CRM
Customer Service
Area
Radio Network Engineering &
Implementation Inner Java-Bali
Radio Network Engineering &
Implementation Outer Java-Bali
End o End Network Quality
Network Operation
Core Network Engineering
Business Control
Accounting
Corporate Finance
Internal Audio
Corporate Secretary
Human Resources
Management
Enterprise Risk
Management
Project Management
3G GroupRegional Network
Operation
COPYcaused human error, then Mr. Widjaja Suki could at once carry out the
correction, but in the matter of the parameter mistake was caused by the
market situation, then Mr. Widjaja Suki will carry out consultations with
the member Capex Committee that was appointed by SingTel Mobile.
(BAP SingTel Mobile on July 4 2007)
89. The agreement was for the realisation of the budget given by Capex
Committee each quarter in accordance with the requirement that was put
forward by each department (BAP SingTel Mobile on July 4 2007);
90. Against annual of budget that was agreed , SingTel assigned his two staffs,
that is Mr. Widjadja Suki and Mr. Quah Kung Yang to monitor his
implementation and give the recommendation to Telkomsel Commissioner
who was appointed by SingTel Mobile. In the implementation of this task,
Mr. Widjaja Suki could communicate directly with Telkomsel
management staffs in the part business control, in part and that most often
that is with Mr Jaka Susanta (BAP SingTel Mobile on July 4 2007);
91. SingTel also actively gave advice to Telkomsel Commissioner who was
appointed by SingTel Mobile in relation to the efforts point of view and
business plan of Telkomsel (BAP SingTel on July 4 2007);
92. There is not joint procurement that was carried out by Telkomsel with the
other company that was afiliation with SingTel but was gotten sharing
information with these companies (BAP Telcom on July 24 2007);
93. The summary of the Telkomsel finance achievement was as follows:
94. PT. Indosat Tbk was established during 1967 as the PMA company to
serve continuation immediately was international in Indonesia. During
1980 the Indonesian Government took over the ownership whole of the
PT. Indosat Tbk share and since then PT. Indosat Tbk had operated as
BUMN. In 1994 PT. Indosat go public and registered his share in the
Jakarta Stock Exchange, Surabaya Stock Exchange, and New York Stock
Exchange;
95. In 2002 the Indonesian Government took divestation ownership of his share
in PT. Indosat of 41, 94% (forty-one point ninety-four percent) to St
Telemedia went through his subsidiary company namely Indonesia
Communication Ltd (ICL). and since that time the PT. Indosat Tbk status
had changed again became the PMA company that was agreed on
February 7 2003 to by BKPM (the Report on Konsolidasi Indosat Finance
th 2003, 2002, and 2001);
96. Shareholders's composition of PT. Indosat Tbk was as follows:
Table 19 Shareholders's composition of PT. Indosat
Number of Shares Capital deposited/ placed (Rp) Name of
Shareholders series A
Series B Rp 100 Rp 100
%
Republic of Indonesia Government 1 776,624,999 100 77.662.499.900 14.58
Indonesia Communication Limited
0 2,171,250,000 0 217.125.000.000 40.77
Public 0 2,377,330,500 0 237.733.050.000 44.65 Total 1 5,325,205,500 100 532,520,550.000 100.00
97. In 2003 Satelindo, IM3, and Bimagraha carried out the merger with PT.
Indosat Tbk and afterwards PT. Indosat Tbk became the company that
focussed itself in the business selular;
COPY98. PT. Indosat gave the service in 3 categories, that is: mobile service (Matrix,
Mentari, IM3), telephony service (SLI, Voip Telephony, StarOne), and
multimedia service (IM2 and the Artha Passage);
99. The main product from PT. Indosat Tbk was:
a. Mentari, GSM Card prepaid for middle class as a target of market;
b. IM3, GSM Card prepaid for student and youth as a target of market;
c. Matrix, GSM Card pasca paid for middle to upper class as a target of
market;
d. Starone, pre and pasca card fix wireless access based on CDMA;
100. The service scope of PT Indosat Tbk covered all province in Indonesia and
included 410 regencies all over Indonesia;
101. The Share Purchase Agreement between the Government of Indonesia and
STT on 15 December 2002 stated that: --------------------------------------------
a. Article 5.8 EGM Resolution: The seller is about to use voting rights of the series of A and B shares in the extraordinary general meeting of shareholders to support the following matters: -------------------------------
i. To appoint additional director(s) and to appoint or to replace the commissioners of the management and the buyer’s appointed commissioners as its rights stated in Article 3.2 on Shareholder Agreement.-----------------------------------------------------------------
ii. To amend the document of company organization for exhibiting the amendments as it stated exhibit E ----------------------------------
iii. To approve principally the establishment of Employee Share Option Program (ESOP) -------------------------------------------------
102. The Share Purchase Agreement between the Government of Indonesia and
STT on 15 December 2002 stated that: --------------------------------------------
a. The Article 3.1.b: For the period of one year from the date of the
agreement signature, the Minister of State-Owned Company (BUMN) agrees to use the voting rights of shares as it is instructed in written by investors: --------------------------------------------------------------------------
i. The agreement of dividend sharing; ------------------------------------
COPYii. The amendment of the Statutes;-----------------------------------------
iii. The agreement of merger, consolidation and acquisition; -----------
b. Article 3.2.a: The shareholders use their voting rights to elect a number of members of board of commissioner to make (i) a number of commissioners of the shareholders’ representatives simple majority within the board of commissioner; (ii) the two of the commissioners are nominated by Minister of State-owned Companies. It is only one commissioner nominated by the Minister if the shares are remitted, but it is series A shares; --------------------------------------------------------------
c. Article 3.2.b: The shareholders use their voting rights to elect a number of members of board of director to make (i) a number of directors of the shareholders’ representatives simple majority within; (ii) the two of the directors are nominated by Minister of State-owned Companies. It is only one director nominated by the Minister if the shares are remitted, but it is series A shares ----------------------------------
d. Article 3.3: Any shareholders have absolute rights to replace their own nominated director and commissioners and other shareholders vote are about to approve the replacement. ---------------------------------------------
e. Article 3.5: The Director and Commissioner meeting will be a quorum only if it is presented by the majority of Director and Commissioner or at least one Minister’s/investors’ appointed Commissioner or Director ;-
f. Article 4.1: Investors will not expropriate the shares to the third party for the period of three years as from the date of the agreement signature, except;-----------------------------------------------------------------
i. The party are international financial institutions that agree to be bided by and about to be a party in the agreement, and the form of the expropriation are mortgage, charge or grant;------------------------
ii. The allowed parties are those of parties agree to be bided by the agreement. --------------------------------------------------------------------
g. Article 4.2: Minister of the State-Owned Companies is not allowed to expropriate the outstanding share to the third party for the period of one year as from the date of the agreement signature -----------------------
h. Article 5.3: The parties will not expropriate the core asset for the period of three years as from the date of the agreement signature. The parties will seriously consider the commercial impacts of the divestment of Lintasarta and IM2 by noticing that Lintasarta and IM2 contribute significantly toward company’s annual revenues; --------------
COPY103. It explains further in the Indosat statutes that the authorities of shareholder
general meeting, Commissioners, Board of Directors and the decision making procedures are as follow: ---------------------------------------------------
a. Under Article 10.2 of the Indosat Statutes, the Indosat Board of Directors consists of at least three with one of them appointed as a President Director; ---------------------------------------------------------------
b. Under Article 10.3 of the Indosat Statutes, the members of Board of Directors are elected and dismissed at the shareholder general meeting with at least 1 (one) member is nominated by the shareholders of series A; -----------------------------------------------------------------------------------
c. Under Article 11.7 of the Indosat Statutes, the distribution of duties and authorities of Board of Directors as well as edifice of the company shall be approved by Board of Commissioners;------
d. Under Article 12.2 of the Indosat Statutes, the meeting of Board of directors will be a quorum if it is attended by at least ½ (a half) of members of the Board of Directors; -------------------------------------------
e. Under Article 12.4 of the Indosat Statutes, the decisions at Board of Directors meeting are determined by deliberation to come to terms. If there is a deadlock, the decision is determined by majority votes. If the votes are even, the decision are determined by President Director; -------
f. Under Article 11.3 of the Indosat Statutes, the Board of Director shall have an agreement from the Board of Commissioners: ---------------------
1. to buy and/or to sell other companies’ shares in stock exchange higher than those of determined by the Board of Commissioner (The Amendment of Statutes, dated 30 September 2004 and approved by Ministry of Justice on 2 December 2004); ----------------
2. to perform an agreement on license, management, and other similar agreement with other corporations or parties for 1 (one) year or more;---------------------------------------------------------------------------
3. to buy, to release, to sell, to mortgage, or to cost fixed assets of the company higher than those of determined by the Board of Commissioner; ---------------------------------------------------------------
4. not to re-bill for and to write off debt from the book as well as to procure goods higher than those of determined by the Board of commissioner; ----------------------------------------------------------------
5. to abide company as guarantor resulted on the financial excessive reach certain amount stated by board of commissioner; ----------------
COPY6. to borrow or to lend short or middle term debts for non-operational
purposes higher than those of arranged in work schedule and Company budget that are approved by Board of Commissioners; ----
7. to raise or to release equity capital of the company in other companies but it does not perform at stock exchange; ------------------
8. to establish subsidiaries; ----------------------------------------------------
g. Under Article 14.1 of the Indosat Statutes, the Board of Commissioner consist of at least 3 (three) people with one of them appointed as President Commissioner;--------------------------------------------------------
h. The members of Board of Commissioner are appointed and dismissed by the decision determined at the shareholders general meeting on condition that at least 1 (one) nominee of Commissioner member is nominated by the shareholder of series A; ------------------------------------
i. Under Article 16 of the Indosat Statutes, the Board of Commissioner is obliged;-------------------------------------------------
1. to pass opinions and suggestion on the Annual Report of Finance and other important matters during the shareholders general meeting;-----------------------------------------------------
2. to approve Work Schedule and Company Budget for at least 30 (thirty) days prior to the commencement of company fiscal year. In case of the Work Schedule and Company Budget are not approved over such period of time, the previous year’s Work Schedule and Company Budget will be valid; --------------------------------------------------------------
3. to monitor the progress of the company and to report immediately at the shareholder general meeting along with its suggestions for the improvement any time the company is in disadvantages; -------------------------------------------------
4. to pass opinions and suggestions any important problems concerning company’s management at the shareholder general meeting;-----------------------------------------------------
5. to suggest an appointment of accountant to audit financial account of the company to be reported at the shareholder general meeting;-----------------------------------------------------
6. to perform any other monitoring duties determined at the shareholder general meeting; --------------------------------------
COPYii. Under Article 17.3 of the Indosat Statutes, the quorum of Board
of Commissioner meeting shall be at least attended by ½ (a half) of the members of company’s commissioners; ------------------------
iii. Under Article 17.5 of the Indosat Statutes, the decision on a plan at the meeting of the Board of Commissioner are determined by deliberation to come to terms. In case of the votes are even, the decisions are determined by majority votes. If the votes are even, the decision is deemed to be disapproved. The decision on the personal things are determined by President Commissioner; --------
iv. Under Article 19.3 of the Indosat Statutes, the quorum of shareholder general meeting shall be at least attended by ½ (a half) of the shareholders; -------------------------------------------------
v. Under Article 24.1 of the Indosat Statutes, the decision of a plan at the shareholder general meeting are valid if they are approved by majority votes of those in attendance or in representative. In case of the votes are even, the decision is deemed to be disapproved; ----------------------------------------------------------------
vi. Under Article 25.1 of the Indosat Statutes; in case of a merger, consolidation, and acquisition, the quorum of shareholder general meeting shall be at least attended by the shareholders of series A and other shareholders or their representatives that jointly represent ¾ (three fourth) of the authorized shareholders and approved by the shareholders of series A as well as other shareholders that jointly represent ¾ (three fourth) of the valid votes at the meeting;-------------------------------------------------------
vii. Under Article 28.1 of the Indosat Statutes, the amendment of the Statutes shall be determined at the extraordinary shareholder general meeting that at least attended by 2/3 (two third) of those in attendance. In case of amendment of the statutes that related to the right of shareholders of series A, the amendment shall be approved by the shareholders of series A;------------------------------
viii. Under Article 29.1 of the Indosat Statutes, the provision of special resolution is also applied in case of the dismiss al and liquidation;------------------------------------------------------------------
104. Under Article 29.1 of the Indosat Statutes, the provision of special resolution is also applied in case of the dismissal and liquidation; -------------
COPY
105. After the acquisition of STT, the management edifice of Indosat is as
Income Before Tax 2,138.40 1,350.20 1,586.70 2,382.80 2,352.80 2,022.70
Net Income -412.20 -776.50 17.80 -724.60 -697.90 -576.10 The Profit prior to Extraordinary Post, Minority Right to the Nett Profit Subsidiaries and Profit Prior to Acquisition
1,726.3
573.80
1,604.5
1,658
1.654.9
1,446.60
Extraordinary Post 4,499.90
Minority Right to the Loss (Nett) Profit of Subsidiaries
-273.50 -27.20 -22.50 -25.00 -31.40 -36.50
Profit Before Acquisition -205.90
Nett Profit 1,452.80 340.70 6,082.00 1,633.20 1,623.50 1,410.10 Subscribed Capital (in millions of shares)
122. That although since 2007 the regime of interconnection has been based on
tariff, to date there is no inter-operators PKS that cover the agreement (The
IOR of Witness: Telecommunication Society, dated 25 September 2007); ---
123. That in reality, the operators that search for interconnection do not have
balanced bargaining position with incumbent operator. Consequently, they
have to follow the will of incumbent operator to avoid disconnecting of the
COPYinterconnection (The IOR of Witness: Telecommunication Society, dated
25 September 2007). It used to be an interconnection resistance to a new
arrival operator by Telkomsel. Telkomsel requires to meet a traffic for 48
erl that is hard to be accomplished by other operators (The IOR of
Witness: Hutchinson 21 June 2007);-----------------------------------------------
124. In one of an interconnection agreement between Telkomsel and one of
operators, it is arranged the loading expense, claim, and payment. They are
mentioned further in the paragraph of the Article that: --------------------------
“The tariff charged against the users of SMS services is subject to the authority of any party. Therefore, operators can fix their own tariff by condition that the tariff charged against the users by operator X shall not be lower than those of Telkomsel’s. As from tariff notification provided by Telkomsel, the tariff adjustment will be made by Operator X at the furthest of 3 (three) months, as a time for dissemination in case of Telkomsel amends its tariff.” ---------------------------------------------------------------------
However, the provision is revoked after the agreement is amended;----------
125. Another constraint are conditions that require the presence of third party,
appointed by Telkomsel, for developing interconnection link.
Consequently, the significant cost shall be paid by interconnection
searcher. The ownership and operating rights of the link also belong to the
third party and Telkomsel rather than interconnection searchers. (The IOR
of Witness: Hutchinson , 21 June 2007);------------------------------------------
on whether Temasek Group is a business actor qualified as it is stipulation in
Article 1. 5 of the Law No.5/1999. The following is the analysis to the
accomplishment of substance of Article 1.5 of the Law No.5/1999 to Temasek
Business Group;--------------------------------------------------------------------------------
150. Article 1.5 of the Law No.5/1999 defines business actor as follows: ------------------
“Any individuals or corporations, in the form of corporate body or non corporate body , are established and domiciled or performing activities within
23 See Article 36.f and 36.h of the Law No.5/1999
COPYthe territory of jurisdiction of the Republic of Indonesia, and; independently or jointly by an agreement perform any business activities.” ----------------------------
151. In order to recognize whether Temasek, STT, STTC, AMHC, AMH, ICL, ICPL,
SingTel , SingTel Mobile (hereinafter referred to as the Temasek Group) are
categorized as business actors or not, the accomplishment of the substances of
Article 1.5 of the Law No. 5/1999 shall be proved: --------------------------------------
a. The substance of ”any individuals or corporations” ---------------------------------
That Temasek Group, based on its Statutes, is corporation; therefore, this
substance is accomplished; --------------------------------------------------------------
b. The substance of ”in the form of body or non corporate body ” -------------------
Temasek Group is a corporate body and established under Singaporean law
not Indonesian law. This substance is an alternative substance in which
Temasek Group accomplishes the substance of non corporate body ; -------------
c. The substance of ”established and domiciled or performing activities within
the territory of jurisdiction of the Republic of Indonesia” ---------------------------
That the Group is established and domiciled in Singapore, but in its capacity
as Business Group, it performs activities within the territory of jurisdiction of
the Republic Indonesia as it is elucidated as follows: --------------------------------
1. The understanding of business actor in Article 1.5 of the Law No.5/1999
employ functional approach that emphasize on an economic activity
rather than legal24. In line with such an approach, the body of corporate
is considered to be a material in determining a business actor;---------------
2. The approach is employed in the theory of Single Economic Entity
Doctrine, seeing the relationship between holding company and its
subsidiaries, in which subsidiaries do not have independency in
determining company policy direction as a unity of economic entity.25
The degree of the independencies of the subsidiaries can be seen from
any factors such as the control of holding company toward the
24 Knud Hansen et al., Undang-undang Larangan Praktek Monopoli danPersaingan Usaha Tidak Sehat (The Law
on the Prohibition of Monopolistic Practices and Unfair Competition)n , Katalis, Jakarta, 2002, page 50 25 See Alison Jones and Brenda Sufrin, EC Competition Law, Text, Cases, and Materials, Oxford University Press,
New York, 2004 page 123
COPYmanagement of subsidiaries, the benefit taken by holding company that
are contributed by the subsidiaries, and the pursuance of the subsidiaries
to the policies of holding company, on marketing and investment as
3. The consequence of the implementation of Single Economic Entity is
that a business actor can be asked for its responsibility over the conducts
of other business actors within a unity of economic entity although it is
performed in the outside of a state’s jurisdiction of a business actor.
Therefore the competition law is categorized as extraterritorial27; --------
4. The consideration of part “c” in the Law No.5/1999 stresses that anyone
who perform business activity in Indonesia shall be in fair competition.
As a general principle of a competition law, the Law No.5/1999 is vested
with jurisdiction over a competition condition within the territory of the
Republic of Indonesia, without any distinction to whom and where the
business actor causes impacts to the competition; -----------------------------
5. The expressions of “that perform an activity” or “that perform a business
activity” do not infer that a business actor shall be in the relevant market
. A corporation can perform a business activity in other country by
establishing a company or acquiring other existing companies in a
country without directly perform business activity in the relevant market
of the country. In other word, a business actor may influence competition
condition although it is absence in the relevant market ; ----------------------
6. The perspective is seen in the body of the Law No.5/1999 that the
terminology of “a business actor” or “a group of business actor” are
used frequently in its Articles. According to Knud Hansen, et.al., the
definition of business actor is28: --------------------------------------------------
Some independent corporations that are joined into an independent
economic unity. The independent corporations are under one
control, appearing outside as a holding company that make plans
standard for its subsidiaries; ------------------------------------------------
26 Ibid., page 135 27 Single Economic Entity Doctrine becomes a basic of European Community to implement competition law to the
business actor in the outside of the regions. EC, See Alison Jones and Brenda Sufrin, op.cit page 126 28 Knud Hansen et.al.,op.cit, page 52
COPY
7. That from the fact founded, Indosat and Telkomsel are controlled by
Temasek through its subsidiaries. The control of Temasek is possible
because Temasek is not a passive investor of SingTel and STT as
SingTel and STT to Telkomsel and Indosat. Passive investor is defined
as investor that has no voting rights over its shares, has no
representatives in the management of the company, give no directives
for the company policies, no influences to company management, has no
access to sensitive information of the company.29 In European Union,
even a passive investment is claimed to be able to reduce competition,
especially in the concentrated market, and to infringe competition30;-------
8. The control occurs due to the position of Temasek as a Holding
Company of its subsidiaries. Holding Company concentrates the
ownership of shares in order to influence its specific subsidiaries or
branches aiming at controlling them31; ------------------------------------------
9. From the perspective of investment, Temasek Group is a foreign
investment in Indosat and Telkomsel. Under Article 1.1 of the Law No.
25/ 2007 on Investment, the definition of investment is:----------------------
any investment activity, foreign or domestic investment, that perform business activity in the territory of the Republic of Indonesia: ----------
10. Article 1.3 further defines that foreign investment is: ------------------------
an investment activity to perform business activity in the territory of the Republic of Indonesia that is conducted in a whole by foreign investors or jointly with domestic investors. -------------------------------
11. Referring to the provision, the investment of Temasek Group aims at
performing business activity in the territory of the Republic of Indonesia.
Analytically, the substance is accomplished ------------------------------------
d. The substance of ”independently of jointly by agreement” --------------------------
29 See Jon B. Dubrow, Challenging The Economic Incentives Analysis of Competitive Effects in Acquisitions of Passive Minority Equity Interests, Antitrust Law journal, 2001, page 120-121 30 See Ariel Ezrachi and David Gilo, EC Competition Law and The Regulation of Passive Investment Among Competitiors, Oxford Journal of Legal Studies, page 329 31 See Hasim Purba, A Review to Holding Company, Trust, Cartel and Concern, http://www. www.library.usu.ac.id
COPYTemasek, as a business group, together by agreement with other parties
performs business activity in the territory of the Republic of Indonesia.
Temasek Group, along with other shareholders, control Indosat that their
rights and duties are arranged in the Statutes of Indosat. It also occurs to
Telkomsel, in which Temasek Group along with other shareholders, control
Telkomsel that their rights and duties are arranged in the Statutes of
Telkomsel. Thereby, the substance has been accomplished by Temasek Group:
e. The substance ”performing any business activity in the field of economy”--------
Telkomsel is the biggest cellular operator in Indonesia while Indosat owns
various business unit in the sector of telecommunication technology in
Indonesia, such as telephony, cellular services, and multimedia. Thereby,
Temasek Group has accomplished this substance. -----------------------------------
The Definition of Majority Shares; -------------------------------------------------------------
152. Under the provision of Article 46 of the Law No.1/1995 on the Limited
Company32, share is classified into some variants with the different rights one to
another. Article 27 of the Law No.5/1999 does not explain kind of share within the
term of “majority shares”. Therefore, the definition of majority shares in Article
27 of the Law No.5/1999 needs to be interpreted further33;------------------------------
153. According to Indonesian Completed Dictionary (KBBI); the third edition,
National Education Department, Balai Pustaka, Jakarta, 2005; share is (1) Part,
take part; stock. 2. Title deed of the ownership of company’s part of shares which
gives dividend and other beneficial rights on the basis of the amount of paid up
32 The detail of Article 46 of the Law on Limited Company is: (1)The Statutes states 1 (one) classification of share or more. (2)Any share in the similar classification provides the same rights to its shareholders. (3)In case of 1 (one) classification of share, the Statutes determines 1 (one) classification as an ordinary share. (4)Other than classification of share as it mentioned in paragraph 3, 1 (one) classification of share or more can be determined in the Statutes. a. With the exceptional of vote right, conditional, limited, or without vote right; b. Those that are revocable or changed with other classification of share over a particular period;
c. Those that give rights to its holders to receive dividend accumulatively or non accumulatively; and or, d. Those that give rights to its holders to receive dividend and after liquidation
33 Particularly, those related to the company which its shares are tradable and fluctuant daily in the stock exchange. The need of interpretation of the term ”majority share” is suggested by Knud Hansen et.al., in the book “Undang-undang Larangan Praktek Monopoli and Persaingan Usaha Tidak Sehat (The Law on the Prohibition of Monopoly Practice and Unfair Competition)”, Katalis, Jakarta, 2002, page 352.
COPYcapital; 3. rights owned by individual (shareholders) over a company due to paid
up capital34; -------------------------------------------------------------------------------------
154. KBBI does not explain the definition of majority share but only the word majority,
that a numbers of people who show particular characters on the basis of specific
criteria are greater than those who do not35;------------------------------------------------
155. Based on the combined definition of the words share and majority as it is defined
in KBBI, majority share is an evidence of ownership of limited company’s capital
that are greater in number and show particular characters on the basis of specific
criteria than those that do not. The definition remains to be unclear in its
interpretation due to the definition of majority in KBBI refer only to people and to
the indefinite phrase “specific criteria”;----------------------------------------------------
156. In Black’s Law Dictionary, Shareholder is “one who owns or holds a shares in a
company, esp. a corporation”36 and majority shareholder is “a shareholder who
owns or controls more than half the corporation’s stock”37; -----------------------------
157. According to Black’s Law Dictionary, the definition of majority shareholder is a
shareholder who owns or controls more than half the corporation’s stock. Such a
definition is too limited if there is more than classification of share in a company; --
158. If the definition of Black’s Law Dictionary is employed to interpret majority share
in Article 27 of the Law No.5/1999, it will be simply biased by issuing more than
50% without vote right shares to be provided for other parties, while the rights to
control the company are on the less than 50% of extraordinary issued shares or
even only on one share; -----------------------------------------------------------------------
159. Therefore, other interpretations of “majority share” as it mentioned in Article 27
the Law No.5/1999 is more than just a linguistic interpretation; ------------------------
160. The term “share” is also found in the Law No.1/1995 on Limited Company.38 The
Law defined structures of a limited company, there are shareholder general
34 Kamus Besar Bahasa Indonesia Edisi Ketiga (The Third Edition of the Completed Indonesian Dictionary, Departemen Pendidikan Nasional (Department of National Education), Balai Pustaka, Jakarta, 2005 page 977 35 Ibid. page 725 36 Bryan A. Garner, Black’s Law Dictionary, Seventh Edition, page 1380 37 Ibid. page 1381
COPYmeeting,39 Board of Commissioner40, and Management41. The supreme decision
maker in a company is a shareholder general meeting. The owner of a company
gives a company directive policies that further implemented by Management
under the supervision of Board of Commissioner in its implementation: --------------
161. Based on the regime of “one share one vote”42, a decision in shareholder general
meeting can be achieved by simple majority (the votes is to 50%). Thereby, the
control over a company is possible if a business actor owns to 50% of the shares;---
162. In the case of no shareholder owns to 50% of its shares in a company, there will be
no de jure control. De facto, the bargaining position of the biggest shareholders are
stronger than the other shareholders; therefore, the smaller ones tend to follow the
wills of the biggest; ----------------------------------------------------------------------------
163. Therefore, in the position as it mentioned in number 16, the company majority is
understood as the biggest shareholders in a company. The percentage of share
ownership is not a criterion in mentioning a company majority , but its distribution
of share ownership; ----------------------------------------------------------------------------
164. In details, the Law on Limited Company states the need of majority shares for
making decision to specific cases, the two third of majority shares for Statutes
amendment43 and three forth for business combination, merger, taking over,
dismissal and bankruptcy44; ------------------------------------------------------------------
165. Regarding to the decision making for problems as it mentioned in number 18, the
share ownership of above 25% is significant because it is able to veto the
decisions in shareholder general meeting (RUPS). It shows that no matter how
much are the shares owned by other shareholders as long as there are shareholders
with its ownership more than 25%, the shareholders are considered to be majority
38 Although the latest Law on Limited Company is available, the Law No.1/1995 is still become a reference
because the infringement was conducted in time of the Law No.1/1995 is still valid. 39 Article 1 paragraph (3) of the Law No.1/1995 40 Article 1 paragraph (5) of the Law No.1/1995 41 Article 1 paragraph (4) of the Law No.1/1995 42 Article 72 paragraph (1) of the Law No.1/1995 43 Article 75 paragraph (1) of the Law No.1/ 1995 44 Article 76 of the Law No.1/ 1995
COPY166. The elucidation of shareholders’ votes, as it mentioned in number 15 to 19, shall
be assumed that the condition is normal in that there is no deal among
shareholders to use their votes in shareholder general meeting; -------------------------
167. According to memory of elucidation, the comprehensive elucidation on majority
shares is not provided, particularly during elucidating Article 27 of the Law
No.5/1999. The memory of elucidation explains nothing to the term “majority
shares” during the arrangement of the Law No.5/1999; ----------------------------------
The Interpretation of Teleology;---------------------------------------------------------------
168. The definition of majority shares shall be seen on the basis of its social aims. The
aims of the arrangement of the Law No.5/1999 are those mentioned in the
consideration of the Law45 and Article 346. The considerations and the aims of the
Law No.5/1999 are to avoid the concentration of economic power in the hand of
certain business actors47; ---------------------------------------------------------------------
45 The consideration of the Law No.5/1999 is:
a. that the development of economy shall be directed to the establishment of society’s wealth on the basis of Pancasila (The five basic principles of the Republic of Indonesia) and the Constitution of 1945;
b. that the democracy economy requires an equal chance of the citizen to participate in the production process and distribution of goods and/or services fairly, effectively, and efficiently in order to boost economic growth and normal market operation;
c. that anyone who perform business in Indonesia shall compete fairly in order to avoid the concentration of economic power to certain business actor by considering the convention ratified by the Republic of Indonesia over international agreements;
d. that to actualize to what it is mentioned in Article a, b, and c; the Law on the Prohibition of Monopoly Practice and Unfair Competition is arranged based on the initiative proposal of the House of Representative;
46 Article 3 of the Law No. 5/1999 states that the objectives of the Law arrangement is to: a. keep public interest and to boost national economic efficiency as one of efforts to increase people’s
wealth;
b. to accomplish conducive business climate through the regulation of fair competition for guaranteeing a certainty to perform business fairly for big, middle and small business actors;
c. to avoid monopoly practice and/or unfair competition conducted by business actor; and
d. to establish effectiveness and efficiency of business activity.
47 See Article c of the consideration of the Law No.5/ 1999 and Article 3.c of the Law No. 5/1999 juncto Article 1.2 of the Law No.5/1999 that elucidate that monopoly practice also requires a concentration of economic power.
COPY169. Article 27 of the Law No.5/1999 is issued as a model to support the aims. The
Article states that it is forbidden to be a majority shares ownership in a number of
companies that operate in the same market if it leads to the control of to 50% of
“Commissioner is commonly known as Board of Commissioner and its members are called member of commissioner. The specific shareholders are controlling shareholders or majority shareholders of a public limited company and the whole of shareholders of limited company.” ----------------------
48 The complete statement of Article 27 of the Law No.5/1999 is: A business actor is not allowed to own majority shares in some companies that perform similar business activities at the similar relevant market if such ownership causes:
a. a business actor or a group of business actor control to 50% (fifty percent) of a market share of one kind of certain goods or services.
b. two or three business actors or a group of business actor that control to 75% (seventy five percent) of a market share of one kind of certain goods or services.
COPY173. There is no other legislations in Indonesia which defines majority share and some
existing laws defines only primary share or majority shares as it mentions below;---
174. The regulation of BAPEPAM No. IX.H.1 on the Taking Over of public limited
company mentions that:-----------------------------------------------------------------------
1) A party which possess 25% (twenty five percent) or more, unless the party is able to prove that it does not control public limited company; or ------------
2) A party which is capable, directly or indirectly, to control public limited company by:-----------------------------------------------------------------------------
a) Establishing the appointment and the dismiss all of directors of commissioner; or -------------------------------------------------------------------
b) Amending the Statutes of Public Limited Company --------------------------
175. The regulation of Central Bank of Indonesia No.8/16/PBI/2006 on Single
Ownership in Indonesian Banking defines Controlling Shareholders as a corporate
body and/or individual and/or a group of business that:
-
a. Possess 25% (twenty five percent) or more out of shares issued by Bank and have voting rights-----------------------------------------------------------------------
b. Possess 25% (twenty five percent) or more out of shares issued by Bank and have voting rights but it can be proved of controlling a Bank directly or indirectly. --------------------------------------------------------------------------------
Practices in Some Countries----------------------------------------------------------------------
176. In other countries, the cross ownership by one business actor is not regulated
specifically. The regulation of the share ownership is generally part of merger
analysis and acquisition which impact negatively to competition. The merger
exists when the first company acquires certain quantity of second company’s
shares and the impact of competition caused by the merger shall be further
COPY177. In European Union, the percentages of acquired share are not relevant because the
focal of merger analysis is the inception of concentration49. The regulation of
merger in European Union states that concentration exists due to the taking over of
a control50. A control is known as any possibilities of performing decisive
influence within a company51. Therefore, European Union merger regime needs
no verification that the decisive influence is performed or not52;-----------------------
178. A concentration exists in two ways: de jure and de facto. De jure concentration
exists if a company takes over voting rights majority of other company (positive
control). In case of the taking over of voting rights is minority shares, the minority
shareholders is able to preclude a proposal needed to be endorsed by super
majority shareholders. Therefore, the taking over of minority shares also have a
control over the taken over-company (negative control)53; ------------------------------
179. De facto concentration happens if minority shareholders, referring to the presence
of shareholders at the shareholder general meeting of the previous years, owns
majority shares at the shareholder general meeting54; ------------------------------------
180. In European Union, the share acquisition that does not influence the control
change (passive investments) to a company of its competitor is also regulated in its
competition due to the possibility of creating unfair competition in that market55;---
181. In UK, the merger happened if two companies becomes one because it is
performed under one ownership and control56. A control is defined as an ability to:
(i) control directly or indirectly (ii) to influence substantially company policies
49 See recital 20 EC Merger Regulation that states the concept of concentration in relation with activities that creating permanent changes to a market structure. Further, Article 31(1)(b) ECMR states that the inception of concentration is caused by the taking over of control. 50 Article 31(1)(b) ECMR 51 Article 31(2) ECMR 52 See Commission Consolidated Jurisdictional Notice Under Council Regulation (EC) No.139/2004 on the Control of Concentration Between Undertakings (“ EC Consolidated Jurisdictional Notice”), par. 16 53 See EC Consolidated Jurisdictional Notice, par. 56-58 54 See EC Consolidated Jurisdictional Notice, par. 59-60 55 The regulation on passive investment is detailed by Ariel Ezrachi and David Gilo in their article “EC Competition Law and The Regulation of Passive Investment Among Competitors”, Oxford Journal of Legal Studies, 2006 56 A. Niger Parr, Roger J. Finbow, and Matthew J. Hughes, UK Merger Control: Law and Practice, Second Edition, Sweet & Maxwell, London, 2005, page 22
COPY(without any controlling interests to the company) and based on the definition,
three levels of controlling are known, there are57:-----------------------------------------
a. Controlling interest (de jure control);---------------------------------------------------
b. Ability to control Policy (de facto control);--------------------------------------------
c. Ability to influence policies materially (material influence);------------------------
182. The control of merger in UK similar to those of European Union does not need
proof that the control has already been performed or even shown to perform58. ------
183. The controlling interest (de jure control) is widely understood as an ownership of
more than 50% of shares of company’s voting rights, so that enabling shareholders
to perform decisions on the basis of common majority59. In case of vetoing
decisions that need an agreement of specific majority, the controlling interest
owned by one shareholder does not block other shareholders to own a control over
the company60; ---------------------------------------------------------------------------------
184. The ability to control policies (de facto control) is interpreted by competition
agency in UK by referring to two situations61:-------------------------------------------
a. In case of the shareholders are able to veto decisions that need an agreement of supra majority (negative control) ----------------------------------------------------
b. In case of an entity is known vividly as company majority, for example the
policy of an experienced investor in his/her industry, the policy will be most certainly implemented in anyway. ------------------------------------------------------
185. In UK, the ability to influence policy materially (material influence) is not defined
clearly by competition agency; consequently it should be analyzed case by case.
The competition agency is to see factors that cause material influence such as
shareholder distribution, the pattern of presence and vote-given at the shareholder
57 See Ibid. page 23 58 See Ibid. page 23 59 See Ibid. page 24 60 If “A” owns 51% of shares in a company and “B” owns 25% of shares in the same company so that it is able to block the decision of specific majority, it is most certainly that “B” has material influence over the company. See Ibid. page 24 61 See Ibid. page 24
COPYgeneral meeting, the existence of special vote or veto authority owned by specific
shareholders and extraordinary stipulation stated in the Statutes that enabling to
influence company policies62;----------------------------------------------------------------
186. Usually, competition agency in UK considers 25% voting rights ownership that
has ability to influence materially (material influence) over the company policies,
although the rest of voting rights are owned only by one party63; ------------------
187. In United States, Article 7 Clayton Act regulates not only share acquisition but
also an acquisition of other companies’ shares that potentially lessen a competition
or create monopoly.64 Article 7 Clayton Act give an exemption to the acquisition
for investment purpose only. Share acquisition intended to perform monopoly
practice is defined in the case of Crane Co. V. The Anaconda Co.65 : (1) Crane
cannot take over more than 22,6% of Anaconda’s shares (2) Crane does not have
representatives in the management of Anaconda, and (3) Crane is about to
comply with Article 7 Clayton Act by trying not to reduce competition; -------------
188. In other case, US Department of Justice (“DOJ”) forestall the take over of 19%
Columbia Picture’s shares by Tracinda. Tracinda is owned in whole by Kirk
Kerkorian, Tracinda and Kirk Kerkorian owned jointly 48% of MGM’s shares.
MGM and Columbia Picture compete each other and operate in the similar
relevant market . Prior to the takeover of 19% Columbia Picture’s shares by
Tracinda, Kirk Kerkorian has already own 5% of Columbia Picture’s shares.
Finally, the court permits to a plan of the takeover on the basis of the shareholder
agreement of Columbia Picture that not allow Tracinda to control Columbia
Picture and to influence management of Colombia Picture, such an acquisition
therefore, is for investment purpose66; ------------------------------------------------------
189. In addition to the above litigation, DOJ achieves Consent Order in some share
transaction respectively as follow 67:--------------------------------------------------------
62 See Ibid. page 25 63 See Ibid. page 25 64 See Jon B. Dubrow, op.cit, page 116 65 See Ibid. page 117 66 See Ibid. page 118 67 See Ibid. page 119 to 126
COPY- Rockwell/Serck. Rockwell, a company with the market share of 80% in the
United States, purchases 29.7% shares of Serck, its main world competitor and is about to enter the United States. The DOJ fights against the transaction and consent order is finally achieved with Rockwell to divest its shares to Serck for four years period of time. Within such period, Rockwell enact its shares ownership in Serck as a passive investor by not using its voting rights, not placing its representatives in management, and not keeping in touch with Serck to give policy directives.----------------------------------------------------------
- Gillette/Wilkinson Sword. Gillette agrees to purchase brand and assets of Wilkinson Sword and take over 23% shares of Eemland, a company that control Wilkinson Sword worldwide. The DOJ fights against the plan and consent order is achieved: Gillete cancels its plan to purchase Wilkinson Sword but is allowed to own 23% of Eemland’s shares with the condition that Gillete is not allowed to influence company policies, to nominate Eemland’s directors or to have Gillette’s directors or management to assist Eemland in whatever capacity it is.-------------------------------------------
- US West/Continental Cable Group. US West agrees to purchase Continental. At the time of agreement, Continental owns 20% shares of Teleport, two directors in Teleport, and access to confidential information of Teleport. Teleport is a competitor of US West in the United States. At the time of consent order achieved, the ownership of Continental in Teleport reduce to 11% and withdraw its directors in Teleport. The consent order is achieved and US West is obliged to divest its share in Teleport within two years to come and in that period US West is not allowed to appoint directors for Teleport or to participate in director’s meeting or to access sensitive company’s information.-------------------------------------------------------------------------------
- AT&T/TCI. TCI owns 24% shares of Sprint PCS, a company that competes
with AT&T in wireless communication service. AT&T intends to acquire TCI in whole but it is considered by the DOJ to reduce competition in the market. The DOJ finally achieves consent order with AT&T that is willing to release its ownership in Sprint PCS.-------------------------------------------------------------
Majority Share as a Controller; -----------------------------------------------------------------
190. Based on the description above, the closest meaning of the definition of “majority
share” to interpret Article 27 of the Law No. 5/1995 is a control possessed by a
business actor over other business actors; --------------------------------------------------
191. From the perspective of its values, there is no absolute value that can be counted
to determine the availability of a control. The share ownership with the voting
COPYrights to 50% is almost certainly to give a control to its owner (positive control).
The share ownership under 50% and to 25% is almost certainly to give an ability
to its owner to defend against strategic decisions that need majority agreement
(negative control). Therefore, the share ownership of to 25% or more in one
company also gives significant control over the company, while those with the
share ownership under 25% does not mean that it automatically has no control
over the company because certain factors need to be taken into account to know
whether such shareholders own decisive influence (EU’s term) of material
influence (UK’s term) over company policies. The influence toward company
policy shows that such shareholders are able to control the company although their
shares are not controlling shares. ------------------------------------------------------------
Temasek as a Controller in Telkomsel and Indosat -----------------------------------------
192. Based on the accumulated facts, Temasek through its subsidiaries owns 35% of
Telkomsel shares which have rights to nominate directors and commissioners, as
well as an authority to determine company policy directives especially on budget
endorsement through and to veto general meeting decision on Statutes
amendment, to buy back company shares, to merger, to take over, to dismiss and
to liquidate a company; -----------------------------------------------------------------------
193. It occurs as well in Indosat, Temasek through its subsidiaries owns 41.94% of
Telkomsel shares which have rights to nominate directors and commissioners, as
well as an authority to determine company policy directives of Indosat. The other
shareholders are the Government of Indonesia 15% and public 43.06%. The shares
are sold in Indonesian and American stock exchanges that always be changing
ownership, therefore, it is almost impossible for the shareholders to perform
together as a result Temasek remains to become an active majority (positive
control) in Indosat;-----------------------------------------------------------------------------
194. Thereby, Temasek through its subsidiaries has a control over Telkomsel and Indosat. ------
THE CONCENTRATION MEASUREMENT -----------------------------------------------
203. The measurement of an industry can be conducted by using several methods. The
measurement of CRn and HHI is a method mostly used by competition agency;-----
204. Concentration Ratio (CRn) is defined as a sum of market share owned by n of a
highest company. An n means 2, 3, 4, 5, 6 (companies). Usually n that is used is 4,
so that Concentration Ratio is written as CR4. A value of CRn measurement is
around 0% to d. 100%. For example, an industry has a value of CR4 96.8%, it
means that there are four companies in such industry that control 96.8% of market
share of the industry; -------------------------------------------------------------------------
Herfindahl-Hircshman Index (HHI); --------------------------------------------------------------
205. Another measurement alternative is the one developed by Orris Herfindahl and
Albert Hirchsman. Such a measurement is based on the sum of quadrate of market
share in a relevant market that is owned by business actor; ----------------------------
206. The method is formulated as follows:-------------------------------------------------------
H Index = ∑ = )...,3,2,1()( 2 nisi
s is market share stated in percentage of i company while n is a number of companies within the industry. For example, if there are 4 companies with market of 5 %, 10%, 15%, and 70%, then upon the formula the value of HHI will be as follow
H Index = (5)2 + (10)2 + (15)2 + (70)2 = 5250
207. The value of HHI index is 0 to 10,000 and a value of 10,000 means the industrial
structure is monopoly;-------------------------------------------------------------------------
COPY208. As a reference in determining a high and low of the industrial concentration, a
limit number of HHI, used in Horizontal Merger Guideline and published by US-
FTC and US-DOJ68, is suggested. The uses of the limit is also adopted by some
Competition Commission in several countries69; ------------------------------------------
209. The HHI value under 1000 is the lowest concentration of an industry, 1000 to
1800 is moderate and more than 1800 is high;---------------------------------------------
210. A serious investigation will be conducted to a merger with a high concentration
(HHI 1800) or around 1000 to 1800 by giving a value changing of HHI for 100
211. In the condition in which cross-ownership exists among business actors in the
relevant market , it is suggested to use Generalized Herfindahl Hirschman Index
(GHHI) to measure concentration. This method was firstly developed by Maxwell
et. al and later by Campos and Vega70;
212. Based on the derivation of the formula, GHHI’s formula is the following:------------
jkN
j
N
jk M
iijij
M
iikij
SSHHIGHHI ∑ ∑∑∑
= =
=
=+=1
1
1
βγ
βγ
in which:
n : A number of company
M : A number of Investors or group of shareholders
βij : The share ownership of investor i in the company of j
γij : A degree of investor’s control of i in company j
Sk : A segment market of k company
Sj : A segment market of j company
the equation can be written in the following matrix:
68 Http:www.usdoj.gov/atr/public/guideline/horiz_book/toc.html 69 Gilbreto Vega, Javier Campos; Concentration Measurement under cross-ownership. An Application to the Spanish electricity sector; Document to De Trabajo 2002-06; Foot Note 2, page 3 70 Gilbreto Vega, Javier Campos; Concentration Measurement under cross-ownership. An Application to the Spanish electricity sector; Journal of Industry, Competition and Trade, Bank Papers 313-315, 2003
SSGHHI φ'=
COPYwhich
⎥⎥⎥
⎦
⎤
⎢⎢⎢
⎣
⎡=
NNN
N
φφ
φφφ
L
MOM
L
1
111
, gained from ∑∑
=
== M
iijij
M
iikij
kj
1
1
βγ
βγφ
S = Market share
Ф =Cross-ownership coefficient cross-ownership.
213. The degree of control used in analyzing changing structure as a result of cross-
ownership can be observed by the value of a number of shares owned by investor
in certain company as a representation of a simple control degree principle, one
share one vote. Therefore, control degree is more complex than only share on
The average of retail selling price of cellular service (peak time) in 2002 - 2006 *)The data of quarter II 2002 to quarter IV 2006. The available data is prices of regular prepaid card (not economic prepaid card such as As and Jempol). Source: The Data are proceeded
98. The following pictures describe the development of retail selling price of call to
PSTN, intra operator, and inter operator for three dominant operators:
Picture 5
The growth of retail selling price of call to PSTN
COPYPascabayar - PSTN
460470480490500510520530540
1/1/
2002
7/1/
2002
1/1/
2003
7/1/
2003
1/1/
2004
7/1/
2004
1/1/
2005
7/1/
2005
1/1/
2006
7/1/
2006
TelkomselIndosatXL
Prabayar - PSTN
0200400600800
10001200
4/1/
2002
10/1
/200
2
4/1/
2003
10/1
/200
3
4/1/
2004
10/1
/200
4
4/1/
2005
10/1
/200
5
4/1/
2006
10/1
/200
6
Series1Series2Series3
Source: Data are proceeded
Picture 6
The development of retail price of inter-operator call
COPY
Pascabayar - intraoperator
808.5809
809.5810
810.5811
811.5812
812.5813
813.51/
1/20
02
7/1/
2002
1/1/
2003
7/1/
2003
1/1/
2004
7/1/
2004
1/1/
2005
7/1/
2005
1/1/
2006
7/1/
2006
TelkomselIndosatXL
Prabayar - intraoperator
0200400600800
1,0001,2001,4001,6001,800
4/1/
2002
10/1
/200
2
4/1/
2003
10/1
/200
3
4/1/
2004
10/1
/200
4
4/1/
2005
10/1
/200
5
4/1/
2006
10/1
/200
6Series1Series2Series3
Source: Data are proceeded
Picture 7
The development of retail price of inter operator calls
COPYPascabayar - interoperator
870880890900910920930940950
1/1/
2002
7/1/
2002
1/1/
2003
7/1/
2003
1/1/
2004
7/1/
2004
1/1/
2005
7/1/
2005
1/1/
2006
7/1/
2006
TelkomselIndosatXL
Prabayar - Interoperator
0200400600800
100012001400160018002000
4/1/
2002
10/1
/200
2
4/1/
2003
10/1
/200
3
4/1/
2004
10/1
/200
4
4/1/
2005
10/1
/200
5
4/1/
2006
10/1
/200
6
Series1Series2Series3
Source: Data are proceeded
99. The above pictures show a price-parallelism for postpaid card. Firstly,
Telkomsel changes the price, followed then by Indosat and XL. There is no
significant price-changing for prepaid card.
100. The following table shows price-changing, in quarter IV of 2006 and quarter I
of 2002:---------------------------------------------------------------------------------------
Table 5
The growth of retail selling price of cellular service (peak time) 2002-2006
PSTN Intra operator Inter operator
COPY T
elko
mse
l
Indo
sat
XL
Tel
kom
sel
Indo
sat
XL
Tel
kom
sel
Indo
sat
XL
Prepaid 5,36% 5,41% 8,38% 0,00
% 0,06% -0,25% 3,08
% 3,08% 4,47%
Postpaid*
4,40%
-11,15%
-21,78%
0,00%
0,07%
-22,00%
0,00%
-12,43%
-17,81%
*) The data in quarter II of 2002 to quarter IV of 2006. The data show retail price of regular prepaid card (not economic prepaid cards such as As Card and Jempol). Source: The data are proceeded
101. Since quarter I of 2002 to the end of 2006, the retail price of prepaid cellular
service to PSTN has increased 5% for Telkomsel and Indosat, and 8.4% for XL.
Different with two other operators, the price of Telkomsel postpaid increased in
2002 – 2006 for calls to PSTN and intra-operators, while the two other operator
decreased their selling price. The changing shows that Indosat and XL tried to
narrow price differences between prepaid and postpaid services.
102. In general, the retail price of postpaid increases although its customer also
increase significantly. From the viewpoint of economic of scale, a high margin
growth is belong to operators. It is an interesting phenomenon because it seems
that no competition occurs to fight for consumers and to decrease price. If they
are competitive companies, each company will try to decrease prices as a
significant factor to fight for consumers from its competitors.
103. According to Price-Leadership Model, a dominant company plays apart in
fixing price while others come after such a price-fixing. It will happen if the
follower companies have no bravery to compete on price because the economic
scale is not relatively competitive. Price–Leadership is a form of tacit collusion
that look like cartel to consumers with the absence of agreement between the
two parties and it simply a strategy of follower company to gain optimum profit
by adjusting price with dominant company.
III. THE ANALYSIS OF CROSS OWNERSHIP IMPACT: -----------------------------
High concentration and Market Ownership Unbalances----------------------------------------
104. The acceleration of concentration and the unbalanced market share ownership
can be measured by market share value, HHI and GHHI.
105. With the single entity doctrine principle, cross ownership of Temasek in
Telkomsel and Indosat made the two operators be a single entity in the relevant
COPYmarket . The following is a table of revenue and market share of the cellular
telecommunication providers:
Table 6
The Revenues and Market Share of Cellular Telecommunication Providers (In Billion Rupiahs)
110. Based on the index value, the HHI values have increased highly since the croos-
ownership. The values changed from 4312 in 2002 to 4555 in 2003.
111. The value of HHI tends to increase from year to year. It is indicated by delta
value of HHI which is always positive.
112. The average value of HHI in cross-ownership period (2003-2006) was around
4823.73. It is higher than the indicator limit of horizontal merger guideline
published by US-FTC and US DOJ72. The value of HHI above 3000 is stated as
an industry that causes a limitation to competition73---------------------------
72 72 Http:www.usdoj.gov/atr/public/guideline/horiz_book/toc.html 73 Gilbreto Vega, Javier Campos; Concentration Measurement under cross-ownership. An Application to the Spanish electricity sector; Documeeto De Trabajo 2002-06; Foot Note 2, Page 3
COPY113. The value of HHI will be greater and higher in the concentration if cross-
ownership is taken into account to measure concentration in the analysis----
114. The high concentration shown by HHI has not described in whole that the
changes of industrial concentration is caused by cross-ownership. The result can
be measured by using GHHI method---------------------------------
115. The control degree in the measurement of GHHI is approached by the degree of
share ownership as it is mentioned below: ---------------------------
Year 2001 Cellular Operators Telkomsel Satelindo Exelcomindo
INDOSAT 35% 75%* 0 TELKOM 65% 0 0
The Business Actor which Become Shareholder:
Other Business Actors 25% 100%
*Consist of 7.5% that was owned before 2000, 22.5% was from the swap of Telkom’s shares, 40% was through Bimagraha Year 2002 Cellular Operator
Source: Data Processing 117. Annually, the value of GHHI is getting bigger than its previous year. It indicates
that a structure of cellular industry is being concentrated from year to year and
market share ownership being unbalanced.-------------------
118. Annually, the value of GHHI is bigger than HHI and tends to increase. The total
value of GHHI to HHI indicates that cross-ownership make the industry be
more concentrated compare to the absence of cross-ownership
Picture 2 The Graphic of the Annual HHI and GHHI Value
(The Period of 2001-2006)
COPY
119. The exception occurred in 2002, in which the value of HHI was same as the
value of GHHI that is 4313. Besides, the value of GHHI decreased to -829 at
that year so that the value of GHHI, 5142 in 2001, decreased to 4313 in 2001--
120. --- From the viewpoint of competition, cellular industry was in a better structure in
2002 as it indicated by the decreasing of GHHI’s value, lower than those of the
previous year. It is caused by cross-ownership [between Telkom and Indosat in
Telkomsel and Satelindo] in cellular industry as it stated by the Blue Print of
Government Policy on Telecommunication in Indonesia. According to the
formula, the absence of cross-ownership causes GHHI’s value and HHI’s
remain the same.-----------------------------
121. In 2003, the value of GHHI increased high, from 4313 in 2002 to 5484 in 2003.
The increasing value of GHHI for amount of 1172 was caused by the beginning
of cross-ownership period by Temasek Group with its purchase of Indosat
through its subsidiary, STT. The purchase had Temasek Group controlled 35%
of Telkomsel’s shares and at the same time Temasek Group also controlled
41.94% of Indosat’s shares------------
122. The values of GHHI, annually tended to increase in the cross ownership period,
vividly provides a conclusion that cross-ownership have brought a structure of
43134555 4585
494752075142
4313
5484 55775872 5987
4120
750
1750
2750
3750
4750
5750
6750
2001 2002 2003 2004 2005 2006
HHI
GHHI
Equal Size
Batas Highly Concentrated
Batas Moderat Concentrated
COPYcellular industry to be getting concentrated. It is disadvantage to fair
competition. The increasing of concentration will boost market power to its
business actor or other dominants business actors ---------------
Degree of Competition Analysis----------------------------------------------------------
123. The measurement of competition degree conducted by examiner team applies a
model developed by Parker & Roller (1997) that adopt a model of market power
measurement of Bresnahan (1989) . The degree of competition measurement is
a function of demand and cost. The measurement result indicates that
company’s behavior in Indonesia cellular industry in non competitive. (See: An
analysis of competition degree of Cellular Industry in Indonesia).-------------------
An analysis of Network Competition---------------------------------------------------- 124. The decreasing of competition degree can be seen from the decreasing of
competition power in developing network. As a network-based industry,
competition in this industry consists of two stapes, competition in network
development and price. -------------------------------------------------------------
125. Business Actor that focuses in gaining the competition in the first step will have
market power to control competition in the second stage, competition in price.
The advantage of the winner of the first step is called first mover advantage as it
described in the model of Stackelberg’s oligopoly ------------------------------------
-
126. Model Stackelberg explains that there is an advantage for first mover in
oligopolistic industry. For example, the demand in the market is explained by
the function of QaP −= , where P is price and Q is demanded product
quantity, and a>0. In line with Cournot reaction curve, the reaction curve for
company 2 is 12 21
2QaQ −= --------------
127. By considering profit maximization condition, the revenue of company 1 is
122
1111 QQQaQPQTR −−== . Because TR depends on Q2, company 1 has to
anticipate the quantity produced by company 2. Company 1 knows that
company 2 will produce with the condition of 12 21
2QaQ −= , so the revenue of
COPYcompany 1 is 11
21111 2
12
QQaQaQPQTR ⎟⎠⎞
⎜⎝⎛ −−−== , or 2
111 21
2QQaTR −= .
Therefore, the marginal revenue o company 1 is 11 2QaMR −= .
128. With the condition of MR1=0, so 21aQ = , and
42aQ = . In other words, the
quantity produced by company 2 is fewer than those of company 1 as a first
164. In order to prove whether an excessive pricing occurs or not, there are many
ways to prove it such as tariff comparison for the same product in the
market and cellular tariff in other countries. It also can be done by
comparing with the significant component cost in any call, interconnection
tariff (call to other operator and PTSN) ---------------------------------------------
165. According to the study conducted by LPEM76, there are differences
between average tariff in Indonesia and other countries. The study of LPEM
compares the average of three various kind of tariffs (PSTN, Intra Operator,
inter-operator) for peak time prepaid tariff of three cellular operators in
Indonesia with the cellular tariff of comparative countries that is
extrapolated from the data of International Telecommunication Union (ITU)
76 LPEM, Final Report: Studi Mengenai Kerugian Konsumen Akibat Persaingan Usaha Tidak Sehat di Industri Telepon Seluler di Indonesia (A Study on the Consumer Loss Due to Unfair Competition in Cellular Phone Industry), LPEM, Jakarta, 2007.
COPYfor the period of 1996-2002. In order to have data of 2002-2006,
extrapolation was conducted by assuming constant growth per year by using
the quantity of the average tariff growth in 1996-2002. The assumption of
rate of exchange Rp/US $ is IDR 9100, and the tariff comparison is as
Table 14 Cellular Tariff Comparison in 2002-2006 based on the Study of LPEM (US $)
Countries/Operators 2002 2003 2004 2005 2006Telkomsel 0.16 0.15 0.15 0.15 0.14 Indosat 0.15 0.15 0.15 0.15 0.15 XL 0.17 0.16 0.15 0.14 0.14 Asia Selatan 0.22 0.21 0.19 0.18 0.17 ASEAN 0.38 0.38 0.38 0.38 0.38 Korea 0.30 0.28 0.26 0.25 0.23 Hong Kong 0.18 0.14 0.11 0.09 0.07 East Europe 0.09 0.07 0.05 0.04 0.03
Source: LPEM – FEUI, Data Proceeded. Details: 1. In regional level, tariff is an average tariff; in country level, tariff that is
valid in the country. 2. South Asia is represented by India and Sri Lanka 3. ASEAN is represented by Malaysia and Singapore 4. East Europe is represented Belorussia, Estonia, Latvia, Lithuania, Moldova
and Russia.
It can be seen from the table that tariff of Telkomsel, Indosat and XL is higher
than those valid in Hongkong and East Europe. If it is compared to South Asia,
ASEAN, and Korea, the tariff of Telkomsel, Indosat and XL are cheaper.
Nevertheless, the study could be bias because of the extrapolation conducted
toward the comparative ones. If there was a significant efficiency changes in 2002
to 2006 to the cellular operator in that countries, the data could be different in a
whole with the extrapolated data. ----------------------------------------------------------
166. As a comparison, the tariff of Telkomsel, Indosat, and XL can be compared with
the data of Directorate General of Posts and Telecommunication on cellular tariff
in ASEAN countries. The following is the intra operator tariff: ------------------------
Table 15
COPYTariff Comparison–intra operator (Rp)
Countries Operator Peak Off Peak Indonesia Telkomsel 1500 300 Indonesia Indosat 1500 1500 Indonesia XL 1248 1248 Malaysia Celcom 1493 978 Brunei B-Mobile 289 Thailand DTAC 524 India BSN 475 Singapore SingTel 924 462 Vietnam Mobifone 737
Source: Directorate General of Posts and Telecommunication. Data Proceeded
As seen in the table, the cellular tariff for intra operator call (on-net) in Indonesia
is higher than those of other ASEAN countries. The only country which are
different slightly with Indonesia is Malaysia. At peak-time, tariff in Indonesia is 4
times higher than the tariff in Brunei, twice than Thailand and India, 1.2 times
than Singapore, and 1.5 than Vietnam. The comparison is conducted by comparing
with the lowest tariff in Indonesia, XL cellular telecommunication provider. If it
compares with the highest tariff in Indonesia, the differences can be wider. ----------
167. Based on the data of Ditjen Postel, the comparison of inter operator tariff is as
202. The calculation result in the research also shows customer loss in cellular
telecommunication service industry in Indonesia. ---------------------------------
203. Through financial analysis that is based on an acceptable quantity of ROE,
Telkomsel potentially reduce its price as it previously described. Based on
the potency of price reduction counted by the same method, the customer
loss of Telkomsel in 2003 to 2006 can be gained by measuring the
difference between actual revenue and potential revenue:
Table of Customer Loss of Telkomsel from 2001 to 2006
Customer loss (In Billion rupiah) The Value of ROE
2003 2004 2005 2006 Total
77 LPEM, Final: A Study on Consumer Loss Due to Unfair Competition in Celular Phone in Indonesia (Studi Mengenai Kerugian Konsumen Akibat Persaingan Usaha Tidak Sehat di Industri Telepon Seluler di Indonesia), LPEM, Jakarta, 2007.
19. The copy of the pleas of STT Group A and STT Group B can be seen in The
lawsuit of KPPU ; -----------------------------------------------------------------------------
20. In other word, the ownership of the same shares is insufficient evidence to state
that a company is part of a Business Group. There must be an evidence that the
COPYmanagement is under the same policy including a coordination of central
economic activities of the Business Group;------------------------------------------------
21. Previously, to state that a Business Group exists, KPPU undergirds its suspicion only
on “ownership relationship” among entities in “Temasek Business Group”. In part B of
the Second Report, KPPU states that: -------------------------------------------------------------
“This ownership relationship is considered as ‘Temasek Business Group’ by investigator. The Business Group included are Temasek Holdings Pte Ltd and all subsidiaries as well as Telkomsel and PT Indosat Plc.;------------------- Although Temasek Holdings Pte Ltd always answer back that it has control over the decision-making and diary management of its subsidiaries … Temasek does not deny that Temasek Holdings is the owner of all subsidiaries. Later, rational business actor will always try to maximize its profits including the profits of its subsidiaries. In this context, Temasek Holdings Pte Ltd has significant interest to the performance of its subsidiaries to gain maximum profits; ----------------------------------------------- The management of Temasek subsidiaries shall realize to such interests and perform their obligation to shareholders. Therefore, , the interests of shareholders automatically become a main focus of management in its business activity. This condition constitutes an opinion that shareholders represent its economic interest in whole; therefore, the anti-trust law sees ownership structure as it illustrated above a single economic entity; ------------
22. The understanding of KPPU on Business Group is not true. If the requirement of a
separated corporate body to be considered as Business Group is only “ownership
relationship” (and, according to KPPU, even need no majority ownership), then
all companies that have the same shares of a company will be considered to be
part of Business Group. In logic and in principle, it is also not true; -------------------
23. The affirmation of KPPU that a view of a subsidiary to the interests of its
shareholders in maximizing profits as an evidence of “common economic
interests” is also a mistake. It is admitted by KPPU that all rational business
actors will try to maximize profits from its subsidiaries. All companies will
calculate its the interests of shareholders. If KPPU is right and “shareholders
represent common economy interests”, all companies will be a part of other
Business Groups. In logic and in principle, it is also not true;---------------------------
24. As it is stated in Hansen’s Comments, a Business Group needs an evidence
concerning common management including central economic plan;-------------------
25. In this case, there is no evidence indicating that Reported Parties 2 to 9 under the
same management of Temasek or forming a single economic entity with it
centralized economic activities coordinated by Temasek. The only relationship
COPYbetween Temasek and Reported Parties 2 to 9 are share ownerships STT and
SingTel by Temasek; -------------------------------------------------------------------------
26. Furthermore, the entity that is suspected as “Temasek Business Group” has
submitted evidences that Temasek does not control, manage, influence or
coordinate its policy and operational decisions. The Board of Directors and
management of the companies perform their businesses separately from Temasek; -
27. Mr. Goh has stated in written to KPPU on 15 May 2007. It is stated by Mr.Goh in its statement in paragaraf 33 to 35 that:
“In its policy and practices, Temasek does not direct commercial and operational decisions of the companies in which Temasek owns their shares. - Articles of faith and the policies of Temasek concerning such matters has been recognized and confessed by international high reputed institutions that take parts in scrutinizing the steps of Temasek. They acknowledge the policies and performances of Temasek. Take as an example the Report Rating Standard & Poor 2006, it states that: ---------------------------------------- “Temasek continues to effort its performance and to establish fair competition among its companies [related to Temasek] by appointing qualified board of directors …. Temasek keeps on staying away from the decision-making of diary policies ---------------------------------------------------- In line with such a statement, the Report of Moodys Investor Services Rating also state the same thing about Temasek that: ----------------------------- “In any company in which Temasek has its investment, it is managed by its management guided by Board of Directors. Temasek stays away from any commercial and operational decicions of the companies Temasek invests;-----
28. The copy of Mr. Goh’ statement can be found in The lawsuit of KPPU .
29. In the session of KPPU on 13 August 2007, KPPU expresses some questions aiming at
affirming that Temasek controls or influences board of directors and management of
STT and SingTel as well as its subsidiaries. It is denied by Mr.Goh and testifies as
“Q. Does Temasek involve in the decision-making and management of STT and SingTel ? -----------------------------------------------------------------------
A. No. Temasek does not involve in business operation and decision making conducted by board of directors and its management--------------------------
Q. Do STT and SingTel report their investment growth to Temasek annually? ----------------------------------------------------------------------------
A. No, they do not report to Temasek----------------------------------------------- Q. As a business actor and Temasek as an owner of SingTel and STT. What
is the obligation of SingTel and STT to Temasek----------------------------- A. SingTel and STT treat Temasek as the same as other shareholders . ------- Q. Logically, Temasek as an owner has privileges rights to SingTel and
STT. Would you please help us in giving the explanation to this? ----------
COPYA. SingTel and STT have obligation to Temasek as the as the obligation of
other shareholders. ----------------------------------------------------------------- Q. Would you please describe the rights of Temasek as an owner of
SingTel and STT ------------------------------------------------------------------ A. I want to reiterate that both companies treat Temasek the same as other
shareholders, our rights is the same as other companies’ rights ------------- Q. Would you please explain the rights of Temasek as an owner of 100%
STT shareholders? ----------------------------------------------------------------- A. As I have already reiterated, STT is a company in which we invest. We
see our investment from the perspective of finance. We do not get involved in the operation and decision of the companies, conducted by board of directors and management of STT. Our rights does not differs from other shareholders’ rights. We have rights to attend shareholders general meeting RUPS and have voting rights. --------------------------------
Q. Among other names who are already mentioned, do they work for STT and SingTel ? -----------------------------------------------------------------------
A. There is no name mentioned who serve in board of directors of STT, but one, Simon Israel. He serves as board of directors of SingTel . However, he has been serving as board of directors of SingTel before joining Temasek. ----------------------------------------------------------------------------
Q. Does one of them work for STTC? ---------------------------------------------- . A. No ----------------------------------------------------------------------------------- Q. Are they working for AMH? ------------------------------------------------------ A. No ------------------------------------------------------------------------------------- Q. Are those mentioned working for AMHC?-------------------------------------- A. No ------------------------------------------------------------------------------------- Q. Are those mentioned working for ICL? ------------------------------------------ A. No ------------------------------------------------------------------------------------- Q. Are those mentioned working for Indosat? -------------------------------------- A. No ------------------------------------------------------------------------------------- Q. Are those mentioned working for SingTel Mobile? --------------------------- A. No ------------------------------------------------------------------------------------- Q. Are those mentioned working for Telkomsel? ---------------------------------- A. No ------------------------------------------------------------------------------------- Q. Is it correct that Ho Ching is currently serving as Executive Vice
President in STT and STTC? ----------------------------------------------------- A. No ------------------------------------------------------------------------------------- Q. Do the management of SingTel and STT assigned by Temasek?------------ A. No ------------------------------------------------------------------------------------- Q. Who does assign its director? ----------------------------------------------------- A. Any of the RUPS-------------------------------------------------------------------- Q. The shareholders of STT none but Temasek, it means Temasek appoint
the director of STT?--------------------------------------------------------------- A. No. STT is an independent company, in which the election of director
conducted by the RUPS of STT. These directors are elected by an election committee of STT and not by Temasek. Temasek only have voting right in the RUPS ----------------------------------------------------------
The copy of the session of Temasek in KPPU on 13 August 2007 can be seen in The
lawsuit of KPPU . ------------------------------------------------------------------------------------
COPY30. Thereby, Temasek performs no coordination in any decision and policy (on
economy or others) in the company/entity that is assumed as“Temasek Business
Group”. This companies are not under Temasek’s management and central
economic activities directed a guideline of company’s activities. ----------------------
31. On the contrary, there are a lot of evidences that show the fact STT and SingTel
compete each other in Singapore and other countries around the world. It indicates
that Temasek does not have ability to coordinate with the activities of STT,
SingTel and its subsidiaries to gain economic advantages. -----------------------------
32. It can be seen in paragraph 58 of the plea of STT Group A and paragraph 34(d) of the
plea of STT Group B, STT and SingTel have already compete each other:-----------------
The fact that Temasek conduct no coordination on central economic activities as it suspected as part of “Temasek Business Group” is seen clearly from the tight competition of the companies as well as a the two chains as it suspected as “Temasek Business Group”. The good Example is competition between STT Group A and SingTel : -------------------------------- (a) The indirect telecommunications interest of STT Group A in Singapore
consist of 50% its share (through AMH) in StarHub Ltd. (“Starhub”) and indirect telecommunications interests in Indonesia that consist of its share (through AMH/ICL/ICPL) in Indosat. SingTel , listed subsidiary of Temasek, is a telecommunication operator in Singapore its indirect telecommunication interests in Indonesia consists of indirect shares in Telkomsel. Therefore, STT compete with SingTel not only in Indonesia but also in Singapore --------------------------------------------------------------
(b) In Singapore, SingTel competes with StarHub. The evidences concerning their competition are: ------------------------------------------------ (i). In 2005, SingTel brought a lawsuit against StarHub Cable Vision
Ltd (“StarHub Cable”), a subsidiary of StarHub. SingTel alleged StarHub Cable conducting non accomplishment with a network lease agreement in which SingTel has agreed to lease its optical network infrastructure to StarHub Cable. According to SingTel , the company had lost its profits because StarHub Cable had not deliberately complied the agreement by using the infrastructure to supply properties that exempted from the agreement. The litigation process between the two parties is conducted and SingTel submit the lawsuit to Court of Appeal, the Highest Court of Appeal in Singapore. An amount of damage StarHub has to pay to Starhub to SingTel is determined by the court. The nature shows the bitter competition between SingTel and no out-of-court settlement performed by SingTel and StarHub.
(ii) There is also a regulative intervention in the competition between SingTel and StarHub. Since liberalization of telecommunication regime Singapore, Info-communications Development Authority (“IDA”), the independent telecommunication regulator in
COPYSingapore, has intervened at least 30 disputes reported cases between SingTel and StarHub concerning allegation and disputes on the interconnection appealed by the parties. The number of reported disputes, indicates the presence of fair competition. To the present time, as far as our knowledge, there is no allegation on anti-competition in which SingTel and StarHub alleged to cooperate each other shall be considered by IDA.-----------------------
(iii) The above description on jurisdiction and regulation process show there are tight competition between the companies to which Temasek has interest on the two companies. In the plea of STT Group A, it is stated that such a nature is real facts of the reality from separateness and differences of economic interest of the companies---------------------------------------------------------------------
(iv) The competition between SingTel and StarHub varies, depending on the spectrum of the parties’ business. At this time, SingTel has already include pay television market to compete directly with business of cable television that has been operated by StarHub since 1995. No collusive practices between the two operators” -------
33. In paragraph 56 of STT plea, it has been stated that STT Group A operates
independently separated from SingTel and had no interests in SingTel or its
“Director of and management of STT/STTC/AMHC (if relevant) are not directors or employee of SingTel , SingTel Mobile, Telkomsel or PT Telkom because of the independency of the company. STT does not own shares or indirect interest at all to SingTel , SingTel Mobile, PT Telkom or Telkomsel. -------------------------------------------------------------------------------
34. In Paragraf 34 of the plea of STT Group B, it has been stated that there is no similar
policies between STT Group B, SingTel and its subsidiaries :--------------------------------
“The activities of STT Group B and the companies that own its investments, Indosat and StarHub, do not have the same and similar management or plans, unity of objectives between STT Group B and Temasek as well as its interests in SingTel , SingTel Mobile, and Telkomsel. --------------------------- (a) STT Group B has neither shares nor rights in Telkomsel, PT Telkom,
SingTel , dan SingTel Mobile. Thus, STT Group B does not have interests in trying to boost up cellular market share of Telkomsel or to improve the performance of Telkomsel by sacrificing Indosat. -------------
(b) STT Group B firmly denied an assumption that Temasek has used STT Group B as an instrument to coordinate its economic activities in cellular industry in Indonesia or other countries. The denial is supported by the facts that the tight competition between Indosat and Telkomsel in Indonesia occurs as it is between StarHub and SingTel in Singapore.------
COPY
35. Widya Purnama (“Mr. Purnama) as the President Director of Indosat in 2002 to
2005 gives his statement to KPPU (combined with the written plea of STT Group
A). In paragraph 14 and 20 of the statement, he confirms that Indosat and
Telkomsel had never colluded each other and oppressed by Temasek to regulate and
to fix price: ---------------------------------------------------------------------------------------
“I understand if there are many questions concerning whether or not collusion in fixing price between Indosat and Telkomsel. In my whole career in Indosat, there is no collusion between Telkomsel and Indosat. There are no directives from ICL, STT or Temasek concerning price fixing. I have never been asked to cooperate with Telkomsel in my whole career in Indosat. We compete each other in running business.”----------------------------
The copy of the statement of Mr. Purnama can be found in the lawsuit of KPPU .
36. In paragraph 24 and 26 of Mr. Goh’s statements, he also confirms that Temasek has
never and had capacity to instruct or to coordinate with the operational decisions s of
STT, SingTel , Indosat and Telkomsel. -----------------------------------------------------------
“Temasek does not instruct or coordinate commercial and/or operational decisions of SingTel and/or STT, especially those of Indosat or Telkomsel. By all means, Temasek does not have capacities or ability to establish anti-competition in relevant market .”
37. Temasek even does not supervise individual investment s performed by STT and
SingTel . Temasek only concerns on the financial performance of STT and
SingTel as a whole. Temasek does not have rights and deserve to accept detailed
reports from STT, SingTel or their subsidiaries concerning company’s status to
which Temasek had invested such as Indosat and Telkomsel. --------------------------
38. During a session in KPPU on 13 August 2007, Mr Goh explained that Temasek apply
“Total Shareholder Return” to evaluate performances of companies to which Temasek
holds their shares. The performance of a company becomes a basis for Temasek to
invest. In this case, Temasek as a shareholders of STT and SingTel evaluates the
performances of both company by applying Total Shareholder Return without
concerning to the details of individual investment performed by each company.
“Q. In general, does Temasek satisfy with the performance of SingTel and STT? ---------------------------------------------------------------------------------
A. Yes, we do. --------------------------------------------------------------------------
COPYQ. What are the reasons? -------------------------------------------------------------- A. The criteria applied to evaluate is Total Shareholder Return (TSR). The
performance of the companies is more than the criteria we qualify --------- Q. Are there any other criteria? ------------------------------------------------------ A. No ------------------------------------------------------------------------------------- Q. Does a value of TSR 20% reflect the investment of SingTel and STT in
telecommunication sector?-------------------------------------------------------- A. The value of TSR represents the result of business activity of SingTel
and STT as well as business activities of STT. For example, SingTel has already invested in Australia, India and Thailand. In addition to invest in Indonesia, STT does it in United States. Thus, the value of TSR is an accumulated amount of SingTel ’s investment s and separately, an accumulated amount of STT’s investment. We only see final TSR and not the detailed investment performed by SingTel and STT.” --------------
STT Group A; ----------------------------------------------------------------------------------------
39. The evidence provided by STT Group A also support the facts that Temasek does
not control, manage or influence the operational policy and decision made by STT
Group A----------------------------------------------------------------------------------------
40. In paragraph 51 to 55, and 57 of the written plea of STT Group A provided for KPPU,
STT Group A has given the following evidences that Temasek does not control,
manage or influence operational policy and decision made by STT Group A: -------------
Although STT is a subsidiary owned in whole by Temasek, the shares of Temasek in STT is only part of diversified portfolio of Temasek as an investment holding company. Temasek does not have control over business and/or operational decisions of STT. The decisions are made by Board of directors and team management of STT/ STTC ---------------------- It is proved by acquiring the shares of Indosat by STT. Acquisition is authorized by STT Board of director without any agreement conditions from the shareholders ---------------------------------------------------------------- In line with its Statutes and Singaporean Law (the State law in which every entity we mentioned as STT was founded), business and STT’s affairs and STTC are managed or at the directives of their own directors. Directors perform their authorities on behalf of company unless for those that require approvals from shareholders. ----------------------------------------- Any companies we called STT Group A is an entity/corporate body separated from Temasek, while STT/STTC has independent business and operational activity-------------------------------------------------------------------
Directors and management of STT/STTC and director of AMHC (if relevant) are not directors or employees of Temasek. ------------------------------------------------------ Directors of STT, STTC and AMHC are obliged to conduct independently and in good will for STT, STTC and/or AMHC (appropriate for each company) under the law of Singapore in which STT, STTC and AMHC were founded. STT and STTC
COPYhave their own Board of directors, from all over the world that consist of respected and reputed members. ---------------------------------------------------------------------------
41. During the session in KPPU on 18 June 2007, KPPU asked many questions aiming at
affirming that Temasek is a final decision-maker of the policy for STT, STTC and
AMHC. Such an opinion has been clarified. STT Group A gives the following
“Q. To whom you make performance evaluation report of each company under STT and who is a final decision maker of STT?
A. The final decision maker is STT Board of Director ----------------------- Q. So, the main policy maker in STT is Temasek?---------------------------- A. No. Temasek is a passive investor. Temasek does not involve in
plans, operating and management of STT. --------------------------------- Q. Does it mean that Temasek has no voting rights in STT? does not involve in operational plan and management of STT.
Nevertheless, under the law of Singapore, Temasek has voting rights in STT. There is no Directors or employees of Temasek in Board of Director and management of STT, STT Communications and Asia Mobile Holding Company.”--------------------------------------------------
The copy of the session official report of STT Group A in KPPU on 18 June 2007
has been available in the lawsuit document of KPPU ------------------------------------
42. The representative of STT Group A, Mr.Stephen Geoffrey Miller (“Mr. Miller”),
has also submit its written statement to KPPU on 18 June 2007, in which he stated that STT, STTC and AMHC perform their activities separated from Temasek: --------
“Temasek, STT, STTC and AMHC are managed by Boards of Director and/or their own managements. The member of Board of Director and management of STT, STTC and AMHC are not directors or employees of Temasek. Temasek (in one side) and STT, STTC and AMHC (in the other side) are operated and managed unconnected. -------------------------------------- STT is a substantive company with its authority, investment and business interest separated one to another in the regions and all over the world. Temasek does not control the decision on business, planning and operating of STT, STTC or AMHC. The decisions are made entirely by Boards of Director and/or managements of STT, STTC or AMHC. STT, STTC and AMHC have their own boards of director with their worldwide respected and reputed members.------------------------------------------------------------------
The copy of Miller’s statement has been available in the lawsuit document of KPPU
43. During the session in KPPU on 27 June 2007, STT Group A testified that there are no
directors or employees of Temasek served as directors of STT, STTC and AMHC: -------
“Q: Is there any directors of STT, STTC and AMHC serving in Temasek Holding?
COPYA: There is no directors of STT, STTC and AMHC serving in Temasek
Holding?----------------------------------------------------------------------------- Q: Is there any employees of STTC out of nine directors of STTC who are
also employees of Temasek Holding?------------------------------------------- A: As long as I know there is no employees of Temasek who are stationed in
STTC” ------------------------------------------------------------------------------- The copy of the session official report of STT Group A in KPPU on 27 June 2007
is available in the lawsuit documents of KPPU. ------------------------------------------
44. It is important to note that in the follow-up investigating session of Mr. Goh on 13
August 2007, he has been specifically asked on whether it is correct or not that
Ms. Ho Ching concurrently serves as Chief Executive Officer of Temasek and
Vice President of STT and STTC. The answer of Mr. Goh is “no”. Although the
evidences have been gained and they are unarguable, KPPU in its third report
keeps on accusing Ms. Ho Ching for concurrently serving as Executive Vice
President STT. It is an effort of KPPU, in its desperation, to provide “facts” for
the shake of justifying its allegations concerning the “control” on the basis of
allegation on crossed ownership. ------------------------------------------------------------
STT Group B; ---------------------------------------------------------------------------------------
45. The evidences provided by STT Group B to support a summation that Temasek
does not control, arrange, or coordinate operational policies and decisions of STT
Group B through STT Group A, directly of indirectly ----------------------------------
46. As it is stated in paragraph 25 above, AMH is a joint venture company between
AMHC and Qatar Telecom. Qatar Telecom owned/controlled independently by
Qatar and it is by any means correlated or controlled by Temasek. --------------------
47. According to the decision of AMH, board of director that consists of representatives
from Qatar Telecom and independent director, is responsible to arrange AMH’s
activities AMH. Temasek and its companies in STT Group A do not control or arrange
such operational activities of AMH . In paragraph 63 and 64 plea of STT Group A, has
been expressed matter as follows: -----------------------------------------------------------------
“AMH has its own board of director that is responsible to manage and to operate AMH. Qatar Telecom has senior representatives in Board of Director of AMH. At present, the Qatar Telecom Chief Executive Officer is the Vice Chairman of AMH Board of Director. There are also several independent directors in AMH Board of Director or those who do not serve as directors or employees of STT, STTC or AMHC. AMH Board of Director does not make decision benefited for STT Group A. The
COPYrepresentative of Qatar Telecom and independent directors within AMH Board of Director will not let it happen.--------------------------------------------- The board of director is also assisted by Management Committee and Monitoring Committee. Management Committee is responsible to take care of AMH diary management and to make recommendation to AMH Board of Director on strategic planning, financing, treasury and merger and acquisition. Monitoring Committee is responsible to review regular report from every company that invested by AMH which this condition are include also StarHubdan Indosat. Qatar Telecom has representative (representatives) in both this committee and active members(active participant) in business AMH”--------------------------------------------------------
48. In paragraph 32 and 33 the plea of STT group B, STT Group B has testified or given
the following fact that Temasek does not control, arrange or influence policies and
“Temasek does not control to business and/or operational decision from STT Group B, directly of indirectly (through STT, STTC or AMHC) ---------- AMH is an independent company which Temasek does not control.------------ (a) AMH is not owned fully (wholly-owned) by Temasek and/or STT. More
or less 25% its share is owned by Qatar Telecom, Qatar Telecom enlisted in London Stock Exchange and other Mid-east Stock market, which 55% of its share is owned directly and also indirectly by Qatar. At present AMH is a provider of communication service in Qatar, and operates as well in Kuwait, Saudi Arabia, Tunisia, Algeria and Maldiva through 51% of its subsidiaries. Wataniya (a company that enlisted in Kuwait Stock Exchange), and in Oman through 55% its subsidiary , Nawras. Qatar Telecom is an independent corporate body with its substances and various interests abroad. As long as I am concerned, Temasek does not have share at all in Qatar Telecom. ----------------------------------------------
(b) AMH has its own board of director separated from those of Temasek, SingTel and SingTel Mobile. Particularly, Qatar Telecom has senior representatives at AMH Board of Director. Chief Executive Officer Qatar Telecom and Board of Director Vice Chairman Qatar Telecom is its representative in AMH Board of Director. There are also some directors in AMH Board of Director that not director or employee Temasek and/or STT, STTC or AMHC. The decision making in AMH is taken by its board of director. The Director, as it is a director in other companies in STT Group B, has an obligation to perform a good will and for the sake of AMH under the law of Singapore, in which AMH is founded. Board of Director has to put forward the interests of its shareholders and not for the advantageous of STT, STTC or AMHC only. The Director, appointed by Qatar Telecom, has to be prudent to
COPYensure that the decision made by board of director of AMH is advantageous to AMH, not only to its shareholders .--------------------------
(c) Board of Director is assisted by Management Committee and Monitoring Committee . Management Committee is responsible to the daily management of AMH and recommends to the AMH management board concerning strategic plan, financing, treasury and merger and acquisition. Monitoring Committee is responsible to review regular report of each AMH investee companies, including Indosat. Qatar Telecom has its representatives in the two committees and they are active participantw in the business of STT Group B. --------------------------
(d) Temasek does not make plan for central economic activities of STT Group B. Such plans are made by Board of Director STT Group B. Furthermore, Qatar Telecom, which have representatives in the management of STT Group B and have veto rights relating to certain decision, will object to any decision that made for benefiting the interests of Telkomsel on the expense of Indosat. Besides, Qatar Telecom does not have interests at all in Telkomsel or PT Telkom. Qatar Telecom takes part actively in the business of STT Group B and there are no indications as it alleged/suspected by KPPU in the business activities of STT Group B. -------------------------------------------------------------------------------------
49. During the session in KPPU on 25 June 2007, STT Group B also provided the
following facts and testimonies stated that AMH operates separated from AMHC unless for the approval of shareholders: ----------------------------------------------------------------------------------------------------
“Q. Are all AMH decisions consulted with AMHC? ----- A. No. The decisions are made by AMH without consulting with AMHC
and Qatar Telecom.-------------------------------------------------------------- Q: In what case does AMH contact AMHC? --------------------------------------- A. The contact with AMHC is conducted in case of an acquisition and new
investment performed by AMH. The bank loans by AMH shall consult AMHC and Qatar Telecom------------------------------
Q. Is there any contact between AMH and AMHC in case of asset disposal? - A. If AMH wants to sell its material assets, AMH will consult Qatar
Telecom and AMHC as its shareholders. The copy of the session official report of STT Group A in KPPU on 25 June 2007 can be seen in the lawsuit documents of KPPU.------------------------------------------
50. The representative of STT Group, Mr. Anupam Garg (Senior Vice president of
International Business Development STT) (“Mr.Garg”), has submitted his written
COPYstatement to KPPU on 25 June 2007. In paragraph 9,10 and 15 he stated that AMH, ICL
and ICPL operate independently: ------------------------------------------------------------------
AMH/ICL/ICPL is managed by their own Board of Directors separated from
Temasek. The members of Board of Director of AMH/ICL/ICPL are not
directors or employees of Temasek. Temasek (in one side) and
AMH/ICL/ICPL (in other side) are managed independently each other. ------
----------------------------------
Business decisions, planning and operating of AMH/ ICL/ IPL are made independently by Board of Directors of AMH / ICL/ ICPL, free from the influence of Temasek. The Board of Director of AMH, ICL and ICPL consist of respected and reputed parties worldwide. There are 2 members of AMH board of director who are not directors or employees of Temasek, STT, STTC, AMHC or Qatar Telecom. --------------------------------------------- AMH through its board of directors, also consisted of candidates from Qatar Telecom, make its own decision. AMH Board of Director does not and cannot make decision benefiting STT, STTC and AMHC only. Such a deed is contradictory with the law of Singapore and Qatar Telecom will not allow such a thing happen.”-------------------------------------------------------------------
The copy of Mr.Garg’s statement can be found in the lawsuit documents of
KPPU.
51. Mr. Guy Norman (The Manager of Business Development of Qatar Telecom) (“Mr.
Norman”) has submitted his written statement to KPPU representing STT Group B on
25 June 2007. In paragraph 9 to 14 he stated that director of AMH make decisions for
the interest of AMH and for STT Group A or Temasek:---------------------------------------
“Qatar Telecom has its representatives in AMH Board of Director. Chief Executive Officer Qatar Telecom and Vice Chairman of Qatar Telecom Board of Director are its representatives in AMH Board of Director---------------------------- The important decisions are made by AMH Board of Director. The Board of Director is obliged to prioritize the interest of AMH higher than those of shareholders’ per head. The director assigned by Qatar Telecom carefully ascertains the decisions of AMH and its benefit to AMH, not only to STTC.-- The AMH Board of Director, in performing its jobs, is assisted by Management Committee and Monitoring Committee. Management Committee is responsible to take care of AMH diary management and to recommend AMH board of management on (a) the strategy of company financing and treasuring; (b) Merger and acquisition of company; and (c) company strategic plan, including any strategic issues of shareholders. Monitoring Committee is responsible to review regular report of each AMH’s investee company (one of them is Indosat), to evaluate the financial
COPYand operational performances of investee companies and to observe strategic issues and shareholder that possibly appear in relation with any investee company --------------------------------------------------------------------------------- Qatar Telecom has had representatives, either in Management Committee or Monitoring Committee. --------------------------------------------------------------- It is clear that Qatar Telecom is an active member in the business performed by AMH. Qatar Telecom is sure that AMH is manageable. ---------------------- I want to affirm that Qatar Telecom invested its funds for amount of US$635 millions in this joint venture. The composition of Management Committee and the management of AMH provide Qatar Telecom with a certain protection that the decisions are made independently without any directives from STTC” -----------------------------------------------------------------------------
The copy of Mr. Norman’s statement is available in the lawsuit documents of
“Q. How many directors of SingTel that served for Temasek? ---------------- A. Only one, and it after he took hold a position in management borad of
SingTel . Nominations Committee proposed some candidate for electing appropriate one precise. At that moment, Simon [Israel] was not in Temasek. He used to be a citizen of New Zealand and at present a citizen of Singapore.”--------------------------------------------------------------
Q: When did he work for SingTel ? ------------------------------------------------- Q. To Temasek?------------------------------------------------------------------------ A. I thing in 2005. Q. Are there any other management boards who serve in Temasek? ----------- A. Not in the last 3 years. I will check it out later.” -------------------------------
The copy of SingTel ’ official report in KPPU on 4 July 2007 can be found in lawsuit documents of KPPU. -------------------------------------------------------------------------------- 54. Mr. Israel is only 1 of 10 SingTel board of directors and Mr.Israel is not a
candidate proposed by Temasek. The truth is, when Mr. Israel was appointed as
Director of SingTel , at the same time he was not a director Temasek. ----------------
55. During the session on 23 July 2007, in its testimonies SingTel explains that SingTel
board of director is responsible to Temasek as to other shareholder of SingTel :----------
COPYQ: To whom does CEO of SingTel give report?------------------------------------- A. Board of Director Q. To whom does Board of Director give report?------------------------------------ A. Board of Director does not give report to certain party, but they are responsible to the whole stakeholders such as creditor and shareholder . --------- Q. What does an accountability look like? ------------------------------------------- A. I do not feel that there is specific thing of the shareholders but the form of the accountability is to make a company running well.------------------------------ Q. How do shareholders ask accountability from SingTel Board of Director? -- A. There is an annual shareholder general meeting (RUPS) and the performance is informed to shareholders previously. It is the time to ask the performance. Usually after RUPS, the director arrange management agenda for a year to come. ----------------------------------------------------------------------- Q. Is there any meeting agenda with shareholders apart from RUPS? ------------ A. There is a quarter report, but as long as I know there is no other meeting outside annual RUPS. -------------------------------------------------------------------- Q. If there is any important issue faced by Board of Director; how is it lifted to the shareholders? ---------------------------------------------------------------------- A. It it is an important thing, Board of Director will be able to summon up Extraordinary RUPS.--------------------------------------------------------------------- Q. Who are shareholders? --------------------------------------------------------------- A. The total is around 1 million shareholders. SingTel has already been listed company in Singapore and Australia. There is also an institution as shareholders ------------------------------------------------------------------------------- Q. What are the institutions? ------------------------------------------------------------ A. I do not know exactly; it look like a funding institution in America. Majority Shareholder can be seen in annual report of SingTel by 3 May 2007, on page 174 -175. ----------------------------------------------------------------- Q. Is Temasek a shareholder? --------------------------------------------------------- A. Yes”-------------------------------------------------------------------------------------
The copy of the official report session of SingTel in KPPU on 23 July 2007 can be found in lawsuit of KPPU.----------------------------------------------------------------
56. Through SingTel , Temasek does not control, arrange or coordinate operational policies
and decisions of SingTel Mobile, directly or indirectly. ---------------------------------------
57. SingTel Mobile is a subsidiary that its shares wholly owned by SingTel . However,
SingTel Mobile is a separated corporate body in which its operating is managed by its
own board of director for the interest of SingTel Mobile. -------------------------------------
58. During a session in KPPU on 4 July 2007, SingTel testified that SingTel Mobile and
Temasek does not have the same director (Mr Israel does not hold a position of the
management of SingTel Mobile) ------------------------------------------------------------------
COPY“Q. Is it right that Mr. Simon Israel, Board of Directors SingTel , also has
double A. Yes, as a member of Board of director. ------------------------------------------ Q. Is there any other Board of Directors that have double position in SingTel
? -------------------------------------------------------------------------------------- A. Ms. Cuah, a member of Board of Director and CEO in SingTel , and member of the Board Director (as it is Board of Commissioners in Indonesia) in SingTel Mobile” -------------------------------------------------------
59. During the session, SingTel also states that Ms.Chua, in its capacities as SingTel
Mobile director, is acting for the interest of SingTel Mobile, not SingTel : ----------------
“Q: What are the responsibilities of Ms. Cuah in SingTel Mobile? --------------
A. She has voting right in SingTel Mobile Board of Directors in making decision. The Board must take decision in accordance with the interest of SingTel Mobile---------------------------------------------------------------------
Q. It can be said that Ms.Cuah brings the interest of SingTel and SingTel Mobile?------------------------------------------------------------------------------
A. No, in its capacity as SingTel Mobile Board of Director, Ms. Cuah must
prioritize the interests of SingTel Mobile and not only the interest of
shareholders, but also creditor and other stakeholders” -----------------------
60. Furthermore, SingTel also testified and provided facts that SingTel Mobile has
corporate services of SingTel . Concerning final operational decisions, corporate
service is not controlled and influenced by SingTel : -------------------------------------------
“Q. You said that you give recommendations/guidelines to [SingTel Mobile] monthly, do you continue giving recommendations to [SingTel Mobile], while you are hired also by SingTel ? -------------------------------
A. Yes, I am employed by SingTel . I provide management recommendation as it is asked by [SingTel Mobile]-----------------------------------------------
Q. Is it right that you are paid by SingTel and had fees from giving consulting services to SingTel Mobile? ----------------------------------------
A. Yes, I am employed by SingTel . The fee of consulting services are paid by SingTel Mobile to SingTel .--------------------------------------------------
Q. Is the service fee given to SingTel Mobile paid monthly?-------------------- A. I do not know whether it is paid monthly, but it is periodically given by
SingTel Mobile to SingTel over the services I have given to SingTel Mobile. ------------------------------------------------------------------------------
Q. Does it mean that you do not get fee directly from SingTel Mobile? ------- A. Yes, as I told it previously that I am an employee of SingTel and paid by
SingTel .----------------------------------------------------------------------------- Q. How many percent are your recommendations implemented by SingTel
Mobile?------------------------------------------------------------------------------ A. I do not know exactly, but around 50% my recommendations are
followed up by SingTel Mobile.-------------------------------------------------
COPYQ. Can you explain? Which recommendation that are not implemented by
SingTel Mobile?------------------------------------------------------------------- A. We have ever recommended SingTel Mobile to improve its capital
structure by recover ratio debt to equity but SingTel Mobile does not follow up my recommendation . -------------------------------------------------
Q. Do the recommendations you suggest related to investment of SingTel Mobile are not followed by Telkomsel? ----------------------------------------
A. We ever give recommendation on the potency of dividend and business plan of Telkomsel. -----------------------------------------------------------------
Q. Can you elaborate, what kind of recommendation you suggest at that time? A. Telkomsel pays dividend. We have ever given recommendation that company’s capital structure is inefficient due to abundant cash. -------
Q.How do you know that SingTel Mobile do not want to follow your suggestion?--------------------------------------------------------------------------
A. SingTel Mobile told it verbally -------------------------------------------------- Q. Why does SingTel Mobile reluctant to implement your suggestion? ------- A.SingTel Mobile does not always inform me the reason. -----------------------
61. During the session in KPPU on 23 July 2007, SingTel Mobile has given
testimonies/facts that SingTel Mobile Board of Director is acting for the interest of
SingTel Mobile, and not the interest of SingTel or Temasek: --------------------------------
“Q. What is the obligation [SingTel Mobile] to SingTel ? Does [SingTel Mobile] have to conduct all by request of SingTel ? --------------------------
A. No, Board of directors has obligation to [SingTel Mobile], it means that they conduct the best for the interest of [SingTel Mobile]-------------------
Q. Does [SingTel Mobile] have obligation to SingTel ?------------------------- A. Under the Law of Singapore, our company does not have obligation to
other company, but every company has its own management board, consequently the obligation is the responsibility of company management board. ----------------------------------------------------------------
Q. Do you think that [SingTel Mobile] as a company must act for the benefit of SingTel? ----------------------------------------------------------------
A. No.[SingTel Mobile] must act for the best of its own, and the interest all stakeholders ------------------------------------------------------------------------
Q. What are the interests of shareholders ?----------------------------------------- A. The Board of director is acting for the best interest of [SingTel Mobile],
including all its stakeholders”-----------------------------------------------------
The copy of the official report session of SingTel in KPPU on 23 July 2007 can be found in lawsuit of KPPU.----------------------------------------------------------------
Share Acquisition in Indosat and Telkomsel; -------------------------------------------------
COPY
62. Telkomsel is a company that was founded under the law of the Republic of Indonesia.
Telkomsel is also the biggest operator of cellular telecommunications in Indonesia. ------
63. In 2001, SingTel Mobile acquired 17.28% of Telkomsel’s shares from KPN Royal
Dutch Telecommunications and 5% from PT Setdco Megacell Asia (The founder of
66. In the end of 2002, as a result of the tender, the Government of Indonesia divested its
41.94% Indosat’s shares to STTC. STTC acquired the shares through two special
purpose vehicles, ICL and ICPL. ------------------------------------------------------------------
67. In 2006, in order to establish a joint venture with Qatar Telecom, STTC transferred its
ownership over ICL and ICPL to AMH under an internal agreement. As it is previously
explained, Qatar Telecom controls 25% of the shares in AMH while AMHC controls
75%. AMHC is wholly owned by STTC.---------------------------------------------------------
68. During the process of taking over of shares in Telkomsel and Indosat, Temasek did not
involve in whatever form. Temasek also never involved in deciding to perform the
investment . It has been confirmed by Mr.Goh in its facts/testimonies during the session
in KPPU on 13 Augusts 2007: ---------------------------------------------------------------------
“Q. Would you please affirm? Who did perform investment in the Indonesian telecommunications company?-------------------------------------
A. STT and SingTel . These companies invested globally. Temasek did not involve in the decision-making of STT and SingTel to perform investment at Indosat and Telkomsel. ------------------------------------------
COPYQ. Does Temasek get involved in the decision making for the investment
and management activities of STT and SingTel ? ---------------------------------------
A. No. Temasek did not involve in the operational and decision of the business of the two companies. The decision on investment is made by board of commissioner and management of each company. -----------------
Q. How is the investment planning of Temasek in telecommunication field in Indonesia?
A. I will never answer it --------------------------------------------------------------- Q. Is there any person who knows it from investment committee? ---------- A. Invesment in Indosat and Telkomsel are performed by SingTel and STT
not by Temasek. -------------------------------------------------------------------- Q. It is preposterous for us that as Managing Director you do not know the
investment plan. I think that you are stashing away in this investigation. I request the attorney-in-fact to explain it. -------------------------------------
A. With due respect, I want to explain that investment in Indonesia is performed by by SingTel and STT and Temasek does not know the consideration of the companies performing investment in Indonesia. I want to say that no one is responsible over the telecommunications investment in Indonesia.“---------------------------------------------------------
69. During the session in KPPU on 4 July 2008, SingTel has given testemonies/facts that
Temasek did not take part in the decision to perform investment in Telkomsel: -----------
“Q.Does Temasek also get involved with the decision to invest in Indonesia? ---------------------------------------------------------------------------
A. No. The decision is approved by [SingTel Mobile] with the support of SingTel , Temasek is not involved” ---------------------------------------------
70. During the session in KPPU on 27 June 2007, STT Group A also provided the
facts/testimonies that the investment in Indosat was performed by STTC, not STT or
“Q. What is the motif of establishing STTC? -------------------------------------- A. To achieved company’s vision and mission. To be a global player and to
invest in telecommunication fields all over the world. ------------------------ Q. Thus. Are STTC and STT under one management?---------------------------- A. STT and STTC are 2 different corporate. STT only has investment s in
STTC…. Historically, the reason of creating this structure is to have STTC arranged an IPO one day. -------------------------------------------------
Q. Thus, there is no bureaucracy behind the policy making between STTC and STT? ----------------------------------------------------------------------------
A. STT and STTC are 2 separated corporate. STTC is a corporate that
makes a decision to have investment s for STTC“ -----------------------------
71. In line with the testimony, STT Group B also gives the same testimonies in the session
in KPPU on 25 June 2007:--------------------------------------------------------------------------
COPYQ. Can it be said that investment policy in Indonesia not from AMH? A. The initial decision on investment in Indosat comes from STTC”-----------
White Paper tahun 2003;--------------------------------------------------------------------------
72. On 4 February 2003, the State Ministry of State-owned Enterprise (“Meneg BUMN”)
published white paper that describe share divestment of Indosat to ICL/ICPL (“white
paper ”). The copy of White Paper is in the lawsuit case document of KPPU. White
paper particularly consider the question of whether, referring to the shares of SingTel
Mobile in Telkomsel, the plan of taking over the Indosat’s shares by ICL and ICPL
infringe the Law No.5/99. Its final conclusion is “No!” ----------------------------------------
“E. The rumors of Monopoly. -------------------------------------------------------- Telecommunication is regulated tightly --------------------------------------------- The telecommunication industry in Indonesia is tightly regulated. The industry is not only subject unto the Law No.36/1999 and its implementation regulation No.52 and 53/2000 on telecommunications industry but also the Law No.5/1999 Prohibition of Monopolistic Practice and Unfair Competition. --------------------------------------------------------------- STT and SingTel are independent in Telecommunication Industry ------------ Temasek owns 67% shares of SingTel and indirectly owns STT. SingTel owns 35% of Telkomsel’s shares with the limited management representatives in which Telkom controls the majority (shares) of Telkomsel. Telkom is owned in majority by the Government of Indonesia. SingTel and STT are managed independently and competed in Singapore and other markets. It should be noted that as a listed company the shareholders of Indosat are the Government of Indonesia, foreign and domestic investors.
73. White Paper continuously states as follows: -----------------------------------------------------
“2. Monopoly ---------------------------------------------------------------------------------- • Under the Law No.5/1999, there is a prohibition to own share majority
in some companies that operate in the same field. The ownership of STT over Indosat through ICL is not majority (less than 50% out of the whole shares of Indosat). In addition, the ownership of Singaporean company in Telkomsel is also less than 50%. Furthermore, Mennen BUMN considers that the regulation is on prohibiting monopolistic practices and not on majority ownership. -------------------------------------------------------
• Prior to the awarded announcement, there is no objection from public although government has announces the attendance of STT in divestment program. ---------------------------------------------------------------
COPY• Telecommunication Industry has already been tightly regulated and
operators may not determine certain policies include in tariff fixing.-------
• For the purpose of divesting Indosat’s shares, Mennen BUMN established an intradepartmental team that consists of the Minister of Communication and Indosat management to ascertain that any inputs have been responded”--------------------------------------------------------------
74. The conclusions of White Paper argues all KPPU’s allegations under Article 27(a).
Provisional People’s Consultative Assembly/House of Representatives (MPR/DPR) of
the Republic of Indonesia has clearly concluded that: ------------------------------------------
a. Telecommunication industry in Indonesia has been tightly regulated and operators cannot determine the policies including tariff fixing.
b. Telkom controls Telkomsel. SingTel only has 35% of Telkomsel’s shares with few number of voting rights. In majority, Telkom is controlled by the Government of Indonesia. ------------------------------------------------------------------------------------
c. STT and SingTel are managed in independently and they compete in Singapore and other markets.-----------------------------------------------------------------------
d. The phrase “majority share” in Article 27 (a) of the Law No.5/99 shall be interpreted literally that means more than 50% of shares (in numerical sense). -------
e. The ownership of STT over Indosat through ICL is not majority because it is less than 50% of Indosat listed shares. -----------------------------------------------------------
f. SingTel also has less than 50% of Telkomsel’s shares-----------------------------------
75. The conclusion of Menneg BUMN is relevant, not only to the interpretation of
Article 27 (a) of the Law No.5/99(See part (E) below) but also to claims of
Temasek that the lasted jurisdiction process at is ultra vires and infringe legal
procedure. (See part (H) below) -------------------------------------------------------------
76. It is also important to be noted that on the basis of other documents in the lawsuit
of KPPU entitled “Goverment’s Elucidation in the Meeting of the Joint
Commission of the House of Representatives in 2003, that KPPU has consulted
Menneg BUMN on its views. As it is elucidated below, KPPU “need no further
information from Government/Indosat concerning Indosat’s divesting settlement”.
It is seen that KPPU does not raise any issues or objections to the plan of the
acquisition which then the acquisition was performed under the stipulation of the
Law in Indonesia. -----------------------------------------------------------------------------
COPY
77. Relevant Paragraph on this matter in the document:
“In accordance with the Law No.5/1999 on the Prohibiton of Monopolistic Practices and Unfair Competition, especially Article 27 and 28 paragraphs 3, it can be elucidated that STT is not an owner of 50% Indosat’s shares. The regulation on acquisition in Article 28.1 of the Law No.5/1999 has not been regulated in the Government Decree. The State Minister of BUMN in 23 January 2003 have completed an invitation of KPPU for consulting meeting and theretofore KPPU does not need further information from Government/Indosat relating to Indosat’s divestment. Without keeping aside the discussion, telecommunication industry is industry that tightly regulated by Government”
78. In this case, KPPU cannot change its mind. There are reasons to believe that
ICL/ICPL had approvals not only from MPR/DPR of the Republic of Indonesia
but also government institutions and fullfil legislative regulation required to
perform acquisition of Indosat’s shares. KPPU does not have the power or any
basis to start investigation after 4 years the acquisition performed. KPPU tries to
cancel the approval of government institutions and law and regulations obtained
previously by ICL/ICPL using suspected infringement of Article 27(a), although
significant changes had never happened in the shareholders structure of Indosat
and Telkomsel.---------------------------------------------------------------------------------
Ther is no control in Indosat and Telkomsel; -------------------------------------------------
79. The principal allegation in the case of KPPU versus Temasek and Reported
Parties 2 to 9 is that Temasek (directly or through Reported Parties 2 to 9) and
Reported Parties 2 to 9 controls Indosat and Telkomsel. Without these claims, all
legal cases to Temasek and Reported Parties 2 to 9 are nun and void. -----------------
80. The claim [of KPPU] is not entirely true. --------------------------------------------------
81. From the viewpoint of Telkomsel, SingTel Mobile is only a minority
shareholders that has right to appoint 2 out of 6 members of Commisioner board
of Telkomsel and the rests are appointed by Telkom. At this time, there are only 5
Commissioners, Telkom remains to entitle to the sixth commissioner. Similar to
this, SingTel Mobile only entitles to appoint 2 out of 5 board of directors of
Telkomsel. Again, Telkom is a right party to appoint the rest. All decisions of
management board of Telkomsel must be made with majority votes, therefore it is
impossible for Temasek, by itself or through Reported 2 to 9, to control
COPY82. Out of 9 Director of Indosat, there are only 4 appointed by ICL/ICPL. On the
contrary, the Government of Indonesia has A series of shares in Indosat that make
it owns special voting right and veto right to certain things as stated in the
Statutes. Besides having A series of special shares, the Government of Indonesia
also owns rights to appoint at least one director and commissioner in
management board of Indosat. By usage, the President Director of Indosat is
appointed by the Government of Indonesia. At present, 5 of 9 directors of Indosat
(including President Director) are the representatives of the Government of
Indonesia.
83. The facts are the same reason as stated by Mr. Pasaribu when he said that
Temasek and Reported Parties 2 to 9 do not control Indosat and Telkomsel----------
84. Without considering the facts, KPPU submits surprisingly allegations that
Temasek is able to control Telkomsel and Indosat through Reported 2 to 9. The
evidences used by KPPU as its guidance are bizarre and irrelevant.
85. Whereas, the evidences passed to KPPU in the preliminary investigation and
follow-up investigation are enough to prove that Temasek and also Reported
Parties 2 to 9 do not control, manage, or influence the operational policies and
decisions of Indosat. --------------------------------------------------------------------------
The evidences submitted by Temasek; ------------------------------------------------------------
86. During the session in KPPU on 13 May 2007, Mr. Goh states that Temasek does not
have shares in Indosat and Telkomsel, and TEmasek does not also instruct or
coordinate operational policies and decisions of the both companies. ------------------------
“Temasek does not have shares in Indosat or Telkomsel. These companies are managed and observed by its own management team and management board. Temasek does not instruct or coordinate commercial decision and company operating or to take part in their business activity or any other business activity in the relevant market ” -------------------------------------------
The copy of the session official report in KKPU on 13 May 2007 can be found in the lawsuit of KPPU.
87. In paragraph 22 and 23 of Mr. Goh’s statements he gave testimonies/facts that
management board of Indosat and Telkomsel performed their activities separated from
COPYTemasek, and Temasek does not have any rights to appoint nominees to be in
“Indosat and Telkomsel are managed and observed by their own management board and management team. Temasek does not have representative or nominee in this management board or management team of the companies.
88. In addition, Temasek has already got independent certificationfrom Mr.Tham Sai Choy
(“Mr.Tham”), a partner in KPMG Singapore (External Auditor of Temasek), and also a
partner that lead statutory audit of Temasek. Mr.Tham has confirmed in its letter dated
11 October 2007 to KPPU that no single agenda as well as official report of
management board meeting of Temasek and RUPS has carried out during the last 3
years discussing the performance, management, or operational of Indosat or Telkomsel.
The certificate is quaoted as follows:--------------------------------------------------------------
“I have read all agendas and the board of director official report and annual RUPS that hold from date 1 August 2004 to 31 August 2007 (“Agenda and official report)”.------------------------------------------------------------------------- No agenda and official report I read discuss performance, management or operating of PT Indosat Plc. and PT Telekomunikasi Indonesia”----------------
The copy of Mr. Tham’s certificate is enclosed in Annex C ----------------------------- The evidence submitted by STT Group A and STT Group B; --------------------------------
89. In Paragraf 68 to 76 of the plea of STT Group A, it has been confirmed that Indosat
board of director perform its duty without any influences from STT Group A and STT
Group B, but in reality the Government of Indonesia has significant influenceto
“The Indosat Board of directors is responsible fully concerning management and operational Indosat. According to Article 11(1) in relation with Article 3 (1) of the Indosat Statutes, the key task of Directors including obligations to: (a) lead and manage the company to keep it in track with the company’s objectives that is to carry out network and/or telecommunication services and to run business information; and (b) to try continuously boosting efficiency and effectiveness of the company.---------------------------- The decisions of Indosat board of director are made by deliberation for general consensus. The Indosat Statutes mentions that anytime an agreement is unattainable then the decision making is obtained by voting in which every member of board of director is entitled to releases one vote. Managing director has an authority to determine a decision in the case of the votes is even. Written circulating decision need animity from all members of board of director ------------------------------------------------------------------------------- The representatives of AMH nominated through ICL, are not a majority in Indosat board of director. Those nominated by the Government of Indonesia
COPYare majority in Indosat board of director, its including managing director. Under the Statutes of Indosat, the member of Indosat board of director are elected and dismissed by RUPS with normal majority. AMH (vote it through ICL and ICPL) can fall behind in votes than other shareholders in RUPS and AMH cannot act unilaterally. -------------------------------------------- The responsibility of Board Commissioner is observing management of Indosat: see Article 15 (1) the Statutes of Indosat. --------------------------------- The decisions of Indosat board of commissioner are conducted by deliberation to reach a general consensus, if fails, the decision will be determined on the basis of majority votes in which every commissioner is entitled to have one vote. The prominent commissioner has no authority to determine decisions in the case of the votes are even. In performing observing activities, Board of commissioner represent shareholders’ interests and it accounts for the whole shareholders. ------------------------------ Board of directors and other representatives from AMH are not majority in Indosat Board of commissioner. Considering the authority of the Government of Indonesia, based on the Indosat Statutes, the member of Indosat commissioner board are elected and dismissed by RUPS. Five of 10 members of Indosat commissioner board are nominated by the Government of Indonesia or Independent Commissioner. As the company enlisted in Jakarta Effect exchange, Surabaya Effect exchange and New York Effect exchange, Indosat is obliged to have Independent Commissioner. -------------- In the level of shareholders, the indirect ownership of AMH (through ICL and ICPL) in Indosat is only 41%. As a consequence, STT/STTC/AMHC only has indirect shares around 31% (75% of 41%) in Indosat. The Indosat Statutes required that the decision of Indosat RUPS Indosat is conducted through normal majority vote of the shareholders. In such cases, the Statutes required a decision to be made through majority of 66 2/3 or 75% and/or only through the votes of shareholders that hold Seri A shares of “Special” shares owned by the Government of Indonesia. Therefore, whether it is AMH, ICL or ICPL cannot unilaterally control decision-making processes in Indosat shareholders level. --------------------------------------------------------- The allegation that Indosat is part of “Temasek Business Group” is also inconsistent with the significant influence of the Government of Indonesia in Indosat.-------------------------------------------------------------------------------- (a) The Government of Indonesia still has more than 14% common shares
in Indosat. -------------------------------------------------------------------------
(b) Apart from its significant ownership over common shares in Indosat, the position and authority of the Government of Indonesia in Indosat is strengthened farther with its ownership of “Series A” shares in Indosat. The A series shares give the Government of Indonesia special voting right, including veto right to: (a) merger, consolidate, acquire, disband and liquid Indosat; and (b) to amend the Statutes, including its purposes and objectives of Indosat, and to improve its capital stock improvement without having pre-emptive rights.----------------------------
(c) Besides, series A shares also gives the Government of Indonesia rights to appoint one Director of and one commissioner of Indosat. At this
COPYtime, 5 of 9 Director of Indosat (including managing director) are the representatives of the Government of Indonesia. The major representatives of the Government of Indonesia in Indosat board of director (apart from 14% of ownership over common shares in Indosat), indicate that AMH does not use its rights that usually owned by majority shares in a company. ----------------------------------------------
(d) Since the divestment to the present time, the managing director in board of director of Indosat are always nominated by the Government of Indonesia, including Mr. Widya Purnama, Mr. Hasnul Suhaimi and Mr. Johny Swandi Sjam. After the divestment, some articles in the newspapers report that the Government of Indonesia affirms its rights to appoint Indosat managing director and indicates all managing director candidates to pass fit and proper test. It is a significant influence of the Government of Indonesia to place its candidate as a managing director of Indosat. Judicially, there is no rights for the government of Indonesia to appoint managing director Indosat unilaterally.
(e) The half of Indosat Board of commissioner consists of two people who are nominated by the Government of Indonesia and three independent comminisoners. The number of representatives of the Government of Indonesia in Board of commissioner passes its special rights as the shareholders of A series shares. ------------------------------------------------
90. Mr. Purnama, a former president director of Indosat, confirms in its statement in
“Q. What kind of STT policies to STTC, AMHC, ICL and [ICPL] when Indosat management does not run properly?” ----------------------------------
A. The Indosat performance is the responsibility of Board of Directors and Board of Commissioner. At the end, the performance will be evaluated by its shareholders.-----------------------------------------------------------------
Q. Can it be concluded that as a Chief Finance Officer of STT you release your authority to observe STTC, AMHC, ICL and (ICPL) by entrusting Indosat management ------------------------------------------------------
A. In our opinion, the current performance of Indosat is better. If the performance of Indosat is bad, STT can do nothing. STT must cooperate with other shareholders including the Government of Indonesia to find the best way to benefit shareholders.
COPYQ. With whom STT discuss the performance of Indosat management? -- A. The answer is the same with the previous one.”
92. During an investigation conducted in KPPU on 25 June 2006, STT Group B
submits evidence that AMH (not STT Group A or Temasek) make decision to
whom Indosat board of director nominated :
“Q. Do the two directors of AMH and Qatar Telecom get involved in the elction of Director in Indosat? -------------------------------------------------
A. The representative from Qatar Telecom and AMHC who are also Directors of AMH involved in the discussion but the decision itself, applying collective consensus, is made by board of director. ----------------------------------
Q. Actually, where (in which level) is the decisions made? AMH or AMHC? -----------------------------------------------------------------------------
A. The decision is made by AMH. ---------------------------------------------------- Q. Can it be concluded that in electing Indosat board of director by AMH,
AMHC involve in it? --------------------------------------------------------------- A. The decision on Indosat board of director is made by AMH. AMHC may
nominate a candidate but the final decision is on AMH board of
director.”
93. During the investigation, STT Group B submits evidence that only AMH (not STT
Group A or Temasek) get involved in observing the performance of Indosat:
“Q. Concerning monitoring of Indosat, does AMH consult AMHC? --------- A. As long as I know, AMHC monitor the performance of AMH, but in
the level of monitoring is only AMH. Q. How does AMHC monitor the performance of Indosat? A. AMHC does not monitor the performance of Indosat. There is no
compulsion for AMH to give report to AMHC or Qatar Telecom on the
performance of Indosat.” --------------------------------------------------------
94. During the investigation, STT Group B submits evidence that AMH does not
arrange, manage or influence operational policy and decision of Indosat:
“Q. Does AMH monitor the policy on procurement and tariff in Indosat?----- A. There is no interference or involvement from AMH. It is a responsibility
of Board of Director Indosat. ---------------------------------------------------- Q. The investigation team gets an information that there is an active
involvement from AMH regarding procurement process in Indosat. ------- A. We are very sorry to hear misled news informed by Investigating Team.
As a matter of fact, all are the responsibility and the authority of Board of Director without any interferences of AMH.
COPYQ. (We even have been asked) What about if procurement regulation is
conducted along with the shareholders, in this case AMH. Will the price be cheaper? -----------------------------------------------------------------------
A. Whether Indosat or Starhub is listed public corporation. There is a rule to obey, including Good Corporate Governance. Therefore, the involvement of Indosat Board of Director is in everything. ------------------
Q. Is the rumour true? ----------------------------------------------------------------- A. No. That’s not true. ----------------------------------------------------------------- A. Is the procurement of prepaid voucher from Singapore? ---------------------- A. I will never give answer, but it already confirms that shareholders never
purchase goods to sell to Indosat or to recommend them to procure. All are in the hand of Indosat Board of Director. There is no AMH’s interference.-------------------------------------------------------------------------
Q. Who does form the work division of the Indosat Board of Director? ------- A. The duty of board of director is determined by shareholders based on the
Statutes of Indosat.----------------------------------------------------------------- Q. Does Director of Marketing have to be from Singapore? --------------------- A. The Director of Marketing is not always from Singapore, the incumbent
Director of Marketing is from the Government of Indonesia ------------------------
Q. Does Director of Finance have to be from Singapore? ------------------------ A. Director of Finance of Indosat is not always from ICL.----------------------- Q. Where does the Director of Research and Development come from? ------- A. I have never heard the position .-------------------------------------------------- Q. Is General Manager (“GM”) that works under Director of Marketing is
from Singapore?-------------------------------------------------------------------- Q. I do not know. GM of marketing is part of Director of Marketing
appointed by the Government of Indonesia. Q. Who does arrange organization structure of Indosat? Why is ICL only
interested in filling the position of Vice President and not President Director? ----------------------------------------------------------------------------
A. The form of Board of Director structure has already been available prior to he presence of ICPL and ICL as shareholders of Indosat. -----------------
Q. Why is Khaizad B Herjee not appointed to be a President Director? -------- A. In reality, the position of President Director is always peoposed by the
Government of Indonesia and be an Indonesian Citizen. --------------------- Q. Does such condition create a vacuum in Indosat Board of Director? -------- A. We must await the decision from the Government of Indonesia
concerning President Director’s election. Q. Does ICL understand that the position of Vice President is more
authoritative than President Director in determining a policy? -------------- A. No. President Director has greater role compare to Vice President
because President Director has casting vote in case of a deadlock. The
decision of board of director meeting is also decided by President
Director.
COPY95. In paragraph 16 and 17 of Mr. Garg’s statements and the submitted evidences, it
is described that Indosat Board of Director independently separated from from STT
Group A&B:
“PT Indosat is operated and managed independently by AMH. The Board of Director or Manajemen of PT Indosat is different with those of AMH/ICL/ICP -------------------------------------------------------------------------- Therefore, the operating and management of AMH/ICL/ICP and PT Indosat are performed separately. They do not form an institute or company group for their single interest. They are not part of “Temasek Business Group”. -----
96. ---- In paragraph 18 and 19 of Mr. Miller’s statement who submits evidences that
Indosat Board of Director is operated independently apart from STT Group A&B:
---
“PT Indosat is operated and managed independently by AMH, therefore the Board of Director or Management is different. ------------------------------------ Therefore, we want to affirm that operation and management Temasek, STT/STTC/AMHC, AMH/ICL/ICPL and PT Indosat are separated one to another. They do not form an institute or company group for their single interest. They do not form an institute or company group for their single interest. They are not part of “Temasek Business Group” in which there is no dependency one to another. -------------------------------------------------------
The evidences provided on behalf of SingTel and SingTel Mobile--------------------------
97. The policy and operational decision of Telkomsel are not controlled, managed or
influenced by Temasek, SingTel and/or SingTel Mobile.
98. During an investigation conducted in KPPU on 4 July 2007, SingTel submit
evidences that SingTel Mobile (not Temasek) that monitor Telkomsel
performance:
“Q. Does monthly financial statement submitted by SingTel Mobile also reflect Telkomsel performance? -----------------------------------------------
A. Yes ---------------------------------------------------------------------------------- Q. So, Telkomsel Management reports to SingTel Mobile and they deliver the
report to you? ----------------------------------------- A. SingTel Mobile gets report and they ask my suggestion and
recommendation for anything they may conduct and SingTel Mobile then. Q. To whom you report your job result? ------------------------------------------------ A. SingTel Mobile is a party that appointed by Telkomsel. ------------------------- Q. I am getting mixed up. Do you give recommendation or do they report? -----
----------
COPYA. I accept the reports. On the basis of it, I give recommendations.----------------
-- Q. To whom are you responsible for? --------------------------------------------------- A. I give report to SingTel Mobile a party that is appointed by Telkomsel. My
Supervisor is CEO. --------------------------------------------------------------------- Q. To whom the CEO report to? --------------------------------------------------------- A. I report to internal CEO and internal CEO report to CEO of SingTel .” --------
99. During investigation, SingTel also submit evidences that Telkomsel does not
consult SingTel in determining operational policy, including procurement
“Q. Does SingTel consult if Telkomsel want to procure? ----------------------- A. No. ----------------------------------------------------------------------------------- Q. Who is Widjaja? Director of? ----------------------------------------------------- A. Management team. He helps keeping the investment of SingTel in
Indonesia. --------------------------------------------------------------------------- Q. Is it right that he gives recommendation on procuring to Telkomsel? ------- A. Usually not. There is division instead of Board of commissioner, Cap Ex
committee with its member 2 form Telkoms and 1 from SingTel . If Telkomsel wants to perform acquisition, then required approval from Cap Ex is needed. SingTel Board of Commissioner is enabled to ask and clarify problems. --------------------------------------------------------------
Q. Can you specify what Cap Ex is? ------------------------------------------------- A. As far as I know, its member consists of 3 people, 1 from SingTel
Mobile and 2 from Telkom. It is a sub-committee of Board of commissioner. They responsibility is approving capital expenditure.------
Q. Thus, Cap Ex has 3 commissaries, 2 from Telkom and 1 from SingTel Mobile?------------------------------------------------------------------------------
A. Exactly.------------------------------------------------------------------------------- Q. Its duty is to approve Cap Ex? ---------------------------------------------------- A. That’s right. -------------------------------------------------------------------------- Q. Including procurement?-----------------------------------------------------------
-------- A. It is not at actual process. The amounts are approved by Board of
Commissioner and then Telkomsel Board of Director performs actual procurement. ------------------------------------------------------------------------
Q. Does Cap Ex committee consult you?------------------------------------------- A. No. Widaja is part of my team. If Board of Director has an affairs they
will ask my opinion.---------------------------------------------------- Q. Do committee member of Cap Ex consult SingTel ? -------------------------- A. No. Cap Ex does it by itself. If they need an assistant, they will ask may
team /Widjaja to get information and we will give re-information to SingTel Mobile a party appointed by Cap Ex and, if agree they decide it. -------------------------------------------------------------------------------------
Q. Will he consult your team before the member of Cap Ex make decision? ----------------------------------------------------------------------------------------
COPYA. No. We only provide information they need and then Cap Ex decide it by
itself. We only help parties assigned by SingTel Mobile. Telkom has its own aid.” ----------------------------------------------------------------------------
100. During the investigation on 23 June 2007, SingTel also submits evidences that
Telkomsel do not consult SingTel in determining operational policy, including
procurement agreement:
“Q. Has ever Did SingTel consulted when Telkomsel want to conduct
goods acquirement?---------------------------------------------------------------- A. No. SingTel does not involve. If a question appear, it will be brought to
Telkomsel Board of commissioner ---------------------------------------------- Q. Who does arrange handset procurement? --------------------------------------- A. Decision is made by CEO of the whole companies.-------------------- Q. In your opinion, is there any possibility of Telkomsel to follow
agreement if it is not a subsidiary. ----------------------------------------------- A. Yes. That’s right. Telkomsel is not a subsidiary of SingTel or SingTel
Mobile because it owns only 35%. But usually in telco industry telco, Vodafone for instance, has many affiliated company and public can join to procure. It same as alliance in which is no shareholders, they join for the sake of economic scale. -------------------------------------------------------
Q. Such as those which you spelled out members mentioned on procurement handset? -----------------------------------------------------------------------------
A. Exactly. This is the question on economic of scale. We are not a majority shareholders, and surrendered to CEO and the boards to determine do they want to participate. -----------------------------------------------------------
Q. Does SingTel or SingTel Mobile agree to the probation of the cooperation?
A. If it gives profits to many parties, I think they will like. ----------------------- Q. Are there any specific written permission? -------------------------------------- A. The direct discussion between CEO’s as business partners. Finally,
procurements are performed by individual companies and so do the contract but the negotiation is done jointly among them.---------------------
Q. I worry that there is a possibility of pressure from SingTel pressure, assure or force others to perform it.
A. No. We are minority investor. And public realize that it is a good idea for their profits. They see this from their point of view. --------------------------
Q. For your notes.This procurement agreement is not always bad. Telkomsel gets good price. It will be regretted if SingTel Mobile gets better price than Telkomsel.---------------------------------------------------------------------
A. In its implementation, it does not happen. If Telkomsel gets profit, they approve it. ---------------------------------------------------------------------------
Q. Prove that there is no transfer pricing. A. But Telkom as a majority shareholder never object it. Q. Frankly speaking, we get information that SingTel Mobile is minority
but it controls Telkomsel which lead to a question, what is the profit of
COPYTelkomsel and does this operation benefit to SingTel and does SingTel make decision on procurement and tariff or even transfer pricing. ---------
A. Information that you got is not true. We are not in a controlling position. Telkomsel board of commissioner controls it. Procurement is performed by Board of directors and it is the responsibility of the party assigned by Telkomsel.” -------------------------------------------------------------------------
101. During an investigation conducted in KPPU on 4 July 2007, SingTel
Mobile submitted evidences that the involvement of SingTel Mobile with
Telkomsel is limited only to nominate boards in Telkomsel and monitor Telkomsel
performance:
“Q. What does SingTel Mobile do to Telkomsel apart from nominating someone to be member of Board of commissioner/Board of Director?-----
A. Only that. --------------------------------------------------------------------------- Q. Is it true that to nominate a person conducted only toward the Telkomsel
Annual General Meeting? The general meeting is once in a year and not every year you can nominate your candidate. Thus, it seems that you do not do other things?
A. SingTel Mobile as a shareholder has interests in Telkomsel. SingTel can nominate 2 of 5 people to be member of Board of Director and 2 of 6 people for Board of commissioner. But SingTel Mobile is committed to Telkomsel daily work performance. ---------------------------------------------
Q. Does SingTel Mobile monitor the performance of Telkomsel? A. That’s right. ------------------------------------------------------------------------- Q. How many times are you committed? ------------------------------------------- A. The function is bought from SingTel . I am so sure but not many. ---------- Q. What is the work procedure standard of monitoring and evaluating
Telkomsel? A. We monitor upon the basis of approved budget agreed by Telkomsel
Board of commissioner from and if there are differences, we inform SingTel Mobile that is appointed to be in Board of commissioner, and it within the discretion of SingTel Mobile.
Q. Who does conduct tender? Do you monitor it? --------------------------------- A. Tender is conducted by using Telkomsel as intermediary. The director in
charge is not a party assigned by SingTel Mobile.---------------------------- Q. In deciding intermediary, does SingTel Mobile have role? The selection
of most favorable vendor? -------------------------------------------------------- A. No. SingTel Mobile does not have role. Telkomsel does it and they use
their way. ---------------------------------------------------------------------------
102. During an investigation conducted in KPPU on 23 July 2007, SingTel Mobile
submitted evidences that SingTel Mobile (through corporate service agreement of
SingTel , not Temasek) monitor the performance of Telkomsel: -------------------------
Q. What kind of services from SingTel to Telkomsel?-----------------------------------
COPYA. The service from SingTel to SingTel Mobile is performing monitoring in the
investment . -------------------------------------------------------------------------------- Q. What are things included in investment monitoring ? ------------------------------- A. Including observes SingTel Mobile party appointed in Board of commissioner.
To check/analysis, to report/problem and, giving recommendation to SingTel Mobile appointed in Board of commissioner. The final decision is made by SingTel Mobile and its views depend on balloting result of the boards. ----------
Q. Can you be more specific on the report accepted by SingTel Mobile from Telkomsel? --------------------------------------------------------------------------------
A. Annually, Telkomsel Board of Director gives report. Report check and analyzed by me and I last give recommendation to party that is appointed by SingTel Mobile at Board of commissioner. And also ad hoc affairs submitted by Board of commissioner. The matter will be studied and recommended. ------
During the investigation, SingTel Mobile also submits evidences that
SingTel Mobile is staying away from determining tariff policy of Telkomsel: --------------------------------------------------------------------------
“Q. If we analysis economically, the tariff of Telkomsel is high. Does
SingTel Mobile realize it?-------------------------------------------------------- A. No. SingTel Mobile does not involve in tariff fixing. It is fixed by
Telkomsel Board of Director .---------------------------------------------------- Q. So it is fixed by Board of Director? ---------------------------------------------- A. Exactly. The Director of commerce has a flexibility to perform short-
term advertising, but it is delivered to the policy of President Director assigned by Telkom. --------------------------------------------------------------- Q. Is there any SingTel boards from the parties appointed in Telkomsel Board of commissioner? ----------------------------------------------------------
A. No. ------------------------------------------------------------------------------------ Q. Is there any Temasek boards from the parties appointed in Telkomsel
Board of commissioner? ---------------------------------------------------------- A. No. ------------------------------------------------------------------------------------ Q. We limit Temasek Group as a company that owns shares, directly or
indirectly. Thus, how do you know that they are not in one company mentioned in this definition? -----------------------------------------------------
A. Since the very beginning we disagree with the term Temasek Group. ------- Q. We do not ask your agreement. We believe that among the companies
where Temasek directly or indirectly hold shares it is part of a group.---- A. We disagree but however the people are our employee. ----------------------- Q. We don not care whether you agree or not. Do they serve as boards in
one of Temasek Group? ----------------------------------------------------------- A. No. They are SingTel employee. -------------------------------------------------
Q. To the 2 people appointed in Telkomsel Board of Director, the questions is the same. Is one of them or both in Temasek Boards or related to Temasek?----------------------------------------------------------------------------
A. No. They are employees of Telkomsel nominated by SingTel Mobile.----- Q. In your opinion, is one of them or both employee to a company related to
Temasek, apart from a company that hire them-------------------------------- A. No. ----------------------------------------------------------------------------------- Q. SingTel Mobile does not worry with Telkomsel tariff ?------------------
COPYA. SingTel Mobile is not committed to the daily performance. The Board of
Director fixes the tariff. ----------------------------------------------------------- Q. Is there any SingTel Mobile policy concerning dividend from
Telkomsel?-------------------------------------------------------------------------- A. There is no SingTel Mobile policy concerning Telkomsel dividend. ------- Q. What do you mean?----------------------------------------------------------------- A. SingTel Mobile does not determine policy for Telkomsel. ------------------- Q. So, what is your policy? Are all dividends are paid or the profits
obtained are re-invested?---------------------------------------------------------- A. We have no special policy. -------------------------------------------------------- Q. Shall be the whole dividends paid? ----------------------------------------------- A. We have no policy for Telkomsel to pay all profits as dividend or to be
kept to be re-invested. ------------------------------------------------------------- Q. It means that you never ask whether the dividend will be re-invested or
not?----------------------------------------------------------------------------------- A. Dividend is determined by Board of commissioner and it depends on
GM. ---------------------------------------------------------------------------------- Q. Thus. T can be concluded that if there is no policy you never ask whether
the dividend will be kept by Telkomsel to be re-invested or not? ----------- A. As far as I know, It’s correct. But we also never ask on the profits paid as
dividends. It is decided by Board of commissioner.--------------------------- Q. Thus. What is your opinion on your appointment about that? ---------------- A. Our Minority is only in Board of commissioner. ------------------------------- Q. But you have big influences here. You have 35% shares and you appoint
2 people in Board of commissioner. --------------------------------------------- A. We are only minority and out appointing relied on Telkomsel interests.” --
s it mentioned in paragraph 53-55, Temasek and Reported Parties 2 to 9 do not get
involved in monitoring or evaluating of Indosat or Telkomsel performances. The
evidences indicate that Temasek and Reported Parties 2 to 9 have no information on
the performance or management policy of Indosat and Telkomsel, therefore the
debate on the cooperation of Temasek (direct or through Reported Parties 2 to 9)
and Reported Parties 2 to 9 to manage operational policy and decision of Indosat
and Telkomsel is groundless. ------------------------------------------------------------------
THE ABSENCE OF JUSRISDICTION;-------------------------------------------------------
104. Based on Article 1 (18) of the Law No.5/99, KPPU is given an authority to
monitor only “business actor that perform its business activity so that they do not
practice monopoly and/or unfair competition .”
Pasal 1 (5) Undang-Undang No.5/99 menjelaskan apa itu “pelaku bisnis” : ---------------------
COPY
105. Article 1 (5) of the Law No.5/99 defines “business people” :
“Business actor is an individual everyone or corporate, whether it is corporate body or corporate body founded and domiciled or conduct activities in the territory of jurisdiction of the Republic of Indonesia, either its own or together through agreement, carry out various of business activities in the field of economy.” ---------------------------------------------------
106. It is contradictory with the statement of KPPU in part A.1 on analysis of the third
report, none of Temasek or Reported Parties 2 to 9 are business actors as it is
described in Article 1 (5) of the Law No.5/99. Temasek is not in a jurisdiction of
KPPU.
107. As it is known that Temasek and Reported Parties 2 to 9 are founded and
domiciled in Singapore (ICL is founded in Mauritius), not in Indonesia.
108. Therefore, in order to have Temasek accorded with the definition of business
actor in as it is in Article 1 (5), KPPU in third report, put it only in economic
doctrine stated that the activity of Temasek Business Group is bounded in the
territory of Indonesia.
109. Meanwhile, the argument of KPPU on this matter is far beyond the truth. A series
of KPPU’s reasons are as follows:
(a) Temasek and its subsidiaries called “Temasek Business Group” considered as a single economic entity. With this reason, according to Article 1 (5) UU No.5/99 any deed of Temasek’s subsidiaries can be justified to Temasek --------
(b) Temasek Business Group is committed with its activities in Indonesia due to its control over Indosat and Telkomsel. ------------------------------------------------
(c) Another alternative from part (b) above is the reason why Temasek Business Group is committed with its activities in Indonesia simply because Temasek Business Group invest in Indosat and Telkomsel. ------------------------------------
110. The three statements are groundless.
111. It needs to be concerned that Mr. Pasaribu has concluded that “business actor” is
clearly defined in Article 1 (5) the Law No. 5/99, therefore the usage of “business
group” or “ultimate parent” in determining jurisdiction is not clear. -------------------
COPY112. In an expert report on 27 August 2007, Professor Hikmahanto Juwana (“Professor
Hikmahanto”), a jurist that is proposed by STT Group A, has a notion that the
doctrine of single economic entity is unknown to the law of Indonesia. According
to Professor Hikmahanto, even if the concept exists, it can be accomplished only
by the following requirements: (i) there is common management between ultimate
holding company and subsidiaries ; (ii) the plan of holding company also covers
economic activities of its subsidiaries; and (iii) subsidiaries are not allowed to
argue to the action set in company management. The fact of share ownership is
not enough to accomplish the requirement. The copy of Professor Hikmahanto’s
testimonies can be found in the lawsuit of KPPU. ---------------------------------------
113. Besides, by referring to the performance of anti monopoly authority in other
countries, KPPU has indirectly agreed that the Law No. 5/99 shall be assumed to
be in line with the law principle internationally and the standard applied by the
more sophisticated system of competition law.
114. Temasek has submitted an expert opinion of Dr Frank Montag (“Dr Montag”), a
partner in antitrust, competition and trade (ACT) group in Freshfields Bruckhaus
Deringer, one of the biggest business law firm in the world. Having its residence
in Brussel, Dr Montag focuses its practices on the law of competition in Europe
and Germany. For years, Dr Montag considered to be one of competition expert in
Europe by Chambers Global, European Legal 500, Global Competition Review,
Global Counsel magazine and Juve. The copy of Dr Montag’s opinion is enclosed
as an evidence D. -----------------------------------------------------------------------------
The application of single economic entity doctrine;-----------------------------------------
115. As it is stated by Dr. Montag that under the law of European Union and Germany,
the holding company and its subsidiaries remains to be a single economic entity
only if the subsidiaries do not have freedom to act and to get absolute economy.
When a subsidiary has an economic independency supported by its holding
company, the two must be considered to be separated economic entity. -------------
116. Dr Montag states that the problem of economic independency, or autonomy, can
alter certain fact in every case. Specially, the relevance of share ownership in
subsidiaries, board of directors the composition of both companies, and how far
COPYholding company influences policy or instructs its subsidiaries. Particularly, in the
case of joint venture. The company is not called common economic entity as one
of the holding company, unless the holding company enjoy certain rights enabling
to control, or unless both holding company coordinates their decision relating to
joint venture. So, joint venture in fact is not autonomous -------------------------------
117. As it is mentioned in item 88 to 91 above, Minister of BUMN has considered (and
agree) with the structure of share ownership of Indosat and Telkomsel concerning
to acquisition by ICL/ICPL to the share of Indosat. It is important to know that in
its consideration Minister of BUMN does not assume that Temasek and Reported
Parties 2 to 9 are Business Group. The white paper clearly mentions that “SingTel
and STT are managed independently and compete in Singapore and in other
markets.” The presupposition of KPPU about “Temasek Business Group” does
not only fight against fact but also disagree with the previous conclusion stated by
other government institution and hearings before member of parliament
121. However, such factors are not adequate supportive evidences to prove the
allegation that Temasek and/or Reported Parties 2 to 9 controls Indosat and
Telkomsel. The fact that the shareholders are not passive investors cannot be
compared to company control in whatever reasons. -------------------------------------
122. KPPU supports its consideration from the article written by Ezrachi and Gilo that
written “in European Union, even passive investments is considered to minimize
competition, especially in a concentrated market that infringe the law of
competition.” First of all, it is not relevant related to Indosat and Telkomsel that
are controlled by ICL/ICPL and later by SingTel Mobile. This article does not
COPYjustify an assumption expressed by KPPU, either on page of reference or in any
other parts. The conclusion of the article states that passive investment can cause
anti-competition effect when the relevant market is concentrated. Such effects do
not always occurs in the competition law of European Union. Indeed, the main
purpose of the article is to identify similar transaction that is not argued under the
regulation of competition law in European Union, as it is expressed clearly in the
article’s abstract: “The article identifies a coverage of transactions that potentially
affect competition; however they remain unchallenged under current regulation.” 78 -------------------------------------------------------------------------------------------------
123. It is seen that the assumption of KPPU on effect of minority investment at Indosat
and Telkomsel based on article is (i) not relevant at all, and (ii) the statements and
the assumption of KPPU is contradictory. -------------------------------------------------
124. Holding company is not automatically having a control over its direct and indirect
subsidiaries. Additionally, the indirect subsidiary is able to decide to perform its
own investment. -------------------------------------------------------------------------------
125. Therefore, KPPU cannot easily assume that minority investment in Indosat and
Telkomsel give by itself a control to such companies. The available evidences
show the facts; especially those relating the amount of share ownership and
shareholders involvement or holding company are under the management of
subsidiary and investee companies. ---------------------------------------------------------
126. In aquo case: -----------------------------------------------------------------------------------
(a) ICL and ICPL only control 41.94% of Indosat shares, whereas SingTel Mobile only owns 35% of Telkomsel shares; ICL/ICPL and SingTel Mobile are only minority shareholders in the two companies. ----------------------------
(b) The statutes of Telkomsel and Indosat do not give SingTel Mobile and ICL/ICPL veto right to influence the business strategy decision of the both companies. There is no agreement between SingTel Mobile and ICL/ICPL, and also other shareholders in Telkomsel and Indosat to let them possess veto rights. ------------------------------------------------------------------------------
(c) Out of 9 members of Indosat board of directors, there are only 4 nominated by ICL/ICPL. ICL/ICPL only nominates 6 of 10 members of Indosat commissioner board which the rest are accomplished by one independent commissioner and one by Qatar Telecom through ICL. Temasek nominates none for the Indosat board of directors and commissioner, and none of the directors and commissioner become members of Temasek board of director --
(d) Out of 5 current members of Telkomsel board of directors, there are only 2 nominated by SingTel Mobile. SingTel Mobile only nominates 2 of 5 members of Telkomsel commissioner board. Temasek nominates none for
78 ibid p. 327.
COPYthe Indosat board of directors and commissioners, and none of the directors and commissioner become members of Temasek board of director -------------
(e) The fact is that neither Temasek nor Reported Parties 2 to 9 controls, manages and influences the policy and decision made by Indosat and Telkomsel one way or another. ------------------------------------------------------
127. The facts conclude that ICL/ICPL and SingTel Mobile do not have control to
Indosat and Telkomsel. -----------------------------------------------------------------------
128. In fact, there is a body that control Indosat and Telkomsel, It is not Temasek but
the Government of Indonesia ----------------------------------------------------------------
(a) In addition to its share ownership in Indosat, the Government of Indonesia holds A series shares in the companies, as a consequence it has special voting and veto rights over the strategic problems as it stated by the Statutes. The Government of Indonesia also has rights to select at least one director and one commissioner in Indosat. At this time, 5 of 9 Indosat directors (including president director) and two of board of commissioner of Indosat are the representatives of the Government of Indonesia. In 2002, when the divestment of Indosat shares to STTC, President Director of Indosat agreed to be always appointed by the Government of Indonesia under the agreement with STTC. -----------------------------------------------------------------
(b) Related to Telkomsel, the majority shareholders (65% shares) is Telkom. Telkom appoints 3 of 5 Telkomsel directors and 3 of 5 Commissioner Telkomsel. The majority shareholder of Telkom is the Government of Indonesia. --------------------------------------------------------------------------------
129. The facts that the Jakarta Post Newspaper on 25 October 2007 wrote an
awkwardness in the investigation of KPPU: ----------------------------------------------
“The government controls PT Telkom, which in turn owns 65% of Telkomsel, the country's largest cellular operator, and consequently appoints the majority of its directors and commissioners. ------------------------------------------------------ Temasek, through its subsidiaries, owns only 18.9% of Telkomsel. ---------------- On the other hand, Temasek, also through its subsidiaries, holds 30.61% of Indosat, the country's second largest mobile operator, with 14.29% owned by the Indonesia government, 10.20% by the Qatari government and 44.89% by the investing public, including foreign institutional investors. ----------------------- Even though the Indonesian government owns only 14.29% of Indosat, it succeeded in appointing five of the nine members of the board of directors, including the president director. More than half if its nine-member board of commissioners were either representatives of the government or independent commissioners. ----------------------------------------------------------------------------- The government holds a golden share (A share) in Indosat which gives it veto power over important corporate decisions.----------------------------------------------
COPYWhat then is the logic of the KPPU findings? Wouldn't those allegations also insult the intelligence of the investing public, including foreign institutional portfolio investors, who own 44.89% of Indosat and 47.77% of Telkomsel? ------ If the conclusion of the investigation team is true, which theoretically should be the case because, as the vanguard and defender of fair business competition, the KPPU is supposed to come out with an assessment that has logic and makes economic sense, that would be worrisome indeed. ------------------------------------ But the question then is how could Temasek, despite its cross-ownership at Indosat and Telkomsel, control both companies and dictate their prices while the Indonesian government simply sat back and relaxed, acting as a seemingly innocent bystander.------------------------------------------------------------------------- What then is the function of government-appointed directors and commissioners at both cellular operators, and why did the Telecommunications Regulatory Body close its eyes to the alleged price fixing? -------------------------- Has the government been ignorant or grossly incompetent in recruiting and appointing directors and commissioners? ----------------------------------------------- Is the way the government treats and oversees Indosat and Telkomsel typical of its management and supervision of the other 128 state companies?----------------- It is Telkomsel, which is 65% controlled by state-owned Telkom, that would benefit the most if Temasek deliberately hampered Indosat's business growth, as the KPPU team concluded. What is the logic of this? It simply insults the intelligence of even the man on the street, because Temasek indirectly holds only 18.9% of Telkomsel. ----------------------------------------------------------------- These are just some of a layman's questions about the logic of the most important conclusions of the KPPU report.”
The copy of this article is enclosed as an Evidence E ------------------------------------
130. Mr. Pasaribu also finds that Telkomsel is a subsidiary of Telkom (and not SingTel
131. Therefore, either Temasek or Reported 2 to 9 excluded from the definition of
performing activities in Indonesia, as it is mentioned in Article 1 (5) of the Law
No. 5/99., on the presence of control over Indosat and/or Telkomsel.
The fact concerning investments in Indosat and Telkomsel;-------------------------------
132. Another KPPU’s arguments is on controlling Indosat and Telkomsel. KPPU bases
its argument on the ties of Temasek Business Group with the activities in
Indonesia due to its investment in Indosat and Telkomsel. ------------------------------
COPY133. The allegation is groundless. According to Professor Hikmahanto Juwana, law
expert that propossed by STT Group A, states in its report delivered to KPPU:----
“I want to affirm that explanation KPPU on term “business actor” during preliminary investigation is wrong. In my opinion, foreign corporations cannot be qualified as business actor because they have to perform their activities directly in Indonesia. ------------------------------------------------------- STT, STTC,AMHC,AMH, ICL and ICPL only have shares in Indosat Plc., directly or indirectly, and KPPU cannot prove that they get involved in any operational decision. Under Competition Law, such companies cannot be qualified as performing activities and be mentioned as business actor.”--------
134. If KPPU interprets correctly “managing activities in the territory of the Republic
of Indonesia”, the Article 1 (5) cannot be implemented and make any investors (in
any form of investment) to be “business actor”, under the requirement of Article
1(5). The result is illogical caused by KPPU’s complicated interpretation.-----------
135. In its dissenting opinion, Mr. Pasaribu concludes that shareholders in Indonesian
company cannot be compared to the deeds of performing business activities. The
first investment in Indosat and Telkomsel is activities in capital market not in
cellular market. To find a jurisdiction, the evidences of Temasek and/or Reported
2-9 in the business activity or business transaction of cellular telecommunication
in Indonesia. In this case, the evidences are not found. ----------------------------------
136. In the third report, citing the definition of “Investment” in the Law No.25/2007 on
investment is defined in Article 1 (1) as follows: ----------------------------------------
“Investment is any kind of activities on investing, either by domestic or foreign investors to perform business in the territory of the Republic of Indonesia.” -----------
137. The third report also cites Article 1 (3) of the Law No.25/2007 on investment:------
138. “Foreign investment” is an activity of investing to perform business in the
territory of the Republic of Indonesia by foreign investor, either foreign capital in
whole or joint venture with the domestic investor.’---------------------------------------
139. KPPU bases on this rule to conclude that “The Investment of Temasek Business
Group aims at creating business acess to the territory of the Republic of
Indonesia.” (See paragraphs 9-11 of the Analysis of Third Report) --------------------
140. The conclusion of KPPU: --------------------------------------------------------------------
(a) The two stipulation cited by KPPU depicts a clear difference between
“investing activity” in one side and business implementation in Indonesia on
COPYthe other hand. However, KPPU has already concluded both different concepts without explaining why the allegation to the investment of “Temasek Business Group” “intended” to perform business in Indonesia. -----
(b) The description of KPPU is in the contrary on its own. In one side, there is clear differences between passive and active investors, and on the other it implicitly state that any investment will be automatically classified as business activities in Indonesia. ------------------------------------------------------
(c) The Law on Limited Corporation (the Law No.1/1995 amended with the Law No.40/2007) and the law on Investment does not recognize controlling company as a form of businesses. Investment Coordinating Body (“BKPM”) has clearly positioned in this problems. In 2004, BKPM canceled a regulation (THE DECREE OF THE HEAD OF INVESTMENT COORDINATING BODY NUMBER57/SK/2004 YEAR 2004 ON THE GUIDELINE OF INVESTMENT APPLICATION THAT FOUNDED IN ORDER TO BOOST DOMESTIC INVESTMENT AND FOREIGN INVESTMENT) that permit establishing holding company under the law of investment. Further, as it is cited by Ratnawati Prasodjo, former Director of General Corporate Body department of justice (now Department of Law and Human Rights) and one drafter of the Law of Corporation. The Law of Corporation does not recognize share ownership or investment in other company as a form of business.-------------------------------------------------------
141. In accordance with that, it is clear that Temasek and also Reported Parties 2 to 9
are not business actors under the meaning of Article 1 (5). Due to the reason, the
statement of KPPU has already been null and void since its inception-----------------
THE ABSENCE OF MAJORITY SHAREHOLDERS ; --------------------------------------
142. Although, it opposes against the opinion above, Temasek can be considered as
business actor under Article 1 (5) of the Law No.5/99; its facts shows an
infringement of Article 27 (a) of the Law. -------------------------------------------------
143. Article 27 (a) of the Law No.5/99 states:--------------------------------------------------
“Business actor is prohibited to have majority shares at some similar companies that conduct business activity in the common field at the commone relevant market , or establish some companies that have business activities at common relevant market , if the ownership resulted: -------------- (a) one business actor or one group of business actor control more than
50% (five percents) market share of one goods or certain service.” ----
144. Article 27 (a) only prohibits ownership of majority shareholders in some
companies, under certain conditions. This Article does not prohibit an ownership
from other type of majority shares. ---------------------------------------------------------
COPY145. As it told previously, Temasek or one of Reported Parties 2 to 9 have “majority
shares” in Indosat or Telkomsel. ICL/ICPL only has 41.94% of majority shares in
Indosat and even SingTel Mobile has smaller majority shares in Telkomsel, 35%.
Precondition is important in applying Article 27 (a) not accomplished. ---------------
146. State Minister of BUMN has clearly stated that the interests of shareholders
ICL/ICPL and SingTel Mobile at Indosat and Telkomsel does not meet
qualification as majority shareholders. As it is stated in paragraph 90 and 91
above, the White Paper states clearly that “Telkom controls the majority of
Telkomsel” and “The ownership of STT in Indosat through ICL (ICPL) is not
majority (less than 50% from the enlisted shares in Indosat). The ownership of
Singaporean company in Telkomsel also less than 50%.” In other word, MENEG
BUMN and also parliament in Indonesia has taken into consider to choose the
word for Article 27 (a) and interpreted majority shareholders in number (less than
149. There are two reasons why the conclusion is not true. First, the description of
KPPU on “majority share” is not consistencies at all either its source definition or
the intention of its form. It is not also supported by argument that KPPU trusts.
Second, in KPPU’s broad construction, Indosat and Telkomsel are not controlled
by Temasek or one of the Reported Parties 2 to 9. ---------------------------------------
The Fair Forming of “majority share” in Article 27;-----------------------------------------
150. The interpretation of KPPU on “majority share” is indefensible, either from the
perspective of Indonesian of from anti-trust law in other jurisdictions. ----------------
151. Based on Indonesian law, Professor Hikmahanto Juwana, the law expert proposed
by STT Group A, states in its report delivered to KPPU: -------------------------------
COPY“The conclusion I can take from the meaning of “own majority shares” is majority shareholders must have more than 50% (fifty percent) of company’s sold shares and paid up capital. ----------------------------------------- Under Article 27 of Competition Law, ICL and ICPL (direct shareholders in Indosat) only have 40.8% of Indosat shares, STT, STTC, AMHC, AMH, ICL and ICPL. Therefore, they cannot be called “own majority shares” of Indosat. ......... The concept of significant influence is not recognized in Indonesian corporation law and for this reason, the meaning of “own majority shares” cannot be determined by using the concept. The KPPU’s approach on majority share in Second Report is inaccurate and it is not applicable judicially. In my opinion, as t mentioned in the beginning of the paragraph, “majority shares” is majority shareholders above 50% (fifty percent) of company’s sold shares and paid up capital. It is importance to be underlined that significant influence is not relevant test according under the law of Indonesia in determining whether majority share exists, and it is judge’s fault that to determine a decisions is part of KPPU.” ---------------
152. The conclusion of Professor Hikmahanto Juwana is based from the definition of
“majority share” in Indonesian corporation law. He explains laws in its report as
“Pivotal reference laws are as follows: ---------------------------------------------- a. The Law No. 1/ 1995 on Limited Corporation (“UUPT”)---------------------- b. The Law No. 8/ 1995 on Capital Market (“UUPM”) c. The Law No. 19/2003 State-Owned Company (“the Law of BUMN”) ------ “Usable reference Law are as follows:----------------------------------------------- a. The Law No. 1/ 1995 on Limited Corporation (“UUPT”)---------------------- b. The Law No. 8/ 1995 on Capital Market (“UUPM”) c. The Law No. 19/2003 State-Owned Company (“the Law of BUMN”) ------ a. Based on UUPT, the definition of “own majority shares” is not found.
b. Based on UUPM, elucidation Article 15 paragraph 2 explained: ----------
“Share Majority is shareholders that have more than 50% (fifty percent) of company’s subscribed capital and remit.” ------------------- The explanation of UUPM is interpreted that majority shareholders is shareholders that have more than 50% of sold share and paid up capital.---------------------------------------------------------------------------
c. Based on the Law of BUMN , the meaning of “own majority shares” is not used. Nevertheless, there is an equal meaning. In the meaning of “a large part of” can be seen in Article 1 number 1 and 2 of the Law of BUMN .-----------------------------------------------------------------------------
Article 1 (1) is:--------------------------------------------------------------------- “State-owned Enterprise, hereinafter referred to as BUMN, is a corporate with its capital owned by state through direct equity of dissociated national wealth.” ---------------------------------------------------
In which Article 1 (2) further states: -------------------------------------------
COPY“Company, hereinafter referred to as Persero, is a limited company of BUMN with its capital divided into shares owned in whole or at least 51 % (fifty percent) by the Republic of Indonesia aiming at having profits.”----------------------------------------------------------------------------
153. It is common that words in law are not ambiguous. As it expressed by Prof Dr Jimly
Asshidiqie, the Chief of Constitution Court, in Concerning Laws, if its legal
requirement is clear, a court must apply the rule in accordance with existence
whatever result it is. If law is clearly showed (express verbis) there will be no space
for the court to interpret inversely. In this case, the term of majority share has been
self explanatory and not ambiguous that make ti no space for other interpretation. ----
154. There is a similar perspective with international law on anti-trust. The most
acceptable interpretation of “majority shares” is the percentage of majority
shareholders. Dr. Frank Montag in his capacity as an expert said in his report that
irregularity and exclusion of prohibition in Article 27, by comparing to the
antimonopoly Law in other jurisdictions, requires an understanding of majority
shares”. Based on international anti-trust regulation and the scheme of the Law
No.5/99 as a whole, the function of creating this Article is to have a similar
perception on Indonesian law such as the obligation of shareholders to have more
than 50% of paid up capital in the sense of controlling. ------------------------------------
155. The KKPU’s argument is based on the grammatical, systematical and teleological
perspective of Article 27. The same goes for understanding regulation and practices
in other countries:--------------------------------------------------------------------------------
a) KPPU admits that “grammatical” understanding of Article 27 interprets “majority shares” as a holder of more than half of company’s shares. Yet, KPPU refuses such an understanding. Relating to a number of more than one share classifications in a company, the understanding is too narrow79. The understanding is applicable if it needs de facto statement on whose controls a company. The problem is on the understanding of majority shareholder. The rejection of KPPU on the grammatical interpretation is a test for lawmaker bodies. -------------------------------------------------
b) The systematical and teleological interpretation of KPPU in Article 27 relied on wide understanding of company80 decision maker. The interpretation is its own willingness and relied on the intention to refuse to what has been gauged clearly in
79 Third report, Analysis, paragraph 7 -13 80 ibid, paragraph 14-20 and 22 -25
COPYthe regulation. Legislative Body can select to put “majority shares” as a de facto control but it is not conducted.-----------------------------------------------------------------
c) Based on the discussion and observing other regulation on majority shareholder, KPPU conclude that no available legislative regulation defining majority shareholder but controlling shareholders81. If it happens, Article 27 of the Law No.5/99 supports Temasek in control of the shareholder and not a percentage of shareholders. Therefore, it is better to write it as the existence of “controlling shareholding” in some companies rather than majority shareholder. ---------------------
d) KPPU gives coherent statement that in European Union, share acquisition that does not cause control changing in competitor’s company is arranged by an “unfair competition law” 82. The statement is imprecise because there is no such a law. There are also no such Ezrachi and Gilo Artcile, which then directed by KPPU regarding to such a law. It is true that cases of share acquisition and the effect of its consequences might be regulated by Article 81 and 82 of European Union agreement in which the conditions of the Article have been accomplished but it gives no clues for the interpretation of Article 27 of the Law No.5/1999 that has different stipulation. The Law No.5/1999 contains wide stipulation as it Article 81 and 82: it is regulated (particularly) in Article 4-16 and Article 25. The conclusion is that the Articles in Ezrachi and Gilo resemble to with the Law No.5/1999 on the kernel of the problem and not different regulation of Article 27 that has no similarity with Article 81 or Article 82. ----------------------------------------------------
e) The discussion of KPPU on controlling merger in other territory of jurisdiction83 is very irrelevant, because it discusses other competition issues. Since the very beginning it leads to share acquisition: they then apply ex ante regulation. As early as 2001 to 2002, Article 27 was exercised as ex post to shareholders. Every jurisdiction on merger prohibition is only applicable to a company that has performed merger or the company to merger infringes competition.84 Anti-competitive effects in Article 27 is not explicitly found, and KPPU also does not mention such conditions in its legal analysis. The different perspective on law and the different implementation, no supportive understanding on “majority shares” in Article 27 cannot be found. Finally, Dr Montag states that the understanding illustrated at extraordinary occurrence in Article 27 by comparing to stipulation of modern anti-trust system, then it is suggested to adapted original understanding in arranging shareholding requirement.
81 ibid, paragraph 26-29 82 ibid, paragraph 34 83 Ibid, paragraph 30-22 and 35-43 84 In UK, merger is allowed only if Competition Commission determine that the merger “result of expected to result
the decrease of competition in any market of goods and services in UK.” (Part 35(2)(a) Enterprise Act 2002). Under the merger regulation of European Commission, merger is prohibited if “intentionally disturb the effectiveness of market competition especially if it results strong dominant position” (Article 2(3) of Regulation 139/2004/EC.
COPY156. KPPU intend to justify its interpretation to Article 27(a) of the Law No.5/1999 by
stating the following reasons: ------------------------------------------------------------------
(a) If Article 27(a) applied literally only when there are majority shareholders, it will not prevent loss to competition and public interest caused by a conspiracy among minority shareholders that control some companies. --------
(b) The elucidation of the Law. No.5/1999 determines that one the objectives is to prevent economic concentration. Therefore, Article 27 (a) must be read as a measurement to economic concentration.
(c) The legislative banking regulation and capital market depict “controlling” company/shareholders as a unity with shares ownership of less than 50% in company.---------------------------------------------------------------------------------
157. The following proposed reasons are groundless -----------------------------------
(a) If minority shareholders conspire to lessen competition in the market, this conspiracy can create cartel. It can be attacked by Article 11, a trust by Article 12 or Article 4 of the Law No.5/1999.------------------------------------
(b) The Law No.5/99 does not prohibit market concentration. The Law No.5/99 prohibit abuse of the concentration. It elucidated in Article 25 of the Law No.5/99.----------------------------------------------------------------------------------
Article 25 permit a group of business actor to hold 75% or more of available market without any abuse. In its own case of KPPU, group of business actor may control of 75% or more of the market through its ownership of minority shares in some companies. In the case, Article 27 must be read as an exemption to public freedom regulation that is specifically regulated in Article 25 – in which Article 25 allow group of business actor control 75% or more of the market, Article 27 (a) prohibit such control, if is is performed by group of business actor (literal understanding) with majority shareholders in separated competitor’s company.---------------------------------------------------------------------------------
(c) First, legislation delivers to KPPU to use word “owner of majority shares” and not “majority shareholders”. Second, the statute is used in the different purpose from the Law No.5/99 and the usage is not proper even it can be made as analogy. In so many activities, KPPU does not concern to Indonesian legislation as it mentioned by Professor Hikmahanto in its report (see above); the legislation intend to be in line with the Law No.5/99 and clearly illustrates that “majority shareholders ” must be interpreted as the share owner 50% bigger in a company.---------------------------------------------
158. The discussion of KPPU has already been misdirection in its effort to implement
Article 27 as a stipulation of retroactive controlling merger. As a whole it is null
and void. The Law No.5/99 consists of the rule of controlling merger: as it
COPYregulated in Article 28 and 29. Article 27 is not available as law that regulate
controlling merger, and this stipulation basically differs from the stipulation of
controlling merger. It highlights problem that any effort to put on the concept of
controlling merger is irrelevant with the construction that is prohibited to some
different types, in the framework of structural condition of ownership of majority
share. Furthermore, the implementation of Article 27 by KPPU retroactively to
replace Article 28 and 29 boost basic problems on justice and legal insecurity------
159. Mr Pasaribu also has already (dispassionately) agreed in its statement that oppose
against the statement of KPPU that literal interpretation must be given to the
161. Temasek and Reported Parties 2 to 9 do not control Indosat or Telkomsel. As it
mentioned in paragraph ## above [shareholders that control Indosat is the
Government of Indonesia and even Telkomsel is not controlled by Temasek or
one of the Reported Parties 2 to 9. Telkom is controlling PT Telkomsel with its
65% of shares]. --------------------------------------------------------------------------------
162. Based on the reason, Mr Pasaribu in its opinion adversatively with KPPU, refuses
allegation of KPPU that base on Article 27. Temasek states that Mr. Pasaribu is
entitled to state his opinion. -----------------------------------------------------------------
THERE IS NO MARKET SHARE CONTROL IF MORE THAN 50%----------------
163. If KPPU disagree with the opinion submitted by Temasek that Temasek does not
have “majority shares” in Indosat and Telkomsel, component in Article 27 (a) of
the Law 5/99 that must beproven later is: --------------------------------------------------
“a business actor or a group of business actor control more than 50% (fifty percents) market share of the type of certain goods or services.” ---------------
164. In the First Report, KPPU rely on the study of Research Institute of LPEM-FE UI
“Study on the loss of customer to the business competition in cellular telephone
industry in Indonesia, 2007” (“Report LPEM”) concluded that “Telkomsel and
COPYIndosat control more than 50% (fifty percent) of market cellular
telecommunication in Indonesia.”-----------------------------------------------------------
165. The Second Report states that “Telkomsel and PT Indosat, Plc., jointly control 89%
market share or more or less 50% from compartment psar cellular
telecommunications in Indonesia.”------------------------------------------------------------
166. The Second report mention that compartment of alliance market of Indosat and
Telkomsel is more than 50%. Further investigation must be conducted to determine
whether or not Temasek infringed Article 27 (a) the Law No. 5/99. --------------------
167. In the Third Report, KPPU found that in 2006, on the basis of customer amount,
Telkomsel controls 57.79% of the relevant market while Indosat 26.18%. Based on
the business revenues of the same year, Telkomsel controlled 68.08% of the
relevant market and Indosat 21.55%. The allegation of KPPU mentions that
Temasek through Telkomsel and Indosat control more than 50% of the relevant
market in 2006. 85 --------------------------------------------------------------------------------
168. There is some dissociated assumptions in allegation of KPPU: ---------------------------
a) The definition of KPPU on relevant market is true;-------------------------------
b) The calculation of KPPU on market share of Indosat and Telkomsel is true;
and
c) Temasek controls Indosat and Telkomsel and also their market share .---------
169. The assumption is not true. Each of them handles its own business. ---------------------
The Untrue of Market Definition --------------------------------------------------------------------
170. KPPU defines relevant market as “service of cellular telecommunications in any
regions of Indonesia.” --------------------------------------------------------------------------
171. Temasek does not agree with definition in which it is too narrow and keeping aside
the substitution of cellular service, especially fixed wireless access (“FWA”). ---------
85 It is clearly seen that the Table number 3 and 6 provided by KPPU in paragraph 35 and 60 of the Third Report
mentioned that since 2004, alliance market segment of Telkomsel and Indosat is more than 50%.
COPY172. Based on the report prepared by Spectrum Strategy Consultants on 27 August 2007
(“Spectrum Report”), the definition of KPPU on relevant market is not true.
Paragraph 2.1 of Spectrum Report states: ----------------------------------------------------
We believe that relevant market in this case should be interpreted as market for service basic technology combined mobile and fixed wireless access (“FWA”) if not combined fixed and mobile market itself.”-----------------------
173. Spectrum Report gives some reasons for supporting its statement. -----------------------
174. Firstly, FWA service is a direct subtitusition of GSM service from customer’s point
of view. Although FWA service provides only limited coverage (in which mobile
service provides fully national coverage full [of]), FWA service can consider as
the replacement for mobile service, its reason shall be as follows: -----------------------
a) Area distribution of limited mobility will be bigger and determined by area
code. Area with enormous number of customer of limited mobility in Jakarta and its area is using one area code. It means that mobile service has a little bit benefit in this area.
b) The recognition of service call-forwarding of FWA operator allow customer to receive call outside the coverage area of FWA service. The FWA service is similar to the previous mobile service in which it is only going into effect to limit call-forward outside restricted area, usually area low-usage.-----------------
c) In Indonesia, for an exemption of “Mudik (Going hometown annually, its performed prior to Eid al-Fitr)” period, it is less than 1% of people perform interregional by land, ship, and air monthly. Besides, there is no real need for most Indonesian people performing full mobility, especially since the customers have a call-forwarding to contact its relatives in the area outside their residence.
175. Secondly, most analyse and industry actor consider TWA as part of mobile market,
either in Indonesia and other regional market area: -----------------------------------------
a) The comment and analysis on Indonesian market mostly describe the influence of FWA service in mobile services market competition. The FWA operators offer great discount at standard mobile tariff with low capital expenditure and interconnection costs as well as license.
b) There is a similar regulation perspective in other global markets. The regulation in India and China (in which FWA service has similar market share with Indonesia) implicitly treat FWA service as part of mobile services market in any regulation announcement. ----------------------------------------------
COPYc) The operators in Indonesia treat mobile service and FWA in common market
share . An operator, Bakrie for instance, prefer not to change their FWA license to full mobile service for the shake of profits, low interconnection bill, and license expense. Operators do not see the limitation of mobility offered by FWA service will put them in advantageous position.
176. Responding to the reason, Spectrum Report concludes:------------------------------------
“Some analysis have been offered concerning relevant market, including fixed services such as in mobile market and fixed service tends to be concentrated by the awareness of fixed-mobile products and mobile substitution. In order to have single definition on fixed and mobile service market, the discussion of inter-states needs to be arranged -------------------------------------------------------------------------- Therefore, the exact market analysis on mobile market shall also involve service of FWA and mobile.” -------------------------------------------------------------------------
177. The report of Dr Cento Veljanovski in Case Associates on [10 August 2007]
(“Report CA”) takes similar conclusion. According to CA Report, there are
differences between service of cellular telecommunications and FWA: -----------------
“We do not find that the difference is a basis for not putting telecommunications FWA service into relevant product market, or an exemption remains to be consistence with the evidence on hand.” ---------------------------------------------------
178. The reason stated in CA Report CA for this conclusion is:-----------------------------------
a. Some coverage area of FWA are not nationwide coverage therefore, most operators of FWA have area codes consisting of significant population proportion, Jakarta as an example.------------------------------------------------------
b. The limitation of area code for most FWA operators that provide the service latter and it enables them to have larger geographical coverage area. -------------
c. The regulation is feasible and included through Mobile Virtual Network Operator in which regulation can be made with other cellular operators to put in the way of FWA operator covering nationwide service.--------------------------
179. Report CA stated that KPPU has failed to justify its statement on the intention of
competition assessment of crossed-ownership regulation. FWA and cellular
telecommunication service are not in common relevant product market. The reasons
stated in CA Report are: ------------------------------------------------------------------------
a) The facts indicate that FWA operators compete directly and tightly with other cellular operators. In an area consisting 2 network types, the FWA operators provide effective and competitive cellular price. It is considered by consumer as a substitution of cellular service. Cellular operator and industrial analyst have explained publicly.-------------------------------------------------------------------
COPYb) There are evidences that prove that FWA service has captured many
customers in certain areas. Jakarta as an example. The customers of FWA reach to 50% or more than the whole customers of cellular services.
c) For cellular user in Indonesia, mobility is not an important assessment. In 2007, more than 80% cellular calls in Indonesia are local calls, 90% to 95% in urban and rural areas. There is even no national roaming.
180. It has been explained in report of Analysis Consulting Limited on 19 September
2007 (“the First analysis Report”) that FWA service is a potential competition for
cellular operators (on page 6): -----------------------------------------------------------------
“KPPU considers to define market as not only operator of cellular but also Public Switched Telephone Network operator (PSTN) and fixed wireless access (“FWA”) for limited mobility service. KPPU defines economic market as “service of cellular telecommunication within the areas of Indonesia,” on the analysis basis of benefit, characteristic and service price along with the geographical region offering from operators. We adopt this market definition to discuss a competition to take part. It must be noted that FWA service becomes a potential competition to cellular service operator with 2 reasons to state. Firstly, a few years ago in India a regulator was able to change license structure to allow FWA operator provide full mobility service to compete directly with cellular service. Secondly, although there is no change in license structure, improving investment on the current FWA operator is important. The marketing also increase because it attracts customer to enjoy limited mobility service.” ------------------------------------------------------------
181. If KPPU defines relevant market wrongly, the decision KPPU will be null and
void.
“ In defining relevant market, KPPU must have reasons and analysis by attaching evidences. By following international custom, KPPU has wrongly define relevant market and any decisions will be null and void.” -----------------------------------------
182. KPPU makes mistake in defining relevant market. If KPPU fails to amend the
mistakes and to give opportunity to the parties answering and providing claimed
evidence to amend, the decision of KPPU will be null and void at High Court level
or Supreme Court. -------------------------------------------------------------------------------
The calculation mistake of Indosat and Telkomsel’s market shares -----------------------
183. In the First Report, KPPU states that market share of Indosat and Telkomsel (based
on business revenues) are 26.79% and 63.15%. According to the First Report taken
from the report of LPEM. If KPPU bases on the description of LPEM in taking
conclusion, (in the Second Report) that Indosat and Telkomsel “jointly control 89%
COPYmarket share or at least more than 50% of the of market share of cellular
telecommunications” To the common effect, the Third Report states that the
average of market share of Indosat and Telkomsel during the period of 2003-2006
was 89.61%. Since it is controlled by Indosat and Telkomsel in 2002, their market
share improve from only 83.58%. ------------------------------------------------------------
184. Yet, KPPU fails to explain of why business revenues of Indosat and Telkomsel are
used to calculate their market share when at the same time acceptable and fair way
to calculate market share on the basis of customer domicile in market share and the
number of customers can be conducted. 86 ---------------------------------------------------
185. By using available information in Third Report on the customer basis, the average
market share of Indosat and Telkomsel (based on the number of customer) for the
period of 2004-2006 was only 83.54%. In fact, the Third Report indicates clearly
that market shares of Indosat and Telkomsel (based on the number of customer)
have decreased slowly from 85.85% in 2004 to 81.97% in 2006.-------------------------
186. Even in the case of revenues, market share stated in the Report of LPEM is different
with those in the First Analysis Report), Spectrum Report and CA Report. The three
Reports determine that alliance market share of Indosat and Telkomsel is smaller
than the Report of LPEM. It can be said that allocation of market share in the
Report of LPEM is not suitable with the allocation of market share stated by the
three notable international telecommunication companies. --------------------------------
The incorrect assumption to Temasek concerning market share of Indosat and
Telkomsel
187. The market shares of Indosat and Telkomsel cannot be assumed as Temasek market
188. As it mentioned above, Temasek will not control neither Indosat nor Telkomsel.
Therefore, there is no basic assumption able to state that market share of Indosat or
Telkomsel are also Temasek market share .--------------------------------------------------
189. Maximally, the assumption that market share of Indosat or Telkomsel is the same as
Temasek’s limited only to a proportional number of its indirect share ownership in
86 See paragraph 106 Analysis part of Third Report
COPYIndosat or Telkomsel. The method is a calculating method used frequently in the
last research that refer to one of paragraph entitled “Temasek does not running
monopoly: Study” published by Jakarta Post on 3 August 2007: -------------------------
“To nail to the counter to recent allegation provided by KPPU, the last research concludes that Singapore’s Temasek Holdings does not practice monopoly to mobile telecommunication market in Indonesia. ------------------------------------------ “Concerning opinions from many point of views that Temasek does not infringe Article 27 of anti-trust law,” Centre for Strategic and senior economist of International Studies (CSIS), and also former member of KPPU, Pande Radjasilalahi express it in the seminar on competition law in Jakarta. ----------------- The Study, headed by Pande and uses the latest data and calculation of mobile telecommunication industry, states that market share of State-owned Enterprise of Singapore (seen from the viewpoint of operating revenues) valued only 20.12% of the total industries in 2006, and tended to decrease since 2004. --------------------- “Market share of Temasek in industry of mobile telecommunication Indonesia, with the operating revenues, decreased from 21.56% in 2004 to 21.11% in 2005 and then to 20.12% in 2006,” he said. ------------------------------------------------------ He also mentions that gross added value of the company including variable, such as employee’s salary, Temasek holds 19.79% of segment market. “Viewpoint of gross added value also used by KPPU and concerning to this, I find that Temasek does not have market share majority,” he said. ------------------------------------------- Meanwhile, based on a number of customers as the most used variables in determining whether monopoly practices occur or not, Temasek only controlled for around 19.18% of market through its subsidiaries in 2006.” ----------------------- The copy of this article is in Annex F.------------------------------------------------------
190. Under such condition, it is clear that Temasek does not have “more than 50% (fifty
percent) of market share” of relevant market. The substance of Article body 27 (a)
of the Law No.5/99 is not accomplished, the allegation to Temasek is null and void --
THE ABSENCE OF ANTI-COMPETITIVE EFFECTS
Allegation OF KPPU -----------------------------------------------------------------------------------
191. In the three of reports, KPPU concludes that Temasek crossed ownership to Indosat
and Telkomsel have negatively influence to competition nature in the relevant
market. Referring to this condition, KPPU claims a number of important matters: ----
(a) The claim that relevant market is highly concentrated and continued
increasing in the last few time --------------------------------------------------------
(b) The variation of claim of Telkomsel finance statement is good. -----------------
(c) The claim that the performance of Indosat is bad since the share acquisition by ICL/ICPL ----------------------------------------------------------------------------
COPY(d) The claim stated that Telkomsel has caused bad performance of Indosat. -----
(e) The claim that market characterized by the price leadership of Telkomsel. ----
(f) The claim that the tariff of Telkomsel is excessive --------------------------------
(g) The claim that the absence of “crossed ownership” makes better competition nature in the market --------------------------------------------------------------------
192. Any assumption is not true and in turned it will be handled. Initially, it must be
performed an observation on the development of cellular telecommunication market
in Indonesia to put the discussion of KPPU in the appropriate factual context. ---------
The competition of cellular telecommunication market in Indonesia ------------------------
193. It is stated in the First Analysis Report that there is evidence proving “mobile
market in Indonesia is fair”. In achieving this conclusion, the consideration of First
Analysis Report shall be as follows:----------------------------------------------------------
(a). This Market has 4 active actors and 3 actors that have permit and plan to
widen the market. This is competition resistance to the market power by
Indosat and Telkomsel.
(b). The mobile customer basis in Indonesia has decreased 871% since 2001 and
increase double since 2004. For the year of 2007, Goldman Sachs predicts
that 26 million of new customers will be capture. The growth rate is fair
compare to other countries. It means that Indosat and Telkomsel do not boost
their market power aiming at constraining other operators capture new
customers. The high growth rate is evidence that market power is not
mobilize. So far, it has no loss impact for the growth.
(c).The tariff of three-minute call in peak time is lower than neighboring
countries. Philippine and Vietnam have seen the decrease of tariff in
Indonesia. The price rate in Thailand and Malaysia increased although US
dollar price exchanges decreased. Last year, Goldman Sachs also mentioned
that vote tariffs decreased to 20-30%. Consequently, customers in Indonesia
have enjoyed the low mean value for a number of years that bring to the
improvement of market penetration.
(d). Since 2002, the users of cellular phone have grown stably, except in 2005.
The evidence indicates that the industry in Indonesia gives its advantage for
the customers, especially new users. Yet, the new users are not as enthusiastic
COPYas the establish users, Indonesia does not see the decrease of user. It estimates
the existence of stable growth in the market penetration. This decrease has
been experience by other country.
194. In the First Analysis Report also found an evidence of aggressive competition
among operators in Indonesia. The followings are factors used as consideration in Analysis Report: ---------------------------------------------------------------------------------
(a) The market share of Indosat has decreased in the last two years. Most of Indosat market share has been lessen and moved to Excelcomindo and Mobile-8. The Indosat collective market shares of Indosat and Terkomsel have been decreased 3% in 2005 to 2006. Market share of Telkomsel is leading boosted by its superior network coverage. If other operators implement their plans to expand coverage power, it is possible to capture new bigger customers. ----------------------------------------------------------------
(b) The users of Indosat and Telkomsel usually overpay for each minute local call during peak hours in weekdays. It is charge only by established operators while the newcomer operators offered lower tariff to convince new customers. With the lower tariff, the newcomer operators not only persuade customers to leave their previous operators but also capture market. The tariffs reflect value and broad covering operators (in the sense of coverage and customers) could obtain more value for the usage and offer on-net calling to largest base. --------------------------------------------------------
(c) Excelcomindo and Mobile-8 have introduced promotions and offers to heighten a number of customers and users. As a matter of fact, Excelcomindo and Mobile-8 aggressively target new customers. It shows that there is a growth barrier in the market. -----------------------------------------
195. Spectrum Report provides common conclusion that “The last condition of mobile
market in Indonesia is competitive, at least compared to other market.” The
following are factors considered in the Spectrum Report:
(a) A number of mobile operators in Indonesian market are bigger than emerging and regional markets. The number of established operators indicates a competition rate in the market. ----------------------------------------------------------
(b) The combination of Indosat and Telkomsel market share, two powerful operators in Indonesia, could be compare to market share of other two big operators in a different market. The combination of market share of the two leading-edge operators in Indonesia shall not generate worriedness over the
COPYanti-competitive practice compared to other more competed market as assumed. ------------------------------------------------------------------------------------
(c) HHI of Indonesian market is lower than comparable markets and it means that competition level in Indonesian market is higher. Particularly, HHI of Indonesian market is lower than HHI of Chinese and the Philippines market. The degree of comparison in both markets is considered reasonable competitive by analyst. HHI also reflects the improvement of competitive market since STT has shares in Indosat. -----------------------------------------------
(d) Indonesian market is highly developed compare to other markets of the same growth. It indicates that mobile operators in Indonesia aggressively develop their market and its market and no anti-competitive conduct in the market. ------
(e) The extrapolation conducted in the Report of LPEM on consumer loss is not true, the following are the reasons:------------------------------------------------------
(1) The Report of LPEM use data extrapolation of pricing from THAT fly by night; ---------------------------------------------------------------------
(2) The Report of LPEM has inconsistent data source;-----------------------
(3) The Report of LPEM uses unweighted average of PSTN, on-net and off-net tariff; --------------------------------------------------------------------
(4) The Report of LPEM uses comparison that disagree with market majority post-paid; -------------------------------------------------------------
(5) The Report of LPEM uses comparison that disagree with developed market;---------------------------------------------------------------------------
(6) The Report of LPEM is made ineffectively by using headline pricing as a comparison with other markets; and-----------------------------------
(7) The Report of LPEM leans on inaccurate market data. -------------------
The whole extrapolation of customer loss of the Report of LPEM is not true and no other evidence that prove consumer loss.----------------------------------------------- (f) The average revenue per user (“ARPU”) from mobile operators as a
percentage of gross domestic product (“GDP”) per capita in Indonesia is the lowest in the region. It proves that Indonesian GDP per capita is lower than other markets. It indicates a competition in which ARPU describe the percentages of GDP per capita. It is clearly that Indonesian customers are spending comparable or lower proportions of GDP per capita in service mobile than customers in other markets. --------------------------------------------------------
(g) Indonesia has the higher churn rates than its regional peers. It shows a strong indication of a competition in the market and a substantial movement from
COPYcustomers among operators possibly caused marginal price changes or ongoing promotions.---------------------------------------------------------------------------------
(h) The operators in Indonesia receive a comparison or low return over their assets than operators in other markets. Although operators in Indonesia obtain high margin revenues before interest, taxes, depreciation and amortization (“EBITDA”), the margin EBITDA in Indonesia increases because the method of calculation implemented. EBITDA is not a benchmark in counting profitability for the capital-intensive in Indonesian mobile market. The other measurement is better as a consideration in return on assets (“RoA”) of Indonesian market. Significantly, mobile market in Indonesia is less beneficial than other country. A few profits expected because Indonesia has sovereign rating for foreign currency long-term debts. Therefore, the higher RoA is needed to assure reinvestment, high quality service and sustainable expansion of the network. -----------------------------------------------------------------------------
196. Consider the degree of price competition in the market. The CA Report found
“evidence of past and increasing price competition)” on the basis of following
facts:
(a) The high ARPU indicated by a high tariff and/or a high usage by customer. The ARPU of the three main cellular operators in Indonesia decreased significant in 2002 to 2006 – Telkomsel 42%, Indosat more than 50% and Excelcomindo 65%. The price competition excitement identified as a main reason of the decrease of ARPU. The data source is the finance statements of the two operators and comment of industrial analysts. ----------------------------
(b) The decrease of price showed by other benchmark, Average Revenue per Minute (“ARPM”). ARPM is more specific indicator on average prices of ARPU. The research conducted by Deutsche Bank found that in 2005 and first quarter of 2006, ARPM three cellular operators in Indonesia decrease in significant. Research concludes that there are “more than 20% accumulated vote tariff reductions in 2004-2006” on the calculation of ARPM. At this moment, The ARPM of Indonesia is below the average and among the lowest in Asia.--------------------------------------------------------------------------------------
(c) In fourth quarter of 2006, Indonesia was one of countries that has the highest monthly churn rate among other countries in Asia. The churn rates is not counted explicitly, either customers rotate to select various tariff offered by one mobile operator or among available mobile operators. There is no constraint for customers to move from one operator to another. --------------------
(d) The three operators adopt different pricing strategies such as Indosat IM3 with flat tariff, As Card Telkomsel with differential tariff for daily different time,
COPYExcelcomindo with differential tariff for different free tariff area. The financial statement of the operators indicate the introduction of new price is always connected to the parameter of wide coverage including the introduction of new single national tariff, flat tariff, starter packs, free subscribing expense, lengthen off-peak period and special offer. The evidence indicates that cellular operators tightly compete one to another by cutting price. Between June 2004 and September 2005, Credit Suisse reports that there is a cutting under of ten-fold for starter package aiming at increasing customer, penetrating mobile, and responding to shrinkage of customer caused by competition among operators. --
(e) There are other growths toward the shrinkage of price: ----------------------------
• In 2004, Excelcomindo perform re-branded and re-positions itself. Excelcomindo used to consider as an operator that provide high tariff.
• In the end of 2005, cellular operators introduced off-peak tariff as the result of decreasing substantial price.----------------------------------------------
• Cellular operators decrease monthly subscription expense or even freeing it.----------------------------------------------------------------------------------------
(f) There is evidence that main operators respond to the price and package change. For example, in 2005, Telkomsel responded within a month to the offer of Indosat and Indosat respond to the offer made by Telkomsel.-------------
(g) The peak tariff for well establish and predefine packages is hard to change dramatically in mobile market development but in mid 2006, the peak tariff of starter pack decreased. One of the reasons is competitive pressure conscription from FWA operators cut the tariff nearly to fix cellular. The competition predicted to be tense as FWA recently allocate a better spectrum and lower price in structure than 2G and 3G-operator Some FWA operator also has strengthened their financial position. Bakrie Telecom, as an example, obtained huge credit syndications in June 2007 and used the liquid to start its service in Indonesia.-----------------------------------------------------------------------------------
(h) The 3G Hutchinson Service was launch in March 2007 and Hutchinson has adopted aggressive pricing strategy that fixes its prices close to those of FWA. Other operators respond to Hutchinson price by arranging promotion. ------------
(i) There is a regulation for maximum prepaid tariff. Minister of Tourism and Post and Telecommunication Department establish the tariff of airtime, subscribing expense and interconnection price. Regulator body can prevent price competition. For example, marketing strategy of Mobile-8 has encumbered by BRTI. BRTI does not allow Mobile-8 to case document
COPYmobile. The FWA service in Mobile-8 is unable to offer excitement coverage with FWA in local area and mobile outside local area.-------------------------------
197. It is understandable that market for service of cellular telecommunication compete
tightly one to another in Indonesia. Since 2001, the growth has been high and
operators compete aggressively. Comparing to proportional regional market,
Indonesian market is not concentrate anymore by the presence of many licensed
operators. Pricing competition has led into lower and innovative tariff for the
consumers. The fluctuant price indicated a competition. Based on these facts and
market evidence allegations of KPPU must be considered
203. As an additional claim to the whole market, KKPU continues providing a number
of claims that Telkomsel has EBITDA higher than its closest competitor, Indosat
and Exelcomindo89 and has high Return on Equity (ROE)90. The operational
revenues, total assets and the capital shareholders increase multiply since 2002.
91 The claims seem to support the statement on Telkomsel’s market power and its
involvement in a high tariff.
204. As a matter of fact, this statement is absolutely incorrect for the reason detailed
explained in Second Analysis Report. The Report explains:
a. The high margin of EBITDA is not an indication of market share controlling but it simply means a company in an industry with a high upfront requirement of capital expenditure, in which it is normal for telecommunications cellular operator around the world. Furthermore, EBITDA margin of Telkomsel did not increase in 2001 -2006. However, it shows market stability rather than market power within the period---------------------------------------------------------
b. ROE does not give indication whether a tariff is high or not because it only considering company’s influence. The claim of KPPU that “applicable ROE” is 20-35% is not supported by precedent or economic analysis. It is only a raw statement. As it is written in the analysis, it is impossible to mention a standard of ROE for company enlisted in international capital standard with those Telkom, a holding company of Telkomsel.
c. The improvement of Telkomsel operational revenues, total assets and shareholders capital are not caused by anti-trust of Telkomsel (especially by
COPYTemasek) but they are boosted by exponential growth of cellular telecommunication market in Indonesia which move to the fast improvement of investment and the high growth of customer. The claim of revenues growth is based only to a crude rate and avoiding inflation rate 58% by that time. Price can only be stated excessive if it is related to expense. Not only operating expenses are considered in a number of expense calculations, but also customer growth and usage and for that reason, decision making on price rate cannot be conducted.
205. In such a situation, the finance performance of Telkomsel during the period of
2001-2006 does not support KKPU’s statement on competitive condition in the
market of cellular telecommunication in Indonesia.
Indosat Market Performance
206. Turning from Telkomsel to Indosat, KPPU states [suspect] that the performance
of Indosat had been decreased during the period of 2001-2006.92
207. Nevertheless, the existing evidence indicates the fluctuation of Indosat’s
performance during that period caused by the merger of Satelindo with IM3 in
2003. Johnny Swandi Sjam, President Director of Indosat, for and on behalf of
board of director of Indosat wrote in paragraph 4 of his letter dated 13 August
2007:
“The following is an explanation concerning to Indosat’s performance. Since 2001, Indosat has gone through several structural changes, whether it is in business activity or company structure. By the year of 2001, the main business activity of Indosat is international telecommunication. Responding to the growth of technology, the integration of mobility and bandwith, Indosat changed its vision by becoming integrated telecommunication operator focusing on cellular. Indosat obtained the ownership of Satelindo in 2002 and established celluler subsidiary in 2001. Another significant change is a merger of Satelindo, IM3 and Indosat in the end of 2003. As a rule of merger, the changes of Indosat business activity take several years to be able to be implemented in some aspects of business activity such as a structure of business activity, network integration, organization and corporate culture. ------------------------------------------------------------------------- Since merger agreement was signed in the end of 2003, the changing process in the structure of organization, corporate culture, identity/company’s name, legal agreements/contractual, especially in network and infrastructure finished in general around 2006. It has influenced sale service of Indosat and had the performance of Indosat fluctuated to the middle of 2006. During that period, no operator but Indosat went through significant changes. ----------------------
92 Ibid, paragraph 130-147
COPYApart from the condition mentioned above, concerning the business scale and company of Satelindo, IM3 and Indosat that have wide business coverage, such a changing process is smoothly and short in time. The intended business scale is in the sense of a number of customers which remains increase significantly amid the tight of competition. Comparing to other provider that do not perform structural changes as Indosat does, their performances should be better.-------------------------------------------------- Since the middle of the 2006, Indosat started to get a momentum to capture its customer and revenues. The improvements of its performance are reflected in the selling price of Indosat shares IDR 7.650 in July 2007 or hit a ceiling price since its IPO.”-------------------------------------------------------------------------------
The result Analysis of KPPU does not clearly mention the significant changes in
evaluating Indosat. The copy of Johnny Swandi Sjam’s letter can be seen in
208. The Spectrum Report also shows good Indosat performance, especially in the last
period. In Chapter 4 of Spectrum Report, it is written that:
“The performance of Indosat has varied since 2003. Some challenges occured as from the merger of Satelindo and IM3 although it was anticipated in the Memorandum of Information of Indosat. It was published prior to acquisition process. Furthermore, Indosat has improved its involvement in an area of CDMA competition in the side law and coverage network, if it is competed with Telkomsel------------------------------------- Apart from the time of Indosat’s weakening performance, it is relative fast for Indosat to reach a turning point and significantly improves its operational performance and finance. It can be seen as follows: • EBIT • BITDA • Earnings Improvement • Share price performance --------------------------------------------------------------- It needs to be keeping in mind that the improvement was obvious before the presence of anticompetitive report. The rating agents have also been revised their rating and Reported Party positive estimation to Indosat. ------------- The decrease of market share after the acquisition is actually smaller than those prior to the acquisition process beside competition improvement in the end of 2002. ---------------------------------------------------------------------------- The turning point of Indosat is to finish a large part of network integration, adaptation, and the recovery of weakening performance in time of integration
COPYperiod, is shorter than Celcom in Malaysia. The case study of Celcom illustrates that a dynamic market of a similar nature and with fewer resistance from those faced by Indosat, Indosat has shorter time to be in a turning point as it happens in the stronger position of a market.”--------------
209. Besides facing various challenges, Spectrum Report indicates that, after STT
acquires Indosat shares, the combination of market share of Satelindo and IM3 do
not decrease drastically and even increase in the last quarter: Part 4.6.
210. Spectrum Report in Part 4.5 states that Indosat does not have bad performance, on
the contrary Indosat won some awards in good innovation and majemen including
“Best Managed Company, Indonesia” from Euromoney in 2004 and “Best
Managed Companies” and “Best Corporate Governance” from Finance Asia in
2005.
211. Based on CA Report, the allegation of KPUU that Indosat have bad performance
comparing to other operators is not acceptable, because:
a) The bad finance statement of Indosat results tight capital restriction and disability to perform investment in proportion to Telkomsel. Specifically, the finance statement of Indosat in 2002 could not respond the market changing nature by developing its network or responding by introducing its operating result due to big debt obligation. Besides, there are agreements defined for Satelindo as part of its debt restructuring.
b) Indosat has operated two separated networks, IM3 and Satelindo. These networks are integrated into one network to increase a number of customers and to improve service quality and, to lessen operating cost. Unfortunately both networks do not run well result on the decrease of service quality, revenues, market share and, consumer perception.
c) Apart from it, Indosat’s performance is better than Excelcomindo for rollout network. The performance of Indosat increases caused by the introduction of high speed 3G/HSDPA in which Indosat is the first operator that operates it.
212. The First Analysis Report also admits the series of event. In page 29-30 it is
expressed:
“Many explanations are available concerning the result of the operator at the
moment. The division of Indosat mobile cellular is slower than a broad market
in the recent that make Indosat loses its market share due to the problems on
network integration after the merger of Satelindo and IM3. Since 2005
COPYIndosat find it difficulties to run its integration plan in key area, Java island.
As a consequence, Indosat is unable to launch nationwide marketing activities
until first quarter of 2006, make it left by 1.5 million customers in the first
quarter of 2006. Based on the company’s data, the problem was over in 2006
and some nationwide marketing campaign launched to capture new customer.
The marketing cost increase significantly, from IDR 360,05 billion in 2005 to
IDR 468,92 billion in 2006, increase 30% compare to the previous year that
only 3%. It is related to the improvement of capital expenditure and also to
state that this expenditure would not be conducted if the suspected
infringement was true, quod non, that the performance of Indosat was
sacrificed for Telkomsel.” --------------------------------------------------------------
213. It is clear that the performance of Indosat is not bad. Remembering structural
reform that been done, Indosat have a good performance and have won some
award.
The allegation of the involvelment of Temasek in the Performance of Indosat
214. Furthermore, if Indosat has bad performance during 2001-2006, KPPU provide
either evidence that Temasek give permission to Indosat for not competing in the
market nor the relationship of Temasek ownership in STT and SingTel with the
allegation of Indosat’s bad performance. Without any crucial matters, the
allegation to Temasek will be null and void.
215. It’s stated in the CA Report (page39-40)
“In my opinion, KPPU is not only obliged to prove that the things (for example the bad performance of Indosat and less competitive) really happen in relation with capital ownership of Temasek and/or its subsidiaries in both cellular operators. Specifically, KPPU is obliged to prove: 1. That there is directly a joint control to Telkomsel and Indosat by Temasek
and/or its subsidiary or simultaneous control to commercial strategy of both cellular operators. -------------------------------------------------------------
2. That there is prima facie evidence concerning the coordination between Telkomsel and Indosat causing an anticompetitive as it is intended, and----
3. It is especially a direct result of the indirect ownership by Temasek and/or its subsidiaries in Telkomsel and Indosat. ---------------------------------------
COPY216. KPPU cannot provide evidence on the relationship between Temasek indirect
ownership in Indosat and Telkomsel and allegation of less competitive by Indosat.
Without any crucial relationship, the allegation of KPPU is meaning nothing. The
CA Report, page 40, states:
“The main weakness of the allegation of KPPU is its failure to give analysis or to provide evidence on the direct relationship between ownership structure in Indosat and Telkomsel and allegation of anti-competitive consequence as it explained above.”------------------------------------------------------------------------
217. KPPU states that Vice President Director of Indosat Mr Khaizad B. Heerdje (“Mr
Khaizad”), nominated by ICL, allegedly break procurement policy arranged by
Mr. Hasnul Suhaimi (“Mr. Hasnul”) President Director (at that time) influences
Indosat operating while Mr. Lee Theng Kiat is assumed to do nothing although
there are complain from 4 (four) Directors of Indosat concerning the policy and
leadership of Mr Khaizad.
218. The statement of KPPU is inconsistent with the evidence, Mr. Sjam is one of 4
(four) Directors who propose complain to Mr. Khaizad and President Director of
Indosat. He give evidence on 27 August 2007 that procurement above
USD5.000.000 must be approved by President Director and below it must be
proposed to the meeting of board of director and as it prescribed by the rule The
statement of KPPU that Mr. Khaizad unilaterally displaces and changes
procurement policy Mr. Hasnul is groundless.
219. The evidence that Mr. Sjam is supported by evidence given by the representative
of MSOE, Mr. Roes Ariwidjaya (“Mr. Ariwidjaya”), by then a commissioner of
Indosat. During the session in KPPU on 19 July 2007, Mr. Ariwidjaya gave
evidence that procurement policy of Mr. Hasnul is not applied due to some
different opinion in board of director and not the taking control over the
procurement policy by Mr. Khaizad. The copy of investigation of Mr. Roes
Ariwidjaya is in the official report document of KPPU.
220. Apart from unproven claim, KPPU give no result or progress but raw allegation
that Temasek constrained Indosat to optimize its performance. 93 It is
insufficient to accomplish verification of obligation on the suspected infringement
of anti-trust to Temasek. 93 Ibid paragraph 146
COPY221. That, the available evidence in general shows the opposite that Telkomsel and
Indosat have already competed and been competing dynamically each other.
Therefore, Spectrum Report concludes that “in cellular mobile market, Indosat
has already compete aggressively with Telkomsel in operating area.”, with the
following evidence:
(a) Indosat has already competed aggressively with Telkomsel in the case of pricing including certain PSTN, and off-net tariff, Indosat, even tariff offered by Indosat is lower than Excelcomindo. It proves that Indosat have competed aggressively with Telkomsel in the case of a number of customers and it is not intentionally fix high tariff. The Report of LPEM concluded that there is a regulation on tariff between Indosat and Telkomsel. It is not true considering that there are many weaknesses in the analysis. -------------------------------------
(b) Since 2002, there were several innovative products introduced to market. It includes larger and cheaper package, lower denomination of refill voucher for prepaid customer, micro prepaid scheme and, promotion various bonus as it is for SMS. The overflow innovative product launched by Indonesian operators is one of competition result in the market. The tight competition has provided various product for consumers and triggered new product innovation offering better direct access for middle to low market share ---------------------------------
(c) Indosat and Telkomsel have improved amount of money amount they spent substantially for marketing and advertising since 2003in which the expense of marketing cost of Indosat also improves profits percentage. It indicates that both operators acknowledge tight competition in the market. Every expense spent for marketing produce customer’s improvement. Although the sale economically states that marketing cost of Telkomsel for every customer improvement should be decreased, it is clearly an improvement trend. It means that Telkomsel capture customers aggressively through marketing. Indosat also obtains big improvement in the sense of marketing expense for every customer improvement in 2006; increase treble for every customer improvement. The facts that both operators have already performed huge investment in marketing prove that cellular market is very competitive.---------
(d) Indosat and Telkomsel also perform marketing campaigns as competitive tools. In so many cases, Indosat nearly always respond to the marketing campaign of Telkomsel. It is extraordinary concerning resistances of network and IT to which Indosat has to deal with.---------------------------------------------
(e) Indosat and Telkomsel have launched various initiatives to maintain their old customer including loyal customer program related to refill system and new voucher purchasing. As an example, Telkomsel launches Telkomsel Point in
COPY2006 later Indosat shortly responds it competitively to counterbalance the offer of Telkomsel. ----------------------------------------------------------------------
(f) Indosat capital expenditure is relatively big in percentage from its profits and it significantly higher than Telkomsel. It indicates that Indosat competitively develop its network coverage counterbalance the network of Telkomsel. Although Excelcomindo spend larger percentages from its profits for capital expenditure than Indosat, it remains fair considering that Excelcomindo is relatively new player.--------------------------------------------------------------------
(g) Indosat and Telkomsel have maintained high capital expenditure since 2002. It indicates that every operator performs huge investment in the market. Especially, Indosat keeps on margin quantity in capital expenditure as the profit percentage to Telkomsel since 2002 when it has taken over by STT. -----
222. Thereby, the statement of KPPU is not only based on speculation but also raw
statement that is directly opposite with the evidence in the market.
The allegation of Price Leadership by Telkomsel ------------------------------------------------
223. In its Third Report, KPPU depicts a situation that in oligopoly theory known as
Price Leadership. According to KPPU, when a market actor has very dominant
position to market and relatively to its competitor, relevant market actor can
determine unilaterally market price avoiding a price given by its competitor. 22
224. KPPU then accuses Telkomsel for being a price leader. In its conclusion KPPU
states the following reasons:
(a) Since 2001Telkomsel owns (i) the biggest market in the relevant market ; (ii) the widest BTS network; and (iii) the biggest average profits among Indosat, Excelcomindo and Telkomsel for period the period of 2001-2006.23--------------
(b) Price comparison of Telkomsel, Indosat and Excelcomindo in one side and the analysis of tariff pattern in the other show that the two has price-parallelism, Indosat and Excelcomindo in particular. Both operators are following price change fixed by Telkomsel for in the postpaid market . 24 --------------------------
(c) Telkomsel is a price leader in which Indosat and Excelcommindo have no ability to compete in price. Effectively, there is a collusive conducts among
22 ibid, paragraph 148-153 23 ibid, paragraph 85, 92, 178-180. 24 ibid, paragraph 99-101. In paragraph 99,analysis, KPPU admits that “For the prepaid card, price change is not
significant at all.” KPPU can explain nothing although prepaid and postpaid customers depend on BTS network (in which Telkomsel has wide network), the suspected/allegation price-parallelism occurs only in postpaid market not the prepaid on.
COPYthe three operators to create a look-like cartel condition in order to dominate market. 25--
225. The analysis and logic of KPPU are obviously wrong. In its inception, the
evidence of KPPU is opposed against the statement mentioning other operators
come after the price fixing of Telkomsel. Table 5 shows the growth of cellular
service retail price at peak-time in 2002-2006. This table indicates the differences
of pricing strategies arranged by the pertinent operators, Telkomsel, Indosat and
Excelcomindo. It is confirmed by the following comments:
“As it is seen since first quarter in 2002 to year-end of 2006, the retail price of postpaid cellular service for a call to PSTN is around 5% for Telkomsel and Indosat, and 8,4% for XL. Difference from two other operators, Telkomsel postpaid selling price increased during 2002 – 2006 for a call to PSTN and other operators, in the contrary both other operators decrease their selling price. From this change, it is seen that Indosat and Excelcomindo try to thin price differences between prepaid and postpaid products.” ---------------------------
226. It confirms well (a) that Indosat and XL keeps off in following the price; and (b)
that it opposes against the statement of KPPU, the two companies in reality
involved in price competition with Telkomsel.
227. Secondly, the tariff pattern analysis of KPPU in Analysis section, paragraph 148-
153, only show statistically significant correlation of price proving nothing about
price-leadership by Telkomsel.
228. Thirdly, the similarity of price change really occurs so far resulted not from price-
leadership, but rather from different sources. Later, the analysis of KPPU cannot
indicate that Telkomsel always leads price. As it shown in the Second Analysis
Report:
“Though KPPU admits that the price pattern is not homogeneity between
documented service of prepaid and postpaid. The record is not available on
whether operators spend similar cost to cut price to the same direction. For
instance, operators face similar changes in the sense of labor and material
expense in Indonesia in which goods cost affects capital expenditure cost (i.e.
equipments cost) and operational expenditure cost (i.e. cost electricity and 25 ibid, paragraph 102-103.
COPYenergy). Thereby, by the cost changes, they coincidently go through similar
impacts and it will be burden for consumers at various level from time to
time.” Furthermore, the analysis of tariff pattern in paragraph 148-153 (Third
Report) only indicates significant statistic and price correlation but not
indicate a position of Telkomsel as a leader in improving tariff. To depict
price leadership, KPPU has to conduct regression analysis that will control
variable effects such as expenses that affected any goods and indicate a
relationship between tariff improvement by Telkomsel and other operators.”
229. That it is proven per se as it is in the EU anti-trust regulation that “conduct
parallelism can not be considered as verification of an argument unless the
argument is the only elucidation of the conduct (The Case C-89/85 Ahlstroms v
Commission [1993] ECR I-1307).” Thereby, if KPPU can prove the collusion that
it is the only possible elucidation of the price change similarity, KPPU cannot
maintain its statement on price leadership (or logically on “following tariff” by
Indosat and Telkomsel).
230. At its fact, Mr Pasaribu in his dissenting opinion states that price parallelism per
se cannot prove the collusion. According to Pasaribu:
“In a competitive nature, if a company decrease tariff, other company must follow it to prevent consumer loss.”
231. KPPU also fails to consider the differences of price strategies conducted by
Telkomsel, Indosat and XL that have their own key aspects such as peak period,
calling prices, roaming rates, SMS, MMS, and expense of GPRS. Such a different
strategy is inconsistent with those of alleged by KPPU on collusive conducts and
market failure in general.
232. Therefore, the allegation of KPPU on the position of Telkomsel as a price leader
in a relevant market is unacceptable, considering that it opposes against the case
of KPPU per se and no objective evidence available to support the fact.
The Suspicion on Excessive Tariff -------------------------------------------------------------------
233. Starting from the incorrect conclusion that Telkomsel is a price leader, KPPU
then accuses Telkomsel unilaterally for maintaining excessive tariff in Indonesian
market. KPPU alleges that price for postpaid service has increased between in
COPY2002 and 2006 although a number of customers increase significantly.
Considering it from the concept of economic scale, it illustrates high margin
growth for operators and lack of competition in the relevant market. 26
234. The claims also weakened by an elementary fault in which KPPU does not
consider inflation. Tariff adjustment for reflecting inflation is, in the contrary,
opposing against the claim of KPPU, in fact the price is significantly decrease
since 2002. It is seen in the Second Analysis Report:
“KPPU states that the price has increased since period 2002 to 2006. Economy grew in the scale of customer’s growth along with the increase of prices that is considered to be lack of competition by KPPU. KPPU uses nominal price but it is real price paid by consumer annually. During the period 2002 to 2006, inflation increased higher than the price increase. It means that price of telecommunication service has been decreased significantly over the inflation. For example, since Telkomsel increased postpaid cellular call retail price to PSTN for 5% during the period of 2002-2006, the flat rate measured by price of consumer index (consumer price index) increased 5% in that period. Since the price of cellular service price increase fewer than the level of goods price in general its real price actually decrease much during that period.”-------------------------------------------------------------------------------------
235. KPPU is also incorrect when it compares the price in Indonesia with it in other
country and it is baseless to conclude the high tariff in Indonesia. The Second
Analysis Report states:
“In general, international price comparison is hard to be applied for some reasons. Firstly, total cost of cellular service has several components such as activation fee, handset cost, monthly fee (for postpaid service), termination expense of calling-party-pays countries, and expense difference charged against the country of calling-party-pays countries for call in the different time and network Operator in every country may select to get back at expense that has been spent in many ways such as subsidizing handset cost and obtain through investment, offering significant discount on-net etc. Considering such differences, the comparison of one element of service fee such as fee obtained from one minute peak-hour call might be disproportionate comparison.---------- To explain tariff differences, international comparison usually compares monthly fee and a service package expense such as a number of certain minutes for every call plus activation portion and equipments. The comparison process of package price also generates its own problems such as determining a pattern to compare. Nevertheless, KPPU does not try to
26 ibid, paragraph 102-103.
COPYcompare a package expense of a number of countries and merely focuses on the comparison of one certain tariff and as it mention above that it cannot be used to base a comparison.” -------------------------------------------------------------
236. The following illustration is to show the difficulties of implementing the adopted
method:
“KPPU makes comparison by referring to the price made by Directorate General of Post and Telecommunication that relatively high for Indonesia. As it mentioned above, the comparison of an element of cellular service expense has not yet completed because it does not consider the whole expenses. As an example Indonesia, that becoming a calling-party-pays country where there is part of expenses given to other operator used to terminate call. Singapore is a country of calling-party-pays that getting the call expense from caller party and call receiver party. Therfore, the tariff that charged to Singapore is only expense paid by the caller party. The fact is that the operator of caller party will charge it to the call receiver party with a common number of expenses. Basically, it has duplicated of total call expenses in Indonesia, where the call receiver party does not pay to receive a call.” ----------------------------------------
237. In fact, based on the Second Analysis Report, KPPU has used not only unclear
conceptual method but also providing data that cannot be used by KPPU itself.
“KPPU cites several numbers in the Report of LPEM to make international tariff comparison in Indonesia from 2002 to 2006. As it is noted by KPPU, LPEM does not have actual data of international price for those years which then the price is extrapolated based on the price, higher than it should be, in several countries from 1996 to 2002. As it expressed by KPPU, it may be changes happened from 2002 to 2006 that will affects to actual price compare to those of projected ones. We conclude that the changes means projected price is not better than price estimation during those years. Consequently, the price cannot be used as a basis of inter-states comparison.” ------------------------
238. Lastly, KPPU does not satisfactorily consider the fact that tariff in Indonesia is
strictly regulated and none of the regulation infringed by Telkomsel and other
operators.
239. Although KPPU admits that tariff in Indonesia is regulated under the Decree of
the Minister Post and Telecommunication No. 27/PR.301/MPPT-98 on Service
Tariff for Prepaid Mobile Phone Service (“KM 27/98”) and the Decree of the
Minister of Transportation No. 79/1998 on about Service Tariff for Prepaid
Mobile Phone Service (“KM 79/98”). KPPU then vaguely states that the decision
COPYis not persisted any longer and that “cellular operator is waiting for regulation on
the calculation of tariff rate.”
240. Nevertheless, something that KPPU has overruled is the fact that the regulation
already available, there are KM 27/98 and KM 79/98. The regulation is competent
to be use. The KM 27/98 and KM 79/98 regulate admissible maximum tariff in
cellular industry that are established by Ministers in their consideration. Based on
the regulation, there is no statement that Telkomsel or other operator have
exceeded maximum tariff as it regulated in KM 27/98 and KM 79/98. Without
any infringement to the regulation, how does KPPU allege that the tariff charged
by Telkomsel excessively?
241. During the arrangement of the allegation, KPPU actively try to take over an
authority delegated by the Government of Indonesia to the ministers by
determining admissible tariff. The conduct of KPPU is not admissible. The fact is
opposed against what KPU has alleged. Temasek has a notion that the ministers
are authorities to determine fair and competitive price for market in Indonesia.
242. In this case, the plea of Temasek is confirmed by CA by concluding (page 67) that
“cellular price/tariff of Indonesia is not excessive compared to international
standard”.
243. The Report of CA is based on the following things for coming to the first
conclusion:
(a) The research supported by International Development Research Centre Canada and applied International Telecommunications union (“ITU”) approach indicates that cellular tariff in Indonesia is lower compared to cellular other tariff in its vicinities countries. In 2005, ITU data show three-minute off-peak call of cellular tariff in Indonesia is the cheapest among Asian and East European countries. Latvia is the only country with lower tariff. It also occurs in 2004.
(b) Research conducted by World Bank concludes that cellular tariff in Indonesia is far from the average of low-middle income countries and under the average of East Asia/Pacific. In 2006, the price of the Indonesian basket of mobile services is USD 5.9 lower compared to the average price of the basket for low-middle income group and USD 0.7 lower compared to the average applied in East Asia/Pacific countries. -------------------------------------------------
COPY(c) Research Merrill Lynch shows that ARPU in Indonesia is under the average
number of the developing Asian markets. ---------------------------------------------
244. That the allegation of KPPU on the excessive tariff in the relevant market has
made based on distrusted data and incorrect conceptual method. The objective
evidence display it clearly that the price in Indonesia has decreased is since the
crossed ownership of Temasek in Indosat and Telkomsel. None of operators in the
relevant market have infringed effective tariff regulation. Thereby, an allegation
of KPPU on the excessive cellular tariff is groundless and unacceptable.
245. That on 13 July 2003, Telkomsel gave evidences that tariff determined by board
of director in which SingTel Mobile is not a majority in board of director. The
fact is that SingTel Mobile as a shareholder only supervise business performance
of Telkomsel as a whole.
Question : Does SingTel have role to determine price?
Answer : Something to recall is the differences between price and tariff
where tariff is always determined by prevailing regulation and policy. Tariff is
fixed by board of director while commissioner and shareholders only agree to the
result of business performance achieved by management team.”
The copy of official repot of Telkomsel’s investigation is in document of case of
KPPU.
246. It is confirmed by Pasaribu found that KPPU has failed to causality prove
between crossed ownership in Indosat and Telkomsel and an allegation of high
tariff. The facts, according to Pasaribu, tariff in Indonesia has been decreased
since the crossed ownership period.
The Allegation on Consumer Loss --------------------------------------------------------------
247. In paragraph 190-204 in the Analysis Article of the Third Report, KPPU
compares tariff in Indonesia to “competitive tariff” in other countries. Combined
with the KPPU previous finding in paragraph 175 in the Analysis Article that the
ROE of Telkomsel is 55%, the conclusion is taken:
“With the average of ROE 20%-25%, the entire consumer loss of Telkom from
2002 to 2006 is more than Rp24 Trillion and Rp19 Trillion. With the ROE 30%
and 35%, the entire consumer loss of Telkom from 2002 to 2006 more than
Rp14.5 Trillion and Rp9.8 Trillion.”
COPY
248. Nevertheless, the calculation method of KPPU on consumer loss is incorrect and
the result shall be disqualified. The Second Analysis Report states:
“Consumer Surplus is counted from the differences between price consumer
pay and the price that ought to be paid by consumer and counted with the
numbers under demand curve (symbolizes the willingness to pay) and the paid
price. As it used in this context, it reflects consumer deposit realized by
consumer that the price is lower. It is expressed that consumers in Indonesia
spend much more than they have to if there is no crossed ownership and it is
determined on the basis of price paid by consumer in other countries. There
are two mistakes in the analysis of (KPPU) that leads to the disqualified
conclusion.
Firstly, as it explained above that comparing price with other countries is difficult to be done due to many elements of tariff such as intra-operator peak rate. Secondly, in order to perform consumer surplus analysis, tariff comparison could not explain whole of it, KPPU shall consider competitive differences, inflation rate and especial costs in any country. It is difficult to conclude that if there is no crossed ownership in Indonesia, consumer will have price in the same amount as it in Thailand or Singapore. No factual indication that the competition in those countries are higher than in Indonesia. Therefore, competition is only one factor to consider tariff differences. -------------------------------------------------------------------------------- Finally, the statement basis of KPPU is also arguable by the fact that price varies in certain countries caused by some specific industrial factors that cannot represent contra factual condition in Indonesia. The example of industry specific factors includes mobile termination rate, network development cost, and revenues and the gain and usage of spectrum. It is true, according to Mastel, that cellular service quality in Indonesia is better than Thailand, Philippine, Cambodia, and Laos. A better quality service increases the cost. Example of specific factor of a country is company capital cost and labor condition in each country. Thereby, it is no reason to say that price level in other country is able to represent the price level in Indonesia which has more competed as a result the count of consumer surplus means nothing.” -----------------------------------------------------------------------------------
249. That there is no evidence of consumer loss caused by the deed of anti-trust in
Indonesian cellular market.
250. In accordance with the statement of Mr. Pasaribu in his dissenting opinion that the
findings of KPP on the costumer loss are not acceptable. Firstly, the calculation in
the LPEM Report is marked up in number. Secondly, the use of other countries’
COPYtariff to calculate Indonesian consumer loss is not permissible. Thirdly, the tariff
in Indonesia is in the coverage of valid regulation.
Contra Factual Case
251. The statement of KPPU on the absence of cross ownership in Indosat and
Telkomsel creates better competition. Such a statement is supported by no
evidence.
252. That Second Analysis Report states:
(a) The allegation of KPPU that the absence of Tease’s cross ownership will create a more competitive market (especially the development of Indosat network will not be constrained) has ignored the evidence on the problem of network integration faced by Indosat.--------------------------------------------------
(b) Indosat investment give a significant positive impact toward share price and market become more competitive apart from the allegation of cross ownership. It opposes against the statement alleged by KPPU.
(c) The allegation of KPPU that the absence of cross ownership of Temasek will lead market to be more competitive under Cournot-Nash method (creating competitive prices as the consequences) is a complicated theory to predict a result. ---------------------------------------------------------------------------------------
(d) The allegation of KPPU that Cournot-Nash competition method causes the three operators control equal market share (for instance one third of market) has ignored the fact that the three operators (the old and the new ones) perform investment in the market to develop their market portion. There is no evidence proving that the absence of cross ownership lead to equal possession of market share. Considering that any operator in the same country tend to focusing in different market share, indicated by price, network launching with different speed, the different step of implementing new technology will come to different results and it cannot be denied. ------------------------------------------
253. The CA Report also concludes the following things:
a. KPPU implicitly assumes that Indosat substantially performs higher investment to create lower tariff for Indosat and Telkomsel only if there is no indirect ownership of Temasek. Yet, it is impossible to occur.Whether Indosat or Telkomsel is the biggest operators that have same incentive to coordinate their activities. Both of them will face similar or even bigger problems on capital limit and finance. That the risk of coordination and collusive conducts will be increase if there is no indirect of cross ownership by Temasek.-----------
COPYb. The momentum for Telkomsel to develop and to keep its highest standing has
little impact in the problem of ownership and suspected of jointly practices. The possession of wide coverage telecommunication network has put Telkomsel to be a biggest operator. The fact supported by accurate economic theory and empirical proof of the cellular structure not only in already developed Asian market but also in the developing ones. ---------------------------
c. The research conducted to European and Asian cellular market concludes that if Indonesian cellular market developed without indirect cross ownership of Temasek, market growth remains the same as it is today. -------------------------
d. KPPU states that its notion is the finding of theory and the commercial explanation. Yet, the competition consideration basis is inconsistent with the commercial pressure on the base of cellular operator ownership. It is illogical to state that the shareholders are about to invest their money in the biggest operators in Indonesia by sacrificing one of them in one side and let another develop in the other side. The rational strategic do the opposite, using Telkomsel to capture a market share for high class and Indosat for other market shares in order to increase revenue. The theory proposed by KPPU reduces the prospective growth of Indosat and Telkomsel as well as increasing competitive threat from other operators.-----------------------------------------------
e. The most possible contra factual case is that the release of Temasek and/or its subsidiaries will not boost competition or have Indosat to change its expenditures and to develop network. The effect of cross ownership of Temasek is de minimis and it has no relationship with the decrease of competition in the relevant market.-----------------------------------------------------
254. Thereby, there is no evidence to support KPPU’s statement on contra factual case.
KPPU states that there will be higher competition in the relevant market. On the
contrary, economic analysis shows any possibility of no difference to the
competition in the market, with or without cross ownership in Indosat and
Telkomsel. No evidence is provided by KPPU to argue the analysis in the CA
Report and make it fails to prove a notion of cross ownership of Indosat and
Temasek. The decrease of competition in the relevant market is also not proved.
THE ABUSE AND VIOLATION OF DUE PROCESS -------------------------------------
255. The verbal process of Temasek and its procedures is ultra vires. It violates the
Law No.5/1999, stipulation of due process reserved by Article 28 D (1) UUD
1945 (“Constitution”), ICCPR and Regulation of KPPU NO.1/2006. KPPU bases
COPYits improper evidence to come to the conclusion in the First, Second and Third
Reports. The verbal process is improper and come to the incorrect decision.
The verbal process is Ultra vires and it abuses verbal process ----------------------------
256. KPPU alleges Temasek to infringe Article 27 (a) the Law No.5/99 means the case
is proposed, discussed, and approved by the Government of Indonesia.
257. As it described in paragraph 88-91 above, in 2003 the Government of Indonesia,
in White Paper, decided that the ownership of SingTel in Telkomsel and
acquisition of ICL or ICPL in do not infringe the Law No.5/99. Prior to the
acquisition, Minister of BUMN (MENEG BUMN) had learned and verified that
the acquisition was in line with the valid law including the Law No.5/99. There is
no basis at all for KPPU to have the structure of share ownership retroactive or
conversely since the substance has not change since 2003. KPPU is inconsistent
in interpreting the Law No.5/99 on acquisition differs from government’s
interpretation such as on “majority share” that literally means the ownership of
more than 50% share of a company.
258. As it stated above, the conclusion in White Paper has argue the element proposed
in the allegation of KPPU:
(a) Telecommunication Industry in Indonesia is highly regulated and operator can’t determine tariff policy. ------------------------------------------------------------
(b) Telkom is controlling Telkomsel. SingTel only owns 35% of Telkomsel’s shares with the limited authority. In majority, the dominant share of Telkom owned by the Government of Indonesia. ----------------------------------------------
(c) STT and SingTel managed independently and enable them to compete each other in Singapore and other markets. -------------------------------------------------
(d) The understanding of majority shares in Article 27 (a) the Law No.5/1999 shall be interpreted literally namely “the ownership of more than 50% shares”.-------------------------------------------------------------------------------------
(e) The ownership of STT in Indosat through ICL is not majority ownership in which its shares are under 50% of Indosat’s shares enlisted in stock exchanged.---------------------------------------------------------------------------------
(f) SingTel only owns less than 50% of Telkomsel’s shares. ---------------------------
COPY259. Further and the most important thing is that MENEG BUMN consulted KPPU in
2003 on the implementation of the Law No.5/99 (Article 27 and 28 in particular)
related to the plan of Indosat’s shares divestment to ICL/ICPL. See the paper
dated 2003 entitled “Government’s Elucidation in the meeting with DPR” that is
available in case document of KPPU, as it is mentioned in paragraph 94 above.
KPPU states no ojection at all. If an investigation is conducted on the basis of the
infringement of Article 27 (a) it is ultra vires and it is an abuse of verbal process
and law in Indonesia. Especially it is regarding to the facts trelated to Article 27
(a) on “majority shares” and “cross ownership”. It does not change since 2003. ---
260. In his opinion Mr. Pasaribu state that KPUU has no authority to revoke the
decision of the Government of Indonesia concerning Indosat’s shares divestment
through open tender that it finally awarded to ICL/ICPL. He stresses that the
decision is a Government’s initiatives and political decision concerning finance
condition at that time. -----------------------------------------------------------------------
261. It is true, there is no basis for KPPU to deviate the decision of the Government of
Indonesia by starting an investigation to the acquisition on the same basis because
the acquisition itself has been considered, calculated and supported by the
Government. The acquisition is possible to be performed by ICL/ICPL with the
approval of government and the accomplishment of the Law as well as cryptic
approval of KPPU through the consultation of government with its competition
(1) Anyone who knows a conduct or properly suspected conduct that infringe the Law may report writtenly to the Commision with clear information about the infringement by enclosing identity of the reporting.
(2) The party suffered financial loss caused by the infringement of the Law may report in written to the Commission along with clear information about the infringement by enclosing identity of the reporting.
(3) The Reporting identity as it meant in (1) must be kept confidentially. (4) The procedures of proposing a report as it meant in (1) and (2) is arranged
COPY “Based on the report as it meant in Article 38(1) and (2), the Commission is obliged to perform Preliminary Investigation for the furthest of 30 (thirty) days after receiving the report, the Commission is obliged to determine whether it is necessary or not to perform Follow-up Investigation.”
264. In the letter of Arief Poyuono, Chairperson of FSP-BUMN (The Labor Union of
State-owned Company) dated 4 April 2007 published in
“On 18 October 2006, FSP BUMN submitting a report to KPPU for the suspected monopolistic practices (tender conspiracy) suspected to be conducted by Temasek Holding, Indosat, STT, SingTel in telecommunication business in Indonesia.”
265. Therefore, the decision of KPPU to perform preliminary investigation to
Temasek, as it proved by the Convocation No.112/KPPU/TP-PP/IV/2007, issued
after 6 (six) month since the date of submittal of FSP-BUMN Report.---------------
266. Further, the decision to perform follow-up investigation to Temasek, as it is
proved in Second Report issued on 22 May 2007, after 7 (seven) months since the
date of submittal of FSP-BUMN Report.--------------------------------------------------
267. Thereby, it is clear that there is an infringement to Article 39 (1) of the Law
No.5/1999 states that KPPU has to decide the need of follow-up investigation for
a time of 30 (thirty) days after receiving the Report. ------------------------------------
268. http://bumnbersatunews.shoutpost.com also states:-------------------------------------
“Therefore, on 2 April 2007 FSP BUMN United revoked the Report to KPPU on the suspected monopolistic practice conducted by Temasek Holding. It also revokes any propositions, the evidence argumentation related to the Report” -----
269. The revoke of FSP BUMN Report was on 2 April 2007 and on 26 April 2007
KPPU kept on deciding to perform preliminary investigation.------------------------
270. Although under Article 40 of the Law No.5/1999 KPPU has an authority to
perform an investigation in its own initiatives, the clarification on whether the
process is in the initiative of KPPU or the Report of FSP BUMN is not necessary.
If it is a follow up of the FSP BUMN report, we have a notion that KPPU is
obliged to stop its investigation since the report has been revoked. If the process is
COPYin the initiative of KPPU, KPPU shall explain why the number of case is the same
as the number registered to FSP BUMN.--------------------------------------------------
271. As an addition, Temasek received the Third Report from KPPU overshooting the
mark of time period that states in the Law about the time period of report delivery.
Article 43 of the Law No.5/99, states:-----------------------------------------------------
(1) The Commission is obliged to complete follow-up investigation at the furthest of 60 (sixty) days since the conduct of follow-up investigation as it meant in Article 39 (1). ----------------------------------------------------------------
(2) When it is needed, the time period of follow up investigation as it meant on (1) is lengthen at longest 30 (thirty) days.------------------------------------------
(3) The Commission is obliged to decide whether the infringement to the Law occurs or not at longest 30 (thirty) days as from the completion of follow-up investigation as it meant in (1) and (2). ------------------------------
272. Article 48 of the Regulation of KPPU No.1/2006, states:
“(1) Prior to the end of Follow-up Investigation, the team of Follow-up Investigation conclude whether the evidence of infringement is available or not.” --
273. Article 49 of the Regulation of KPPU No.1/2006, states:
“The conclusion, as it meant in Article 48, is composed in the form of The Report of Follow-up Investigation Result” ---------------------------------------------------------
274. KPPU should issue Third Report before the stage of follow-up investigation
completed. The last day of the follow-up investigation is 27 September 2007.
KPPU should issue its decision at the latest on the date. Yet, Temasek was only
informed while Third Report accepted on 3 October 2007. The copy of letter of
Lubis Santosa & Maulana No.452/LSM-PC-TR/L/X/2007 dated 4 October 2007
shows that Temasek submit an objection to the delay and the non-compliance of
KPPU Regulation No.1/2006, enclosed as Written Proof H.---------
275. Further, the Third Report is supposedly confidential until it officially announced
publicly and informed to the Reported Party. It is mentioned clearly by Article of
the Law 43 No.5/99:
COPY(3). The Commission is obliged to decide whether the infringement to the law
occurs or not at the furthest 30 (thirty) days as from the completion of follow-up investigation as it meant in (1) or (2). -----------------------------------
(4). The decision of Commission as it meant in (3) has to be read in a session
open for public and informed later to the business actor.”-----------------------
276. However, prior to the decision of follow-up investigation, the Third Report has
been disclosed publicly before it is officially informed by the Reported Party
Party. An article in Singapore Starits Times reports:
“JAKARTA - IN the latest twist to the long- running Indosat saga, an Indonesian regulatory body is citing the sudden resignation of a top company executive to back up its claims that Temasek Holdings broke the country's antitrust laws. ------------------------------------------------------------------------------ It is alleging this even though the executive, Mr Hasnul Suhaimi, has denied it. The resignation of Mr Hasnul was the latest in a series of leaks splashed in the Indonesian press from a supposedly confidential report that alleges Temasek Holdings has broken laws. --------------------------------------------------- … The anti-monopoly watchdog Business Competition Supervisory Commission (KPPU) raised the issue of Mr Hasnul's resignation in its case against Temasek, which has stakes in two telephone companies, Indosat and Telkomsel, in an arrangement that the KPPU said violates Indonesia's anti-monopoly laws. … The KPPU is Reported Party party to be using Mr Hasnul's resignation to prove that Temasek interfered in the running of Indosat and thus breached the anti-monopoly law. ------------------------------------------------------------------------ Quoting the team's confidential report, the Kontan newspaper said that Mr Hasnul stepped down because his Singapuraan deputy, Dr Kaizad Heerje, was in fact running the company. ------------------------------------------------------ 'The president director is only acting as a symbol while the deputy president director controls Indosat,' it said, quoting the report which has not been officially released.------------------------------------------------------------------------- Dr Kaizad was also said to have changed Indosat's procurement systems, something previously handled by Mr Hasnul. ----------------------------------------- Dr Kaizad, who was appointed deputy president director of Indosat in December 2005, is a former senior vice-president of ST Telemedia. --------------- Mr Hasnul, who is now the president director of another telco, was not available for comment but he told Kontan that he did not resign because of his deputy. --------------------------------------------------------------------------------------
COPY'I left the company because I felt that I could no longer offer any contribution that would be of value to the company's needs,' he said. ----------------------------- … Indonesia's media has been reporting the details of the KPPU investigation with excerpts from its official report even though it has yet to be officially released. ------------------------------------------------------------------------------------ According to the reports, Temasek has been found to have breached regulations and has been summoned to appear before a five-man council to respond to the findings. ------------------------------------------------------------------- The KPPU is not expected to issue a ruling before next month.--------------------- 'If, after that, Temasek does not accept the decision, they can take the case to a district court,' commission chairman Mohamad Iqbal was quoted as saying by AFP on Monday.--------------------------------------------------------------------------- If a district court ruled against it, Temasek could then appeal to Indonesia's Supreme Court, he added.” --------------------------------------------------------------
The copy of article in Singapura Straits Times dated 24 October 2007 is enclosed
as Written Proof I. -----------------------------------------------------------------------------
277. The report in Bisnis Indonesia dated 23 October 2007 also confirmed that KPPU
alone leaked the information of related verbal process to press:
“In the follow-up investigation document, KPPU conclude that Temasek has infringed the Law No.5/99 regarding cross ownership in Indosat dan Telkomsel. ---------------------------------------------------------------------------------- The Chairman of KPPU, Mohammad Iqbal expressed the follow up investigation conclude that there is indication of infringement conducted by Temasek.------------------------------------------------------------------------------------ “The essence of its conclusion is that we find indication of the infringement to the Law of Anti-trust in Indonesia conducted Temasek and it potentially inflicts financial loss to Government and consumers,” he told to Bisnis Indonesia yesterday.---------------------------------------------------- The conclusion is recently sent by Commision Asembly to the Reported Party. ---------------------------------------------------------------------------------------
The data revealed by KPPU show that there are ten Reported Party Party in the case concerning nine business group under Temasek and Telkomsel.---------------------------------------------------------------------------------- The chairperson of Indonesian Telemetics Society (Mastel), Wigrantoro Roes Setiyadi have seen that the indications are insufficient. ------------------------------
COPYKPPU shall display evidence that Temasek infringes the regulation and not only give Temasek indication.”----------------------------------------------------------
The copy of the article dated 23 October 2007 is enclosed in Evidence I.-------------
278. The following up illustration of the public statement arranged by KPPU can be
read in paragraph 331-374 as follows.-----------------------------------------------------
279. Therefore, the verbal process of Temasek is improper and it opposes the Law No.
5/99. Consequently, whatever decision resulted through this verbal process will be
invalid. KPPU shall close down verbal process of Temasek.
The infringement to Due Process of Articles in Constitution and KPPU Regulation No. 1/2006 -----------------------------------------------------------------------------------------------------
280. The in time progress process is also infringe the guarantee of due process
promised by Temasek under the Cosntitution and KPPU Regulation No. 1/2006.--
281. According to Professor Hikmahanto:-----------------------------------------------------
“Not considering the due process of law may have the consequences of nullifying the Preliminary Examination Decree and all other following examinations decree. Of course, the nullification has to be done by a court. Consequently, any Business Actor who is suspected of violation has to be notified and given an opportunity to defend itself, failing which the KPPU’s Preliminary Examination to which the Preliminary Report relates and all other following examinations should be nullified.”------------------------------------------
282. Article 28D(1) of the Constitution states:-------------------------------------------------
“Every person shall be entitled to the acknowledgment, guarantee, protection and certainty of law in a just manner and shall be entitled to equal treatment before the law.” --------------------------------------------------------------------------
283. Article 2(1) of KPPU Regulation No. 1/2006 also guarantee that due process of
the law will be monitored and also transparent:------------------------------------------
“The Chairman of the Commission has the task to facilitate all activities in handling cases based on the principles of transparency, effectiveness, and due process of the law.”----------------------------------------------------------------------
284. Something than cannot be separated is the condition of two essences for security,
justice and certainty (1) whether the party is informed about the case (2) and
COPYjudges in this case is impartial. The two fundamental securities have been
violated.----------
Right to watch over allegations ----------------------------------------------------------------
285. The aim of establishment of judicial body or quasi-judicial worldwide is the
same-to guarantee the enforcement of law certainty. In the end, the strict
mechanism (laws in particular) is put in the space for guaranteeing any parties
present before judicial body and watch over allegations.
286. The assumption of right has an important role in which administrative partay
and/or crime sanction can be force to the parties in the end of a process. The
fundamental right is in Article 28D(1) of the Constitution and KPPU Regulation
No. 1/2006. It depends on the first task of prosecuting authority which is to
guarantee the party alleged, understanding what are they alleged for, so that the
party is able to watch over allegations.----------------------------------------------------
287. KPPU as a prosecuting authority and Temasek as a party alleged for violating
law, the two are very bewildering. Temasek has never been informed on its
allegation or on the evidence to support the allegation. To this day, Temasek has
never known a number of its allegations, a party who submits the allegation, and
the contenr of the allegation. ---------------------------------------------------------------
288. Further, we understand that there are allegations coincided with those to
Telkomsel, which have same number as in on going process. Yet, with the
acceptance of the Third Report, Temasek finds that there is no information on the
allegation of Telkomsel or other supporting evidence although the information
has a relationship with the on going process. --------------------------------------------
289. Without such a vital information, Temasek, remorsefully cannot help KPPU in its
investigation. It comes to the interesting conclusion that the decision of KPPU is
made on the basis of incomplete information, we said it incomplete, therefore, it
will be easily revoke in the appeal.---------------------------------------------------------
290. Basically, the deed of KPPU’s verbal process is not only opposed against the
objective awareness of justice and morality but also against KPPU Regulation
COPY291. Article 65 (2) of KPPU Regulation No.1/2006 guarantee two things: (1) law
enforcement monitoring (2) procedural transparency. It is stated:--------------------
“ In any stage of investigation and the session of Council of Commission , the Reported Party Party is entitled to:----------------------------------------------------------
a. obtain an information on the Suspected Infringement Report; -------------------
b. obtain an information on the determining of Preliminary Investigation;--------
c. obtain an information on the status of Reported Party Party, agreement and/or activities suspected to infringe and the laws suspected to be infringed by the Reported Party Party; ----------------------------------------------------------
d. obtain an information on the determining of the case to be continued or discontinued to Follow-up Investigation;--------------------------------------------
e. perform an investigation to the written proof used as a basis of Investigation Conclusion;------------------------------------------------------------
f. submit answer over a suspected infringement allegation ;--------------------
g. change upon the behavior in Preliminary Investigation; --------------------------
h. have a copy of Decision;---------------------------------------------------------------
i. accompanied by legal adviser or attorney-in-fact in every stape of investigation and the Council Session.-----------------------------------------------
292. The usage of “In any stage of investigation and the session of Council of
Commission” in Article 65 (2) clarify that the rights mentioned in Article 65 (2)
given to the Reported Party since the report was made. Yet, the Reported Party
party has rights to, inter alia, “obtain information of Suspected Infringement
Report” and “obtain information on the determining of Preliminary
Investigation.” Any interpretation stating that the rights, as it mentioned in Article
65 (2), given only to the Repoted after Follow-up Investigation completed is
inattentive to Article 65 (2) as it is mentioned and as it is meant.----------------------
293. Article 65 (2) (e) and (f) give the Reported Party rights to “perform and
investigation to the written proof used as a basis of Investigation Conclusion” and
to “submit answers over a suspected infringement”. Nevertheless, although KPPU
has issued First Report and Second Report to Temasek, Temasek is not (to the
issue of Third Report and investigation on important case document of KPPU
COPYdocument) given an access to the “written proof used as a basis of Investigation
Conclusion”. It violates Article 65 (2) (e).------------------------------------------------
294. Without having any chance to observe written proof that weigh against itself, it is
impossible for Temasek to understand the characteristic meaning of the suspicion
that alleged on it or to submit evidence to fight against the allegations. Article 65
(2) (f) has also been violated.---------------------------------------------------------------
295. In fact, KPPU itself is not sure with the allegation alleged to Temasek and
Reported Party 2 to 9. It can be seen from the effort of KPPU to pick fault to
Temasek during investigating process of Follow-up Investigation. KPPU asked
illogical questions on 27 (a) of the Law No.5/99 that enable it to have information
used then as a basis to prosecute in the future. The following is the questions of
KPPU to Mr. Goh during Temasek investigation on 13 August 2007: ---------------
Question 7-8 -------------------------------------------------------------------------------------- “Q. Could you explain the development of investment of Temasek in Indonesia in
the last three years and its future development? -------------------------------------- A. Could you explain the relevance of the question?------------------------------------- Q. It is very relevant. Investigation team needs such an information to
comprehend whether Temasek investment is success or not? Does the success of Temasek give an impact to the competition?” -------------------------------------
Question 10 ------------------------------------------------------------------------------------- “Q. What is the plan of Temasek investment in telecommunication field in
Indonesia and other regions for three years to come? -------------------------------- A. I am about to explain one by one. Temasek does not have investment in
telecommunication field in Indonesia. With all respects, to my understanding the investigation is to explain telecommunication and not investment of Temasek in other regions.”
Questions 59-61 -------------------------------------------------------------------------------- “Q. What is the plans of Temasek investment in telecommunication field in
Indonesia?---------------------------------------------------------------------------------- A. I cannot answer it. ------------------------------------------------------------------------ Q. Is there anyone able to answer the question? ----------------------------------------- A. With all my respects, I see no relevance with your question. ---------------------- Q. It is very relevant because it is an investment plan impacted to
telecommunication industry in Indonesia.”-------------------------------------------- Questions 98-100 ------------------------------------------------------------------------------- “Q. Is there any previous discussion concerning the investment plan discussed
through government access related to the last visit of Lee Kuan Yew to Indonesia. --------------------------------------------------------------------------------
COPY A. No. ------------------------------------------------------------------------------------------ Q. Is there any possibility of Temasek to move its investment from
telecommunication to banking? ------------------------------------------------------------ A. We do not have investment in telecommunication sector in Indonesia. ------------ Q. It is very important question because we have to map any investment sector. ---- A. It notes further that investing decision is based on their own will. If there is a possible investment in banking, it shall be separated from telecommunication investment. It is a separated decision.”----------------------------------------------------
Questions 114 ------------------------------------------------------------------------------------ “Q. Is it possible to hire a same auditor for the last five years? -------------------------
A. I do not know.”----------------------------------------------------------------------------
296. During Follow-up Investigation of SingTel Mobile, KPPU ask some irrelevant
questions as follows:
(a) Questions on the investment profit of SingTel Mobile in Telkomsel:---------------- (i) What is the satisfied percentage of SingTel Mobile’s performance namely a
reference to re-investing? (Question 17) --------------------------------------------
(ii) What does Telkomsel gain from the investment? ----------------------------------
(iii) Does it repay your investment? (Question 19)--------------------------------------
(iv) If you sell the investment, what did you get?
(v) Compare to other investments, how is the performance of Telkomsel? (Question 23)----------------------------------------------------------------------------
(vi) Does SingTel Mobile realize that there is EBITDA tariff? (Question 28) -----
(vii) Are you satisfied with the investment? (Question 33) -----------------------------
(viii) How much is the revenue percentage of SingTel that is gained from SingTel Mobile? (Question 50) ------------------------------------------------------
(ix) How much is the revenue percentage of Telkomsel from the total revenue of SingTel Mobile? (Question 56)---------------------------------------------------
(b) Questions of pricing strategy of Telkomsel: -----------------------------------------------
(i) Can I say that commissioner of SingTel Mobile never join issue with tariff? (Question 42)----------------------------------------------------------------------------
(ii) Is SingTel Mobile discussing only on profit? (Question 35)---------------------
(c) Questions on the history of acquisition of SingTel Mobile’s shares from Telkomsel.--------------------------------------------------------------------------------------
COPY(i) Are there any documented evidence that KPPU initiate selling shares to
(ii) Why did you buy KPN’s shares? (Question 135) ----------------------------------
(d) Questions on profit re-investment to Telkomsel: -----------------------------------------
(i) Does SingTel Mobile propose re-investing profits? (Question 140) ------------
(ii) Is there any SingTel Mobile’s policy on dividend of Telkomsel? (Question 135)---------------------------------------------------------------------------------------
297. It is not surprising that none of the questions and the answers above are matching
and find a way to enter Third Report.
298. Further, the objective of Third Report is to report completely to evidence gathered
by follow-up investigation team and how they accomplish element of Article 27
(a) of the Law No.5/99: Article 48 and 49 of KPPU Regulation No.1/2006.
299. That (a) Reported Party must have equal opportunity to self defence and (b) equal
the principle of process and transparency as it mentioned in KPPU Regulation
No.1/2006. It is clear that Third Report shall consist of sufficient information
enabling Reported Party to deny allegations to it. Third Report must also describe
why Article 27 (a) has been accomplished and provided comprehensive
conclusion of the material facts so that Reported Party is able prepare its. Third
Report should be able to identify sources of whole information to rely on. In fact,
Third Report has been failed in proving the case.
300. Third Report does show material facts in whole or asymmetrical including those
facts supporting and not supporting KPPU. In some cases, Third Report is failed
in providing facts that support its statement. The following is the lack of Third
Report:
(a) Anything but in some cases, Third Report is failed in mentioning the sources of information to rely on, the references to be cited, and the cross-references correspondence to case document up important documents of KPPU. ----------
1. In paragraph 17-21 Part IV of the Third Report, KPPU does not state an authority that support the statements in order to come to conclusion that appropriated geographical market is the region of Indonesia.----------------
COPY2. In paragraph 104-105 Part V of the Third Report, KPPU does not state
an authority that support the statements on the organizational structure of Indosat before and after acquisition of STT. --------------------------------
3. In paragraph 182 Analysis Part of the Third Report, KPPU state “available data” but KPPU cannot identify the form of the data. ------------
4. In paragraph 188 Analysis Part of the Third Report, KPPU state “the document of agreement between Telkomsel and one of the operator regarding interconnection” but KPPU cannot identify kind of the document. ---------------------------------------------------------------------------
5. In paragraph 189 Analysis Part of the Third Report, KPPU does not state an authority that support the statements “there are many constraints concerning interconnection faced by new operators because Telkomsel creates a condition to make operators get difficulties to meet one to another”. KPPU also attents to the fact that there is a newly business actor entering telecommunication sector in Indonesia.------------------------
6. In paragraph 200 Analysis Part of the Third Report, KPPU state a scenario and benchmark based calculation but KPPU cannot identify the kind of calculation.-----------------------------------------------------------------
(b) Third Report fails to identify the facts or evidence to support the statement that Temasek control Indosat and Telkomsel. --------------------------------------
(c) Third Report (anything but Mr. Pasaribu’s rejecting statements) does not obviously consider Analysis, Spectrum and Case Associate Reports. ----------
(d) Third Report is failed in identifying any supporting facts and evidences that Temasek through Reported Party party 2 to 9 has been fixed Telkomel’s tariff. -------------------------------------------------------------------------------------
(e) Third Report does not consider pricing strategy implemented by Telkomsel, Indosat and Excelcomindo but conclude that the tariff charged is excessive, avoiding cap on tariff regulated by government. ----------------------------------
301. KPPU obviously neglects protective process offered to Temasek that stated in the
Constitution and KPPU Regulation No.1/2006. As the lack of transparence in a
series of process, any decisions of KPPU shall be revoked.----------------------
Bias and its Form---------------------------------------------------------------------------
COPY302. A crucial question appears concerning the properness of process and the behavior
of certain KPPU’s members who influence the result investigation. The bona fides
process and individuals as well as their fairness and integrity are doubtful.----------
303. To start with, the investigation seems to be started from the information on 18
October 2007 by the State-owned Enterprise Worker Union (“FSP-BUMN”).
Apart from the fact that FSP-BUMN withdrew its report on Temasek, on or
around 2 April 2007, KPPU kept on deciding on 26 April 2007 to continue an
investigation to Temasek. Although the deadlines admitted by Article 39 (1) of
the Law No.5/99 to perform preliminary investigation has been overdue: See
304. Although KPPU gave no reason over its decision to continue an investigation to
Temasek, it was reported that Mr. Poyuono withdrew its report on Temasek as he
did not want FSP-BUMN to be used by Altimo (subsidiary of Alfa
Telecommunications JSC). Altimo is a telecommunication division of Alfa Group
Consortium (“Alfa”), a Russian corporate owned by Russian conglomerate that
has a plan to control telecommunication shares in Indonesia. An article entitled
“Project Indosat” in Strait Times, 5 Mei 2007 edition wrote: ---------------------
“The complaints against Temasek were filed last October by the Federation of State-Owned Enterprises Employees' Union (FSP).--------------------------------- IA-ITB coordinator Musarman told The Straits Times: 'That is why they'll press on with the investigations even though the FSP has withdrawn their complaints.”
FSP withdrew its complaints on April 2. At that time, its president Arief Poyuono had said that it had a weak case and could not prove that Temasek had violated anti-trust law. More recently, he disclosed to The Straits Times that the move was made because he had heard about Altimo's alleged plans and did not want to be made use of. ---------------------------------------------------------------------------------
He asked: “What is the point of buying back Indosat only to give it away to another foreign company?” -----------------------------------------------------------------
305. This is not the first time this allegation making bow. The Jakarta Business Times
reported on 4 May 2007:---------------------------------------------------------
COPY“Some light has been shed on the recent media and public siege on ST Telemedia over its stake in Indosat, Indonesia’s second largest telecommunications company. According to various sources, the Singapore company may be the target of a pressure campaign by parties keen to edge it out of Indonesia’s lucrative telecom turf.
The Indonesian daily Koran Tempo has, in fact, named Russian conglomerate Alfa Group as the company behind the campaign. The paper this week ran several reports detailing come of its aggressive lobbying of key government and political leaders aimed allegedly at pressuring ST Telemedia to sell its stake, either directly to the Russian group indirectly through the Indonesian government. ------------
The group is said to be eyeing the 42 per cent stake in Indosat held by Asia Mobile, a subsidiary of St Telemedia.---------------------------------------------------
According to some sources, the detailed maneuver behind Alfa has been started since the last two weeks prior to thought of publishing completed report to selected mass media by non government parties.------------------------- In accordance with what a source suggested, an institution for information analysis and business technology called Alfa as a party behind the effort of obtaining Indosat’ shares. ... In early November, Russian newspaper called Tribuna wrote that an internal document from Alfa called “Project Indosat has been obtained. The report, in which part of the article was translated into English by Russian media monitoring agent WPS, stated that Alfa planned to take over 42% of ST Telemedia shares in Indosat. The project was involving Indonesian politician and bureaucrats. ... Last month, FSP-BUMN suddenly cancelled its plan to submit the allegation by reason of FSP was lack of evidence to prove its allegation and even the President of FSP admitted to make mistakes in this case. Mr. Arief stated later that the changes occurred soon after FSP found that a pressuring campaign had be done by Altimo. Athough it was not stressed that there was no other parties outside FSP boosting to submit its initial allegation, Mr. Arief admitted that FSP had no intention to have itself used by other parties.”
306. The suspicion appeared when Mr. Poyuono was willing to testify that Mohammad
Iqbal (“Iqbal”), Chairperson of KPPU, had any contact with Altimo Group. The
report of The Jakarta Post on 24 May 2007:
“The KPPU’s apparent zeal in pursuing the case has sparked speculation that the KPPU could have been bribed, especially after copies of a purported KPPU
COPYproposal to Altimo, a subsidiary of Russia’s Alfa Group, seeking money to support the Temasek investigation, were widely distributed this month. Altimo has been reported to be interested in acquiring a stake in Indosat. … Another document setting out an apparent master plan, called the “Indosat Project”, to wrest control of the Telcom from Temesaek, has also been circled among journalists. This document details a purported Altimo plan to offer a loan to the government to enable it to buy back all of STT’s shares in Indosat in return for a portion of the shares. The document proposes a black propaganda campaign against Temasek. Earlier this month, Altimo vice president for corporate communications Kirill Babaev denied all the allegations and claimed he was a victim of a smear campaign. Altimo opened a representative office in Jakarta in December and plans to invest US$2 billion in the country’s telecoms industry. [FSP]-BUMN chairman Arief Poyuono said the investigation by the KPPU had been tainted by the involvement of Altimo, and added that he could prove this. ‘I will report the bribed to the Corruption Eradication Commission, and I’m ready to testify under oath. I can prove beyond a shadow of doubt that Altimo has been communicating with Iqbal,’ he said.” “KPPU was enthusiastic to continue the case with the speculation that KPPU could be bribed. The suspicion was supported by the existence of a copy of KPPU’s proposal to Altimo, a subsidiary of Russian Alfa Group, to have some money for financing investigation to Temasek. The copy is about to be circulated this month. Altimo expressed its interest to have Indosat’s shares. ... Other document states the arrangement of detail master plan, called “Indosat Project”, to take the control of Telkom from Temasek. The document has been circulated among journalists and it explained the plan of Altimo offering government debts for taking over the whole shares of STT in Indosat and Altimo deserves to have some portion of shares in return.--------- The document proposed a black campaign to Temasek. The document proposes that there is a black campaign to Temasek. At the early of this month, Vice President of Altimo for corporate communication, Kirill Babaev denied the entire allegation and claimed that he was the victim of destroying campaign.-------------- In December, Altimo opened its representative office in Indonesia and planned to invest US$2 billion in telecommunication industry. ------------------------------------ The Chairperson of FSP-BUMN, Arief Poyuono states that the investigation of KPPU has been sullied by the involvement of Altimo. He is even able to prove it.
COPY ‘I will report to Corruption Eradication Commission (KPK) the bribery and I am ready to testify under oath. I can prove unhestatingly that Altimo had a contact with Iqbal,”he said”. --------------------------------------------------------------------
307. So far, it was seen when FSP BUMN wrote to KPPU in July 2007 on the reason
of the withdrawal. The letter was found in the document of KPPU. The letter is
begun, inter alia as follows:---------------------------------------------------
“In the early of April 2007, the Chairperson of FSP BUMN Union and its legal representative met with Suharto (Regional Director strategic & business development of Altimo Central and South East Asia) in Suharto’s office in GKBI building Jalan Sudirman Jakarta.------------------------------------------------------- There were many problems to be solved in that meeting.------------------------------- - Suharto asked Chairperson of FSP BUMN Union to cancel press conference
proposal regarding the withdrawal of FSP BUMN Report to KPPU.
- At that time, Suharto asked someone to come, according to Suharto he is Muhamad Iqbal (the Chairperson of KPPU), and hesitated the formation of preliminary investigation. Suharto stated that he prefers Nawir Messi to Benny Pasaribu as a chair of preliminary investigation team.”
308. In other words, if the allegation in the letter is correct, there is a conspiracy
between Alfa ans senior member of KPPU (including at least one of the members
of investigation team) to manipulate the investigation result of KPPU.----------
309. It is a serious allegation to KPU. If the allegation is correct, the ongoing process
of Temasek in KPPU is wholly improper and it has to be brought to a close
promptly. At least, KPPU shall have to investigate the allegation but there is no
evidence proved and an effort to discuss it with Mr. Puyono to clarify the
allegation. There is no public or media statement performed by KPPU to
straighten the note.-----------------------------------------------------------------------
310. To make the situation getting worse, a series of bias statement made by Iqbal
alone to mass media to add fuel to the flame.----------------------------------------
311. In early February 2007, Iqbal stated a statement to prove his preconceived
judgment that Temasek was guilty. In the report in Investor Daily, 6 February
“To date, there are many dirty competition indications in telecommunication sector, cross ownership as an example. ---------------------------------------------------
COPY As an evidence telecommunication tariff in Indonesia, it is higher than other countries.” -----------------------------------------------------------------------------------
312. The statement was made prior to the implementation of preliminary investigation
to Temasek. It is ridiculous for a Chairperson of KPPU to publicly states that
there is “a cut throat competition in telecommunication sector”, before a formal
investigation being conducted. KPPU should be impartial and Iqbal in his
capacity of the chair of the on going investigation may not states such a
314. Only two days before the first report sent to Temasek and preliminary
investigation to Temasek started, Iqbal stated that KPPU has calculated the loss
that has to be paid by Temasek. Thereby, it indicates implicitly that the guilty of
Temasek has been decided and the investigation performed was only a formality.
In Rakyat Merdeka, 24 April 2007, Iqbal said:-------------------------------------
“As a result of our examination, there is a suspicion of unhealthy competition. We are currently calculating the loss of the state. There is an impact on the price that consumers have to pay. Our telephone rate is higher than those of Singapore and Malaysia.” -----------------------------------------------------------------
315. Iqbal kept on stating harmful statements to Temasek in time of follow up
investigation process was on going.---------------------------------------------------
316. In Koran Tempo, 24 May 2007, Iqbal said: “In the preliminary investigation, our
team has found sufficient evidence of infringement indication that Temasek
317. The same statement goes for in Indo Pos, 24 May 2007. Iqbal was reported to
state “after preliminary investigation, we accumulate sufficient evidence that there
is a monopolistic practices performed by Temasek.”-------------------------------
318. It is also in the Jakarta Post, 24 May 2007, Iqbal was reported to state:----
COPY“There are evidences discovered, including the fact that there is a cross ownership by Temasek in Indosat and Telkomsel, which violates article No.27 of the 1999 Antimonopoly Law”. -------------------------------------------------------------------- We have also found indications of lack of competition between Telkomsel and Indosat. This is reflected by the similarity of the rates of their mobile telecommunication products. This indicates a possibility of strategic control by their parent company, Temasek.” --------------------------------------------------------
319. On 26 May 2007, Bisnis Indonesia reported that Iqbal said:-------------------
“The suspicion has become more intense. It is a fact that there is a cross-ownership of Temasek in two Indonesian telecommunication companies: Indosat and Telkomsel”. ----------------------------------------------------------------------------
KPPU reckons that there’s no healthy competition between both telecommunications companies yet.”------------------------------------------------------
320. On 7 June 2007, Rakyat Merdeka reported that Iqbal said: “I am sure by
removing cross ownership, competition will be fairer.” ---------------------------
321. According to Koran Tempo, 8 June 2007, Iqbal said:“Crossownership has created
conflict of interest among the shareholders.”-------------------------------
322. In Trust on 11-17 June 2007, Iqbal was reported that “KPPU finds an
infringement of the Anti-trust Law by Temasek.”----------------------------------
323. In Gatra 20 June 2007, Iqbal said : -----------------------------------------------
“The cross ownership of Temasek Holding through its subsidiaries: STT in Indosat and SingTel that owns 35% of Telkomsel’s shares has violated Article 27 of Law No. 5/1999 with regard to Prohibition of Monopoly and Unhealthy Competition. That is why we will summon SingTel and STT for further clarification.”------
324. Wall Street Journal on 21 June 2007 reported that Iqbal said “there is indication
of the lack of competition between Telkomsel and Indosat.”---------
325. Bisnis Indonesia on 6 September 2007 reported that Iqbal said:----------------
“The [KPPU] team has found sufficient evidence of monopoly practice and unhealthy competition committed by Temasek Group in Indonesia’s telecommunication industry.”---------------------------------------------------------------
326. In Iqbal’s opinions, the indications of monopolistic practice has been obviously
seen and some evidence are needed to ratify the allegation. The statement was
COPYpublished by Kontan on 12 September 2007: “there is a negative indication, and
we just need to ratify it with evidence.” It is clearly a priori judgement and
classical example of reversely conduct, finding evidence from a conclusion.---
327. In Indo Pos on 12 September 2007, Iqbal openly stated his choice that KPPU will
not change its mind on the guilty of Temasek: --------------------------------
“Early November is the deadline for us to make the verdict. I hope there will not be any changes.”-----------------------------------------------------------------------------
328. His opinion was re-stated in Rakyat Merdeka on 16 September 2007: ---------------
“After that, we went through the commission hearing, So, we can expect the verdict to be made in early November 2007. I hope there will be no changes.”----
329. Recently, on 22 October 2007, in Thomson Financial Iqbal stated that the last
thing to be done by KPPU is to determine sanctions for Temasek; the guilty of
Temasek has been decided.-------------------------------------------------------------
“A panel of investigators is planning to decide on sanctions against Temasek in mid-November, [Iqbal] said.---------------------------------------------------------------- ‘If, after that, they [Temasek] do not accept the decision, they can take the case to a district court,’ said Iqbal.”-----------------------------------------------------------------
330. The fact that Iqbal stated such comments before an investigation to Temasek
being conducted has put the case in trouble. Iqbal is a Chairperson of KPPU and
his statements are able to influence the performance of KPPU’s investigation
team. Besides, it also omits presumption of innocence.-----------------------------
331. Mr. Nawir Messi (“Mr. Messi”) is a chair of follow up investigation team on
Temasek. He made a statement depicting an opinion that has been previously
created, suspicion that Temasek is guilty. The New Straits Times on 7 June 2007
“Nawir Messi, vice chairman of the Business Competition and Supervisory Commission (KPPU), said last month the body had found ‘strong suspicions to bring this case to an advanced investigation’.” --------------------------------------
332. Such a statement made by Mr. Messi is surprising concerning his capacity as a
chair of preliminary and follow up investigation teams of Temasek. He shall not
discuss and report a meeting report publicly before it is concluded.------------
COPY333. Iqbal also spoke distinctly about the type of sanction imposed to Temasek.
Although under the Law No.5/99 KPPU has right to decide wide coverage of
sanction, Iqbal has focused only to certain sanction ---- an order to have Temasek
released its shares in Indosat and Telkomsel. It is perfectly embedding with
Altimo that has a plan to buy at bargain the shares in telecommunication sector.
There is no explanation stated by Iqbal on why releasing shares is the only
334. Iqbal has made his own decision, as it has been known since early February 2007.
In Investor Daily on 6 Februari 2007, Iqbal said:----------------------------
“KPPU does not want to lessen Temasek’s ownership [in either company]. Instead, (Temasek) should choose between Telkomel or Indosat.”--------------------
335. Again, in Tempo May 2007, Iqbal was reported that he said:-------------------
“It’s to them whether they want to sell the shares of Telkomsel or Indosat.”--------
336. In Koran Tempo on 16 May 2007, Iqbal said:-------------------------------------
“If Temasek is proven guilty, Temasek should let go one of its ownerships in the biggest telecommunication companies in Indonesia, Telkomsel and PT Indosat.”
337. On 26 June 2007 Kontan reported that Iqbal said:-------------------------------
“If Temasek proven guilty, Temasek should sell one of the companies.”-----------
338. In Warta Ekonomi, July 2007 Iqbal said: ----------------------------------------
“If the suspicion is proven, Temasek should let go one of its shares, either Indosat or Telkomsel.”---------------------------------------------------------------------------------
339. In Investor Daily on 22 August 2007, Iqbal said:---------------------------------
“If it were proven that a violation took place, Iqbal said, the commission has the authority to put a stop to the anti-competition behavior. In doing so, KPPU will ask Temasek to let go one of its shares in the cellular company, i.e. PT Telkomsel or PT Indosat.”-------------------------------------------------------------------------------
340. In Kontan on 10 August 2007, Iqbal said that it Temasek found guilty,-------
“Temasek will have to let go one of its shares.”------------------------------------------
COPY341. In an article of Trust Magazine, dated 24 – 30 September 2007, Iqbal expressed
such a following statement:-------------------------------------------------------------
“The directive of KPPU’s decision lead to two possibilities namely violates a law or not. If there is a violation to the law, KPPU may impose administrative fine. An imposing of fine can be valid for another business actor for not conducting the same deed. Concerning that the case is crossownership, its order is divestment of one of the company. KPPU may also impose financial fine. Whether it is punishable or not and however much a number of money will be, it depends on the decision of extraordinary commission.”------------------------------------------
342. In his statements, as it cited above, Iqbal ignores the facts that Temasek does not
have shares at all in Indosat an Telkomsel. Besides, Temasek is also not a party
that decide to invest in both companies.----------------------------------------
343. The “solution” suggested by Mr. Iqbal is also awkward due to its similarity with
the suspected plan of Altimo. It is the only sanction enabling Altimo obtain part
of shares of Indosat and Telkomsel.---------------------------------------------------
344. When the three facts are combined with the suspected conspiracy of KPPU with
Altimo, it is plausible to wonder the independency and impartiality of part of
members of KPPU. They are in their capacity as members of investigation team
that are able to influence investigation result. --------------------------------------
345. The conclusion is also supported by the incidents recently blow up by mass media
that Mr. Iqbal and Mr. Messi has been reported to the Police. The news describes
a tape of phone call between Mr. Iqbal and the representative of Altimo.
346. An article in Detik Newspaper on 23 August 2007 mentioned the following
“The Chairperson of KPPU, Muhammad Iqbal, will be reported to police headquarter. Iqbal is alleged for abusing his authority in during the investigation toward a case of cellular communication monopoly by Temasek Holding.”--------- ”KPPU has been used by Altimo Alfa Group, a Russian telecommunication company that intends to have Temasek’s shares in Indosat,” the Coordinator of Sates Commission Watch, MA Husein said in Menteng Hotel UI, Central Jakarta. Thursday (23/8/2007).”------------------------------------------------------------------ “According to Husein, Iqbal compels to investigate Temasek and then alleges for conducting monopolistic practice. “Tomorrow, Iqbal and another member of KPPU, Nawir Messi, will be reported to police headquarter by us,” he said.---- Husein admits to have a tape of phone call between Iqbal and Suharto (Altimo representative). The record tells an arrangement to be applied during an
COPYinvestigation performed by KPPU on the suspected monopolistic practice conducted by Temasek. Unfortunately, Hussein cannot sound off the record to journalists.------------------------------------------------------------------------------------- ”We do apologize for not having informed yet the report publicly before our report is verified in the police headquarters.” Husein said. Husein also alleges Iqbal and Nawir to have been bribed by Altimo. He said that each of them receives IDR 5 billion. The fee will be added if the investigation is over and Temasek is stated guilty. Husein added that an injunction of KPPU required by Altimo is to punish Temasek to release its shares in Indosat at the latest of one month.”-----------------------------------------------------------------------------------------
347. In the same day, State Commision Watch performed press release concerning
suspected bribery received by Mr. Iqbal and Messi. Consequently, they should be
reported to body authority:--------------------------------------------------------------
• In this case, it is suspected that KPPU has been used by Altimo Alfa Group, a Russian telecommunication company intended to purchase Temasek’s shares in Indosat.--------------------------------------------------------------------------------
• The decision of KPPU Chairperson to insist conducting follow up investigation to Temasek is a strong evidence that KPPU, or at least its Chairperson, has prioritized the business interest of Altimo. The investigation to Temasek itself is ended with the conclusion that Temasek is found guilty for conducting monopolistic practice.-------------------------------------------------
• At the moment, Muhammad Iqbal is trying hard to prove the guilty of Temasek by presenting a series of discussion and seminar to propagandize that Temasek has conducted monopolistic practice in cellular telecommunication industry in Indonesia. The deed of Iqbal is unethical because KPPU’s investigation team has not issued any decision at all.--------
• Muhammad Iqbal tries to create public opinion prior to the issuance of KPPU’s decision in order to obtain public support when KPPU decides to find Temasek guilty.---------------------------------------------------------------------------
• On Friday 24 August, we are about to report to the Police KPPU’s chairperson, Muhammad Iqbal and his member Nawir Messi. The report will be submitted concerning a strong indication of bribery conducted by Altimo to Muhamad Iqbal and Nawir Messi for amount of IDR 5 Billion (around US$555,000) each, plus “success fee” if Temasek is found guilty.---------------
• One of initials evidence we are going to submit is a tape phone call between Muhammad Iqbal and Suharto (the representative of Altimo in Indonesia) on the plan to investigate suspected monopoly practice conducted by Temasek. The phone call occurred around March or April 2007.---------------------------
• The record cannot be sounded off to the media prior to be officially verified by the Police.------------------------------------------------------------------------------
COPY• Based on our on hand information, the details of decision expected by Altimo
are as follows:----------------------------------------------------------------------------- • Temasek is found guilty for monopolistic practice in cellular
telecommunication industry in Indonesia.--------------------------------------- • The monopolistic practice has caused consumer loss of GSM for amount
of USD 5,000,000.------------------------------------------------------------------- • Thereby, KPPU sanctions Temasek to pay fine for amount of USD
5,000,000 (KPPU does not sanction Indosat to pay fine because Altimo is about to purchase Indosat’s shares soon after Temasek is found guilty).----
• KPPU sanctions Temasek and compel it sell its shares in Indosat at the latest of one month. -----------------------------------------------------------------
348. Further, in an article of The Strait Times daily on 5 September 2007, it was stated
that Mr. Iqbal and Mr.Messi have been reported to the Police:------------
“A NON-GOVERNMENTAL organization has filed a police report accusing the head of Indonesia's anti-trust watchdog of corruption and conspiracy in connection with his probe against Singapore's Temasek Holdings.”----------------- In its report filed late last week, State Commission Watch , alleged Mr Muhammad Iqbal, the head of the Business Competition Supervisory Commission (KPPU), of underhanded dealings with Russian conglomerate Alfa Group in his efforts to investigate Temasek for allegedly breaking anti-monopoly laws.---------- Mr Iqbal's probe against Temasek, the NGO said in its report, was intended to help Alfa get hold of shares in Indosat.--------------------------------------------------- KNW coordinator Ahmad Hussein told The Straits times that his group has evidence of a recording of an alleged conversation between Mr Iqbal and Alfa's representative in Indonesia, Mr Suharto.---------------------------------------------- He said: 'The conversation was about KPPU's investigation of Temasek. We feel this is improper and we want the police to investigate the matter.’--------------- Mr. Ahmad alleged that the Alfa group, whose telecommunications subsidiary Altimo, has an office in Jakarta, had bribed KPPU officials to probe Temasek for allegedly breaking anti-monopoly laws.”--------------------------------------------------
349. Further, in a media report in Trust dated 24-30 September 2007, Iqbal said:
“It is a matter of competition; a public case. When the case has passed a process of clarification, bundling and so on, the process then finished. It it not a civil suit, it is a competition case. The allegation is the infringement of the Law No.5/99. If a reporting party withdraws its report, there must be something wrong with its report. The reporting party reports something and then withdraws it, it is useless. The reporting party (FSP BUMN) is not serious or there are other things behind it. Besides, they have been withdrawn. It is ridiculous to say that a party has compelled KPPU to accelerate a process and it is asked to cancel it now. What’s
COPYwrong? It because of one party closes its relationship with Altimo and takes side to Temasek, it does not mean that KPPU can be a scapegoat.”------------------------
350. Based on the news above, it is a firm reason for Temasek to question the
imparsiality of Council of Commission in the aquo case.---------------------------
351. Temasek also questions over the decision of KPPU to expel Mr. Pasaribu, as the
only member of team who disagree with the decision taken by follow up
investigation team, from the the Council of Commission that investigate the aquo
case. In our knowledge, the expression of dissenting opinion and the expel of
member of follow up investigation team are groundless and KPPU does not ever
state its decision to expel its member.------------------------------------------------
352. An article in the Jakarta Post daily newspaper on 25 October 2007 also drew
attention to the decision of KPPU expelling Mr. Pasaribu from the follow up
investigation team and also the fact that Iqbal has been been uncharacteristically
vocal in the press about his views on Temasek’s “guilt” in the course of the
“The events that led to the KPPU investigation of Temasek, Indosat and Telkomsel were controversial and full of political intrigue right from the outset. The KPPU also seemed to have departed from its standard procedures and practices in handling the case.-------------------------------------------------------------- Departing from the KPPU’s normal practice, Benny Pasaribu, a member of the KPPU investigation team who disagreed with the conclusions of the team, was not included in the five-member panel of judges.----------------------------------------Very rarely has the KPPU chairman talked to the media about a case still under investigation. But over the past few months Muhammad Iqbal has often been quoted in the media about the case even though he was not a member of the investigation team.”--------------------------------------------------------------------------
353. Besides, KPPU has not expressed any decision at all to focus its investigation
only to Temasek, and not to the Government of Indonesia, that in fact, controls
over Telkomsel owns significant share in Indosat (A series shares that has right to
control company significantly). It triggers public protest such as comes from
university students and worker union of Indonesia, as it reported by Channel
News Asia on 24 October 2007 as follows:---------------------------------------------
“JAKARTA: An alliance of Indonesian university students and a labor union have jointly sent a petition to Indonesia's president and parliament calling for the removal of the head of the anti-trust watchdog the KPPU.----------
COPYThe petition also called for the replacement of all members of the KPPU, also known as the Business Competition Supervisory Committee. ---------------- It alleged that KPPU members have created uncertainties in the business environment by wrongfully prosecuting state-owned enterprises for alleged anti-competition practices.------------------------------------------------------------ … The groups listed three recent cases of mishandling by the KPPU. One of them is the current probe on Singapore investment company Temasek Holdings and its subsidiaries, Singapore Technologies Telemedia and Singapore Telecom.------ The KPPU has alleged Temasek of violating Indonesia's anti-monopoly laws through its two subsidiaries, which have stakes in Indonesian telecom operators Indosat and Telkomsel.------------------------------------------------------- As the Indonesian government has stakes in both Indosat and Telkomsel, the petition said the KPPU should investigate the government along with Temasek Holdings for cross-ownership.”------------------------------------------
354. The copy of the whole article cited above is also enclosed as Written Proof J.---
355. Although various allegations and speculations have been expressed by many
parties and reported by mass media, therefore KPPU that is involved in this case
seems to be indifferent and to keep quiet as well as to give no clarification at all
toward its suspected involvement in this case.---------------------------------------
356. Whether it is correct or incorrect that there is bias in the settlement of this case,
basically KPPU’s investigation has biased. Therefore, whatever decision
aggrieving Temasek will be spoilage. In this case, KPPU shall discontinue the
investigation of the case promptly.---------------------------------------------------
365. Referring to this condition, the consideration taken from the draft Report of
LPEM by KPPU is misleading and the conclusion of First and Second Reports are
null and void. Thereby , the case to Temasek shall be discontinued.-------------
COPYThe Law No.5/99 and KPPU Regulation No. 1/2006 violate the principle of due
process of law as it guaranteed by the Constitution 1945.
366. In the hierarchy of laws in Indonesia, the Constitution of 1945 is the fundamental
laws of the Republic of Indonesia. In Article 28D of the Constitution 1945 it is
stated that the state guarantee the enforcement of due process of law including the
enforcement of judicial power and quasi-judicial in Indonesia. Yet, some
stipulations in the Law No. 5/99 and KPPU Regulation No. 1/2006 as well as its
implementation are opposed against human rights although they are guaranteed
by the Constitution 1945, such as in the following things:---------------------------
(a) Article 38(3) of Law No. 5/99 states that the identity of the reporter (i.e. complainant) must be kept secret from a reported party. However, the copy of report from the Reporter Party has been kept as a secret too from the Reported Party.---------------------------------------------------------------------------------------
(b) Article 43(3) of the Law No. 5/99 obligates the Commission to decide whether an infringement occurs or not at the latest of 30 (thirty) days since follow up investigation has been completed. Therefore, in such a shortest time, Reported Party is expected to be able to observe the whole document in the case document of KPPU, to interpret it (if necessary), and to prepare answers over the suspected infringement. The Commission shall divide the 30 (thirty) days so that there will be sufficient time for the Commission to consider the case and to state a decision before the 30 (thirty) days stated by the Law is overdue. ------------------------------
(c) Article 45(2) The Law No. 5/99 obliges District Court to issue a decision on the objection to the decision of KPPU in as from the illogical time that only 30 days since the start of the examining of the objection.--------------------
(d) Based on the interpretation of Commission to the Article 65 of the KPPU Regulation No. 1/2006, the reported party is entitled to observe the documents and to check through evidence for prosecution after follow up investigation completed.---------------------------------------------------------------------------------
(e) Based on the interpretation of Commission to the Article 65 of the KPPU Regulation No. 1/2006, the reported party is given only a short time that makes it impossible to observe and check through the whole documents or evidence in the case document of KPPU. The copy of the letter sent by Temasek on 4 October 2007 to KPPU on the objection of KPPU to the short period of time given by KPPU has been enclosed as Annex H.-------------------
(f) Article 5 (4) of MA Regulation No.3/2005 on the Procedures of Submitting Objection toward KPPU’s Decision, indicates that Reported Party that submits objection to the Court cannot add further evidence if it is not previously submitted to KPPU.----------------------------------------------------------------------
367. Any pointers mentioned above are the examples of deeds that is opposed to the
principle of due process of law as it guaranteed its enforcement by the
Constitution of the Republic of Indonesia. Thereby, the Law No.5/1999 cannot be
implemented basically so that any decision issued has to be revoked since it has
COPYviolated the basic principle of justice and moral as it is guaranteed by the
(h) Singapore Telecom Mobile Pte. Ltd. (“SingTel Mobile”);
and
(i) PT Telecommunications Selular (“Telkomsel”).
7. Nevertheless, LPP was not delivered to STT on that date. On 5
June 2007, STT accepted peremptory writ to meet Investigation
team of KPPU. It is for the first time STT accepted a notification
from KPPU that STT was suspected to infringe the Law of Anti-
monopoly. Afterwards, around 7 or 8 June 2007, the LPP was
delivered to STT.
8. On 18 and 27 June 2007, Mr. Stephen Geoffrey Miller (“Mr.
Miller”) met KPPU represented STT. Mr. Stephen Geoffrey Miller
occupied an office as Chief Financial Officer and Senior Vice
President of STTC. Mr. Miller also submitted a brief statement is
written.
9. On 13 September 2007, STT submitted First Statement of STT,
submitted a letter to KPPU to be permitted to check through the
KPPU case document in the end of Preliminary Investigation stage.
The request was rejected by KPPU by reason of it is permitted only
in the end of Follow-up Investigation.
COPY (a) The statement of Mr. Widya Purnama. He was Managing
Director of PT Indosat Plc. (“Indosat”) from 2002 to 2004.
(b) The report from an expert of Spectrum Strategy Consultants
(“Spectrum”) entitled “Independent Review of Competition
in the Indonesian Mobile Market and Indosat’s
Performance.”
(c) The opinion of an expert, Professor Hikmahanto Juwana,
Ph.D (“Professor Hikmahanto”). He is from University of
Indonesia.
10. Follow Up Investigation should have been completed and issued
the Report of Follow Up Investigation (“LPL”) on 27 September
2007. On 27 September 2007, the attorney-in-fact of STT
submitted a letter to KPPU to ask checking through the case
document of KPPU.
11. It was newly on 3 October 2007 that KPPU delivered the Report of
Follow up Investigation (RFI). The RFI decided that the Reported
Parties is part of “Temasek Business Group” that conducted
collusion to lessen competition in the relevant market through PT
Indosat Tbk (“Indosat”) and Telkomsel by keeping the tariff high.
The RFI did not consider at all the statements, answers and
evidences submitted by STT during the step of Follow up
Investigation.
12. On 5 October 2007, the attorney-in-fact s of STT checked through
the case document of KPPU.
III. THE SUBMISSION OF ANSWER/EVIDENCE BY STT
DURING THE STAPE OF FOLLOW UP INVESTIGATION
COPY A. The Summary of KPPU’s Allegations after the step of
Preliminary Investigation
13. The followings are KPPU’s allegations after the stage of
Preliminary Investigation completed:
1. “Temasek Holding (Private) Limited, through Singapore Telecommunication Ltd, Singapore Technologies Telemedia Pte. Ltd., STT Communication Ltd., Singapore Telecom Mobile Pte. Ltd., and Indonesia Communication Limited own shares of 35% in Telkomsel and 40.77% in PT. Indosat, Plc.
2. Telkomsel and PT. Indosat, Plc., jointly control 89% of market shares or at least more than 50% of market shares in market of cellular telecommunication service all over Indonesia.
3. Based on economic data, it is seen that the performance of PT. Indosat, Plc, is not good as other operators’ performances.
4. The crossed ownership of Temasek Business Group in Telkomsel and PT. Indosat, Plc., has caused lack of competition among Telkomsel, that owns the biggest market shares and PT. Indosat, Plc., as the second biggest shares in market of cellular telecommunication service all over Indonesia.”
B. The Summary of Answers/Evidences of STT in the stage of
Preliminary Investigation
14. The first allegation is incorrect because STT only owns 75% of
AMH’s shares and AMH’s ownership to Indosat is 40.77%. It
means that the indirect ownership of STT in Indosat is only around
31%. As it is affirmed by KPPU that SingTel ’s ownership in
Telkomsel is 35%. The ownership of STT in Indonesia’s
telecommunication operator is only indirect ownership (through
AMH, ICL and ICPL). STT does not have any interest or rights in
PT Telkom or Telkomsel. Therefore, the ownership of Temasek
First statement of STT
COPYand/or SingTel in Telkomsel cannot be related to STT. The
fundamental thing to consider is that STT not part of what it called
as “Temasek Business Group”, because STT is not under Temasek
management and its main economic activities is not controlled by
Temasek.
15. The second allegation cannot be proven because the only STT’s
investment in Indonesia’s telecommunication operator is regarding
their indirect ownership (through AMH, ICL and ICPL) in Indosat.
STT does not have any interest or rights in PT Telkom or
Telkomsel. Furthermore, Indosat does not have control (in any
way) in more than 50% of market shares in cellular
telecommunication market. KPPU has also failed to explain how
did they determined the relevant market or measured the market
share of Indosat, though the measurement is inconsistence with the
existed market definition.
First
statement
of STT
16. The third allegation is incorrect, because all objective indicators
showed the increase of Indosat performance since 2002.
17. The fourth allegation is not based on fact because all indicators
show a high competition between Telkomsel and Indosat in any
aspect, such as price competition, high “churn rate” and product
innovation. Further, a lot of evidence showed in a whole the high
competitiveness of telecommunication market in Indonesia.
18. The report made by independent expert from Spectrum finds no
allegation basis of KPPU and concludes that Indosat and
Telkomsel competing directly in many ways. The tariff fixing at
the present time is also competitive.
19. In its expert report, Professor Hikmahanto concludes as follows:
COPY (a) STT does not have majority share in Indosat.
(b) STT cannot be considered as business actor under Anti-
monopoly Law.
(c) KPPU has to show the abuse of dominant position to prove that
Article 27 of Anti-monopoly Law has been infringed. Further,
KPPU must also prove the causality between ownership of
majority shares and the domination of market shares.
(d) The analysis of KPPU on “relevant market” in the Report of
Preliminary Investigation is incorrect.
20. Concerning the allegations to STT, KPPU cannot prove that the
elements in Article 27 (a) of Anti-monopoly Law have been
accomplished:
a. KPPU can not prove that STT has “majority share” in Indosat – STT does not have more than 50% of Indosat’s shares.
b. KPPU is also incorrect in concluding that STT “controls more than 50% of market shares.” The only ownership of STT in Indosat is its indirect ownership (through AMH, ICL and ICPL). STT does not hold an ownership or rights in PT Telkomsel. Indosat, in whatever ways, does not control more than 50% of cellular telecommunication market in Indonesia.
c. Article 27 of Anti-monopoly Law only applies to “business actor” and STT is not a business actor as it is defined in Anti-monopoly Law. A business actor shall be founded or domiciled in the Republic of Indonesia, and STT was not founded or domiciled in the Republic of Indonesia. STT also does not perform economic activities in Indonesia.
21. KPPU does not comply with valid regulation in conducting its
investigation. KPPU is negligent to inform or involve STT in the
preliminary investigation process. By doing it, KPPU has omitted
COPYthe opportunity of STT to arrange comments and to submit answers
during preliminary investigation step. Further, KPPU should start
its investigation within 30 days since the report is accepted and
discontinue its investigation when the report was withdrawn. In
this case, KPPU starts its investigation several months after the
first reports completed and continue its investigation even though
the report has been withdrawn.
22. Further, the investment of STT in Indosat has been conducted
transparently, approved and executed by the Government of
Indonesia. ST Telemedia even has been invited by the
Government of Indonesia to take part in an open tender of the sales
of Indosat’s shares. The sales is observed by functionaries of the
Government of Indonesia and IMF. The process has been
accomplished wholly the procedures stated by the Government of
Indonesia, in this case acted through the Ministry of State-owned
Enterprise of Indonesia (“The Minister of BUMN”), as it is proven
in the Divestment Document of the Minister of BUMN on the
Indosat divestment process on 4 February 2003 (”Divestment
Document”). Based on an independent evaluation to the submitted
documents tender, the Government of Indonesia itself appointed
ST Telemedia as a new investor of Indosat.
23. At that moment, SingTel has held an ownership in Telkomsel. The
Government of Indonesia has considered it and concluded that the
divestment would not infringe Article 27.
IV. THE ALLEGATIONS IN THE REPORT OF FOLLOW UP
INVESTIGATION
24. In LPL, allegations of KPPU change in sudden:
“1. Temasek Holdings Pte. Ltd (hereinafter referred to as Temasek) owns a majority share in two companies that
COPYconducting business activity in the same field and in common relevant market that make it infringes Article 27(a) of the Law No.5/1999.
[“Allegation 1”]
2. PT. Telecommunications Cellular (hereinafter referred to as Telkomsel) maintains its high cellular tariff that make it infringes Article 17 (1) of the Law No.5/1999.
[“Allegation 2”]
3. Telkomsel abuses its dominant position to limit market and technology development that make it infringes Article 25 (1.b) of the Law No.5/1999.
[“Allegation 3”]
25. Although there is no allegation specifically addressed to STT, the
allegations seem to state that:
(a) The first to the ninth Reported Parties are “Temasek
Business Group” as a “single economic entity”.
(b) KPPU has a jurisdiction toward STT because Temasek
Business Group performs its business in Indonesia through
Indosat and Telkomsel as its control.
(c) Temasek Business Group has “majority share” in Indosat
and Telkomsel with its control as a shareholder.
(d) Temasek Business Group controls more than 50% of market
shares in the relevant product market, a cellular market.
(e) The cross ownership of Temasek Business Group has
decreased competition in the market which then causes
consumer loss.
COPY26. In its defense statement, STT will conclude expressly that:
(a) There is no corporate body known as Temasek Business
Group legally or economically.
(b) STT, STTC and AMHC are not “business actors” and
KPPU does not have jurisdiction on them;
(c) STT does not have “majority share” in Indosat in whatever
bases.
(d) Fundamentally, the conclusion of KPPU is incorrect
because KPPU has stated wrongly that relevant product
market is not competitive.
(e) STT does not control more than 50% of relevant product
market.
(f) There is no evidence indicating that crossed ownership
causes the decrease of competition between Indosat and
Telkomsel.
(g) The conclusion of RFI that Temasek through SingTel and
STT controls economic activities of Indosat and Telkomsel
is illogical. It fully disregards the Government of Indonesia
the ownership of majority share owned in Telkomsel and
the control to Telkomsel and Indosat. If the RFI states that
Temasek controls these companies, it means that the
representatives of the Government of Indonesia in
Telkomsel/Indosat do not work properly. It is surprising to
know that KPPU comes up with such conclusion without ay
single evidence.
(h) KPPU does not have an authority to make allegations as it
described in RFI because it has been considered previously
by DPR and KPPU. It also comes up with a conclusion that
COPYthere is no infringement to the Article 27 of Anti-monopoly
Law.
(i) The RFI has intentionally disregarded plenty of evidences
in the case document of KPPU that actually it is opposed
against its conclusion. In fact, the RFI is a deviation of law
and prevailing evidence.
(j) The RFI is very partial and KPPU seems to have
intentionally deviated from the evidences to come to its
conclusion. The consideration to the evidence in the case
document of KPPU is conducted partially.
(k) KPPU has made STT a subject of unfair treatment,
infringed legal process and the principles of justice under
the Indonesian laws.
V. THERE IS NO TEMASEK BUSINESS GROUP
27. STT will show in the defense statement that KPPU cannot prove
the elements of Article 27. Nevertheless, before discussing it STT
will show beforehand that all basic cases of KPPU concerning the
existence of a single economic entity known as Temasek Business
Group is simply fictitious.
A. KPPU is careless in considering legal condition to define
“Business Group"
28. The Statutes of each company, AMH and Indosat in one side, and
Sing Tel and Telkomsel in other side, arranges shareholders’ rights
to nominate director in board of directors. As a consequence,
KPPU concludes in item 77 to 84 in the RFI that Temasek has an
‘authority” to its subsidiaries. According to KPPU, there are some
directors who also take hold as a member of board of directors in
LPL, Facts,
Paragraph
77 to 84
COPYmore than one subsidiary. KPPU has diverted an evidence to be
able to reach a conclusion as what it wants by mentioning that
there is a Business Group known as.
29. There is no law to be infringed or no impropriety if shareholders
with their significant ownership deserves to have right to nominate
directors in its subsidiaries.
30. Paragraph 5(c)(6) of the Analysis Article in the RFI cited Hansen’s
opinion in coming to the conclusion of the existence of Business
Group Temasek, as it mentioned below:
“Some self-supporting corporations that join into one self support economic unity. The self-supporting corporation is under one common head that shows outside as a holding company that makes similar plans for its subsidiaries.”
31. Yet, the RFI really disregards First Statement of AMH that
encloses the citation of Knud Hansen on the requirements to be
fulfilled by a group of entity, known later as Business Group. The
requirements are:
First statement of STT, item 46
(a) The so-called subsidiary, it must stay in an integrated
management of holding company, arranges an integrated
plan for all its subsidiaries;
(b) The plans of holding company to its subsidiaries must cover
main economic activity of the so-called subsidiaries; and
(c) The so-called subsidiary is prohibited to disobey the rules
arranged by the management of holding company.
32. In LPL, the only clue of KPPU to support its opinion on Temasek
Business Group is the capacity of Temasek as a shareholder of
STT and SingTel . KPPU does not have evidence to prove that
COPYeither STT or SingTel (or their subsidiaries) stay in the same
management of a holding company. The holding company controls
the main economic activity and its subsidiaries are prohibited to
digress from the rules of the holding company’s management.
33. Further, Professor Hikmahanto, in its second expert opinion
clarifies that there is no legal basis for KPPU to treat the Reported
Parties as an entity known as Temasek Business Group:
The Second
opinion of
an expert,
Professor
Hikmahant
o
“I concerned about that KPPU gives reference to Temasek Business Group as one entity including: Temasek Holdings, Pte. Ltd., Singapore Technologies Telemedia, Pte. Ltd., STT Communications, Ltd., Asia Mobile Holdings Company, Pte. Ltd., Asia Mobile Holdings, Pte. Ltd., Indonesia Communications Limited, Indonesia Communications, Pte. Ltd., Singapore Telecommunications, Ltd., Singapore Telecom Mobile, Pte. Ltd. In my opinion, under Indonesian law, it is judicially incorrect because I comprehend that each of corporate body above is separated one to another that cannot assumed as an entity. Indonesian Law will treat each of corporate bodies as a separated of independent corporate body.
Therefore, all references cited by KPPU to Temasek Business Group is judicially incorrect. I do not find any evidence that support the Report of KPPU on the existence of Temasek Business Group. KPPU should treat and mention each of the corporate body as a separated corporate or independent corporate body.”
B. KPPU Ignores the evidence that Temasek does not control
COPYSTT
34 In the First Statement of STT, respond statement and evidence
have been in detail submitted to indicate that Temasek does not
control directly or indirectly business and/or operational decision
of STT. None of the evidence is mentioned in RFI and none of
the team members of KPPU Follow-up Investigation, but Dr. Ir.
Benny Pasaribu, M.Ec, has disregarded all evidence and response
statement submitted by STT.
The First
Statement,
item 49 to
58
35. Although ST Telemedia is a subsidiary of Temasek, the Temasek’s
share in ST Telemedia is only part of portfolio diversification.
Temasek does not perform business operation and/or operational
decision STT. The decisions are made by board of director and
management team of ST Telemedia/STTC.
36. It is seen by the way of ST Telemedia acquires shares of Indosat.
The acquisition approved by board of director STTC, without any
approval from shareholder.
37. In accordance with its Statutes and the law of Singapore (the law
which is valid in the country where any entity of STT is founded),
the business and affairs of ST Telemedia and STTC are managed
by its own directors. This Directors perform their authorities on
behalf of company, unless if there is specific requirement for the of
shareholder approval
38. Members of STT are corporate bodies separated from Temasek and
ST Telemedia/STTC. They have their own business and substantial
operation. For example, ST Telemedia/STTC also has significant
number of shares in Global Crossing Limited, a network operator
of integrated global IP-based that is based in the United States and
COPYin Tele Choice International Limited, a company listed in
Singapore Exchange Limited. Under independent management, the
corporate bodies have been listed themselves in various stock
exchanges and subjected to transparent regulation of corporate
governance of capital market.
39. There are no directors and management team of ST
Telemedia/STTC/AMHC (as they are related) and director of
AMHC who serve as directors or employees of Temasek.
40. There are also no directors and management team of ST
Telemedia/STTC/AMHC (as they are related) and director of
AMHC who serve as directors or employees of Temasek SingTel,
SingTel Mobile, Telkomsel or PT Telkom due to the
independency of the companies. STT does not have share or
indirect ownership in SingTel , SingTel Mobile, PT Telkom or
Telkomsel. Therefore, STT does not have interest to prefer
increasing cell phone market shares of Telkomsel to Indosat. The
only investment of STT in Indonesian telecommunication cellular
operator is (through AMH, ICL and ICPL) in Indosat,
consequently STT has to boost the performance and value of
Indosat for its own interest.
C. KPPU is neglecting the Representatives of STT
41. On 18 June 2007, Mr. Miller appeared before KPPU and his
written statement clearly states that STT is separated from
Temasek:
The
Statement
of Mr.
Miller in
the case
document
of KPPU
COPY
“8. We also emphatically deny the existence of “Temasek Business Group” as it is alleged. Temasek does not control business decision, plans and the operation of STT, STTC and AMHC. 10. And more importantly, we do not have any shares at all in Telkomsel. Thus, we really do not prefer enlarging market share of Telkomsel to PT. Indosat. The only investment we have in Indonesia is in PT. Indosat and our single interest is to improve the performance and value of PT Indosat. What is called “Temasek Business Group” is actually absent.
(a) STT, STTC and AMHC
11. There is no entity called “Temasek Business Group”. Each of Temasek, STT, STTC, and AMHC is an independent corporate body. Each of us is not part of “Temasek Business Group” as it is alleged. (a) STT, STTC and AMHC
12. Temasek, STT, STTC and AMHC are managed by their own board of directors and/or management teams. The members of board of director and management team of STT, STTC and AMHC are not director or employees of Temasek. Temasek (in one side) and STT, STTC and AMHC (in the other) are managed separately one to another.
13. STT is an independent company with its various investments and business interests all over the world. Temasek does not control the business decisions, plans and operating of STT, STTC or AMHC. The decisions are drawn fully by board of director and/or management team of STT, STTC or AMHC. Each of STT, STTC and AMHC has its own board of director stuffed by worldwide reputed members.”
D. KPPU is neglecting the presence of competition between
StarHub and SingTel
42. The RFI is wholly neglecting the evidence of the presence of
competition between StarHub and SingTel, as the current
telecommunication operators in Singapore.
43. In 2003, SingTel sued StarHub Cable Vision Ltd. (“StarHub The
COPYCable”), a subsidiary of StarHub. The litigation process was
running severely and ended with the submittal of appeal by
SingTel to Court of Appeal, the highest court of appeal in
Singapore.
Highlight
of Finance
Statement
of StarHub
and Straits
Times’
article,
dated 4
September
2007,
exhibited in
the First
Statement
of STT
44. The RFI also entirely disregards an evidence of the existence of
intervention of policy making institution in the dispute of SingTel
versus StarHub. Since the period liberalization of
telecommunication regime occurred in Singapore, Info-
communications Development Authority (“IDA”), a Singaporean
independent telecommunication regulating agency, has to intervene
at least 30 dispute cases of SingTel and StarHub. A number of
disputes reflected a level of fair competition.
E. The deviation in LPL
45. Firstly, KPPU is incorrect in mentioning that Ms.Ho Ching of
Temasek is an Executive Vice President of STT and STTC
LPL, Facts
Paragraph
78 (d)
46. It is absolutely wrong because Ms. Ho Ching serves no single
position in either STT or STTC. Furthermore, it has be asked by
KPPU in one of sessions with the representatives of Temasek,
COPYMr.Goh Yiong Siang (“Mr Goh ”):
“Question: Is it true that Ho Ching serves as an Executive Vice President in STT and STTC at the moment?
Answer: No.”
The Follow
Up
Investigatio
n over Mr.
Goh that is
available in
the
document
case of
KPPU
47. Secondly, it is more general. Mr Goh expresses a statement
referring to the policy of Temasek that Temasek does not ever
instruct or coordinate the commercial and operational decisions
with its subsidiaries:
“35. “It is a policy of Temasek for not instructing or coordinating commercial or operational decisions s with the companies to which Temasek has its shares. Thus far, the policy remains to be implemented.
36. Such strong and firm principles have been acknowledged by reliable international institution. The institutions are carefully monitoring the deeds of Temasek by confirming the policy and practices of Temasek. The Rating Report 2006 issued by Standard & Poor’s stated as follows:
“Temasek seeks to ensure good governance, performance, and competitiveness at each TLC through ensuring a high quality board of directors…Temasek refrains from involvement in day-to-day decision-making.”
37. The same goes for the Rating Report of Moodys Investor Services:
“Each [Temasek] investee company is managed by their respective management team and guided by their board of directors. Temasek is not involved in the
The
Statement
of Mr. Goh
in
paragraph
33 to 35 in
the case
document
of KPPU
COPYdaily commercial or operational decisions of its investee companies.”
48. In his investigating, Mr.Goh Yiong Siang categorically explains
that Temasek does not interfere in the decision making of Temasek
investee companies, including STT.
“14. “Question: Does Temasek get involved in the investment decision making and management activity of STT and SingTel ?
Answer: No, Temasek does not involve in operational fields and business decision in both companies. The decision on investment is taken by board of commissioner and management of each company.”
“27. Do STT and SingTel report their investment development to Temasek annually?
Answer: No, they do not report to Temasek.”
“30. It is important for us to have a copy of Temasek’s Statutes. Would you please explain the rights of Temasek in its capacity as an owner of SingTel and STT?
Answer: I want to repeat. Both companies treat Temasek as they do to other shareholders, our rights is the same as our rights in investee companies. We reserve rights as it is conducted by other shareholders to buy more shares or to sell or to maintain our shares.
“31. Question: Would you please explain the rights of Temasek in its capacity as 100% shareholders to STT?
Answer: As I have already told. STT is our investee company. We see our investment from financial point of view. We do not involve in the making and operational decision of the company because they have been performed by the board of directors and management of STT. Our Rights is not different with other shareholders. We are entitled to attend shareholder meeting and to have voting right.”
83. Question: Are there any names serving to STT and SingTel ?
Answer: None of them serves as member of STT
The Follow
Up
Investigatio
n over Mr.
Goh that is
available in
the
document
case of
KPPU
COPYBoard of Director STT, but Simon Israel. He is a member of board of directors in SingTel. Yet, he has been there before joining Temasek.
84. Question: Is one or the other serving for STTCom?
Answer: Nobody.
85. Question: Is one or the other serving for AMH?
Answer: Nobody.
86. Question: Is one or the other serving for AMHC?
Answer: Nobody.
87. Question: Is one or the other serving for ICL?
Answer: Nobody.
88. Question: Is one or the other serving for Indosat?
Answer: Nobody.
89. Question: Is one or the other serving for SingTel Mobile?
Answer: Nobody.
90. Question: Is one or the other serving for Telkomsel?
Answer: Nobody.
49. Although the evidences are contended with, the RFI does not show
them that make it conceals the truth
50. Thirdly, in its meeting with KPPU on 19 July 2007, Mr.Roes
Aryawijaya (“Mr.Roes”), the Commissioner of Indosat who is
nominated by Minister of BUMN, clearly confirmed that ST
Telemedia and SingTel competes each other:
Meeting
Official
Report
between
KPPU and
The
Ministry of
State-
COPYOwned
Enterprise
(BUMN)
page 3 that
is available
in the case
document
of KPPU
“21. Question: Is Temasek influencing the decision in Indosat?
Answer: As far as I know. It is negative.
22. Question: Do you mean the institution?STT or ICL?
Answer: STT is very influencing, STT competed tightly with SingTel , concerning the capacity of SingTel as a becomes shareholder in Telkomsel.”
51. Mr. Roes also shows evidence on the selection of director in
Telkomsel. It is fully transparent process:
“41. Question: How is the mechanism of electing board of director in Telkomsel?
Answer: The proposal to elect board of director is arranged inn Shareholder General Meeting (RUPS), in this case the commissioner of Telkomse., Tantri Abeng proposed several candidates to State Minister of BUMN, at that time, Mr. Sugiharto.”
52. Fourthly, in item 78 of RFI also incorrect in mentioning that Mr.
Peter Seah, Mr. Sum Soon Lim and Mr. Vincent Perez are the
Director on AMHC, that (ii) Mr. Sum Soon Lin is one of the
directors in AMH, that (iii) Mr. Miller is the CFO of AMHC and
COPYICPL. Furthermore, there is no person by name George Chow
Yow Tong inside the board or management of ST Telemedia,
STTC and AMHC. It was very surprising that the RFI has done
some fiction in the effort to get a wrong conclusion.
53. Finally, the allegation of KPPU concerning the influences of
Temasek Business Group to Indosat and Telkomsel by
coordinating their actions is inconsistent with the evidence
accumulated by KPPU from Dr. Ir. Bambang P. Adiwiyoto, M. Sc.
(member BRTI), in his meeting with KPPU on 10 July 2007:
Meeting
Official
Report
between
KPPU,
BRTI and
Directorate
General
Posts and
Telecommu
nication
that is
available in
the case
document
of KPPU
“Nevertheless, Telkomsel and Indosat is competed, if it is seen from the perspective of technology”
54. Practically, Mr.Hasnul Suhaimi (“HS”), the CEO of
Excelcommindo (“Excel”), informed by KPPU to have leaved
Indosat in an unfavorable condition, also confirmed in the follow-
up investigation of KPPU on 9 August 2007 that:
The
Official
Report of
Follow Up
Investigatio
n to
Suhaimi,
on page 5
COPYthat is
available in
the case
document
of KPPU
“Marginally, the market in Indonesia is still more competitive compared to the market abroad. In my opinion, the condition of cellular phone in Indonesia is over competitive. To my prediction, tariff will be in consumers’ side.”
F. It is understandable that shareholders propose to name
directors
55. In LPL, KPPU also states in item 102 to 109 that it is possible for
ICL have any control to Indosat with its authority to nominate
directors in Indosat, Deputy managing director, Director of Finance
and Information and Director of Information and Technology (IT)
in particular.
56. Once again, KPPU diverts the evidence for the sake of coming to
its conclusion. Although ICL is entitled to nominate director and
commissioner of Indosat, the appointment of both positions shall
be approved by shareholders of Indosat. Deputy Managing
director also has to report to managing director, a Chief Executive
of Indosat, and in reality the managing director is always
nominated by the Government of Indonesia.
57. Further, Managing director of Indosat, Mr.Johnny Swandi Sjam who is nominated by the Government of Indonesia, mentions that is nothing wrong with ICL to nominate director. It has also nothing to do with the nominated directors including Director of Finance and Director of Information and Technology:
“45. Question: Which post does ICL remain to hold?
The
Official
Report of
Follow Up
Investigatio
COPYAnswer: Deputy, Director of Finance and IT.
46. Question: To whom the position of ICL is given when the Director of Network is occupied by an Indonesian citizen?
Answer: Director of Operation.
47. Question: Why should Director of Finance always be taken by ICL?
Answer: As long as I know, the finance management generally held by the investor.
48. Question: Why IT Director always held by ICL?
Answen: For all I know, Singapore is dominant in IT.’’
n to
Swandy
Sjam,
dated 27
August
2007,
available in
the case
document
of KPPU
58. In displaying the facts, the RFI does not refer to the statement of
Mr. Johnny Swandi Sjam. It disregards the fact that nomination is
approved through the transparent balloting by the whole
shareholders during RUPS
59. There is no law infringing or improper for a shareholder with its
significant ownership nominating director for its subsidiary. Under
the Statutes of Indosat, any shareholder that has at least 25% of
share may propose to be included in the agenda of annual RUPS
(including the proposal to nominate Board of commissioner and
board of director in Indosat). It is untrue to tell that the
shareholders of Indosat (other than the Government of Indonesia as
the owner of dwiwarna shares) are able to appoint directly board of
directors or commissioner. Shareholders have rights to nominate
candidate to be members of Board of commissioner or board of
director and appointed then by an agreement of shareholders during
RUPS. STT does not have more than 50% ownership in Indosat,
therefore STT cannot do it alone and it is possible to be defeated
during RUPS.
COPY G. The deviation of KPPU over the evidence concerning the
procurement in Indosat
60. The evidence held by KPPU to prove ‘a control’ allegedly
conducted by STT is by relating it with procurement. The evidence
is wholly misinterpreted and it is clearly unable to prove a form of
domination at all.
61. In item 104 to 115 Part IV of LPL, the Deputy of managing
director who perform operational activities of Indosat, procurement
included is alleged, in this case to Mr.Khaizad B. Heerjee
(“Mr.Heerjee”). Hereunder we cite:
111. Prior to the management led by Khaizad, the method of procuring network is non turnkey under the management of Hasnul Suhaimi (Managing director) and it is that conducted by local company. It changes to become turn key and conducted by foreign under Khaizad management (IOR of Wimbo S Hardjito date 25 September 2007);------------------------------------------------------------
112. That cancellation (by Khaizad) to the development method applied by Hasnul, is one of the factors that make Hasnul resigned. It also indicates that the control of Indosat is in the hand of deputy managing director, let the managing director be a symbol. (IOR dated 22 August 2007);
113. The Cancellation leads to the absence of procurement decision to develop network. Such a condition was taking place in the first 9 (nine) month of 2006. It caused the business activities of Indosat is constrained and felt behind other operators. (IOR of Wimbo S Hardjito date 25 September 2007);
114. That the delay of network development is the basis of 4 (four) board of director of Indosat, Jhoni Swandy Sjam, Apocalypse Widjajadi, S. Wimbo S. Hardjito and Wityasmoro to meet Lee Theng Kiat (Commissary Indosat) in Singapore to explain the
LPL, Part
IV,
Paragraph
111 to 114
COPYdelay of network development that will be detrimental Indosat. In other hand 4 (four) board of director of Indosat their assessments that Khaizad is incompetent to become a leader in Indosat (IOR of Wimbo S Hardjito date 25 September 2007);
115. To the information given by 4 (four) board of director, Lee Theng Kiat does not take action at all (IOR of Wimbo S Hardjito dated 25 September 2007).”
62. In the first place, there is a suspicion that Mr.Heerjee is a party
appointed by ICL to control procurement process and to overrule
the managing director. When the four Indonesian went to
Singapore to submit their objection, Mr.Lee Theng Kiat
(“Mr.Lee”) is suspected to do nothing. All of the facts are
provided by Mr.Wimbo S Hardjito (“Mr.Wimbo”).
63. The RFI absolutely fails to use evidence that directly and clearly
submitted by STT, from Mr.Widya Purnama and one of the four
“dissatisfied” directors. Mr.Johnny Swandi Sjam told very
different information.
64. Mr.Widya Purnama worked in Indosat in 1983-2004 and assigned
by the Government of Indonesia and served as managing director
of Indosat from June 2002 to September 2004. The relevant parts
of his written statement to KPPU are as follow:
“8. Since June 2003, majority member of board of directors are Indonesians (5 of 7 directors are Indonesians). Director of Finance is more international, including some Singaporean people and Independent Commissioner.
…The directors from Indonesia are majority when I was a Managing Director; the deputy director was from Singapore as well as Director of Finance. Nevertheless, all the Directors report to me. I lead a meeting every Mondays where we hold a consultation prior to the
COPYapproval of my direction and everything to be performed.
10. This is effective structure. Our Indonesian directors covers the areas that need local understanding such as sales and marketing, business development, regulation, legal and human resource. The directors from Singapore submit their newest business understanding and finance aspects of reorganizing Indosat. I remember the successful package of refinancing our loan. The assessment/rating of Indosat loan increased and we reach the biggest transaction ever in Indonesian market since Asian financial crisis. The most important thing is Indosat find a way to boost.
13. STT/ICL does not ever take part in how I run Indosat. STT/ICL never dictate me on how Indosat shall be managed or controlled”
65. Referring to Mr.Johnny Swandi Sjam, in his view, the board of
director as a whole decides whether a certain program shall be
performed in turn key or non turn key. The deputy of managing
director does not control the procurement and the board of director
work in collegial way:
33. Question: Who does make the policy program of changing it to turnkey project?
Answer: As far as I know board of director through board of directors meeting in 2006.
34. Question: How about procurement?
Answer: For procurement above USD 5 million, the approval of managing director is needed.
35. Question: What about procurement under USD 5 million?
Answer: There is a rule on it concerning its authorization.
36. Question: Since 2007, are there any procurement above USD 5 million?
Answer: Since June 2007 (I have been a managing director), at least there were 2
COPYprocurements above USD 5 million. .Network Procurement, which is for filter and CDMA.
37. Question: The procurement that only need Deputy’s approval?
Answer: As I recall, the procurement around USD 1million to USD 5 million. But I am not sure the exact number.
38. Question: Shall Managing director know or approve procurement proposal?
Answer: To approve a procurement above USD 5 million
39. Question: In other hand, what is the authority of Deputy that need no approval from managing director?
Answer: All the things usually conducted in Collegial, in the sense of discussed in the meeting of board of director
The testimony of Mr.Jhonny Swandi Sjam that cited above are
conducted in collegial, in line with the Statutes of Indosat, for
example, stating that all decisions of the board of director meeting
conducted by deliberation for general consensus, and otherwise
succeed by majority votes
66. The RFI also really disregards that this evidence is justified by Mr.
Roes, who were and who are an Indosat Commissioner:
“28 Is it true that after Mr.Hasnul retiring the position is automatically occupied by Mr. Khaizad, but the proposal of Bapak Hasnul is refused? Is it true?
No. There are many different opinions. The proposal of Mr.Hasnul was tried to be applied in the company; nevertheless, in field, in managerial level, there were many oppositions against him. The board of director prefer to low
The
Official
Report of
Follow Up
Investigatio
n to Mr.
Roes, dated
COPYpricing to consumer.
19 July
2007,
available in
the case
document
of KPPU
67. Further, Mr. Roes explains that the long vacuum position left by
Hasnul is not caused by STT:
An
interview
with Mr.
Roes, on
page 7 of
the case
document
of KPPU
30. Question: As a commissioner, according to Mr. Roes, is the atmosphere in the mid manager level is such bad that the vacuum for the position is far too long?
Answer: It due to the lack of Minister of BMN to take action. Besides, it is also caused by the resistance of mid level manager, 750 people.
31. Question: Does it happen due to the refusal of STT?
Answer: No
68. The opinions of Mr. Widya Purnama, Mr.Johnny Swandi Sjam and
Mr.Roes Aryawijaya differ much with those given by KPPU.
Although it has been mentioned that Mr.Johnny Swandi Sjam is
one of directors who is suspected of expressing his complaint to
Mr Lee, RFI is really negligence in explaining why RFI only rely
on the evidence provided by Mr.Wimbo and not from Mr.Johnny
Swandi Sjam.
COPY69. Although Mr.Heerjee is possible not to agree with managing
director in a certain problem it does not mean that AMH controls
board of director of Indosat. Directors can be in a regular way
agreeing or not agreeing with something, and that it does not mean
that just because one director is insistent on a certain problem, such
a director control board of directors.
70. KPPU prefers to consider the evidence provided by “a management
staff of PT. Indosat (who was asked not to disclose the identity)” to
those from Mr.Johnny Swandi Sjam. It is surprising that KPPU
based its report on the evidence from an eyewitness who wish not
disclose the identity. Without mentioning identity in the official
report, such a witness is unreliable because he/she cannot explain
the fact owned of opposes it from the evidence. Such evidence is
null and void.
71. Concerning to the resignation of Mr. Hasnul, an article in
Detik.com on 5 July 2006 stated that he resigned for a personal
reason without any pressure on him. Further, officially Mr.Hasnul
is appointed as managing director of Excelcomindo on 1
September 2006 during RUPS of Excelcomindo. Although STT
does not know the private reason of Mr.Hasnul behind his
resignation, the evidence submitted by Mr.Roes Aryawijaya
indicates that Mr.Hasnul did not resign but it was caused by the
intervention of Vice Managing Director.
Article
dated 5
July 2006
in
Detik.com
“Why should be a vacuum in top management of Indosat, is caused by the refusal of STT?
No. The problem is in Indonesia itself.
The
Official
Report of
COPY
Investigatio
n of Mr.
Roes that is
available in
the case
document
of KPPU
72. The failure of KPPU in evaluating relevant evidence in its case
document, clearly indicate that RFI was prepared to come to a
conclusion of the infringement of Article 27 by ignoring existing
evidence. It is regrettable that there is no serious effort shown by
KPPU to evaluate evidence in LPL.
Letter from
the
Ministry of
BUMN,
Annex 1
73. As it is reported in annual report of Indosat for a fiscal year ended
on 31 December 2006, the revenues of Indosat within nine months
respectively (since April 2006) recorded to reach two-digit growth
to 30%.
“The revenues of Indosat within nine months respectively (since April 2006) recorded to reach two-digit growth to 30% after passing slow growth for almost five quarters. Operating income of Indosat in 2006 was around IDR 12.2 trillion, rose to 5.6% to those of the previous years. The margin of Indosat’s EBITDA within a year remained to be healthy and framed in the previous market guidance between 57%-59%. In the end of December 2006, Indosat recorded almost 16.7 million cellular customers, raise to go up to 21%, although the churn rate was high and compulsory abolition as an enactment of prepaid registration compulsory in early year.”
74. Caused by the problems mentioned above, the statement of
KPPU in item 145 of RFI describing that the decrease of
Indosat’s performance due to the nine-month delayed of BTS in
2006 is incorrect.
H. The Conclusion of Follow-up Investigation is Illogical
COPYBecause the Decision State that the Government of
Indonesia is not competent
75. STT always appreciate the active role of the Government of
Indonesia either in Indosat’s board of director or commissioner.
The managing director is usually a representative of board of
director. Mr. Roes Aryawijaya, used to be a Indosat
commissioner in 2003, is a Deputy of Minister of BUMN at the
moment. In this case, if RFI states that STT controls Indosat for
the sake of Temasek, it automatically indicate that the
Government of Indonesia and its representative do not have any
influence at all to STT. It is an aspersion to the Government of
Indonesia.
76. KPPU realizes fully that the Government of Indonesia is a
significant shareholder either in Indosat or Telkomsel.
Unfortunately, the facts are ignored in LPL. Another interview has
ever been conducted by KPPU and the result of the interview with
Deputy Minister of BUMN, Mr.Roes Aryawijaya that should be
cited:
“2. How are the composition of board of director and commissioner in each company, Indosat and Telkomsel?
Indosat : 4 board of directors are from STT, 5 from Telkom, 4 commissioners are from Telkom and 6 from STT. While in Telkomsel there are 3 board of directors from SingTel and 2 from Telkom.
3. Is STT dominant during decision making?
In the decision making we always concerns good corporate governance and avoids implementing voting mechanism. We do that in the meeting of Indosat board of director and commissioner.
The
Official
Report of
Investigatio
n of Mr.
Roes that is
available in
the case
document
of KPPU
COPY77. In the part where KPPU discusses allegation on ‘”authority”
Temasek, KPPU has eliminated the fact that Deputy Minister has
explained not only in selecting a number of director and
commissioner in Telkomsel and Indosat by the Government of
Indonesia but also in becoming active participant to control
initiatives and to attend a numbers of meetings
78. If the ability to elect director and commissioner as well as double
position people is the evidence of “controlling of the holding
company”, it means that the Government of Indonesia not only
controls either Indosat or Telkomsel but also infringe Article 27 of
Anti-monopoly Law. The facts show that (i) the Government of
Indonesia (acted via Minister of BUMN) is a shareholder either in
Indosat and Telkom (that has more than 50% of Telkomsel’s shares
and control it); (ii) the higher officials from the Minstry of BUMN
serve as commissioner in Indosat and Telkom; (iii) people assigned
by Ministry are those serving as member of board of directors.
79. STT always appreciates the active role of the Government of
Indonesia and its representatives in management Indosat. The
conclusion of RFI, that Temasek (that only has indirect minority
ownership in Indosat or Telkomsel) “controlling” either Indosat or
Telkomsel is unreasonable. Logically, it concludes that the
directors and commissioners appointed by the Government of
Indonesia are subject to Temasek. It is surprising that KPPU has
come to conclusion without any evidences to support.
80. It is opposed against the fact, between evidence in the case
document of KPPU and the “Government’s Elucidation”. It is
stated that, on page 14 of the case document of KPPU, the
“majority” share of Telkomsel “owned and controlled” by PT
Telkom Plc., and Further, that STT and SingTel are separated each
COPYother.
SingTel has 35% of Telkomsel’s shares with the limited management representation, in which the majority share of Telkomsel is owned and controlled by PT Telkom Plc. SingTel also is a public corporation that bring interests not only for Temasek as a shareholder but also public interest. Either SingTel or STT is managed by separated management team and competed freely in fixed access of cellular area, and internet service in Singapore. Concerning STT and Indosat, it is important to recall that that Indosat is also a public corporation, bring interests not only to STT but also to shareholders (government with 15%, overseas public shareholder/NYSE 30%, and domestic shareholders less than 13%).
STT and SingTel are owned by Temasek with their own independency. The competition between them must be subject to law and legislative regulation that go into effect in Indonesia either in the field of telecommunications, business competition, or capital market.
81. From the Government’s Elucidation, it is clear that the divestment
in Indosat has been considered carefully by member of House of
Representatives (DPR) in Indonesia. The more importantly, DRY
has obviously seen that there is no problem concerning cross
ownership because the majority shares in Telkomsel are owned and
controlled by the Government of Indonesia.
82. It shows that RFI is partial. The RFI does not take well-balanced
approach, in which RFI considers and conducts an evaluation to
the evidence that explained and advocated the position of STT. On
the contrary, RFI even disregards the evidence provided by DRY.
KPPU does not consider this as fairly and precisely.
VI. THE ALLEGATIONS OF THE INFRINGEMENT TO
ARTICLE 27 ANTI-MONOPOLY LAW
COPY83. Article 27 of Anti-monopoly Law states:
“business actor is prohibited to have majority share in several same kind of companies that conduct perform business in the same relevant market, if the ownership causes:
a. One business actor or a group of business actor controlling more than 50% (fifty percent) of market share of the certain similar goods or services.”
84. KPPU can not prove the whole elements of Article 27:
(a) STT is not a business actor.
(b) STT does not have majority share in Indosat or Telkomsel.
(c) STT does not control more than 50% of the relevant market.
(d) STT does not abuse dominant position.
85. Firstly, KPPU thinks that the whole Temasek Businesses Group
has to be considered as a single economic entity. Secondly, the
Temasek Business Group is suspected “to control” some entities in
Indonesia, Indosat and Telkomsel. Thirdly, Business Group
Temasek is suspected to use its influences in Indonesia, therefore
KPPU has an authority to apply jurisdiction extra-territorial to
Temasek Business Group, in accordance with practices suspected
implemented by European Union.
RFI,
Analysis,
page 5
86. The following defense statement indicates that KPPU has not only
distorted evidence but also legal interpretation in its effort to come
to groundless conclusion in LPL.
COPY A. STT is not a business actor
87. RFI is intentionally not to mention defense statement of STT that
companies within STT are not entities under the jurisdiction of
KPPU.
88. The definition of jurisdiction is a fundamental condition to start
investigation of KPPU.
89. Jurisdiction scope of KPPU as it is stated in Article 1(18) of Anti-
monopoly Law, mentioning that KPPU will, for example, “monitor
business actor who perform their business activity” (enhanced to
emphasis).
90. In consequence, an entity is only under jurisdiction of KPPU if the
entity is ”business actor” as referred to Anti-monopoly Law. The
term ”business actor” is defined explicitly in Article 1 (5) of Anti-
monopoly Law as, ”individual or corporate body ... that is founded
and is domiciled or to conduct activity in the territorial jurisdiction
of the Republic of Indonesia, either by itself or jointly under
agreement, carrying out various business activities in the field of
economy.” (enhanced to emphasis)
91. During Preliminary Investigation, the Reported Party is identified
as ”Temasek Business Group”. Although LPP, further jointly refer
to the Reported Party as ”Temasek Business Group”, STT note that
LPP clearly defines any entity suspected to form ”Business
Group” as separated ”Reported Party”.
COPY92. In LPL, the companies to which we refer to as STT is conceived as
the Reported Party. Nevertheless, as it is mentioned above, there is
no certain allegation addressed to them. At the moment, the
allegation is addressed to Temasek. It is obvious that even KPPU
“confuse” to which party the investigation is conducted to.
93. Under Article 1(5) of Anti-monopoly Law, STT clearly excluded
from the definition of “business actor”.
94. First of all, STT is not “founded” or “domiciled” in Indonesia.
95. Further, the most important thing, as it is intended by Article 1(5),
STT does not “perform any activity” in Indonesia. All “activities”
in Indonesia are performed by Indosat. STT is couldn’t considered
to “conduct” activities because the business of Indosat is managed
by its own board of directors for benefitting Indosat, therefore STT
does not take any operational decision in the business of cellular
telecommunication of Indosat. Based on the above reason, the
status of STT toward Indosat limited only as indirect shareholder
of 30% Indosat’s shares.
96. The Follow-up Investigation of KPPU is relied on bias
interpretation of Article 1(5) Anti-monopoly Law. After referring
to the definition of “business actor” in Article 1(5), RFI further
states (in item (A)(2)) that:
The Report
of
Preliminar
y
Investigatio
n
…Any activity of business actor that are not founded
and not domiciled in the territorial jurisdiction of the
Republic of Indonesia but its activity impacted the
competition in the territorial jurisdiction of the
COPYRepublic of Indonesia is subjected to the stipulation in
the Law No. 5/1999.
(enhanced to emphasis)
97. With all respect, this statement deviates from the definition of
“business actor”, according to Article 1(5). The concept of
“activity that have impact to the competition in… Indonesia” is
broader than the condition of “performing activities in …
Indonesia,” according to Article 1(5). The last sentence signifies
an active involvement in Indonesia, but not for the first. The
conduct of equalizing the two different concepts has distorted the
actual meaning of Article 1(5) Anti-monopoly Law, therefore, it
has unfairly extended its jurisdiction that actually beyond its
authority.
98. Our analysis above is supported by the evidence of Professor
Hikmahanto in his first expert statement. It is stated that :
“In my opinion, foreign corporate to qualify as Business Actor shall perform “business activity”. This activity shall be seen in the context of direct capital investment (direct investment) that not simply indirect capital investment (indirect investment), due to another sentence to follow of Article 1(5) that state “carry out
4. Is foreign corporate body that only possessing shares in Indonesian company and has no involvement in whatever activity or operational decision can be assumed to conduct “business activity”?
In my opinion, it is not. It simply owns shares and not performs any business activity or operational decision in the sense of indirect investment. For this reason, such a foreign corporate body can not be considered as business actor under Anti-monopoly Law.
5. Can a foreign corporate body that is not founded
and domiciled in Indonesia and only has for around
41% of the entire shares in Indonesian company be
COPYconsidered as Business Actor under Anti-monopoly
Law ?
In my opinion, such foreign corporate body cannot be
considered as Business Actor. There are four things
constituting my opinion. Firstly, such a foreign
corporate does not perform “business activity in the
field of economy” as it is required by Article 1(5) Anti-
monopoly Law. Secondly, the activity conducted is only
limited to own shares and not to conduct direct capital
investment (indirect investment). Thirdly, it is Indosat’s
board of director with its member that have obligation
to Indosat to conduct based on Indosat’s best interests,
that perform operational cellular telecommunications
(see Article 11 (1) and (2) AD). As it is determined in
the Statutes of Indosat that the decision of board of
director is taken with the deliberation to agree. In this
case it is null and void. It must be noted that board of
director that nominated by ICL is few in number or
minority. The majority of director’s members’ board,
including managing director, is whom nominated by
the Government of Indonesia. Fourthly, the
corporation was not founded or domiciled in
Indonesia.
6. Can STT, STTC, AMHC, AMH, ICL and ICPL be considered as Business Actor, when they are not founded and domiciled in Indonesia?
I have a notion that the definition of KPPU on “Business Actor” in its Report on the Result of Preliminary Investigation94 is incorrect. In my opinion, in order to consider foreign corporate body a Business Actor, such a corporate body must directly conduct “business activity” in Indonesia.
STT, STTC, AMHC, AMH, ICL and ICPL hold shares directly or indirectly in Indosat and KPPU does not prove that the companies do not make operational decisions for Indosat. In consequence, this companies can not be assumed to conduct business activity, and it is not Business Actor under Anti-
COPYmonopoly Law.
99. RFI has ignored the evidence from Professor Hikmahanto. Its
failure in considering evidence shows the RFI is partial.
100. The conduct of equalizing the two different concepts of “activity”
and “impact” in RFI is distorting an actual definition of Article
1(5) of the Law and it is unfairly extended the jurisdiction scope of
KPPU.
101. The Item (A) (2) of LPP refers to consideration of (c) of the Law
and it emphasizes that “anyone who perform business in Indonesia
must stay in healthy and fair competition nature” (enhanced to
emphasis). The reference “to perform actual business in
Indonesia” has supported the interpretation of STT, and those of
KPPU to the term of “business actor”.
102. The term “to perform business in Indonesia”, is similar to
“performs activity in … Indonesia”, it requires a positive
involvement in business/activity in Indonesia. The two concepts is
narrower than those offered by KPPU on “activity that impacted
competition nature in Indonesia.”
103. In Indonesian law interpretation, there is only one member of
KPPU, Dr. Ir. Benny Pasaribu that seems to consider the evidence
in the case document of KPPU:
COPY “I do not find any evidence that Reported Party I to
Reported Party IX are business actors as referred to Article 1 item 5 of the Law No.5/1999. The fact is, The Reported Parties are corporate bodies that are founded and domiciled not in the territorial jurisdiction of the Republic of Indonesia. Several Reported Parties also do not perform business activity or business transaction in the area of cellular telecommunication in Indonesia. Although Reported Party VI and Reported Party VII own shares in PT. Indosat and Reported Party IX owns shares in PT. Telkomsel, they are improvable to conduct transaction of cellular telecommunication goods and/or service in Indonesia. The shareholders are improvable to conduct and/or take cellular business decision. The fact, its market also differs: stock exchange activities in capita market and cellular business in goods and service market – often called also as “real sector”. There are also fact that board of commissioner and board of director of PT. Telkomsel and PT. Indosat that conduct operational activity and take decision on cellular telecommunications business in Indonesia, not shareholder or the Reported Parties.”
104. Further, there is no international law principle that permitted KPPU
to use extraterritorial jurisdiction to STT. As it is mentioned by
Professor Hikmahanto in his second expert statement:
The Report
of expert,
Professor
Hikmahant
o, page 2
In international law theory, there are 4 principles in applying a jurisdiction; first, territorial jurisdiction; second, personal jurisdiction; third, jurisdiction according to the protective principle; and fourth, jurisdiction according to the universal principle.
105. KPPU cannot use territorial jurisdiction because Indonesian law
does not admit single economic entity. In whatever case, there is
no evidence that Temasek Business Group is a single economic
entity. The previous evidence indicates that so-called companies in
The Second
expert
Statement
of
COPYTemasek Business Group have their own management separately
one to another and competed one among them.
Professor
Hikmahant
o
106.
KPPU also cannot use personal jurisdiction because STT is not founded
under Indonesian law and not an Indonesia entity. KPPU can not use
universal jurisdiction because the jurisdiction is only enforced to
international crime such as hijacking and humanity crime. It cannot to
enforce jurisdiction to protect the interests of a country because the
enforcement must be based on the suspected action conducted
intentionally certain targeted country. Furthermore, this action must
results remarkable impacts to certain targeted country. In this case,
KPPU can not show any single evidence showing that STT (or other
Reported Parties) intentionally conduct to cause remarkable impacts to
Indonesia as a country.
B. STT does not have “Majority Shares”
107. The objective of allegation 1 is that Temasek owns “majority
share” in 2 providers of telecommunication services in Indonesia
through its subsidiaries. It is incorrect.
(i) KPPU equalizes the term “Minority” shareholder and
“Majority” shareholder
108. The actual understanding of “majority share” is an ownership more
than 50% of shares in a company. In general, the words ‘majority’
and ‘minority’ are exclusive. It means one only can hold majority
ownership of share. In the expert statement, exhibited in the
The expert
Statement
of
Professor
COPYdefense of STT, Professor Hikmahanto emphasizes that in the Law
No. 19 /2003 on State-owned Enterprise (“The Law of BUMN”)
and the Law No. 8/1995 on capital market, the two laws define the
term of majority shareholder and they could be a best guidance in
determining the definition of the term in this context.
Hikmahant
o page 2,
item 4(c)
exhibited
as First
STT
Statement
109. The elucidation of Article 15 (2) of the Law No.8/1995 on Capita
Market defines “majority shareholder” as:
“Majority share is shareholder that has more than 50% (fifty percent) of subscribed and paid-up capital.”
The expert
Statement
of
Professor
Hikmahant
o page 2,
item 4(b)
exhibited
as First
STT
Statement
110. Article 1 (1) of the Law of BUMN mentions as follows:
“1. “State-owned Enterprise, hereinafter referred to as BUMN, is a corporate with its capital owned by state through direct equity of dissociated national wealth.”.
The expert
Statement
of
Professor
Hikmahant
o page 2,
item 4(c)
exhibited
as First
STT
Statement
COPY111. Article 1 (2) of the Law of BUMN mentions as follows:
“2. “Company, hereinafter referred to as Persero, is a limited company of BUMN with its capital divided into shares owned in whole or at least 51 % (fifty percent) by the Republic of Indonesia aiming at having profits.”
The expert
Statement
of
Professor
Hikmahant
o page 2,
item 4(b)
exhibited
as First
STT
Statement
(ii) “Grammatical” misinterpretation of KPPU toward Article 27
112. The first “interpretation” of KPPU, a grammatical interpretation. It
consults two different dictionaries but only the second dictionary,
Black’s Law Dictionary provides a term of “majority shareholder”:
“shareholder that has or controls more than half of company share”
LPL,
Analysis,
item 10
113. STT as a whole agrees with this definition due to its consistency
with the interpretation rules in Indonesian Civil Code. It is defined
that if a meaning of a statement is clear, then the simple and clear
meaning that must be applied. As it is mentioned in the second
expert statement of Professor Hikmahanto:
Furthermore, under the regulation of interpretation (Article 1342 of Civil Codes), if the intention of a statement is clear, then
LPL,
Analysis ,
item 18
The Second
expert
COPYthe simple and generally accepted interpretation shall be applied. In this case, the meaning of “majority” is clear, consequently it has to be applied in which its meaning “more than 50%”. Therefore, “majority shareholder” must be interpreted as a shareholder of more than 50%.
Statement
of
Professor
Hikmahant
o
114. Nevertheless, RFI refuses the approach arguing that there is
“different type of share”. It is possible that someone may controls
more than 50% of voting right in a company without controlling
more than a half of the same shares. RFI does not cite any
evidence that indicate that Temasek controls more than 50% voting
right either in Telkomsel or Indosat. The content of RFI in
whatever reason is illogical. The definition wants to say that
Temasek is able to control voting rights of other important
shareholders such as the Government of Indonesia.
115. Although someone approaches the definition of “majority
shareholder” in voting rights is not in the sense of amount of
shares, it must be noted that STT remains not to hold majority
either in voting rights or in a number of shares in Indosat. Thus,
any definition applied, STT remains to be under 50%. STT is only
an indirect shareholder and has no voting rights in Indosat.
116. RFI ignores the fact that mostly used words in Article 27 do not
prohibit a shareholder to increase its level of “domination”. Article
27 mentions majority ownership. Even when lawmaker refers to
controlling, the lawmaker has already conducted using simple
COPYlanguage, for example in Article 17 and 18 of Anti-monopoly Law.
CHAPTER IV
PROHIBITED ACTIVITIES
First Part
Monopoly
Article 17
(1) Business actor is prohibited to conduct a domination to the production and/or goods marketing and/or service that can result the creation of monopolistic practices and/or unfair business competition.
(2) Business actor is suspected or assumed to conduct domination over the production and/or marketing of goods and/or service as referred to in (1) if:
a. the relevant goods and/or service do not have their substitution; or
b. causes entry barrier to other business actors in the competition of common goods and/or service; or
c. One business actor or one group of business actor control more than 50% (fifty percents) of market shares in one type and/or certain of goods and/or services.
Part Two
Monopsony
COPYArticle 18
(1) Business actor is prohibited to control acceptance supply or become a single buyer to the goods and/ or service in the relevant market that possible to cause the creation of monopolistic practices and/or unfair business competition.
d. Business actor is suspected or assumed to control acceptance supply or to become a single buyer as referred to in (1) if one business actor or one group of business actor control more than 50% (fifty percents) of market shares in one type and/or certain of goods and/or services.
(iii) “Disorganized” interpretation of KPPU toward Article 27
117. The “systematic interpretation” of KPPU toward Article 27 has
created ambiguity to the concept of ‘majority’ that is able to
influence decision making in a company. For example, in its
“systematic interpretation”, KPPU tells that a share ownership of
25% is able to consider as share majority ownership because with
such an ownership it is able to veto certain decisions. This is
absolutely incorrect. It does not mean that if one party has ability
to restraint certain decision making in a company, the party is
considered to be a “majority shareholder” in company.
118. Further, if the statements of KPPU in paragraph 18 and 29 of RFI
are applied, it will come to illogical conclusion with the following
reasons:
COPY (a) In the case of Telkomsel, Sing Tel (that only has indirect
ownership for 35% in Telkomsel) will be considered a “control holder” in Telkomsel. If it is true, the “control holder” shall be Telkom and Sing Tel due to their positon as “majority shareholders” in Telkomsel.
(b) In the case of Indosat, KPPU is negligence to reckon Dwiwarna shares as the ownership of the Government of Indonesia in which the shares give the Government of Indonesia rights to veto certain things that require special majority.
119. Although in certain level the whole shareholders are possible to be
influencing shareholders in a company by performing their voting
rights, such an ‘influence’ is not understood as ‘majority share’.
Each of this concept is different, and the regulation will use one of
the this words to submit a different thing. RFI intentionally brings
the word “majority share” to an ambiguous meaning that make
KPPU ignores the actual meaning of a rule.
120. The second expert statement of Professor Hikmahanto is:
“Such an interpretation cannot be implemented in this case because in PT Indosat, there is one special share called dwiwarna shares. It is indicating that the owner of the shares. If the biggest shareholder is majority share (controlling shareholder), it cannot be stated that the Government of Indonesia as the shareholder of dwiwarna shares is the biggest shareholder/majority shareholder.”
The Second
expert
Statement
of
Professor
Hikmahant
o
COPY
(iv) Derivative Interpretation
121. KPPU admits by itself that such an interpretation is unhelpful in
defining the term “majority share”.
(v) The teleological misinterpretation
122. The interpretation of teleology of Article 27, as it meant by KPPU
in paragraph 22 to 23 of LPL, is to avoid a concentration of
economic power in a single entity. The test of power concentration
is in paragraph 24 of LPL:
“Concentration of economic power, as it referred to number 2 above, is implemented through the centralization of economic decision making in the hand of one particular business actor. A decision can be effectively obtained if there is a real control owned by a business actor in a company. The company will implement the decisions. In the context of Article 27 of the Law No.5/1999, such a company has more than 50 % of market shares so that a control conducted by a business in it will affect to the relevant market.”
RFI,
Analysis
123. It is seen from paragraph 47 of RFI that KPPU has already
concluded that Temasek positively control Indosat on the basis of
(i) Temasek’s ownership of 41.94% Indosat’s shares; (ii) the rights
of Temasek to nominate directors and commissioners; and (iii) the
authority of Temasek to specify the corporate policy of Indosat. It
is to be informed that the conclusion of KPPU above is wrong and
groundless for the following reasons:
COPY124. In accordance with the statement of KPPU in LPL, the ownership
of more than 50% voting means give the owner a control or in
KPPU’s word, an active control. STT (and Temasek) does not have
more than 50% voting right in Indosat. STT only has 31% of
indirect ownership in Indosat. Thereby, it is incorrect if KPPU said
that Temasek has 41.94% of shares in Indosat. Even if it is true that
Temasek has 41.94% of ownership in Indosat (that is not true), the
assumed ownership of Temasek is still below 50%.
125. Further, it is untrue to say that Temasek has rights to nominate
director and commissioner in Indosat. Under the Statutes of
Indosat, the only Indosat’s shareholders with voting right that may
nominate Indosat’s directors or commissioners. Consequently,
neither Temasek nor STT can nominate directors or
commissioners. Out of 10 Reported Parties there are ICL and ICPL
that have right to nominate directors and commissioner in their
capacity as direct shareholders in Indosat. Nevertheless, the right to
nominate director or commissioner is also available for every
Indosat shareholder Indosat that meet minimum requirement of
total shares on hand but it is not exclusively valid to ICL and ICPL.
The whole share ownership of ICL and ICPL is less than 50%,
therefore their votes can be defeated and have no ability to act
unilaterally.
126. KPPU really ignores to consider that the Government of Indonesia
(as another and significant shareholder in Indosat) has right to
nominate director and commissioner in board of director and
commissioner. The Government of Indonesia, as the single and
special holder of Indosat’s dwiwarna shares, has not only to
COPYnominate but also to appoint at least one board of director and
commissioner of Indosat. Further, the current majority of Indosat
board of director is nominated by the Government of Indonesia
(including the managing director). The Government of Indonesia is
able to use its extensive veto right to the things that need special
majority. The Government of Indonesia also has ability, in certain
level, to perform a significant control to Indosat (refer to the
opinion of KPPU on the term controlling), while STT (with its
indirect ownership of 31% shares) cannot act unilaterally to
determine corporate policy of Indosat.
127. The second expert statement of Professor Hikmahanto states that
there is no evidence to be proved concerning the concentration of
economic power.
”I do not agree with teleological interpretation in the Report because the concentration of economy power cannot be implemented to determine who the majority shareholder is according to Article 27. The economic power concentration differs in determining who the majority shareholder is. ... Further, I do not find single evidence in the Report on concentration of economy power in STT.”
The Second
expert
Statement
of
Professor
Hikmahant
o
(vi) The confidence of KPPU over an irrelevant law
128. The first regulation cited by KPPU is the elucidation of Article 10
(4) of the Law No.19 /2003. It actually supports the opinion that it
is different between controlling concepts and ownership of
majority share. The sentences cited by KPPU are:
“The understanding of commissioner adhere in the sense of human and of corporate, both known as commissioner member and commissioner council respectively. What is meant by certain shareholder is a controlling shareholder or majority shareholder of a
LPL,
Analysis,
COPYlimited, public and the whole shareholders of limited closed company”
Point 26
129. It is not necessary to use the both phrase “controlling shareholder”
and “majority shareholder” if they are same in meaning. It seems
that the regulation gives broader meaning for the phrase of
majority shareholder by placing specifically majority shareholder
and controlling shareholder into one concept. Nevertheless, they
are different concept in reality, and Article 27 is limited only to
relate to ”majority shareholder ” and not to “controlling
shareholder ”.
130. Article 1 (1) and Article 1 (2) of the Law No. 19 /2003 on State-
owned Enterprise also further indicates that “majority” mean more
than 50%. As it is expressed by Professor Hikmahanto in his first
and second expert statements :
The Second
Expert
Statement
of
Professor
Hikmahant
o
“The Law No.19 /2003 on State-owned Enterprise (“the Law of BUMN”) using no term ”majority share”. Yet, it is found in the Law of BUMN an interpretable similar term, “a large part of”. The term “a large part of” can be found in Article 1 (1) and (2) of the Law of BUMN.
Article 1 (1) states as follow: “State-owned Enterprise, hereinafter referred to as BUMN, is a corporate with its capital owned by state through direct equity of dissociated national wealth.”
Meanwhile Article 1 (2) states as follow: “Company, hereinafter referred to as Persero, is a limited company of BUMN with its capital divided into shares owned in whole or at least 51 % (fifty percent) by the Republic of Indonesia aiming at having profits.” ------------------------------------------------------------------ Based on aforementioned explanation, the conclusion I can
COPYtake on meaning of the phrase “have majority share” in Article 27 is to have more than 50% (fifty percent) of share of subscribed and paid-up capital of a company.”
131. Two other regulations cited by KPPU is BAPEPAM Regulation
No. IX.H.1 and Central Bank (Indonesia Bank) Regulation No.
8/16/PBI/2006 that define specifically ‘controller shareholder’
(both definition are little bit different), and not define ‘majority
shareholder’. This not at all relevant. The irrelevant law cited by
KPPU is described in the second expert statement of Professor
Hikmahanto:
”9. Do you agree with Report that refer to BAPEPAM Regulation No.
IX.H.1 (item 28) in identifying the meaning of majority share?
I disagree with that. The BAPEPAM Regulation No. IX.H.1
to define meaning of “majority share” particularly
formulates the meaning of “controlling party” in public
company in the sense of taking over of public company. The
meaning of “have majority share” as referred to Article 27
differ from the meaning of “the party of controller”.
Therefore, BAPEPAM Regulation No. IX.H.1 is not
relevant to be implemented in finding the meaning of
”majority share”.
10. Do you agree with the Report that refers to Central Bank
(Indonesia Bank) Regulation No.8/16/PBI/2006 (item 29) in
identifying the meaning of majority share?
As it is mentioned above, the regulation defines meaning of
the term ”controller shareholder” differ from meaning of the
term ”have majority share” as it is elaborated in Article 27
of Competition Law.
LPL,
Analysis ,
item 28 to
29
The Second
Expert
Statement
of
Professor
Hikmahant
o
COPY132. RFI states that there is no the Laws and regulations that define
majority shareholder. It is untrue. The Law No. 8 /1995, shown by
Professor Hikmahanto, explains what the meaning (of) “majority
share” is?
“The Law No. 8 /1995 on Capital market (“the Law on Capital market”)
The elucidation of Article 15 paragraphs (2) of the Law on Capital market states that “share majority” is:
“Share majority is shareholder that has more than 50% (fifty percents) of subscribed and paid-up capital of a company.”
Based on the elucidation of Capital market Law, mentioned above, it can be interpreted that “have majority share” to have more than 50% (fifty percent)of subscribed and paid-up capital of a company.”
LPL,
Analysis,
item 27
(vii) The misapplication of foreign law and regulation by KPPU
133. Concerning merger regulation, the references used in RFI are the
laws of European Union (“EU”), UK (“UK”) and the United States
(”US”) that discuss about share acquisition. It is different with the
way KPPU enforce Article 27, in this case, to punish the existing
shareholders.
134. No single law regulation in the foreign law cited by in RFI defines
“majority shares. It is surprisingly that KPPU deviate the foreign
law in its effort to bias the actual meaning in Indonesian laws.
135. EC Merger Regulation cited by KPPU, (a basis of UK Merger
Regulation) for example, defines ‘concentration’ and not majority
LPL,
Analysis,
COPYownership.
Paragraph
30
“Without lessen the intention of Article 4 (5) and Article 22, the Regulation goes into effect to all concentrations in a sense of community dimension as referred to in this Article.”
136. A concentration is defined in Article 3 of EC Merger Regulation as:
“A concentration is assumed happened where there is change of defense control as consequence of:
(a) merger from two or more independent and previous effort or part of effort; or
(b) Acquisition, that conducted by one people or more that has controlled at least one effort, or by one effort or more, either by effect purchasing or asset, by contract or by different way, with direct or indirect domination from all or some of a or more other effort.”
137. It is absolutely different with the ownership concept of ‘majority
share’. It discusses a merger or taking over rather than on existing
ownership and it is measured by “controlling” and not by
’majority’ ownership.
138. Part 7 of Clayton Act in United States, another regulations cited by
KPPU, is very different with Article 27. The regulation states:
COPY “Nobody that conduct commerce or another activity that
influence commerce can acquired , directly or indirectly, all or every part of share or capital other share and nobody that at one's feet of Federal Trade Commission can acquired all or every part of asset owned by others that also conduct commerce or other activity that influence commerce, that in line with commerce or activity and giving influence in any country part, effect of acquisition are lessening competition in substantial, or tend to result monopolies.”
LPL,
Analysis,
item 41
139. Once again, there are two important differences. First, Clayton Act
discusses on share acquisition, and not existing ownership. Second,
Clayton Act uses the phrase ‘all or any particular part of share’, a
concept wider than ’majority share’. Concerning this, it is
ridiculous to implement regulations that sounded differently in its
effort to interpret the meaning of Article 27 of Anti-monopoly
Law. And so do all cases that interpret this Law will apply
different testing from the testing of “majority share”. Therefore, it
is irrelevant for the purpose.
140. KPPU shall realize that Article 28 and 29 (in Part IV of the Law
No.5) discuss on merger, consolidation and taking over. Article 27
is found in Part III of the Law No.5 and in relation with the
existing share ownership. Nevertheless, RFI remains to make it
unclear for the actual meaning of “majority”:
”By implementing the concept of “controlling”, KPPU seems to apply Article 28 and 29 of Competition Law that have not be implemented yet, await for the Government Decree to enforce the Articles (Article 28 and 29 of the Competition Law). The Article 28 and 29 will be interpreted differently from Article 27. It can be seen from the following facts : a. Article 27 is put under Part Three entitling “Share
Ownership”, while Article 28 and 29 is put under Part Four entitling “Merger, Acquisition, and Taking Over.”
b. Article 28 and 29 are addressed to anticipate monopolistic
COPYaction that are proved by the fact that government must be informed beforehand on merger of corporate body or share acquisition. Nevertheless, the application of Article 27can be triggered after majority shareholder causes the taking over of more than 50% market share.
Second
Expert
Statement
of
Professor
Hikmahant
o
(viii) KPPU has ignored the facts that the definition of majority
shares has been considered by KPPU and DPR in 2003
141. The Government of Indonesia, in the Divestment Document on
divestment process of Indosat, dated 4 February 2003, conducted
special consideration to Anti-monopoly Law and concluded that:
Divestment
Document
of the
Governme
nt on the
divestment
of Indosat,
in the first
Statement
of STT
Under Anti-monopoly Law No. 5/1999, a majority
ownership in many companies that conduct common
business activity is prohibited. The ownership of STT
I in Indosat through ICL and not a majority
shareholder (less than 50% of the listed Indosat’s
shares). In addition, the ownership of a Singaporean
company in Telkomsel is also less than 50%. Further,
Minister of BUMN is sure that the law prohibits
COPYmonopolistic practices, and not majority ownership
…Telecommunications Industry is arranged tightly and
operators cannot determine policies including on tariff.
(enhanced to emphasis)
142. STT also notes that there is another important document on share
divestment of Indosat in the case document of KPPU, a document
entitling “Government Elucidation in the hearing with DPR’s
Commission” on the share sales.
143. This is a follow-up meeting on Indosat’s shares sale. The date of
the document was 2003. The most importantly is on page 11 that
states:
“Concerning the Law No.5/1999 on the Prohibition of Monopolistic Practice and Unfair Competition, particularly Article 27 and 28 (3), it can be elucidated that STT is not a shareholder of more than 50% of Indosat’s share. While the stipulation on the Taking over in Article 28 (1) of the Law No.5/1999 has not bee regulated in the Government Regulation and Government Decree. Furthermore, the Ministry of BUMN on 23 January 200 has meet the invitation of consultative meeting with the Commission for Supervision of Business Competition (KPPU), and until present KPPU need no further information from the Government/Indosat concerning the divestment f Indosat. Without keeping aside the information above, telecommunication industry is “highly regulated” by the Government.”
The
Elucidation
of
Governme
nt in the
Commissio
n Joined
Meeting of
the House
of
Representa
tives,
available in
the case
document
COPYof KPPU
144. From the citation, it is clear that KPPU is not only knows the
divestment process but also firmly invited to present its opinion
whether the process infringe Article 27 or not. KPPU states that
there is no problem concerning the STT’s interests in Indosat.
Unfortunately, it has not been four years yet, KPPU takes a
different position. It shows that KPPU is inconsistent.
145. It must be noted that the participation of ICL (a subsidiary that
entirely owned by ST Telemedia) in Indosat divestment is also
approved by Indonesia Investment Coordinating Body (BKPM) in
its decision No.14/V/PMA/2003 dated 7 February 2003. By
offending to the decision of the investment at the moment, KPPU
has gone far beyond its authority. As it is expressed by Dr. Ir.
Benny Pasaribu:
“I have a notion that KPPU RI does not have the power or competency to cancel, to take different decision, to take a legal action or to make a policy over the decision that had been taken by the government concerning the divestment of PT. Indosat, through open tender and awarded given to Singapore Technologies Telemedia (STT) in 2002. Because, the initial process of divestment was initiated by Government and the policy was a political decision of Government relating to the financial condition at that time. (Read Article 50 items a and Article 51 of the Law No.5/1999 that regulate the exemption”
Approval
of BKPM
dated 7
February
2003
The
different
opinion
with the
majority
members of
Commissio
n Council
with Benny
Pasaribu
146. By offending the investment of ST Telemedia, under Article 27,
particularly the first statement of the Government of Indonesia
mentioning that Article 27 was infringed, it will create a serious
worry among international investors.
C. There is no evidence of controlling more than 50%
market share
COPY
147. The only evidence given by KPPU about market share is in
paragraph 105 of its analysis part. The followings are the market
shares of Telkomsel and Indosat:
148. The table shows that Indosat has less than 50% of market shares of
cellular telecommunication, and the ownership of STT is possibly
less than that. Due to the position of STT that does not have an
ownership in Telkom and/or Telkomsel, the further analysis
concerning STT does not need to be done. It is because STT cannot
control more than 50% of the cellular telecommunication market
unilaterally.
COPY
D. KPPU does not find an evidence of dominant position
abuse
149. Professor Hikmahanto states in his first expert statement that is
presented along with the first Statement of STT that it is not an
infringement of the Law of Anti-monopoly simply because of its
dominant position resulted from the ownership of several
companies. The abuse of dominant position that causes an
infringement of the Anti-monopoly Law. KPPU has ignored to
consider such a condition.
The First Report of Expert Opinion, Prof. Hikmahanto, page 7, paragraph 1, in the First Statement of STT
150. According to Professor Hikmahanto, Article 27 (a) of the Anti-
monopoly Law shall be read on the basis of Rule of Reason of
Article 27 (a) of Anti-monopoly Law is a part of Dominant
Position and in this case; Article 27 (a) of Anti-monopoly Law
must be read together with specific abuse of Dominant Position
prohibited by Article 25 of Anti-monopoly Law. Wide perspective
reading of Article 27 (a) of Anti-monopoly Law that the existence
of Dominant Position merely breaking the law lead to
misinterpretation an ambiguity of Article 25 of Anti-monopoly
Law because Article 25 of Anti-monopoly Law enforced only if
Dominant Position is abused.
The First Report of Expert Opinion, Prof. Hikmahanto, page 8, paragraph 1, in the First Statement of STT
151. Therefore, KPPU shall prove its allegations that STT has obviously
utilized its ownership to lessen a level of competition in the
market. Majority ownership itself is not an infringement to the
Law. KPPU shall prove the existence of dominant position abuse.
KPPU must also prove the causality between share ownership of
STT and allegation of lessening competition. The misused of
dominant position could be seen as infringement. It is stated that
KPPU has not proved this case yet.
152. Besides, the mandate of KPPU is only to investigate to the abuse of
dominant position and not the existence of dominant position itself.
The First
Report of
Expert
COPYOpinion,
Prof.
Hikmahant
o, page 9 to
10in the
first
Statement
of STT
(a) Article 4 of the Presidential Decree No. 75 /1999, a legal regulation that define mission of KPPU. It is stated that the tasks of KPPU is to conduct an assessment whether it abuses dominant position or not, as it regulated by Article 25 to Article 28 of the Anti-monopoly Law .
Presidentia
l decree
number 75
year 1999,
item 4, in
the First
Statement
of STT
(b) Article 1 (9) of KPPU Regulation No. 1/2006, that arrange the Procedures of Case Handling in KPPU, states that ”An infringement is an agreement and/or activity of dominant position abuse that cause monopoly practice and/or unfair competition.”
the
regulation
of KPPU
No.1/ 2006,
Article 1
(9), in the
first
KPPU’s
statement
KPPU -1
153 The allegation of abuse in RFI is only Allegation 2 and Allegation
3, but the two allegations are concerning the Telkomsel policy of
price structure. There is no allegation of abuse to Indosat as well
its shareholders. With the absence of the allegation, there is no
infringement to Article 27(a) of the Anti-monopoly Law.
Therefore, there is no basis fro KPPU to follow up the
investigation.
COPY
VII. ECONOMIC ANALYSIS AND FINANCE
154. In this part we will discuss economic analysis and finance of
KPPU and then we have a notion that:
(a) The definition of market by KPU is incorrect. (b) Competing Market. (c)
(i) The BTS Investment is not an indication of competition level in the market
(ii) Price charged by operator is a competitive price (iii) The increase of concentration is not caused by STT (iv) STT does not enjoy the expanding of market power. (v) KPPU ignores to prove that Indosat and Telkomsel are
competed each other. (d) The allegation of abuse by Telkomsel is not related to STT (e) The calculation of KPPU on consumer loss is untrue.
A. The Wrong Definition of Market by KPPU.
(i) KPPU applies wrong definition on Market
155. RFI concludes wrongly that product market shall be limited to
GSM, excluded CDMA (wireless fixed) or limited access. The
geographical market shall be defined as the entire area all over
Indonesia.
.
LPL,
Analysis,
Part IV,
Paragraph
6 to 16
(market
product)
and 17 to
21
(Geographi
cal market)
COPY
156. RFI ignores clear expert statement that geographical market is
defined correctly as Indonesia and product market is covering
FWA service. In a developing country like Indonesia, wireless and
FWA is actually substituted each other. The expert statement is
available in Spectrum Report presented by STT, the Study of CSE
is presented by AMH and the Analysis Study presented by
Temasek. KPPU does not discuss the single reports in coming to
the conclusion. KPPU comes to its conclusion that market shall be
treated separately.
The report
AMH,
Paragraph
65 to 77;
Paragraph
2.1 the
First
Statement
of STT
157. In checking through the case document of KPPU, STT also obtains
a report from Institute of Economic and Social Research, Faculty
of Economic University of Indonesia (“LPEM Study”). The study
of LPEM is also used by KPPU in other part of LPL.
158. Nevertheless, KPPU does not mention the fact that Report of
LPEM also finds an existence of competition between technology
CDMA and GSM, and the two products are substituted each other.
We cited and underlined the relevant parts of the LPEM Report of
LPEM as follow:
“Market structure in this industry is also determined by a platform used. An old operator like TELKOM develops TelkomFlexi that based on CDMA and INDOSAT with StarOne. Thereby, in cellular operator industry, CDMA and GSM competing each other to capture consumer. Such competition is called competition for market that is followed then with competition in the market. It means, determining the most used platform and then capture
The report
of LPEM
Chapter 2,
paragraph
2.1 in the
case
COPYconsumers as many as possible.
Document
of KPPU
159. The opinion is also confirmed by the team of Follow- up
Investigation of KPPU to Mr.Mas Wigrantoro from
Telecommunication Community (Masyarakat Telekomunikasi):
28. Question: In your opinion, are FWA and GSM competitor?
Answer: Yes, within an area code. It is inconsistent. How can be FWA mobile?”
The official
report of
Investigatio
n to Mas
Wigrantor
o date 25
September
2007
KPPU’s
case
document
160.
Professor Hikmahanto states in his first expert statement:
”In determining relevant market, KPPU must conduct evidence based and logical analysis. Under international best practices, if KPPU is wrong in defining relevant market, then its decision can be revoked.”
161. RFI has made mistake in defining market. It is defined on baseless
evidence. It is a severe fault because it influences entire process of
investigation.
COPY
(ii) KPPU has calculated wrong market share
162. If the market does not define precisely, the market share calculated
to market player will also be different.
163. There are some references for calculating market shares, and it
varies along with the product (for example CDMA/GSM),
geography and set of measurement (such as revenue/a number of
customers).
164. As it is explained above, STT does not have any control or
ownership to Telkom and/or Telkomsel, that is why calculating any
part of Telkomsel’s market shares to STAT is incorrect.
165. It is incorrect to calculate market shares of STAT to Temasek for
instance, since Temasek has no influence in any form in the way
ST manage its indirect investment in Indosat.
(iii) KPPU only takes 3 Operators in it Analysis
166. Finally, it must be noted that KPPU only calculate market shares of
three operator, reckon market share from 3 operators, Telkomsel,
Indosat and Excelcomindo:
The RFI,
Analysis,
Paragraph
COPY 105
The RFI,
Analysis ,
item 105
167. Nevertheless, according to Spectrum Associates there are nine
operators in Indonesian market:
“The number of cellular telephone in Indonesian market is bigger than the newly established and equalized regional market. The operators are (written in descending order of consumer market shares) Telkomsel, Indosat, Excelcomindo, TelkomFlexi, Mobile 8, Bakrie, StarOne, Hutchison 3 and NTS (used to be Lippo).”
The Report
of Case
Associates,
Paragraph
2.2, in the
First
Statement
of STT
168. It is higher than other regional market:
COPY
The Report
of Case
Associates,
Paragraph
2.2, in the
First
Statement
of STT
B. The Competitive Market
169. RFI develops its analysis, in part B of Analysis, on the basis of the
fact that cellular communication market in Indonesia in reality is
not competitive.
170. In the following sub heading, C to G, we discuss some facts and
arguments cited by KPPU to support its assumption. We also
emphasize a number of indicators that miscalculated by KPPU.
They are about to conclude that relevant market, even if it is
limited to cellular phone, is very competitive.
C. BTS Investment is not an indicator of competition level
in the market
171. RFI concludes that Indosat’s investment in BTS is not as
aggressive as its competitors. KPPU observes the data until the
year of 2006 and conclude:
“Based on the above data, the growth of Indosat BTS is sluggish compare to its competitor. Actually, Indosat is in the closest position to a dominant player. The sluggish growth of
The RFI,
Analysis,
COPYthe closest competitor had made dominant player optimize its market power.
item 96
172. There are important problems regarding this argumentation:
(i) The number of BTS station is not automatically a best indicator of competition; and
(ii) It is untrue to say that Indosat investment in BTS is not as aggressive as its competitors.
(i) The number of BTS station is not automatically a best
indicator of competition
173. Firstly, it is not clear whether a number of BTS stations is a
indication of competition in market. Finally, customer usually
more interests in service level from an operator than a number of
its BTS stations.
174. The analysis in Spectrum Report displays a number of competition
indicators and they are compared with the regional reference in
order to determine whether the market is competitive or not. These
portions are also explained in the First Statement of STT. None of
the evidence is discussed by KPPU.
175. First, there are some mobile telephone operators with significant
market share (more than 1%) in Indonesia. The neighboring
countries that have 3 to 6 operators with significant market shares,
Indonesia has 9 and 6 of them have more than 5% market shares.
Spectrum
Report ,
Paragraph
2.2, The
First
Statement
of STAT
176. Market power concentration between two most topmost operators
are not different significantly with other regional markets. In China
and Philippine, two most topmost operators control 96% and 95%
of market shares each. In Indonesia, the two most topmost
operators enjoy only 75% market shares. Therefore, there is
Spectrum
Report ,
Paragraph
2.2, The
First
COPYnothing special concerning industrial structure or distribution of
market shares between market leading operators. Industrial
structure does not relate at all to share ownership.
Statement
of STAT
177. There is no evidence that Indonesian operators conducts “price
increase”, a classic abuse from market force that permit operators
to enjoy advantage above normal advantage. A good way to
measure price increase is by identify percentage from the average
of earnings that expended by Indonesia consumers in mobile
telephone service. This condition can be measured with ratio
Average Revenue per User (“ARPU”) to Gross Domestic Product
(“GDP”) per capita. In an analysis to India, Bangladesh, Chinese,
Indonesia, Philippine, Thailand and Malaysia by Merrill Lynch in
2007, ARPU to GDP per capita from India is the very top at 17%
while Indonesia only expends 7% from GDP per capita they in
mobile telephone shop. Growing low comparison ARPU in
percentage to GDP that means consumers do not expend more
compared to to their earnings. Consumers Indonesia so accept
advantages from competition in [the] market as it is shown in
numbers above.
Spectrum
Report ,
Paragraph
2.2, The
First
Statement
of STAT
178. According to Spectrum, since 2002, Indonesia market has sprang
up with significant from 11 million customers become 66 million
customers. Compared to other markets by penetration level of a
similar nature, Indonesia market has grown in line with or faster
than markets is, although has been required from operators in
Indonesia to extend network in more islands / in all Indonesia. This
condition means that operators in Indonesia have been in
aggressive develop market. It’s explained that Indonesia market
operates in competitive way.
179. Indonesia has sprung up quicker compared to other market which
was in growth step in common. This condition explains that mobile
telephone operators in Indonesia have been in aggressive
Spectrum
Report ,
Paragraph
COPYdeveloping their position in market compared to operators in other
markets. Speed of market growth also makes old player fact less
important – customer amount that has been owned by an operator
less important with obtainable new customer amount by operator in
market that expands.
2.2, The
First
Statement
of STAT
180. Finally, if monopolies exist, not will happen that consumer will
often change cellular operator on a regular basis. Nevertheless, in
Indonesia, commutation level is the very top (even till fold
duplicate in comparison with country by next level of the very top
commutation) in comparison with 51 countries around the world,
that mean consumer in Indonesia often change operator:-
181. Enclosure 10: Churn rate monthly in markets that just emerge,
Kuartal 1 Tahun 2007 (%)
8 .6 %
4 .1 % 4 .0 % 3 .7 %3 .1 % 2 .9 % 2 .7 %
2 .1 %
Indo
nesi
a
Pak
ista
n
Indi
a
Mal
aysi
a
Phili
ppin
es
Thai
land
Chi
na
Bang
lade
sh
Mon
thly
Chu
rn
Source: Merrill Lynch
Spectrum
Report ,
Paragraph
2.2, The
First
Statement
of STAT
182. Furthermore, for period after 2002 (2002 is year where ST
Telemedia takes over first ownership in Indosat) churn rate
Indonesia quicker level are compared to its other country in
regional, that growing clarify that consumer has choice among
operators and they are execute its choice:
COPY183.
Enclosure 11: Churn rate monthly in markets that just emerge, 2001-2007
2007
0%
2%
4%
6%
8%
10%
2001 2002 2003 2004 2005 2006 2007
Year
Mon
thly
chu
rn ra
te %
Indonesia
Malaysia
India
Philippines
Thailand
China
Pakistan
source: Merrill Lynch, 2005, 2007
Report
Spectrum,
paragraph
2.8
184. All indicators that cited above discussed how operators struggling
to get customer. It was very surprising when all of those indicators
haven’t considered by KPPU, which even more interested to use
investment at BTS as [the] indication from competition level.
(ii) The Decision of Indosat Investment referring to the
investment of BTS is valid and sensible
185. Nevertheless, data expresses as follows:
COPY
The RFI,
Analysis,
Paragraph
93
186. It's clear here that a number of invested BTS of Indosat increased
from 2000 to 2006, from 1,357 to 7.221. In an absolute term, the
growth is more than 5 times. In such condition it is hard to say that
the investment is low.
187. Further, there is a strong business reason for not extending network
carelessly. BTS is a huge investment and it causes company’s
profit reduction due to its depreciation. In one side, the directive
question of KPPU is a criticism to Indosat for its low profit and on
the other hand KPPU criticizes it for its low investment. In reality,
high investment is paid by low profit in the short-term. It is stated
by Mr.Johnny Swandi Sjam in the Official Report of Follow-Up
Investigation on 14 September 2007:
”25. Question: Why did Return on Equity of Indosat decrease in 2006?
Answer: In 2006, we were developing, there was a depreciation cost that reduces net income, but after finishing the integration, the net incomes increased. The decrease is caused by high depreciation cost caused by integration.”
The official
report of
Follow-Up
Investigatio
n to
Johnny
Swandi
Sjam dated
COPY
14
September
2007 in the
case KPPU
188. The analysis of RFI is insufficient due to the ignorance that
Indosat is planning to invest 3.500 BTS in 2007:
”19. Question: How is the method of BTS
procurement Indosat?
Answer: Up to 2006, the program implemented
is separated programs; most of them are turn-
key. Usually, the building of BTS is performed
by vendor and the radio is installed by big
vendors such as Siemens, Alcatel, Ericsson, etc.
Considering that we have been developing
huge networks (around 3,500 BTSs) since
2007, we decided to perform some of the works
under turn-key project.”
The official
report of
Follow-Up
Investigatio
n of
Johnny
Swandi
Sjam dated
14
September
2007 in the
case
document
KPPU
189. Regarding the criticism of KPPU that Indosat does not have
enough BTS to compete, it must be noted that Indosat has
already had 7,221 BTS and its competitors, Hutchison one of
them, thought that they are able to compete by targeting to
have 2,100 BTS in 2011:-
”33 Question: How many BTS PT Hutchison CP
COPYTelecommunications has been built?
Answer: Around 1,000 BTS. We have built them
since the end of 2005 and we are targeting 2,100
BTS until 2011.”
190. All evidences accepted by KPPU in step of its Follow-Up
Investigation are not reflected in LPL. If the fact is included,
description will be more well-balanced that Indosat has
invested much for BTS but it is equilibrated by the investment
for gaining more profit. Indosat also has planned to expand
greatly in 2007. The addition of 3,500 BTS has increased its
network for about 50%. The absence of consideration to the
important evidence has shown that KPPU comes to its
conclusion without considering the proofs.
D. The Price Charged by Operators is competitive price
(i) The basic measurement of KPPU is incorrect.
191. The defense of STT is also harmed by the negligence of KPPU
to present the data sources so that it makes STT hard to verify
and to defend. For instance, there are more than 20 detailed
diagrams in paragraph 56 to 59 in Part V relating to cellular
tariff of the operators but the sources are not mentioned.
Concerning the allegation of monopolistic practices in fixing
high tariff, Telkomsel in particular, it is necessary for STT to
know data sources presented by KPPU. According to STT, the
tariff is not high; KPPU could make mistakes in referring to
the incorrect tariff rate.
The RFI,
Analysis,
Paragraph
56 to 59
192. The prices cited by KPPU are as follows:-
COPY
The RFI,
Paragraph
165
193. The table is an average tariff. Nevertheless, the table is not
reliable to be a comparison because there are two tariff types,
“on-net” and “off-net”. The “on-net” tariff refers to price level
paid by cellular users who perform a call to other cellular users
within the same network. On the contrary, “off-net” tariff
refers to price level paid by cellular users who perform a call
to other network. The basic difference is in a call to other
network in which interconnection fee shall be paid.
Interconnection fee is arranged tightly by government, and
service providers have less authority on this. Thus, if
significant comparison is going to be made, the “on-net” tariff
is suitable. Furthermore, there are various discount packages
offered by service providers. To comprehend the price paid by
consumer, the right basic comparison is not based on ”on-net”
tariff but the average of “on-net” tariff paid by customer after
all discounts are calculated.
(ii) The mistake made by KPPU concerning Price Analysis
194. The tables provided by KPPU in paragraph 97 to 101 do not
show whether KPPU compares tariff or price. Tariff is not a
price indicator due to the discount and free minutes call
offered in all tariff packages.
COPY
195. The only fraudulence touched by KPPU referring to the price
is in two following paragraphs:
“In general, the retail price of postpaid increases although its customer also increase significantly. From the viewpoint of economic scale, a high margin growth belongs to operators. It is an interesting phenomenon because it seems that there is no competition to capture consumers through price decrease. If there are competitive companies, each company will try to decrease price as a significant factor to capture consumers from its competitors.”
“According to Price-Leadership Model, a dominant company fixing price while others comes after such a price-fixing. It will happen if the follower companies have no bravery to compete on price because the economic scale is not relatively competitive. Price–Leadership is a form of tacit collusion that looks like a cartel to consumers with the absence of agreement between the two parties and it simply a strategy of a follower company to gain optimum profit by adjusting price with dominant company."
196. It must be attended that in reality there is no basis to tell that
there is no competition in capturing consumers or decreasing
price. The replacement rated cited above shows a competition
to grab customer.
197. The Spectrum Report also submits evidence to the existences
of price competition by comparing wide range of tariff
between prepaid and postpaid segments indicating that the
tariff of Indosat is lower than Telkomsel, even in some cases
more than 50%.
Spectrum
Report,
Paragraph
3.1, the
First
Statement
of STAT
198. There are no evidences submitted by Spectrum that are
considered by KPPU in its report. It clearly shows that the
COPYanalysis of the case is incorrect.
199. The judgment of KPPU is that the choice of Indosat to follow
the price fixed by Telkomsel remains to be a tacit collusion.
Suppose it is true, it has nothing to do with STT. The decision
is from Indosat board of director.
200. In this case, it is only a matter of logic that Indosat cannot
compete with Telkomsel in price without decreasing its profit.
It also strengthens other KPPU’s complaints concerning low
profit of Indosat. Concerning its allegations, KPPU shall be
consistent whether accusing Indosat for imposing high price
(in line with the price of Telkomsel) or for gaining low profit.
KPPU cannot accuse both at the same time.
201. It must be attended further that although the price fixed by Indosat
and Telkomsel is the same, it does not mean that it is an anti
competition behavior. According to Dr Chatib Basri, the Head of
LPEM FE UI, the price uniformity is not concurrently a pricing
indication:
“In a discussion hosted by Centre for Strategic and
International Studies last Thursday, the Head LPEM,
Mr. Chatib Basri, refuses the report that the studies
conducted by his researchers strengthen the
allegation of KPPU to Temasek.
‘Our executive research summary clearly tells that
equation in price pattern fixed by operators is not
always interpreted as an indication of price fixing,’
he said.”
Singapore
Institute of
Internation
al Affairs
Webpage
COPY202. The same opinion suggested by Dr. Chatib Basri in is interview
with Tempo Magazine. He said that the price similarity is only an
indication of competition and not a conclusive evidence anti
competition behavior:
“Chatib explains that similar tariff pattern is not always interpreted as price fixing or collusive result. In the United States, the price fixing independently, unilaterally, and considering consensus parallelism is not assumed as Antitrust. .
Therefore, he affirms that statistic movement of mobile tariff between Telkomsel and Indosat cannot be concluded as cartel of the two companies.
The similar tariff Movement is possible to occurs due to the competition in the industry, so that it shall be seen carefully whether Telkomsel and Indosat formulating cartel tariff in telecommunications industry,” said Chatib in the public discussion entitled “Enforcing Business rule in the Globalization Era: The Case of Telecommunications Sector in Indonesia” in Centre for Strategic and International Studies.
Chatib admit that he does not know why KPPU comes to such a conclusion. “We do not for sure conclude that there is price fixing (or cartel) conducted by both company," he said.”
Article
Tempo,
20 Septemb
er 07
203. STT has also assessed an independent report compiled by Dr Sri
Adiningsih (“Dr Adiningsih”) dated August 2007, in the case
document of KPPU, concluding that although its industrial
structure is benefiting incumbent players, there is no indication of
collusion and price competition:-
“Although many new entries are entering market, the incumbent operator that have dominant position remain to have big market share either in fixed line wireless or cellular because incumbency advantage is going into effect in telecommunication industry in which incumbent has wide network and infrastructure
The Report
of Dr.
Adiningsih,
on page 8
COPYas an advantage. Therefore, it is hard for new entries to compete in the relevant market. Considering the geography and huge population of Indonesia that have not been served by the telecommunication service, it attracts new operators to enter fixed line wireless and cellular market. Low price is a common platform offered by new entries to capture consumers which leads then to the price war. It can be seen from the various advertisements in mass media. The new operator, tight competition makes the service vary, increasing consumers and quality of services. Under such condition, public gain advantages from the new development and competition among operators. It indicates that the market structure of telecommunication in Indonesia is tight oligopoly but price war among operators is possible to occur. The worries to the existence of collusion in this industry are invisible in the market.”
in the
Letter of
AMH
dated 25
September
2007
204. Dr Adiningsih also emphasizes its evidence that in reality there is a
price competition in any level among business actors:-
“In other hand, tariff promotion also conducted by operator, for example PT Exelcomindo Pratama decreasing its tariff for about IDR 149 per 30 second, while Simpati (PT Telkomsel) impose IDR 300 per minute for a call about 23.00 to 07.00. PT Indosat (Mentari) even gives free call from 00.00 to 05.00. It indicates that today, telecommunication industry in fixed wireless network and cellular in Indonesia is in ‘tariff war’ and operators just maximize their network capacities. Consequently, tariff war remains to keep on going until network capacities are fully used (Nathan & Atmira). The recent growth shows intensive tariff war among operators through the offering of various advantages such as free roaming, the same price of inter local and local call, pulse bonus, and others. Compare to the previous condition, tariff war among operators has made the decrease of cellular tariff as it is described in Table 7. The tendency of the decrease of cellular tariff indicate that the competition among cellular operators is growing tightens.”
The Report
of Dr.
Adiningsih,
on page 5
in the
Letter of
AMH
dated 25
September
2007
E. The Development of Concentration
COPY (i) The size of concentration
205. Referring to concentration, KPPU seems to use two different
measurements, Concentration Ratio (“CRn”) and Herfindahl-
Hirschman Index (“HHI”).
The RFI,
analysis,
item 57
206. Therefore, these measurements are not choices due to the same
variable used, market share. CRn is a total of market share
controlled by the ‘n’ top companies. HHI is a square of market
share of all business actors in the industry. In this case, CRn and
HHI actually do not give the real choice of concentration
measurement. The main indication shown by CRn and HHI is
huge market shares.
The RFI,
Analysis
item 58
to59
207. Therefore, as it has been mentioned previously that a big market
share will not automatically show losses. It could be caused by the
characteristic of its industry. The losses arise only if there is
collusion among the actors. In this case, the only loss shown by
HHI is as follows:
“Oligopoly theory, as it is cournot equilibrium, is very consistent only if companies in the market are the same in size which also have the same market power. On the contrary, Price-Leadership Model is very consistent to explain company behavior if there is a dominant company in the market. Other companies are small and have no power to fight against dominant company. Both model is actually compatible to be used in the extreme situation.
In cellular telecommunication industry, every company must have agreement, especially concerning interconnection agreement with other company (competitor). It tends to create collusion in the field in which competition shall occur such as price fixing
The RFI,
Analysis ,
Paragraph
78 to 79
COPY(tariff), marketing, and others.”
208. It must be noted that all judgments of KPPU are based on market
structure. Telkomsel owns the biggest market share and other
companies must sign interconnection agreement. There is a
tendency of collusion. In fact, KPPU does not identify the
evidence collusive behavior.
209. Indosat does not have power to face the reality that Telkomsel
owns the biggest market share. It is a characteristic of an industry
that anytime a party enters an industry; it will do the best to
compete. The same goes for the interconnection agreement. KPPU
seem to argue that Indosat operates in an industry as it mentioned
above and all shareholders have to be responsible to the allegation
of infringement of Anti-monopoly Law by Telkomsel. It is
illogical.
(ii) The increase of concentration
210. KPPU has a notion in its analysis that market concentration have
increased from 2002 to 2006. It is based on the observation of
KPPU that there was an improvement of generated HHI and HHI
(“GHHI“). STT cannot prove the accuracy of HHI and GHHI
measurement conducted by KPPU because the sources are not
mentioned as “data processed“. There are no clues where does the
raw data come from. Although we refer to the numbers provided
by KPPU, it does not mean that we us agree to its accuracy.
The RFI,
Analysis,
item IV,
item 104 to
121.
COPY211.
The argument of KPPU in this matter is available in item 122:
“The values of GHHI that tend to increase annually in the cross ownership period give a conclusion that cross-ownership have concentrated the structure of cellular industry. It is unprofitable to the fair competition. The concentration increases in the oligopoly structure”
The LPL,
Analysis,
Chapter
IV, item
122
212. KPPU states that there is equality in the crossed ownership period
and the increase of GHHI, the crossed ownership has caused the
increase of GHHI. It is illogical. In the same period, the
Government of Indonesia has also ownerships in both companies
and the representatives in Board of commissioners. Consequently,
it is illogical for KPPU (without any evidence as a basis) to suspect
Temasek crossed ownership as a cause of the increase of
competition and not the ownership of the Government of
Indonesia.
213. Because HHI is controlled by market share, then it is seen that the
only player increases its market share at that moment is Telkomsel:
COPY
The LPL,
Analysis ,
Chapter
IV, item
105
214. The HHI is not related to Indosat. The increase of HHI is
controlled fully by the increase of Telkomsel market share. In fact,
the contributions of Indosat to HHI actually decrease from 888 in
2004 to 465 in 2006:
The LPL,
Analysis,
Chapter
IV, Item
109
215. If Indosat itself contribute nothing in the increasing of HHI, the
shareholders cannot be asked to get involved in the increasing of
HHI in by whatever reasons.
216. The most important thing is that KPPU has ignored the fixed
COPYevidences that STT has played insignificant role in Indosat’s main
decisions. The agenda of Indosat is controlled more by board of
director and board of commissioner (See evidence from Mr.Roes
Aryawijaya as cited above). If the illogical conclusion of RFI is
trusted, the Government of Indonesia is the only party to be
responsible.
(iii) The concentration rate is put in a perspective
217. KPPU states that concentrated industry must be placed in its
perspective. When it is compared to the regional countries, the HHI
is not so high:
The Report
of 1CA,
Paragraph
2.3 in the
First
Statement
of AMH
218. In paragraph 112 of LPL, it must be noted that according to the
diagram above, the HHI for Indonesia is 3,337 differs from the one
LPL,
Analysis,
COPYsuggested by KPPU, 4823.73. It is caused by other mistakes done
KPPU in defining market because KPPU only considers 3 service
providers (see above) KPPU will have larger market share each of
them, and the HHI resulted from the square of market share will
express the mistake.
item 112
F. The increasing of Market Power
219. In item 154 to 171, KPPU analyzes the increase of market power
improvement, as it is measured by the increase of EBITDA.
Again, without any elucidation on how the data “is proceeded”,
STT is harmed because STT cannot give opinion concerning the
data provided by KPPU.
220. The first problem is that Indosat is a diversified business in which
Telkomsel and Excelkomindo focus on cellular services. The
EBITDA number of Indosat expresses the EBITDA of all its
businesses namely junction fixed, cellular, wireless junction and
MIDI, while the numbers Telkomsel and Excelkomindo only
express cellular business. As far as this numbers are used as a
comparison, there will no accurate comparison. In this case,
statement of KPPU saying that EBITDA of cellular operators is
always more than 50% is not accurate entirely.
221. The arguments of KPPU can be summarized as follows,
”The high market power that is suspected caused by concentrated structure because cross-ownership can be addressed by some indications. For example the height of the rate of profit margin measured by EBITDA. The high selling price compared to other country, and the difference of the selling price and expenditure cost.”
The RFI,
Analysis,
part IV,
item 154
COPY222. According to KPPU, the operators are getting high EBITDA, they
must t have high profit, and the high profit achievement is
compared to other countries.
223. The mistake of the argument is the assumption of EBITDA as a
good measurement of profit rate. EBITDA is Earning Before
Interest, Tax, Depreciation, and Amortization. In the other hand,
profit refers to earnings after interest, tax, depreciation and
amortization. Finally, profit represents to what is obtained by
company after all expenses are reckoned, whereas EBITDA does
not reckon all expenses.
224. KPPU ignores in reckoning depreciation in stating profit rate.
Indonesia is a big country and many BTS shall be built to provide
sufficient coverage networks. In general, one BTS symbolizes a
very huge investment and the depreciation must be reckoned to
assess the profit rate of a company.
225. The important differentiation between EBITDA and profit has have
been explained in Follow up Investigation of KPPU to Hasnul
Suhaimi, the Managing director of Excelcommindo:
15. Question: What is your opinion about excessive profit caused by the high tariff?
Answer: The cellular industry is growing fast. I am sure that the operator cash flow is still negative and the only operator that has positive cash flow is Telkomsel due to its USD 1.5 billion investment. The cash flow of XL is negative because its investment, minus 3 trillions. In the year of 2007 as an example, the Ebitda of XL is 3.3, while our investment is 6.3 trillions. It is a plan of XL to have long term investment. It is not sweet as it imagine, I wonder why many operators enter cellular market in Indonesia.
Official
Report of
Hasnul
Suhaimi
dated
9 August
2007 in the
case
document
COPYof KPPU
226. The expensive investment of BTS stations has caused negative
cash flow. The profit seems to be plenty if it is seen only from
EBITDA. Such a measurement is misleading because substantial
operating cost invested in BTS is not reckoned and it will be
reckoned by every investor. Excelcomindo clearly states that its
investment ‘is not as good as imagined’, and it proves that the
request of KPPU to have business actor build BTS is not a wise
suggestion. Once again, KPPU has already ignored to attach the
evidences in its LPL.
227. It shall be noted as well that the real measurement on whether
excessive profit shall be based on business income. The business
income is recognized also as ‘super-normal profit’ or profit outside
what are usually expected from a business. In consequence, in
order to measure business income, KPPU has to determine first the
normal rate of return of mobile cell phone operator in Indonesia.
There is no measurement conducted for that.
228. KPPU states in paragraph 162 of RFI:-
”The high values of Ebitda in the cross-ownership period that is always above 50% indicating that business actors in telecommunication service industries have big market power. The market power owned are for creating monopolistic advantages that exceed double than the costs.”
The RFI,
Analysis,
item 162
229. Such a statement is groundless because (i) the EBITDA margin is
based on inconsistent input among business actors, (ii) there is no
reason to state that 50% of the EBITDA margin indicating
“sufficient” market force (iii) there is no measurement of
monopolistic profit (business income) as it is explained above.
COPY230. In consequence, the conclusion of KPPU stating that there is
excessive profit in the mobile cell phone sector in Indonesia
groundless. At least, KPPU ignores to reckon two important
factors, depreciation and normal profit, the two factors reckoned
prior to conclude that business income available in an industry.
G. The allegations of an abuse by “Telkomsel”
231. The item 172 to 189, KPPU discusses market force of Telkomsel
and its abuse allegation. The market force of Telkomsel is seen
from the height of EBITDA (the mistake of this analysis has been
explained above).
232. Initially, we will show that Mr. Roes Aryawijaya in its meeting
with KPPU on 19 July 2007 state that the performance of Indosat is
getting better after the investment of STT in Indosat. Therefore,
Indosat cannot be sacrificed for Telkomsel.
The
Meeting
Report of
the
Ministry of
BUMN on
page 4 of
the case
document
of KPPU
47. Question: Which company performance is better, before or after the purchasing STT in Indosat? Answer: For Ebitda, it was 53% before and 57 % after acquisition. The increase of Ebitda margin is supported also by the technological development of MIDI.
233. Another serious allegation is that Telkomsel has used its market
power for “constraining” its competitors by misusing its bargaining
The RFI,
Analysis,
COPYposition on interconnection fee. part IV,
item 185 to
189
234. It has nothing to do with Indosat. It has been expressed clearly in
the Follow up Investigation of KPPU to Mr.Lioe Phan Koen, the
General Manager of ICR PT Hutchison CP Telecommunications
(“Hutchison”):
1. Question: According to the information we have, initially
PT Hutchison CP Telecommunications find interconnection resistance? Answer: Yes, but it has already finished by the mediation of BRTI.
2. Question: Would you tell me more detail? Answer: When we would have an interconnection, we had to sign an agreement that must be approved by BRTI. The rules on interconnection should be done by fulfilling certain requirements such as 48 ERL for its traffic.
3. Question: Is the requirement made by incumbent company? Answer: Yes, the requirement is made in its DPI by incumbent company.
4. Question: As long as the requirement is wholly conducted, there will be no new entry operating? Answer: Yes.
5. Question: So, is it impossible for new business actor or companies to pass the requirement? Answer: Yes.
6. Question: Do you think that the requirement constraint new business actors? Answer: Yes.
7. Question: Does the requirement have a technical justification? Answer: There is a technical quantification but actually there is no single business actor is able to fulfill it. As long as I know, there is no such a requirement in Ministerial Decree.
8. Question: So, if the requirement cannot be fulfilled the interconnection is not approved?
Answer: It does not mean that it is unapproved but delayed until the business actor fulfills the requirement.
9. Question: Do all incumbent operators require such a requirement? Answer: Such a requirement is asked by PT Telekomunikasi Selular and in my opinion XL also leads to the same policy as it is done by PT Telecommunications Cellular.
The
Official
Report of
Follow up
Investigatio
n to Lioe
Phan Koen
dated 21
June 2007
that is
available in
the case
document
of KPPU
COPY20. Question: How about Indosat?
Answer: Indosat does not require such requirement.
235. The involvement of Indosat has been clear denied by Hutchinson in
an interview with KPPU. Therefore, KPPU does not only ignore
such important evidence in the RFI but also KPPU keeps on
defending its argument that the abuse conducted by Telkomsel
should be controlled by Temasek through its crossed ownership.
H. Inaccuracy of consumer loss quantification
236. In paragraph 205 to 213 of RFI, KPPU states its argument that
Temasek crossed ownership has caused consumer loss. The
quantification conducted by KPPU is doubtful.
237. As it is explained in the part that discussing excessive profit, KPPU
shall conduct correct development from the curve of margin costs
of each supplier, and it covers the measurement of depreciation and
normal profit.
238. Further, KPPU has to understand the excessive profit resulted from
the allegation of Temasek’s crossed ownership. KPPU need to
establish a clear causality between crossed ownership of Temasek
and consumer loss. It is not conducted by KPPU. It is difficult to
be done because at least, there must be two factors (based on RFI)
contribute to the consumer loss (with the assumption that there is
consumer loss):-----------
(a) The unilateral anti-competition of Telkomsel; and
(b) The industrial structure that tends to be monopolistic. (It is
COPYthe elucidation of Dr. Adiningsih on the current condition).
239. It is reflected from RFI that KPPU uses tariff rate of other
countries as references in determining consumer loss in Indonesia.
In this case, KPPU relies much on the report of LPEM.
240. Therefore, the use of mobile cellular phone structure in other
countries as a comparison is only possible under the condition that
the supply and demands can be compared. In facts, it is not. In a
small country, for example, the lower price is possible by reducing
marginal cost for not investing in BTS.
241. In this case, it must be noted that Dr. Chatib Basri, the Head of
LPEM FE UI qualifies the Report of LPEM only in the following
things:
Commenting to the price rate in Indonesia as a second highest in Asia, he said that international comparison is hard to perform due to the different cost structure of each country.
The Head of LPEM-UI, Chatib Basri, agrees that it is hard to compare due to its complexities.
“I know other research concluding that comparing to other countries in South Asia, our price is higher. Nevertheless, the problem is not as simple as that because we have to quantify its cost structure and economic scale," he said.
Chatib tells that the find no price fixing conducted by industrial actors although it is reported by media.
An article in
Jakarta Post
dated
24 September
2007
242. In this case, the Report of LPEM as a reference of KPPU to
quantify consumer loss is not reliable. Therefore, as it is
predicted, the, RFI relies on the Report of LPEM without any deep
COPYobservation to include it as an evidence.
VIII. THE INFRINGEMENT TO THE LAW
243. STT also finds some important evidences in the case document of
KPPU concerning the termination of report by FSP BUMN in
which it is not discussed or mentioned in the report of KPPU. The
termination of report by FSP BUMN is initiated by Arief Poyuono,
the chairperson of FSP BUMN. The letter to KPPU is about the
worries, truth and integrity of the whole investigation of the case.
A. The investigation of KPPU is stained
244. The most worrying thing is the statement of Arief Poyuono in the
meeting with Suharto, an Altimo’s representative, describing that
the investigation process of KPPU is influenced by Altimo:
“1. That in the beginning of April 2007, the Chief of United FSP BUMN with his Attorney-in-fact met Suharto (Regional Director Strategic & Business Development of Altimo Central and South East Asia) at the office of Suharto in Wisma GKBI at Jalan Sudirman Jakarta. There were some thing come out from the meeting:
-That Suharto asked the Chairperson of United FSP BUMN to cancel press conference plan on the withdrawal of United FSP BUMN’s report to KPPU.
-At that moment, Suharto called someone, Muhamed Iqbal (the Chairperson of KPPU) and ask the forming of Preliminary investigation team. Suharto prefers Nawir Messi to Benny Pasaribu as the Chairperson of Preliminary Investigation Team.”
The letter
of FSP
BUMN to
KPPU date
18 July
2007
245. The meeting is also reflected in the media report and read by STT
stating that the investigation of KPPU is influenced by Altimo.
COPY246. The most surprising is that the election of Nawir Messi is
influenced by Altimo. Therefore, there is no explanation
concerning the election of Nawir Messi as a chairperson of
Preliminary Investigation of KPPU. According to Altimo, Dr. Ir.
Benny Pasaribu as a member of KPPU, cannot be influence. In 3
October 2007, Benny Pasaribu is the only member that has
different opinion with the Council Commission when RFI released.
247. It is strange that RFI does not discuss this evidence questioning the
credibility and integrity of the investigation
B. KPPU keeps on continuing the investigation although
the report has been withdrawn
248. It must be noted also that in the different part of the letter, the
affirmation of STT is stated that KPPU continues its investigation
long after the report is withdrawn.
249. FSP BUMN submitted the report on 18 October 2006 and the
report is accompanied by two additional reports on 17 November
2006 and 22 December 2006.
250. According to Anti-monopoly law, in 30 days since the acceptance
of the report, KPPU is obliged to specify whether the investigation
must be conducted or not. The period has to end on 30 November
2006.
251. According to Article 43(3) of the regulation of KPPU, the step of
Follow up investigation must be finished in 60 days since the
acceptance of the report and it is possible to be extended for the 30
days to come.
COPY252. However, as it is known that RFI is issued on 3 October 2007, a
year after the early report.
C. KPPU has constrained the defense of STT
(i) STT is not given a chance in the Preliminary Investigation
253. KPPU also has constrained the efforts of STT to advocate during
investigation process. It was started when STT was summoned for
the first time for a session in the Follow-up Investigation on June
2007, without any Preliminary investigation at all previously.
254. Based on Article 1, Item 14 of the KPPU regulation:
“Preliminary investigation is a couple of activity that conducted by Preliminary investigation team to report the suspected infringement and to conclude whether Follow up Investigation needs to be performed or not.”
255. Therefore, based on the Regulation of KPPU, the Preliminary
Investigation shall be performed in order to decide whether Follow
up Investigation shall conducted or not for our client. Our clients is
not given a chance to get involved in the Preliminary Investigation
so that their important rights has been neglected. The rights to
mentioned are:
a) To have the result of Preliminary investigation (Article 34
of KPPU Regulation)
b) To inform the mistake and to be given opportunity to
changes its behavior before stipulating Follow up
Investigation (Article 29 paragraph (2) of the Regulation of
KPPU)
COPY256. The negligence of the rights of our client has resulted to the
important implication of STT. Firstly, STT has no information
concerning the allegation to STT prior to be a party in the Follow
up Investigation. Secondly, it means that STT has no opportunity
to discuss special deed KPPU wants from STT. Thirdly, STT shall
be displayed evidences that are owned by KPPU in order to make
STT write appropriate defenses.
(ii) STT is not given a suitable access to observe the case
document of KPPU
257. The case document of KPPU consists of many materials needed by
STT to be learnt in order to be able to advocate correctly. It is
important because the RFI intentionally eliminates or not discuss
all relevant evidences that there is no infringement to Article 27.
258. In this case, STT objects strongly to the procedure used by KPPU
to in refusing to the material in the case document of KPPU. It has
been submitted to KPPU on 27 September 2007.
259. It can be seen clearly in Article 65 paragraph (2) of KPPU
regulation that our client should be given a permit to scrutinize the
evidences from KPPU in each step of investigation:
“In any step of investigation and the session of Council Commission, the Reported Party is entitled to:
e. scrutinize evidences used as the Investigation Summary.”
260. On the contrary, KPPU refuses the request of STT on 20 July 2007
to give an access to case document of KPPU by stating that STT is
COPYonly permitted to see case document of KPPU in the step of “Final
Investigation”. Even if the opinion of KPPU is correct (in which
we cannot accept it), KPPU ought to consider that there are many
documents that shall be learnt, therefore KPPU must give enough
time to STT.
261. The situation is worsened by the fact that KPPU has summarized
its Follow up Investigation on 27 September 2007 and KPPU
delivers it to STT on 3 October 2007. KPPU finally permits STT to
study the evidences in case document of KPPU on 5 October 2007
for only 2 hours. Further, upon our request KPPU then permits
STT to check its document for 2 following day.
262. The situations in which STT is permitted to study the case
document of KPPU shows that KPPU is not serious in giving
opportunity to STT for advocating itself.
(a) Firstly, the evidences are huge in number. The evidences
consist of 4 document boxes and 17 document folders.
Most of the documents are written in Indonesian. All
Reported Parties (unless Telkomsel) are foreigners,
therefore the documents shall be translated and give it to
clients before giving instructions concerning to the case.
(b) Secondly, the access to the case document of KPPU is
passed on the dates on the eve of Eid al-Fitr that make it
impossible to find translators.
(c) Thirdly, most of the evidences are related to economy and
law. The expert consultants on anti-monopoly and economy
are needed in order to have STT comprehend KPPU’s case
document.
(d) Fourthly, STT asks an access to certain documents
COPYmentioned by KPPU in its footnotes of the report. The
documents are articles from journal (such as Tinjauan
terhadap Holding Company, Trust, Cartel dan Concern by
Hashim Purba) and the passages of other textbook (for
example UK Merger Control: Law and Practice). However,
KPPU refuses to give access to STT by saying that there
are ‘public document’. Although STT can find documents
is if there are much times, STT does not see the reason of
KPPU to refuse a direct access of STT, unless to lessen the
available time of prepare its defense.
(e) Finally, STT cannot translate the whole documents because
of the limitation of time, and KPPU refuses to give
opportunity to STT to defense further after 2 November
2007. There is no reason for KPPU to confine the Reported
Party to check the case document.
(iii) KPPU has collided with the obligation of keeping the
confidentiality.
263. STT also very worries to the fact that some members of KPPU,
including its Chairperson have informed journalists that the
Reported parties are responsible prior to hearing to the defense of
the Reported Parties. It violates KPPU’s Ethical Conduct and the
deniable to the justice of the Reported parties.
264. The neutrality of KPPU is questioned. The media have reported
sue to the Chairperson of KPPU. Indonesian Development
Monitoring Group alleges that the Chairperson of KPPU is
influenced by Altimo to investigate Temasek. The deeds of the
Chairperson has generated problem on the neutrality of KPPU. In
a statement to The Jakarta Post on 21 March 2007, the Chairperson
states openly that he disagrees with the decision of the Government
Refer to
Press
Reports in
the First
Statement
of STT
An article
COPYof Indonesia to divest Indosat because it is one of the important
state’s assets. The statement of Chairperson, along with bias
allegations to Chairperson, clearly expresses the problem of
KPPU’s neutrality. The complaint toward the neutrality of KPPU
keeps on going based on mass media report on 29 August 2007 to
the activity and influence of Altimo.
Hukumonli
ne.com
date 28
Augusts
2007 in the
First
Statement
of STT
An Article
in Jakarta
post date
29 August
2007Article
the Jakarta
Post in the
First
Statement
of STT
265. Since the investigation is started, the open statement of KPPU is
public consumption, and all express its opponent to STT and other
Reported Parties.
(a) On 6 February 2007, in Investor Daily dated 6
February 2007, the Chairperson of KPPU stated:
“Today, there are many indication of unfair competition in telecommunications sector, crossed ownership as an example. It is proved that telephone tariff in Indonesia at this time is more expensive than those of other countries.”
(b) On 24 May 2007, the Chairperson of KPPU told
journalist that KPPU had found “the lack of
competition between Telkomsel and Indosat”. All
An article
date 6
February
2007 in
Investor
Daily
An article
date 24
May 2007
COPYthe statements were made before Temasek is
contacted for being interviewed in the investigation.
(c) On May 2007, Nawir Messi, the Vice Chairperson
of KPPU told Reuters that KPPU has “strong
suspicions to bring this case to higher
investigation.”
from
Agency
France-
Press in the
First
Statement
of
An article
date 7 June
2007 in
Business
times in the
First
Statement
of
266. The statements to journalist oppose Article 5 (4) of KPPU’s Decree
No. 8/KPPU/Piece/XI/2000 on ethical conducts and working
mechanism KPPU:
Code of
Conduct of
KPPU
“The Commission Member is prohibited to give information to the public because it is able to influence the decision of Commission over the case that is being handled.”
267. The statements of KPPU to journalist is premature and able
influence KPPU’s neutrality that is in charge to decide a case. Even
a head of District Court in Indonesian has never stated opinions on
the substances of ongoing legal process.
268. In fact, even Dr. Ir.Benny Pasaribu, a team member Follow up
investigation has questioned a legitimization of the legal process
and hesitated RFI:
COPY (a) In an article of Seputar Indonesia on 24 October
2007, a former Chairperson of KPPU, Sutrisno
Iwantono states that in this case, “monopoly is not
proved because the share ownership is less 50%.”
He also suggested that KPPU has implemented
inappropriate rules of law.
(b) An article in AntaraNews on 25 October 2007, a
member of Commission VI of House of
Representative (DPR), Hasto Kristianto reacted to
the “strong controversy related to the decision of
KPPU” and the process of KPPU is not
“transparent”.
(c) In article AntaraNews on 25 October 2007, a
member of Follow up investigation team, Dr. Ir.
Benny Pasaribu states that the substance of RFI is
“irrelevant and not rely on the objective idea.” He
also comments that the procedure of KPPU “is not
favorable” and questions the premature statements
of KPPU to media.
An article
date 24
October
2007 from
Seputar
Jakarta
An article
date 25
October
2007 from
Antara
News
D. KPPU does not investigate Evidences
269. We are worrying to the objectivity of KPPU investigation from the
beginning. We are considering the reports in some media referring
to RFI that make us hesitate to the objectivity of the team.
(i) KPPU is negligent to scrutinize the study conducted by
LPEM
COPY270. One of the studies cited by KPPU is a study conducted by LPEM.
KPPU relies on the measurement of LPEM concerning consumer
loss.
271. As it is mentioned in Part VII above that the study of LPEM is
used by KPPU to determine consumer loss. Dr. Chatib Basri also
indicates that the study does not support an opinion that price
uniformity among operators is an indication of anti-competition
behavior because such behavior is consistent with the condition of
competition. He also criticize the way KPPU omitted some
significant substances in summarizing the report of LPEM:
“In his opinion: currently the sentence used from executive summary is “an indication of tariff uniformity is an early step to identify price fixing". But, there is another sentence following it, “nevertheless, it does not identify price fixing". The last sentence is omitted by KPPU.”
An Article
in tempo
dated 20
September
2007
272. STT is very surprised to know that KPPU tries to make a statement
describing wrongly the report of expert in order to strengthen the
allegation to STT by eliminating some part of the content. It
indicates that the investigation process is not neutral but preparing
a conclusion previously.
(ii) The criticism of Dr. Ir. Benny Pasaribu to the Follow up
Investigation
273. The severe criticism from Dr. Ir. Benny Pasaribu is on the
appropriate investigation. There is an obligation among members
for not discussing the investigation openly but the Chairperson of
KPPU breaks it by informing to mass media:-
COPY “He also questions the attitude of the Chairperson of
KPPU for frequently exposed it to media, as if there
has been guilty parties.
Benny said that the result of the meeting agrees for not
exposing publicly before there is a decision.
Article
AntaraNew
s dated 25
October
2007
274. Intentionally, KPPU seems to backdates its report to make it as if
fulfill the regulation of KPPU although the fact is the opposite:
“He said, in other hand conclusion making has been done beyond permitted boundary. Nevertheless, after the conclusion is agreed, the date of the conclusion is backdated. “Judicially, it is forbidden. The same goes for the forming of Commission Council, in which it is also backdated.”
Article
AntaraNew
s dated 25
October
2007
275. If it is true, such dishonesty is worried. The dissenting opinion of
Dr. Ir. Benny Pasaribu is not backdated. It was 29 September 2007
or the deadline.
276. Finally, it is seen that the members of Follow up Investigation has
no enough time to observe the evidences:
“Benny said that the discussion of RFI is limited. Due to
the limitation of time, the members of RFI only revise
the draft of the conclusion. “In my opinion, the
substance is irrelevant and no objective rationale. It is
better for me to have dissenting opinion than to revise and
sign it.”
Article
AntaraNew
s dated 25
October
2007
277. The comment of Dr. Ir. Benny Pasaribu affirms many worries of
STT such as a suspicion to its members, especially Chairperson of
KPPU for not conducting properly. The team of Follow up
COPYInvestigation does not consider objectively all evidences submitted
to them during Follow up investigation.
E. KPPU has treated STT discriminatively
278. Finally, it must be noted that KPPU treats STT discriminately. It is
seen in the way KPPU interpret the phrase “majority” differ from
the its allegations to Sing Tel in one side and STT on the other.
279. Referring to SingTel indirect ownership in Telkomsel, 35%,
KPPU has an argument that SingTel conducts ‘negative
operation’ for enabling them to restrain certain decisions that
require special majority approval although their shares is less than
50%.
LPL,
Paragraph
46
280. Nevertheless, if the testing of ‘negative operation’ is misused to
Indosat, it is clearly then that through ” Dwiwarna Share” the
Government of Indonesia also is able to “restrain” important
decisions requiring majority approval. If we apply “negative
operation” parameter, the Government of Indonesia ought to
become majority shareholder of Indosat.
281. Concerning Indosat, KPPU thinks that Temasek has ‘positive
control’ because Temasek has 41.94% of shares while other
shareholders that purchase the share in public stock exchange have
no power to act collectively.
282. Nevertheless, if “positive control” parameter applied in the case of
Telkomsel, Telkom should be the majority shareholder in
Telkomsel with its 65% of shares.
283. The clearest indication of the discriminative behavior is in the
COPYimplementation of different benchmark of justice to different
parties. KPPU has been wrongly applies law just for getting a
conclusion that “Temasek” is a majority shareholder in Indosat and
Telkomsel. But, if KPPU tests it correctly, it will come up with the
conclusion that the Government of Indonesia and Telkom are the
majority shareholders of Indosat and Telkomsel. In fact, there is
only Temasek that is being investigated and not the Government of
Indonesia or Telkomsel. It is a clear indication of discriminative
treatment.
IX. CONCLUSION
284. The biggest problem in RFI of KPPU is:
(a) KPPU consistently and intentionally does not cite and
consider all evidences that have been already available for
this case; there are evidences oppose against the opinion of
KPPU concerning the investigation of STT and other
Reported Parties
(b) KPPU does not intentionally cite the evidence or facts
correctly
(c) KPPU does not implement applicable and proper law.
285. The unconsidered evidences are very important and the brief
summary on our defense statement, based on the evidences shall be
as follows:
(a) There is no Temasek Business Group. (Part V)
(b) The substances of Article 27 are not fulfilled. KPPU does
not apply Article 27 properly. (Part VI)
COPY(c) Minister of BUMN has consulted KPPU on 23 January
2003 on the early divestment and other things referring to
the implementation of Article 27. At this time, KPPU does
not have right to question again the divestment. (Part VI)
(d) The business and economic Analysis of KPPU is incorrect..
(Part VII)
(e) There is an evidence of mistakes and partisanship
conducted by the Follow up Investigation Team and
Commission Council, including the criticism of Dr. Ir.
Benny Pasaribu, a member of KPPU. (Part VIII)
286. This defense statement depicts STT implemented defense
considering that KPPU has restrain STT to advocate properly such
as the delay of issuing RFI for more than one week, the rejection of
accesses to case document of KPPU up to the eve of Eid al-Fitr
(concerning the difficulties of finding translator at that time) and
the rejection of mentioning the information sources in its report
clearly.
287. STT asks all investigation to be terminated. There is no evidence in
RFI that show the fault of STT. The investigation processes is an
abuse of law process.
288. If the investigation of STT is not terminated, STT is entitled to
submit further defense statement if needed, because STT cannot
observed thoroughly all documents in the case document of KPPU
that have not entirely translated yet.
289. This defense Statement is relied on Indonesian law and not be
based on international law or related international agreement. STT
maintains all its rights under international law or any valid
COPYinternational agreement.
16. Considering that further, on the basis of Follow-up Investigation Report, Council of
Commission has accepted responses of AMH, ICL, ICPL on 2 November 2007 that in essence state the following matters: ----------------------------------------------------------------------------------------------
References
I. INTRODUCTION
1. We are acting for and on behalf of Asia Mobile Holdings Pte.,
Ltd (“AMHPL”), Indonesia Communications Limited (“ICL”)
and Indonesia Communications Pte., Ltd (“ICPL”) to submit
answer to the accusations stated in Follow up Investigation
Report (“RFI ”) of the Commission for the Supervision of
Business Competition (“KPPU”) that has already been accepted
on 3 October 2007. For writing fluency, AMHPL, ICL and ICPL
henceforth jointly will be conceived as “AMH”.
RFI
2. This defense statement submitted (“The Second Statement of
AMH”) is addition of, and must be concurrently read with
defense statement that has been beforehand submitted by AMH
to KPPU on 10 September 2007 (“The First Statement of
AMH”), and the content of both defense statements used by STT
as part of the whole defenses to the accusations of KPPU. All
references used in the First Statement of AMH will also be into
effect in the Second Statement of AMH, unless it expressed on
the contrary.
3. AMHPL is a joint venture of Qatar Telecom (Qtel) Q.S.C.
(“Qatar Telecom”) that owns 25% of shares, and STT
COPYCommunications Ltd (“STTC”) that, through Asia Mobile
Holding Company Pte Ltd (“AMHC”), owns the rest for about
75%. ICL and ICPL are subsidiaries of AMHPL
II. THE BACKGROUND OF CASE INVESTIGATION
PROCEDURES
4. On 18 October 2006 the Federation of State-owned Enterprise
Worker Union (“FSP BUMN”) submitted a report to KPPU that
suspects a monopolistic practice conducted by Temasek Holdings
(Private) Limited (“Temasek”).
A letter
from FSP
BUMN to
KPPU,
dated 17
July 2007, is
available in
the case
document of
KPPU
5. The report was then withdrawn by FSP BUMN on 2 April 2007
by reason of as it elaborated in the letter sent to KPPU on 18 July
2007.
A letter
from FSP
BUMN to
KPPU,
dated 17
July 2007, is
available in
the case
document of
KPPU
COPY6. AMH knows that KPPU summons Temasek to attend
preliminary investigation referring to the suspected infringement
of the Law No. 5/1999 on the Prohibition of Monopolistic
Practices and Unfair Competition (“the Law of Anti-trust”).
The Report of KPPU dated 26 April 2007 was also exhibited.
(viii) Singapore Telecom Mobile Pte Ltd (“Singtel Mobile”); and
(ix) PT Telekomunikasi Selular (“Telkomsel”).
8. Nevertheless, LPP was not delivered to AMH on that date. On 5
June 2007, AMH accepted peremptory writ to meet Investigation
team of KPPU. It is for the first time AMH accepted a
notification from KPPU that AMH was suspected to infringe the
Law of Anti-trust. Afterwards, around 7 or 8 June 2007, the LPP
was delivered to AMH.
COPY9. On 25 and 11 July 2007, Mr. Guy Norman and Mr. Anupam
Garg met KPPU. Mr. Guy Norman represented Qatar Telecom
while Mr. Anupam Garg is a representative of AMH. Each of
them submitted a brief statement is written to KPPU.
10. On 20 July 2007, the attorney-in-fact of AMH submitted a letter
to KPPU to be permitted to check through the KPPU case
document in the end of Preliminary Investigation phase. The
request was rejected by KPPU due to it is permitted only in the
end of Follow-up Investigation.
11. On 14 August 2007, the attorney-in-fact of AMH submitted a
letter to KPPU with the objection that there is an infringement to
Article 39 of KPPU Regulation No.1 that obliges KPPU starts its
investigation within 30 days as from the acceptance of the
objection.
12. On 14 September 2007, AMH submitted a written statement and
evidence to KPPU concerning the refusal of all suspicions. AMH
also submitted an independent expert statement prepared by
CASE Associates entitle “A Competition in the Cellular
Telecommunication Market in Indonesia”, as well as a letter from
Indosat board of director (“BOD”) to AMH on the accusation in
LPP and independent expert statement, Dr. Sri Adiningsih,
entitled “Persaingan dalam Industri Telepon Selular di Indonesia
(A Competition in the industry of Cellular phone in Indonesia)”.
13. Follow-up Investigation has to be completed, and RFI (“RFI ”)
has to be issued on 27 September 2007. On 27 September 2007,
the attorney-in-fact of AMH submitted a letter to KPPU ask a
COPYpermission to check through the case document of KPPU.
14. On 3 October 2007 KPPU delivered RFI . RFI decided that all
Reported Parties are part of “Temasek Business Group”
(“Temasek Business Group”) that through PT Indosat Tbk
(“Indosat”) and Telkomsel, has cooperated to lessen competition
in the pertinent market by pressing the performance of Indosat in
maintaining high tariff. RFI did not consider at all any response
and evidences submitted by AMH during the phase of Follow-up
Investigation.
15. On 5 October 2007, an attorney-in-fact AMH checked through
the bundle of case document of KPPU.
III. THE SUBMISSION OF ANSWER/EVIDENCE BY AMH
DURING THE PHASE OF FOLLOW UP
INVESTIGATION
A. The Summary of KPPU’s Accusations after the phase of
Preliminary Investigation
16. The followings are KPPU’s accusations after the phase of
Preliminary Investigation completed:
“1. “Temasek Holding (Private) Limited, through Singapore Telecomunication Ltd, Singapore Technologies Telemedia Pte. Ltd., STT Communication Ltd., Singapore Telecom Mobile Pte. Ltd., and Indonesia Communication Limited own shares of 35% in Telkomsel and 40.77% in PT. Indosat, Plc.
2. Telkomsel and PT. Indosat, Plc., jointly control 89% of market shares or at least more than 50% of market shares in market of cellular telecommunication service all over
COPYIndonesia.
3. Based on economic data, it is seen that the performance of PT. Indosat, Plc., is not good as other operators’ performances.
4. The crossed ownership of Temasek Business Group in Telkomsel and PT. Indosat, Plc., has caused lack of competition among Telkomsel, that owns the biggest market shares and PT. Indosat, Plc., as the second biggest shares in market of cellular telecommunication service all over Indonesia.”
B. The Summary of Answers/Evidences of AMH in the phase
of Preliminary Investigation
17. The first accusation is based on the assumption that AMH is part
of Temasek Business Group predicted to have 35% of
Telkomsel’s shares and 40.77% of Indosat’s shares. It is
incorrect to treat AMH as part of Temasek Business Group, even
if it exists AMH is not under the common management of
Temasek as well as a concentration of economic activity
controlled by Temasek. The companies of AMHPL’s investees,
Indosat and StarHub Ltd (“StarHub”), the two
telecommunication operators in Singapore, compete tightly with
other competitors in Indonesia and Singapore, Telkomsel and
SingTel (the leading telecommunication operator in Singapore),
as well as other competitors.
The First
Statement of
AMH
18. The second accusation cannot be proven because Indosat does
not have more than 50% of market shares in cellular
telecommunication market. Indosat does not jointly control 89%
of market shares with Telkomsel because AMH does not have
portion in the alleged Temasek Business Group, only if the entity
exists. Further , KPPU provides no clear definition of the market
The First
Statement of
AMH
COPYin which KPPU thinks uncompetitive.
19. The third accusation is groundless as the performance of Indosat
is getting better. The investment of AMH in Indonesia is only in
Indosat, therefore its interests are to boost the performance and
value of Indosat.
The First
Statement of
AMH
20. The fourth accusation is groundless as KKPU does not
accomplish the stipulation in Article 27.
The First
Statement of
AMH
(i) KPPU cannot prove that AMH is a “majority
shareholder” in Indosat. ICL and ICPL jointly hold only
41% of Indosat’s shares. Therefore, AMH does not have
more than 50% of shares in Indosat.
(ii) KPPU is incorrect in concluding that Indosat “controls
more than 50% of market shares.”
(iii) In whatever case, the majority ownership of Indosat’s
shares alone does not cause the infringement of Anti-
trust Law, due to the findings required to show that there
is an abuse od Indosat’s dominant position and causal
relationship between the ownership of market shares by
Indosat with the abuse of dominant position. KPPU
cannot prove that there is an abuse of dominant position.
(iv) KPPU has only an authority to ‘business actor’ and its
relationship with the infringement investigation of Article
27 of Anti-trust Law and none of corporate body in AMH
is business actor under Anti-trust Law. A business actor
shall be founded or domiciled in the Republic of
Indonesia, and AMH does not fulfill even one of the
COPYelements. AMH also does not perform economic
activities in Indonesia. AMH is only a shareholder and it
does not make operational decision in Indosat.
21. In whatever case, KPPU failed to inform and to involve AMH in
the preliminary investigation as well as not to give chance to
AMH to prepare a defense at all in the phase of a session. Under
Article 65 (2) of KPPU Regulation No.1/2006, the failure is
absolutely a serious infringement to the rights of Reported Parties
to receive an information concerning its status and to prepare a
defense. KPPU is obliged to determine the need or not follow up
investigation performed within 30 days as from the acceptance of
the report. In this case, KPPU start its investigation for months
prior to the acceptance of the firs report and even kept on
performing investigation although the report had been
withdrawn.
22. The independent expert’s statement prepared by CASE
Associates consists of a detailed economic analysis and the study
on the accusation in LPP. It finally concluded the followings:
(a) KPPU gives no direct or indirect evidence that lack of
competition existed due to the interest of Temasek
ownership and/or its subsidiaries in Telkomsel and
Indosat.
(b) KPPU gives no direct or indirect evidence that the
different performance of Indosat toward Telkomsel is
relatively caused, if any, by the interest of Temasek
ownership and/or its subsidiaries in Telkomsel and
Indosat.
COPY23. The statement of Indosat board of director Indosat which in
major appointed by the Government of Indonesia is also difficult
to be understood, that AMH does not involve in Indosat
management and that the severe competition between Indosat and
Telkomsel is present.
IV. THE ACCUSATIONS IN THE REPORT OF FOLLOW UP
INVESTIGATION
24. In RFI , accusations of KPPU change in sudden:
1.”Temasek Holdings Pte. Ltd (hereinafter referred to as Temasek) owns a majority share in two companies that conducting business activity in the same field and in common pertinent market that make it infringes Article 27(a) of the Law No.5/1999.”
2. “PT. Telekomunikasi Selular (hereinafter referred to as Telkomsel) maintains its high cellular tariff that make it infringes Article 17 (1) of the Law No.5/1999.”
3. “Telkomsel abuses its dominant position to limit market and technology development that make it infringes Article 25 (1.b) of the Law No.5/1999.”
25. Although there is no accusation addressed to AMH in particular,
the accusations seem to state that:
(f) The first to the ninth Reported Party are “Temasek
Business Group” as a “single economic entity”.
(g) KPPU has a jurisdiction toward STT because Temasek
Business Group performs its business in Indonesia
through Indosat and Telkomsel as its control.
(h) Temasek Business Group has “majority share” in Indosat
and Telkomsel with its control as a shareholder.
COPY(i) Temasek Business Group controls more than 50% of
market shares in the pertinent product market, a cellular
market.
(j) The cross ownership of Temasek Business Group has
decreased competition in the market which then causes
consumer loss.
26. In its defense statement, AMH will conclude expressly that:
a) There is no corporate body known as Temasek Business
Group legally or economically.
b) AMHPL, ICL and ICPL are not “business actors” and KPPU
does not have jurisdiction on them;
c) In whatever case, AMH does not have “majority share” in
Indosat.
d) Fundamentally, the conclusion of KPPU is incorrect because
KPPU has stated wrongly that pertinent product market is
not competitive.
e) AMH does not control more than 50% of relevant product
market.
f) There is no evidence indicating that crossed ownership
causes the decrease of competition between Indosat and
Telkomsel.
g) RFI is illogical to come up with its conclusion, due to the
ignorance in a whole the ownership of the Government of
Indonesia in Telkomsel, and its level of control to both
Telkomsel and Indosat.
h) KPPU does not have an authority to make accusations as it
COPYdescribed in RFI because it has been considered previously
by DPR and KPPU. It also comes up with a conclusion that
there is no infringement to the Article 27 of Anti-trust Law.
i) RFI has intentionally disregarded plenty of evidences in the
case document of KPPU that actually it is opposed against its
conclusion. In fact, RFI is a deviation of law and prevailing
evidence.
j) KPPU has made AMH a subject of unfair treatment,
infringed legal process and the principles of justice under the
Indonesian laws.
V. THERE IS NO TEMASEK BUSINESS GROUP
27. AMH will show in the defense statement that KPPU cannot
prove the elements of Article 27. Nevertheless, before discussing
it AMH will show beforehand that all basic cases of KPPU
concerning the existence of a single economic entity known as
Temasek Business Group is simply fictions.
A. KPPU is careless in considering legal condition to define
“Business Group"
28. The Statutes of each company, AMH and Indosat in one side, and
Sing Tel and Telkomsel in other side, arranges shareholders’
rights to nominate director in board of directors. As a
consequence, KPPU concludes in item 77 to 84 in RFI that
Temasek has an ‘authority” to its subsidiaries. According to
KPPU, there are some directors who also take hold as a member
of board of directors in more than one subsidiary. KPPU has
diverted an evidence to be able to reach a conclusion as what it
wants by mentioning that there is a Business Group known as.
RFI , Facts,
Paragraph
77 to 84
COPY29. There is no law to be infringed or no impropriety if shareholders
with their significant ownership deserves to have right to
nominate directors in its subsidiaries.
30. Paragraph 5(c)(6) of the Analysis Article in RFI cited Hansen’s
opinion in coming to the conclusion of the existence of Business
Group Temasek, as it mentioned below:
“Some self-supporting corporation that join into one self-supporting economic unity. The self-supporting corporation is under one common head that shows outside as a holding company that makes similar plans for its subsidiaries.”
31. Yet, RFI really disregards First Statement of AMH that encloses
the citation of Knud Hansen on the requirements to be fulfilled
by a group of entity, known later as Business Group. The
requirements are:
The First
Statement of
AMH,
paragraph
27
(d) The so-called subsidiary, it must stay in an integrated
management of holding company, arranges an integrated
plan for all its subsidiaries;
(e) The plans of holding company to its subsidiaries must
cover main economic activity of the so-called
subsidiaries; and
(f) The so-called subsidiary is prohibited to disobey the rules
arranged by the management of holding company.
32. In RFI , the only clue of KPPU to support its opinion on
Temasek Business Group is the capacity of Temasek as a
shareholder of AMH and SingTel. KPPU does not have evidence
to prove that either AMH or SingTel (or their subsidiaries) stay
COPYin the same management of a holding company. The holding
company controls the main economic activity and its subsidiaries
are prohibited to digress from the rules of the holding company’s
management.
B. KPPU ignores the evidence that Temasek does not
control AMH
33. In the First Statement of AMH, respond statement and evidence
have been in detail submitted to indicate that Temasek does not
control directly or indirectly (through STT, STTC or AMHC)
business and/or operational decision of AMH. None of the
evidence is mentioned in RFI and none of the team members of
KPPU Follow-up Investigation, but Dr. Ir. Benny Pasaribu,
M.Ec, has disregarded all evidence and response statement
submitted by AMH.
The First
Statement of
AMH ,
paragraph
34. AMHPL is not owned in whole by Temasek and/or STT.
Around 25% of its shares are owned by Qatar Telecom. Qatar
Telecom is listed in London Stock Exchange, Bahrain Stock
Exchange, and Abu Dhabi Stock Exchange. Further , the 55% of
its shares is owned directly or indirectly by the Government of
Qatar. Qatar Telecom is a leading provider of
telecommunication service in Qatar. It operates as well in
Kuwait, Saudi Arabia, Tunisian, Algeria, and Maladewa through
their subsidiaries with 51% of shares, Wataniya (a listed
company in Kuwaiti Stock Exchange), and Nawras in Oman with
55% of shares. Qatar Telecom is an independent company and
has absolute authority and interest worldwide.
The
Statement of
Mr.Guy
Norman to
KPPU
exhibited in
the First
Statement of
AMH
35. AMHPL is a joint venture and invests its capital in
telecommunication fields in East Asia-Pasific. AMHPL (through
ICL and ICPL) controls around 41% of shares in Indosat and
COPYaround 49% in StarHub. On 25 July 2007, also acquired 49% of
Shenington’s shares (Shenington Investments Pte Ltd) with its
investment in Cambodia and Laos. It shows a sustainable
investment of AMHPL.
36. In May 2007, AMHPL obtained loan facility for amount of
US$1,160,000,000 from the bank syndication in the form of
external fiduciary loan. AMHPL also obtained financial support
from shareholders. It indicates further the absolute authority of
AMH.
Article on
page 36, 2
June 2007
Issue of
Ifrasia
(Internation
al Financing
Review
Asia)
exhibited in
the First
Statement of
AMH
37. AMHPL has its own board of director, separated from Temasek’s
and/or SingTel, SingTel Mobile’s board of directors and
employee. Qatar Telecom has a senior representatives in
AMHPL’s board of director. The Chief Executive Officer is from
Qatar Telecom while the Vice-Chairman of Qatar Telecom board
of director is its representatives in the AMHPL board of director.
The
Statement of
Mr.Guy
Norman to
KPPU
exhibited in
the First
Statement of
AMH
38. The decision making of AMHPL is done by its own board of
director. The directors, as other directors within AMH’s
COPYcompanies, are responsible to AMHPL by performing their job
fairly and for the interests of AMHPL under the law of Singapore
in which AMHP was founded. The board of director is obliged to
prefer AMHPL’s interests to the interests of head per head’s
shareholders. They have to make decisions only for benefitting
STT, STTC or AMHC. The director appointed by Qatar
Telecom, in due diligence exercise, has to make sure that the
decision made by AMHPL board of director benefit AMHPL, not
only shareholders.
39. The board of director is backed up by Committee of Management
and Monitoring. Management Committee is responsible to the
daily management of AMH and to make recommendation to
AMH board of director on planning, finance, treasury, as well as
merger and acquisition activities. The Monitoring Committee is
responsible to monitor regular report of any investee companies
of AMH, Indosat included. Qatar Telecom has its representatives
in the two Committees and an active player in the business o
AMH.
The
Statement of
Mr.Guy
Norman to
KPPU in
paragraph
11 to 15 and
exhibited in
the First
Statement of
AMH
C. KPPU is neglecting the presence of competition
between StarHub and SingTel
40. RFI is wholly neglecting the evidence of the presence of
competition between StarHub and SingTel, as the current
telecommunication operators in Singapore.
41. In 2003, SingTel sued StarHub Cable Vision Ltd. (“StarHub
Cable”), a subsidiary of StarHub. The litigation process was
running severely and ended with the submittal of appeal by
Singtel to Court of Appeal, the highest court of appeal in
Highlighted
from
Finance
Statement of
COPYSingapore. StarHub
and Straits
Times’
article,
dated 4
September
2007,
exhibited in
the First
Statement of
STT
42. RFI also entirely disregards an evidence of the existence of
intervention of policy making institution in the dispute of
SingTel versus StarHub. Since the period liberalization of
telecommunication regime occurred in Singapore, Info-
communications Development Authority (“IDA”), a Singaporean
independent telecommunication regulating agency, has to
intervene at least 30 dispute cases of SingTel and StarHub. A
number of disputes reflected a level of fair competition.
D. KPPU is neglecting the evidence provided by AMH
representative, Anupam Garg
43. KPPU is neglecting the existence of AMHPL, whether as a
separated corporate body or as substantive company with its own
rights. AMHPL’s shareholders, Qatar Telecom and AMHC, even
are not drawn in the organizational structure as it is seen in
paragraph 45 of RFI .
44. RFI is also ignoring a written statements made by Anupam
Garg, a AMH representative, during investigation:-
COPY “AMH/CL/ICPL is managed by its own board of
director separated from Temasek. The member of board of director AMHIICLICPL is neither director nor employee of Temasek. Temasek (in one side) and AMH/ICLIICPL (in the other) are managed separately one to another.
The business, planning, operational decisions are drawn fully by board of AMH/ICL/ICPL director and/or management team and separated from Temasek. Each of AMH, ICL and ICPL has its own board of director stuffed by worldwide reputed members. There are 2 member of AMH board of director who are not director or employee of Temasek, STT, STTC, AMHC or Qatar Telecom.
AMH decides its own decision through the board of director, in which its members area the selective people of Qatar Telecom. The board of director of AMH does not make decisions that not only STT, STTC and AMHC. IT opposed against the law of Singapore and consequently Qatar Telecom does not it happen.”
The
Statement of
Anupam
Garg that is
available in
the
document
case of
KPPU
E KPPU is ignoring the evidence of Qatar Telecom and
its representative, Guy Norman
45. KPPU is ignoring the existence of Qatar Telecom as a
shareholder of more than 25% of AMHPL’s shares, a company
that is unseen in the organizational structure in paragraph 45 of
RFI.
46. The statement of Mr. Guy Norman, a Qatar Telecom
representative, described the independency of AMH. It is ignored
in RFI :
“Qatar Telecom has a representative in the AMH board of director AMH. The Chief Executive Officer of Qatar Telecom and the Vice-Chairman of Qatar Telecom board of directors are its senior representatives in the AMH board of director.
COPYThe strategic decisions are made through AMH board of director and obliged to carry the interest of AMH and not the interest of head per head’s shareholder. The directors appointed by Qatar Telecom, in due diligence exercise, make sure to the decisions made by AMH will be benefitting not only STTC but also AMH.
The board of director is backed up by Committee of Management and Monitoring. Management Committee is responsible to the daily management of AMH and to make recommendation to AMH board of director on (a) financing, and company treasury strategy; (b) merger and acquisition activities; and (c) company strategic planning including any problem concerning shareholders’ strategy. The Monitoring Committee is responsible to monitor regular report of any investee companies of AMH, (one of them is Indosat), to analyze finance and operational of company performance as well as any problem concerning shareholders’ strategy that probably occurs in any investee companies.
Qatar Telecom has its representatives in both Management and Monitoring Committee.
It is cleat that Qatar Telecom is an active player in AMH business. Qatar Telecom is sure that AMH is managed well.
I just want to show that Qatar Telecom has invested US$635 million in this joint venture. The composition of Management and AMH board of director enable Qatar Telecom an insurance that the decisions are made independently and not dictated by STTC.”
F The deviation in RFI
47. Firstly, KPPU is incorrect in mentioning that Ms.Ho Ching of
Temasek is an Executive Vice President of STT and STTC.
RFI , Facts
Paragraph
78 (d)
48. It is wrong because Ms. Ho Ching serves no single position in
either STT or STTC. Furthermore, it has be asked by KPPU in
one of sessions with the representatives of Temasek, Mr.Goh
COPYYiong Siang (“Mr Goh ”):
“Question : Is it true that Ho Ching serves as an Executive Vice President in STT and STTC at the moment?
Answer : No.”
The Follow
Up
Investigatio
n over Mr.
Goh that is
available in
the
document
case of
KPPU
49. Secondly, it is more general. Mr Goh expresses a statement
referring to the policy of Temasek that Temasek does not ever
instruct or coordinate the commercial and operational decisions
with its subsidiaries:
“35. “It is a policy of Temasek for not instructings or coordinating commercial or operational decisions s with the companies to which Temasek has its shares. Thus far, the policy remains to be implemented.
36. Such strong and firm principles have been acknowledged by reliable international institution. The institutions are carefully monitoring the deeds of Temasek by confirming the policy and practices of Temasek. The Rating Report 2006 issued by Standard & Poor’s stated as follows: “Temasek seeks to ensure good governance, performance, and competitiveness at each TLC through ensuring a high quality board of directors…Temasek refrains from involvement in day-to-day decision-making.”
The
Statement of
Mr. Goh in
paragraph
33 to 35 in
the case
document of
KPPU
COPY37. The same goes for the Rating Report of Moodys Investor Services:
“Each [Temasek] investee company is managed by their respective management team and guided by their board of directors. Temasek is not involved in the daily commercial or operational decisions of its investee companies.”
50. In his investigating, Mr.Goh Yiong Siang categorically explains
that Temasek does not intervere in the decision making of
Temasek investee companies, including AMH.
“14. “Question: Does Temasek get involved in the investment decision making and management activity of STT and SingTel?
Answer: No, Temasek does not involve in operational fields and business decision in both companies. The decision on investment is taken by board of commissioner and management of each company ...”
“27. Do STT and SingTel report their investment development to Temasek annually?
Answer: No, they do not report to Temasek.”
“30. It is important for us to have a copy of TEmasek’s Statutes. Would you please explain the rights of Temasek in its capacity as an owner of SingTel and STT?
Answer: I want to repeat. Both companies treat Temasek as they do to other shareholders, our rights is the same as our rights in investee companies. We reserve rights as it is conducted by other shareholders to buy more shares or to sell or to maintain our shares.
“31. Question :. Would you please explain the rights of Temasek in its capacity as 100% shareholders to STT?
Answer: As I have already told. STT is our investee company. We see our investment from financial point of view. We do not involve in the making and
The Follow
Up
Investigatio
n over Mr.
Goh that is
available in
the
document
case of
KPPU
COPYoperational decision of the company because they have been performed by the board of directors and management of STT. Our Rights is not different with other shareholders. We are entitled to attend shareholder meeting and to have voting right.”
83. Question: Are there any names serving to STT and SingTel?
Answer: None of them serves as member of STT Board of Director STT, but Simon Israel. He is a member of board of directors in SingTel. Yet, he has been there before joining Temasek.
84. Question : Is one or the other serving for STT Com?
Answer: Nobody.
85. Question : Is one or the other serving for AMH?
Answer: Nobody.
86. Question : Is one or the other serving for AMHC?
Answer: Nobody.
87. Question : Is one or the other serving for ICL?
Answer: There is no.
88. Question : : Is one or the other serving for Indosat?
Answer: Nobody.
89. Question : : Is one or the other serving for SingTel Mobile?
Answer: There is no.
90. Question :: Is one or the other serving for Telkomsel?
Answer: Nobody.
51. Although the evidences are contended with, the RFI does not
show them that make it conceals the truth.
COPY52. Thirdly, in its meeting with KPPU on 19 July 2007, Mr. Roes
Aryawijaya (“Mr.Roes”), the Commissioner of Indosat who is
nominated by Minister of BUMN, clearly confirmed that ST
Telemedia and Singtel competes each other:
Meeting
Official
Report
between
KPPU and
The
Ministry of
State-
Owned
Enterprise
(BUMN)
page 5 that
is available
in the case
document of
KPPU
“21. Question: Is Temasek influencing the decision in Indosat ? As far as I know. It is negative. To make it sure, would you please ask Mr. Setianto.
22. Do you mean the institution? STT or ICL? STT is very influencing, STT competed tightly with SingTel, concerning the capacity of SingTel as a shareholder in Telkomsel.”
53. Mr. Roes also shows evidence on the selection of director in
Telkomsel. It is fully transparent process:
“41. How is the mechanism of electing board of director in Telkomsel? The proposal to elect board of director is arranged in Shareholder General Meeting (RUPS), in this case the commissioner of Telkomse., Tantri Abeng proposed several candidates to State Minister of BUMN, at that time, Mr. Sugiharto.”
COPY54. Fourthly, RFI in item 78 also incorrect in mentioning that
Stephen Geoffrey Miller is CFO of AMHC and ICPL and that
Sheikh Mohammed is a Commissioner of Telkomsel. Sheikh
Mohammed is nominated by Qatar Telekom as an Indosat
Commissioner, and Qatar Telecom does not have any interest at
all in Telkomsel.
55. Finally, the accusation of KPPU concerning the influences of
Temasek Business Group to Indosat and Telkomsel by
coordinating their actions is inconsistent with the evidence
accumulated by KPPU from Dr. Ir. Bambang P. Adiwiyoto, M.
Sc. (member BRTI), in his meeting with KPPU on 10 July 2007:
Meeting
Official
Report
between
KPPU,
BRTI and
Directorate
General
Posts and
Telecommu
nication
that is
available in
the case
document of
KPPU
Nevertheless, Telkomsel and Indosat is competed, if it is seen from the perspective of technology”
56. Practically, Mr.Hasnul Suhaimi (“HS”), the CEO of
Excelcommindo (“Excel”), informed by KPPU to have leaved
Indosat in an unfavorable condition, also confirmed in the
follow-up investigation of KPPU on 9 August 2007 that:
The Official
Report of
Follow Up
Investigatio
n to
Suhaimi, on
COPYpage 5 that
is available
in the case
document of
KPPU
“Marginally, the market in Indonesia is still more competitive compared to the market abroad. In my opinion, the condition of cellular phone in Indonesia is over competitive. To my prediction, tariff will be in consumers’ side.”
G It is understandable that shareholders propose to name
directors
57. In RFI, KPPU also states in item 102 to 109 that it is possible for
ICL have any control to Indosat with its authority to nominate
directors in Indosat, Deputy managing director, Director of
Finance and Information and Director of Information and
Technology (IT) in particular.
58. Once again, KPPU diverts the evidence for the shake of coming
to its conclusion. Although ICL is entitled to nominate director
and commissioner of Indosat, the appointment of both positions
shall be approved by shareholders of Indosat. Deputy Managing
director also has to report to managing director, a Chief
Executive of Indosat, and in reality the managing director is
always nominated by the Government of Indonesia.
59. Further , Managing director of Indosat, Mr.Johnny Swandi Sjam
who is nominated by the Government of Indonesia, mentions that
is nothing wrong with ICL to nominate director. He has also
nothing to do with the nominated directors including Director of
Finance and Director of Information and Technology:
COPY “45. Question : Which post does ICL remain to hold?
Answer: Deputy, Director of Finance and IT.
46. Question : To whom the position of ICL is given when the Director of Network is occupied by an Indonesian citizen?
Answer: Director of Operation.
47. Question : Why should Director of Finance always be taken by ICL?
Answer: As I known, investor usually handle the finance
48. Question : Why IT Director are always hold by ICL?
Answer: For all I know, Singapore is dominant in IT.’’
The Official
Report of
Follow Up
Investigatio
n to
Swandy
Sjam, dated
27 August
2007,
available in
the case
document of
KPPU
60. In displaying the facts, RFI does not refer to the statement of Mr.
Johnny Swandi Sjam. It disregards the fact that nomination is
approved through the transparent balloting by the whole
shareholders during RUPS.
61. There is no law infringing or improper for a shareholder with its
significant ownership nominating director for its subsidiary.
H. The deviation of KPPU over the evidence concerning
the procurement in Indosat
62. The evidence held by KPPU to prove ‘a control’ allegedly
conducted by STT is by relating it with procurement. The
evidence is wholly misinterpreted and it proves a form of
domination at all.
63. In item 104 to 115 Part IV of RFI , the Deputy of managing
director who perform operational activities of Indosat,
COPYprocurement included is accused, in this case to Mr.Khaizad B.
Heerjee (“Mr.Heerjee”). Hereunder we cite:
“111. Prior to the management led by Khaizad, the method of procuring network is non turn key under the management of Hasnul Suhaimi (Managing director) and it is that conducted by local company. It changes to become turnkey and conducted by foreign under Khaizad management (IOR of Wimbo S Hardjito date 25 September 2007); --------------------------------------------
112. That cancellation (by Khaizad) to the development method applied by Hasnul, is one factor that make Hasnul resign. It also indicates that the control of Indosat is in the hand of deputy managing director, let the managing director be a symbol. (IOR dated 22 August 2007);
113. The Cancellation leads to the absence of procurement decision to develop network. Such a condition was taking place in the first 9 (nine) month of 2006. It caused the business activities of Indosat is hindered and felt behind other operators. (IOR of Wimbo S Hardjito date 25 September 2007);
114. That the delay of network development is the basis of 4 (four) board of director of Indosat, Jhoni Swandy Sjam, Apocalypse Widjajadi, S. Wimbo S. Hardjito and Wityasmoro to meet Lee Theng Kiat (Commissary Indosat) in Singapore to explain the delay of network development that will be detrimental Indosat. In other hand 4 (four) board of director of Indosat give their assessment that Khaizad is incompetent to become a leader in Indosat (IOR of Wimbo S Hardjito date 25 September 2007);
115. To the information given by 4 (four) board of director, Lee Theng Kiat does not take action at all (IOR of Wimbo S Hardjito dated 25 September 2007).”
RFI , Part
IV,
Paragraph
111 to 114
64. In the first place, there is a suspicion that Mr.Heerjee is a party
appointed by ICL to control procurement process and to overrule
COPYsuccessfully the managing director. When the four Indonesian
went to Singapore to meet Mr.Lee Theng Kiat (“Mr.Lee”), he is
suspected to do nothing. All the facts are provided by
Mr.Wimbo S Hardjito (“Mr.Wimbo”).
65. RFI absolutely fails to use evidence that directly and clearly
submitted from one of the four “dissatisfied” directors,
Mr.Johnny Swandi Sjam which told very different information.
In his view, the board of director as a whole decides whether a
certain program shall be performed in turnkey or non turnkey.
The deputy of managing director does not control the
procurement and the board of director work in collegial way:
21. Question : Who does make the policy program of changing it to turnkey project?
Answer : As far as I know board of director through board of directors meeting in 2006.
34. Question : How about procurement ?
Answer : For a procurement above USD 5 million, the approval of managing director is needed.
35. Question : What about a procurement under USD 5 million?
Answer : There is a rule on it concerning its authorization.
36. Question : Since 2007, are there any procurement above USD 5 million?
Answer : Since June 2007 (I have been a managing director), at least there were 2 procurements above USD 5 million. Network Procurement, filter and CDMA.
37. Question : The procurement that only need Deputy’s approval?
COPY Answer : As I recall, the procurement around USD 1million to USD 5 million. But I am not sure the exact number.
38. Question : Shall Managing director know or approve procurement proposal?
Answer :To approve a procurement above USD 5 million
39. Question : In other hand, what is the authority of Deputy that need no approval from managing director?
Answer : All the things usually conducted in Collegial, in the sense of discussed in the meeting of board of director
66. The testimony of Mr.Jhonny Swandi Sjam that cited above are
conducted in collegial, in line with the Statutes of Indosat, for
example, stating that all decisions of the board of director
meeting conducted by deliberation for general consensus, and
otherwise succeed by majority votes.
67. RFI also really disregards that this evidence is justified by Mr.
Roes, who were an Indosat Commissioner:
“28 Is it true that after Mr.Hasnul retiring the position is automatically occupied by Mr. Khaizad, but the proposal of Bapak Hasnul is refused? Is it true?
No. There are many different opinions. The proposal of Mr.Hasnul was tried to be applied in the company; nevertheless, in field, in managerial level, there were many oppositions against him. The board of director prefer to low pricing to consumer.
The Official
Report of
Follow Up
Investigatio
n to Mr.
Roes, dated
19 July
2007,
available in
the case
document of
KPPU
COPY68. Further, Mr. Roes explains that the long period of vacuum
position left by Hasnul is not caused by STT:
An
interview
with Mr.
Roes, on
page 7 of the
case
document of
KPPU
30. Question : As a commissioner, according to Mr. Roes, is the atmosphere in the mid manager level is such bad that the vacuum for the position is far too long?
Answer: It due to the lack of Minister of BMN to take action. Besides, it is also caused by the resistance of mid level manager, 750 people.
31. Question : Does it happen due to the refusal of STT?
Answer : No
69. The opinions of Mr. Widya Purnama, Mr.Johnny Swandi Sjam
and Mr.Roes Aryawijaya differ much with those given by KPPU.
Although it has been mentioned that Mr.Johnny Swandi Sjam is
one of directors who is suspected of expressing his complaint to
Mr Lee, RFI is really negligence in explaining why RFI only
rely on the evidence provided by Mr.Wimbo and not from
Mr.Johnny Swandi Sjam.
Although Mr.Heerjee is possible not to agree with managing
director in a certain problem it does not mean that AMH controls
board of director of Indosat. Directors can be in a regular way
agree or not to agree with something and that it does not mean
that just because one director is insistent on a certain problem,
such a director control board of directors.
COPY70. KPPU prefers to consider the evidence provided by “a
management staff of PT. Indosat (who asks not to disclose the
identity)” to those from Mr.Johnny Swandi Sjam. It is surprising
that KPPU based its report on the evidence from an eyewitness
who wish not disclose the identity. Without mentioning identity
in the official report, such a witness is unreliable because he/she
cannot explain the fact owned of opposes it from the evidence.
Such evidence is null and void.
The Official
Report of
Investigatio
n, date 22
August 2007
in the case
document of
KPPU
71. That the Government of Indonesia has replaced Mr.Wimbo as
one of Indosat directors based on the proposal of Ministrial of
BUMN. AMH give a same comment with Ministrial of BUMN.
Therefore, Mr. Wimbo may be not carrying well to AMH in this
case, and KPPU should not enters such a consideration in its
proof.
A Letter
from the
Ministry of
BUMN,
Annex 1
72. Concerning to the resignation of Mr. Hasnul, an article in
Detik.com on 5 July 2006 stated that he resigned for a personal
reason without any pressure on him. Further, officially
Mr.Hasnul is appointed as managing director of Excelcomindo
on 1 September 2006 during RUPS (AGM) of Excelcomindo.
Although STT does not know the private reason of Mr.Hasnul
behind his resignation, the evidence submitted by Mr. Roes
Aryawijaya indicates that Mr.Hasnul did not resign by the
intervention of Vice Managing Director.
An Article
on 5 Juyi
2006 in
Detik.com,
Annex 2
73. Even if Hasnul has resigned, the Government of Indonesia can
use its right under Article 20(3) or Article 21(1) of Indosat
Statutes, to nominate the appointment of new Managing Director
or asks to perform RUPS regarding to the problem. The
following is the Investigation Official Report of Roes:
COPY “Why should be a vacuum in top management of
Indosat, is caused by the refusal of STT?
No. The problem is in Indonesia itself.
The Official
Report of
Investigatio
n of Mr.
Roes that is
available in
the case
document of
KPPU
74. The Government of Indonesia does not nominate for Managing
Director until the date of Annual RUPS of Indosat on 5 June
2007. The proposal for the nomination is enclosed.
Letter fro
the Ministry
of BUMN,
Annex 1
75. The failure of KPPU in evaluating relevant evidence in its case
document, clearly indicate that RFI was prepared to come to a
conclusion of the infringement of Article 27 by ignoring existing
evidence.
I. The conclusion of RFI is illogical because the decision
conclude that the Government of Indonesia is
incompetent
76. KPPU realizes fully that the Government of Indonesia is a
significant shareholder either in Indosat or Telkomsel.
Unfortunately, the facts are ignored in RFI. Another
investigation has ever been conducted by KPPU was
investigation with Deputy Minister of BUMN, Mr. Roes
Aryawijaya that should be cited:
“2. How are the composition of board of director and commissioner in each company, Indosat
The Official
Report of
COPYand Telkomsel?
Indosat : 4 board of directors are from STT, 5 from Telkom, 4 commissioners are from Telkom and 6 from STT. While in Telkomsel there are 3 board of directors from SingTel and 2 from Telkom.
3. Is STT dominant during decision making?
In the decision making we always concerns good corporate governance and avoids implementing voting mechanism. We do that in the meeting of Indosat board of director and commissioner.
Investigatio
n of Mr.
Roes, dated
19 July 2007
in the case
document of
KPPU
77. In the part where KPPU discusses accusation on ‘”authority” of
Temasek, KPPU has eliminated the fact that Deputy Minister has
explained not only in selecting a number of director and
commissioner in Telkomsel and Indosat by the Government of
Indonesia but also in becoming active participant to control
initiatives and to attend a numbers of meetings.
78. If the ability to elect director and commissioner as well as double
position people is the evidence of “controlling of the holding
company”, then the facts show that (i) the Government of
Indonesia (acted via Minister of BUMN) is a shareholder either
in Indosat and Telkom (that has more than 50% of Telkomsel’s
shares and control it); (ii) the higher officials from the Ministry
of BUMN serve as commissioner in Indosat and Telkom; (iii)
people assigned by Ministry are those serving as member of
board of directors, shown that Government of Indonesia control
both Indosat and Telkomsel.
79. The conclusion of RFI’s stating that Temasek (that only has
indirect minority ownership in Indosat or Telkomsel) “control”
either Indosat or Telkomsel is unreasonable. Logically, it
COPYconcludes that the directors and commissioners appointed by the
Government of Indonesia. It is surprising that KPPU has come
to conclusion without any evidences to support.
80. It is opposed against the fact, between evidence in the case
document of KPPU and the “Government’s Elucidation”. It is
stated that, on page 14 of the case document of KPPU, the
“majority” share of Telkomsel “owned and controlled” by PT
Telkom Plc., and further, that STT and SingTel are separated
each other.
SingTel has 35% of Telkomsel’s shares with the limited management representation, in which the majority share of Telkomsel is owned and controlled by PT Telkom Plc. SingTel also is a public corporation that bring interests not only for Temasek as a shareholder but also public interest. Either SingTel or STT is managed by separated management team and competed freely in fixed access of cellular area, and internet service in Singapore. Concerning STT and Indosat, it is important to recall that that Indosat is also a public corporation, bring interests not only to STT but also to shareholders (government with 15%, overseas public shareholder/NYSE 30%, and domestic shareholders less than 13%).
STT and/or SingTel are owned by Temasek with each part are independence and competition between them must be subject to law and legislative regulation that go into effect in Indonesia either in the field of telecommunications, business competition, or capital market.
81. From the Government’s Elucidation, it is clear that the
divestment in Indosat has been considered carefully by member
of House of Representatives (DPR) in Indonesia. The more
importantly, DPR has obviously seen that there is no problem
concerning cross ownership because the majority shares in
Telkomsel are owned and controlled by the Government of
COPYIndonesia.
82. It shows that RFI is partial. RFI does not take well-balanced
approach, in which RFI considers and conducts an evaluation to
the evidence that explains and alleviates the position of AMH.
On the contrary, RFI even disregards the evidence provided by
DPR. KPPU does not consider this case fairly and precisely.
VI. THE ACCUSATIONS OF THE INFRINGEMENT TO
ARTICLE 27 ANTI-TRUST LAW
83. Article 27 of Anti-trust Law states:
“Business actor shall be prohibited from owning majority shares in several similar companies conducting business activities in the same field on the same market, or establishing several companies with the same business activities on the same market, if such ownership causes
a. One business actor or a group of business actor control more than 50% (fifty percent) of the market share of a certain type of goods or services.”
84. KPPU cannot prove the whole elements of Article 27
(e) AMH is not a business actor.
(f) AMH does not have majority share in Indosat or Telkomsel.
(g) AMH does not control more than 50% of the relevant market.
(h) AMH does not abuse dominant position.
COPY85. Firstly, KPPU thinks that the whole Temasek Businesses Group
have to be considered as a single economic entity. Secondly, the
Temasek Business Group is suspected “to control” some entities
in Indonesia, Indosat and Telkomsel. Thirdly, Business Group
Temasek is suspected to use its influences in Indonesia, therefore
KPPU has an authority to apply jurisdiction extra-territorial to
Temasek Business Group, in accordance with practices suspected
implemented by European Union.
RFI ,
Analysis,
Paragraph 5
86. The following defense statements indicate that KPPU has not
only distorted evidence but also legal interpretation in its effort to
come to groundless conclusion in RFI.
A. AMH is not a business actor
87. RFI is failing to mention defense statement of AMH that
companies within AMH are not entities under the jurisdiction of
KPPU.
88. The definition of jurisdiction is a fundamental condition to start
investigation of KPPU.
89. Jurisdiction scope of KPPU as it is stated in Article 1(18) of
Anti-trust Law, mentioning that KPPU will, for example,
“monitor business actor who perform their business activity”
(enhanced to emphasis).
90. In consequence, an entity is only under jurisdiction of KPPU if
the entity is a”business actor” as referred to Anti-trust Law. The
term ”business actor” is defined explicitly in Article 1 (5) of
Anti-trust Law as, ”individual or corporate body ... that is
founded and is domiciled or to conduct activity in the territorial
COPYjurisdiction of the Republic of Indonesia, either by itself or
jointly under agreement, carrying out various business activities
in the field of economy.” (enhanced to emphasis)
91. During Preliminary Investigation, the Reported Party is identified
as ”Temasek Business Group”. Although RPI, further jointly
refer to the Reported Party as ”Temasek Business Group”, AMH
note that LPP clearly defines any entity suspected to form
”Business Group” as separated ”Reported”.
92. In RFI, the companies to which we refer to as AMH is conceived
as the Reported. Nevertheless, as it is mentioned above, there is
no certain accusation addressed to them. At the moment, the
accusation is addressed to Temasek. It is obvious that even
KPPU “confuse” to which party the investigation is conducted to.
93. Under Article 1(5) of Anti-trust Law, AMHPL, ICL and ICPL
clearly excluded from the definition of “business actor”.
94. First of all, AMHPL, ICL and ICPL is not “founded” or
“domiciled” in Indonesia.
95. Further, the most important thing, as it is intended by Article
1(5), AMH does not “perform any activity” in Indonesia. All
“activities” in Indonesia are performed by Indosat. AMH is
unutterable “conduct” activities because the business of Indosat
is managed by its own board of directors for benefiting Indosat,
therefore AMH does not take any operational decision in the
business of cellular telecommunication of Indosat. Based on the
above reason, the status of AMH toward Indosat limited only as
indirect shareholder of 30% Indosat’s shares. .
COPY96. The Following up Investigation of KPPU is relied on bias
interpretation of Article 1(5) Anti-trust Law. After referring to
the definition of “business actor” in Article 1(5), RFI further
states (in item (A)(2)) that:
The Report
of
Preliminary
Investigatio
n
…Any activity of business actor that are not founded and not domiciled in the territorial jurisdiction of the Republic of Indonesia but its activity impacted the competition in the territorial jurisdiction of the Republic of Indonesia is subjected to the stipulation in the Law No. 5/1999.
(enhanced to emphasis)
97. With all respect, this statement deviates from the definition of
“business actor”, according to Article 1(5). The concept of
“activity that have impact to the competition in… Indonesia” is
broader than the condition of “performing activities in …
Indonesia,” according to Article 1(5). The last sentence signifies
an active involvement in Indonesia, but not for the first. The
conduct of equalizing the two different concept has distorted the
actual meaning of Article 1(5) Anti-trust Law, therefore, it has
unfairly extended its jurisdiction that actually beyond its
authority.
98. The Item (A)(2) of LPP refers to consideration of (c) of the Law
and it emphasizes that “anyone who perform business in
Indonesia must stay in healthy and fair competition nature”
(enhanced to emphasis). The reference “to perform actual
business in Indonesia” has supported the interpretation of AMH
and those of KPPU to the term of “business actor”.
99. The term “to perform business in Indonesia”, is similar to
“performs activity in … Indonesia”, it requires a positive
COPYinvolvement in business/activity in Indonesia. The two concepts
is narrower than those offered by KPPU on “activity that
impacted competition nature in Indonesia.”
100. In international law theory, there are 4 principles in applying a
jurisdiction:-
(a) territorial jurisdiction,
(b) personal jurisdiction,
(c) jurisdiction according to the protective principle and
(d) jurisdiction according to the universal principle.
Ian Brownline, Principles of Public International Law (Edition
ke-5: 1998) page 303-7
101. The two basic are not applicable because AMH is not Indonesian
or in its region. Jurisdiction Universal are also not applicable
because AMH does not conduct any international crime resulted
on this.
102. Causality Doctrine only goes into effect in particular limited
circumstance, that is if it can be indicated that
(a) its application must be relied on the deed that is suspected
to conduct intentionally to the visited.
(b) The cundact must have extra ordinary visited country
103. KPPU cannot prove even on of these conditions. KPPU does not
affirm any evidence of AMH's deeds addressed to Indonesia.
COPYSecond, KPPU also does not prove “any extraordinary
consequences” for Indonesia.
104. In Indonesian law interpretation, there is only one member of
KPPU, Dr. Ir. Benny Pasaribu that seems to consider the
evidence in the case document of KPPU:
“I do not find any evidence that Reported Party I to Reported Party IX are business actors as referred to Article 1 item 5 of the Law No.5/1999. The fact is, The Reported Parties are corporate bodies that are founded and domiciled not in the territorial jurisdiction of the Republic of Indonesia. Several Reported Parties also do not perform business activity or business transaction in the area of cellular telecommunication in Indonesia. Although Reported Party VI and Reported Party VII own shares in PT. Indosat and Reported Party IX owns shares in PT. Telkomsel, they are improvable to conduct transaction of cellular telecommunication goods and/or service in Indonesia. The shareholders are improvable to conduct and/or take cellular business decision. The fact, its market also differs: stock exchange activities in capita market and cellular business in goods and service market – often called also as “real sector”. There are also fact that board of commissioner and board of director of PT. Telkomsel and PT. Indosat that conduct operational activity and take decision on cellular telecommunications business in Indonesia, not shareholder or the Reported Parties.”
B. AMH does not have “Majority Shares”
105. The objective of suspicion 1 is that Temasek owns “majority
share” in 2 providers of telecommunication services in Indonesia
through its subsidiaries. It is incorrect.
(i) KPPU equalizes the term “Minority” shareholder and
“Majority” shareholder
COPY106. The actual understanding of “majority share” is an ownership
more than 50% of shares in a company. In general, the words
‘majority’ and ‘minority’ are exclusive. It means one only can
hold majority ownership of share. In the expert statement,
exhibited in the defense of STT, Professor Hikmahanto
emphasizes that in the Law No. 19 /2003 on State-owned
Enterprise (“The Law of BUMN”) and the Law No. 8/1995 on
capital market, the two laws define the term of majority
shareholder and they could be a best guidance in determining the
definition of the term in this context.
The Report
of expert,
Professor
Hikmahanto
, page 2, 4(c)
exhibited in
the First
Statement of
STT
available in
the case
document of
KPPU
107. The elucidation of Article 15 (2) of the Law No.8/1995 on
Capita Market defines “majority shareholder” as:
“Majority share is shareholder that has more than 50% (fifty
percent) of subscribed and paid-up capital.” The Report
of expert,
Professor
Hikmahanto
, page 2, 4(c)
exhibited in
the First
Statement of
STT
available in
the case
document of
KPPU
108. Further , there is no international law principle that permit KPPU
to use extrateritorial jurisdiction to STT. As it is mentioned by
The Report
of expert,
Professor
COPYProfessor Hikmahanto in his second expert statement:
In the expert report of Professor Hikmahanto attached in the
statement of STT in the case document of KPPU, Professor
Hikmahanto emphasizes that the law on BUMN defines State-
owned Company (“BUMN”) as a corporate law which part or in
a whole capital owned by the state.
Hikmahanto
, page 2, 4(c)
exhibited in
the First
Statement of
STT
available in
the case
document of
KPPU
109. Article 1 (1) of the Law of BUMN mentions as follows:
“1. State-owned Enterprise, Further referred to as BUMN, is a corporate with its capital owned by state through direct equity of dissociated national wealth.”
The Report
of expert,
Professor
Hikmahanto
, page 2, 4(c)
exhibited in
the First
Statement of
STT
available in
the case
document of
KPPU
110. Article 1 (2) of the Law of BUMN mentions as follows:
“2. Company, hereinafter referred to as Persero, is a limited company of BUMN with its capital divided into shares owned in whole or at least 51 % (fifty percent) by the Republic of Indonesia aiming at having profits.”
The expert
Statement of
Professor
Hikmahanto
page 3, item
COPY4(c)
exhibited as
First STT
Statement
(ii) “Grammatical” misinterpretation of KPPU toward Article 27
111. The first “interpretation” of KPPU, a grammatical interpretation.
It consults two different dictionaries but only the second
dictionary, Black’s Law Dictionary provides a term of “majority
shareholder”:
“a shareholder who owns or controls more than half a corporation’s stock”
RFI ,
Analysis,
Paragraph
10
112. AMH as a whole agrees with this definition. Nevertheless, RFI
refuses the approach arguing that there is “different type of
share”. It is possible that someone may controls more than 50%
of voting right in a company without controlling more than a half
of the same shares. Even if this definition can not be
implemented because of differentiation of share class, the reason
was that it can not be implemented if one of share holder has less
than 50% of all shares and has special right, or share holder that
has more than 50% of share, but has rights that removed. Basic
of this thing is that ‘the majority’ is not reflection of voting right.
AMH aim to highlight that its all share in Indosat is common
share that has same right with other share that belong to other
share holder, except A series share that belong to Government of
Indonesia. Because of AMH doesn’t have bigger right, this is
show that AMH can not be a majority share holder. RFI does not
cite any evidence that indicate that Temasek controls more than
RFI ,
Analysis,
Paragraph
18
COPY50% voting right either in Telkomsel or Indosat. The content of
RFI in whatever reason is illogical. The definition wants to say
that Temasek is able to control voting rights of other important
shareholders such as the Government of Indonesia
113. Although someone approaches the definition of “majority
shareholder” in voting rights is not in the sense of amount of
shares, it must be noted that AMH remains not to hold majority
either in voting rights or in a number of shares in Indosat. Thus,
any definition applied, AMH remains to be under 50%. AMH is
only an indirect shareholder and has no voting rights in Indosat.
114. RFI ignores the fact that mostly used words in Article 27 do not
prohibit a shareholder to increase its level of “domination”.
Article 27 mentions majority ownership. Even when lawmaker
will refer to the those of concerning controlling, the lawmaker
has already conducted using simple language, for example in
Article 17 and 18 of Anti-trust Law.
” CHAPTER IV
PROHIBITED ACTIVITIES
First Part
Monopoly
Article 17
(3) Business actor is prohibited to conduct a domination to the production and/or goods marketing and/or service that can result the creation of monopolistic practices and/or unfair business competition.
(4) Business actor is suspected or assumed to conduct domination over the production and/or marketing of goods and/or service as
COPYreferred to in (1) if:
a. the pertinent goods and/or service do not have their substitution; or
b. causes entry barrier to other business actors in the competition of common goods and/or service; or
c. one business actor or one group of business actor control more than 50% (fifty percents) of market shares in one type and/or certain of goods and/or services
Part Two
Monopsony
Article 18
(2) Business actor is prohibited to control acceptance supply or become a single buyer to the goods and/ or service in the pertinent market that possible to cause the creation of monopolistic practices and/or unfair business competition.
(2) Business actor is suspected or assumed to control acceptance supply or to become a single buyer as referred to in (1) if one business actor or one group of business actor control more than 50% (fifty percents) of market shares in one type and/or certain of goods and/or services
(iii) “Disorganized” interpretation of KPPU toward Article 27
115. The “systematic interpretation” of KPPU toward Article 27 has
created ambiguity to the concept of ‘majority’ that is able to
influence decision making in a company. For example, in its
“systematic interpretation”, KPPU tells that a share ownership of
25% is able to consider as share majority ownership because with
such an ownership it is able to veto certain decisions. This is
COPYincorrect. It does not mean that if one party has ability to hinder
certain decision making in a company, the party is considered a
“majority shareholder” in company.
116. Further, if the statements of KPPU in paragraph 18 and 29 of RFI
are applied, it will come to illogical conclusion with the
following reasons:
(c) In the case of Telkomsel, Sing Tel (that only has indirect ownership for 35% in Telkomsel) will be considered a “controlling holder” in Telkomsel. If it is true, the “controlling holder” shall be Telkom and Sing Tel due to their positon as “majority shareholders” in Telkomsel.
(d) In the case of Indosat, KPPU is negligence to consider A series share of the Government of Indonesia in which the shares give the Government of Indonesia rights to veto certain things that require special majority.
117. Although in certain level the whole shareholders are possible to
be influencing shareholders in a company by performing their
voting rights, such an ‘influence’ is not understood as ‘majority
share’. Each of these concepts is different, and the regulation will
use one of the words to submit a different thing. RFI
intentionally brings the word “majority share” to an ambiguous
meaning that make KPPU ignores the actual meaning of a rule.
(iv) Historical Interpretation
118. KPPU admits by itself that such an interpretation is unhelpful in
defining the term “majority share”.
(v) The teleological misinterpretation
119. The interpretation of teleology of Article 27, as it meant by KPPU in paragraph 22 to 23 of RFI, is to avoid a concentration of economic power in a single entity. The test
RFI,
Analysis,
COPYof power concentration is in paragraph 24 of RFI :
“Concentration of economic power, as it referred to number 2 above, is implemented through the centralization of economic decision making in the hand of one particular business actor. A decision can be effectively obtained if there is a real control owned by a business actor in a company. The company will implement the decisions. In the context of Article 27 of the Law No.5/1999, such companies have more than 50 % of market shares so that a control conducted by a business in it will affect to the pertinent market.”
page 63 of
RFI
120. It is seen from paragraph 47 of RFI that KPPU has already
concluded that Temasek positively control Indosat on the basis of
(i) Temasek’s ownership of 41.94% Indosat’s shares; (ii) the
rights of Temasek to nominate directors and commissioners; and
(iii) the authority of Temasek to specify the corporate policy of
Indosat. It is to be informed that the conclusion of KPPU above
is wrong and groundless for the following reasons:
121. In accordance with the statement of KPPU in RFI, the ownership
of more than 50% of voting rights aims at give a control through
its owner and it is appointed by KPPU as positive control. AMH
(and Temasek) does not have more than 50% voting right in
Indosat. Temasek only has 31% of indirect ownership in Indosat.
Thereby, it is incorrect if KPPU said that Temasek has 41.94% of
shares in Indosat. Even if it is true that Temasek has 41.94% of
ownership in Indosat (that is not true), the assumed ownership of
Temasek is still below 50%.
122. Further, it is untrue to say that Temasek has rights to nominate
director and commissioner in Indosat. Consequently, neither
Temasek nor STT can nominate directors or commissioners. Out
of 10 Reported Parties, there are ICL and ICPL that have right to
COPYnominate directors and commissioner in their capacity as direct
shareholders in Indosat. Nevertheless, the right to nominate
director or commissioner is also available for every Indosat
shareholder Indosat that meet minimum requirement (10%) of
total shares on hand but it is not exclusively valid to ICL and
ICPL. The whole share ownership of ICL and ICPL is less than
50%, therefore their votes can be defeated and have no ability to
act unilaterally.
123. In mentioning that AMH has an ability to determine corporation
policy of Indosat, KPPU has failed at all to consider that the
Government of Indonesia (as other shareholder of Indosat) also
has an ability to influence Indosat. The majority of Indosat board
director are assigned by the Government of Indonesia (including
Managing Director) and the Government of Indonesia is a holder
of A Series Shares that give it veto right to things that need
special majority, the Government of Indonesia (KPPU's
definition) also has an ability to execute control in the significant
level to Indosat, and AMH will not be able to act in unilaterally
to determine the corporation's policy of Indosat.
(vi) The implementation of irrelevant law by KPPU
124. The first regulation cited by KPPU is the elucidation of Article
10 (4) of the Law No.19 /2003. It actually supports the opinion
that it is different between controlling concepts and ownership of
majority share. The sentences cited by KPPU are:
“The understanding of commissioner adhere in the sense of human and of corporate, both known as commissioner member and commissioner Council respectively. What is meant by certain shareholder is a controlling shareholder or majority shareholder of a limited, public and the whole shareholders of limited closed company”
RFI ,
Analysis,
Paragraph
26 page 64
COPY125. It is not necessary to use the both phrase “controlling
shareholder” and “majority shareholder” if they are same in
meaning.
Nevertheless, they are different concept in reality, and Article 27
is limited only to relate to ”majority shareholder ” and not to
“controlling shareholder
126. Two other regulations cited by KPPU is BAPEPAM Regulation
No. IX.H.1 and Central Bank (Indonesia Bank) Regulation No.
8/16/PBI/2006 that define specifically ‘controller shareholder’
(both definition are little bit different), and not define ‘majority
shareholder’. This not at all relevant.
RFI ,
Analysis,
Paragraph
28-9 page
64
127. RFI states that there are no Laws and regulations that define
majority shareholder. It is untrue. RFI wholly ignores the
evidence cited above by Professor Hikmahanto:
RFI ,
Analysis,
Paragraph
27 page 64
(vii) The misapplication of foreign law and regulation by
KPPU
128. Concerning merger regulation, the references used in RFI are the
laws of European Union (“EU”), UK (“UK”) and the United
States (”US”) that discuss about share acquisition. It is different
with the way KPPU enforce Article 27, in this case, to punish the
existing shareholders.
129. No single law regulation in the foreign law cited by in RFI
defines “majority shares”. It is surprisingly that KPPU deviate
the foreign law in its effort to bias the actual meaning in
Indonesian laws.
COPY130. EC Merger Regulation cited by KPPU, (a basis of UK Merger
Regulation) for example, defines ‘concentration’ and not
majority ownership.
RFI ,
Analysis,
Paragraph
30
“Without lessen the intention of Article 4 (5) and Article 22, the Regulation goes into effect to all concentrations in a sense of community dimension as referred to in this Article.”
131. A concentration is defined in Article 3 of EC Merger Regulation
as:
“A concentration is assumed happened where there is change of defense control as consequence of:
(a) merger from two or more independent and previous effort or part of effort; or
(b) Acquisition, that conducted by one people or more that has controlled at least one effort, or by one effort or more, either by effect purchasing or asset, by contract or by different way, with direct or indirect domination from all or some of a or more other effort.”
132. It is absolutely different with the ownership concept of ‘majority
share’. It discusses a merger or taking over rather than on
existing ownership and it is measured by “controlling” and not
by ’majority’ ownership.
133. Part 7 of Clayton Act in United States, another regulations cited
by KPPU, is very different with Article 27. The regulation states:
“Nobody that conduct commerce or another activity that influence commerce can acquisition, directly or indirectly, all or every part of share or other capital share and nobody that at one's feet of Federal Trade Commission Jurisdiction can acquisition all or every
RFI ,
Analysis,
Paragraph
COPYpart of asset owned by others that also conduct commerce or activity other that influence commerce, that in line with commerce or activity other that influence commerce in any country part, effect of acquisition can lessen competition in substantial, or tend to result monopolies.”
41
134. Once again, there are two important differences. First, Clayton
Act discusses on share acquisition, and not existing ownership.
Second, Clayton Act uses the phrase ‘all or any particular part of
share’, a concept wider than ’majority share’. Concerning this, it
is ridiculous to implement regulations that sounded differently in
its effort to interpret the meaning of Article 27 of Anti-trust Law.
And so do all cases that interpret this Law will apply different
testing from the testing of “majority share”. Therefore, it is
irrelevant for the purpose.
135. KPPU shall realize that Article 28 and 29 (in Part IV of the Law
No.5) discuss on merger, consolidation and acquisition. Article
27 is found in Part III of the Law No.5 and in relation with the
existing share ownership. Nevertheless, RFI remains to make it
unclear for the actual meaning of “majority”:
(viii) KPPU has ignored the facts that the definition of majority
shares has been considered by KPPU and DPR in 2003
136. The Government of Indonesia, in the Divestment Document on
divestment process of Indosat, dated 4 February 2003, conducted
special consideration to Anti-trust Law and concluded that:
The White
Paper of the
Government
of Indonesia
on
Divestment
of Indosat
exhibited in
the First
COPYStatement of
STT
Under Anti-trust No. 5/1999, a majority ownership in many companies that conduct common business activity is prohibited. The ownership of STT in Indosat through ICL and not a majority shareholder (less than 50% of the listed Indosat’s shares). In addition, the ownership of a Singaporean company in Telkomsel is also less than 50%. Further , Minister of BUMN is sure that the law prohibits monopolistic practices, and not majority ownership
…Telecommunications Industry is arranged tightly and operators cannot determine policies including on tariff.
(enhanced to emphasis)
137. AMH also notes that there is another important document on
share divestment of Indosat in the case document of KPPU, a
document entitling “Government Elucidation in the hearing with
“the Commission and House of Representatives” on the share
sales.
138. This is a follow-up meeting on Indosat’s shares sale. The date of
the document was 2003. The most importantly is on page 11 that
states:
“Concerning the Law No.5/1999 on the Prohibition of Monopolistic Practice and Unfair Competition, particularly Article 27 and 28 (3), it can be elucidated that STT is not a shareholder of more than 50% of Indosat’s share. While the stipulation on the Taking over in Article 28 (1) of the Law No.5/1999 has not be regulated in the Government Regulation and Government Decree. Furthermore, the Ministry of BUMN on 23 January 2003 has meet the invitation of consultative meeting with the Commission for Supervision of Business Competition (KPPU), and until present KPPU need no further information from the
The
Elucidation
of
Government
in the
Commission
Joined
Meeting of
the House of
COPYGovernment/Indosat concerning the divestment of Indosat. Without keeping aside the information above, telecommunication industry is “highly regulated” by the Government.”
Representat
ives,
available in
the case
document of
KPPU
139. From the citation, it is clear that KPPU is not only knows the
divestment process but also firmly invited to present its opinion
whether the process infringe Article 27 or not. KPPU states that
there is no problem concerning the STT’s interests in Indosat.
Unfortunately, it has not been four years yet, KPPU takes a
different position. It shows that KPPU is inconsistent.
140. It must be noted that the participation of ICL (a subsidiary that
entirely owned by ST Telemedia) in Indosat divestment is also
approved by Indonesia Investment Coordinating Body (BKPM)
in its decision No.14/V/PMA/2003 dated 7 February 2003. By
offending to the decision of the investment at the moment, KPPU
has gone far beyond its authority. As it is expressed by Dr. Ir.
Benny Pasaribu:
Dissenting
Opinion of
Dr. Ir.
Benny
Pasaribu
“I have a notion that KPPU RI does not have the power to be competent to cancel, to take different decision, to take a legal action or to make a policy over the decision that had been taken by the government concerning the divestment of PT. Indosat, through open tender and awarded given to Singapore Technologies Telemedia (STT) in 2002. Because, the initial process of divestment was initiated by Government and the policy was a political decision of Government relating to the financial condition at that time. (Read Article 50 items a and Article 51 of the Law No.5/1999 that regulate the exemption”
141. Although AMH was absence when the divestment exist¸ AMH is
COPYrights router of ST Telecommunications and joint venture with
the Government of Qatar. The agreement was signed by
expecting that it will be protected. By offending the investment
after the initial statement told it so, a serious problem will be
faced by Indonesia concerning the uneasiness of foreign investor
to the legal security in Indonesia.
C. There is no evidence of controlling more than 50%
market share
142. The only evidence given by KPPU about market share is in
paragraph 105 of its analysis part. The followings are the market
shares of Telkomsel and Indosat:
143. The table shows that Indosat has less than 50% of market shares
of cellular telecommunication, and the ownership of AMH is
possibly less than that. Due to the position of AMH that does not
have an ownership in Telkom and/or Telkomsel, the further
analysis concerning AMH does not need to be done.
D. KPPU does not find an evidence of dominant position
abuse
COPY144. Professor Hikmahanto states in his first expert statement that is
presented along with the first Statement of STT that it is not an
infringement of the Law of Anti-trust simply because of its
dominant position resulted from the ownership of several
companies. The abuse of dominant position that causes an
infringement of the Anti-trust Law.
The First
Report of
Expert
Opinion,
Prof.
Hikmahanto
, page 8,
paragraph
1, in the
case
document of
KPPU has
ignored to
consider
such a
condition.KP
PU
145. According to Professor Hikmahanto, Article 27 (a) of the Anti-
trust Law shall be read on the basis of Rule of Reason of Article
27 (a) of Anti-trust Law is a part of Dominant Position and in this
case; Article 27 (a) of Anti-trust Law must be read together with
specific abuse of Dominant Position prohibited by Article 25 of
Anti-trust Law. Wide perspective reading of Article 27 (a) of
Anti-trust Law that the existence of Dominant Position merely
breaking the law lead to misinterpretation an ambiguity of Article
25 of Anti-trust Law because Article 25 of Anti-trust Law
enforced only if Dominant Position is abused.
The First
Report of
Expert
Opinion,
Prof.
Hikmahanto
, page 8,
paragraph
1, in the
case
document of
KPPU
146. Therefore, KPPU shall prove its accusations that Temasek has
obviously utilized its ownership to lessen a level of competition
COPYin the market. Majority ownership itself is not an infringement to
the Law. KPPU shall prove the existence of dominant position
abuse. KPPU must also prove the causality between share
ownership of Temasek and accusation of lessening competition.
If the dominant position is abused, it is an infringement. It is
stated that KPPU has not proved this case yet.
147. Besides, the mandate of KPPU is only to investigate the abuse of
dominant position and not the existence of dominant position
itself.
Report
Hikmahanto
, page 8 - 10,
in case
document
KPPU
The Report
of
Hikmahanto
, page 8 to
10 in the
case
document of
KPPU
(a)) Article 4 of the Presidential Decree No. 75 /1999, a
legal regulation that limited mission of KPPU. It is
stated that the tasks of KPPU is to conduct an
assessment whether it abuses dominant position or
not, as it regulated by Article 25 to Article 28 of the
Anti-trust Law .
Presidential
Decree No.
75/1999.
Article 4, in
the case
document of
KPPU
(b))Article 1 (9) of KPPU Regulation No. 1/2006, that arrange
the Procedures of Case Handling in KPPU, states that ”An
COPYinfringement is an agreement and/or activity of dominant
position abuse that cause monopoly practice and/or unfair
competition.”
148. The accusation of abuse in RFI is only Accusation 2
and Accusation 3, but the two accusations are
concerning the Telkomsel policy of price structure.
There is no accusation of abuse to Indosat as well its
shareholders. With the absence of the accusation,
there is no infringement to Article 27(a) of the Anti-
trust Law. Therefore, there is no basis from KPPU to
follow up the investigation.
VII. ECONOMIC AND FINANCIAL ANALYSIS
149. In this part we discuss economic analysis and finance of KPPU
and then we have a notion that:
d. The definition of market by KPU is incorrect.
e. The market is competitive
(i) The BTS Invesment is not an indication of competition
level in the market
(ii) Price charged by operator is a competitive price
(iii) The increase of concentration is not for AMH
(iv) AMH does not enjoy the expanding of market power
(v) KPPU ignores to prove that Indosat and Telkomsel compete each other.
f. The accusation of abuse by Telkomsel is not related to AMH
COPYg. The calculation of KPPU on consumer loss is untrue.
150. As a starting point, KPPU keeps on assuming that there is
coordination between Telkomsel and Indosat that is “engineered”
by Temasek. Unfortunately, KPPU has failed to identify the
concrete incentives for Temasek to get involve to such deed.
Paragraph
2.1 of the
2CA
Report,
Annex 3
151. It is stated as well by DR. Cento in his second opinion that has
evaluated carefully RFI in his second Report. (“Report 2CA”).
AMH uses the independent conclusion from Dr. Cento as part of
its defense.
A. The Wrong Definition of Market by KPPU
(i) KPPU applies wrong definition on Market
152. RFI concludes wrongly that product market shall be limited to
GSM, excluded CDMA (wireless fixed) or fixed access. The
geographical market shall be defined as the entire area all over
Indonesia.
RFI ,
Analysis,
Paragraph 6
to 16
(Product
Market) and
17 to 21
(Geographic
al Market)
153. RFI ignores a clear expert statement that geographical market is
defined correctly as Indonesia and product market is covering
fixed wireless service (FWA). In a developing country like
Indonesia, wireless and fixed wireless is actually substituted each
The
Statement of
AMH,
Paragraph
COPYother. The expert statement is available in Spectrum Report
presented by AMH; the Study of CSE is presented by AMH and
the Analysis Study presented by Temasek. KPPU does not
discuss the single reports in coming to the conclusion. KPPU
comes to its conclusion that market shall be treated separately.
88 to 96;
Spectrum
Report
Paragraph
2.1 that is
available in
the case
document of
KPPU
154. In checking through the case document of KPPU, AMH also
obtains a report from Institute of Economic and Social Research,
Faculty of Economic University of Indonesia (“LPEM Study”).
The study of LPEM is also used by KPPU in other part of RFI.
Report of
LPEM in
the case
document of
KPPU
155. Nevertheless, KPPU does not mention the fact that Report of
LPEM also finds an existence of competition between
technology CDMA and GSM, and the two products are
substituted each other. We cited and underlined the relevant parts
of the LPEM Report of LPEM as follow:
“Market structure in this industry is also determined by a platform used. An old operator like TELKOM develops TelkomFlexi that based on CDMA and INDOSAT with StarOne. Thereby, in cellular operator industry, CDMA and GSM competes each other to capture consumer. Such competition is called competition for market that is followed then with competition in the market. It means, determining the most used platform and then capture consumers as many as possible.
The Report
of LPEM,
Chapter 2,
paragraph
2.1 in the
case
document of
KPPU
156. The opinion is also confirmed by the team of Follow- up
Investigation of KPPU to Mr.Mas Wigrantoro (“Mr. Mas”) from
COPYTelecommunication Community (“MASTEL”)
28. Question: In your opinion, are FWA and GSM competitor?
Answer: Yes. Within an area code. It is inconsistent in a policy, how can be FWA mobile?”
The Official
Report of
Follow Up
Investigatio
n of KPPU
to Mr. Mas
dated 25
September
2007 in the
case
document of
KPPU
157. Professor Hikmahanto states in his first expert statement:
”In determining relevant market, KPPU must conduct evidence based and logical analysis. Under international best practices, if KPPU is wrong in defining pertinent market, then its decision can be revoked.”
158. RFI has made mistake in defining market. It is defined on
baseless evidence. It is a severe fault because it influences entire
process of investigation.
(ii) KPPU has calculated wrong market share
159. If the market does not define precisely, the market share
COPYcalculated to market player will also be different.
160. There are some permutations for calculating market shares, and it
varies along with the product (for example CDMA/GSM),
geography and set of measurement (such as revenue/a number of
customers).
161. As it is explained above, AMH does not have any control or
ownership to Telkom and/or Telkomsel that is why calculating
any part of Telkomsel’s market shares to AMH is incorrect.
162. It is incorrect to calculate market shares of AMH to Temasek for
instance, since Temasek has no influence in any form in the way
AMH manage its indirect investment in Indosat.
(iii) KPPU only takes 3 Operators in its Analysis
163. Finally, it must be noted that KPPU only calculate market shares
of three operators, reckon market share from 3 operators,
Telkomsel, Indosat and Excelcomindo:-
164. RFI ,
Analysis,
Paragraph
105, page 82
165. Nevertheless, according to Spectrum Associates there are 6
cellular operators with CDMA permit and 6 with 2G/2G permit
in Indonesian market:
COPY
The Report
of Case
Associates,
Paragraph
3.3, in the
First
Statement of
AMH
166. KPPU does not consider market shares of the player. The
calculation of KPPU is based on the assumption that the whole
market is shared only to three players and it is wrong.
B. The Competitive Market
167. RFI develops its analysis, in part B of Analysis, on the basis of
the fact that cellular communication market in Indonesia in
reality is not competitive.
168. In the following sub heading, C to G, we discuss some facts and
arguments cited by KPPU to support its assumption. We also
emphasize a number of indicators that miscalculated by KPPU.
They are about to conclude that relevant market, even if it is
limited to cellular phone, is very competitive.
C. BTS Investment is not an indicator of competition level
in the market
169. RFI concludes that Indosat’s investment in BTS is not as
aggressive as its competitors. KPPU observes the data until the
COPYyear of 2006 and conclude:
“Based on the above data, the growth of Indosat BTS is sluggish compare to its competitor. Actually, Indosat is in the closest position to a dominant player. The sluggish growth of the closest competitor had made dominant player optimize its market power.
RFI ,
Analysis,
Part IIIA,
Paragraph
96
170. There are important problems regarding this argumentation:-
(iii) The number of BTS station is not automatically a best indicator of competition; and
(iv) Indosat’s decision concerning the BTS investment was legal and logical.
(i) The number of BTS station is not automatically a best
indicator of competition;
171. Firstly, it is not clear whether a number of BTS stations are an
indication of competition in market. Finally, customer usually
more interests in service level from an operator than stations
amount BTS
172. The report of Case Associates is related to some competitive
indicator, and none of them used by KPPU.
173. ARPU (Average Revenue Per User) of the three main cellular
operators in Indonesia decreased significant in 2002 to 2006. It
was because of aggressive effort to develop of their basis
costumer by offering low prices
COPY
The Report
of 1CA,
paragraph
6.4, in the
First
Statement of
AMH
174. Indonesia was one of countries that has the highest monthly
churn rate among other countries in Asia
The Report
of 1CA,
paragraph
6.4, in the
First
Statement of
AMH
The Report
of 1CA,
paragraph
6.4, in the
First
Statement of
AMH
COPY175. Finally, if there is a monopolistic power, it has to be proved with
the high income of users, reflecting premium price that may be
imposed by abuse of such a position. However, a comparison of
Indonesia’s ARPU rates with other countries in the region shows
that it is on the lower end of the spectrum:
F ig u re 6 .9 : A v e ra g e re v e n u e p e r u s e r, Q 1 2 0 0 7
$3.58$4.00
$5.57
$6.91
$8.17$8.85 $9.09
$9.55
$15.51
$18.43
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
$18.00
$20.00
Bangla
desh
Pakist
an
Philipp
ines
Indone
sia
Russia
Thaila
ndInd
iaChin
aBraz
il
Malays
ia
S o u rc e : M e rrill L y nc h .
1CA,
paragraph
6.4, in the
First
Statement of
AMH
176. Based on these three measures alone, it is clear that prices in the
cellular market have declined since 2002, mobile subscribers
have a choice between operators and exercise this choice
regularly, and finally there is no indication that Indonesian
operators enjoy larger revenues per customer than other countries
in the region. 1CA goes even further and explores a number of
other metrics that reflect the competition on the Indonesian
market. Thus competition is alive and well in the Indonesian
Cellular Market and there is no indication whatsoever of any
abuse of market position.
(ii) Indosat’s decisions in relation to BTS investments are
legitimate and sensible.
177. Despite KPPU’s claim that Indosat is not investing sufficiently in
BTS, the data itself reflects the following:-
COPY RFI ,
Analysis,
Paragraph
93
178. It is clear that a number of BTS invested by Indosat certainly
increase from 2000 to 2006, grew from 1,357 to 7,221. In the
absolute term, the growth of more than 5 times is not a low
investment.
179. Further, there is a powerful business reason for not extending
network carelessly. BTS is a huge investment and reduce great
profits resulted from the depreciation result big reduction to
advantage [of] a company because of its deprived measurement.
The objective of KPPU’s investigation, in one side, criticizes
Indosat for getting lower profit and on the other hand, for having
low investment. In reality, high investment produces low profit,
at least for a short term. It is explained by Mr.Johnny Swandi
Sjam the official report of Further Investigation on 14 September
2007:
”25. Question: Why did Return on equity of Indosat decrease in 2006?
Answer: In 2006, we were developing, there was high deprivation that reduced income net but after the integration was performed the net income increased. The decrease was caused by high deprivation cost from the integration.”
180. The analysis of RFI is insufficient and it ignores evidence that
Indosat planned to invest for 3,500 BTS’s in 2007:
COPY ”19. Question: How did the procurement pattern
of BTS in Indosat?
Answer: Until 2006, we applied separated program, but we used turn-key project for BTS at the moment. It usually the development/procurement of BTS Tower are performed by vendor tower and then the radio is installed by big vendors such as Siemens, Alcatel, Ericsson, etc. Concerning that, we have been developing huge network (around 3.500 BTSs) since 2007, we decide to perform the work by turnkey project.”
The Official
Report of
Follow Up
Investigatio
n to
Mr.Johnny
Swandi
Sjam, l
181. Concerning KPPU’s criticism toward Indosat that has no
sufficient BTS so that Indosat cannot compete, It must be noted
that Indosat possesses 7,221 BTSs and other competitors such as
Hutchison thinks of being ready to compete by targeting 2,100
BTSs in 2011:-
33 Question: How many BTS have been built by PT Hutchison CP Telecommunications?
Answer: Around 1,000 BTS. We have been developing them since the end of 2005 and we target them for about 2,100 BTS until 2011.”
The Follow
Up
Investigatio
n of LPK,
dated 21
June 2007 in
the case
document of
KPPU
182. Finally, even if we continue with the assumption that (i) that the
growth of Indosat’s BTS development is low compare to its
competitor (ii) that it has a bad effect to the performance of
Indosat, KPPU has failed to explain that it is a best interest for
Temasek, with the assumption that Temasek tries maximize its
profit.
Paragraph
2.1 Report
2CA, Annex
3
COPY183. The building of BTS is the best way maximizing operator profit,
Temasek’s interest to ensure that either Indosat and Ttelkomsel
build as much station as can, because to benefiting Temasek as in
direct investor.
184. All evidences accepted by KPPU in step of its Further
Investigation are not reflected in RFI. If the facts are included,
description will be more well-balanced that Indosat has invested
much for BTS but it is equilibrated by the investment for gaining
more profit. Indosat also has planned to expand greatly in 2007.
The addition of 3,500 BTSs increases its network for about 50%.
The absence of consideration to the important evidence has
shown that KPPU comes to its conclusion without considering
the proofs.
185. The seriousness of Indosat (as it is proved in the statement of
Mr.Johnny) on the development of BTS to boost its network is in
line with improvement of capital expenditure of the company.
D. The Price Charged by Operators is competitive price
(i) The basic measurement of KPPU is incorrect.
186. The defense of AMH is also harmed by the negligence of KPPU
to present correctly the sources of its data so that it makes it
difficult to verify and to defend. For example, there are more
than 20 detailed diagrams and in paragraph 56 to 59 in Part V
relating to cellular tariff of the operators without mentioning
sources. Concerning the accusation is on monopolistic practices
in fixing high tariff, Telkomsel in particular, it is necessary for
AMH to know data sources of KPPU. According to AMH, the
tariff is not high and it probably KPPU is making mistake in
RFI ,
Analysis,
Paragraph
56 to 59
COPYreferring the data sources.
187. The prices cited by KPPU are as follow:-
RFI,
Paragraph
165,
188. The table is an average tariff. Nevertheless, the table is not
reliable to be a comparison because there are two tariff types,
“on-net” and “off-net”. The “on-net” tariff refers to price level
paid by cellular users who perform a call to other cellular users
within the same network. On the contrary, “off-net” tariff refers
to price level paid by cellular users who perform a call to other
network. The basic difference is in a call to other network in
which interconnection fee shall be paid. Interconnection fee is
arranged tightly by government, and service providers have less
authority on this. Thus, if significant comparison is going to be
made, the “on-net” tariff is suitable. Furthermore, there are
various discount packages offered by service providers. To
comprehend the price paid by consumer, the right basic
comparison is not based on ”on-net” tariff but the average of
“on-net” tariff paid by customer after all discounts are calculated.
(ii) The mistake of KPPU in Price Analysis
COPY189. The KPPU tables in paragraph 97 to 101 do not show whether
KPPU compares tariff or price. Tariff is not such a price indicator
due to the discount and free minutes call offered in all tariff
packages.
190. The only fraudulence touched by KPPU referring to price is
in two following paragraphs:
“In general, the retail price of postpaid increases although its subscribers also increase significantly. From the point of view of economic of scale, a high margin growth is belonging to operators. It is an interesting phenomenon because it seems that no competition occurs to fight for consumers and to decrease price. If they are competitive companies, each company will try to decrease prices as a significant factor to fight for consumers from its competitors.”
“According to Price-Leadership Model, a dominant company plays apart in fixing price while others come after such a price-fixing. It will happen if the follower companies have no bravery to compete on price because the economic scale is not relatively competitive. Price–Leadership is a form of tacit collusion that looks like cartel to consumers with the absence of agreement between the two parties and it simply a strategy of follower company to gain optimum profit by adjusting price with dominant company."
191. There is no basis to say that there is no competition to capture
customers or to decrease price. The price change level cited
above shows a competition to grab customers.
192. The Report of Case Associate 1CA also gives an evidence to
show that there is no reason to trust that the price in Indonesia is
fixed by anti-competitive. (See pa. 46 to 64). It is not considered
COPYby KPPU.
193. Firstly, compare to the international rate, the average price of
cellular in Indonesia is the lowest among OECD.
Report
1CA,
Paragraph
6.4 in the
First
Statement of
AMH
194. The Report of Case Associate 1CA also learns tariff changing
and general evidence of tariff competition based on the acts of
competitors are:
“Operator financial statement indicates that there
have already happened several times new price
offering refer to the level of price parameter
including new price launching, tariff fixed, starter
pack, free for registration expense, lengthening off
peak hour and other interesting offers for example
Indosat Mentari double free-talk (table 6.16).”
Evidence indicates that operator cellular is tightly
competing by to decrease price, especially starter
Report
1CA,
Paragraph
6.4 in the
First
Statement of
AMH
COPYpacks 84 The Credit Suisse reports that in the period
of June 2004 and September 2005, there were 10 (ten)
time of decreasing price from IDR. 50.000 to IDR
5.000 for starter pack. 85
It is designed to boost a number of customers and
cellular penetration and to respond the lost customers
in the competition with other operators. Telkomsel is
reported launched new edition of starter pack called
“Sympathy 10HOKI” offered new ten advantages’ on
15 March 2005, aiming at speeding up the growth of
SimPATI and to boost up the rate of movement
(churn rate).’86.”
195. KPPU’s opinion stating that Indosat chooses to follow
Telkomsel’s price independently without any discussion
among them, Indosat remains to be accused for “conducting
collusion”. Firstly, such argument was not logically
supported. If it is true, it has nothing to do with AMH. It is a
decision made by Indosat board of director.
196. In this case, Indosat cannot compete in price with Telkomsel
without lessening its profit. It strengthen the accusation of KPPU
to Indosat that Indosat gains low profits. KPPU shall be
consistence in its accusation. One of them is on KPPU’s blame to
Indosat for imposing high price (in line with price Telkomsel) or
KPPU alleges it for making insufficient profit. KPPU cannot
accuse simultaneously to Indosat with two contrary accusations.
197. AMH has also assessed an independent report compiled by Dr
Sri Adiningsih (“Dr. Adiningsih”) dated August 2007, in the case
The Report
of Dr.
COPYdocument of KPPU, concluding that although its industrial
structure is benefiting incumbent players, there is no indication
of collusion and price competition:-
Adiningsih,
on page 8 in
the Letter of
AMH dated
25
September
2007
“Although many new entries are entering market, the incumbent operator that have dominant position remain to have big market share either in fixed line wireless or cellular because incumbency advantage is going into effect in telecommunication industry in which incumbent has wide network and infrastructure as an advantage. Therefore, it is hard for new entries to compete in the pertinent market. Considering the geography and huge population of Indonesia that have not been served by the telecommunication service, it attracts new operators to enter fixed line wireless and cellular market. Low price is a common platform offered by new entries to capture consumers which leads then to the price war. It can be seen from the various advertisements in mass media. The new operator, tight competition makes the service vary, increasing consumers and quality of services. Under such condition, public gain advantages from the new development and competition among operators. It indicates that the market structure of telecommunication in Indonesia is tight oligopoly but price war among operators is possible to occur. The worries to the existence of collusion in this industry are invisible in the market.”
198. Dr Adiningsih also emphasizes its evidence that in reality there is
a price competition in any level among business actors:
“In other hand, tariff promotion also conducted by operator, for example PT Exelcomindo Pratama decrease its tariff for about IDR 149 per 30 second, while Simpati (PT Telkomsel) impose IDR 300 per minute for a call between 23.00 to 07.00. PT Indosat (Mentari) even gives free call about 00.00 to 05.00. It indicates that today, telecommunication industry in fixed wireless network and cellular in Indonesia is in
The Report
of Dr.
Adiningsih,
on page 5 in
the Letter of
COPY‘tariff war’ and operators just maximize their network capacities. Consequently, tariff war remain to keep on going until network capacities are fully used (Nathan & Atmira). The recent growth shows intensive tariff war among operators through the offering of various advantages such as free roaming, the same price of inter local and local call, pulse bonus, and others. Compare to the previous condition, tariff war among operators has made the decrease of cellular tariff as it is described in Table 7. The tendency of the decrease of cellular tariff indicate that the competition among cellular operators is growing tightens.”
AMH dated
25
September
2007
(iii) The failure of presenting the relationship of high tariff with
cross ownership
199. Concerning the allegations of KPPU on excessive tariff
conducted by Telkomsel, KPPU limits only to Telkomsel, and
not to other providers. For this case, KPPU's arguments fail
prove to find the relationship between Temasek's cross-
ownership and price.
Paragraph
2.4, 2CA,
Enclosure 3
200. Dr. Cento sees the fact that it is seldom to find anti-trust
behaviour intending to create excessive price. Broader analysis is
needed more than what has conducted by KPPU. Dr. Cento
mentions that by using EBITDA and selective comparison with
other countries as a benchmark is incorrect.
Paragraph
2.4, 2CA,
Annex3
201. It is due to reciprocal evidence, affirmed in the Report of Case
Associate 1CA indicating that Indonesia is one country among
other low income countries that has the lowest cell phone price, it
is ignored by KPPU. When KPPU uses other countries as
comparison, there are no adjustment on other structural factors in
Indonesia made by KPPU that have no relation with the cross-
Paragraph
2.4, 2CA,
Annex3
COPYownership of Temasek.
E. The Increase of Concentration
(i) The concentration measurement
202. Concerning to concentration, KPPU seems to use two different
measurement, Concentration Ratio (“CRn”) and Herfindahl-
Hirschman Index (“HHI”).
RFI ,
Analysis,
Paragraph
57
203. Such measurement is not a good choice actually because they use
common variable, market share. CRn is a total of market shares
controlled by ‘n’ topmost companies; HHI is a square of market
share for all business actors in industry. In this case, CRn and
HHI actually do not give truthfully choice of concentration
measurement. Posed at main Indication by CRn and HHI is big
market share.
RFI ,
Analysis,
Paragraph
58 to 59
204. As it is stated before that big market share will not bring
disadvantages. It happens because of its character of the industry.
The advantages appear only if there is collusion among business
actors. The only loss shown by HII is as follow:
“Oligopoly Theory that like cournot equilibrium very consistence if companies in market have big that relative same, so also have strength that relative same in market. On the contrary, Price-Leadership Model very consistent explains company behavior if there has been only one dominant company in market is... very small other company till relative powerless to vie with dominant company. In consequence, both model actually compatible used in the situation that extreme.
“In cellular telecommunication industry, each
company must establish an agreement,
RFI ,
Analysis,
Paragraph
78 to 79
COPYinterconnection agreement with other company
(competitor). Such condition tends to open an
opportunity to conduct collusion in the fields to
which it should be a competition such as pricing,
marketing and others.”
205. It must be noted that according to KPPU, the presence of
collusion is possible to happen because of its market structure.
There is only one dominant company, Telkomsel that has the
biggest market shares. The collusion is suspected to occur when
telecommunication companies shall sign an interconnection
agreement. Unfortunately, KPPU cannot identify the evidence of
collusive behavior.
206. Indosat has no power to compete with Telkomsel relating to its
market shares. Yet, it is normal in an industry because it shows
that any parties that enter into an industry have to do the best by
itself to compete. An interconnection agreement is also normal in
an industry. The argumentation of KPPU is that Indosat is
operating in an industry as it mentioned above and the
shareholders have to responsible to the suspected infringement of
Anti-trust law by Telkomsel.
(ii) The increase of Concentration
207. KPPU performs market research and the result shows that market
concentration increase in 2002-2006. It occurs due to the
improvement of HHI and GHHI. Unfortunately, AMH cannot
analyze the accuracy to the measurement of HHI and GHII
because KPPU does not state the data source, raw and proceeded
data. In this part, we refer to the KPPU’s statistic data but it does
not mean that we agree to the result of the analysis.
RFI ,
Analysis,
Paragraph
104 to 121.
COPY208. Arguments of KPPU can be summarized as follows:
The values of GHHI, annually tended to increase in the cross ownership period, vividly provides a conclusion that cross-ownership have brought a structure of cellular industry to be getting concentrated. It is disadvantage to fair compatition. The increasing of concentration will boost tor oligopolistic structure.
RFI , Part
IV,
Paragraph
122
209. KPPU states that there is a similarity between the period of cross-
ownership and the increasing of GHHI. The cross ownership has
increased GHHI. Such an opinion is hard to understand. At the
same period, the Government of Indonesia had also ownership in
two companies.
210. HHI is controlled by market share and it will be seen that the
only market player that increase within that period was
Telkomsel:
RFI ,
Analysis,
Paragraph
105
211. It means that the increase of HHI does not relate to Indosat. The
increase of HHI was controlled wholly by the market share of
Telkomsel. In reality, the contribution of Indosat to HHI actually
decreased from 8888 in 2004 to 465 in 2006.
COPY
RFI , Part
IV,
paragraph
109
212. If Indosat does not give any contribution to the enhancement of
HHI, the shareholders cannot be entangled in any way to increase
this HHI.
213. The most important thing is that KPPU has ignored confirmed
evidence that AMH plays insignificant roles in the major
decision of Indosat and its agenda Control much Indosat by
board of director and commissioner Indosat. (See the evidence
from Mr. Roes Aryawijaya). If the illogical conclusion is trusted,
the Government of Indonesia is the only party that is responsible
for it
(iii) The level of concentration is placed in one perspective
214. Finally, the high intended concentration numbers must be placed
in its perspective. The Report of Case Associate 1CA has
underlined that the market shares combined of Telkomsel and
Indosat equal to matured markets in Europe and the different
phase markets in Asia.
The Report
of Case
Associates
of 2CR in
paragraph
2.5, Annex 3
215. The mature markets, as in Europe, it usually has biggest operator
controlling for 40% of all customers, and in most matured market
in Europe, it reaches 80%. The second largest operator in this
The Report
of Case
Associates
COPYcountry has 20% of market shares or less. of 2CR in
paragraph
2.5, Annex
3
216. It also happens in Asian developing markets. In China,
Philippine and Korea for example, the biggest operator have
more than 80% of market shares. In Thailand, Bangladesh and
Malaysia, the two biggest operators have more than 70% of the
market shares combined.
The Report
of Case
Associates
of 2CR in
paragraph
2.5, Annex 3
217. It indicates that a high HHI is caused by the structure of the
industry itself. Although it is probably a little bit pushed by
cross-ownership of Temasek to Indosat and Telkomsel, it tends
to structure than industry itself.
(iv) The use of HHI Generalized
218. KPPU also uses GHHI to equip its HHI's based analysis. The
main difference between the two measurement is that GHHI
considers market concentration
2 CR,
Paragraph
3.1, Annex
3
219. Therefore, the main problem of measurement is the difficulties of
measuring correctly the control reflection of shareholders to a
company. The equation in RFI uses an assumption that control is
measured by the principle of “one share one vote” and based its
assumption on the shares predicted to be owned by Temasek but
it opposes with the fact that the Government of Indonesia has
shares with special votes in Telkomsel and Indosat that giving
the special control in both companies.
COPY220. The main criticism of Dr. Cento to the GHHI is that GHHI fails
to calculate the definition of law and institution that determine
the real control. Therefore, the other dimension given by this
measurement to HHI that usually has doubted values.
F. Market Power Improvement
221. On items 154 up to 171, KPPU analysis of market force
improvement, as it is measured from improvement EBITDA.
Again, without existence of explanation on how data “to
process”, AMH is harmed without can pass an opinion to the
accurate calculation or data extraction that presented by KPPU
222. The first Problem is that Indosat is business that diversified,
where Telkomsel and Excelkomindo focus at cellular services.
That is why, EBITDA numbers for Indosat express EBITDA
from its all businesses, that is junction fixed, cellular, wireless
junction and MIDI, whereas numbers of Telkomsel and
Excelkomindo will only express cellular business. If this
numbers used as the comparison, the comparison will not be
accurate. In this case, statement of KPPU that EBITDA of from
cellular operators always exceed 50% it is not accurate entirely,
as elementary from unequal comparison.
223. It must be noted that Dr. Cento has underlined that EBITDA
could have limited value in comparing to operators profitability.
It is various depend on the maximum phase that companies stay
in its investment cycle, and tend to be higher in the developing
markets where investors ask higher capital return for their
investment. Therefore, relying only on this numbers is wrong.
The Report
of Case
Associate
2CR,
Paragraph
3.4, Annex 3
COPY224.
Arguments of KPPU can be summarized as follows:
”The high market power that is suspected caused by concentrated structure because of cross-ownership can be addressed by some indications. For example the height of the rate of profit margin measured by EBITDA. The high selling price compared to other country, and the difference of the selling price and expenditure cost.”
RFI, Part
IV,
Paragraph
154
225. KPPU thinks that if operators obtain high EBITA, it
automatically the profit gained is also high and the profit is
higher compare to other countries
226. The argumentation of KPPU on EBITDA is incorrect. KPPU
assumes that EBITDA is a good measurement to count profits.
EBITDA is earning before Interest, Tax Depreciation, and
Amortization. Profits represent what a company has gained after
all costs are calculated while EBITDA does not calculate costs at
all.
227. KPPU ignores to calculate deprivation in fixing profit rates.
Indonesia is a huge country and many BTS shall be built to have
sufficient network coverage. A BTS reflects huge investment and
it has to be calculated to find the deprivation in order to calculate
company profits rate.
228. The most important differences between EBITDA and profits
have been clearly explained by Hasnul Suhaimi, the Managing
Director of Excelommindo during KPPU’s Follow up
investigation.
15. Question: How is your opinion about excessive profit
gained from the high tariff? The
Investigatio
COPYAnswer: Cellular industry is developing faster. I am
sure that the cash flow of each operator is still
negative. The only positive cash flow is Telkomsel for
its USD 1.5 billion investment. The cash flow of XL is
negative due to its 3 trillion investments. In 2007 for
example, EBITDA of XL was 3.3, while our
investment was 6.3 trillion. It is long-term investment
of XL. It is not a beautiful as people thought. I wonder
why many operators enter cellular market in Indonesia.
n Official
Report
Hasnul
Suhaimi
terdate 9
August
2007i in case
document
ofKPPU
the
Investigatio
n Official
Report
Hasnul
Suhaimi 0nl
9 August
2007i in case
document of
KPPU
229. The expensive investment in BTS stations causes negative cash
flow. The profits seem to be high if it is calculated from
EBITDA, and it is misleading. The substantial cost invested in
this business is in the development of BTS, and it is carefully
calculated by investor. Excelcomindo clearly states that its
investment “is not good as it is thought”. It shows that KPPU
suggestion to Indosat, for building BTS in order to be able to
compete, is not a wise suggestion. Once again KPPU has ignored
to consider the evidence in its RFI.
230. KPPU states in paragraph 162 of RFI:-
COPY ”The high values of EBITDA in the cross-ownership
period that is always above 50% indicating that business actors in telecommunication service industries have big market power. The market power owned are for creating monopolistic advantages that exceed double than the costs.”
RFI,
Analysis ,
item 162
231. Such a statement is groundless because (i) the EBITDA margin is
based on inconsistent input among business actors, (ii) there is no
reason to state that 50% of the EBITDA margin indicating
“sufficient” market force (iii) there is no measurement of
monopolistic profit (business income) as it is explained above.
232. In consequence, the conclusion of KPPU stating that there is
excessive profit in the mobile cell phone sector in Indonesia
groundless. At least, KPPU ignores to reckon two important
factors, depreciation and normal profit, the two factors reckoned
prior to conclude that business income available in an industry.
G. The allegations of an abuse by “Telkomsel”
233. In item 172 to 189, KPPU discusses market force of Telkomsel
and its abuse allegation. The market force of Telkomsel is seen
from the height of EBITDA (the mistake of this analysis has been
explained above).
234. Initially, we will show that Mr. Roes Aryawijaya in its meeting
with KPPU on 19 July 2007 state that the performance of Indosat
is getting better after the investment of STT in Indosat.
Therefore, Indosat cannot be sacrificed for Telkomsel.
The Meeting
Report of
the Ministry
of BUMN
on page 4 of
the case
document of
KPPU
COPY
47. 47. Question: Which company performance is better, before or after the purchasing STT in Indosat?
Answer: For EBITDA, it was 53% before and 57 % after acquisition. The increase of EBITDA margin is supported also by the technological development of MIDI.
235. Other big Allegation is that Telkomsel has used its market force
for “hinder” the competitors, specially by misuse offer strength
that the of referring to interconnection expense
The RFI,
Analysis,
part IV,
item 185 to
189
236. It was not have connection with Indosat. It explained clearly in
KPPU’s interview with Mr. Lioe Phan Koen, General Manager
of ICR of PT Hutchison CP Telecommunications
(“HUTCHISON”)
1. Question: According to the information we have, initially
PT Hutchison CP Telecommunications find interconnection resistance? Answer: Yes, but it has already finished by the mediation of BRTI.
2. Question: Would you tell me more detail? Answer: When we would have an interconnection, we had to sign an agreement that must be approved by BRTI. The rules on interconnection should be done by fulfilling certain requirements such as 48 ERL for its traffic.
3. Question: Is the requirement made by incumbent company? Answer: Yes, the requirement is made in its DPI by incumbent company.
4. Question: As long as the requirement is wholly conducted, there will be no new entry operating? Answer : Yes.
5. Question: So, is it impossible for new business actor or companies to pass the requirement? Answer : Yes.
6. Question: Do you think that the requirement constraint new business actors? Answer : Yes.
7. Question: Does the requirement have a technical justification?
Of follow-up
investigatio
n to LPK
date 21 June
2007 in case
document of
KPPU
COPYAnswer: There is a technical quantification but actually there is no single business actor is able to fulfill it. As long as I know, there is no such a requirement in Ministerial Decree.
8. Question: So, if the requirement cannot be fulfilled the interconnection is not approved?
Answer: It does not mean that it is unapproved but delayed until the business actor fulfills the requirement.
9. Question: Do all incumbent operators require such a requirement? Answer: Such a requirement is asked by PT Telekomunikasi Selular and in my opinion XL also leads to the same policy as it is done by PT Telecommunications Cellular.
20. Question : How about Indosat ?
Answer : Indosat does not require such requirement .
237. Involvement Indosat has been in clear denied by Hutchinson in
an interview that conducted by KPPU. Although, KPPU not only
already negligence to load this important evidence in RFI , but
KPPU even fixed with its argument that abuse that conducted by
Telkomsel must be in anyway controlled by Temasek crossed
ownership allegation.
H. Inaccuracy of consumer loss quantification
238. In paragraph 205 to 213 of RFI, KPPU states its argument that
Temasek crossed ownership has caused consumer loss. But
KPPU didn’t mentioned numbers of consumer loss.
(i) Inaccuracy of theoretical approach
239. The main basis used by KPPU in measuring consumer loss (in
COPYparagraph 190 to 200 of RFI) is to use other countries prices as
benchmarks and the Report of LPEM FE UI (in paragraph 201 to
203 RFI).
240. The first problem is whether the theoretical approach
implemented to determine consumer loss is true or not. The
report of LPEM uses framework of ‘Structure-Conduct-
Performance’ (“SCP”) as an analysis and it is one of Report used
by KPPU to quantify consumer loss.
Report of
LPEM in
case
document of
KPPU;
RFI,
Analysis,
paragraph
201.
241. According to the Report of LPEM, the task is to:
“Analyze Structure-Conduct-Performance cellular telecommunication sub-industry in Ind
onesia.”
Report of
LPEM,
paragraph
1.2, in case
document of
KPPU
242. The model is criticized internationally by Chicago School of
Economics. Dr. Adiningsih writes a newly report on it and we
cite as well. The report analyzes theoretical approach in the
context of our case.
The opinion
of an expert
Dr.
Adiningsih,
Enclosure 4
243. According to theory of SCP, the industrial structure will form
business actors’ conducts that influence later to their
performances. It is a theory benefiting regulator because it
expresses that industrial structure is not perfect. Like in
oligopoly, the players probably conduct collusion which gives
The opinion
of an expert
Dr.
Adiningsih,
paragraph
COPYthem super- normal profits (known as business income or
monopolistic profits) but causes consumer loss. This theory is
usually used to support a proposition that a presence of economy
is a presence of economic loss. In this case, the conclusion of
KPPU that high EBITDA claimed by cellular operators is a proof
of their market shares (paragraph 162 RFI) is based on this
theory.
2.1,
Enclosure 4
244. This Theory has been criticized sharply by Chicago School with
the reason that in many industries, what is described as
‘monopolistic profit’ is usually a company that enjoys efficiently
competitive excellence over the less efficient producers. In
reality, such companies cannot use their power to fix real price
due to competitive treatment. Such a company shall keep on
innovating to make it a leader. In this case, there is no ‘real
wealth loss, because all companies get ‘normal’ profit and not
‘economic’ profit.
The opinion
of an expert
Dr.
Adiningsih,
paragraph
2.1,
Enclosure 4
245. Dr. Adiningsih compares a great number of price and non-price
competitions among player, and concludes:
• The liberalization of telecommunication industry has
brought to a dynamics business competition in cellular
phone industry in Indonesia. The tight competition leads
to price war directly and indirectly (converted). Such a
price competition, for a long term will direct to perfect
competition balance, or more known as Bertrand balance.
• In addition to price competition, competition is also
tightening by the developing of innovative product. The
tight competition results to intensive promotion and the
changing of life style. It creates then a need of mobile
phone for the consumer who previously does not need it.
Therefore, the consumer develops faster and market scale
The opinion
of an expert
Dr.
Adiningsih,
Part
Conclusion,
Enclosure 4
COPYbigger than those of other countries.
• The monopolistic structure does not always produce
welfare loss. Monopolistic market with high potential
entrant pressure could perform like a perfect competition
market. In this case, some indicators show that industrial
structure of cellular market in Indonesia tends to be
directed to contestable market structure. In such market
structure, this Structure known by the name of contestable
market structure. In such market structure, the
government's duty is to keep market access open as wide
as possible. Besides, the Government needs to evaluate
any producer strategy, using rule of reason approach.
246. KPPU does not seem to have ever considered the mistake of the
theory. By assuming market shares per se shows that there is
consumer loss. It is absolutely possible to consider that the
market is ‘contestable market’, then there will be no consumer
loss produced since there is no single player is able to influence
price significantly. Dr. Adiningsih has a notion that Indonesian
cellular market has such kind of characteristic. The evidence,
either mentioned in her Report or the Report of Case Associates
1CA and 2CA, are taken from public sources and it supports the
statement.
(ii) Inaccurate calculating method
247. The starting point of KPPU is to determine correctly contra-
factual problems. The problem has to consider possible market
structure to prospectively exist without a cross-ownership of
Temasek.
The Report
2CR,
paragraph
2.2,
Enclosure 3
COPY248. The first assumption of KPPU in its calculation is that without
Temasek’s cross-ownership, the price tends to decrease to the
competitive level. Yet, the assumption is not accurate if the main
actor of the claimed unbalancing is the market structure itself
The Report
2CR,
paragraph
2.2,
Enclosure 3
249. The second mistake is to identify consumer loss exactly, liable to
the conduct of claimed anti-competitive. The accurate data to
exercise is to calculate exactly consumer loss (an it depends on
contra-factual, and not merely price in other market) and put it
into which part of consumer loss caused by cross-ownership and
the imperfect of other markets (such as market structure) and
other abuses (such as anti-competitive pricing by Telkomsel as it
is alleged). As it is underlined by Dr. Cento, this is an analysis
that is backed up by part of abundant data that is not included by
KPPU in RFI .
The Report
2CR,
paragraph
3.4,
Enclosure 3
250. Finally, the method used by KPPU, to compare price with other
market in Asia, has been criticized by Dr. Cento. It includes:
• assuming implicitly that the differences between
fixation of price and actual price (keeping aside the
problem in its calculation) can be wholly liable to the
cross-ownership of Temasek (that is not a problem
here );
• ignoring facts that omitting Temasek’s cross-
ownership will not omit excessive price in the
market that remains to be very concentrated; ;
• ignoring facts, that interconnection costs or termination
will be influenced by the changing or ownership because
it depends on the ending of monopoly.
The Report
2CR,
paragraph
3.5,
Enclosure 3
COPY• Hereinafter, the prediction of consumer loss is very
controversial. It because KPPU does not adjust different
factor in the countries used as bench mark. The Analysis
of KPPU assumes:
• that demand in all comparative countries is the same as in
Indonesia . It is not realistic due to the difference rate of
income in that countries;
• that the cost to provide cellular telecommunication in
all countries are the same. Again, it is not realistic
due to the different step of the establishment of
network in any countries.”
251. Further, it depends on the estimation of market elasticity on
demand, by assuming that the supply and demand condition in all
comparative countries are equal to Indonesia. It includes the
assumption that the cost of provide cellular telecommunication
service in the comparative countries are equal to Indonesia.
The Report
2CR,
Paragraph
3.5,
Enclosure 3
252. The approach using the Report of LPEM is questionable. Based
on paragraph 1.4, in the research methodology:
“Starting from a hypothesis that a tariff of cellular phone service (GSM) in the market structure of national telecommunication service market is higher than it should be, it is suspected to be a consumer loss.”
The Report
of LPEM ,
case
document of
KPPU
253. The Report of LPEM is started with a premise that there is a
consumer loss. Further, the report uses SCP framework to
explain the loss that is predicted to exist. The fact, the report does
not describe contra factual approach to which price in Indonesian
market, and the conclusion cannot be used as a precise prediction
COPYon consumer loss. The Head of LPEM FE UI comments on this
that is cited in part VIII below.
VIII.
THE INFRINGEMENT TO THE LAW
254. AMH also finds some important evidences in the case document
of KPPU concerning the termination of report by FSP BUMN in
which it is not discussed or mentioned in the report of KPPU.
The termination of report by FSP BUMN is initiated by Arief
Poyuono, the chairperson of FSP BUMN. The letter to KPPU is
about the worries, truth and integrity of the whole investigation
of the case.
A. The investigation of KPPU is stained
255. The most worry is the statement of Arief Poyuono in the meeting
with Suharto, an Altimo’s representative, describing that the
investigation process of KPPU is influenced by Altimo:
“1. That in the beginning of April 2007, the Chief of United FSP BUMN with his Attorney-in-fact met Suharto (Regional Director Strategic & Business Development of Altimo Central and South East Asia) at the office of Suharto in Wisma GKBI at Jalan Sudirman Jakarta. There were some thing come out from the meeting:
-That Suharto asked the Chairperson of United FSP BUMN to cancel press conference plan on the withdrawal of United FSP BUMN’s report to KPPU.
-At that moment, Suharto called someone, Muhamed Iqbal (the Chairperson of KPPU) and ask the forming of Preliminary investigation team. Suharto prefers Nawir Messi to Benny Pasaribu as the Chairperson of Preliminary Investigation
The letter of
FSP BUMN
to KPPU
date 18 July
2007
COPYTeam.”
256. It is unusual that Follow-up Investigation Report does not discuss
the evidence that directly questioning the partiality and integrity
of the investigation. Surprisingly, when the document appears
from the Reporting party that its report starting this
“investigation”.
B. KPPU keeps on continuing the investigation although
the report has been withdrawn
257. It must be noted also that in the different part of the letter, the
affirmation of STT is stated that KPPU continues its
investigation long after the report is withdrawn.
258. FSP BUMN submitted the report on 18 October 2006 and the
report is accompanied by two additional reports on 17 November
2006 and 22 December 2006.
259. According to Anti-trust law, in 30 days since the acceptance of
the report, KPPU is obliged to specify whether the investigation
must be conducted or not. The period has to end on 30
November 2006.
260. According to Article 43(3) of the regulation of KPPU, the step of
Follow up investigation must be finished in 60 days since the
acceptance of the report and it is possible to be extended for the
30 days to come.
261. However, as it is known that RFI is issued on 3 October 2007, a
year after the early report.
COPY C. KPPU has constrained the defense of AMH
(i) AMH is not given a chance in the Preliminary
Investigation
262. KPPU also has constrained the efforts of AMH to advocate
during investigation process. It was started when AMH was
summoned for the first time for a session in the Further
Investigation on June 2007, without any Preliminary
investigation at all previously.
263. Based on Article 1, Item 14 of the KPPU regulation:
“Preliminary investigation is a couple of activity that conducted by Preliminary investigation team to report the suspected infringement and to conclude whether Follow up Investigation needs to be performed or not.”
264. Therefore, based on the Regulation of KPPU, the Preliminary
Investigation shall be performed in order to decide whether
Follow up Investigation shall conducted or not for our client. Our
clients are not given a chance to get involved in the Preliminary
Investigation so that their important rights have been neglected.
The rights to mentioned are:
c) To have the result of Preliminary investigation (Article 34
of KPPU Regulation)
d) To inform the mistake and to be given opportunity to
changes its behavior before stipulating Further
Investigation (Article 29 paragraph (2) of the Regulation
of KPPU)
COPY265. The negligence of the rights of our client has resulted to the
important implication of AMH. Firstly, AMH has no information
concerning the allegation to AMH prior to be a party in the
Further Investigation. Secondly, it means that AMH has no
opportunity to discuss special deed KPPU wants from AMH.
Thirdly, AMH shall be displayed evidences that are owned by
KPPU in order to make AMH write appropriate defenses.
(ii) AMH is not given a suitable access to observe the case
document of KPPU
266. The case document of KPPU consists of many materials needed
by AMH to be learnt in order to be able to advocate correctly. It
is important because the RFI intentionally eliminates or not
discuss all relevant evidences that there is no infringement to
Article 27.
267. In this case, AMH objects strongly to the procedure used by
KPPU to in refusing to the material in the case document of
KPPU. It has been submitted to KPPU on 27 September 2007.
268. It can be seen clearly in Article 65 paragraph (2) of KPPU
regulation that our client should be given a permit to scrutinize
the evidences from KPPU in each step of investigation:
“In any step of investigation and the session of Council Commission, the Reported Party is entitled to:
e. scrutinize evidences used as the Investigation Summary.”
COPY269. On the contrary, KPPU refuses the request of AMH on 20 July
2007 to give an access to case document of KPPU by stating that
AMH is only permitted to see case document of KPPU in the
step of “Final Investigation”. Even if the opinion of KPPU is
correct (in which we cannot accept it), KPPU ought to consider
that there are many documents that shall be learnt, therefore
KPPU must give enough time to AMH.
270. The situation is worsened by the fact that KPPU has summarized
its Further Investigation on 27 September 2007 and KPPU
delivers it to AMH on 3 October 2007. KPPU finally permits
AMH to study the evidences in case document of KPPU on 5
October 2007 for only 2 hours. Further, upon our request KPPU
then permits AMH to check its document for 2 following day.
But there were no access toward document that that was given
after, although there were request from us.
271. The situations in which AMH is permitted to study the case
document of KPPU shows that KPPU is not serious in giving
opportunity to AMH for advocating itself.
(f) Firstly, the evidences are huge in number. The evidences
consist of 4 document boxes and 17 document folders.
Most of the documents are written in Indonesian. All
Reported Parties (unless Telkomsel) are foreigners,
therefore the documents shall be translated and give it to
clients before giving instructions concerning to the case.
(g) Secondly, the access to the case document of KPPU is
passed on the dates on the eve of Idul Fitri that make it
impossible to find translators.
COPY(h) Thirdly, most of the evidences are related to economy and
law. The expert consultants on anti-trust and economy are
needed in order to have AMH comprehend contain of
KPPU’s case document.
(i) Fourthly, AMH asks an access to certain documents
mentioned by KPPU in its footnotes of the report. The
documents are articles from journal (for example
Tinjauan terhadap Holding Company, Trust, Cartel and
Concern by Hashim Purba) and the passages of other
textbook (for example UK Merger Control: Law and
Practice). However, KPPU refuses to give access to
AMH by saying that there are ‘public document’.
Although AMH can find documents is if there are much
times, AMH does not see the reason of KPPU to refuse a
direct access of AMH, unless to lessen the available time
of prepare its defense.
(j) Finally, STT cannot translate the whole documents
because of the limitation of time, and KPPU refuses to
give opportunity to AMH to defense further after 2
November 2007. There is no reason for KPPU to confine
the Reported Party to check the case document.
(iii) KPPU has collided with the obligation of keeping the
confidentiality
272. AMH also very worries to the fact that some members of KPPU,
including its Chairperson have informed journalists that the
Reported parties are responsible prior to hearing to the defense of
the Reported Parties. It violates KPPU’s Ethical Conduct and the
deniable to the justice of the Reported parties.
COPY273. Since the investigation is started, the open statement of KPPU is
public consumption, and all express its opponent to STT and
other Reported Parties.
a. On 6 February 2007, in Investor Daily dated 6 February
2007, the Chairperson of KPPU stated:
“Today, there are many indication of unfair competition in telecommunications sector, crossed ownership as an example. It is proved that telephone tariff in Indonesia at this time is more expensive than Singapore and Malaysia.”
b. In article Harian Rakyat on 24 April 2007, Iqbal stated :
“There is a lot of indication on unfair competition in telecommunications sector, cross ownership as one of example. Telephone tariff in Indonesia at this time is much more expensive compare to Singapore and Malaysia.”
19. On 24 May 2007, the Chairperson of KPPU told journalist
that KPPU have found “lack of competition between Telkomsel
and Indosat”. Even, all statements are made before any
information to Temasek concerning investigation conducted to
Temasek.
a. On May 2007, Nawir Messi, Vice Chairman of KPPU
told Reuters that KPPU has “strong suspicions to bring
this case to a higher investigation level.”
Article
dated 6
February
2007 from
Investor
Daily,
Enclosure 5
Article date
24 May
2007 from
Agency
France-
Press in The
First
Statement of
AMH
Article date
7 June 2007
from
Business
times in the
First
Statement of
AMH
274. The statements to journalist oppose Article 5 (4) of KPPU’s
Decree No. 8/KPPU/Piece/XI/2000 on ethical conducts and
Ethical
Conduct
COPYworking mechanism KPPU: and
Mechanism
of KPPU
Enclosure 6
“The Commission Member is prohibited to give information to the public because it is able to influence the decision of Commission over the case that is being handled.”
275. The statements of KPPU to journalist is premature and able
influence KPPU’s neutrality that is in charge to decide a case.
276. In fact, even Dr. Ir.Benny Pasaribu, a team member Follow up
investigation has questioned a legitimization of the legal process
and hesitated RFI:
1. In an article of Seputar Indonesia on 24 October 2007, a former
Chairperson of KPPU, Sutrisno Iwantono states that in this case,
“monopoly is not proved because the share ownership is less
50%.”
2. An article in Antara News on 25 October 2007, a member of
Commission VI of House of Representative (DPR), Hasto
Kristianto reacted to the “strong controversy related to the decision
of KPPU” and the process of KPPU is not “transparent”and had
potential to threaten the climate of investment.
3. In article in Ekonomi & Bisnis on 25 October 2007, a
member of Further Investigation team, Dr. Ir. Benny Pasaribu
states that the substance of RFI is “irrelevant and not rely on
the objective idea.” He also comments that the procedure of
KPPU “is not favourable” and questions the premature
statements of KPPU to media.
Article
dated 25
October
2007,
Enclosure 7
COPY D. KPPU does not investigate Evidences
277. We are worrying to the objectivity of KPPU investigation from
the beginning. We are considering the reports in some media
referring to RFI that make us hesitate to the objectivity of the
team.
(i) KPPU is negligent to scrutinize the study conducted by
LPEM
278. One of the studies cited by KPPU is a study conducted by LPEM.
KPPU relies on the measurement of LPEM concerning consumer
loss.
279. It is interesting to note that the head of LPEM has publicly
inform that the proof of Oligopoly is very weak and need deeper
study on the structure of company cost prior to come to the
conclusion:
Commenting to the price rate in Indonesia as a second
highest in Asia, he said that international comparison is
hard to perform due to the different cost structure of each
country.
The Head of LPEM-UI, Chatib Basri, agrees that it is hard
to compare due to its complexities.
“I know other research concluding that comparing to other
countries in South Asia, our price is higher. Nevertheless,
the problem is not as simple as that because we have to
quantify its cost structure and economic scale," he said.
Chatib tells that the find no price fixing conducted by
industrial actors although it is reported by media.
Article
Jakarta Post
date 24
September
2007,
Enclosure 8
COPY280. In one of public forum, he also abolished the view that LPEM
report supported the view that there is co-operation between
Indosat and Telkomsel. He also criticize the way KPPU omitted
some significant substances in summarizing the report of LPEM:
“In his opinion: currently the sentence used from executive summary is “an indication of tariff uniformity is an early step to identify price fixing". But, there is another sentence following it, “nevertheless, it does not identify price fixing". The last sentence is omitted by KPPU.”
“Chatib explains that similar tariff pattern is not always interpreted as price fixing or collusive result. In the United States, the price fixing independently, unilaterally, and considering consensus parallelism is not assumed as Antitrust. .
Therefore, he affirms that statistic movement of mobile tariff between Telkomsel and Indosat cannot be concluded as cartel of the two companies.
The similar tariff Movement is possible to occurs due to the competition in the industry, so that it shall be seen carefully whether Telkomsel and Indosat formulating cartel tariff in telecommunications industry,” said Chatib in the public discussion entitled “Enforcing Business rule in the Globalization Era: The Case of Telecommunications Sector in Indonesia” in Centre for Strategic and International Studies.
Chatib admit that he does not know why KPPU comes to such a conclusion. “We do not for sure conclude that there is price fixing (or cartel) conducted by both company," he said.”
An Article
in tempo
date 20
september
2007
281. KPPU cites the report without entering qualifications made by
the Head of LPEM FE UI. Particularly, one of KPPU’s
conclusions that the tariff similarity supports the suspect that
there is cooperation. In the assumption of KPPU, quantifying
consumer loss through the practice in other countries is valid.
COPYTherefore, such propositions are those qualified by the
Chairperson of KPPU.
(ii) The criticism of Dr. Ir. Benny Pasaribu to the Further
Investigation
282. The severe criticism from Dr. Ir. Benny Pasaribu is on the
appropriate investigation. There is an obligation among members
for not discussing the investigation openly but the Chairperson of
KPPU breaks it by informing to mass media:-
Article
Antara
dated 25
October
2007,
Enclosure
10
“He also questions the attitude of the Chairperson of
KPPU for frequently exposed it to media, as if there has
been guilty parties.
Benny said that the result of the meeting agrees for not exposing publicly before there is a decision.
283. Intentionally, KPPU seems to backdates its report to make it as if
fulfill the regulation of KPPU although the fact is the opposite:-
“He said, in other hand conclusion making has been done beyond permitted boundary. Nevertheless, after the conclusion is agreed, the date of the conclusion is backdated. “Judicially, it is forbidden. The same goes for the forming of Commission Council, in which it is also backdated.”
284. If it is true, such dishonesty is worried. The dissenting opinion of
Dr. Ir. Benny Pasaribu is not backdated. It was 29 September
2007 or the deadline.
COPY285. Finally, it is seen that the members of Further Investigation has
no enough time to observe the evidences:
“Benny said that the discussion of RFI is limited. Due to the limitation of time, the members of RFI only revise the draft of the conclusion. “In my opinion, the substance is irrelevant and no objective rationale. It is better for me to have dissenting opinion than to revise and sign it.”
286. The comment of Dr. Ir. Benny Pasaribu affirms several of
worries of AMH such as a suspicion to its members, especially
Chairperson of KPPU for not conducting properly. The team of
Further Investigation does not consider objectively all evidences
submitted to them during Follow up investigation.
287. E. KPPU has treated AMH discriminatively
288. Finally, it must be noted that KPPU treats AMH discriminately.
It is seen in the way KPPU interpret the phrase “majority” differ
from its allegations to Sing Tel in one side and AMH on the
other.
289. Referring to SingTel indirect ownership in Telkomsel, 35%,
KPPU has an argument that SingTel conducts ‘negative
operation’ for enabling them to restrain certain decisions that
require special majority approval although their shares is less
than 50%.
RFI,
Paragraph
46
290. Nevertheless, if the testing of ‘negative operation’ is misused to
Indosat, it is clearly then that through ” Dwiwarna Share”, the
Government of Indonesia also is able to “restrain” important
decisions requiring majority approval. If we apply “negative
operation” parameter, the Government of Indonesia ought to
COPYbecome majority shareholder of Indosat.
291. Concerning Indosat, KPPU thinks that Temasek has ‘positive
control’ because Temasek has 41.94% of shares while other
shareholders that purchase the share in public stock exchange
have no power to act collectively.
RFI ,
Paragraph
47
292. Nevertheless, if “positive control” parameter applied in the case
of Telkomsel, Government of Indonesia should be the majority
shareholder in Telkomsel with its 65% of shares and has stronger
power to act collectively rather than SingTel.
293. The clearest indication of the discriminative behavior is in the
implementation of different benchmark of justice to different
parties. KPPU has been wrongly applies law just for getting a
conclusion that “Temasek” is a majority shareholder in Indosat
and Telkomsel. But, if KPPU tests it correctly, it will come up
with the conclusion that the Government of Indonesia and
Telkom are the majority shareholders of Indosat and Telkomsel.
In fact, there is only Temasek that is being investigated and not
the Government of Indonesia or Telkomsel. It is a clear
indication of discriminative treatment.
IX. CONCLUSION
294. The biggest problem in RFI of KPPU is:
i. The failure in quoting and showing proof that could be
accessed but went conversely towards the case against AMH
and other Reported Parties.
ii. KPPU does not consider factual evidence
COPYiii. Law distortion occurred again.
295. The unconsidered evidences are very important and the brief
summary on our defense statement, based on the evidences shall
be as follows:
(f) There is no Temasek Business Group. (Part V)
(g) The substances of Article 27 are not fulfilled. KPPU does
not apply Article 27 properly. (Part VI)
(h) Minister of BUMN has consulted KPPU on 23 January
2003 on the early divestment and other things referring to
the implementation of Article 27. At this time, KPPU
does not have right to question again the divestment.
(Part VI)
(i) The business and economic Analysis of KPPU is
incorrect. (Part VII)
(j) There is an evidence of mistakes and partisanship
conducted by the Further Investigation Team and
Commission Council, including the criticism of Dr. Ir.
Benny Pasaribu, a member of KPPU. (Part VIII)
296. This defense statement depicts AMH implementable defense
considering that KPPU has restrain AMH to advocate properly
such as the delay of issuing RFI for more than one week, the
rejection of accesses to case document of KPPU up to the eve of
Idul Fitri (concerning the difficulties of finding translator at that
time) and the rejection of mentioning the information sources in
its report clearly.
297. AMH asks all investigation to be terminated. There is no
COPYevidence in RFI that show the fault of AMH. The investigation
processes is an abuse of law process.
298. If the investigation of AMH is not terminated, AMH is entitled to
submit further defense statement if needed, because AMH cannot
observed thoroughly all documents in the case document of
KPPU that have not entirely translated yet.
299. This defense Statement is relied on Indonesian law and not be
based on international law or related international agreement.
AMH maintains all its rights under international law or any valid
international agreement.
19. Considering that further, on the basis of Further Investigation Report, Commission
Assembly has accepted responses of SINGTEL and ST Mobile on 30 October 2007
that in essence state the following things: -------------------------------------------------------
1. Singapore Telecommunications Limited (“SingTel”) and Singapore Telecom
Mobile Pte Ltd (“ST Mobile”) under investigation of the Commission for the
Supervision of Business Competition (“KPPU”) Indonesia on the suspected
infringement of Article 27(a) of the Law No.5/1999 on (“Anti-trust Law”).
Based on the Report of the Follow-up Investigation team No.
60/PEN/KPPU/IX/2007 (“Report”) dated 27 September 2007, accepted by
SingTel and ST Mobile on 3 October 2007, KPPU concludes that Temasek
Holdings Pte. Ltd (hereinafter referred to as “Temasek”) has infringed Article
27(a) Anti-trust Law through “Temasek Business Group” in which the group
covers SingTel and ST Mobile. Further, the report concludes as follows: ----------
(a) KPPU has owns jurisdiction over Temasek as well as “Temasek Business
Group ” based on Article 1(5) of Anti-trust Law because the corporate
bodies perform their businesses in the territory of the Republic of Indonesia.
The party to be referred as “Temasek Business Group” covers SingTel and
ST Mobile;-------------------------------------------------------------------------------
COPY(b) Temasek owns majority shares in two companies that operate in the same
field and in the common pertinent market that make it infringes Article 27
(a) the Law No. 5/1999 due to; -------------------------------------------------------
(i) Temasek owns and controls PT Indosat Plc., (“Indosat”) through
Singapore Technologies Telemedia Pte Ltd (“STT”) and owns and
controls PT. Telecommunication Selular (“Telkomsel”) through
SingTel and ST Mobile; and --------------------------------------------------
(ii) Such cross-ownership and control create high concentration of
industrial structure and market power as well as low competition in
cellular service in Indonesia. ---------------------------------------------------
Its fact, as it revealed in this plea, all accusations submitted and conclusion to be
taken to SingTel and ST Mobile do not have legal basis and facts. ------------------
2. The defense made based on Article 53 of KPPU Regulation No.1/2006 on the
Procedures of Case Handling in KPPU (hereinafter referred to as KPPU
Regulation No.1 / 2006). The main objective of submitting the defense is to
reaffirms the position of SingTel and ST Mobile before KPPU and to deny
assertively conclusion of the Report, none but. The main points can concluded
as follow: -------------------------------------------------------------------------------------
(a) The investigation process is null and void because KPPU does not hold in
respect to due process of law of SingTel and ST Mobile during the process
of investigation of the case ----------------------------------------------------------
(b) The Report does not provide a whole description on the facts of the case.
Conversely, the Report selectively presents and haphazardly relates facts,
assumption and, theory for benefitting the suspicion of KPPU; and
systematically keeps aside or distorts the whole evidences and analysis that
oppose against the suspicion. Thus, the Report significantly hinders the
ability of SingTel and ST Mobile to protect and to plead them. ---------------
(c) SingTel and ST Mobile are not under the jurisdiction of KPPU because
either SingTel or ST Mobile is not “business actor” in the understanding of
Article 1(5) of the Anti-trust Law; -------------------------------------------------
(d) Article 27 (a) of Anti-trust Law is not valid to SingTel and/or ST Mobile.
The Report fails to prove the elements in the Article infringed by
Temasek, for what is known as “Temasek Business Group”, SingTel and
ST Mobile;-----------------------------------------------------------------------------
COPY(e) “Temasek Business Group” is never present. Temasek controls the
business and operation of neither SingTel nor ST Mobile.----------------------
(f) Besides, Telkomsel is not controlled by Temasek through SingTel and/or
ST Mobile, because SingTel and/or ST Mobile do not control Telkomsel.
Conversely, PT Telecommunication Indonesia Plc., (Telkom), a majority
shareholder, controls Telkomsel;
(g) Indonesian cellular market is competitive and no evidences at all showing
anti-competitive behavior of Telkomsel or Indosat or both of them; ----------
INVESTIGATION PROCESS IS NULL AND VOID BECAUSE KPPU DOES
NOT HOLD IN RESPECT THE BASIC RIGHTS AND DUE PROCESS OF
LAW OF SINGTEL AND ST MOBILE DURING THE PROCESS OF THE
INVESTIGATION OF THE CASE. ------------------------------------------------------------
3. SingTel and ST Mobile notice that Indonesia is a constitutional state
(Rechstaat), and not authoritative state (Machstaat) and that the Constitution
1945 of Indonesia (as it has been amended) obligates (i) the establishment of
independent judicial system to enforce law and justice. (Article 24 of the
Constitution), and (ii) anyone has rights to have legal security and to be equally
treated before law. (Article 28D Constitution), namely: -------------------------------
“The judicial power is an independent power to exercise judicature for enforcing law and justice.” (Article 24 of the Constitution) ---------------------- “Anyone is entitled to have acknowledgement, guarantee, protection, and fair legal security as well as equal treatment before law.” (Article 28D of Constitution)95 --------------------------------------------------------------------------
4. Besides, it is publicly admitted that to enforce law and justice and to protect
legal security, the entire legal process shall be exercised with the principle of
due process of law. Especially, International Covenant on Civil and Political
Rights (“ICCPR”), in which the Republic of Indonesia is a party96. Article 26
of ICCPR, particularly states:--------------------------------------------------------------
“All men shall be equal before law and without being discriminated is entitled to have equal legal protection. In this case, the law prohibits the presence of any kind of discrimination and guarantee equal protection across the board of discrimination based on race, skin color, sex, language, religion, ideology, citizenship or nationality or social, wealth, birth status or other status.
95 See the Constitution of the Republic of Indonesia, third and fourth Amendment. 96 It has been ratified by the Law No.12/2005
COPY5. Especially, concerning foreign investor, Article 14.a the Law of Investment
Modal No. 25/2007 determine the right of investor over legal security as follow: -
“Any investor is entitled to have: a. right security, legal security, and protection;..”
6. Especially, as Singaporean entities that perform their investment in Indonesia,
the rights of SingTel and SingTel mobile to have due process of law is
assertively admitted in the agreement of the Government of Malaysia, the
Republic of Philippines, the Republic of Singapore and the Kingdom of
Thailand on Promotion and Investment Protection dated 15 December 1987 (as
it amended by protocol on 12 September 1996) (ASEAN Investment
Agreement) as follow: ---------------------------------------------------------------------
Article IV TREATMENT
1. Each Contracting Party shall, within its territory ensure full protection of the investments made in accordance with its legislation by investors of the other Contracting Parties and shall not impair by unjustified or discriminatory measures the management, maintenance, use, enjoyment, extension, disposition or liquidation of such investments.
2. All investments made by investors of any Contracting Party shall enjoy fair and equitable treatment in the territory of any other Contracting Party. This treatment shall be no less favorable than that granted to investor of the most-favored- nation.
Article VI EXPROPRIATION AND COMPENSATION
1. Investments of nationals or companies of any Contracting Party shall not be subject to expropriation nationalization or any measure equivalent thereto (in the article referred to as "expropriation"), except for public use, or public purpose, or in the public interest, and-under due process of law, on a non-discriminatory basis and upon payment of adequate compensation. Such compensation shall amount to the market value of the investments affected, immediately before the measure of dispossession became public knowledge and it shall be freely transferable in freely-usable currencies from the host country. The compensation shall be settled and paid without unreasonable delay. The national or company affected shall have the right, under the law of Contracting Party making the expropriation, to prompt review by a judicial body or some other independent authority of that Contracting Party in accordance with principles set out in this paragraph.
COPY2. Where a Contracting Party expropriates the assets of a company which is
incorporated or constituted under the law in force in its territory, and in which nationals or companies of another Contracting Party own shares, it shall apply the provisions of paragraph 1 of this Article so as to ensure the compensation provided for in that Paragraph to such nationals or companies to the extend of their interest in the assets expropriated.
7. We note that as an independent state commission, KPPU shall be subject to the
principle of state governance as it detailed in the Law No.28/1999 on the
Governing of State that is free from Corruption, Collusion and Nepotism (as it
cited below). Especially, KPPU shall be subject to the principle of legal
Article 3 The General principles of governing of state: -------------------------------------- 1. The principle of legal security; ---------------------------------------------------- 2. The principle of well-regulated state governance; ------------------------------ 3. The principle of public interest; --------------------------------------------------- 4. The principle of openness; --------------------------------------------------------- 5. The principle of proportionality --------------------------------------------------- 6. The principle of professionalism; and -------------------------------------------- 7. The principle of accountability.----------------------------------------------------
8. KPPU itself has admitted that Anti-trust Law obliges the right of due process of
law. In Article 2(1) of KPPU Regulation No.1/2006, it is stated that: ---------------
“The Chairperson of Commission has tasks to facilitate all case handling activity under the principle of transparency, effectiveness and” [enhance to emphasize]-------------------------------------------------------------------------------
9. Besides, SingTel and ST Mobile refer to the expert’s statement on Article 27
of Anti-trust Law by Hikmahanto Juwana (“Hikmahanto”)97, the Professor of
Law at University of Indonesia who specialize himself in business and
competition law in Indonesia, is proposed on behalf of STT for this legal
process. According to Hikmahanto, an infringement to due process of law
conducted by KPPU had the findings and court decision been null and void. ------
10. Unfortunately, in any step of judicial procedure, the right to have due process of
law of SingTel and ST Mobile been contravened. So far, the legal process
conducted by KPPU is not transparent and fail to enforce due process of law,
professionalisms and proportionalities.---------------------------------------------------
SingTel and ST Mobile does not have an opportunity to have their opinion been
heard during preliminary investigation. -------------------------------------------------------
97 Registered in the KPPU case document No. C60
COPY11. SingTel and ST Mobile are not summoned; therefore, their opinions are not
heard during preliminary investigation. There are only Temasek and Telkomsel
that have their opinion been heard. SingTel and ST Mobile have no chance to
have their opinion been heard in the preliminary investigation. ----------------------
KPPU does not give proper opportunity to SingTel and ST Mobile to deny the
suspicion to them during the process of further investigation. ----------------------------
12. SingTel and ST Mobile are not given proper time to prepare their reply over the
serious suspicion alleged to them and their defense over the Report. SingTel and
ST mobile noted that the early Convocation was received in the afternoon on 22
June 200798 to be invited for investigation on 4 July 2007. Further, SingTel
received Report on 3 October 2007 and the investigation before Assembly of
KPPU scheduled on 25 October 200799. SingTel and ST Mobile are
Singaporean corporate bodies that are not under jurisdiction of KPPU.
Therefore, most of the case document written in Indonesian language and the
allegations to them are dealing with the Law of Indonesia, we have to find a
legal adviser in Indonesia. Relating to Idul Fitri, most of Indonesian were in
holiday and we only had eight workdays (around 10 to 25 October, including
Eid-al Fitr on 12, 15 and 16 October) to examine the case of document before
submitting defense or opinion on 25 October 2007. We had already asked to
delay in a week to this investigation process but KPPU only agreed to replace
the date to 30 October 2007100, so that we had extended time for 3 workdays to
prepare our defense. We want to note that SingTel and ST Mobile cannot expect
to present their response to the evidence properly in such a short time.
Especially it considers that (i) the Report itself is not completed and distorted in
its content, as it is detailed in this defense, and (ii) the short time available to
examine case document, we are only able to copy less than 50% of the whole
existing case document (excluded case document that is unavailable for us). ------
SingTel and ST Mobile are not informed properly on their allegation ------------------
13. There is no transparency at all during the investigation on the allegation to
SingTel and ST Mobile. The first summons to them only mentioned that
SingTel and ST Mobile were about to be investigated for the possibilities to 98 Letter of KPPU No. 265/KPPU/TP-PL/VI/2007 (Document No. A87) and No. 266/KPPU/TP-PL/VI/2007 (Document No. A88) 99 Letter of KPPU No. 347/AK/KMK/X/2007 100 Letter of KPPU No. 368/AK/KMK/X/2007, dated 25 October 2007.
COPYconduct infringement to Article 27(a) Anti-trust Law. The early enclosed Report
only analysis the infringement to Article 27 by Temasek, Telkomsel and
Indosat. The information on what and how SingTel suspected to infringe Article
27 is not completed. ------------------------------------------------------------------------
14. SingTel and ST Mobile do not engage at all in the Preliminary Investigation and
know nothing on the problem to be investigated or the summons addressed to
them. SingTel and ST Mobile have only what is stated in the Report of
Preliminary Investigation enclosed to Convocation101, that it unofficial
translation enclosed along with this letter in Annex 1, in which its related part
are as follow: --------------------------------------------------------------------------------
“Although Temasek Holdings Pte Ltd keep on denying to have a control of decision making and diary management of its subsidiaries as it is described in the diagram above, but its party cannot deny that Temasek Holdings Pte Ltd is the owner of entire subsidiaries. Besides, the rational, business actor yang, always try to maximize profits, including its subsidiaries. In this context, Temasek Holding Pte Ltd has significant interests to the performance of its subsidiaries in order to have maximum profits.-------------- The management of Temasek’s subsidiaries should know the interest and it a form of responsibility to the shareholders. On that account, the interest of shareholders is automatically a main focus of their diary management. It is a basis of the opinion that share ownership represents economic interest, so that the law of anti-trust sees that ownership structure, as it explained above, as a single economic entity.--------------------------------------------------- Therefore, further investigation needed to comprehend the influence of Temasek Holdings Pte Ltd to it entire subsidiaries102….-------------------------- SingTel and SingTel Mobile are very significant operators in cellular industry within Asia Pacific. It is seen from number customers in general and the revenues from gained from that areas. The information has been indeed by the management of Telkomsel and influenced to the policy of Telkomsel103… -------------------------------------------------------------------------- Meanwhile, based on what have been mentioned above, there are sufficient preliminary evidence show that Temasek through its subsidiaries control Telkomsel and PT. Indosat Plc. So that it creates lack of competition in the market of cellular telecommunication in all over Indonesia, in which Temasek Business Group, on the basis of such thing, is suspected to have infringed Article 17 (a) of the Law No. 5/1999104.”--------------------------------
15. As it is seen from the citation above, SingTel and ST Mobile are not informed
on what is suspected to be an infringement under the law of Indonesia. The
Report of Preliminary Investigation shows only “Temasek Business Group” that
101 Citation of KPPU’s Decision KPPU No. 23/PEN/KPPU/V/2007 102 Preliminary Investigation Report , part IV (b), page 5 to 7. 103 Preliminary Investigation Report , part IV (c), page 5. 104 Preliminary Investigation Report , part V.
COPYhas infringed Article 27(a) of Law of Anti-trust, without any explanation on
how SingTel and/or ST Mobile are responsible to such infringement. Especially,
there is no clue at all on whom will be responsible or what kind of conducts or
ignorance that makes KPPU sure that they are infringement under the law of
16. The team of further investigation conducted lack transparency along with the
worst due process of law during the investigation to the case. The investigation
conducted in the way that makes SingTel and ST Mobile nearly give no correct
and completed response of the allegation addressed to their parties. During
investigation conducted on 4 July 2007105 and on 23 July 2007106, SingTel and
ST Mobile questioned on their roles in the business affair of Telkomsel. The
questions directed to how SingTel and/or ST Mobile generally engaged in the
business management of Telkomsel, with the targets mostly to be questioned
were board of commissioner and board of directors of Telkomsel. The questions
also on whether Temasek uses its control to SingTel, ST Mobile and/or
Telkomsel. However, KPPU does not tell exactly to the representatives of
SingTel and ST Mobile on what have been conducted by SingTel and/or ST
Mobile so that they infringe Anti-trust Law. --------------------------------------------
17. Besides, during the process of investigation, there were many questions
presented to the representative of SingTel and ST Mobile had no relationship at
all with Article 27. For instance, in the investigation on 23 July 2007 before
KPPU, the representative of SingTel were questioned whether there is an
opportunity of SingTel’s subsidiaries in India and Bangladesh arrange
something jointly, and in how much the price is. In a separated investigation at
the same date, the representative of ST Mobiles questioned with the following
questions that have no relationship with the allegations of Article 27(a): -----------
(a) The questions on the production share obtained from the investment of SingTel Mobile in Telkomsel:- ------------------------------------------------------- (i) According to ST Mobile, concerning the performance of Telkomsel,
how many percent does satisfy SingTel Mobile, return of investment for example? (Question 17) --------------------------------------------------
(ii) How much is the return on investment for Telkomsel?------------------- (iii) Is the investment having break even? (Question 19)---------------------- (iv) If you want to sell the investment, what will you get?--------------------
105 See Investigation Official Report SingTel (Document No. B21) and ST Mobile (Document No. B22) 106 See Investigation Official Report of SingTel (Document No. B34) and ST Mobile (Document No. B35)
COPY(v) Compare to the investment of ST Mobile in other places, how is the
RoI of Telkomsel? (Question 23)-------------------------------------------- (vi) Does SingTel Mobile know on the value of EBITDA? (Question 28) - (vii) In your opinion, how is the performance of Telkomsel recently? Is it
satisfying or not? (Question 33) --------------------------------------------- (viii) How many percent are the revenue contributions of SingTel that
given by ST Mobile to SingTel? (Question 50) --------------------------- (ix) Can you explain a number of revenue of ST Mobile from the income
of cellular, how much are the share of Telkomsel? (Question 56) ------ (b) The questions on the price fixing strategy of Telkomsel:- ------------------------
(i) I can say that there is no concern at all on tariff. (Question 42) --------- (ii) Do you care with the consumer’s wealth?---------------------------------- (iii) Is ST Mobile simply concern on the RoI, not on other things lain?
(Question 35)------------------------------------------------------------------- (c) The questions on the story of acquisition of SingTel Mobile in Telkomsel:-
(i) Who did initiate to buy Telkomsel’s share in ST Mobile? (Question 121)------------------------------------------------------------------------------
(ii) What is the consideration of ST Mobile to buy KPN’s shares in Telkomsel? (Question 135)---------------------------------------------------
(d) The questions on the profit return investment to Telkomsel:- -------------------- (i) Is SingTel Mobile as a substantial shareholder 35% of share and an
authority to nominate two commissioner and director, through the two nominees have ever suggested investing the profit? (Question 140)------------------------------------------------------------------------------
(ii) We want to know, where does we can see the policy of ST Mobile on dividend of Tekomsel? (Question 146)---------------------------------
18. We note that it is not important for KPPU to place information on a single
problem mentioned above in the Report, in which it affirms that the questions
are not relevant at all and has no relationship with the decision-making on
Article 27(a). Respectfully, SingTel and ST Mobile think that such irrelevant
questions are not professional and null. -------------------------------------------------
19. Yet, SingTel and ST Mobile have cooperated as good as possible with KPPU,
expecting to be informed in the end on the allegations contends to SingTel and
ST Mobile. -----------------------------------------------------------------------------------
KPPU discriminatively treats SingTel and ST Mobile by not giving much time to
examine the case document of in the Further Investigation.
20. Instead of understand the problem they are dealing with, SingTel and ST Mobile
is entitled to know the basic of allegation accused to their parties. Before and
during investigation on 4 July 2007107, SingTel and ST Mobile had ever asked
access to KPPU to examine case document. Any request was always refused, as
107 See Letter from SingTel (Document No. A106) and ST Mobile (Document No. A107), both are on 29 June 2007.
COPYit is described in document No.B31 of KPPU investigation case document; Asia
Mobile Holdings Pte. Ltd (Reported V), Indonesia Communications Limited
(Reported VI) and Indonesia Communications Pte. Ltd (Reported VII) was
given accesses to examine the case document on 16 July 2007 or during the
Further investigation was performed. Thus, KPPU has conducted
discriminatively to SingTel and ST Mobile during Further Investigation
21. Even after the Report was issued, SingTel and ST Mobile were not given an
access to part of the document in the investigation case document although they
had asked for it.108. It is an infringement of due process of law, causes improper
asymmetric information, and harms the preparation of SingTel’s defense. ---------
KPPU did not issue Report in the deadline as it is obliged by Anti-trust Law. --------
22. The ability of SingTel and ST Mobile to self defend is disrupted when KPPU
did not issue the Report in the deadline as it obliged by Article 43(1) to (3) of
Anti-trust Law. It states:--------------------------------------------------------------------
“(1) The Commission is obliged to complete further investigation at the latest of 60 (sixty) days since the conduct of further investigation as it meant in Article 39 (1). (1). -----------------------------------------------------
(2) When it is needed, the time period of further investigation as it meant on (1) is lengthen at longest 30 (thirty) days --------------------------------------
(3) The Commission is obliged to decide whether the infringement to the Law occurs or not at longest 30 (thirty) days as from the completion of further investigation as it meant in (1) and (2). ------------------------- [enhanced to
Together with Article 48 and 49 of KPPU Regulation No.1/2006 that states: ------ “(1) Prior to the end of Follow-up Investigation, the team of Further
Investigation conclude whether the evidence of infringement is available or not.” --------------------------------------------------------------- [enhanced to
(1) “The conclusion, as it meant in Article 48, is composed in the form of The Report of Follow-up Investigation Result”. ----------------------
(2) The further investigation team submits the Report of further investigation Result, along with letter, document or other written proofs to Commission “The conclusion, as it meant in Article 48, is composed in the form of The Report of Further Investigation Result” the infringement occurs and conducted by the Reported” [enhanced to emphasize]. --------------
Based on it mention above, KPPU shall have issued the Report of Further
investigation prior to Further investigation be completed. The last date of
Further investigation period was 27 September 2007. Thereby, KPPU shall have
issued report at the furthest of 27 September 2007. However, SingTel and ST
108 See a letter from Hadiputranto, Hadinoto & Partners No. RFB 69445-v1dated 10 October 2007 and No. MF 70388-v1 dated 22 October 2007.
COPYMobile were only been informed and received on Report on 3 October 2007.
The delay of Report issue had been an infringement to the procedures of case
handling of KPPU and it harms our right to plead. Supposed the Report issued
on time, we should have three additional workdays to examine the case
document and prepare the defense prior to the holiday of Idul Fitri. -----------------
23. The reality is different with the statement made in the investigation on 23 July
2007109, KPPU decide that they would not summon the representative of
SingTel and ST Mobile to be questioned further and keep on arranging the
Report although SingTel and ST Mobile still need to know what they had
conducted or not conducted as infringement---- ----------------------------------------
24. In short, in the end of Follow-up investigation period, SingTel and ST Mobile
remain to be blank with the allegations contended to them, therefore they are not
in a position to prepare their defense accurately to reply the allegation.
Therefore, SingTel and ST Mobile make only general defense principally on the
element of Article 27 while waiting to the character and detail of the allegations.-
25. As it usually occurs, SingTel and ST Mobile are never been informed to the
allegations accused to them before they received Report. It is important for us to
repeat that, (i) if the Report was issued in the period of time as is proper, the
Reported should have three additional workdays to respond the Report, (ii) the
period of time available was 27 days in between of issuing the Report and at
that date our session cover Idul Fitri’s holidays for about 10 days, in time when
many offices closed (iii) KPPU refused to give extended time for at least one
week to prepare our response but 3 workdays only given. We assume that it is
not fair to give such a short time to SingTel and ST Mobile to prepare their
response to the investigation of KPPU that has been lasting for more than 120
days -------------------------------------------------------------------------------------------
26. Our capability to plead has been harm further during case document
investigation. SingTel and ST Mobile are only given one session (on 9 October)
to examine abundant case document. By the kindness of STT’s legal adviser,
STT, SingTel and ST Mobile are able to follow their investigation session,
SingTel and ST Mobile got two sessions to examine the case document.
Although they have additional time in the investigation, they cannot maximize it 109 See Investigation Official Report of SingTel ST Mobile (Document No. B35), Investigation statement No. 173.
COPYbecause they spent their 90% of time to copy document and not to examine due
to huge of the case document. SingTel and ST Mobile are only able to copy not
more than 50% of the available documents.
27. It is more seriously. KPPU does not give access to part of the unrestricted
documents, as it mentioned in the letter of our legal adviser, Hadiputranto,
Hadinoto and Partners on 10 and 22 October 2007. Specially, KPPU does not
access to the references cited in the Report. The refusal had harmed the ability
of SingTel and ST Mobile to plead because, (i) to write this defense, SingTel
and ST Mobile had to work hard to find other documents that are not available
from other sources and, (ii) later, in the objection phase, KPPU would keep the
document not to be submitted, by reason of that document was excluded of
KPPU’s case document. Although SingTel and ST Mobile were able to obtain
the document from other sources, they would be restricted to use it during the
objection to the evidence. ------------------------------------------------------------------
The Chair of Investigation Team and the Chairperson of KPPU has conducted
against due process of law. ------------------------------------------------------------------------
28. We note that in the further investigation, Mr. Nawir Messi, the Chair of
Investigation team and Mr. M. Iqbal, Chairperson of KPPU, has reported to
press a statement that, (i) the allegation to Temasek and the other Reported has
been proved and further is simply accumulating other additional evidences or
(ii) there are strong prima facie to support the allegation110. Mr. Messi and Mr.
Iqbal do not ever withdraw or give a correction to their statements so that
SingTel and ST Mobile have to take a decision that the statements are correct
or in the meaning of the men. Under Article 2(1) of KPPU Regulation
No.1/2006, such statements show inconsistency of Mr. Iqbal because the
statements show a bias that is able to support that the allegation of the Reported
is true. Besides, the statements have created public opinion that the Reported are
guilty, that decreasing their chance to have fair judicature if the case is
submitted into Court. -----------------------------------------------------------------------
Improper Commission Assembly Composition ----------------------------------------------- 110 Indonesian anti-trust agency investigates Temasek, Business Times Singapore 7 June 2007, document C70, Indonesia’s watchdog probes Singapore’s Temasek, Agence France Presse, 24 May 2007, document C69. Temasek denies anti-competitive behavior in Indonesia, Strait Times, 7 June 2007, C70. There are also parties that do not agree KPPU investigates Temasek, Kontan Daily Kontan, 14 September 2007 (exhibited in the defence as Annex # 19), An interview of Muhammad Iqbal with Trust, 24 September 2007 ((exhibited in the defence as Annex # 20)
COPY29. SingTel and SingTel Mobile note that from three of five Commission Assembly are
former member of Further Investigation team that approved theReport. The only
one team member who disagrees is Mr. Benny Pasaribu but he does not participate
in the Assembly. SingTel and ST Mobile herewith protest against the composition
of the Assembly. With such a composition, KPPU's decision will not be fair in this
case. It is because (i) Commission Assembly does not take part Benny Pasaribu who
give different opinion (ii) the commission assembly which support the Report are
the majority of Commission Assembly, it is clear that this composition has been
biased to strengthen the Report.---------------------------------------------------------------
----------------------------------
THE REPORT DOES NOT PROVIDE A WHOLE DESCRIPTION ON THE FACTS OF THE CASE. CONVERSELY, THE REPORT SELECTIVELY PRESENTS AND HAPHAZARDLY RELATES FACTS, ASSUMPTION AND, THEORY FOR BENEFITTING THE SUSPICION OF KPPU; AND SYSTEMATICALLY KEEPS ASIDE OR DISTORTS THE WHOLE EVIDENCES AND ANALYSIS THAT OPPOSE AGAINST THE SUSPICION. THUS, THE REPORT SIGNIFICANTLY HINDERS THE ABILITY OF SINGTEL AND ST MOBILE TO PROTECT AND TO PLEAD THEM ---------------
30. The objective of the Report is to give completed notes on the evidences
collected by further investigation team and how the evidences fulfill the
elements of Article in Anti-trust Law. In other hand, any written proof ought to
be consistent one to another (not opposed) and in line with adagium unus testis
nullus testis. Every fact ought to be supported at least by two evidences; in
which one evidence is not a fact. The requirement is generally known as due
process of law and it is particularly subject to the rules of Anti-trust Law of and
KPPU Regulation No.1/2006
“Before the terminations of further investigation, member team this investigation must conclude there is or not evidence that has resulted an infringement ...” (Article 48 of KPPU Regulation No.1/2006"-------------------“
The conclusion within the meaning of Article 48 is compiled in the form of Report of Further investigation ….team then submits this Report of Further investigation along with letter, documents or other written proofs to Commission. Afterwards, the decision is taken to identify whether or not an infringement conducted by Reported” (Article 49 of KPPU Regulation No.1/2006).------------------------------------------------
“Investigation written proof of Commission are:----------------------------------- a. witness’ statement -------------------------------------------------------------------
COPYb. expert’s statement ------------------------------------------------------------------- c. letters and /or documents ----------------------------------------------------------- d. indication ----------------------------------------------------------------------------- e. business actor’s explanation” ------------------------------------------------------ (Article 42 of Anti-trust Law)--------------------------------------------------------- “Commission Assembly must decides valid or not a proof is, and decides its verification value based on at least (two) valid written proof” (Article 64 verse 2 of KPPU Regulation No.1/2006). -------------------------------------------
31. Besides, by considering that (a) Reported must have fair opportunity to argue
the conclusion Further investigation team during Commission Assembly
investigation takes place and (b) transparent principle and due process of law
such as those discussed above; it is clear that the Report must contain complete
information in order to have Reported argued the Report. Report must load
complete logic on the elements of Law that must be fulfilled in order to have
Reported Party tested it and, if needed, argue the elements. Report must give
complete and deep summary in order to have the Reported analyzed the facts for
defense purpose. The Report has to give correct identification on the sources of
the whole facts that used as basis of the argumentation in order to have the
Reported tested the sources. Unfortunately, the Report has failed to fulfill all the
(f) Besides, SingTel and ST Mobile surprised with the allegation stated by
KPPU that Telkomsel have anti-competitive behavior, such as through its
interconnectivity and network infrastructures. KPPU affirms that incumbent
operator is able to threat interconnection operator that decrease tariff.
Nevertheless, KPPU does not give any elucidation on where Telkomsel has
limited access to certain operator network infrastructure as it is alleged; and
KPPU does not show how Temasek and/or SingTel and/or ST Mobile has
influenced or control Telkomsel in a way as it is alleged. The most
importantly, KPPU's notes show that during the investigation take place, on
4 and 23 July, the representative of SingTel ands/or ST Mobile is never
been questioned on this problem.
The further elucidation on how the Report make mistake in presenting fact and
haphazardly relates facts, assumption and unprovable theory can be seen in
defiance
SINGTEL AND ST MOBILE ARE NOT UNDER THE JURISDICTION OF KPPU BECAUSE EITHER SINGTEL OR ST MOBILE ARE NOT “BUSINESS ACTOR IN THE UNDERSTANDING OF ARTICLE 1(5) ANTI-TRUST LAW;------------------------------------------------------------------- 33. Article 1(5) Anti-trust Law, define business actor as follows: ------------------------
“Any individuals or corporations, in the form of corporate body or non corporate body, are established and domiciled or performing activities within the territory of jurisdiction of the Republic of Indonesia, and; independently or jointly by an agreement perform any business activities.” ---
34. The elements of Article 1(5) are clear. As Hikmahanto states it, this Article 1(5)
only covers two possibilities: --------------------------------------------------------------
(a) Corporate body or not corporate body founded based on the law of Indonesia and domiciled or perform business activity in the legal territory of Indonesia --------------------------------------------------------------------------------
(b) Corporate body or not corporate body founded based on the law of Indonesia and domiciled or perform business activity in the legal territory of Indonesia111.-----------------------------------------------------------------------------
35. Based on the interpretation of one definition above, none of the element in
Article 1(5) met and therefore SingTel is not under the jurisdiction of KPPU, -----
111 Hikmahanto, Expert Statement on Article 27 of the Law No.5/1999 on the Prohibition of Monopolistic
Practices and Unfair Competition (“Expert Statement”), page 5 to 6.
COPY36. SingTel is a company listed in stock exchange. It is founded under the law of
Singapore and domiciled Singapore. It is founded and domiciled in the
Republic of Indonesia. SingTel has no branches in Indonesia. As it is
mentioned below, we disagree that there is”Temasek Business Group”. We
must note that not all party suspected as member this group living in Singapore.
For example, Indonesia Communications Limited living in Mauritius and if we
follow the logic presented in the Report, Indosat and Telkomsel (that actually is
a corporate body Indonesia that is founded and domiciled in Indonesia) are
taken part in this group.
37. Besides, SingTel does not have share in a company actively participated in the
market. While ST Mobile owns only its minority share in Telkomsel. We note
Hikmahanto in which he states that share ownership alone is not a business
activity, even less is minority shares because business activity requires
operational decisions that is usually conducted by company management.
Therefore, KPPU does not have jurisdiction over SingTel or ST Mobile.-----------
38. We notes that KPPU’s insistent suggestions in its Report on the doctrine of
single economic entity that business actor is considered to be responsible over
the conducts of other business actor if the two are forming single economic
entity. KPPU try to state that Telkomsel and Temasek establish Temasek that
allegedly through SingTel and/or ST Mobile, controls single economic entity
due to Telkomsel. ---------------------------------------------------------------------------
39. In responding to this, the first thing SingTel and ST Mobile do is citing
Hikmahanto’s view that there is no doctrine of “single economic interest”112
under Indonesian law. Therefore, KPPU cannot depend on this unless KPPU can
prove that Indonesian law confesses this doctrine. -------------------------------------
40. Secondly, SingTel and ST Mobile note that Hikmahanto also said on the
concept of, if the concept exist, then under the Indonesian law, the test can be
completed only if, (i) there is a joint management of the holding company and
its subsidiaries; (ii) the holding company planning covers a centralized
economic activity of the subsidiary and; (iii) subsidiary is prohibited to disagree
with the decision of management. In short, there must be a total control of the
holding company toward a core economic activity of subsidiary as it is pointed
112 Hikmahanto, Expert Statement, page 12 to 14.
COPYby Hikmahanto (it is true according to SingTel and ST Mobile), the share
ownership alone is not enough to completed this rule113. Besides, as it detailed
below,(1) the testing to verify “single economic entity” under Singaporean law
and jurisdiction that is tightly investigated and; (2) the testing is no completed. --
41. Apart from the fact, whether the testing is applied under Indonesian,
Singaporean or one of the investigated jurisdictions, the evidence in KPPU
displays that Temasek does not use its control or even material influence to
Telkomsel (as it is mentioned below, Telkomsel has testified that it is not
relevant to asked whether initiative to the policy is from SingTel or Telkomsel.
It is also mentioned below that Telkom stated the control to Telkomsel is in its
authority relating to the decision of Capex Committee) and ST Mobile does not
control or give influence material to Telkomsel. Thereby, KPPU cannot state
that its party owns a jurisdiction over ST Mobile, SingTel and/or Temasek under
Article 1(5) of the Anti-trust law. ---------------------------------------------------------
42. Besides, the cites the definition of “foreign investment” in the Law No. 40/2007
on Foreign Investment as states “an investment activity to perform business
activity in the territory of the Republic of Indonesia …”. Thus, “Temasek
Business Group” means to perform business in Indonesia (paragraph 10 and 11
on page 59-60). ------------------------------------------------------------------------------
43. In responding to that, SingTel and ST Mobile are sure that the Report has
provided misinterpreted Indonesian law on foreign investment by the reason
a. Article 1.1 of the Law No. 40/2007 refers to separated conducts namely, “to
invest” and “to perform business in Indonesia”. The Article does not infer
that investment is the same as to perform business. Conversely, it infers the
objective of conduct namely to invest is to perform business. Thus, it is
incorrect if the Report states that the law implicitly equalizes to invest with
to perform business. --------------------------------------------------------------------
b. We have to note that the Report does not consider that the entire regulation
of foreign investment in Indonesia is valid only in direct investment.
Indonesian Investment Coordinating Body (BKPM) gives a permit and
monitor direct foreign investment. In this case, BKPM and the Law of
113 Ibid.
COPYInvestment are valid to ST Mobile in Telkomsel. Yet, it is neither the
investment of SingTel in ST Mobile nor Temasek in SingTel.-------------------
c. Besides, it is inconsistent and contradictory if the Report equalizes to
perform business to investment, since the Report admits the difference of
active and passive investors. It is unlikely the Report admits the differences
if it is explicitly stated that the entire investment or in its eventual has on the
investor perform its own business. ---------------------------------------------------
d. The Law on Limited Company(No. 1/1995, replaced by No. 40/2007)) and
the Law on Foreign Investment does not admit company shareholders
(holding company) as a business field. As it stated by Ratnawati Prasodjo,
the former Director of Civil Department of Justice (at present: Department
of Law and Human Rights) and one of the lawmaker of the Law on Limited
Company, does not admit own share in other company as a business
activity. Even the Law No. 40/ 2007 is applied to clarify that the Law on
Limited Company does not admit the concept of holding company. ------------
ARTICLE 27(A) ANTI-TRUST LAW IS NOT VALID TO SINGTEL AND/OR ST MOBILE. THE REPORT FAILS TO PROVE THAT THERE ATE ELEMENTS IN THIS ARTICLE HAS BEEN INFRINGED BY TEMASEK, WHAT IS KNOWN AS “TEMASEK BUSINESS GROUP ”, SINGTEL AND ST MOBILE -------------------------------------------------------------------------------------
44. The position of SingTel and ST Mobile since their initial stages is KPPU does
not have jurisdiction over SingTel or ST Mobile to conduct the investigation.
The distinct reading of Anti-trust Law infers that KPPU does not have
jurisdiction over the party that only becomes shareholder. ----------------------------
45. Besides, there is no indication at all that SingTel and/or ST Mobile infringe
Article 27(a). A world notable expert of law competition, Professor Claus-Dieter
Ehlermann (“Ehlermann”), has proposed and unquestionable argument, to
SingTel and ST Mobile it is precisely, on the clear understanding of Article 27.
Ehlermann examines on how Article 27(a) of Anti-trust Law shall be
comprehended in accordance with the international law principle and
competition law standard regime of European Community (“EC”), Germany
England (“UK”) and the United States of America (“US”) (“the examined
jurisdiction”). According to Professor Ehlermann, in which his report enclosed
in this defiance in Annex 3, the majority of share ownership requirement in a
number of companies in Article 27(a) mustbe interpreted literally. Wilmer
COPYCutler Pickering Hale and Dorr LLP (“WilmerHale”), one of notable anti-trust
law and competition practitioner in the United States of America and Europe,
has made an opinion, that enhanced in this letter in Annex 1 (“Opinion
WilmerHale”) supportin the view of Ehlermann114. Hikmahanto also supports
the interpretation of Article 27(a) fully. It is a simple truth that either SingTel or
ST Mobile do not have majority shares in Telkomsel and the fundamental
requirement of Article 27(a) is not fulfilled. The allegation to Singtel and ST
Mobile that be based on Article 27(a) shall be null and void. -------------------------
46. Furthermore, the Report ignores different opinions proposed by the Reported.
No less than three independent experts, Spectrum Strategy Consultants
(Spectrum), Case Associates (Case) and Analysis Consulting (Analysis) 115 have
given different analyzes to this case. The integrity and pointed analyzes of this
firms are unquestionable. Even the Report does not try respond to the different
47. On the chance of Commission Assembly would repair the mistake of follow-up
investigation team, we herewith propose one independent expert statement from
NERA economic consulting (“NERA”) a reputed international economy
consultant firm. According to NERA, it seems that there is no evidence of anti-
competition behavior or loss of consumer in Indonesian cellular market in
Indonesia. Even the evidence indicates that market is competed and market
result is better than market in other 16 countries in the case of demography,
economy and Telecommunication (comparative countries) -------------------------
114 The opinion of Wilmer Hale, in page 2. 115 NERA Economic Consulting, an international economic consultant, has been hired by SingTel and ST
Mobile to express its independent expert statement to the mobile service market condition in Indonesia in general and its independent expert analysis to the allegation of the company and the suspected infringement to the Indonesian Anti-trust law. Spectrum Strategy Consultants, an outstanding management consultant focuses in the telecommunication sector and media worldwide, and has presented its independent study to the competition condition in the Indonesian mobile market; assigned by STT, STT Communications Ltd and Asia Mobile Holding Company Pte Ltd. Analysis Consulting, a company that provides consultation on strategy and management and information and initial support to any telecommunication sector, It and media. They submit its completed report asked by Temasek Holdings (“Analysis”). Case Associates is an international office of economist on economic competition and regulation based in England. They are hired by Asia Mobile Holdings Pte Ltd (“AMH”), Indonesia Communication Ltd (“ICL”) and Indonesia Communication Pte Ltd (“ICPL”) to perform its an independent assessment to the competition in telecommunication sector in Indonesia. This analysis is based in a whole on the publicly accepted information.
COPY48. We also propose two additional reports, it has been also proposed by society and
we obtained from public forum, the Analysis of Mr. Pande Raja Silalahi, former
member of KPPU (Annex 6) and the Report of Lembaga Manajemen Faculty of
49. The incorrect enforcement of substantive law competition in the Report reflects
in the treatment of KPPU to the rights of SingTel and ST Mobile's due process
of law. Since the corporate body is summoned in the step of legal process, some
fundamental rights of SingTel and ST Mobile are unappreciated.--------------------
50. Shortly, the Report cannot provide evidence to support its allegations. The
whole stuffs, considered as evidence, are inconsistent one to another. The
Report also fails to consider facts to be in contradiction with its conclusion. -------
SingTel and ST Mobile do not have majority share in Telkomsel. -----------------------
51. The following part of this defense is submitted by assumption that KPPU, in
opposition to the early defense of SingTel and ST Mobile, find that its party has
jurisdiction over SingTel and/or ST Mobile. Article 27 Anti-trust Laws specify
as follows: ------------------------------------------------------------------------------------
“Business actor is prohibited to have majority shares at some similar companies that conduct business activity in the common field at the common pertinent market, or establish some companies that have business activities at common pertinent market, if the ownership resulted: ------------
(a) one business actor or one group of business actor control more than 50% (five percents) market share of one goods or certain service.” ------------------------------------------------------------------------
(b) two or three business actors or group of business actor that control more than 75% (seventy five percents) of certain goods type or service certain.” [enhance to emphasis] -----------------------------------
52. We note that the Report does not question whether ST Mobile has more than
35% of Telkomsel shares or not and that its remaining (65%) is owned by
No Indonesian Law available to interpret “Majority” broadly ---------------------------
118 See Temasek does not practice monopoly: A Study, the Jakarta Post, Friday 3 August 2007, document C57, The integrity of KPPU is in the floating line in Indosat case, the Jakarta Post, Wednesday 15 Augustus 2007, document C62. 119 See The Former of KPPU’s chairperson: No Cross Shares of STT in Indosat and Telkomsel (Mantan Chairperson KPPU: Tidak ada Saham Silang STT di Indosat and Telkomsel), Investor Daily, 17 September 2007, exhibited in the defence as Annex # 26. 120 Slide No. 11 and 12 of the presentation of The Role of Law in Business: Recycling Market Structure to establish Fair Competition (Peranan Hukum dalam Usaha untuk Merekayasa Ulang Struktur Pasar Guna Menciptakan Persaingan Usaha yang Sehat), by Frans Hendrawinarta, exhibited in the defense as an Annex # 8. 121 Hikmahanto, Expert Statement, page 1 to 3.
COPY62. Thus, the Report does not acknowledge that “majority” means majority. On the
contrary, the Report continuously copes agree that majority shall be interpreted
widely and creatively to cover minority (share) as well. In justifying its
interpretation, the Report misread or misstate the rule of law and other
regulations in Indonesia (they all are not related in this case at all) and the
standard of international anti-trust, as the same manner as SingTel and ST
Mobile is about to discuss hereunder: ----------------------------------------------------
(a) According to the Report if KPPU permits Article 27(a) remain to be limited
for share ownership majority, then its party cannot prevent detrimental
impact to competition and society due to conspiracy of minority
shareholders that actually control some company. We herewith state that
that the truth is conversely: Anti-trust Law gives KPPU sufficient rules to
offend such conspiracy, that is: -------------------------------------------------------
i. If minority shareholders keep on dominating through its subsidiaries,
it is logic that its party has to arrange its subsidiaries in order to be in
active conspiring to monopolize market. If minority shareholders
conspire to lessen competition in the market, this conspiracy can
create cartel. Article 11, a trust by Article 12 or Article 4 of the Law
No.5/1999, can attack it. ------------------------------------------------------
ii. The Report relies on illogical truth that if minority shareholders with
a control power want to dominate market through its subsidiaries
(for example two subsidiaries), it will dominate through one
subsidiary and intentionally destroys other subsidiaries. In a case
(that is impossible), as it is referred clearly be the Report, the first
and prioritized subsidiary is handled with Article 25, an article
prohibiting dominant abuse, or other articles of Anti-trust Law that
prohibit unilateral conduct such Article 17 to Article 21 of Anti-trust
122 Ehlermann, Expert Statement of SingTel and ST Mobile, page 84. 123 WilmerHale, page 3.
COPY65. The detail Analysis of Ehlermann to the Article 27 as compared to several
jurisdictions of competition law and the principle of international law principle
bring it to some conclusion: 124: -----------------------------------------------------------
(a) Article 27 must be applied – as he written – as prohibition per se. If it does, then the requirement of Article 27, that is (i) “majority shares”; (ii) “some companies (iii) “common area in a pertinent market”; and (iv) structural market requirement jointly read literally. Based on this analysis, any allegation to Sing Tel or ST Mobile cannot be justified because no single entity has majority shares in some companies; -------------------------------------
(b) In case of non-literal interpretation to ‘majority shares” is applied, then Article 27 must be interpreted as entering actual loss impact requirement into competition. By reading it, KPPU shall prove the loss impacts; and-------
(c) Two approaches above are standing alone – namely, the prohibition per se of Article 27 cannot be combined by non-literal interpretation of the ‘majority share’. ------------------------------------------------------------------------
66. We think that Article 27(a) is infringement per se that need no testing on the
impact to the market. Yet, as Ehlermann argued, if KPPU insists to implement
broader and incorrect interpretation in the phrase “majority share”, then Article
27(a) shall be read as entering substantive test on the loss impact of competition.
Any other interpretations will infringe the principle of international law and
advance competition standard regime in the investigated jurisdiction. --------------
67. KKPU with its long analysis in Part B of the Report on, Economy, tries (and in
our opinion, fails) to show that cellular telecommunication market in
Indonesia is not competitive and the loss thrust to consumer. It is not crucial for
KPPU to indicate the loss against competition and to present economic analysis. -
68. Ehlermann notes that there is no equality between Article 27 and the European
jurisdiction to consider, the closest equality with the infringement per se in
Article 27 is Article 8 of US Act, corporate structure that apply strict liability of
the director or official of the competing corporate125. He notes that United Sates
court judicial does not want to read consistently a rule of law beyond its literal
expression. The refusal is justifiable due to such strict interpretation of a
provision entailing strict liability is a well-established principle of statutory
interpretation. The Courts do not add words to, or expand concepts in, statutes
just to make them more effective where strict liability is at issue. To do this
124 Ehlermann, SingTel and ST Mobile, Expert Statement, page 83 to 86. 125 Ehlermann, Expert Statement of SingTel and ST Mobile, page 34.
COPYwould infringe the fundamental principles of separation of governmental powers
as well as the principle of legal certainty.’)126
69. Ehlermann has performed functional comparison of Article 27 with the relevant
law in his opinion in the examined jurisdiction. Ehlermann considers that
Article 27 is Part 3 of the Chapter V of Anti-trust Law, that covers “Dominant
Position”, and then the most relevant comparison is dominant position abuse
and the law on monopolization127. -------------------------------------------------------
70. Based on the functional comparison in which he has performed to the law in the
(a) That the laws only prohibit dominant abuse (in EC, England and Germany) or the implementation or acquiring monopolistic power by breaking the law (in the United States). Possessing high market position itself is not illegal in such jurisdiction128; --------------------------------------------------------------------
(b) That the law is on unilateral conduct, against the unification law, only to conduct abuse has occurred in the market. The authority has no jurisdiction to control the possible future abuse129. This prospective Analysis is possible based on the unification controlling law and to apply the same analysis to Article 27 is illogical. It because Article 27, from the perspective of function is different with unification controlling law in which Article 27 is applied ex post that is to the situation in which market ahs already existed, while unification controlling is ante; and -------------------------------------------
(c) Therefore, although the interpretation of majority share in Article 27(a) means controlling of even material influence is acceptable (in which we deny it) related to the competition law regime international standard in Europe and the United States of America, it is only possible if the control or influence has been abuse and loss the competition in the market. -----------
71. We note that KPPU in its Report has referred to the unification regulation if
European Union, England and the United States of America to support its
argument that “majority share” shall be read as control– particularly shareholder
can give determining influence (on the EU’s term) or material influence (on
UK’s term) on the directive policy of a company. Especially, KPPU refers to
Article 31(1) (b) of EC Merger Regulation that state that a concentration arises
because of controlling. KPPU insists that based on the law of EC, control means
capacity to use an influence to determine a company and no evidence
requirement that the decisive influence has been used or about to use130. -----------
126 Ehlermann, Expert Statement of SingTel and ST Mobile, page 35. 127 Ehlermann, Expert Statement of SingTel and ST Mobile, page 40. 128 Ehlermann, Expert Statement of SingTel and ST Mobile, page 49. 129 Ehlermann, Expert Statement of SingTel and ST Mobile, page 43. 130 Ehlermann, Expert Statement of SingTel and ST Mobile, page 54, page 31.
COPY72. Ehlermann does not questions that controlling concept or material influence of
the holding company over subsidiaries exist and related in the law on
unification control in the examined jurisdiction. Di EU, England and Germany
one of many factors that trigger the requirements to report transaction to the
authoritative party based on the unification law is the changes or acquiring
“control” in a corporation. In this context, control in defined broadly and not
only covers acquiring shares ownership majority but also transaction that
produce ability to decisive influence of other corporations131-------------------------
73. As an example, Ehlermann refers to Article 37 of the German Law 1958 on Act
Against Restraint of Competition (“ARC”) that require an information in which
any corporation enables a corporation or some corporation use the “significant
competition influence” directly or indirectly to other corporation (Part
74. Yet, Ehlermann insists that it is a mistake to widen the meaning of “ownership
majority” in Article 27 so that it means significant competition influence or
material to Telkomesl because of some reason as follows:
(a) Firstly, he thinks that basically unification law is a mechanism of ex ante control, while Article 27 apply to any available situation. Unification law is true in determining that wider distance of transaction meet a requirements as unification, Article 27 shall be interpreted by way of depending more on similar functional rules.133; ------------------------------------------------------------
(b) Secondly, German unification law assertively defines acquiring significant competition as a punishable unification. The authoritative party shall have not of rewrite such a simple language of the law to come to such conclusion. There is nothing identical in Anti-trust Law (even less Article 27) that can be defined by KPPU134;----------------------------------------------------------------
(c) Thirdly, German Unification Law also defines between acquiring control, share ownership majority (defined as share ownership for at least 50%) significant influence. 135. --------------------------------------------------------------
(d) Finally, the facts do not support the allegation that SingTel and/or ST Mobile have a significant competition influence over Telkomsel. The existing indication show the opposite, namely: i) Ehlermann understands that management Telkomsel does not require shareholders to agree before Telkomsel enter new market (apart from material acquisition); and (ii) majority shareholders of Telkomsel is an incumbent of fixed line telephony
131 Ehlermann, Expert Statement of SingTel and ST Mobile, page 66. 132 Ehlermann, Expert Statement of SingTel and ST Mobile, page 70. 133 Ehlermann, Expert Statement of SingTel and ST Mobile, page 72. 134 Ehlermann, Expert Statement of SingTel and ST Mobile, page 73. 135 Ehlermann, Expert Statement of SingTel and ST Mobile, page 74.
COPYoperator in Indonesia and, therefore it is experience in telecommunication sector.136. -------------------------------------------------------------------------------
75. As it is stated above and below, Ehlermann thinks that we all agree entirely that
Article 27 conceptually and functionally is different with the unification
controlling law. Therefore, It is illogical that material influence and decisive
influence is taken and inserted in the definition of “majority share” in Article
27(a). Significantly, Ehlermann also show that wider interpretation to Article 27
beyond its literal reading seems to be risky to be a substitute of an
implementation (postponed) of the rule Part IV, Chapter V entitled “Merger,
Consolidation and taking over” (Article 28 and 29). To the present time, the
rule of law have not been valid due to the regulation required by Article 28(3)
and 29(3) have not been available yet.137. We state retroactive implementation
of the law infringe legal certainty and give no justice to SingTel and ST Mobile. -
76. Continuing the analysis of Ehlermann on the invalidity of analogy on the rule of
unification control for the case, WilmerHale suggests that, in whatever thing, the
evaluation to unification control ex post facto by the Report is inconsistent with
the principle of unification control in UK and the United States of America. In
England, a study on ex post of unification is enabled to conduct for four months
since Office of Fair Trading (“OFT”) detects a transaction.138 It is not, OFT only
examines ex post transaction if during unification, the information is misleading
or fake in the sense of material document. ---------------------------------------------
77. After studying the report and the existing problems, WilmerHale concludes that
the report does not inform the impact of Temasek indirect investment in
Telkomsel and Indosat. The lack of competition in the market after the
investment is not proved. The Report only tells that the market structure and
performance of cellular telecommunication service in Indonesia has been more
concentrated since 2002. The market position of Telkomsel increased but not for
Indosat. Market becomes to be oligopolistic, with the price of cellular
telecommunications higher than those of price in some other countries are.
Report only finds that relevant market is oligopoly with consistent behavior with
136 Ehlermann, Expert Statement of SingTel and ST Mobile, page 75. 137 Ehlermann, Expert Statement of SingTel and ST Mobile, page 30. 138 WilmerHale, page 7.
COPYoligopolistic market structure. WilmerHale furthermore said that such a market
structure has been formed before Temasek invest in Telkomsel and Indosat..139---
78. As it is shown further by WilmerHale, the Report does not result any findings
that competition in cellular telecommunication in Indonesia less strong than it
should be after the indirect takeover of Temasek on Telkomsel and Indosat. The
finding is very crucial based on Article 7 of Clayton Act. For example, the
Report does not get findings on the increase of price after the investment of
Temasek in Indosat on December 2002. At the same time, Indosat was unable to
compete to grab customer and even Indosat have conducted other way to lessen
its significant competition referring to investment of Temasek in Telkomsel.
For such reason, WilmerHale concludes that the analysis of KPPU does not
complete Article 7 Clayton Acts. Further, SingTel and ST Mobile describe
further KPPU's failure in determining causality relationship between allegedly
cross ownership and the substantive loss to competition in market. According to
us, market is really competitive, this conclusion is based on our research that
relied on related competition index and supported by empiric data. -----------------
79. “Majority Share” must be comprehended as control owned by a business player
to other business player. KPPU has acted (1) in opposite to Indonesian law
principles in interpreting rule of law(2) in opposition to principle and law
standard international in law of competition. WilmerHale concludes that
extension of Article 27 in the Report exceed its text.140.-------------------------------
Legal certainty forbid any interpreting Article 27(a) beyond its plain meaning-------
80. Furthermore, KPPU must obey to the legal principle and try not to add or extend
Article 27. By doing it KPPU will deserve to have crime sanction as Article 1.1
Code of Law concerned. -------------------------------------------------------------------
“A conduct cannot be sentenced by crime sanction, unless it is under existing regulation of law.” -------------------------------------------------------
81. In this case, although a crime rule may be interpreted, the interpretation shall be
strict; grammatical interpretation must first priority method. Furthermore, (i)
analogy, as it is applied in the Report by citing some article from other
regulations, capital market and banking regulation, is not admissible. (ii) if
extensive interpretation will be applied. it shall be limited and it does not deviate
139 WlmerHale, page 10. 140 WilmerHale, page 5.
COPYgeneral understanding or which all individual shares in a society. In this case,
we share our opinion that the extensive interpretation of majority is inapplicable
since it is considered minority in its interpretation. It is biased from the concept
of majority which all individual shares in a society.------------------------------------
82. Although KPPU state on administrative sanction and not crime sanction, the
expression of "majority" shall be equal because, (i) KPPU shall be subject to the
principles of legal certainty as a state governing body; (ii) KPPU is not
legislative body that authoritatively make new law and; (iii) applying the
expression of “majority” contradictive between the regime of administrative and
crime law infringe the legal entities, justice and equal treatment before law.-------
83. In brief, it can be said that there is no fundamental thing to extend literal
definition of “majority shares” in Article 27(a) under Indonesia law or
competition law in the observed jurisdictions law. If Article 27(a) is not
interpreted literally, KPPU can say that SingTel and/or ST Mobile have created
loss in the competition. Unfortunately, there is no fact that Temasek through
SingTel or ST Mobile use its significant influence to the Telkomsel. Majority
shareholder of Telkomsel is PT Telkom and Telkom that has privilege to use its
significant influence. KPPU insist to read Article 27 in its own way and it give
bad precedence to the law in Indonesia.--------------------------------------------------
Either SingTel or ST Mobile do not have shares in several companies in Indonesia ----
84. Article 27 requires Reported that own shares in “several” company that run
business activity in the pertinent market. The bodies that operate in market are
only Telkomsel and Indosat. Thus, according to Ehlermann, Article 27(a) cannot
be applied to SingTel and/or ST Mobile because none of them runs business
activity in the relevant market.141 --------------------------------------------------------
85. SingTel does not have share in any company but Telkomsel, in the relevant
market and, it automatically cannot control any market shares. It can be seen
from the Annual Repot of Singtel and financial statement of ST Mobile that are
submitted to KPPU on 4 July 2007.142 ST Mobile only has minority share in
one company in the market. It is clear that KPPU has not yet and been able to
141 Ehlermann, Expert Statement of SingTel and ST Mobile, page 22 to page 25. 142 See Singtel Annual Reports of 2006/2007,2005/2006 and 2004/2005, 2003/2004 and 2002/2003 and Finance Statement of ST Mobile for the fiscal year ended on 31 March 2006, 31 March 2005, 31 March 2004, 31 March 2003 and 31 March 2002, submitted to KPPU on 4 July 2007.
COPYprove the elements of Article 27(a) infringed by ST Mobile. Just from this
reason, the allegation to SingTel and ST Mobile have to revoked--------------------
Either SingTel or ST Mobile does not have shares in cellular market in Indonesia
86. KPPU must prove the control of more than 50% of market share in the relevant
market. Besides, the relevant market must be correctly defined. In the ongoing
case, the pertinent geographical market is limited only in Indonesia.
Consequently, telephony of ST Mobile in Singapore and in other place is
irrelevant, since Indosat and Telkomsel do not operate outside.143 -------------------
87. Case also shows obviously that PT Telkom has controlling share in Telkomsel
and its share market is between 50% to less than 60%. Even by taking a most
advantageous definition (for KPPU) maximum, market shares of Indosat,
around 25%. By having two reasons, it is impossible for Temasek to control
more than 50% of market share.144.
THERE IS NO “TEMASEK BUSINESS GROUP”. IF ANY, THEN SINGTEL AND ST MOBILE ARE NOT PART OF IT, BECAUSE EITHER SINGTEL OR ST MOBILE IS NOT CONTROLLED BY TEMASEK. --------------------------------------------------------------------------------------------- 88. We wonder to contain of the Report. In it, it is mentioned that SingTel, ST
Mobile and other Reported belong to what is so-called “Temasek Business
Group. ” “Temasek Business Group” is not a corporate body and it is groundless
to say the Reported are part of the single economic entity. ----------------------------
89. In this case, SingTel and ST Mobile refer to Annex 4 of KPPU's report. The
annex is repot on Singaporean company law and regulation (“Report of
Company Law”) written by C.R. Rajah, S.C. (“Rajah”), one of notable,
experienced and senior lawyers and expert of law company in Singapore. Rajah
states assertively that in this category under Singapore law, Temasek, SingTel
and ST Mobile (and his own corporation) is a separated body/operation. 145.-------
90. According to Rajah, “It is a fundamental principle of Singaporean law that after
it is founded, legally a company and those who own and/or manage it separated.
It also goes into effect although only one person owns and manages a
company.” In other hand, Rajah states that it is in a situation in which
Singaporean can assume that the responsibility of owners (or board of directors)
143 Ehlermann, Expert Statement of SingTel and ST Mobile, page 20 to 21. 144 Case, A Competition in the market of cellular telecommunication in Indonesia, Preliminary Economic
Assesment (Persaingan di Pasar Telekomunikasi Seluler Indonesia, Penilaian Ekonomi Awal )(“Case”), page 36 to 37.
145 Rajah, The Report of Enterprise Law , page 46.
COPYvery limited. In deception, case or where company is run only as interest of
controlling party and it practically is not separated (appointed the veil of
incorporation), it can be considered. It is hard to prove it and it is rare in fact. -----
91. There is no deception conducted by SingTel and/or ST Mobile. The two
companies are also not run as a device of controlling party. Therefore, an
accusation to Temasek and SingTel or Temasek and ST Mobile as a single
economic entity is indefensible. -----------------------------------------------------------
92. We note that, on the assessment of Ehlermann to the observed jurisdiction law,
the relevant testing to prove that two companies is one body under competition
law is similar to those in Singapore, namely where a subsidiary is under the
control of holding company not freely performing its own behavior in the
market and in holding company and subsidiary company assumed to be a single
body.
93. Referring to the law that arrange multilateral behavior, Ehlermann notes that’s
in all observed jurisdictions, an agreement among corporation that limit
competition is prohibited146 Nevertheless he explains that, holding company
and subsidiary considered as single economic entity, an agreement among them
cannot be assumed to infringe the rule that arrange multilateral behavior
company --------------------------------------------------------------------------------------
94. Prof Ehlermann states that none of law system in observed jurisdiction assume
that minority ownership gives control or influence to holding company so that a
competition authority assume that market position and the behavior of
subsidiary must be investigated along with its holding company147. Based on
that, Ehlermann concludes that none of observed jurisdiction assumes Temasek
indirect ownership of minority share gives acceptable control to Indosat or
Telkomsel so that anti-trust authority considers Temasek Business Group as one
single economic entity that its market position and behavior are one.148.
95. As it is described above, Ehlermann indicates that “control” according to the
laws on unification controlling is defined broader and not only cover acquisition
of majority share ownership but also transaction that produce an ability of its
146 Ehlermann, Expert Statement of SingTel and ST Mobile, page 54, 57 and 58. 147 Ehlermann, Expert Statement of SingTel and ST Mobile, page 47. 148 Ehlermann, Expert Statement of SingTel and ST Mobile, page 49.
COPYdecisive influence to othercorporations.149 Nevertheless, it is wholly
inappropriate to import this wider concept of control into other areas of
competition law. For example, if “control” for the purposes of the single
economic entity doctrine was understood in the same broad way as in merger
control, this would result in agreements between a parent and a subsidiary in
which it has a minority shareholding escaping fundamental competition law
rules designed to control the multilateral (anticompetitive) behavior of
96. In consequence, under the law of Singapore and observed jurisdiction, there is no
fundamental allegation for Temasek and SingTel or Temasek and ST Mobile to
be considered as Single Corporation. The term “Temasek Business Group”
(seems to be created by KPPU) is never presence and have no significance at all.
All requester in this investigation are separated under the law and fact. . -----------
97. As the same manner as noted above, Hikmahanto affirms that there is no
doctrine of “single economy interest” in Indonesian law. In addition, if any, the
test shall be strictly conducted. ------------------------------------------------------------
98. In whatever case, all evidences before KPPU indicate that Temasek actually
using no control or even significant influence to SingTel or ST Mobile. Besides,
all existing evidences show absolutely that SingTel does not control or use
significant influence to Telkomsel and ST Mobile does not control or use
significant influence to Telkomsel. -------------------------------------------------------
TELKOMSEL IS NOT CONTROLLED BY TEMASEK THROUGH SINGTEL AND/OR ST MOBILE, BECAUSE SINGTEL AND/OR ST MOBILE IS NOT CONTROLLED TELKOMSEL. ON THE CONTRARY, PT TELECOMMUNICATION INDONESIA PLC (TELKOM), MAJORITY SHAREHOLDERS, CONTROL TELKOMSEL.------------------------------------------------
Temasek does not control or give no decisive influence to SingTel.
99. As it mentioned above, that there is no cheat or fraud conduct and to prove that
Temasek and SingTel is single economic entity, it shall be proved first that
SingTel is operated only as a device of Temasek's business and interest. As well
as to be proved, that SingTel does not have own existence/separated operation.---
149 Ehlermann, Expert Statement of SingTel and ST Mobile, page 68.
COPY100. In the beginning it must be shown that, Temasek, apart from its ownership of
more than 50% to SingTel, Temasek does not control or does have important
and decisive influence to SingTel.. -------------------------------------------------------
101. The only fact owned by KPPU so-called in Report as evidence of the control of
Temasek to SingTel is as follows: --------------------------------------------------------
a. That Temasek, under the Statuettes of SingTel Article 59(c), Article 96 (a), Article 102 and Articles 103, Temasek, as a shareholder in SingTel has an authority to appoint and to dismiss members of SingTel board of director. The Report cites the Statutes without analyzing it in the framework of relevant law, Singaporean company law, and;--------------------------------------
b. That Mr. Simon Israel is a member of board of director of Temasek and SingTel. ----------------------------------------------------------------------------------
102. Referring to (a) the above mentioned, it must be affirmed that under the Statutes
of SingTel, the shareholders of SingTel, with normal decision of someone to be
a Director due to a vacant for the position (casual) or be an additional Director
(See Article 103 of SingTel Statutes ) (for example if a Director passed away
during his/her tenure). Normal Nomination to be a member of SingTel board of
directors is in accordance with Code of Corporate Governance) that determined
by Bursa Singapore (SGX) in accordance with Regulation 710 of Registration
Manual) (“Code”). According to Code, as it elaborated by Rajah, a Nominating
Committee (NC), consists of at least three directors (that its majority, including
Chairperson is required to be independent) propose suitable candidates for board
of directors (”Board of Directors”) SingTel, approves the nomination. The
Chairperson of NC shall be a director who are not direct or indirectly related to
shareholders substantial (those shareholders with the interest of 5% or more
with company voting right).150. Its fact, all members of NCCommittee are
103. Referring to (b) above, it shall be emphasized that Simon Israel is only one of
10 members of SingTel board of directors. SingTel board of director makes
decision based on majority votes.151 It is clear that Mr. Simon Israel is possible
to lose out nine other SingTel Directors. Further, Mr. Israel is not candidate
(nominee) from Temasek. In fact, when Mr. Israel nominated as a director of
SingTel on 4 July 2003, he is not a director of Temasek. He only nominated as
director Temasek on 1 August 2005 and directors executive Temasek as from 1 150 Rajah, The Report of Enterprise Law, page 41. 151 See part 106 of the Memorandum and New Statutes of Singapore Telecommunications Limited, submitted
to KPPU on 4 July 2007
COPYJuly 2006. Therefore, structurally Temasek can not give material influence to
the board of SingTel,directors's decisions. It has been elaborated before
KPPU's Question and answer session. We do not know basically, but if any,
why does KPPU not mind to the facts. ---------------------------------------------------
104. Further, any allegation that Temasek conduct control to the SingTel or ST
Mobile is bias. Rajah affirms that Temasek does not have right legally to give
instruction to or to break the decisions of SingTel (or ST Mobile) director
relating to management (including operation and diary business policy) of
SingTel (or ST Mobile). KPPU does not indicate evidence that show it
conversely. For this reason, the finding of KPPU that Temasek give major effect
to the decisions of SingTel or ST Mobile board of directors are groundless and
ignores to examine the evidence before it. -----------------------------------------------
104. Further, any allegation that Temasek conduct control to the SingTel or ST
Mobile is bias. Rajah affirms that Temasek does not have right legally to give
instruction to or to break the decisions of SingTel (or ST Mobile) director
relating to management (including operation and diary business policy) of
SingTel (or ST Mobile).152 KPPU does not indicate that an evidence that show it
conversely. For this reason, the finding of KPPU that Temasek give major effect
to the decisions of SingTel or ST Mobile board of directors are groundless and
ignores to examine the evidence before it. -----------------------------------------------
105. Rajah states that in any matter the directors of SingTel have to work for the sake
of SingTel. The interest of company is not only limited to the interest of their
each shareholders in person and covers the interest of employees and
creditors.153 This is the barrier hereinafter at the instance of Temasek can
influence decision by board of directors of SingTel ------------------------------------
106. The obstacle of Temasek to influence SingTel, as Rajah affirms it, related to
limitation of votes that is required in Company Law (Chop 20) and the Statutes
of SingTel and also on diary management decision. 154 In fact, SingTel does not
consult Temasek and Temasek does not have an obligation to ask an approval to
the business strategy and invesment of SingTel. KPPU never states the
evidence conversely.
152 Rajah, The Report of Enterprise Law , page 20 and 45. 153 Rajah, The Report of Enterprise Law , page 45. 154 Rajah, The Report of Enterprise Law , page 24 and 26.
COPY107. The allegation that Temasek control SingTel busines is groundless. KPPU fails
to prove that Temasek influences SingTel. KPPU also fails in proving that
SingTel does not have its own operation. It is a serious accusation to SingTel as
a biggest enlisted company in Bursa Singapore (“SGX”), SOX, and Bursa
Australia (“ASX”). It is annoying for SingTel to have such kind of allegation
and KPPU allegeds it without providing evidence.
Temasek does not control or influence ST Mobile -------------------------------------------
108. We mention our position as it written in paragraph 99, that there is no cheat or
fraud conduct and to prove that Temasek and SingTel is single economic entity,
it shall be proved first that SingTel is operated only as a device of Temasek's
business and interest. As well as to be proved, that SingTel does not have own
114. The only fact owned by KPPU is as follows:--------------------------------------------
a. That ST Mobile as shareholders Telkomsel own authority to nominate two Telkomsel board of director under Article 10(1) Telkomsel’s Statutes and two Telkomsel board of under Article 13(3) of Telkomsel Statutes. ------------
b. That there are positions that are interconnected between ST Mobile and Telkomsel;-------------------------------------------------------------------------------
c. Since 2002 up to present, the position of Director of Commercial and Director of Operation are always nominated by ST Mobile.----------------------
115. We inform that the Report ignores evidences and facts that make it opposes
against its analysis, as follows: ------------------------------------------------------------ 155 Report , page 28.
COPY116. Referring to (a) above, we state that actually there is an evidence that ST Mobile
does not influence Telkomsel. As minority shareholders, ST Mobile is entitled
to nominate only 2 of 6 members in Telkomsel’s Board of Commissioner
whereas Telkom is entitled to nominate majority (that is 4 from 6 members).
Currently, there are 5 Commissioner. That is, PT Telkom controls majority of
the member of Telkomsel Board of commissioner.. ------------------------------------
117. The same goes for ST Mobile. ST Mobile is only entitled to nominates 2 of 5
members in Telkomsel board of director. Again, PT Telkom controls majority
of members of Telkomsel board of director.---------------------------------------------
118. All decisions of Telkomsel Board of commissioner and board of director
(“Telkomse Council l”) are taken by voting from majority member of related
Council. Due to the candidates of ST Mobile are not majority of Telkomsel
council, structurally, ST Mobile is not in a position to control one of the
decision taken by the council such as PT Telkom, but based on its ability to lift
majority from member Board of commissioner and board of director.
119. Under Indonesia law, candidates of ST Mobile for Telkomsel Council is
required to perform their duties for the sake of Telkomsel and avoid placing
themselves in their position in which the duties for Telkomsel oppose against
other interests, Mr. Lim and Mr. Leong really know and ready to complete their
role each as director and commissioner of Telkomsel. There is no evidence that
the candidates of ST Mobile for Telkomsel Council ever abuse their duties.
120. Mr. Lim Chan Poh and Mr. Leong Shin Loon is only 2 of 5 commissaries in
Board of commissioner of Telkomsel, whereas Mr. Yuan Kuan Moon and Mr.
Mo Boon Teck Alan is only 2 of 5 directors in board of directors Telkomsel. As
the same manner as has been noted KPPU that at least 4 members are obliged to
fulfill quorum for board of directors meeting and board of commissioner. That
is, candidates of ST Mobile will always become minority cannot influence the
decision and policy made by board of directors or commissioner. -------------------
121. Concerning to material argument of KPPU that since 2002 up to present, the
position of Director of Commercial and Operation are always nominated by ST
Mobile, it is actually not true. ST Mobile is entitled to nominate two positions
in Telkomsel Management. In the beginning, ST Mobile nominates Director of
Planning and Development, and Director of Operation. Only recently, ST
Mobile nominates Director of Commercial and Director of Operation. SingTel
COPYand ST cannot see how can it will be as evidence that ST Mobile has ability to
control Telkomsel. Telkomsel is managed by board of directors Telkomsel.
Board of director must approve all business policies, operation and strategy
before they are applied. As it is admitted by KPPU, Telkom own majority in
both Telkomsel council. --------------------------------------------------------------------
122. Hereinafter SingTel and ST Mobile note that ironically KPPU does not mention
that important posts of Managing Director and Director of Finance since 2002
up to present always occupied by candidates of Telkom as it are its rights as
majority shareholders to have it. Concerning to this condition, SingTel and ST
Mobile note that Article 11.3 of Telkomsels’s Statutes states that, if Managing
Director or if he/she absent or then two other Directors nominated by majority
shareholders that have rights and authority to act deputizing board of director
and to sign documents on behalf of Corporation and be representative of
Corporation in and extrajudicial of any kind and in all occurrence, binding
corporation with other party and perform all action, both on management or
That the approval of annual budget on, related to capital expenditure, shall pass Capex Committee that consisted of three personnel, from Telkom (2 personnel) and SingTel (1 personnel) (The IOR of SingTel, dated 4 July 2007, The IOR of SingTel, dated 11 July 2007). SingTel intervenes keenly Capex Committee through its staff posted for it (The IOR of Telkom, dated 24 July 2007) and Capex Committee may consult with the team of SingTel, one of them is Mr. Widjaja Suki (The IOR of Telkom, dated 4 July 2007);). Mr. Widjaja Suki evaluates the parameter applied in the proposal. In case of parameter error caused by human error, the correction is made immediately by Mr. Widjaja, but in case of parameter error caused by market situation, Mr. Widjaja Suki is to consult SingTel Mobile’s appointed members of Capex Committee (The IOR of SingTel Mobile, dated 4 July 2007); -----------------------------------------------------------------
COPYThe budget realization is approved by Capex Committee quarterly in accordance with the needs submitted by any departments (The IOR of SingTel Mobile, dated 4 July 207); Mr. Widjadja Suki and Mr. Quah Kung, the personnel assigned by SingTel, monitors the implementation of approved annual budget. They later recommend it to the SingTel Mobile’s appointed commissioners of Telkomsel. In performing his assignment, Mr. Widjaja Suki may perform a communication with management staffs of Telkomsel’s business control such as Mr. Jaka Susanta to whom Mr. Widjaja Suki perform a contact and communication intensively (The IOR of SingTel Mobile, dated 4 July 2007); ----------------------------------------------------------------- SingTel intensively advises the SingTel’s appointed Commissioners of Telkomsel on business vision plan of Telkomsel (The IOR of SingTel Mobile, dated 4 July 2007);156----------------------------------------------------
Report has wrong Fact in telling the Fact on Telkomsel Capex Committee ------------
125 We firmly refuse the interpretation of KPPU on the evidence that given by
representative of SingTel before KPPU during investigation on 4 July 2007 and
23 July 2997 such cited above. Hereinafter in an Investigation Official Report of
Telkom on 24 July 2007, stating there is no told that Singtel’s staff assigns
actively to influence Capex Committee. It is not true. ---------------------------------
126. First of all, we must emphasize that budget for capital expenditure approved
along with annual budget is arranged. Annual Budget is first proposed by
management of Telkomsel to board of director for having until it finally
submitted by board of director to Telkomsel’s Board of Commissioner for an
approval. With the majority of in both board of director of commissioner of
Telkomsel, PT Telkom stays in the only one conducive position to control the
annual budget.--------------------------
127. Its fact, based on the Investigation Official Report of Telkom on 24 July 2007, it
is clear that if there is a party possessing an influence on the decision of Capex
Committee, is PT Telkom. We elaborate hereunder part of relevant Investigation
Official Report that relevant, in which its Managing Director, under oath,
answer the following questions: -----------------------------------------------------------
23
Question: How decision-making processes are taken in Capex Committee?
Answer: The initial proposal is from Telkomsel board of director.
24.
156 Report , page 35, page 87 to 92.
COPYQuestion: How are about the existence of SingTel representatives?
Answer: In my Experience as a member of Capex Committee that the
decision remains to be in Telkom and as far as I know, currently Telkom
controls the decision of Capex Committee more.
25.
Question: Does SingTel ever influence the decision of Capex Committee,
directly or through staff of Capex Committee?
Answer: Naturally, it does not, of course.
26.
Question: I mean its effectivity?
Answer: Actually, if it is seen from its effectiveness, Telkom controlled more.
27.
Question: In your opinion how much are the influence of each party, between
the representative of Telkom and SingTel?
Answer: Formally, it is 65% and 35%.
28.
Question: If it focuses on the decision of Capex Committee, how many percent
is the influence of each party, between representative of Telkom and SingTel?
Answer: It maybe I am able to depict that Telkomsel is operated under the
directives of Telkom and for several strategic things Telkomsel shall be in
follow it. Although, there are sometimes different opinion exists such as
concerning SLI and Backbone.
29.
Question: For such things, is there any objection from SingTel?
Answer: Yes. SingTel object to that but the decision remain to be won by
Telkom. We want to affirm that for the things that are not strategic, Telkom
always wins it. Nevertheless, for the company operation I know much on that.
It is better to you to as Telkomsel board of director.
The same goes for part of the following interview, taken from Investigation Official Report of Telkomsel on 13 July 2007. It clearly indicates that Telkomsel is taking care of the policy proposal (if any) of SingTel. ---------------- 24.
COPYQuestion: Is there any policy of SingTel adopted by Telkomsel? ------------------- Answer: Telkomsel, in arranging the policy, does not consider the source of
the policy whether it is from SingTel or Telkom. We emphasize on the professionalism and independency--------------------------------------
The position of SingTel and ST Mobile remain to be the same as SingTel
and ST Mobile submit it to KPPU during investigation, that either SingTel
or ST Mobile does not give big influence to the capital expenditure
COPYOperation in line with the fiscal year approved by Board of commissioner for
that year, and from the income of Marketing and Telkomsel's Sales and
personnel of working unit. The proposal is submitted further to be studied by
Capex Committee. Capex Committee gives recommendation to Board of
commissioner whether the proposal is approved or not. However, it is needed to
concern that, it is opposed to the allegation of KPPU, the final decision whether
it is approved or not, for the quarter withdrawal is conducted Telkomsel’s Board
of Commissioner and not by Capex Committee. During the investigation of ST
Mobile on 4 July 2007, the representatives of SingTel, Mr. Slattery has coped to
clarify this problem. The followings are question asked to and the answer.
70. Question: Is there any committee from Telkomsel apart from Capital
Expenditure Committee? Answer: Yes it is. There are several committees from Telkomsel, but the
decision is in board of director. It is also an example of resolution of Telkomsel Commissioner, that Capex Committee recommended, but the approval remains to be in the commissioner of Telkomsel. -------------------------------------------------------------------------------------------------
130. We refuse KPPU's allegation that “SingTel has actively influenced Capex
Committee through the staff assigned for that problems”. As the same manner as
it has been admitted by KPPU, Capex Committee consists of 2 Telkom's
candidates and 1 from ST Mobile. Capex Committee's recommendation is based
on the majority votes; the nomination of ST Mobile had much influence to the
material.
131. KPUU has alleged that”Capex Committee can consult team with SingTel; one
of them is Mr. Widjaja Suki. Mr. Quah Kung Yang and Mr. Widjaja Suki are
two of SingTel team members that always support candidate of ST Mobile to be
Capex Committee (see the objective of the conversation below). They do not
support member Telkom nominate. (See: IOR of SingTel on 4 July 2007). The
members nominated by Telkom have their own supporters. While ST Mobile's
candidates are able to ask Mr. Quah and/or Mr. Suki for information and/or
elucidation to all proposals of quarterly withdrawal, they made their own
decision. It is clearly told by Mr. Quah, during SingTel investigation on 4 July
COPY2007. To refresh the memory of KPPU, hereunder SingTel and ST Mobile
specify questions and comments.-----
KPPU: Does the Committee of Ex Capex consult you? Answer: :No. Widjaja is part of team. When the document proposed to Board of commissioners by the team, the team can ask the opinion of SingTel and ST Mobile, if board of commissioner cannot do that. KPPU: Do members of Committee Cap consult SingTel? Answer: No. Chap Ex that mention it. If they need support, they may ask my team/Widjaja to get information, and SingTel and ST Mobile give feedback to candidate of STM about Cap Ex and they decide by themselves. KPPU: Thus, before the team member makes a decision, does he consult your team? Answer: No. We support it by giving them information they need. After that, it is up to Cap Ex to decide. We only support candidates of STM. Telkom's candidates have their own supporters.
The allegation of KPPU is as follows:----------------------------------------------------
“Mr. Widjaja Suki has helped Capex Committee in evaluating about the possible suggestions of capex. Mr. Widjaja Suki also conducts parameter evaluation used in capex proposal. If the measurement of the parameter is not true caused by human error, Mr. Widjaja Suki must immediately revise it, but if it is caused market condition, Mr. Widjaja Suki must consult member of Capex College nominated by SingTel Mobile (IOR of the SingTel on 4 July 2007) ” [enhanced to emphasis]. ----------------------------------------
The allegation of KPPU that Mr. Suki revises the measurement of parameter
used in the proposal of Capex is incorrect and gains no support in the
testimonies made by the representatives of ST Mobile to KPPU on 4 July 2007.
The following are questions asked by Chairperson of KPPU Mr. Suki
concerning capex's suggestion given to Capex committee to be learnt.--------------
62. KPPU: How often does the parameter not match with budget?
Answer: We often find parameter that does not match with the budget.
64. KPPU: What is the cause of inappropriate?
Answer: Sometimes it caused by human error but sometimes market
condition. 65. KPPU: What do you do if you find such mistakes?
Answer: If the mistake is caused by human error, they will revise it, but if it
is caused by market condition, I consult Mr. Leon Mr. Leong.
COPY66. KPPU: Thus, if the mistake is caused market, it must be discussed with Mr.
Leong?
Answer: Yes, it has.
I do feel that I have authority for that, because if there is any deviation on it I
must inform commissioner of SingTel nomination to finish the problem.
Finally, the decision-making is in Mr. Leon (commissioner nominated by ST
Mobile) to be considered.
132. Base on what are mentioned above, it is clear that, where proposal capex
submitted by the staff of Telkomsel is not fulfilled the budget caused human
error in documentation, “they”, that is, Telkomsel's staff in charged, revise the
document, and not by Mr. Suki. -----------------------------------------------------------
133. KPPU also ever told that, “if the parameter is not true caused by market
condition, Mr. Widjaja Suki shall consult members of Capex Committee
assigned by SingTel Mobile (IOR of SingTel date 4 July 2007). It is untrue.
Based on the note above, it is clearly that proposal of capex does not meet the
budget because of market changes; Mr. Suki will advise the candidates of ST
Mobile about Capex Committee so they can make a decision by notification
about proposal of capex----
134. Further, Temasek, SingTel, or ST Mobile does not give major effect to the
decision of Telkomsel's daily expenditure. All daily expenditures are limited
arranged. IOR of ST Mobile on 4 July 2007). Board of Commissioner in which
ST Mobile has no majority vote agrees the limitations.
135. We understand that KPPU also alleged that “Based on the approved annual
budget, SingTel has assigned its two staff, Mr. Widjaja Suki and Mr. Quah
Kung Yang to monitor the implementation and give recommendation to the
commissioner of Telkomsel appointed by SingTel Mobile... SingTel also has
actively suggested Telkomsel's commissioner appointed by SingTel Mobile
concerning business vision and plan of Telkomsel (IOR of SingTel on 4 July
2007). SingTel does not ever have rights to assign its staff to monitor the
problem of Telkomsel, by itself and its facts. SingTel only perform part of the
agreement with ST Mobile concerning the purchasing of corporation service
limited to human resource management, finance and accounting, and investment
monitoring by ST Mobile from SingTel. The following is information given to
KPPU by SingTel and ST Mobile mention information that given by Mr. Quah
COPYto KPPU during the investigation of the SingTel on 4 July 2007 until now. ------
----------------------------
30. Are there any other management teams and is it the same as management
team of ST Mobile?
Answer: The structure of SingTel for the purpose of efficiency is that certain
functions in subsidiary performed by SingTel as service provider, namely
services of subsidiary company purchasing perform the functions of like
customer service, law, human resource, finance and treasury.
31. KPPU: Can it be told that the function of STM performed by SingTel in
general is the function of corporation?
Answer: Yes. Such function can be called as the function of General
Corporation. In case of ST Mobile, cellular business is still performed by ST
Mobile but the Corporation Function, ST Mobile buys them from SingTel.
. 136. Regulation is accepted commercially. They avoid duplicating function,
economizing fare, and enabling role specialization. Mr. Suki and Mr. Quah
monitor Telkomsel annual budget implementation as part of function of
investment monitoring commissioned to them as agents of ST Mobile. They
also monitor the implementation of Telkomsel and recommend candidates ST
Mobile in Telkomsel's boards of director and commissioner. Mr. Quah and Mr.
Suki do not take part in making the decision in Telkom; it clearly that the
members are those who are in charge in making decision.
137. The members nominated by ST Mobile at the boards of Telkomsel can consider
the recommendation to Mr. Quah and Mr. Suki, but they make decision
independently. They are professional who are qualified and professional expert
required to make decision independently and perform their task for the interest
of Telkomsel. It is shown that the candidate of ST Mobile in the Board of
Telkomsel had ever refused the recommendation Mr. Quah and Mr. Suki. We
refer to examples that containing the letter submitted by SingTel to KPPU on 23
July 2007.
138. KPPU also alleges, “In getting tasks done, Mr. Widjaja Suki can directly contact
Telkomsel’s management member in business monitoring, one of them is Mr.
Jaka Susanta (IOR of SingTel Mobile date 4 July 2007)”. We inform that it is
not an action of SingTel in influencing Telkomsel. In a big business like
COPYTelkomsel, candidates of ST Mobile at any times qualify and ask in order to Mr.
Suki getting the explanation from Telkomsel that enabling candidates make
decisions on the basis of sufficient information approved by Telkomesl boards.
In the context of gathering information, Mr. Suki contacts Telkomsel in
Division of Business Monitoring. Mr. Quah and Mr. Suki do not give instruction
or influence Telkomsel employees or board member. Mr. Quah and Mr. Suki are
in their capacity as consultants. There is no evidence in KPPU that suggest it
Investigation of ST Mobile ----------------------------------------------------------------
27. KPPU: There is a trend that in analyzing economical tariff, Telkomsel keeps on being a Leader in this industry. Telkomsel keeps the tariff high, does SingTel Mobile know about it?----------------------
Answer: Telkomsel board of director fixes Tariff; SingTel Mobile does not take part ----------------------------------------------------------------
143. None of the management member of SingTel gives suggestion and
recommendation on pricing to anybody in Telkomsel, including those assigned
ST Mobile in board of director and commissioner of Telkomsel. PT Telkom as
majority shareholders elected majority of board of director in Telkomsel.
Therefore, none of party may have right to suggest material influence on
Telkomsel’s tariff, but PT Telkom, not Temasek, SingTel or ST Mobile. No
supporting suggestion that Temasek, SingTel or ST Mobile have material
influence to the pricing policy of Telkomsel.--------------------------------------------
CELLULAR MARKET IN INDONESIA IS COMPETITIVE AND NO EVIDENCE SHOW THAT THERE IS ANTI COMPETITION AND BEHAVIOR ANTI-COMPETITION BY TELKOMSEL OR INDOSAT OR BOTH OF THEM 144. It needs to be concerned that since SingTel and ST Mobile do not infringe
Article 27, level of competition evaluation in Indonesian market is not needed
161 See the Decree of Minister of Communication No. KM 20/ 2001 and the Decree of Communication Minister No. KM 21/ 2001on the Regulation of Communication Service as it has been amended (“Kep 21/2001”) (it is exhibited in the defence as Annex #35). 162 Report , page 12.
COPYany longer. The following analysis is for completeness only and not to
emphasize the fault of the allegations addressed to the under investigation
151. According to NERA, “mere parallelism of conduct among putatively competing
forms does not establish the presence of a conspiracy: in competitive, markets,
one would expect forms to respond similarly to common changes in their
environment”171. KPPU should see the better performance than to show the
behavior of the competitor. ----------------------------------------------------------------
152. Market Dedication: Based on the data, Telkomsel, Indosat and Excelcomindo
seem to be for their own market and do competition to maintain and to attract
new consumers because they invest bigger in network coverage and marketing,
indicating that market is competitive and inconsistent with collusion172.
Especially, either Telkomsel or Indosat has spent much more money in network
and marketing. Indosat improves a number of base stations with the average of
27% per year. In marketing cost, the two companies have increased drastically
since 2002173. --------------------------------------------------------------------------------
153. The trend is also observed by Spectrum. The capital expenditure of Indosat and
Telkomsel has remained high since 2002, indicating that the two companies
have invested consistently in the market174. In reality, the capital expenditure of
Indosat increases significantly higher than Telkomsel and relatively highest in
Indonesian market. Indosat widens its network coverage and it indicates
competition. High investment and keep on growing business shows that the
climate in competitive. New innovative products that give better access to low 168 NERA, page 7. 169 NERA, page 173. 170 NERA, part 7.2.1. 171 NERA, page 3 172 NERA, part 7.2.2. 173 NERA, page 102. 174 Spectrum, part 3.7.
COPYincome consumer,175 also an indication of high competition level in the market.
Either Indosat or Telkomsel has improved marketing and advertisement costs
since 2003. -----------------------------------------------------------------------------------
154. It indicates that the two operators admit the high competition in the market.176 In
fact, Indosat has expended its revenues higher than Telkomsel, shows that
Indosat keeps on competing aggressively177. Indosat and Telkomsel has
launched some customer retentive initiatives that shows high competition of t
the two due to the awareness of the operators on the threat of their customer
basis in the market with the high churn rate178. The high churn rate is an
indicator the competition is high competition because of the success of market –
and cellular market in Indonesia has the highest churn rates this regions. ----------
155. Profitability: The profitability, as it is measured in which the income is higher
than capital expenditure, Telkomsel in this case is better than Indosat and
Excelcomindo. Therefore, the analysis reveals that the lower of Indosat
profitability is caused by high cost although per customer operational is close to
what has been spent by Telkomsel179. The new comers such as HCTP that enter
market by competitive pricing along with innovative offering service influence
the profitability in Indonesia. The ability of HCTP to enter market and compete
effectively with the incumbent operators is an indication of the competition in
the market180. Finally, SingTel and ST Mobile stress that KPPU does not give
any reasons explain how high profitability is caused by cross ownership. ----------
156. Benchmark Analysis. Based on the comparison between competition indicators
such as cellular price, rate of customer growth, market concentration, customer
churn, and margin (“EBITDA”) in Indonesia and 16 other countries, with
economic indicators such as, demography and Telecommunication, there is no
evidence indicating that market result in general lower than the comparative
countries. Its fact, for certain size----market concentration, changing of
concentration, cellular (3 minutes call in peak and off-peak, customer churn and
175 Spectrum, part 3.2. 176 Spectrum, part 3.3. 177 Spectrum, part 3.3. 178 Spectrum, part 3.5. 179 NERA, part 7.2.3. 180 NERA, page 6 and 145
COPYrate of customer growth, the product market is better than comparative
169. KPPU does not try to explain the relevance of the element and issues needed to
decide infringement based on competition law and anti-trust. The certain
analysis aspect seems not to be relevant with the problem that is faced. ------------
170. Market Concentration. For one thing, market concentration that has been
described widely by KPPU in its Report is not something strange. In cellular
industry involving huge investment, market concentration is not extraordinary.
According to NERA:189
“Specifically, the market concentration for mobile services in Indonesia is not atypical by international standards, although concentration is high relative to other industries. This, however, is not unexpected, as large fixed costs in the mobile sector limit the number of carriers that the market can support.” ---------------------------------------------------------------
171. Consumer wealth. Secondly, it is related to concentrated issue, the theory
presented by KPPU is advance, based on a diagram suggested by the Report, to
show that cross ownership causes loss consumer190, that the alleged cross
ownership has created consumer loss191.-------------------------------------------------
172. The theory is defected. This theory cannot explain how much cross ownerships
needed to cause consumer loss, even more if it is measured that Telkomsel has
owns around 65% of cellular service market shares in Indonesia before on 15
December 2002. The implication of the diagram that is each value of ownership
will cause consumer loss. ------------------------------------------------------------------
173. On page 86 of the Report, KPPU uses price elasticity estimation price elasticity
of demand in 2006 to measure consumer’s wealth added resulted to the
deduction of price hypothesis of price in Indonesia to price valid in other
countries “that is considered to be competitive”. NERA notes that there are a
number of problem with this analysis. ---------------------------------------------------
174. Firstly, the analysis does not indicate that consumer surplus consumer or
customer decrease in Indonesia in the same period. Analysis shows that what
kind of consumer surplus that will happen if the prices in other countries are
lower than Indonesia. Decreasing price will increase consumer wealth as it is
COPYcited from NERA, (“unexceptional”)”192. It does not implicate that prices in
Indonesia is too high or the prices reflected power of market players.---------------
175. Benny Pasaribu in his opinion states (point 5d), customer surplus has increased
significantly since 2002 and tariff had decreased, from 9.6 million mobile
customers in 2002 to 63.6 million in 2006. Based on price and demand data in
the Report, NERA predict the changing of consumer surplus customer within
the same period is IDR. 17 trillion193.---------------------------------------------------
176. Thirdly, the elasticity predicted by KPPU is incorrect because within the period
of the research, demand curve of cellular service move outside due to many
factors such as developing of network, revenue growth, and preferences. The
prediction of KPPU assumes that the quantity change is caused by price change
and it is not true. Thirdly, as it shown by NERA, a realistic elasticity curves is
significantly different with the prediction of KPPU194. --------------------------------
177. Market concentration – The formula is engineered. KPPU assumes that
whatever high the concentration market is, it always relate to the increase of
market power. This assumption is incorrect – market power is not always
mentioned by concentration, but also elasticity of demand and supply. ------------
178. Secondly, GHHI is seldom used by anti-trust authority I US. The following is
the accuracy of the result of GHHI, cited from NERA:195-----------------------------
“In order to measure the GHHI one has to determine the “exact degree” of control exercised by the firm’s shareholders. Determining the exact degree of control exercised by a firm’s shareholders is a complex undertaking that requires detailed analysis of each firm’s governance rules and structures. The findings can vary significantly based on different methodologies to measure the degree of control. Hence, the GHHI results are unlikely to be robust and are sensitive to the underlying assumptions regarding the degree of control exercised by the firm’s shareholders.” -----------------------------------------------------------------------
We do not have evidence whether KPPU analyze in detail any rule and
regulation structure of the company and even examine accurately. ------------------
179. The usage of GHHI to show market concentration is the same as engineered the
results. The formula in GHHI add one component non-negative to HHI explain
cross ownership among common market. Considering that the component is
COPYalways zero if there is no cross ownership, GHHI will automatically be same
size as HHI196. -------------------------------------------------------------------------------
180. The data of KPPU on HHI shows that a constant increase to concerned years
and it deviates from the statistic result of NERA. The differences are caused by
the method o measuring market shares. KPPU uses income while NERA uses
customer. The usage is theoretically able to defend and the problem is the most
suitable to be implemented present days. If the product is homogenous,
customer is preferred. It has been used by US Federal Trade Communications
Commission. European Court of Justice uses either customer or income197. -------
181. The most part of cellular market in Indonesia is prepaid package; such package
is homogenous. Income in this market does not slightly differ and the
competitor tends to compete based on customer. At least, market shares shall be
based on customer. --------------------------------------------------------------------------
182. A number of decisive competitors. According to KPPU, Telkomsel has profit
as first mover and only Indosat as its closest competitor may use competitive
pressure to take aside Telkomsel from its position. KPPU ascertain that a
number of competitors do not mention a wide area of competition in cellular
market. Such an opinion is wholly denied by NERA – because the empiric
evidence strongly state that a number of competitor and its wide area shows a
fairness of market competition level. All newer players give Telkomsel and
Indosat pressures. The empirical evidence from NERA also show that the newer
player is successful in the market.198.-----------------------------------------------------
183. Price parallelism is a trend of competitive market. Fact of price parallelism is
not by itself means anti- competition behavior. In one side, such behavior is a
price-fixing and in the other hand a consequences of effectively competitive
market in which companies are price-takers. Price market can be altered along
the time because of costs or demand. -----------------------------------------------------
184. We cite Bell Atlantic Corporation, et al. versus William Twombly, et al., United
States Supreme Court, , August 2006 as cited for the report of NERA: -------------
(“As a matter of substantive antitrust law, it has long been clear that mere parallel conduct, even consciously parallel conduct, does not violate Section 1. See, e.g., Theatre Enters., Inc. vs. Paramount Film Distrib.
COPYCorp., 346 U.S. 537, 541 (1954). Indeed, such conduct is commonplace and often efficient. Of course, parallel conduct can result from an agreement between competitors, and such an agreement could violate Section 1. However, an allegation of agreement under Section 1 must rest on something more than allegations of parallel conduct, lest commonplace and efficient economic behavior provide a sufficient basis for costly litigation over largely groundless claims. -----------------------------------------
While a showing of parallel “business behavior is admissible circumstantial evidence from which the fact finder may infer agreement,” it falls short of “conclusively establish[ing] agreement or . . . itself constitut[ing] a Sherman Act offense.” Id., at 540–541. Even “conscious parallelism,” a common reaction of “firms in a concentrated market [that] recogniz[e] their shared economic interests and their interdependence with respect to price and output decisions” is “not in itself unlawful.” Brooke Group Ltd. vs. Brown & Williamson Tobacco Corp., 509 U. S. 209, 227 (1993).”) -------------------------------------
185. According to KPPU, the sign of price parallelism is seen in the prepaid service.
It compares levels of price per minute average and not a number of competitive
differences between price-fixing plans of its operator. Although the operators
increase the prices at the same time it is not anti-competition behavior because
the increase of price could be a response to the increase to cost or changes in the
condition of common demand, cross company in the market exists.199. ------------
186. There is no price fixing. It is stated that the level of prices for Telkomsel,
Indosat and Excelcomindo are getting increase. With such a statement, KPPU
concludes that there is collusion because in the converse fact, a competition will
pressure prices. The postulate of the argument is defected. The postulate seems
to refer to the prices average per minute for the offer of car service, without
considering different unmeasured price based on minutes (such as data
download, customer fee, activation fee etc.) and many non-price attributes as it
in car plan (such as special tariff in busy or non-busy time) -------------------------
187. In measuring price average, KPPU also seem not to consider price plan for one
operator based on a number of its customer. It distorts further the analysis of
KPPU. Finally, the finding of collusion is inconsistent with the basic allegation
of collusion between Telkomsel and Indosat, because the allegation assumes the
participation of Excelcomindo in the alleged cartel. No evidence before KPPU
199 NERA, page 133 and 134.
COPYabout the existence of any cartel, or any positive evidence from Excelcomindo
188. To summarize how the position of SingTel and ST Mobile on the price fixing,
none is stating better than Benny Pasaribu: ----------------------------------------------
“I found no any evidence that tariff parallelism fixed by PT Indosat and PT Telkomsel was a result of cartel or price arrangement. In tight competition, it is normal if one company decrease tariff and followed by other companies for not the customers leave. Chatib Basri, Ph.D. (Director LPEM University of Indonesia) made a same statement in mass media (see Bisnis Indonesia, 25 September 2007, page T1 and Rakyat Merdeka September 2007)201. -------------------------------------------
189. Roll Out Base Transceiver Station. The rollout of Indosat is lower than
Telkomsel. Therefore, Indosat does not compete in the market. Firstly, Indosat’s
rollout can be compared with those of Excelcomindo. Excelcomindo is not
alleged guilty to its negligent202. Secondly, based on indirect share ownership,
Temasek perform rationally and tries to maximize its profit and it enlarge rollout
for the two companies or reduce Telkomsel competitiveness increase the
competitiveness of Indosat. The reducibility of competitiveness decrease
maximizing profit and it is in contrast with the theory of cross ownership. ---------
190. Further, the use of rollout of BTS as a benchmark of competition is no wholly
correct. Comparing rollout has no significant meaning statistically in
competition. According to the data of KPPU, Indosat owns customers higher per
BTS than Telkomsel in 2005 an 2006. Its fact, the roll-out BTS of Indosat and
Telkomsel cover the same geographical market, and KPPU seems to punish
Indosat because the that Indosat has fewer BTS. As NERA indicates, in this
context, Indosat is more efficient than Telkomsel203. Spectrum thinks that
Indosat spent capital expenditure in percentage higher than Telkomsel that
191. According to Case, the network of Indosat is smaller than Telkomsel, it is not an
evidence of the anti-competition behavior. The reason why Indosat’s rollout is
fewer because Indosat is in a financial crisis and it can change the market by
itself by enlarging its network and responding to its result. The lack 200 NERA, page 133. 201 Report , The opinion of Benny Pasaribu, page 2. 202 NERA, page 141. 203 NERA, page 142 204 Spectrum, part 3.3.
COPYperformance of Indosat is also influenced by integration of IM3 and Saltelindo
into one network. This integration does not work well and the lack of services
influence market shares and customer perception. The market indicators in the
end of Q1-2007 show the increase of Indosat performance.205. ----------------------
192. The increase of the newest Telkomsel market shares (measured by income and
customer) less than the decrease of Indosat market shares, as it is shown in the
Written Proof 1, and Written Proof 2 on page 7 and 8 of the report Analysis
and Telkomsel does not have full profit from the lack performance of
Indosat. The percentage of indirect Temasek to Telkomsel is smaller than to
193. Telkomsel and interconnectivity. There is no constructive evidence that
Telkomsel abuses access in the network infrastructure. SingTel and/or ST
Mobile do not take part in such information and both of them are not questioned
on that during the Further investigation. Only when SingTel and ST Mobile
examined the notes of KPPU last week and SingTel and ST Mobile firstly
known from the theory of KPPU, once again it only bases on the anecdote
evidence of Mastel. The account of Mastel in this side is not vividly to SingTel
and ST Mobile, and Mastel is not investigated. 207.------------------------------------
194. The theory of KPPU irrational. The statement of SingTel and ST Mobile are
simple: Theory of KPPU does not imply economic meaning. The analysis of
NERA supports this position. If Temasek really control Telkomsel and Indosat
and think that one of the manage one company for benefitting other companies,
it will be an advantageous strategy, managing Telkomsel for the profit of
Indosat, in which it indirect208 is higher. Based on the Telkomsel profit rated
data in 2003 and 2006, it is shown that the increase of Temasek income, from
the increase of Telkomsel profit that is allegedly to be caused by the decrease of
Indosat income.209. Economically, it is nothing for Temasek to manage
Indosat210. As it indicate by NERA, another defected in KPPU theory of
collusion is an assumption that other Indosat investors, that own 66% in average
205 Case, page 42 and 43. 206 Analysis, page 10. 207 NERA, page 166 and 194 208 NERA, page 4. 209 NERA, page 32. 210 NERA, part 8.
COPYwill tolerate the los. It is impossible, including established investors like Bank
of New York, than own around 8% of Indosat shares211. ------------------------------
195. Summarily, the theory of KPPU is groundless. The theory is improper under
Indonesian and international standard law. According to NERA, the allegation
is fights against economic principles and no evidence support.-----------------------
THE PUNISHMENT TO SINGTEL AND ST MOBILE AT ANY FORMS WILL INFRINGE INDONESIAN AND INTERNATIONAL LAWS ---------------------------------------------------------- 196. Firstly, (i) Temasek, SingTel and/or ST Mobile are not in the definition
suggested by Article 27(a), and (ii) the elements in Article 27(a) are not
197. We have to note as well that the law of Anti-trust gives KPPU authority to
perform a divestment of share, merger and consolidation under Article 28 that is
not subject of the case. Therefore, any instruction regarding divestment is an
infringement to the law of Anti-trust that make it be appropriation, invalid under
international law. It would happen although Temasek, SingTel or ST Mobile is
responsible to the infringement of Article 27(a) (in which we deny)-----------------
198. Ehlermann explains in detail that any legal action to an infringement shall be
proportional. We do not have discussion unless if SingTel and/or ST Mobile are
responsible to the infringement of Article 27(a) (in which we deny), openly and
properly. It is because in the report stated that SingTel and/or ST Mobile have
infringed Article 27(a). Furthermore, SingTel and ST Mobile also do not have
an indication or understanding on the guidelines or consideration of KPPU to
consider potential sanctions under Anti-trust Law. It shows the difficulties of
SingTel and ST Mobile in discussing restoration of right.-----------------------------
199. Ehlermann notes that under the law of EC, England Germany and the United
States of America, under competition law, an instruction to take over to part or
in a whole of corporation unilateral has not ever happen previously212. Such an
authority has just submitted to European Commission under the newest
amendment of EC law and it is not used yet until present time. Based on
Germany law, expert argued on whether the edict on the divestment of share is
possible or not. In whatever reason, Federal Commission Office (“FCO”) has
not instructed an investment of share. It also happens in England. Only in
211 NERA, page 34. 212 Ehlermann, Expert Statement of SingTel and ST Mobile, page 48.
COPYUnited States that an instruction to the investment of share, in a spectacular
situation, that the instruction of share had ever applied. -------------------------------
200. We note that the references in the Report (page 66 to 68) to show the divestment
minority ownership for some cases in the United States of America is
groundless and misleading and cannot be implemented in Indonesia, as it is
described below:-----------------------------------------------------------------------------
a) The cases cannot be applied at all. The single source in the report for the case is an article “Challenging the Economic Incentives Analysis of Competitive Effects in Acquisition of Passive Minority Equity Interest” by John B. Dubrow (enclosed in the Defense as Annex 9). This article and the case concerning the usage of Article 7 of Clayton Act (cited below) is different with Article 27(a) because (i) it does not look like Article 27(a), Part 7 applied for either minority share or majority (in part or I a whole ), and (ii) Part 7 is subject to rule of reason, while Article 27(a) is a prohibition per se: ----------------------------------------------------------------------
No person shall acquire the whole or any part of the stock or other capital share .. of one or more persons engaged in commerce or in any activity affecting commerce, where in any line of commerce or in any activity affecting commerce in any Article of the country, the effect of such acquisition, of such stocks or assets or the use of such stock by the voting or granting of proxies or otherwise, may be substantially to lessen competition, or to tend to create a monopoly. .-
b) Its fact, Mr. Dubrow uses these cases to postulate that the practice of DOJ and FTC in such cases is groundless. (Part 7 of Clayton Act,) as follows:-----
(While there are circumstances in which a truly passive, minority equity interest in a competitor can give rise to anticompetitive concerns, the agencies, in particular the DOJ, have challenged passive minority equity acquisitions in ways that ignore and effectively eviscerate the investment-only exemption contained the Clayton Act. This prosecutorial abandonment of the investment only exemption is troubling, especially because it has been effectuated through several consent orders, rather than litigated matters in which the theory of anticompetitive harm could be fully tested... (Pages 114-115)) --------------------------------------------------------------
c) If we analysis, for just an argument, the case cited by KPPU, cannot be applied analogically to the case all are related to divestment of share, directly or indirectly. SingTel and ST Mobile do not compete in the cellular service in Indonesia, it should be clear that there is no divestment can be applied in Telkomsel. ------------------------------------------------------------------
d) Mr. Dubrow is very critical to challenge share minority ownership. As it is mentioned in part C of his article (Tempering Economic Theory with Real-World Facts) the theory maybe failed because it does not reflect fact issues such as (i) uncompleted information that will restraint effectively cross ownership for competition (ii) incentive management that will fight against
COPYthe objective (iii) other factor that make cross ownership cannot realize its profit.. ------------------------------------------------------------------------------------
201. According to Report, there no ground at all to guarantee or justify divestment in
this case against SingTel or ST Mobile, in the competition law jurisdiction. ------
202. It is important to emphasize that all regulation have been completed in acquisition
of ST Mobile to Telkomsel. Especially a letter of BKPM, dated 19 July 2002
informing to Telkomsel that BKPM approved the structure of Telkomsel
ownership regarding the acquisition of ST Mobile that have ST Mobile own
35% share and Telkom 65% shares .-----------------------------------------------------
203. STT has given statement as a response to KPPU, that STT has acquired
ownership in Indosat openly, advertised and transparent with the approval of the
Government of Indonesia, that consider and revoke potential infringement that
might happen from the perspective of competition. Its fact, STT has stated that
STT was invited by the Government of Indonesia to participate in open tender
of Indosat’s shares213. The selling was under the monitor of the officer of
Government of Indonesia IMF and had passed the procedures required by the
Government of Indonesia, through Department of BUMN, as it is proved in the
White Paper of Department of BUMN on the divestment of Indosat, dated 4
February 2003214.----------------------------------------------------------------------------
204. Based on the facts, it is not fair if KPPU alleges that the ownership structure of
Telkomsel and Indosat is not in accordance with Indonesian law. The result that
is not expected is destroying investment climate in Indonesia and restraint
foreign to invest in Indonesia. -------------------------------------------------------------
COPYDetails: The value of OVUM recommendation is an addition of origination and termination cost. In other words, the value of recommendation has covered whole cost.
5.5.5.4.5 That the value of OVUM recommendation is total of
origination and termination cost and interconnection cost,
then the value of recommendation has covered a whole
prediction of cellular cost per minute. ----------------------
5.5.5.4.6 That based on the table above, the cellular price is above
the cost.----------------------------------------------------------
5.5.5.4.7 That based on LHPL, the lowering price potency of
Telkomsel cellular service is as follow:---------------------
Telkomsel Financial Simulations with ROE 20%, 25%, 30%, and 35%