Allegation of Violating Law No. 5/1999 about Cross-ownership conducted by
Temasek Holdings and Monopoly Practice by Telkomsel

Commission for the Supervision of Business Competition (Komisi Pengawas Persaingan Usaha) has completed investigation according to the applied provision and had decided on the case of No. 07/KPPU-L/2007 regarding allegation of violating Law No. 5/1999 about prohibition of Monopolistic Practice and Unfair Business Competition (Law No. 5/1999) related to cross-ownership by Temasek Holdings and Monopoly Practice by Telkomsel. The Commission Council consisted of Dr. Syamsul Maarif, S.H., LL.M, Prof. Dr. Tresna P. Soemardi, Didik Akhmadi, Ak, M.Comm, Erwin Syahril, S.H. dan Dr. Sukarmi, S.H., M.H., decided that cross-ownership by Temasek Holdings, STT, STT Communication, Asia Mobile Holdings Company, Asia Mobile Holdings, Indonesia Communication Limited, Indonesia Communication Pte. Ltd., SingTel, SingTel Mobile found guilty violating Article 27 letter a, and monopoly practice and abuse of dominant position by Telkomsel guilty violating Article 17 sub-section (1) and Article 25 sub-section (1) letter b. 

About Violation on Article 27 Letter a Law No. 5/1999
At the end of 2002 Indosat divestment that was won by STT, the subsidiary company that his share 100% were controlled by Temasek, caused the cellular telecommunications industry in Indonesia experiencing the structure of cross-ownership. This was because before this divestment, Telkomsel’s share that was the biggest cellular operator in Indonesia was owned by Temasek through his subsidiary company that is Singtel and SingTel Mobile. So, indirectly Temasek Business Group controlled the Indonesia cellular market by holding Telkomsel and Indosat. cross-ownership scheme

Telkomsel and Indosat market share together increase since the structure of cross-ownership, as could be seen in the table below:

	Year	Telkomsel and Indosat Market Share (together)	Joint Income (in billion)	XL Income (in billion)	XL Market Share
	2001	76,34%	6.688	2.073,03	23,66%
	2002	83,58%	10.845	2.130,41	16,42%
Cross-Ownership Period: 2003-2006	2003	88,09%	16.164	2.198,06	11,91%
	2004	89,74%	22.107	2.528,48	10,26%
	2005	90,97%	29.778	2.956,38	9,03
	2006	89,64%	38.373	4.437,17	10,36%
Average 2003 - 2006		89,61%

The control that carried out by Temasek Business Group against Telkomsel and Indosat caused the slowing down of the Indosat development. Indosat become ineffective in competing with Telkomsel, which result in uncompetitive cellular industrial market in Indonesia.

Indosat deceleration marked by BTS growth that descent, compared with Telkomsel and XL that were two other big cellular operators in Indonesia.

About violation of the Article 17 sub-section (1) and Article 25 sub-section (1) Letter b Law No.  5/1999
The structure of cross-ownership of Temasek Business Group caused the price-leadership in the telecommunications industry in Indonesia. Telkomsel as the leader of the market determined the price of the cellular telecommunications service excessively. The consequences are the operator enjoyed the excessive profit and the consumers experienced the loss (consumer loss).

The calculation carried out by the Commission Council showed the loss experienced by the consumers of the cellular telecommunications service in Indonesia from 2003 to 2006 revolved from Rp 14.76498 trillion to Rp 30.80872 trillion. However, in accordance with the provisions of Law No. 5/1999, Commission Council was not in the authorized position to put on compensation sanctions for the consumers.
Further, during the session, the Commission Council did not find the proof that Telkomsel restricted the development of technology in the cellular industry in Indonesia. So, Telkomsel is not violating Article 25 sub-section (1) Letter b Law No. 5/1999.

Based on analysis and the facts mentioned above, Commission Council decided that:

1. Stating that Temasek Holdings, Pte. Ltd. together with Singapore Technologies Telemedia Pte. Ltd., STT Communications Ltd., Asia Mobile Holding Company Pte. Ltd., Asia Mobile Holdings Pte. Ltd., Indonesia Communication Limited, Indonesia Communication Pte. Ltd., Singapore Telecommunications Ltd., and Singapore Telecom Mobile Pte. Ltd were proven validly and convincingly violating Article 27 Letter a Law No. 5/1999
2. Stating that PT. Telekomunikasi Selular was proven validly and convincingly violating Article 17 sub-section (1) Law No. 5/1999.
3. Stating that PT. Telekomunikasi Selular was not proven violating Article 25 sub-section (1) letter b Law No. 5/1999.
4. Instructing Temasek Holdings, Pte. Ltd., together with Singapore Technologies Telemedia Pte. Ltd., STT Communications Ltd., Asia Mobile Holding Company Pte. Ltd., Asia Mobile Holdings Pte. Ltd., Indonesia Communication Limited, Indonesia Communication Pte. Ltd., Singapore Telecommunications Ltd., and Singapore Telecom Mobile Pte. Ltd. to stop the share ownership action in PT. Telekomunikasi Selular and PT. Indosat, Tbk. by releasing all ownership of share in one of the companies, that is PT. Telekomunikasi Selular or PT.Indosat, Tbk., within 2 (two) years since this decision had legal certainty.
5. Instructing Temasek Holdings, Pte. Ltd., together with Singapore Technologies Telemedia Pte. Ltd., STT Communications Ltd., Asia Mobile Holding Company Pte. Ltd., Asia Mobile Holdings Pte. Ltd., Indonesia Communication Limited, Indonesia Communication Pte. Ltd., Singapore Telecommunications Ltd., and Singapore Telecom Mobile Pte. Ltd. to decide the company where their ownership of the share will be released and waived voting rights and the right to appoint the management and the commissioner to one of the companies that will be released that is PT. Telekomunikasi Selular or PT. Indosat, Tbk., until they released the whole share as being ordered in no. 4 above.
6. The release of ownership of the share as being meant in no..4 above was carried out with the condition as follows:
   a. the buyer was restricted maximal 5% from the total share that was released;
   b. the buyer might not associated with Temasek Holdings, Pte. Ltd. and the other buyer.
7. Instructing Temasek Holdings, Pte. Ltd., Singapore Technologies Telemedia Pte. Ltd., STT Communications Ltd., Asia Mobile Holding Company Pte. Ltd, Asia Mobile Holdings Pte. Ltd., Indonesia Communication Limited, Indonesia Communication Pte. Ltd., Singapore Telecommunications Ltd., and Singapore Telecom Mobile Pte. Ltd  to pay fine sanction for each as amount as Rp. 25.000.000.000,00 (twenty-five billion rupiahs) and shall be transferred to State Treasury as income deposit fine of the violation in the business competition, Department of Trade, Commission for the Supervision of Business Competition Unit through Government Bank, with code 423491. 
8. Instructing PT. Telekomunikasi Selular to stop the practice of the imposition of the high tariff and to reduce the cellular tariff at least 15% (fifteen percent) from the tariff that valid in the date the decision was read.
9. Instructing PT. Telekomunikasi Selular paid the fine as amount as Rp.25.000.000.000,00 (twenty-five billion rupiah) and shall be transferred to State Treasury as income deposit fine of the violation in the business competition, Department of Trade, Commission for the Supervision of Business Competition Unit through Government Bank, with code 423491. 

Investigation and decision compiling in this case was conducted by KPPU with principle of independency - not taking position for any sides - solely as independent institution to implement Law No. 5/1999 in order to create equal business certainty for every business actor and to make sure fair business competition run effectively. 
This decision is read off in Commission Council Session which is open for public on Monday, November 19, 2007 at KPPU Building, Jl. Ir. H. Juanda No. 36, Jakarta.

Jakarta, November 19, 2007
Commission for the Supervision of Business Competition
Republic of Indonesia

Additional Information:
This Press release is not part of the Decision of the Case of 07/KPPU-L/2007 and if being gotten by the difference then must refer again to the decision of the case of 07/KPPU-L/2007.

Information of the case no. 07/KPPU-L/2007 (Allegation of Violating Article 27 letter a Law No. 5/1999 about Cross-ownership by Temasek Business Group and Article 17 sub-section (1) and Article 25 sub-section (1) letter b Law No. 5/1999 about monopoly practice and abuse of dominant position by Telkomsel)

Article 17 :
(1) Business actors shall be prohibited from controlling the production and or marketing of goods and or services which may result in monopolistic practices and or unfair business competition.

(2) Business actors may be reasonably suspected or deemed to control the production and or marketing of goods and or services as intended in paragraph (1) in the following events:
a. There is no substitute available yet for the goods and or services concerned; or
b. Causing other business actors to be unable to enter into business competition for the same goods and or services; or
c. One business actor or a group of business actors controls over 50% (fifty percent) of the market segment of a certain type of goods or services.

Article 27 letter a:  
Business actors 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 cause:
a. One business actor or a group of business actors to control over 50% (fifty percent) of the market share of a certain type of goods or services.

Article 25 sub-section 1 letter b: 
(1) Business actors shall be prohibited from using dominant position either directly or indirectly to:
b. Limiting markets and technology development