PT INDOSAT TBK. DIVESTMENT PROCESS TO SINGAPORE TECHNOLOGIES TELEMEDIA DID THE GOVERNMENT GET THE RIGHT PRICE?

On 16 December 2002, the Government of the Republic of Indonesia (“Government”) declared Singapore Technologies Telemedia Pte., Ltd. (“STT”) the winning bidder for the divestment of 41.9% shares of the Government in PT Indonesian Satellite Corporation Tbk. (“Indosat”).  STT utilized its subsidiary Indonesian Corporation Limited (“ICL”) to purchase the shares.  This divestment decision attracted various reactions from the public as well as various institutions within the government.

This divestment process had been long considered by State Minister for the State Owned Enterprise (“Meneg BUMN”) a position which was then held by Mr. Laksamana Sukardi, the Minister of Finance (“MoF”), Mr. Boediono, the Indonesian Banking Restructuring Agency (“IBRA”) and the Capital Market Supervisory Board (“Bapepam”).  To support the divestment process, the Government engaged PT Danareksa Sekuritas and Credit Suisse First Boston (“CSFB”) as coordinators for the sale of the shares, particularly as the financial advisor.

One of the reasons the Government decided to dispose of its shares in Indosat was to increase the level of competitiveness of Indosat in the telecommunication sector in Indonesia.  Another reason was Indosat’s failure to achieve optimum results despite previous efforts to enhance its performance.  However, the main reason was that the MoF had planned to utilize the funds generated by the privatization of State Owned Enterprises (including proceeds from Indosat divestment process) to buy back Recapitulation Bonds from a number of banks.