Indonesia delays 3G auction amid Telkomsel bankruptcy

Indonesia delays 3G auction amid Telkomsel bankruptcy

Summary: The tender for more 3G spectrum is postponed for the fourth time, as the government mulls over a situation where the country's largest telco Telkomsel, is potentially disqualified after it was controversially declared bankrupt.

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Despite telcos facing an increasingly strained network, the Indonesian government has postponed an auction for additional 3G spectrum. This come as it deals with a situation where the country's largest telco and SingTel associate, Telkomsel, could potentially be banned from bidding after it was controversially declared bankrupt.

In a report on Thursday, Indonesia Finance Today reported that the country's third phase of 3G bidding, originally scheduled for late September has been now postponed indefinitely--the fourth time it has been delayed since its original date in June.

The auction is for what's called channel 11 and 12, for bandwidth in the 1,900 Mhz frequency. A company with a bankrupt status is not allowed to bid under current rules.

The news site added that the Information and Communication Technology (ICT) Ministry was considering waiting for Telkomsel's legal saga to be resolved.

Last week, Jakarta courts had declared Telkomsel bankrupt after its prepay phone voucher distributor, PT Prima Jaya, said that it was owed 5.3 billion rupiah (US$557,000)--a claim which the telco disputes.

Under Indonesian law, a company regardless of its balance sheet can be declared bankrupt if it has at least two creditors and it has not settled its due debt for at least one of them.

According to Nonot Harsono, a committee member for the Telecommunications Regulation Committee (BRTI), the bankruptcy ruling has serious repercussions on the wider economy.

“The bankruptcy is a big deal. It’s not just about Telkomsel unable to participate in the 3G tender, but also about the economy of a country," he said in an article by Investor Daily.

Telkomsel is majority controlled by state-owned Telkom, with the rest of the 35 percent stake owned by Singapore's SingTel. It has over 100 million subscribers.

In a statement Thursday, a SingTel spokesperson said it supported Telkomsel's decision to lodge an appeal and pointed out that Telkomsel was a "financially strong company", with net assets of 35 trillion rupiah (US$3.8 billion), as at 30 June 2012.

The case could drag on for up to two months as the appeals process gets underway, according to lawyers cited by Reuters. Analysts and shareholders it interviewed were mostly optimistic the ruling would be overturned in the country's supreme court.

Topics: Telcos, Government, Legal, Networking, SingTel

About

Loves caption contests, leisurely strolls along supermarket aisles and watching How It's Made. Ryan has covered finance, politics, tech and sports for TV, radio and print. He is also co-author of best seller "Profit from the Panic". Ryan is an editor at ZDNet's Asia/Singapore office.

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