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Singtel outlines main basis of appeal against KPPU decision

Singapore, 4 January 2008 -- Singtel and Singtel Mobile filed an appeal with the District Court of Central Jakarta on 19 December 2007 to dismiss the decision of the Commission for Supervision of Business Competition (KPPU). Today, Singtel outlined the main basis of its objections to the KPPU decision regarding the allegation of anti-competitive conduct involving Singtel, Singtel Mobile, as well as other Singaporean and Indonesian companies.

“The decision by the KPPU is wrong and has violated the Rule of Law in Indonesia,” said Singtel lawyer Mr Wimbanu Widyatmoko, Senior Partner, Hadiputranto, Hadinoto & Partners. “Also, fundamental due process rights were not accorded those accused.”
Mr Widyatmoko added: “The KPPU decision also violates the principle of legal certainty as protected by the Indonesian constitution, and runs contrary to KPPU's mission to promote business competition.
“The KPPU decision is not supported by adequate evidence. The KPPU distorted the meaning of present legal terms and invented new legal terms to justify its decision.  Hence, it has acted as judge, jury and legislator. Further, the KPPU is trying to impose sanctions beyond its jurisdictionas it has no power to order divestment in this case.
“We have appealed to the Indonesian courts as they are in a position to put things right.  They have demonstrated this in the past when they overturned KPPU decisions which were wrong.”

Singtel and Singtel Mobile are not majority shareholders
Lead counsel for Singtel, Sundaresh Menon, Senior Partner of Rajah & Tann, said: “The KPPU’s case against Singtel and Singtel Mobile is fundamentally flawed as a result of which there are many grounds for appeal.”
The KPPU has found against Singtel and Singtel Mobile on a charge under Article 27(a) of Law No. 5 of 1999 (Anti-monopoly Law), which prohibits business actors in Indonesia from owning majority shares in more than one company under certain conditions.
Mr Menon noted: “The charge fails at the very first hurdle because Singtel and Singtel Mobile are not business actors operating in Indonesia.  Further, neither company owns majority shares in any Indonesian company.  
Singtel and Singtel Mobile do not control Telkomsel
Faced with this obvious hurdle, the KPPU has taken the approach of reading Article 27(a) as resting on a finding of “control”.  But even this is flawed as Singtel and Singtel Mobile do not control Telkomsel as supported by all available evidence.  In fact PT Telkom, as the 65-per cent majority shareholder of Telkomsel, has made it clear that Singtel Mobile is a minority investor. Telkomsel is ultimately controlled by the boards of Telkomsel, comprising a majority of members who are appointed by PT Telkom.
KPPU applied concepts contrary to recognised competition law concepts
According to Mr Menon: “The KPPU has unfortunately ignored the language of the law and applied its own concepts and ideas which are contrary to competition law concepts that are recognised and applied in most jurisdictions.  This is what has led to the incorrect finding that Singtel Mobile exercises control over Telkomsel, when Singtel Mobile is unmistakably a minority shareholder investor. This has also led to its suggestion and apparent finding that this control goes all the way to Singtel and even to Temasek.”
As a minority investor in Telkomsel, Singtel Mobile is given certain rights as minority protection.  These include the right to minority representation on the boards of directors and commissioners, as well as the right to confidential information.  However, the KPPU has incorrectly alleged that this is proof of control.
Singtel Mobile had regulatory approvals for Telkomsel acquisition
When Singtel Mobile acquired a stake in Telkomsel in 2001, it sought and obtained all the regulatory approvals from the relevant Indonesian authorities.
Mr Menon added: “This case must be seen in the context of an economic era marked by cross border investment and globalisation.  Aside from the approvals, for the last six years, Singtel Mobile has had the further assurance of having PT Telkom, which is majority owned by the Government of Indonesia, as its joint venture partner which in fact and in law controls the joint venture by virtue of its 65-per cent ownership of Telkomsel.  In some respects, it is difficult to imagine a safer investment than this.
“In this light it becomes apparent why we regard the KPPU decision as disappointing and why we will pursue every available course to secure and protect our clients’ interests.”
Mr Lim Chuan Poh, Singtel CEO International, agreed: “Singtel has invested in Indonesia in good faith and remains optimistic about the future of the Indonesian telecommunications industry.
“We respect the laws of Indonesia and have always conducted ourselves according to the law. We continue to believe in the rule of law.  This is why we are pursuing this appeal.”