KPPU vs TEMASEK about Telkomsel and Indosat

It's finally decided as my presentation topic for Business ethics, About KPPU vs TEMASEK, I've tried to find real case situation to convince my teacher, While brainstorming myself to find such case, desperately i tried to relax a bit..checking for soccer news, fortunately I saw a pop out news about KPPU decision to Temasek, and thats it..everything suddenly comes out, just the case I needed. I never thought I could find the nice side of this long story of Telkomsel and Indosat Acquisition by Temasek-group..It's nice only for my discussion material to get through this course.., for other reason there is no more good side about this situation.


I do aware its such controversial things happen about the acquisition..first thing first is national security, Imagine that probably around 80% of Indonesia GSM user are probably tracked by Another Country..Amazing..what is the reason of Indonesia Government did this..., Anyway.. I didnt propose to do this discussion to the teacher..but more into ethical perspective of doing such acquisition (Since it is class about Business ethics of course..)..moreover discussion of National security in a class on another country is inappropriate and embarrass me as well.., although that is the truth..but still..


Here is the Proposal detail, I will probably discuss my result on early January:

Proposal

September 2006, data shown that Mobile user In Indonesia reach 38 million users or about 17.28% of Indonesia Population, and this number increasing rapidly every year. This number represent GSM (Global Satelite Mobile) Technology, CDMA (Code Digital Multiple Access) technology Is not considered yet, since it is relatively new implemented in Indonesia and share much smaller market share compare with GSM.

Nearly 80% of market share dominated by 2 biggest cellular operators, respectively by Telkomsel(49%) and Indosat(30%). Before tide of acquisition, Telkomsel as the biggest cellular operator owned by the government through state telecommunication company PT Telkom, it share is not listed in market. Second Biggest, Indosat listed in market and it shares owned by Government and Public.

Today, after acquisition, Temasek-Singapore based telecommunication company owns a 54.15 percent stake in SingTel Group which holds a 35 percent stake in Telkomsel, while Singapore Technologies Telemedia (STT) -wholy owned by Temasek- owns 75 percent of Asia Mobile Holdings which owns 41.9 percent of Indosat.

Domination and cross ownership make it possible for both operators to apply monopoly such as fixed higher price which is too high and operators enjoyed excessive profit, far above it basic/interconnection cost. Data also shown the fact for Telkomsel that Ebitda Margin (profit after tax, depreciation, and amortization) reach average of 72.09%, second highest after Philippine among 52 countries in the world, 56.7% for Indosat.

Based on laws of business competition or monopolistic practices to ensure sound business competition, The Business Competition Supervisory Commission (KPPU) found Singapore`s Temasek Holdings guilty of cross-ownership in domestic mobile telecommunication companies PT Telkomsel and PT Indosat leading it to abuse its dominant position in the marketplace and to pratice monopoly.

Given Above information, we want to analyze ethical issues related with the approval of acquisition execution, there are several points we want to discuss:

1. Initially, before the acquisition, it is not realized that SingTel Group and STT, both are backed up by a same bigger group, Temasek. From law perspective it is SingTel and STT concern to consider about law consideration regarding cross ownership and ownership of majority shares in companies which work in the same area (telecommunication in this case).However, it is also shareholders concerns (TELKOM) to take care of acquisition process so in the future no such thing happened like today, ethically shareholder have a responsibility to be sure that management is looking after their interest. In other words, shareholders responsibility is not only moral obligation, it may be smart investment as well-reference from Two Ethical Issues in Mergers and Acquisitions-Patricia H. Werhane.
2. Based on current situation, it turns out that the acquisition can be categorized into Hostile Takeover/ Acquisition, Hostile Acquisition can be describe as (from wikipedia): A takeover would be considered "hostile" if (1) the board rejects the offer, but the bidder continues to pursue it, or (2) if the bidder makes the offer without informing the board beforehand. The second imply our reasoning. There is also some ethical aspects from this situation we would like to discuss.-ref Ethical Dimension of Hostile Takeover, Lisa H.Newton.

Questionable Situation: Why the government approved this hostile acquisition, especially when they have already seen the monopoly possibility behind this acquisition? Have they ever followed their responsibility of monitoring and keeping the health of the market?

Actors: Indonesian Government( regulator and market surveillant)、Temasek-Singapore(acquisitor)、Telkomsel and Indosat(local cellular operator)

Stakeholders: users、cellular operator、government、acquisitor

Dilemma： advanced managerial experience of cellular operation、foreign capital for expansion of local network、excess profit from monopoly、personal interest of the governor versus national telecommunication security、quality of service without competition、fixed high communication rate

Alternative reaction: introduce another tactical institutional investor which has no relationship with Temasek to avoid market monopoly or limit the number of board members form Temase to reduce its influence over the companies

Theoretical Reflection: To be discussed

Our view: government responsibility、third party regulator and monitor、perfection of legal system

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some references:

Perang Interpretasi Undang-undang - Senin, 26 November 2007
Indonesian Consulate Sydney - Temasek case not to undermine investment
ANTARA News :: Temasek Bisa Bawa Kasus Kepemilikan Silang ke Arbitrase Internasional
KPPU: Konsumen Seluler Dirugikan 14 - 30 Triliun Rupiah :: Media Konsumen :: Suara Konsumen Online

or for those who interested on some intelegent issues:

[pulsa] Re: Rebut Telkomsel & Indosat dari Temasek !!!