JP/Hutchison, NTS exempt from up-front payments

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JP/Hutchison, NTS exempt from up-front payments - 01 Mar 06 08:59

From The Jakarta Post

Govt exempts Hutchison, NTS from up-front payments

The Jakarta Post, Jakarta

Amid criticism of its failure to respect the sanctity of contract and uphold legal certainty, the government has decided to grant some relief, albeit temporarily, to two foreign-owned 3G operators as regards the demand they pay up-front fees.

The decision was made after the two companies, PT Natrindo Telepon Seluler (NTS) and PT Hutchison CP Telecommunications, said they would refuse to pay, arguing there was no such requirement in their contracts.

Information and Communications Minister Sofjan Djalil agreed last week that they would only be required to pay up-front fees if they wanted to extend their contracts, which expire in 2007.

"We will offer some degree of dispensation. One of the options is that they can pay their up-front fees after their contracts end, but with interest," Sofjan said. "Or, if they don't want to extend their contracts, they can hand back the frequencies."

The government earlier said it would require the two companies to pay up-front fees in the same way as the winners of a recent 3G auction.

The two companies won licenses to operate two 3G frequency blocks through a "beauty contest" in 2004 but have yet to roll out their commercial operations.

Sofjan, however, said they would still be obliged to pay annual fees in the same way as the three recent auction winners -- PT Telkomsel, PT Indosat and PT Excelcomindo Pratama, which each secured one of the three 3G blocks auctioned by the government earlier this month,

Telkomsel bid Rp 218 billion, Excelcomindo Rp 188 billion and Indosat Rp 160 billion in the final round of bidding.

Besides having to pay up-front fees amounting to twice the value of their final bids, the three operators also each have to pay an annual fee of about Rp 160 billion.

"If NTS and HCPT still disagree, they can bring a court action," Sofjan said, adding that the government expected them to announce their decision this week.

He said the two companies would also have the chance to take part in the next 3G auction in 2008 after their current contracts expired.

NTS is owned by Malaysian telecom market leader Maxis, while HCPT, formerly known as PT Cyber Access Communications, is owned by the largest Hong Kong telecommunications operator, Hutchison Whampoa.

Meanwhile, IT and telecommunications observer Roy Suryo said the government had no excuse for failing to respect the contracts it had signed.

"If the government breaks these contracts, (the companies) will be able to file a lawsuit," he said. (06)