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Leading and Managing an Indonesian State Owned Company in the 90s

( The Great Changes in PT Telkom )

Cacuk Sudaryanto, a phenomenal leader who successfully transformed Public

Telecommunication Services Company (Perumtel) into PT. Telekomunikasi Indonesia (PT.
Telkom) since 1988 was dismissed by the board of directors (consisting of representatives of
the government) in 1991. Unverified sources cited various reason for the termination, such as
instegation of projects that did not adhere to laws or ommision of procedures in important
decision making. Although he confessed that all was done for the sake of PT. Telkom, the
ruling government decided Setyanto P. Santosa would be his successor. As quoted in
TEMPO (the most prestigious national magazine in Indonesia at the time), Cacuk stated, "I
accept the ministerial decree (government) with open arms. I have to respect the decision. I
am also happy if my successor is Setyanto, because he is my cadre. "

Why did Cacuk call Setyanto a cadre? It started from Setyanto's career in PT. Telkom in 1972
as an economics graduate. During the leadership of Cacuk, Setyanto's achievements as a head
of inspectorate stand out. At that time one of Cacuk's strategies to finance change was to
execute with efficiency and the role of the inspectorate became very important. Because of
his achievements in supporting Cacuk's work program, Setyanto was appointed Head of
Telecommunication Region (Witel) West Java before his last appointement as President
Director (CEO) of PT. Telecommunication Industry (PT INTI).

As President Director of PT. INTI, Setyanto was responsible in supporting PT. Telkom to
provide telecommunication equipment to meet the government's target of 5 million telephone
lines. Setyanto made a lot of efforts to meet these targets, such as cooperation with Siemens,
supervised the cashflow, and managed human resource at the company. As a result,
the Minister of Research and Technology at the time (BJ Habibie) was impressed with
Setyanto's leadership so that when Cacuk's replacement was needed as President Director of
PT. Telkom, Setyanto was promoted to become the main choice.

Setyanto was shocked himself, because as a "nobody", he was appointed to spearhead as a

director of PT. Telkom, a company that he used to work with. He doubted himself to replace
a prominent figure that he respected, the people that he will lead and the challenges that must
faced in PT. Telkom. Setyanto considers Cacuk as a friend and a role model. He felt nervous
to embark on his journey in PT. Telkom. All his former superiors at the company would later
become his subordinates. He was anxious on how to lead them. The underlying basis of the
company that was grounded by Cacuk with a professional business management must be
extended further. He had to do something different to make the company better.

Cacuk Leadership: Build a Strong Foundation

Cacuk Sudarijanto was born in Tulungagung, East Java on 29 January 1948. He graduated in
Mining Engineering from ITB but his professional career was spent in the IT world by
working at USI-IBM. Cacuk joined Telkom during the transition period of institutional
change from Perum which was heavily regulated by the government at that time, whereby
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many comments of dissatisfaction from both the customers and the staff were received. The
popularity of his leadership at IBM and Indosat convinced the government to appoint Cacuk
as President Director of Perumtel. His main task was to make changes to address such
dissatisfaction in conventional and non-conventional manners.

For Cacuk, making changes will not only satisfy the employees, but also all stakeholders of
the company. Cacuk was aware that Perumtel’s operational and financial performance were
of concern. Many customer complaints arose, not only related to the quality of service but
also the availability of services. In order to get a phone connection in their respective home at
that time, customers are to be put in the waiting list. Ticket scalpers offered acceleration of
telephone installation by cutting the queue. This had a negative impact on the company's
good name and service to the community.

Aware of the above problems, Cacuk began by identifying the main problems which would
be the main target for change. Cacuk finally found three fundamental problems that must be
addressed. First, the financial aspect. During its’ 22-year journey, Perumtel's financial
statements had never met the qualified standard. Second, a lot of the company's financial
statements were irrelevant, as they were always reported backdated for 3 years. When Cacuk
led Perumtel in 1988, he had to get financial statements in 1985. Besides, the area for the
operations of the company stretches from Sabang to Merauke, its accounting treatment is
done centrally. Issuance and output was undertaken in each region, but was controlled and
managed by the Centre. This had caused many unregulated cases. Third, the company's SDM
is structured like onions. Out of 46,000 Telkom employees in 1988, only one person
possessed S3, 750 people possessed S1, 240 people D3, and the rest (approximately 45,000
people) were high school leavers and below.

Initial steps taken by Cacuk and the BOD (Board of Directors) were to make improvements
to the accounting structure into an autonomous company. He was risking IT investment
to support the formation of database. To accelerate its implementation, it seconded IT
Telkom team to study at PT Indosat who had previously implemented this system. As a
result, in just three years, as many as 40 regions had their own accounting structure and PT
Telkom also achieved WTS (Wajar Tanpa Syarat) status from BPKP.

In order for the desired changes to move faster, Cacuk stressed the importance of improving
the quality of human resources. The structure of the onion should be turned into a
pyramid. The trick is to give the best employees the opportunity to continue education in
and out of the country. Open recruitment of employees for S1 began. Telkom then set up a
college named Telkom High School of Technology (STT Telkom), which is
now known as the University of Telkom. The result, in just under four years, the onion
structure gradually began to turn into a pyramidal structure. When Cacuk left Telkom in
1992, several employees had earned a PhD degree. In addition, as many as 200 people won
S2 degrees, and as many as 3,000 people earned a bachelor's degree. Approximately 2,000
people who were studying at STT Telkom were automatically recruited to become employees
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after graduating S1 programs from various departments. They were the crème de la crème of
the nation and it became one of the top and favorite colleges at the time.

Cacuk is aware that the spirit of change must be constantly guarded in the hearts of
employees. Conducive atmosphere was vital. Various forms of seminars and training
were held. Leadership classes (Suspim) with participants from all offices were held based on
their territory. Various experts and facilitators are present in the company. The results of this
activity gave birth to agent of change within the companies in their respective working
areas. In order for the change to take place, every branch office is encouraged to
innovate. Every week Cacuk conducted teleconferences openly with all branch offices. They
each reported on progress and what has been done and plans for change in their respective
areas. Plans and actions were heard openly by the management and staff of other offices. The
next week, what had been done in one kandatel began to be applied in other kandatels. They
were commited to improve Telkom.

To encourage employees’ motivations, Cacuk offers incentives up to 300%. Something that

could not have happened in the past. Some of the employees were surprised to see Wages
Paid by Your Customers written in their paycheck. Bonuses were given to appreciate the
efforts of employees who had provided the best service to consumers. In this era of
leadership, corporate logos should symbolize the spirit of change. All forms of psychological
barriers that had grown were eroded. Employees were not required to use their academic
degree and the competitive nature provided opportunities to employees at every position.

Figure 1: Changes in Company Logo during Cacuk’s Leadership Period

The result of all these efforts, in the relatively short period of Cacuk's leadership (1988-
1992), PT Telkom has had 3.5 million connection units with much better service
quality. Cacuk had laid a milestone of change, either structural or cultural. At the time being,
the quality of the management was equivalent to a reputable private company. One of the
major decisions was changing Telkom’s management on the human resources side with the
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slogan "put the people first" (putting humanity forward). Cultural transformation that occurs
is on the work culture that puts humanity, leadership, and development continuously
(continuous improvement). Under the leadership of Cacuk this major change of fundamentals
occured through Telkom's working culture. Culture known as 3-2-1 culture at the time.
Culture 3-2-1 consists of;
3 main goals;
● Providing the best service for the community
● Provide the best results to stakeholders (government, community, and the
whole range of companies).
● Achieve the best image of the company

2 company strategy
● Developing and using all of the systems
● Fostering and developing human resources (HR)

1 authorized capital
● The spirit of cooperation, both internal and external environment of the company

The 3-2-1 motto of culture is "Your smile is our hope"

In addition to the culture of 3-2-1 there is also:
● Successful service
● Successful development
● Unconditional success
● Successful cadre regeneration
The working culture of Telkom that emphasizes the new corporate culture is reflected
through operational policies known as 4D (decentralization, deregulation,
debureaucracy, delegation). As mentioned above the target to be achieved by PT Telkom is
stipulated in a successful with the realization as follows :
1. Service improvement program
● CSTP (customer service training program)
● Service points
● OPMC (outside plant maintenance center) 1989
● SCR (successful call ratio) project 1991
● Corporate customer service (appoint account manager for each sect ) 1991
● Full authority to every Kandatel (unit under WItel) to improve services.
● Establish a service directorate 1992 (1995 : merged into the operations
directorate) .
● Building computer based SIMOP (operating information management system)
2. Development program
● Automation of the district capital (IKK) 1991
● Cooperation with the private sector : compensation, grant pattern, profit
sharing pattern 1991
● Building a computer based SIMPEM (development management information
system)
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3. Unqualified program
● Team A (the A team) for procurement of goods and services (one gate policy)
● PPBS (planning programing budgeting system)
● Computer based SIMAK (accounting management information system) 1989
● RJPP (long term company ) 1989
4. Cadre program and human resources development
● The budget of Human Resources Development through Training and Training
went up significantly (Rp 36 Billion in 1991, with total personnel expenses +/- Rp
400 Billion) --Motto: "Training lights up 24 hours" and "No one is indispensable"
● Increase the addition of knowledge and skills of employees from only 2% to
10% of service -1989
● SUSPIM SUSGAB BUMN for Head of Region and GM -1990 (candidate for
Board of Directors), cooperation with Lemhannas.
● SUSPIM (Staff and Leaders Course) I (candidate for General
Manager) and II (prospective Manager) -1989, cooperation with SESKOAD, SESKO-
ABRI, ITB, UNPAD, DISPSIAD, SGV-Utomo .
● SUSLIA (Course Supervisor / Supervisor) -1989
● BINTAL, cooperation with PHB AD, and KODAM's Infantry Education
Center -1989
● Established STT Telkom-1990, cooperation with ITB
● Established MBA Bandung (now STMB) -1990, in collaboration with AIM
(Asian Institute of Management), Manila-the Philipines .
● Established Assessment Center-1990, cooperation with DISPSIAD and
institutions from USA and the Netherlands .
● Technical Education - 1989 cooperation with ITB and UI
● Non-Technical Education -1989, cooperation with UGM, UPN (Veteran),
UNPAD, UT, Finance Ministry of Finance / BPKP
● Distance Training and CBT (Computer Based Training) through SKME
(Electronic Management Communication System) -Indonet via Satellite Palapa -
cooperation with UT-1990
● Education S2 and S3 which among others work University of Texas (USA),
ENST (Ecole Nationale de Telecommunications) (France), RMIT (Royal Institute of
Technology) (Australia) -1989 .
● Top Management Course -1989, cooperation with PPM Prasetya Mulya
● Management Course -1990, cooperation with Singapore Telecom, SGV
Utomo
● MBA Program -1990, cooperation with PPM Prasetya Mulya, LPPM
● BIT (Built-In Training) / Inherent Training -1990, which is the job of every
leader
● Building Computer Based SIMPEG (Personnel Information System)
● Establishing OA (Office Automation) network -1990, serving management
information, actual news about Telkom and other information. OA serves electronic
mail delivery between managers and employees and between staff, through
networking between computers, providing daily calendars / agenda, etc.
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The First 90 Days of Setyanto Leadership

Setyanto’s first days as Telkom leader were a test to check on his ability to lead his former
superiors and seniors. Surprisingly, Setyanto implemented a firm leadership and an in-
formal approach in building communication. After all the board of directors gelled together
and became familiarised, Setyanto applied family leadership whereby the main purpose was
to develop ideas together for the progress of Telkom. In Setyanto’s point of view, the
contributions of many will enrich an idea and create a new breakthrough. An important note
in leading former bosses and seniors is maintaining assertiveness to maintain a good warm
relationship when things warmed and gelled together. In short, the management of authority
and teamwork are vital to establish a good working team and remain in a command, because
at that time many of Telkom's directors possessed military background. Setyanto often held a
discussion forum with Telkom employees across generations. From this forum ideas are
developed to achieve IPO.

Setyanto’s career and experience in Telkom allowed him to dwell and improve the
regeneration and succession. As an inspectorate, he saw a lot of integrity issues
and unjust human resource policies. For example, there is always polemic in the change of
directors. Government had too much authority in deciding the change of directors. This
happened when Telkom's leadership was handed over from Cacuk to Setyanto. To avoid
this, Setyanto prepared a system to prevent sudden and early dismissal. The change of
leadership should be announced to the public early.

According to Setyanto, the difference in his leadership approach with Cacuk’s was their
perspectives in looking at the condition of the company. Cacuk viewed Telkom as a large
company with many advantages or profits. This was reasonable because at the time of his
leadership, it was necessary to do various ways to increase the spirit of all parties in the body
of Telkom organization. However, it can bring people into their comfort zone, thus made
the organization difficult to move forward and grow. For Setyanto, it was important to
remember that large corporations certainly have large debts as well, and every worker has
work debt that must be paid for the company's progress. This will push people out of their
comfort zone. However, Setyanto profited the company by emphasising
on employees’ welfare. When their welfare are taken care of, the employees will certainly be
able to work better for Telkom. As a provider of telecommunication services, Telkom relies
on human resources to be able to provide the best service for consumers.

Telkom's IPO profited from the increased degree of freedom of SOEs from government
intervention in making decisions, so that bureaucracy for decision-making can be reduced
because Telkom has the freedom to make decisions as a public company. But in practice it
still can not be completely free from government intervention because the government has
veto rights through the government's dwiwarna share to date. At that time Telkom listing was
not done in Indonesia only (at that time Jakarta stock exchange and Surabaya stock
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exchange) but also in New York and Tokyo. This step was taken to provide competitive
value to Telkom and to avoid high government intervention. Another benefit of overseas
listing is the ease of access to foreign capital sources that are proven to advance Telkom in
the future.

In general, the first steps made by Setyanto shortly after being appointed as Telkom's
Director in October 1992 was introducing ARTI culture which was followed by the IPO.
KSO, a government program was also executed. Witel was restrcutured and converted into
Divre. This program was implemented with a back to basics principle. Anticipating the era of
globalization, such as the implementation of free trade both internationally and regionally,
PT. Telkom implemented 3 major programs in 1995. These programs were internal
restructuring, implementation of Operation Cooperation (KSO) and preparation of
International Public Offering. One of the impacts of restructuring was the reshuffle of 12
Witel into 7 regional divisions (Divre) in 1995 consisting of Divre I Sumatra, Divre II Jakarta
and its surroundings, Divre III West Java, Divre IV Central Java and DI Yogyakarta, Divre V
East Java, VI Kalimantan and Divre VII of Eastern Indonesia and one network division. As
PT. Telkom attempted to go public, the world bank plan to lend development funds on the
conditions of openness in the field of telecommunications. PT. Telkom was also expected to
accelerate the development of telecommunication and infrastructure of
Indonesia. Acceleration is also endeavored by performing KSO in each Divre except Divre 2
and Divre 5.

Initial Public Offering PT. Telkom

The important step taken by Setyanto at the beginning of his leadership in Telkom was to
target Telkom as a listed company and to plan a program that avoided new debt for
Telkom . This was done by avoiding bonds and preferring equity financing (selling some
shares for incoming capital). This strategy had not been announced to anyone and at the
time Setyanto only spoke to JB Sumarlin , who was Minister of Finance at the
time . Telkom’s plan to go public was pre-planned by Cacuk through bonds. Although the
paperwork was completed, it was not yet eligible for submission (BTS and three consecutive
years of profit). Setyanto proposed to list Telkom through IPO with consideration that at that
time Telkom's debt has reached 4 trillion rupiah. JB Sumarlin responded to this plan by
saying, "This will be a tough task for you" and Setyanto only replied, " Yes I will try".

Setyanto began working to direct Telkom to the IPO without notifying his strategy to anyone
including BOD. Setyanto wanted to ensure the chances of it to happen beforehand before
being considered as a liar by other BOD members. In his daily life, Setyanto practiced the
culture and spirit of work that has been pioneered by Cacuk. One of the steps to achieve
IPO's goal was through "back to basic" program. Setyanto stated that Telkom’s business was
prioritised on the telecommunications traffic and not on the phone. This product can be
created through a good network. Interruption-free network was a priority to Setyanto and
complaints were to be entertained and addressed. At that time, Telkom still used copper cable
technology, so complaints were also often related to technical limitations other than services.
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An example of a complaint experienced is a long dial tone to connect. The step taken was to
tidy up the cable connection to easily find the source of the problem. This step
characterizes Setyanto as an economist as he saw the problem holistically and not
sectorally. This step proved to increase profit of Telkom within 1 to 2 years. Leaders and
employees were expected to check and re-check into areas where there are distribution points
to isolate the disturbance. The problems that usually occur in hardware were nesting of ants,
resulted in disturbances, as well as manhole conditions that contained water and mud. Many
of the leaders of Telkom at that time participated in this back to basic program and follow
through the process of repairing themselves. This back to basic program has led Telkom to be
the provider of good telecommunication services. This step is also a breakthrough
improvements made by Telkom to return to its original operational system state.

As Telkom's IPO was materialising, overseas, there was an economic crisis in Mexico.
Indonesian government considered to cancel the IPO abroad, related to the decline in the
purchasing power of the market at that time. Learning from the experience of Indian telecom
companies that failed IPO, the market view of the company became very negative. Indian
Government was considered as greedy and ingnorant. In this state Setyanto maintained his
stand to propose IPO with a smaller quantity so that the value will grow over time than to
create a scandal whereby the market reputation of Telkom and the Indonesian government
were at stake. Other interesting measures taken by Setyanto was the socialization of buying
and selling shares to pesantrens in order to gain the support of the public. From the point of
view of the government at that time, the IPO process was seen as failing as it was unable to
raise the expected funds, but from Telkom's point of view this was a successful stepping
stone for Telkom.

Major transformation occurred on November 14, 1995 where PT. Telkom (hereinafter
referred to as Telkom) conducts Initial Public Offering (IPO) on the Jakarta stock exchange
and Surabaya stock exchange (has merged into Indonesian Stock Exchange in 2007). Telkom
shares was also listed on the NYSE and LSE in the form of American Depositary Shares
(ADS) and is offered to public on the Tokyo stock exchange in the form of a public offering
without listing. On 26 May 1995, Telkom an entity subsidiary of Telkom, Telkomsel, which
handles business of cellular company was established.

Establishment of Telkomsel
The next step was to improve the mentalities of the employees. At that time the
number of Telkom employees has reached 43,000 people and for mental readiness,
employees are reminded that in the future there will be a lot of competition faced by
Telkom. At that time, Telkom still held a monopoly in telecommunication services. Setyanto
however viewed monopoly as an obstacle for Telkom to go forward (weakness point)
because monopoly will cease the company ability to move forward. Setyanto used analogies
and examples of monopolies whereby customers had ceased and eventually left, such as how
TVRI was replaced by private television companies and the likes of Sempati Airlines and
other ailrines in replacing Merpati and Garuda airlines. In the Telecommunications industry,
new player such as Satelindo had slowly emerged and engaged in mobile telecommunication
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and began to take over Telkom home phone market. Setyanto at that time proposed to create
Telkomsel mobile products to go against Satelindo, but the idea was rejected because 95% of
Telkom's profit was made from fixed phone.

Telkomsel’s idea was regarded as a minor breakthrough that is not significant and suggestion
on using a profit sharing (PBH) system with the private sector was given. Setyanto, however
had a different view, cable network will be busy during the day as business activities are busy
in the daytime and in the evening, the network will be of low utilization rate. Mobile can be a
good alternative solution to connect users. Setyanto proposed the formation
of Telkomsel as Satelindo started running mobile. The main objective of Setyanto
with the advancement of Telkomsel was to slam Satelindo prices . At that time
telecommunication equipment were still monopolised by Telkom and in the view of Setyanto
monopoly of procurement of telecommunication equipment or hardware burdened the cash
flow from Telkom itself. Embezzlement done by Telkom insiders resulted in big losses for
the company. If at that time Telkomsel runs with bundling business model, Telkomsel will
have difficulty in selling hardware, and cashflow will be jammed.

Setyanto preference to focus on mobile service products rather than selling hardware was a
good strategy and because of this freedom of purchases and use of telecommunications
equipment for private companies is possible. Telkomsel Project had become an incentive for
IPO projects in the future because it could increase the value of Telkom itself. In a dilemma
where Indonesia was pessimistic with project Telkomsel, Setyanto chose to move quickly
once there is a green light from the government in late 1994, and Setyanto proven his
reliability and capability to oversee the operation of Telkomsel in early 1995 in collaboration
with Ericson. It should be remembered that at that time Satelindo had held big market in DKI
Jakarta and the strategy taken by Telkomsel at that time marked the development
of Telkomsel from outside of DKI such as Batam, Makassar, and others until it finally
reached Jakarta.

Setyanto’s vision in seeing mobile telecommunication business model was a business model
that Telkom can adopt to pave Telkom in entering the IPO process, and he himself proposed
the use of GSM network with the hope of easier infrastructure investment as applied in the
Europe. In deciding Telkomsel’s future, the Indonesian government appointed a consultant to
assist Telkom in deciding the future of T elkomsel. In this case, Setyanto as Director of
Telkom was used as a function of public relations through formal and non formal
communication to obtain approval from consultants and government. With this approach
of thinking, Setyanto was cited in the business analysis report written by the consultant to the
government. It is in this position that his wise view which is in favor of Telkom's progress
must be well communicated. It is a tough test for a leader to be able to determine the future of
a company he leads.

Restructurisation
Under the leadership of Setyanto, Telkom was able to restructure the resources of man power
by laying off about 5,000 employees around the year 1992-1993. The lay off process was
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voluntary, wherein all Telkom employees at that time were informed to consider their
decision to continue working with Telkom. To maintain competent manpower, Telkom
requires the employee to get his supervisor's approval before resigning. In cases of competent
employees, two signatures of their superiors were required. The majority of employees
included in the lay off program were of Primary and Secondary Education level. Up to this
stage, Telkom was revamped and was ready to conduct the IPO process. One of
the interesting commodities in Telkom’s offers was the absence of employees’ union. This is
a good yardstick for investors as it considered Telkom to have good management to
accommodate their workers well (a measure of satisfaction of employees considered high).

In the initial period of Setyanto's leadership, RJPP 1994-1998 Telkom was completed in mid-
1993 wherein there was planning and programing restructuring. Setyanto was skeptical about
this program so it was not raised in 1993 AGM. In 1994, the AGM decided to move forward
with the implementation of the Restructurisation, without the support of Setyanto as the
Director of Telkom. AGM 1994 proposed Telkom to implement KSO (Cooperation of
Operations) program, with the addition of 2 million SST from the 5 million SST Plan in
Repelita VI s / d 1999. The details of the "Internal & External Communication" plan for the
Restructuring Program was completed mid-1994, after intensive discussion was held. The
Director cut the training program for the prospective Head of Division from a 3-month
schedule to 1.5 months. The training was held in September-October 1994. Details of "Job
Description", "SLA" (Service Level Agreement), and "Transfer Pricing" in the form of
Directors' decision, was completed in October 1994. The Division Heads were appointed and
inaugurated in December 1994 which ws then followed by the execution of the Restructuring
process on the 1st of January, 1995, with a 6-month transition period. For efficient
management the following steps were taken:
● 12 Telecommunication Business Areas (Witel) were reduced to 7 Regional
Divisions (January 1, 1995)
● The Satellite Operation Area is removed, incorporated into the Network
Division which also handles SLJJ (January 1, 1995)
● The Training Division replaces PusDiklat (January 1, 1995)
● The RisTi (Information Technology Research) Division replaces
RisTI (1January 1995)
● Division Sisfo replaces SUBDIT Sisfo (January 1, 1995)
● The Atelier Division was formed, to handle "Repair & Maintenance" (January
1, 1995)
● Property Division was formed, to handle Company Office Building and office
/ administration buildings in each Division (January 1, 1995)
Restructuring and privatization of the national telecommunications industry began to roll
since the emergence of Law No.3 of 1989, on Telecommunications. By right, the
telecommunication industry that was previously dominated by Telkom are now open for both
individuals and institutions. The government and the public are starting to be aware and
focus on opportunities in the telecommunication sector because the prospect is very
interesting with a wide open market share. In its development, the Government was making
efforts through policies that develop the private sector. It was targeted to give more roles to
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private sector, as well as an effort to end monopolism and progress towards competitive
system.

Joint Operation (KSO)

Under the leadership of Setyanto, Indonesian government in cooperation with the World
Bank had materialised Telkom's plan of expanding into 7 independent sisters companies in
each regions. The project was executed and supported by the regime at that time in order to
take over the entire company. In the year of 1993, Setyanto gained access of the leaked
document and eventually discovered the ill intention of the regime towards the company.
Setyanto finally propose a compromise to the ministries linked through a letter signed signed
off by the BOD, which emphasises on Operational Cooperation (KSO). The prerequisite in
the KSO, was to make cash operation, whereby partner companies can work to develop its
territory but with Telkom flag.

The phenomenal step, Telkom's revival, was carried out by Setyanto to secure Telkom's
revenue in KSO preparation. The steps are presented to the government through the
Asian Development Bank (ADB). The step taken was to maintain 2 working areas of Telkom
namely Jakarta and East Java as 62% of Telkom's revenue. Both areas are proposed to remain
under the management of Telkom. This was a preventative measure taken to ensure Telkom’s
ability to employ new employees in case any of the KSO fail to operate. Setyanto
invited ADB to run the KSO outside the said two areas which was approved by the finance
ministry. The proposal was deliberately submitted through ADB to the relevant ministries to
show supports from both Telkom and ADB. After getting approval from the ministry of the
management for the two regions, Setyanto revised the definition of the operating limits of
Telkom in Jakarta which initially covered only Jakarta, to Tanggerang, Bekasi,
Bogor, Karawang, Purwakarta, and the surrounding area. This was a mean to increase
Telkom's revenue in these two areas.

KSO partners are obtained through a tender process conducted by the government. With the
KSO partners, Telkom's monopoly can be prevented. Mitra KSO was a foreign company with
capital, technology, and management knowledge which would be helpful in assisting in the
development of Telkom and Indonesia in general. The KSO Partners must also be
a consortium of investors accompanied by the national private sector. Operational
Cooperation between Telkom and KSO's Partners was to assist Telkom to build 7 million
connection units up to Pelita VI, besides supporting the improvement of Telkom to become a
World Class Operator. As the contractual arrangements are lacking in details, the KSO
partners are instead seeking profits without adequate capital, technology and management
provision, even though Telkom has already deviated the right to operate five out of seven
regional divisions (Division of Region I, III, IV, VI and VII) to the private
consortium. With that union, KSO partners were to manage and operate
the regional division for a certain period of time, carry out the construction of fixed line in
the amount set and at the end of the agreement period, transfer the telecommunication
facilities built to Telkom with an agreed amount of compensation.
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Operation Sama Operation (KSO) began to be implemented, precisely on January 1, 1996 in

the Regional Division I Sumatra with partners PT. Pramindo Ikat Nusantara (Pramindo);
Regional Division III West Java and Banten-with partners of PT. Aria West International
(AriaWest); Regional Division IV Central Java and DI Yogyakarta with partners PT. Mitra
Global Telekomunikasi Indonesia (MGTI); Kalimantan Regional Division VI with partner PT
Dayamitra Telekomunikasi (Dayamitra); and Regional Division VII of Eastern Indonesia-
with partner PT Bukaka Singtel. Revenue from KSO will be divided between Telkom and
partners KSO. After the Asian economic crisis that struck Indonesia started in the mid-1997,
some KSO partners had difficulties in fulfilling their obligations to Telkom. Telkom then
proceed to acquire KSO partners in Division Region I, III and VI as well as customizing the
contents of the KSO agreements with partners in Regional Division IV and VII to obtain
legal rights to control decision-making in finance and operation of the regional ends.

End of term of office

At the end of his tenure, Setyanto continued to fight for the IPO process despite being
notified that he will be replaced. What was done by Setyanto later demonstrated a strong
leadership spirit , strong will and his hard work in achieving the goal of Telkom to get IPO,
which was displayed by his successor. One of Setyanto’s proposals, the use of fiber optic as
copper cable replacement technology, was executed in 1995 with a pilot project in Pondok
Indah. He studied the hard work and the costly investments being put by Hong Kong’s
government to switch to fiber optic from copper for its connection and network range
benefits. Being left behind, Indonesia was one of the earliest in switching to fiber optic. One
of the barriers that needed to be overcome is Telkom’s education conservative attitude
whereby acceptance of new technologies is time-taxing.