Putusan Temasek Eng PDF

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DECISION
The Case Number: 07/KPPU-L/2007
The Commission for the Supervision of Business Competition of the Republic of Indonesia
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hereinafter referred to as Commission that investigates the suspected infringement of the
Law No.5/1999 on the Prohibition of Monopoly Practices and Unfair Business
Competition, hereinafter referred to as the Law No.5/1999 conducted by:
1. Reported Party I: Temasek Holdings Pte. Ltd. Alamat: 60B Orchard Road, #06-18
Tower 2, The Atrium@Orchard, Singapore 238891; -------------------------------------------
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2. Reported Party II: Singapore Technologies Telemedia Pte. Ltd. Alamat: 51 Cuppage
Road #10-11/17, StarHub Centre, Singapore 229469; ------------------------------------------
3. Reported Party III: STT Communications Ltd.Alamat: 51 Cuppage Road #10-11/17,
StarHub Centre, Singapore 229469; ---------------------------------------------------------------
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4. Reported Party IV: Asia Mobile Holding Company Pte. Ltd. Alamat: 51 Cuppage Road
#10-11/17, StarHub Centre, Singapore 229469; ------------------------------------------------
5. Reported Party V: Asia Mobile Holdings Pte. Ltd. Alamat: 51 Cuppage Road #10-
11/17, StarHub Centre, Singapore 229469;-------------------------------------------------------
6. Reported Party VI: Indonesia Communications Limited. Alamat: Deutsche
International Trust Corporation (Mauritius) Limited, 4th floor, Barkly Warhf East, Le
Caudian Waterfront, Port Louis Mauritius;-------------------------------------------------------
7. Reported Party VII: Indonesia Communications Pte. Ltd. Alamat: 51 Cuppage Road
#10-11/17, StarHub Centre, Singapore 229469; -------------------------------------------------
8. Reported Party VIII: Singapore Telecommunications Ltd. Alamat: 31 Exeter Road
Comcentre #28-00, Singapore 239732; -----------------------------------------------------------
9. Reported Party IX: Singapore Telecom Mobile Pte. Ltd. Alamat: 31 Exeter Road
Comcentre #28-00, Singapore 239732; -----------------------------------------------------------
10. Reported Party X: PT. Telekomunikasi Selular. Alamat: Wisma Mulia lt. 15, Jl. Jend.
Gatot Subroto No 42, Jakarta 12710;--------------------------------------------------------------
has adopted a Decision as follows:---------------------------------------------------------------------
Council of Commission ; --------------------------------------------------------------------------------
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Having read the documents of the case; ------------------------------------------------------
Having read the result of Preliminary Investigation Report; ------------------------------
Having read the result of Further Investigation Report; -----------------------------
Having read the answer of notice of Reported Parties; -------------------------------------
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Having heard the testimonies of the witnesses;----------------------------------------------
Having read the Interrogation Official Report (hereinafter referred to as “IOR”);------
THE CONDITION OF THE CASE
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Considering that after scrutinizing and clarifying the report on 5 April 2007, Commission
Secretariat presented the Report of the Suspected Infringement at the Meeting of Report
Presentation on Suspected Infringement of the Article 27.a of the Law No.5/1999
conducted by Temasek Group and on the Suspected Infringement of Article 17 and Article
25.1.b of the Law No.5/1999
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1. Considering that to the presentation of the Report on Suspected Infringement, the
Commission Meeting agrees to follow up the case to the stage of Preliminary
Investigation ;
2. Considering that the Commission issues Confirmation Number

13/PEN/KPPU/IV/2007 dated 9 April 2007 on Preliminary Investigation of the
Case Number: 07/KPPU-L/2007, to perform Preliminary Investigation as from 9
April 2007 to 22 May 2007;
3. Considering that after performing Preliminary Investigation, the Examiner Team

find a strong indication that there is an infringement of the Article 27.a of the Law
No.5/1999 conducted by Temasek Group and on the Suspected Infringement of
Article 17 and Article 25.1.b of the Law No.5/1999 conducted by PT
Telekomunikasi Seluler. Further, the Examiner Team recommends extended
investigation to the stage of Further Investigation ;
Considering that based on the recommendation of the Examiner Team, the Commission
issues Confirmation Number 23/PEN/KPPU/V/2007 dated 23 May 2007 stated the
confirmation of extending the Case Number: 07/KPPU-L/2007 to be brought to the stage of
Further Investigation as from 23 May
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4. Considering further that the Commission needs to extend Further Investigation, the
Examiner Team, for the matter of the purpose, issues Decision Number:
152/KEP/KPPU/VIII/2007 dated 16 August 2007 on the Extension of Further
Investigation to the Case Number : 07/KPPU-L/2007 as from 16 August 2007 to 27
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September 2007;
5. That during the process of investigation, the Examiner Team has heard the
statements of Reported Parties, Witnesses and Government;
6. Considering that the identities and statements of Reporting Parties, Reported Parties
and witnesses have been recorded in IOR and signed by Reported and Witnesses ;
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7. Considering that during the process of Preliminary Investigation, Further
Investigation, and Extension of Further Investigation, the Examiner Team has already
collected, examined, and evaluated a numbers of letters and/or documents and other
IOR’s and other convinced evidences;
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8. Considering that after performing examination, the Examiner Team composes a
Report of Further Investigation consisting of:
I. Introduction; ----------------------------------------------------------------------------------
A. Basis; ---------------------------------------------------------------------------------------
1. The Confirmation of the Commission for the Supervision of Business

Competition No. 23/PEN/KPPU/V/2007 dated 23 May 2007 on the
Further Investigation of the Case Number 07/KPPU-L/2007; ----------------
2. The Decision of Commission for the Supervision of Business Competition

Number 152/KEP/KPPU/VIII/2007 dated 16 August 2007;--------------------
B. Examiner Team;---------------------------------------------------------------------------
1. Ir. M. Nawir Messi, M.Sc. (Chairperson); ---------------------------------------------------

2. Dr. Ir. Benny Pasaribu, M.Ec. (Member);---------------------------------------------------
3. Prof. Dr. Tresna P. Soemardi (Member);----------------------------------------------------
4. Didik Akhmadi, A.k., M. Comm (Member); -----------------------------------------------
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5. Dr. Syamsul Maarif, S.H., LL.M (Member); -----------------------------------------------
C. Investigators; -----------------------------------------------------------------------------
1. Farid F. Nasution, S.IP., S.H., LL.M; ---------------------------------------------
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2. Setya Budi Yulianto, SH; -----------------------------------------------------------
3. Abdul Hakim Pasaribu, SE, Ak; ---------------------------------------------------
4. Anang Triyono, S.E; ----------------------------------------------------------------
5. Elpi Nazmuzzaman, SE; ------------------------------------------------------------
6. Pakasa Bary, S.E; --------------------------------------------------------------------
7. Eva S Manalu, S.H;------------------------------------------------------------------
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8. Aru Armando, S.H;------------------------------------------------------------------
D. Clerks; -------------------------------------------------------------------------------------
1. Arnold Sihombing, S.H. M.H; -----------------------------------------------------

2. M. Hadi Susanto, S.H; --------------------------------------------------------------
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E. The Investigation Period of Time; -----------------------------------------------------
23 May 2007 to 27 September 2007; --------------------------------------------------
II. The Identities of Reported Parties ; ------------------------------------------------------
1. Temasek Holdings Pte. Ltd. Alamat: 60B Orchard Road, #06-18 Tower 2,
The Atrium@Orchard, Singapore 238891;----------------------------------------
2. Singapore Technologies Telemedia Pte. Ltd. Alamat: 51 Cuppage Road
#10-11/17, StarHub Centre, Singapore 229469;----------------------------------
3. STT Communications Ltd.Alamat: 51 Cuppage Road #10-11/17, StarHub
Centre, Singapore 229469; ----------------------------------------------------------
4. Asia Mobile Holding Company Pte. Ltd. Alamat: 51 Cuppage Road #10-
11/17, StarHub Centre, Singapore 229469; --------------------------------------
5. Asia Mobile Holdings Pte. Ltd. Alamat: 51 Cuppage Road #10-11/17,
StarHub Centre, Singapore 229469;------------------------------------------------
6. Indonesia Communications Limited. Alamat: Deutsche International Trust
Corporation (Mauritius) Limited, 4th floor, Barkly Warhf East, Le
Caudian Waterfront, Port Louis Mauritius; ---------------------------------------
7. Indonesia Communications Pte. Ltd. Alamat: 51 Cuppage Road #10-
11/17, StarHub Centre, Singapore 229469; ---------------------------------------
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8. Singapore Telecommunications Ltd. Alamat: 31 Exeter Road Comcentre
#28-00, Singapore 239732;----------------------------------------------------------
9. Singapore Telecom Mobile Pte. Ltd. Alamat: 31 Exeter Road Comcentre
#28-00, Singapore 239732;----------------------------------------------------------
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10. PT. Telekomunikasi Selular. Alamat: Wisma Mulia lt. 15, Jl. Jend. Gatot
Subroto No 42, Jakarta 12710;------------------------------------------------------
III.The Suspected Infringements; ---------------------------------------------------------------
1. Temasek Holdings Pte. Ltd (hereinafter referred to as Temasek) owns
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majority of shares in two business activities of the same fields and relevant
market that violates Article 27(a) of the Law No.5 of 1999 ; -----------------
2. PT. Telekomunikasi Selular (hereinafter referred to as Telkomsel) remains
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the airtime tariff high that violates Article 17 (1) of the Law No.5 of
1999 ;-----------------------------------------------------------------------------------
3. Telkomsel abuses its dominant posisition to restrain market and the

development of technology that violates Article 25 paragraph 1.b of the
Law No.5/1999 ; ----------------------------------------------------------------------
IV. The Relevant market ;------------------------------------------------------------------------
4. Under Article 1 (10) of the Law No.5/1999, relevant market is a market

concerning specific coverage or marketing area of business actor over the
likeness or similar goods and/or services or the substitution of such goods
and/or services; -----------------------------------------------------------------------
5. Under the commission law, a market concerning specific coverage or area

of marketing is known as geographical market, while the likeness or
similar goods and/or services or the substitution of such goods and/or
services is known as product market. Therefore, the analysis of relevant
market is performed by analyzing both product and geographical market;-
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4.1 Product Market; ---------------------------------------------------------------------------
6. Principally, product market analysis is to mention kind of goods and/or services,
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likeness or unlikeness, but their substitutions are to compete each other in a case.
To conduct the analysis, a product is treated from several aspects such as utility,
characteristics and price;----------------------------------------------------------------------
7. In general, the market of telecommunication industries can be classified into

network operating, telecommunication service operating and specific
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telecommunication operating 1. Network telecommunication operating is an
activity of providing and/or servicing network telecommunication to make
telecommunication possible. Specific telecommunication operating is a
telecommunication operating with its special characteristic, allotment, and
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operation. Telecommunication service operating, as it mentioned above, is
provided in fixed and mobile networks; ----------------------------------------------------
8. The operating of fixed network or Public Switch Telephone Network (PSTN)

consists of PSTN for local area, PSTN SLJJ, PSTN SLI, Closed PSTN 2, and
limited wireless of PSTN or FWA (fixed wireless access) 3. Mobile network
operating consists of terrestrial, satellite, and cellular mobile network (cellular
telecommunication) 4;--------------------------------------------------------------------------
9. Utility. In general, people are using PSTN telecommunication service, FWA and
cellular telecommunication 5 much more than other network telecommunication
services. The cellular telecommunication, PSTN and FWA are provided to transfer
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See Article 7 to 9 of the Law No. 36/1999 on Telecomunicación
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Article 9.2 of the Government Regulation No. 52/ 2000 on Telecommunication Operating
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The Ministrial Decree No. 35/2004 on the operating of fixed wireless access
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Article 9 ayat (3) of Government Regulation No. 52/ 2000 on Telecommunication Operating
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The Report of Directorate of Telecommunication-Director General of Posts and Telecommunications on the
development of Fixed and Cell Phone (2004-2006)
voices and data so that they are no significant differences one to another. From the
point of view of utilities, therefore, PSTN, FWA, and cellular telecommunications
are classified as substitution products; ------------------------------------------------------
10. Characteristic. The significant characteristic differences of “cellular
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telecommunication” between PSTN and FWA are their mobile abilities. The
operating service of PSTN is fixed while FWA is moveable but limited only to
one area code and cellular telecommunication is fully moveable. Technologically,
cellular telecommunication can be compatible under the platform of both Global
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System for Mobile Communication (‘GSM”) and Code Division Multiple Access
(“CDMA”) as it works as well for FWA. The difference of technology between
GSM and CDMA does not distinguish their service characters. The character of
fixed service is determined by the license owned by cellular operator or FWA.
Therefore, PSTN and FWA are not substitutions of cellular telecommunication
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cellular apart from the kind of technology implemented by the operators of FWA
and cellular telecommunication (GSM or CDMA); ---------------------------------------
11. Price. Regarding to the tariff, there is a tariff coverage between services provided
by PSTN and cellular telecommunication in which the tariff coverage of FWA is
similar to those of PSTN’s, while the tariff coverage of service provided by
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cellular telecommunication is higher than both of them. Concerning the tariff,
therefore PSTN and FWA are not substitutions of cellular telecommunication; ------
12. Consumer survey conducted by KPPU to the cellular phone users indicates that
service provided by FWA and PSTN are not substitutions of cellular
telecommunication services; -----------------------------------------------------------------
13. Although subscribers in specific segment concern on tariff, mostly concern on

network coverage (IOR of Telecommunication Society, dated 25 September
2007);--------------------------------------------------------------------------------------------
14. That FWA and full mobility cellular service competed only in one area code so
that FWA and full mobility cellular service are not a relevant market nationally
(IOR of Telecommunication Society, dated 25 September 2007); ----------------------
15. PT. Telkomsel provides 900/1800 dual band cellular telecommunication service
on the network of GSM, GPRS, Wi-Fi, EDGE, and 3-G Techonology (Kartu Halo,
Simpati, and Kartu As). While PT. Indosat Plc. provides mobile service (Matrix,
Mentari, IM3), telephony service (SLI, VOIP Telephony, StarOne), and
multimedia service (IM2 and Lintas Artha); -----------------------------------------------
16. As products of PT. Telkomsel telecommunication services, Kartu Halo, Simpati,
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and Kartu As are categorized as cellular telecommunications. They are similar to
Matrix, Mentari, and IM3PT that are provided by PT. Indosat Plc.. PT. Telkomsel
does not provide SLI, VOIP Telephony, FWA, internet service, and other
multimedia as PT. Indosat Plc., does. Therefore, PT. Telkomsel and PT.Indosat
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compete each other in the similar market product, cellular telecommunication
services; -----------------------------------------------------------------------------------------
4.2 Geographical Market; -------------------------------------------------------------------
17. Geographical market analysis intends to mention in which area the defined
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product market competed one to another; --------------------------------------------------
18. In relation to the coverage or marketing area, there are no constraints on

technology and regulation are found by operators for marketing their products in
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the regions all over Indonesia; ---------------------------------------------------------------
19. That not all cell phone operators have the same broad of coverage and it causes
one or two network cell phone operators available only in certain area.
Nevertheless, it does not mean that there is no competition in an area that only one
network cell phone operator operated. Still, there is a competition in such an area
although other cell phone operators do not operate in the pertinent area; --------------
20. It is explainable because all cell phone operators determine equal tariff to any
subscribers in whenever places they operated. As an illustration, Telkomsel never
charges tariff in areas beyond the reach of other telephone operator services higher
than those of the areas within the reach of other telephone operator services in
Indonesia. Telkomsel applies the same tariff in the areas which can be reached by
any operators whether other operators are operated or not in an area. It indicates
that in any areas in which Telkomsel operated, the competition with other cell
phone operator occurs, though it is possible that other cell phone operators are not
operated within the areas of Telkomsel’s reach;-------------------------------------------
21. Thereby, relevant market in this case is cellular telecommunication services in any
areas of Indonesia; -----------------------------------------------------------------------------
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V. Facts;----------------------------------------------------------------------------------------------
5.1 The Development of Telecommunication Industry in Indonesia; ----------------
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22. Initially, telecommunication activity in Indonesia was controlled by the state and
operated by State-Owned Company, PT. Telkom, Plc. Government owned the
shares for 51. 19% until 2006 and monopolized domestic telecommunication
service. In 1980 Government performed an acquisition of PT. Indosat, Plc..
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(“Indosat“) and monopolized telecommunications service for international access; -
23. The revolution of telecommunication technology in Indonesia was started with the
inception of PT. Satellite Palapa Indonesia (“Satelindo”) in 1993 that owned a
license for International Access, cell phone, and an exclusive rights to control
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some communication satellites. Satelindo introduced cell phone service in
November 1994. By 2000, Satelindo was a joint venture company with the
following structure of share ownerships:: --------------------------------------------------
i. PT Bimagraha Telekomindo (“Bimagraha”), 45%; -----------------------
ii. Detemobil Deustche Telecom Mobilfunk GmbH, 25%; -----------------
iii. Telkom, 22.5%, and -----------------------------------------------------------
iv. Indosat, 7.5%; ------------------------------------------------------------------
24. On 26 May 1995, PT. Telekomunikasi Selular (“Telkomsel”) was founded. PT.
Telekomunikasi Selular (“Telkomsel”) is a provider of cellular telecommunication
service as well as the first provider in Asia that provides prepaid card service. By
2000, Telkomsel was the subsidiary of Telkom and Indosat with the following
structure of share ownerships::---------------------------------------------------------------
i. Telkom, 42.5%; ----------------------------------------------------------------
ii. Indosat, 35%;-------------------------------------------------------------------
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iii. PTT Telecom BV of Netherland, 17.28%, and ----------------------------
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iv. Setdco Megacell Asia, 5%;---------------------------------------------------
25. As a volunteer of prepaid cellular telecommunications service provider, Telkomsel

has great amount of subscribers and market share s (see Table 3) and grow fast
which make it the biggest cellular telecommunication operator in Indonesia (see
Telkomsel: Financial Highlight); ------------------------------------------------------------
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26. In October 1996, PT. Excelcomindo Pratama (“XL”) began to enter cellular
market and to take part in enlivening the competition of cellular
telecommunication operator in Indonesia;--------------------------------------------------
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27. In May 2001, PT. Indosat Multi Media Mobile (”IM3”) was founded by Indosat
and began to enter cellular market in August 2001 and to take part in enlivening
the competition of cellular telecommunication operator in Indonesia; -----------------
28. In 1999, the Law No. 36/1999 on Telecommunication was published aiming at
promoting telecommunications industry under the principles of fair competition as
it stated in Article 10 and its elucidation 6; -------------------------------------------------
29. To follow up the Ministerial Decree No.72/1999, on 3 April 2001 PT Indosat and
PT Telkom agree to divest their ownership at Telkomsel, Satelindo and Lintas
Artha. Such an agreement has changed the ownership structures in Telkomsel and
Satelindo. Telkom gained additional shares in Telkomsel from Indosat as high as
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Article 10 of the Law No 36/1999 :(1) In operating telecommunication business, it is not permitted to conduct
activities which lead to monopoly practice and unfair fompetition among the operators (2) The prohibition as it
mentioned in (1) is prescribed by the regulation. The elucidation of the Article is: the Article is made it possible to
create fair competition among operators. The valid Law for this purpose is the Law. No. 5/1999 on the Prohibton of
Monopoly Practice and unfair competition along with its implementation regulation.
35%, while Indosat gained additional shares in Satelindo from Telkom as high as
22.5% 7; ------------------------------------------------------------------------------------------
30. Further, Indosat performs an acquisition of Bimagraha’s shares that owns as high
as 45% of Satelindo’s shares. In June 2002, Indosat gains 25% of Satelindo’s
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additional shares that used to be owned by Detemobil. Since then, Indosat controls
100% of Satelindo’s shares -------------------------------------------------------------------
31. At the end of 2001, the shares of Telkomsel owned 17.28% by KPN Netherland
and 5% owned by Sedtco Megacell Asia are bought out by SingTel through
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SingTel Mobile and followed then by the selling of 12.7% Telkomsel’s shares
owned by PT. Telkom to SingTel Mobile in 2002. Totally, the shares ownership of
SingTel Mobile in Telkomsel rises too 35%; ----------------------------------------------
32. In May 2002, the 8.1% shares of Government of Indonesia (GOI) in Indosat was
divested through global tender. Later, on 15 December 2002 the 41.9% shares of
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the GOI in PT. Indosat was divested to Singapore Technologies Telemedia
(”STT”) and then owned by its subsidiary, Indonesia Communication Limited
(”ICL”), founded in Mauritius. Thereby, the shares of ownership structure of
Indosat are as follow:--------------------------------------------------------------------------
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i. The GOI, 14.44%; -----------------------------------------------------------
ii. ICL, 41.9%;-------------------------------------------------------------------
iii. Public, 45.19%; --------------------------------------------------------------
33. Following the acquisition of STT, Indosat realized its plan to perform vertical
merger with its subsidiaries, Satelindo, Bimagraha and IM3 on 20 November
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“The Blueprint [Transportation Ministrial Decree No. 72/1999] call for progressive elimination of these
shareholdings to promote competition and avoid any actual or potential conflict of interest in more competitive
telecommunication environment and the Proposed Transaction are consistent with this Blueprint…. Mobile phone
service: Pursuant to the conditional SPA, the current joint-shareholdings by Telkom and the Company [Indosat]
will be dissolved and the mobile market will be fully competitive as provided in the Blueprint, Indosat, 2000
Annual Report, Form 20-F, hal 41;
2003. It aimed at focusing its business in cellular telecommunication service. By
now, Indosat is the second leading cellular telecommunication operator in
Indonesia and possesses 25.15% of market share in 2006; ------------------------------
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5.2 The Structure of Telecommunication Industry; ------------------------------------
General--------------------------------------------------------------------------------------------
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34. By 2006, the market structure of telecommunication industry in Indonesia is
played by some business actors such as PT. Telkom, PT. Telkomsel, PT. Indosat,
Plc., PT. Excelcomindo, Bakrie Telecom, Mobile 8, Sampoerna Telekomunikasi
Indonesia, and NTS
35. By 2006, the performance of each business actor can be seen from the following
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table that describes a number of their subscribers: ----------------------------------------
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Table 1
The Number of Fixed Phone Subscribers and Their Segments
Number of Subscribers Subscriber Segment

2004 2005 2006 2004 2005 2006
Fixed Phone 8,703,218 8,824,467 8,806,702
PT Telkom 8,559,350 8,686,131 8,709,211 98.35% 98.43% 98.89%
PT Bakrie Telecom
120,990 114,082 68,359 1.39% 1.29% 0.78%
(Ratelindo)
PT Indosat (I-Phone) 20,000 21,724 26,632 0.23% 0.25% 0.30%
Source: Directorate Telecommunication, Director General Posts and Telecommunication,
2007
Table 2
The Number of Fixed Wireless Access Subcribers and Their Segments
Number of Subscribers Subscriber Segment

2004 2005 2006 2004 2005 2006
FWA
1,673,081 4,683,363 6,014,031
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PT Telkom (Flexi)
85.43% 86.73% 69.44%
Subscibers 1,429,368 4,061,800 4,175,853
Prepaid Subscibers
69.19% 56.23%
3,240,500 3,381,426
Postpaid Subscibers
17.54% 13.21%
821,300 794,427
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PT Indosat Subscibers
52,752 3.15% 5.33% 5.97%
249,434 358,980
Prepaid Subscibers
40,854 2.44% 4.91% 5.63%
229,726 338,435
Postpaid Subscibers
11,898 0.71% 0.42% 0.34%
19,708 20,545
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PT Bakrie Telecom
11.41% 7.95% 24.60%
(ESIA) Subscibers 190,961 372,129 1,479,198
Prepaid Subscibers
10.55% 7.51% 23.53%
176,453 351,826 1,414,920
Postpaid Subscibers
14,508 0.87% 0.43% 1.07%
20,303 64,278
Source: Directorate Telecommunication, Director General Posts and Telecommunciation,
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2007
Table 3
The Number of Cellular Phone Subscribers and Their Segments
Number of Subscribers Subscriber Segments

2004 2005 2006 2004 2005 2006
Cellular Phone 30,336,607 46,992,118 63,803,015
Telkomsel 16,291,000 24,269,000 35,597,000 53.70% 51.64% 55.79%
Prepaid
14,963,000 22,798,000 33,935,000 49.32% 48.51% 53.19%
Subscribers
Postpaid
1,328,000 1,471,000 1,662,000 4.38% 3.13% 2.60%
Subscribers
Indosat 9,754,607 14,512,453 16,704,729 32.15% 30.88% 26.18%

Prepaid
9,214,663 13,836,046 15,878,870 30.37% 29.44% 24.89%
Subscribers
Postpaid
539,944 676,407 825,859 1.78% 1.44% 1.29%
Subscribers
Excelkomindo 3,791,000 6,978,519 9,527,970 12.50% 14.85% 14.93%

Prepaid
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6,802,325 9,141,331 12.34% 14.48% 14.33%
Subscribers 3,743,000
Postpaid
48,000 176,194 386,639 0.16% 0.37% 0.61%
Subscribers
Mobile-8 (Fren) 500,000 1,200,000 1,825,888 1.65% 2.55% 2.86%

Prepaid
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1,150,000 1,778,200 0.00% 2.45% 2.79%
Subscribers
Postpaid
50,000 47,688 0.00% 0.11% 0.07%
Subscribers
Sampoerna
Telekomunikasi 10,609 134,713 0.00% 0.02% 0.21%
Indonesia
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Prepaid
133,746 0.00% 0.00% 0.21%
Subscribers
Postpaid
967 0.00% 0.00% 0.00%
Subscribers
Natrindo Telepon
21,537 12,715 0.00% 0.05% 0.02%
Seluler
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Prepaid
10,155 0.00% 0.00% 0.02%
Subscribers
Postpaid
2,560 0.00% 0.00% 0.00%
Subscribers
2007
36. In Indonesia, cellular telecommunication industry is an industrial sector which

owns a biggest subscriber compared to the subscribers of fixed phone and FWA: ---
Table 4
The Number Telecommunication Subscribers Based on the Various
Operating Networks
Number of Subscribers Subscriber Segments

2004 2005 2006 2004 2005 2006
Fixed Phone 8,703,218 8,824,467 21.38% 14.59% 11.20%
8,806,702
FWA
1,673,081 4,683,363 4.11% 7.74% 7.65%
6,014,031
Cellular Phone
30,336,607 46,992,118 74.51% 77.67% 81.15%
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63,803,015
Total
40,712,906 60,499,948 100% 100% 100%
78,623,748
2007
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Picture 1
The Comparative Graphic Subscribers based on the Various Operating
Networks
The Comparation of Subscribers based on the
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Various Operating Networks
90.00%
80.00% 81.15%
74.51% 77.67%
70.00%
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60.00%
50.00%
40.00% Fixed Phone
30.00% 21.38%
14.59% 11.20%
20.00% Mobile Phone
FWA
10.00% 7.74% 7.65%
4.11% Cell Phone
0.00%
2004 2005 2006
Source: Directorate of Telecommunication, Director General of Posts and

Telecommunications 2007. (The data are processed)
Cellular -------------------------------------------------------------------------------------------
37. A Number of Business Actor: Based on the definition of relevant market as it
mentioned above, by the data year of 2006, there are 6 (six) 8 business actors
which play as cell phone operators, there are: ---------------------------------------------
a. Telkomsel; ------------------------------------------------------------------------
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b. Indosat; ----------------------------------------------------------------------------
c. Excelcomindo; --------------------------------------------------------------------
d. Mobile-8 / M-8 (Fren); ----------------------------------------------------------
e. Sampoerna Telekomunikasi Ind; -----------------------------------------------
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f. Natrindo Telepon Seluler (NTS); ----------------------------------------------
38. A numbers of customers or subscribers. By 2006, a number of subscribers of the

six operators were:-----------------------------------------------------------------------------
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Table 5
The Number of Cell Phone Subscribers
The
The
Accumulation
The Number of Subscribers Segment
of Subscriber
Year of
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Segment to n
Subscriber
operator-n
Operators Year Year
2004 2005 2006
2006 2006
1. Telkomsel 15,101,000 24,269,000 35,597,000 55.79% 55.79%
2. Indosat 9,754,607 14,512,453 16,704,729 26.18% 81.97%
3. XL 3,791,000 6,978,519 9,527,970 14.93% 96.91%
4. M-8 500,000 1,200,000 1,825,888 2.86% 99.77%
5. Sampoerna - - 134,713 0.21% 99.98%
6. NTS - - 12,715 0.02% 100.00%
Source: Directorate of Telecommunications, Director General of Posts and
Telecommunications (The data are processed)
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Directorate of Telecommunication-Director General of Posts and and Telecommunications
39. The amount of subscribers from 2004 to 2006 increased twice, from 29 million in
2004 to 64 million in 2006. The operator with the biggest to the smallest
subscribers can be ordered as follow: Telkomsel, Indosat, XL, M-8, Sampoerna
and NTS and the position remain the same from 2004 to 2006;-------------------------
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Ownership Structure ----------------------------------------------------------------------------
40. Temasek through SingTel performed an acquisition of 22.3% Telkomsel shares

from KPN Netherlands in 2001. Later in July 2002, SingTel increased its share
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ownership by acquiring 35% of Telkom’s shares in Telkomsel and as its
compensation, PT. Telkom transfered the assets of Telkom Mobile to Telkomsel
including its license to operate DCS 1800. (The 2002/2003 SingTel Annual Report
p. 21);--------------------------------------------------------------------------------------------
41. On 15 December 2002, STT was awarded a tender of divestment of the 41.9%
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Indosat’s shares which then owned through ICL. (Form 20-F of Indosat, 2005., p.
24);-----------------------------------------------------------------------------------------------
42. Thereby, the ownership structure from Temasek to Indosat and Telkomsel can be
seen in the following tree diagram:----------------------------------------------------------
C
Temasek Holdings
(Private) Limited
100% 54.15%
Y
Singapore Technologies Singapore
Telemedia Pte Ltd Telecommunications Ltd
100%
P
STT Communication Ltd
100% 100%
Indonesia Singapore Telecom

Communication Limited Mobile Pte Ltd
O
41.9% 35%
PT. Indosat, Tbk. Telkomsel
43. On 1 August 2004 and 1 Augstus 2005 Indosats launched Employment Stock
Owner Program (ESOP) which created dilution to its shareholders including STT
C
that rise its share ownership to 39.96%. Then, the STT through ICPL, bought
0.86% Indosat shares so that the whole shares of ICPL came out to 41.16%. The
buying process of the shares was reported to Bapepam (The Investment
Supervisory Board) on 4 May 2006. (Form 20-F Indosat, 2005. p. 89); ---------------
44. In 2006, STT established AMHC and along with Qatar Telecom controlled AMH.
The composition of share ownership of AMH is 75% for AMHC and 25% for
Qatar Telecom. The ownership of STTC over ICL was transferred in whole to
AMHC. (BAP AMH, ICL, and ICPL, dated 25 June 2007);-----------------------------
45. Thereby, the chart of Temasek ownership over Telkomsel and Indosat can be seen
as follow:----------------------------------------------------------------------------------------
Temasek Holdings
(Private) Limited
100% 54.15%
Y
Singapore Technologies Singapore
Telemedia Pte Ltd Telecommunications Ltd
100%
P
STT Communication Ltd
100% 100%
Indonesia Singapore Telecom

Communication Limited Mobile Pte Ltd
O
41.9% 35%
PT. Indosat, Tbk. Telkomsel
5.3 Tariff Regulation;--------------------------------------------------------------------------
C
46. The government regulations that regulate cell telecommunication tariff are:----------
a. The Law No. 36/1999 On Telecommunication; Article 27 and Article

28;
b. Government Regulation No. 52/2000 On Telecommunication Operating; --
c. Ministrial Decree No.21/2001 On Telecommunication Operating;-----------
d. Ministrial Regulation No. 8/2006 On Interconnection Tariff;-----------------
e. Ministrial Regulation No. 12/2006 On Cell Phone Tariff Station;------------

47. Such regulations regulate that the amount of cellular telecommunication tariff is
completely arranged by the operators and referring to the formula and tariff
regulation stated by Goverment as it is elucidated in Article 28 of the Law No.
36/1999 9 and the statements of Director General Posts and Telecommunication to
Examiner Team on 30 August 2007 (The Notes of Meeting with the Director
Y
General Posts and Telecommunication on 30 August 2007); ---------------------------
48. Operationally, the fundamental law used by cellular operator to fix a recent
collection of cellular telecommunication service to public are: -------------------------
P
a. The Decree of Minister of Tourism, Post and Telecommunication No.
27/PR.301/MPPT-98 On Connection Service Tariff of Cell Mobile
Phone (hereinafter referred to as Ministrial Decree 27/98); ----------------
b. The Decree of Ministry of Transportation No. 79/98 On Service Tariff of
O
Prepaid Cell Mobile Phone (hereinafter referred to as Ministrial Decree
79/98);------------------------------------------------------------------------------------
49. The two regulations determine the accepted Ceiling Tariff or Price in Indonesia.
C
Both are part of regulation prior to the effectiveness of the Law No. 36/1999 on
telecommunication 10;--------------------------------------------------------------------------
50. The list of maximum postpaid tariff regulation that is regulated by

Government in its two Decrees are available in the following table: -------------------
Komponen Biaya
Tarif Satuan
(Rp.)
A Biaya Aktivasi 200.000 /sambungan
B Bulanan 65.000 /bulan
C Air Time 325 /Menit
D Biaya Jelajah 1000 / Panggilan
9
The tariff amount of telecommunication network and/or telecommunication service is fixed by the operators of
telecommunication network and/or telecommunication service on the basis of formula that is stipulated by
Government.
10
Article 6 of the Ministrial Decree 27/98:”On the amount of Service Tariff of Prepaid Mobile Phone Cellular is
the maximum tariff as it stated in the Annex of this Decision.”
Biaya Pemakaian Langsung
Waktu Ekonomi: Pukul 22.00-08.00 dan Minggu dan Hari Raya
Tarif
Mobile-Mobile 2 x airtime
Mobile-PSTN 1 x airtime
Y
PSTN-Mobile 1 x airtime
TUK-Mobile 1 x airtime + 41 %
Waktu Bisnis: Pukul 08.00-22.00

Tarif Waktu Ekonomi x 125%
P
Cost Component
Tariff Unit
(Rp)
A Activation Cost 200,000 /Connection
B 65,000 /Month
O
Monthly
C Air time 325 /Minute
D Roaming 1000 / Call
Direct Using Cost
Business Hour: At 08.00-22.00
C
Economical Hour x 125%
51. The maximum Prepaid Tariff is 140% of the business hour tariff of valid postpaid
subscriber; --------------------------------------------------------------------------------------
52. By the end of December 2006, the derivative regulation of the Law No. 36/1999
that regulates the amount of cellular phone conversing effectively the Ministerial
Decree No. 27/98 and No.79/98 had not been available; ---------------------------------
53. In fact, the regulation of the Minister of Communication and Information

No.12/Per/M.Kominfo/02/2006 on the Procedures of Tariff Fixing Conversion for
Basic Telephony Cellular Mobile Network (published in February 2006) is
considered to be a conversion of Ministerial Decree of 27/98 and 79/98.
However, government stated that the regulation is only a transitions regulation
because government has been arranging the revision of Ministerial Regulation of
12/2006 11;---------------------------------------------------------------------------------------
54. In accordance with Article 4 paragraph (1) of the Ministerial Regulation of

12/2006 that stated that ”The tariff conversion calculating formula is performed by
Y
applying floor price”. The substance of tariff regulation in the provision does not
reenact ceiling price but interconnection tariff as a floor price; -------------------------
55. By now, Cellular Operator are awaiting further to the regulation of the basic tariff
calculation. The accepted prevailing tariff system is referring to the Ministerial
P
Decree of 27/98 and 79/98. 12; ----------------------------------------------------------------
5.4 Operational Performances; --------------------------------------------------------------

Tariff Amount ------------------------------------------------------------------------------------
56. From 2002 to 2006, the postpaid tariff of any operators can be seen in the
O
following table: --------------------------------------------------------------------------------
C
The Postpaid Tariff of Any Operators in 2002
To the To the
To
Operator Time Same Other
PSTN
Operator Operators
Kartu Halo Peak time (08.00 -20.00) airtime Rp 406 504 813 910
1 unit = 20 Off peak (20.00 – 08.00) 423 650 748
seconds airtime IDR 325 423 650 748
Sundays and Holidays
Satelindo Peak time (08.00 -20.00) airtime IDR 503.75 812,5 910
Matrix 406 422.5 650 747.5
1 unit = 6 Off peak (20.00 – 08.00) airtime IDR 422.5 650 747.5
seconds 325
Pro XL Peak time (08.00 -20.00) airtime IDR 489 812 895
1 unit = 6 406 408 650 733
second Off peak (20.00 – 08.00) airtime IDR 408 650 733
325
11
The presentation of Hery Nugroho (Member of BRTI) in Jakarta, 15 June 2007
12
Indosat, 2006 Annual Report, page. 100
IM 3 Bright Peak time (08.00 -20.00) airtime IDR 504 812 910
1 unit = 6 406 423 650 748
seconds Off peak (20.00 – 08.00) airtime IDR 423 650 748
Y
325
P
C O
P Y
C O
P Y
C O
P Y
C O
P Y
C O
P Y
C O
P Y
C O
57. From 2002 to 2006, the SMS tariff of any operators can be seen in the following
price list: ----------------------------------------------------------------------------------------
Price list of SMS Tariff
Valid in 2002
SMS for
Operator Domestic SMS for International Access
Access
Halo Card Telkomsel 250 250
250 500
Y
Pro XL Postpaid
Satelindo GSM Indosat 300 300
IM Bright 250
500
To XL 350
Valid in 2003
P
SMS for SMS for International
Operator
Domestic Acces Access
Kartu Halo Telkomsel 250 250
Pro XL Postpaid 250 500
Satelindo GSM Indosat 300 300
IM Bright 250
250
To XL 350
O
Valid in 2004
Operator SMS for Domestic Access SMS for International Access
C
Matrix Indosat* 300 300
IM Bright 250 250
Ke XL 350
*Satelindo change its brand to Matrix
Valid in 2005
Matrix Indosat* 300 300
IM Bright 250
350
To XL 350
Valid in 2006
Xplor Excelcomindo* 250 500
Matrix Indosat** 300 300
*XL launched new postpaid brand called Explor
*XL launched new postpaid brand called Explor
Y
**IM3 Bright merged to be Matrix
58. The prepaid tariff of each operator from 2002 to 2006 can be seen in the following
price list: ----------------------------------------------------------------------------------------
P
The Table of Prepaid Communication Tariff
The Year of 2001-2002

To To the Same To the Other
Operator Entry Call
PSTN Operator Operators
O
Simpati Telkomsel* 700 1,200 IDR 910 Free for local zone
(off peak 23.00- 910 1,500 IDR 1,600 Free for local zone
07.00) 2500#, 3500##
(peak 07.00-23.00) (neighboring zone)
Valid from 1 April 3500#, 4000##
2002 (overseas zone)
Mentari ** 1,013 1,499 1,713 Free
C
Valid from 1 March
2002
Pro XL** 1,070 1,600 1,870 Free
Valid from 15 July
2001
IM3 Smart*** 850 1,100 1,450 2500 (overseas zone)
Valid from 2002
*The tariff is included 10% added value tax, 1 unit = 30 second for local call and inter
local call, 1 unit = 15 second for international call
**Pre added value tax tariff, 1 unit = 30 second
*** 10% Added value tax tariff, 1 unit = 30 second
# off peak
The Year of 2002-2003

Operator To PSTN To the To the Entry Call
Same Other
Operators Operators
Simpati 700 1,200 IDR 910 Free for local
Telkomsel* (off 910 1,500 IDR 1,600 zone
peak 23.00- Free for local
07.00) zone
(peak 07.00- 2500#, 3500##
Y
23.00) (neighboring
Valid from 1 zone)
April 2002 3500#, 4000##
(overseas zone)
Mentari** 1,013 1,499 1,713 Free
Valid from 1
P
March 2002
Pro XL** 820 1600 1,870 Free
Valid from 8
February 2003
IM3 Smart*** 590 500 1,290 3,000 (overseas
(economical tariff 890 1,390 1,550 zone)
00-06.59)
(economical tariff
O
07.00-23.59)
Valid from 2003
* The tariff is included 10% added value tax, 1 unit = 30 second for local call and inter
*** 10% Added value tax tariff, 1 unit = 30 second
C
# off peak
##peak time
The year of 2004

(XL divides the prepaid services into two, called XL Bebas and Jempol)
To To the Same To the Other Entry
Operator
PSTN Operator Operators Call
Simpati Telkomsel* (off peak 700 1,200 IDR 1,300 Free
23.00-07.00) (peak 07.00-23.00) 950 1,500 IDR 1,600
Valid from 1 May 2004
Mentari** 850 1,500 1,710 Free
Valid from 1 Juni 2004
XL Bebas** 875 1,600 1,750 Free
XL Jempol** (off peak 22.00- 399 999 1,299
Y
06.00) (peak 06.00-22.00) 699 1,299 1,599
Valid from 18 August 2004
IM3 Smart*** (economical tariff 600 500 1,300 Free
00.00-06.59) 900 1,000 1,550
(economical tariff 07.00-23.59)
Valid from 21 June 2004
P
*** 10% Added value tax tariff, 1 unit = 30 second. The local call is imposed 20% for a
call performed in the outside of original area.
O
The year of 2004 – 2005
To To the Same To Other Entry
Operator
PSTN Operator Operator Call
Simpati Telkomsel* (off peak 700 300 1,300 Free
23.00-07.00) 950 1,500 1600 Free
(peak 07.00-23.00) 700 1,000 (to similar 1500
C
Valid from 1 February 2005 card)
The Kartu As Telkomsel** 1200 (to Halo and
Valid from 22 September Simpati Cards)
2004
Mentari*** 850 1,500 1,710 Free
XL Regular Free **** 875 1,360 1,650 Free
XL Free for the area of 743 1,360 1,485 Free
Sumatra **** 656 1,190 1,303
XL Free for the area of 399 999 1,299
Kalimantan**** 699 1,299 1,599
Valid from 1July 2005
XL Jempol*** (off peak
22.00-06.00)
(peak 06.00-22.00)
Valid from 18 August 2004
IM3 Smart*** (economical 600 500 1,300 Free
tariff 00.00-06.59) 900 1,000 1,550
(economical tariff 07.00-
23.59)
*** 10% Added value tax tariff, 1 unit = 1 minute
Y
The year of 2005 – 2006 (IM3 merges to Indosat)
To Entry
Operator Intraoperator Interoperator
PSTN Call
Simpati Telkomsel* 700 300 1300 Free
P
(off peak 23.00-07.00) 950 1500 1600 Free
(peak 07.00-23.00) 1800 1200 (all products of 2400
Valid from 1 February Telkomsel)
2005
Kartu As Telkomsel**
Valid from 11 April
2006
O
Mentari*** 900 1,500 freetalk*** 1,500 Free
Berlaku mulai 16
April 2006
XL Bebas 837 1,248 1,537 Free
Reguler**** 743 1,360 485 Free
Valid from 27 656 1,190 1,303 Free
September 2006 399 500 1,299
C
XL Free for the area 699 1,000 1,500
of Sumatra ****
XL Free for the area
of Kalimantan****
Valid from 1 July
2005
XL Jempol*** (off
peak 22.00-06.00)
(peak 06.00-22.00)
Valid from 27
September 2006
IM3 Indosat*** 600 500 1,300 Free
(economical tariff 900 1,000 1,550
00.00-06.59)
(economical tariff
07.00-23.59)
Valid from 21 June
2004
**Pre added value tax tariff, 1 unit = 1 second until December 2006
***Pre added value tax tariff, 1 unit = 30 second. Free talk starts from 00.00-05.00 with
IDR 25,000 for minimum pulse
**** 10% Added value tax tariff, 1 unit = 1 minute
59. In 2002 to 2006 the prepaid SMS tariff of each operator can be seen in the
following tables: -----------------------------------------------------------------------------
Y
Table of Prepaid SMS Tariff
P
Valid from 2002
Operator SMS for Domestic Acces SMS for International Access
Simpati Telkomsel 350 500
Pro XL Prepaid 350 500
Mentari Indosat 350 350
IM3 Smart 350 500
O
Valid from 2004 (in 2003 the tariff was not increased)
Operator SMS for Domestic Acces SMS for International Access
Simpati Telkomsel 350 600
Kartu As* 300 1,000
XL Bebas** 350 500
C
XL Jempol** 99 (to the similar operator) 499
299 (other operators)
IM3 Smart 350 350
*The Telkomsel prepaid new brand
**The Pro XL Prepaid new brand
Valid from 2005

SMS for International
Operator SMS for Domestic Acces
Access
Simpati 350 600
Telkomsel 150 (to similar As Card) 1000
Kartu As 300 (to Telkomsel and other
operators)
XL Bebas 350 500
XL Jempol 149 (to XL Card) 499
299 (to other operators)
IM3 Smart 150 (to Smart Card) 350
350 (to other operators)
Y
Valid from 2006
P
SMS for
Operator SMS for Domestic Acces International
Access
Simpati 350 600
Telkomsel 150 ( to As Card ) 1000
Kartu As 300 (to Telkomsel and other operators )
XL Bebas 350 500
O
XL 99 ( to XL Card) 499
Jempol 299 (other operators )
Mentari
300 300
Indosat
IM3 150 ( to Smart Card) 350
Indosat 350 (other operators )
C
Revenue ------------------------------------------------------------------------------------------
60. The following is a table of revenue of cellular telecommunication providers and
their market shares: ---------------------------------------------------------------------------
Table 6
The Revenue and Market share s of Cellular Telecommunication Providers (In Billion
Rupiah)
Telkomsel INDOSAT XL
The
amount of
Market Market Market
Year Revenue Revenue Revenue Selling in
share share share
Market
share
56.14
Y
2001 4,918.22 1,770 20.20% 2,073.03 23.66% 8,761.15
%
58.37
2002 7,572.95 3,272 25.22% 2,130.41 16.42% 12,975.01
%
11,146.1 60.37
2003 5,118 27.72% 2,198.06 11.91% 18,461.76
2 %
14,765.0 59.93
P
2004 7,342 29.80% 2,528.48 10.26% 24,635.63
8 %
21,132.9 64.56
2005 8,645 26.41% 2,956.38 9.03% 32,734.25
1 %
29,145.1 68.08
2006 9,228 21.55% 4,437.17 10.36% 42,809.89
9 %
Rata- 14,780.0 61.24
5,895.61 25.15% 2,720.59 13.61% 23,396.28
Rata 8 %
O
Source: Financial Higlight of Telkomsel, XL, Indosat for some years. The Data are
proceeded.
Interconnected Charge--------------------------------------------------------------------------
61. The interconnected charge of SMS and vote are the followings: ----------------------
C Table 7
Interconnected Charge
P Y
C O
Source: The Ovum Report of Director General of post and telecommunications , April
2005
62. The followings is interconnected revenue and expenditure of each operator:--
Table 8
Interconnected Revenue and Expenditure
(IDR 000,000)
TELKOMSEL INDOSAT XL
Revenue Expenditur Revenue Expenditur Revenue Expenditur
e e e
2001 599,826 270,904
1,772,909 1,435,710 2,107,312 1,213,492 644,437 287,844
Y
2002
2003 2,239,526 1,746,866 2,483,848 1,398,091 662,928 305,654
2004 2,955,576 2,173,333 2,129,847 1,107,256 768,927 359,826
2005 3,881,599 2,592,809 2,162,370 886,439 914,688 546,684
2006 4,444,779 2,822,602
Source: Financial Highlight
P
Network (BTS)-----------------------------------------------------------------------------------
63. The growth of BTS’s number of each operator is as follow:-----------------------------
O
Table 9
Number of BTS of Each Operator in the period of 2000-2006
Providers 2000 2001 2002 2003 2004 2005 2006
Telkomsel 1,411 1,995 3,483 4,820 6,205 9,895 16,507
INDOSAT 1,357 1,995 2,736 3,007 4,026 5,702 7,221
Excelcomindo 514 739 950 1,491 2,357 4,324 7,260
C
EBITDA -------------------------------------------------------------------------------------------
64. (Earning Before Interest, Tax, Depreciation, and Amortization) of each operator,
EBITDA of Margin and Industry are as follow: -------------------------------------------
Table 10
EBITDA of Each Operator
Year
Amount % Growth Amount % Growth Amount % Growth
(IDR (IDR (IDR
Million) Million) Million)
3,499,000 2,842,40 1,202,205
2001
0
5,110,000 46.04% 3,661,70 28.82% 1,442,463 19.98%
2002
0
8,026,000 57.06% 4,385,90 19.78% 1,456,157 0.95%
Y
2003
0
10,672,00 32.97% 6,016,70 37.18% 1,624,753 11.58%
2004
0 0
15,408,00 44.38% 6,732,10 11.89% 1,733,668 6.70%
2005
0 0
20,737,00 34.59% 7,051,90 4.75% 2,535,881 46.27%
P
2006
0 0
Table 11
Margin of EBITDA of Each Operator
O
Amount Amount Amount
2001 71.14% 55.32% 67.40%
2002 67.48% 54.11% 67.44%
2003 72.01% 53.29% 65.34%
2004 72.28% 57.69% 62.71%
2005 72.91% 58.09% 56.67%
2006 71.15% 57.62% 54.17%
C
Table 12
EBITDA of Industry
Total of
Total of Industry
Industry
Revenues Ebitda Margin
(IDR 000) (IDR 000) of Ebitda
2001 11,839,990,340 7,543,605,000 63.71%
2002 16,478,718,136 10,214,163,000 61.98%
2003 21,604,441,548 13,868,057,000 64.19%
2004 27,785,881,759 18,313,453,000 65.91%
2005 35,781,844,531 23,873,768,000 66.72%
2006 46,066,260,578 30,324,781,000 65.83%
Source: Financial Report of Telkomsel, Indosat, XL. The Data are procceeded
5.5 Concerning Temasek
65. TEMASEK founded in 1974 is an investment company in Asia that is based in

Singapore. The amount of Temasek investment is S$ 129 billion (US$ 80 billion)
Y
extending far apart in Singapore, Asia, and OECD countries covering
telecommunication sector and media, finance service, properties, transportation
and logistics, energy and resources, infrastructure, engineering and technology, as
well as pharmacy and bioscience; -----------------------------------------------------------
P
66. Since 2004, the amount of TEMASEK investment portfolio has kept on
increasing from about S$ 90 billion to S$ 103 billion in 2005. In 2006, the
portfolio investment increased rapidly to S$129 billion. The main focus of
O
Temasek investment is banking and finance as well as telecommunications and
media. In 2004, the investment in telecommunications and media were recorded
as high as 36% and 21% in banking and finance. In 2005, however, investment
in banking and finance began to increase higher than the investment in
telecommunications and media, for amount of 35%, while the investments in
C
telecommunication decreased to 26%. The data show that the major investment of
Temasek is focused on finance industry and telecommunications. The following
table show the description of Temasek investment portfolio on the basis of its
industry; -----------------------------------------------------------------------------------------
Table 13
Temasek Investment Portfolio Based on its Industry
2003-2006 (%)
Investment Portfolio 2003 2004 2005 2006

Telecommunication and Media 36 33 33 26
Financial Services 21 21 21 35
Transportation and Logistics 14 17 17 13
Infrastructure and Technology
10 10 10 9
Engineering
Energy and Resources 7 8 8 6
Properties 6 8 8 7
Biopharmaceutical and others 6 3 3 4
Total 100 100 100 100
67. Specially for telecommunications and media, Temasek owns its shares in
MediaCorp (100%), Singapore Technologies Telemedia (100%), Global Crossing
Y
(71%), StarHub (57%), Singapore Telecommunications (56%), Shin Corporation
(44%), and PT Indosat (around 41%); ------------------------------------------------------
68. ST Telemedia was founded in 1994 and serves fully on information services,
telecommunication, and entertainment by applying fixed line, mobile, and internet.
P
The businesses of ST Telemedia are focused in two fields:------------------------------
a. Wireless telephony ---------------------------------------------------------------

b. Global internet protocol (IP) services
O
69. Referring to SC 13D, a document submitted to US Securities and Exchange
Commission, ST Telemedia owns the whole shares of STT Communications Ltd.
and Indonesia Communication Ltd; ---------------------------------------------------------
70. On 15 December 2002, ST Telemedia through STT Communication and

Indonesian Communication Ltd. acquired the Indosat’s B-series shares for the
C
amount of 434,250,000 or 41.94 % of the total of B-series shares; --------------------
71. SingTel was founded in March 1992 and its initial public offering was in October
1993. SingTel provides voices and data service on fixed line, mobile and internet.
SingTel is a leading cellular telecommunication operator in Singapore by
controlling 43% of prepaid cellular telecommunication market; ------------------------
72. In 2001, SingTel performed a biggest acquisition to foreign company by buying

Optus, a second largest telecommunication operator in Australia, followed then by
buying Telkomsel (Indonesia), Bharti Group (India), Pacific Bangladesh Telecom
Ltd. (Bangladesh). SingTel also increased its share ownership at Globe Telecom
(Philipines). Since March 2006, SingTel and its affiliates had possed 85 million
cellular phone subscribers or the biggest Asian cellular operator outside China; -----
73. In 2005, Temasek investment portfolio in telecommunication sector developed

rapidly from four in 2004 to nine companies and in six of them, Temasek became
a majority shareholder. Temasek is only a minority shareholders in some
companies but it empowered the investment in its own existing companies;----------
Table 14
Y
Temasek Investment Portfolio in Telecommunication and Finance Service
(Year 2004)
The Portion The Portion

Telecommunication of Share Finance Service of Share
(%) (%)
SingTel 65 DBS 28
P
ST Telemedia 100 13 Bank Danamon 53
Media Corp 100 ICICI Bank 9
Telekom Malaysia 5 Bank Internasional 26
Indonesia (BII)
Hana Bank 4
Fullerton Fund Management 100
O
74. According to SingTel Annual Report 2005/2006, in acquiring Telkomsel, SingTel
used SingTel Mobile, a SingTel’s subsidiary in which its 100% of the shares are
owned by SingTel;-----------------------------------------------------------------------------
75. In 2006, Temasek sold his share in several telecommunications companies like
C
Telekom Malaysia and Equinix, as well as sold some of his shares available in the
StarHub company and SingTel. Through Alpen Holdings, Temasek had the share
to the telecommunications company of Shin Corp. In 2006 also, Temasek erected
Asian Financial Holdings, a company that held was full of the control of the
company and banking of the financial service that were had by Temasek; -----------
------------------------------------------------
Table 15
Temasek Portfolio Investment in Telecommunication and Finance Service Companies
(2005)
Portion of Portion of
Telecommunication
Share Finance Service Firms Share
Companies
(%) (%)
SingTel 63 DBS 28
ST Telemedia 100 Bank Danamon 56
13
Through Singapore Technologies Pte Ltd
Telekom Malaysia 5 Bank Internasional Indonesia 35
(BII)
SingTel Optus 63 14 Hana Bank 10
StarHub 63 15 Fullerton Fund Management 100
Global Crossing 71 16 Malaysian Plantations/Alliance 15
Bank
INDOSAT 41 17 China Minsheng Banking 5
Y
Corporation
Equinix 35 18 NDLC-IFIC Bank 25
Table 16
P
Temasek Portfolio Investment in Telecomunication and Finance Service (2006)
Portion of Portion of
Telecommunication
Share Finance Service Companies Share
Companies
(%) (%)
SingTel 56 DBS 28
ST Telemedia 100 Bank Danamon 59*
O
19
StarHub 63 Bank Internasional Indonesia 35*
(BII)
20
Global Crossing 71 Hana Bank 10*
21
INDOSAT 41 Fullerton Fund Management 100
Shin Corporation 44 22 China Construction Bank 6*
E. Sun Financial Holding 6*
Company
C
Bank of China 5*
76. Regionally, Temasek controls most part of cellular telecommunication industry in

ASEAN region by possessing shares in many cellular telecommunication
companies of ASEAN countries. Totally, Temasek has more than 120 million
subscribers in India, Indonesia and Australia; ---------------------------------------------
14
Through SingTel
15
Through ST Telemedia and MediaCorp
16
17
18
19
20
Through ST Telemedia
21
Through ST Telemedia
22
Through Aspen Holdings
* Asia Financial Holdings.
77. The authorities of Temasek, SingTel, SingTel Mobile, STT, STTC, AMHC,
AMH, ICL and ICPL over their subsidiaries are stated in their own statutes as it
mentioned respectively:: ----------------------------------------------------------------------
Y
f. Under Article 59 (c), Article 96 (e), Article 102 and Article 103 of the SingTel
Statutes, Temasek as the shareholder of SingTel is authorized to appoint and to
dismiss Board of Director of SingTel; ------------------------------------------------------
P
g. Under Article 60 (c), Article 98 and Article 99 of the Statutes of STT, Temasek
as the shareholder of STT is authorized to appoint and to dismiss Board of
Director of STT; ---------------------------------------------------------------------------------
h. Under Article 92, Article 93 and Article 94 of the Statutes of SingTel Mobile,
SingTel Mobile as the shareholder of SingTel Mobile is authorized to appoint and
O
to dismiss Board of Director of SingTel Mobile;-----------------------------------------
i. Under Article 10 (1) of Telkomsel Statutes, SingTel Mobile as the shareholder of

Telkomsel is authorized to post two Directors in Telkomsel Board of Director, and
under Article 13 (3) of Telkomsel Statutes, SingTel Mobile as the shareholder of
C
Telkomsel is authorized to post two Commissioners in the Telkomsel Board of
Commissioner; -----------------------------------------------------------------------------------
j. Under Article 60 (c), Article 98 and Article 99 of the STTC Statutes, STT as the
shareholder of STTC is authorized to appoint and to dismiss Board of Director of
STTC;
k. Under Article 60 (c), Article 98 and Article 99 of the STTC Statutes, AMH as the
shareholder of ICPL is authorized to appoint and to dismiss Board of Director of
ICPL ;
l. Under Article 60 (c), Article 98 and Article 99 of the AMH Statutes, AMHC as the
shareholder of AMH is authorized to appoint and to dismiss Board of Director of
AMH ; -----------------------------------------
m. Under Article 60 (c), Article 98 and Article 99 of the ICPL Statutes, AMH as the
shareholder of ICPL is authorized to appoint and to dismiss Board of Director of
ICPL ;
n. Under Article 9 (a ) of the ICL Statutes, AMH as the shareholder of ICL is
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authorized to appoint and to dismiss Board of Director of ICL; -------------------------
o. Under Article 10 (3) of the Statutes of Indosat, ICL and ICPL as the shareholders
of Indosat are authorized to appoint and to dismiss Board of Director of Indosat
and under Article 14 (2), to appoint and to dismiss Board of Commisioner;----------
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78. With its authority, Temasek appoints managements of each company. The control
is in the Holding Company and in this matter is Temasek, that can be seen from
the double position in its companies, as it is seen in the following table: --------------
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a. From Temasek to Telkomsel:
Temasek
S. Dhanabalan (Chairman) Kua Hong Pak
Kwa Chong Seng (Deputy Chairman) Sim Kee Boon
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Lim Siong Guan (Deputy Chairman) Teo Ming Kian
Yong Siong Goh
Goh Yew Lin (Managing Director)
Robert Lhong
Ho Ching (CEO) (Managing Director)
Simon Israel Vijay Parekh
Peter Seah (Advisory
Koh Boon Hwee Panel)
Sing Tel
Director Management
Chumpul NaLamlieng Chua Sock Koong
Francis Heng Hang
Graham John Bradley Keong
Paul Chan Kwai Wah Lim Chuan Poh
Chua Sock Koong Lim Eng
Hee Sweng Keat Ng Yoke Weng
Simon Israel Paul O'Sullivan
Tommy Koh
Lee Hsien Yang
John Powell Morschell
Kaikhushru Shiavax Nargolwala
Deepak S Parekh
Nicky Tang Ng Kuang
SingTel Mobile
Leong Shin Loong Chua Sock Koong
Telkomsel
Komisaris Direksi
Kiskenda Suriahardja
Rinaldy Firmansyah (Dirut)
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Leong Shin Loong Triwahyusari
Bambang Riadhy
Lim Chuan Poh Oemar
Losso Judianto Yuen Kuan Moon
Arif Yahya Ho Boon Teck Alan
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b. The table shows a double position in Temasek Group. There are:---------
i. Simon Israel is a member of both Temasek and member of

SingTel Board of Director; -----------------------------------------------
ii. Chua Sock Koong is in both SingTel and SingTel Mobile
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managements;
iii. Lim Chuan Poh is in Singtel management as well as a
commisioner of Telkomsel; ----------------------------------------------
iv. Leong Shin Loong is a member of Singtel Board of Director as
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well as a commissioner of Telkomsel; ----------------------------------
c. From Temasek to Indosat: ------------------------------------------------------
Temasek
Goh Yew Lin Yong Siong Goh (Managing Director)
Ho Ching (CEO) Robert Lhong (Managing Director)
Koh Boon Hwee Peter Seah (Advisory Panel)
STT
Directors (BAP 2706)
Lee Theng Kiat Ho Ching (Executive Vice President)
Lim Ming Seong George Chow Yew Tong (Senior VP)
Vincente Perez Richard Lim (Senior VP)
Justin Weaver Lilley Pek Siok Lan (Legal Counsel)
Chang See Hiang Lian Mae Ai (Legal Counsel)
Sir Michael Perry Chia Wen See (Legal Cunsel)
Peter Seah Stephen Geoffrey Miller (CFO)
Sio Tat Hiang (Executive Vice
Sam Soon Lin (BAP 2706) President)(website Indosat 25/09)
Tan Guong Ching
STT Comm
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Lim Ming Seong Stephen Geoffrey Miller (CFO)
Vincente Perez
Justin Weaver Lilley
Chang See Hiang
Sir Michael Perry
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Peter Seah
Sam Soon Lin (BAP 2706)
Tan Guong Ching
AMHC
Directors
Stephen Geoffrey Miller (CFO) BAP
Lee Theng Kiat (BAP 2706) 2706
Vincente Perez Pek Siok Lan (Company Secretary)
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Peter Seah Lian Mae Ai (Company Secretary)
Tan Guong Ching (BAP 2706)
Yap Boh Pin
Edward Lee
AMH
Directors
Lee Theng Kiat (BAP 2706) Pek Siok Lan (Company Secretary)
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Vincente Perez Lian Mae Ai (Company Secretary)
Peter Seah
Yap Boh Pin
Edward Lee
Syekh Muhammed
Nasser Marafih
ICL IC Pte. Ltd.
Kek Soon Eng (Director) Kek Soon Eng
Lee Theng Kiat Stephen Geoffrey Miller (CFO)
Mark Sebastian Law Chia Wen See (Company Secretary)
Indosat
Direksi Komisaris
Johnny Swandi Djam (President Director) Sum Soon Lin (BAP 2706)
Kaizad B Herjee (Deputy President Director) Syeikh Mohammed
Fadzri Sentosa (Jabodetabek & Corp Sales Lee Theng Kiat (BAP 2706)
Director)
Syakieb Sungkar (Regional Sales Director) Peter Seah
Guntur S. Siboro (Marketing Director) Sio Tat Hiang
Roy Kannan (IT Director) Setio Anggoro Dewo (Independen)
Raymond Tan Kim Meng (Network Director) Roes Ariwidjaya
Wong Heang Tuck (Finance Director) Soeprapto (Independen)
Wahyu Wiijayadi (Corporate Services Setyanto P Santosa
Director)
Lim Ah Doo (Indenpenden)
Temasek
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Goh Yew Lin Yong Siong Goh (Managing Director)
Ho Ching (CEO) Robert Lhong (Managing Director)
Koh Boon Hwee Peter Seah (Advisory Panel)
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STT
Lim Ming Seong George Chow Yew Tong (Senior VP)
Vincente Perez Richard Lim (Senior VP)
Justin Weaver Lilley Pek Siok Lan (Legal Counsel)
Chang See Hiang Lian Mae Ai (Legal Counsel)
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Sir Michael Perry Chia Wen See (Legal Cunsel)
Peter Seah Stephen Geoffrey Miller (CFO)
Sio Tat Hiang (Executive Vice
Sam Soon Lin (BAP 2706) President)(website Indosat 25/09)
Tan Guong Ching
STT Comm
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Lim Ming Seong Stephen Geoffrey Miller (CFO)
Vincente Perez
Justin Weaver Lilley
Chang See Hiang
Sir Michael Perry
Peter Seah
Sam Soon Lin (BAP 2706)
Tan Guong Ching
AMHC
Directors
Stephen Geoffrey Miller (CFO) BAP
Lee Theng Kiat (BAP 2706) 2706
Vincente Perez Pek Siok Lan (Company Secretary)
Peter Seah Lian Mae Ai (Company Secretary)
Yap Boh Pin
Edward Lee
AMH
Directors
Lee Theng Kiat (BAP 2706) Pek Siok Lan (Company Secretary)
Vincente Perez Lian Mae Ai (Company Secretary)
Peter Seah
Yap Boh Pin
Edward Lee
Syekh Muhammed
Nasser Marafih
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ICL IC Pte. Ltd.
Kek Soon Eng (Director) Kek Soon Eng
Lee Theng Kiat Stephen Geoffrey Miller (CFO)
Mark Sebastian Law Chia Wen See (Company Secretary)
Indosat
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Directors Commisioner
Johnny Swandi Djam (President Director) Sum Soon Lin (BAP 2706)
Kaizad B Herjee (Deputy President Director) Syeikh Mohammed
Fadzri Sentosa (Jabodetabek & Corp Sales Lee Theng Kiat (BAP 2706)
Director)
Syakieb Sungkar (Regional Sales Director) Peter Seah
Guntur S. Siboro (Marketing Director) Sio Tat Hiang
Roy Kannan (IT Director) Setio Anggoro Dewo (Independent)
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Raymond Tan Kim Meng (Network Director) Roes Ariwidjaya
Wong Heang Tuck (Finance Director) Soeprapto (Independen)
Wahyu Wiijayadi (Corporate Services Setyanto P Santosa
Director)
Lim Ah Doo (Indenpenden)
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d. The table shows the double position in Temasek Group. There are: ------
v. Ho Ching is a CEO of Temasek, Executive Vice President of

STT, and Executive Vice President of STTC; -------------------------
vi. Lee Theng Kiat is a Director of STT, STTC, AMHC, AMH,

and a commissioner of Indosat; ------------------------------------------
vii. Lim Ming Seong is a Director of STT and STTC;-------------------
viii. Vincente Perez is a Director of STT, STTC, AMHC, and AMH. -
ix. Justin Weaver Lilley is a Director of STT and STTC; -------------
x. Chang See Hiang is a Director of STT and STTC;------------------
xi. Sir Michael Perry is a Director of STT and STTC. -----------------

xii. Peter Seah is an Temasek Advisory Panel and a Director of
STT, STTC, AMHC, AMH, as well as a Commissioner of
Indosat.
xiii. Sam Soon Lin is a Director of STT, STTC, AMHC, AMH, and
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aCommissionerof Indosat.------------------------------------------------
xiv. Tan Guong Ching is a Director of STT, STTC, AMHC, and

AMH.------------------------------------------------------------------------
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xv. Steven Geoffrey Miller is a CFO of (Chief Financial Officer) of
STT, STTC, AMHC, and ICPL. -----------------------------------------
xvi. Pek Siok Lan is a Legal Counsel of STT and Company Secretary
of AMHC as well as AMH; ---------------------------------------------
xvii. Lian Mae Ai is a Legal Counsel of STT and Company Secretary
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of AMHC as well as AMH. ----------------------------------------------
xviii. Chia Wen See is a Legal Counsel of STT and ICPL. ----------------
xix. Yap Boh Pin is a Director of AMH and AMHC. ---------------------
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xx. Edward Lee is a Director of AMH and AMHC.----------------------
xxi. Kek Soon Eng is a Director of ICL and ICPL.------------------------
xxii. Syeikh Mohammed is a Director of AMH and a commisioner of

Telkomsel. ------------------------------------------------------------------
5.6 Concerning Telkomsel; -------------------------------------------------------------------
79. PT. Telkomsel is a cellular telecommunication operator founded in 1995. It

provides services of dual band 900/1800 GSM network, GPRS, Wi-Fi, EDGE, and
3-G Techonology;-----------------------------------------------------------------------------
80. When KPN Netherlands purchased Telkomsel’s shares, the status of Telkomsel
was converted to be a Foreign Investment company in 1996 with the agreement of
BKPM on 11 March 1996 (Under the Notary Act of Sutjipto SH. No 194 dated 21
June 1996); -------------------------------------------------------------------------------------
81. In 2001, SingTel took over PT. Telkomsel shares from KPN Netherlands
(17.28%) and Setdco Megacell Asia (5%). In the middle of 2002, SingTel
increased its ownership by buying 12.72% of PT. Telkom share, by now the shares
of SingTel are to 35%. The composition of Telkomsel shares can be seen in the
following table: --------------------------------------------------------------------------------
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Table 18
The Composition of Telkomsel Shares
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Paid Up Capital
Shareholders Total of Shares %
(IDR)
PT Telekomunikasi Indonesia Plc. 118,677 118,677,000,000 65
Singapore Telcom Mobile Pte Ltd 63,893 63,893,000,000 35
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Total 182,570 182,570,000,000 100
82. The main products of PT Telkomsel are: ---------------------------------------------------
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a. Halo Card, a postpaid GSM card launched in 1995, has had 14.7 million
subscribers by 2005. It is a market leader in postpaid GSM card; ----------
b. Simpati, a first prepaid GSM card in Asia, was launched in 1997 and its
target market is middle class; ----------------------------------------------------
c. “As” card, a prepaid GSM card, was launched in 2004 and its target
market is low end; -----------------------------------------------------------------
83. The service coverage of PT Telkomsel is the largest in Indonesia. It covers the
whole districts (100% ) and 40% of sub districts in Indonesia;--------------------------
84. Under the Statutes of Telkomsel, the authorities of Shareholders General Meeting
(Shareholder meeting), Commissioners, Management and the procedures of
decision making of are as follows: ----------------------------------------------------------
a. Under Article 1.3.a of Telkomsel’s Statutes, the deeds of Board of Director
that must be approved by Shareholder General Meeting are:---------------------
1. To amend share rights; to approve and to amend any scheme

option for employee; to issue shares or other equities; or to give
option, warrant or other rights to buy shares or other rights that
can be converted into shares; consolidation, conversion of
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repurchase limited company’s shares; or to perform initial public
offering/IPO (it includes the possibility that the IPO covers a
second component and a number of shares that are about to be
sold by shareholders in the IPO). ----------------------------------------
2. To determine dividend or reserve fund, if: ----------------------------
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a. The total of dividends or allotments that determined or paid in a
fiscal year before second anniversary on the date of the Statutes
approved by shareholders will exceed thirty five percents (35%) of
the company’s profits after tax the fiscal year; or------------------------
b. The total of dividends or allotments that determined or paid in a
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fiscal year after second anniversary on the date of the Statutes
approved by shareholders will exceed thirty percents (30%) of the
company’s profits after tax the fiscal year; or ----------------------------
c. Dividend or allotments are determined or paid except the retained

revenues; ----------------------------------------------------------------------
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3. To amend the Statutes; ----------------------------------------------------
4. To convert core business of the company or to alter the main

condition in the communication license issued to the company; ----
5. To liquidate, to disincorporate, to merge, to consolidate or to join

the company; ---------------------------------------------------------------
6. To perform company’s transaction under 10% of the revenues or

12.5% of the shareholder equities and it shall be reported in the
last audited financial statement of the company; ---------------------
7. To appoint and dismiss public accountant for the company; -------
8. To approve shareholders audited financial statement of the

company;--------------------------------------------------------------------
9. To release the company’s interest in one of its subsidiaries;---------
10. To arrange the incentive, including severance pay, for the

commissioner;--------------------------------------------------------------
b. Under Article 11.3.b of the Telkomsel’s Statutes, the deed of Board of
Director must be approved by commissioners as long as there are 20%
of company’s shares owned by shareholders: --------------------------------
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1. To approve commissioner’s audited financial statement of the
company;--------------------------------------------------------------------
2. To establish a subsidiary or joint venture; partnership or

operational cooperation; and an acquisition of companies or
capital investment;---------------------------------------------------------
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3. To receive or to lend loans or guarantee separately or if in whole
with other accepted loans or given guarantees in the common
book year, that exceed US$ 5,000,000 (or its equivalent in other
currencies) or giving exemption, guarantees, performance bond
or release any bank securities by company that exceed one (1)
year or lengthen commitment that exceed one (1) year that, in or
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if it is in whole, bigger than US$ 5,000,000 (or its equivalent in
other currencies) in common book year in which exemption,
guarantee, performance bond or bank security obtained or
lengthened;
4. To approve amendment or performance inappropriately with the
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Statues of the company;---------------------------------------------------

Directors; -------------------------------------------------------------------
c. Under Article 11.3.c of the Telkomsel’s Statutes, as long as there are

20% shares owned by shareholders, the authorities of the managements
are: ---------------------------------------------------------------------------------
1. To establish, to renew, to amend or to terminate an agreement or

company’s transactions, with shareholders, subsidiaries that
become shareholders, companies related to shareholders or
member of Management or Commissioners, (i) value at higher
than US$ 5,000,000 (or its equivalent in other currencies) or (ii)
value at lower than the total of the above mentioned but the
transaction is not under commercial customary condition or in
daily business activities of the company;-------------------------------
2. To approve the management’s audited financial statement ;
3. To give loan or other prolongation of credits independently, or if

it is jointly with other loans and other prolongation of credits by
the company in the same year-end, value at higher than US$
5,000,000 (or its equivalent in other currencies);----------------------
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4. To amend accounting policies of the company; -----------------------

management officer;-------------------------------------------------------
d. Under Article 10.1 of the Telkomsel’s Statutes, Telkom is entitled to
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dispose 3 personnel (President Director, Director of Finance, and
Director for other positions while SingTel Mobile is entitled to dispose
2 personnel in the Telkomsel Board of Director of --------------------------
e. Under Article 11.6 of the Telkomsel’s Statutes, the allotment of tasks

and authorities of each member of management are stated by
Shareholders General Meeting, but it could be given to
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Commissioners; ------------------------------------------------------------------
f. Under Article 11.6 of the Telkomsel’s Statutes, the management

meeting will be a quorum only if it is attended by four member of
management and one member nominated by shareholders who had at
least 10% of the company’s shares;--------------------------------------------
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g. Under Article 12.6 of the Telkomsel’s Statutes, the decisions taken in
management meeting are based on the agreement of the majority of the
member of management attended in the meeting or those of
represented. In case of the votes are even, then the decisions are
determined in the commissioner meeting. If the decisions cannot be
taken in the commissioner meeting because the votes are even, the
decisions are determined in shareholders general meeting;-----------------
h. Under the Article 13 (3) of the Telkomsel’s Statutes, in the Board of

Telkomsel commisioner, Telkom is entitled to dispose four personnel
and two for SingTel Mobile;----------------------------------------------------
i. Under Article 22.1 (a) of the Telkomsel’s Statutes, the general meeting
will be a quorum only if it is attended by at least 51% (fifty one) of the
total shares and one represented shareholders that at least owned 10%
(ten) of the shares issued by the company;------------------------------------
j. The decision of the commissioner meeting was taken based on the

agreement of the majority of the commissioner's member that was
present or was represented. In the matter of the same number of the
voice did not agree and agree then this matter will be decided in
Shareholder meeting. --------------------------------------------------------
k. The decision of the commissioner of the meeting was taken was based
on the agreement of the majority of the commissioner's member that
was present or was represented. In the matter of the voice did not agree
and agree was the same the number then this matter will be decided in
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Shareholder meeting
l. Shareholder meeting achieved the quorum if being attended by

representative shareholders at least 51 (fifty-one) percent of the
number of shares with legal voting rights that were dismissed by the
company including one representative of shareholders who had at least
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10 (ten) percent of the share that was dismissed by the company.(the
Article 22 articles 1 letter a Telkomsel Statutes);
m. The Shareholder meeting decision was taken was based on the

conference to mufakat and in the matter of the decision of the
conference to mufakat was not reached, the decision was taken with
the voting was based on the voice that agreed at least 51% (fifty-one
percent) from the voice that was dismissed legitimately in being in a
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meeting;
n. Shareholder meeting achieved the quorum in the matter decided matters

that were arranged in the article 11,3 (a) if was attended by at least 80
(eighty) percent of all over the share of the company that was
dismissed and stored was full was present or was represented and these
matters it was decided with the voice agreed by at least 80 (eighty)
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percent of all over the company's shareholders who were dismissed
and stored fully;
o. The Shareholder meeting decision was legal if agree to by at least 85%
(eighty-five percent) from the number of legal voices in being in a
meeting (the Article 22 articles 8 Telkomsel statutes);
p. The change in the Statutes including changing the name, the company's
place of residence, extended the company's period, changed capital of
the foundation by reducing or enlarging capital of the company, united
or dispersed the company only could be carried out with the decision
from this unusual Shareholder meeting. Rapat must be represented at
least 85% (eighty-five percent) from the number of shares that was
dismissed by the company and must agree to by at least 85% (eighty-
five percent) the number of legal voices in being in a meeting (the
Article 25 articles 1 Telkomsel Statutes);
85. The structure of the Organisation of the Telkomsel Management was as

follows: --------------
PRESIDENT
DIRECTOR
Directorate Directorate Directorate Directorste of

of Planning & of Commerce of Operations Finance
Development
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Corporate Marketing & Radio Network Business Internal
Planning CRM Engineering & Control Audio
Implementation
Inner Java-Bali
Technology & Produk & Mobile Accounting
Business Data Service Corporate
Incubation
Radio Network Secretary
Engineering &
IT Development Sales Corporate
Implementation
Finance
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Outer Java-Bali
Human
IT Operations & Corporate Account Resources
Services Management Management
Core Network
Engineering
Procurement & Customer
Logistics Service Network Enterprise
Operation Risk
Management
Synergy & Area
Partnership End o End
Network Quality
Project
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Management
3G Group
Regional
Network
Operation
86. That since 2002 till at this time, the position of the director of the trade and
the director of the operation always dinominasikan by SingTel
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Mobile.(Annual report 2002-2006 and BAP Telkomsel on May 2 2007)
87. That for the budget agreement was yearly related capital expenditure must
pass Capex Committee that had a membership of three people who
consisted of two people from Telcom, and one person from SingTel (BAP
SingTel on July 4 2007, BAP SingTel Mobile on July 4 2007, BAP
Telkomsel on July 11 2007). SingTel actively affected Capex Committee
through the staff who was assigned for this matter (BAP Telcom on July
24 2007) and Capex Committee could consult with the team that came
from SingTel, one of them of Mr. Widjaja Suki (BAP SingTel on July 4
2007);
88. Mr. Widjaja Suki helped Capex Committee in the matter to consider the
appropriateness of the proposal capex that was put forward. Mr. Widjaja
Suki in this matter carried out the evaluation towards the parameter that
was used in the proposal capex. In the matter of the mistake paramater was
caused human error, then Mr. Widjaja Suki could at once carry out the
correction, but in the matter of the parameter mistake was caused by the
market situation, then Mr. Widjaja Suki will carry out consultations with
the member Capex Committee that was appointed by SingTel Mobile.
(BAP SingTel Mobile on July 4 2007)
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89. The agreement was for the realisation of the budget given by Capex
Committee each quarter in accordance with the requirement that was put
forward by each department (BAP SingTel Mobile on July 4 2007);
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90. Against annual of budget that was agreed , SingTel assigned his two staffs,
that is Mr. Widjadja Suki and Mr. Quah Kung Yang to monitor his
implementation and give the recommendation to Telkomsel Commissioner
who was appointed by SingTel Mobile. In the implementation of this task,
Mr. Widjaja Suki could communicate directly with Telkomsel
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management staffs in the part business control, in part and that most often
that is with Mr Jaka Susanta (BAP SingTel Mobile on July 4 2007);
91. SingTel also actively gave advice to Telkomsel Commissioner who was
appointed by SingTel Mobile in relation to the efforts point of view and
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business plan of Telkomsel (BAP SingTel on July 4 2007);
92. There is not joint procurement that was carried out by Telkomsel with the
other company that was afiliation with SingTel but was gotten sharing
information with these companies (BAP Telcom on July 24 2007);
93. The summary of the Telkomsel finance achievement was as follows:
TELKOMSEL: FINANCIAL HIGHLIGHTS
(in billion rupiah) 2001 2002 2003 2004 2005 2006

BALANCE SHEETS
Current Assets 1,995 1,856 2,676 3,859 3,048 3,971
Property, Plan and Equipment 5,321 9,034 12,695 14,967 21,993 31,706
Other Assets 143 49 39 723 706 1,624
Total Assets 7,459 10,939 15,410 19,549 25,747 37,301
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Current Liabilities 2,212 1,152 2,790 3,306 6,545 10,588
Other/Long-term Liabilities 27 1,598 2,309 2,365 1,462 3,640
Stockholders' equity 5,220 7,189 10,311 13,878 17,740 23,073
Total Liabilities & Stockholder's 7,459 9,939 15,410 19,549 25,747 37,301
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equity
INCOME STATEMENTS
Operating Revenues (Nets) 4,918 7,573 11,146 14,765 21,133 29,145
Operating Expences (Inc. 1,932 3,444 4,800 6,744 8,772 12,836
Depreciation)
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EBITDA 3,499 5,110 8,026 10,672 15,408 20,737
EBIT 2,986 4,129 6,346 8,021 12,361 16,309
Net Income 2,044 2,787 4,237 5,473 8,647 11,182
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CASH FLOWS
Cash Flows From Operation 2,756 4,517 6,610 8,913 12,892 16,335
Cash Flows From Investing 2,626 4,531 5,311 5,470 8,438 13,144
Activities
Cash Flows From Financing 763 671 475 341 936 2,678
Activities
Devidends 544 818 1,057 1,840 4,616 5,645
Net Cash In/Out Flows 349 161 717 1,262 1,098 224
FINANCIAL RATIOS
EBITDA Margin – gross 1) 57% 54% 58% 58% 59% 59%
EBITDA Margin - net 2) 71% 67% 72% 72% 73% 71%
Net Income Margin 3) 42% 37% 38% 37% 41% 38%
Return on Assets 4) 34% 30% 32% 31% 38% 35%
Return on Equity 5) 47% 45% 48% 45% 55% 55%
Source: Finance Report of Telkomsel
5.5 Concerning Indosat ---------------------------------------------------------------

94. PT. Indosat Tbk was established during 1967 as the PMA company to
serve continuation immediately was international in Indonesia. During
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1980 the Indonesian Government took over the ownership whole of the
PT. Indosat Tbk share and since then PT. Indosat Tbk had operated as
BUMN. In 1994 PT. Indosat go public and registered his share in the
Jakarta Stock Exchange, Surabaya Stock Exchange, and New York Stock
Exchange;
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95. In 2002 the Indonesian Government took divestation ownership of his share
in PT. Indosat of 41, 94% (forty-one point ninety-four percent) to St
Telemedia went through his subsidiary company namely Indonesia
Communication Ltd (ICL). and since that time the PT. Indosat Tbk status
had changed again became the PMA company that was agreed on
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February 7 2003 to by BKPM (the Report on Konsolidasi Indosat Finance
th 2003, 2002, and 2001);
96. Shareholders's composition of PT. Indosat Tbk was as follows:
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Table 19
Shareholders's composition of PT. Indosat
Capital deposited/ placed

Number of Shares
Name of (Rp)
%
Shareholders series Series
Rp 100 Rp 100
A B
Republic of Indonesia
1 776,624,999 100 77.662.499.900 14.58
Government
Indonesia
Communication 0 2,171,250,000 0 217.125.000.000 40.77
Limited
Public 0 2,377,330,500 0 237.733.050.000 44.65
Total 1 5,325,205,500 100 532,520,550.000 100.00
97. In 2003 Satelindo, IM3, and Bimagraha carried out the merger with PT.
Indosat Tbk and afterwards PT. Indosat Tbk became the company that
focussed itself in the business selular;
98. PT. Indosat gave the service in 3 categories, that is: mobile service (Matrix,
Mentari, IM3), telephony service (SLI, Voip Telephony, StarOne), and
multimedia service (IM2 and the Artha Passage);
99. The main product from PT. Indosat Tbk was:
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a. Mentari, GSM Card prepaid for middle class as a target of market;
b. IM3, GSM Card prepaid for student and youth as a target of market;
c. Matrix, GSM Card pasca paid for middle to upper class as a target of
market;
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d. Starone, pre and pasca card fix wireless access based on CDMA;
100. The service scope of PT Indosat Tbk covered all province in Indonesia and
included 410 regencies all over Indonesia;
101. The Share Purchase Agreement between the Government of Indonesia and
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STT on 15 December 2002 stated that: --------------------------------------------
a. Article 5.8 EGM Resolution: The seller is about to use voting rights of
the series of A and B shares in the extraordinary general meeting of
shareholders to support the following matters: -------------------------------
i. To appoint additional director(s) and to appoint or to replace the
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commissioners of the management and the buyer’s appointed
commissioners as its rights stated in Article 3.2 on Shareholder
Agreement.-----------------------------------------------------------------
ii. To amend the document of company organization for exhibiting

the amendments as it stated exhibit E ----------------------------------
iii. To approve principally the establishment of Employee Share

Option Program (ESOP) -------------------------------------------------
102. The Share Purchase Agreement between the Government of Indonesia and
STT on 15 December 2002 stated that: --------------------------------------------
a. The Article 3.1.b: For the period of one year from the date of the
agreement signature, the Minister of State-Owned Company (BUMN)
agrees to use the voting rights of shares as it is instructed in written by
investors: --------------------------------------------------------------------------
i. The agreement of dividend sharing; ------------------------------------

ii. The amendment of the Statutes;-----------------------------------------
iii. The agreement of merger, consolidation and acquisition; -----------
b. Article 3.2.a: The shareholders use their voting rights to elect a

number of members of board of commissioner to make (i) a number of
commissioners of the shareholders’ representatives simple majority
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within the board of commissioner; (ii) the two of the commissioners
are nominated by Minister of State-owned Companies. It is only one
commissioner nominated by the Minister if the shares are remitted, but
it is series A shares; --------------------------------------------------------------
c. Article 3.2.b: The shareholders use their voting rights to elect a
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number of members of board of director to make (i) a number of
directors of the shareholders’ representatives simple majority within;
(ii) the two of the directors are nominated by Minister of State-owned
Companies. It is only one director nominated by the Minister if the
shares are remitted, but it is series A shares ----------------------------------
d. Article 3.3: Any shareholders have absolute rights to replace their own
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nominated director and commissioners and other shareholders vote are
about to approve the replacement. ---------------------------------------------
e. Article 3.5: The Director and Commissioner meeting will be a quorum

only if it is presented by the majority of Director and Commissioner or
at least one Minister’s/investors’ appointed Commissioner or Director ;-
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f. Article 4.1: Investors will not expropriate the shares to the third party
for the period of three years as from the date of the agreement
signature, except;-----------------------------------------------------------------
i. The party are international financial institutions that agree to be

bided by and about to be a party in the agreement, and the form of
the expropriation are mortgage, charge or grant;------------------------
ii. The allowed parties are those of parties agree to be bided by the
agreement. --------------------------------------------------------------------
g. Article 4.2: Minister of the State-Owned Companies is not allowed to

expropriate the outstanding share to the third party for the period of
one year as from the date of the agreement signature -----------------------
h. Article 5.3: The parties will not expropriate the core asset for the
period of three years as from the date of the agreement signature. The
parties will seriously consider the commercial impacts of the
divestment of Lintasarta and IM2 by noticing that Lintasarta and IM2
contribute significantly toward company’s annual revenues; --------------
103. It explains further in the Indosat statutes that the authorities of shareholder
general meeting, Commissioners, Board of Directors and the decision
making procedures are as follow: ---------------------------------------------------
a. Under Article 10.2 of the Indosat Statutes, the Indosat Board of

Directors consists of at least three with one of them appointed as a
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President Director; ---------------------------------------------------------------
b. Under Article 10.3 of the Indosat Statutes, the members of Board of

Directors are elected and dismissed at the shareholder general meeting
with at least 1 (one) member is nominated by the shareholders of series
A; -----------------------------------------------------------------------------------
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c. Under Article 11.7 of the Indosat Statutes, the distribution of duties
and authorities of Board of Directors as well as edifice of the company
shall be approved by Board of Commissioners;------
d. Under Article 12.2 of the Indosat Statutes, the meeting of Board of

directors will be a quorum if it is attended by at least ½ (a half) of
members of the Board of Directors; -------------------------------------------
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e. Under Article 12.4 of the Indosat Statutes, the decisions at Board of
Directors meeting are determined by deliberation to come to terms. If
there is a deadlock, the decision is determined by majority votes. If the
votes are even, the decision are determined by President Director; -------
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f. Under Article 11.3 of the Indosat Statutes, the Board of Director shall
have an agreement from the Board of Commissioners: ---------------------
1. to buy and/or to sell other companies’ shares in stock exchange

higher than those of determined by the Board of Commissioner
(The Amendment of Statutes, dated 30 September 2004 and
approved by Ministry of Justice on 2 December 2004); ----------------
2. to perform an agreement on license, management, and other similar

agreement with other corporations or parties for 1 (one) year or
more;---------------------------------------------------------------------------
3. to buy, to release, to sell, to mortgage, or to cost fixed assets of the

company higher than those of determined by the Board of
Commissioner; ---------------------------------------------------------------
4. not to re-bill for and to write off debt from the book as well as to
procure goods higher than those of determined by the Board of
commissioner; ----------------------------------------------------------------
5. to abide company as guarantor resulted on the financial excessive

reach certain amount stated by board of commissioner; ----------------
6. to borrow or to lend short or middle term debts for non-operational
purposes higher than those of arranged in work schedule and
Company budget that are approved by Board of Commissioners; ----
7. to raise or to release equity capital of the company in other

companies but it does not perform at stock exchange; ------------------
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8. to establish subsidiaries; ----------------------------------------------------
g. Under Article 14.1 of the Indosat Statutes, the Board of Commissioner

consist of at least 3 (three) people with one of them appointed as
President Commissioner;--------------------------------------------------------
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h. The members of Board of Commissioner are appointed and dismissed
by the decision determined at the shareholders general meeting on
condition that at least 1 (one) nominee of Commissioner member is
nominated by the shareholder of series A; ------------------------------------
i. Under Article 16 of the Indosat Statutes, the Board of

Commissioner is obliged;-------------------------------------------------
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1. to pass opinions and suggestion on the Annual Report of
Finance and other important matters during the shareholders
general meeting;-----------------------------------------------------
2. to approve Work Schedule and Company Budget for at least

30 (thirty) days prior to the commencement of company
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fiscal year. In case of the Work Schedule and Company
Budget are not approved over such period of time, the
previous year’s Work Schedule and Company Budget will
be valid; --------------------------------------------------------------
3. to monitor the progress of the company and to report

immediately at the shareholder general meeting along with
its suggestions for the improvement any time the company
is in disadvantages; -------------------------------------------------
4. to pass opinions and suggestions any important problems

concerning company’s management at the shareholder
general meeting;-----------------------------------------------------
5. to suggest an appointment of accountant to audit financial

account of the company to be reported at the shareholder
general meeting;-----------------------------------------------------
6. to perform any other monitoring duties determined at the

shareholder general meeting; --------------------------------------
ii. Under Article 17.3 of the Indosat Statutes, the quorum of Board
of Commissioner meeting shall be at least attended by ½ (a half)
of the members of company’s commissioners; ------------------------
iii. Under Article 17.5 of the Indosat Statutes, the decision on a plan
at the meeting of the Board of Commissioner are determined by
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deliberation to come to terms. In case of the votes are even, the
decisions are determined by majority votes. If the votes are even,
the decision is deemed to be disapproved. The decision on the
personal things are determined by President Commissioner; --------
iv. Under Article 19.3 of the Indosat Statutes, the quorum of
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shareholder general meeting shall be at least attended by ½ (a
half) of the shareholders; -------------------------------------------------
v. Under Article 24.1 of the Indosat Statutes, the decision of a plan

at the shareholder general meeting are valid if they are approved
by majority votes of those in attendance or in representative. In
case of the votes are even, the decision is deemed to be
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disapproved; ----------------------------------------------------------------
vi. Under Article 25.1 of the Indosat Statutes; in case of a merger,

consolidation, and acquisition, the quorum of shareholder general
meeting shall be at least attended by the shareholders of series A
and other shareholders or their representatives that jointly
represent ¾ (three fourth) of the authorized shareholders and
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approved by the shareholders of series A as well as other
shareholders that jointly represent ¾ (three fourth) of the valid
votes at the meeting;-------------------------------------------------------
vii. Under Article 28.1 of the Indosat Statutes, the amendment of the
Statutes shall be determined at the extraordinary shareholder
general meeting that at least attended by 2/3 (two third) of those
in attendance. In case of amendment of the statutes that related to
the right of shareholders of series A, the amendment shall be
approved by the shareholders of series A;------------------------------
viii. Under Article 29.1 of the Indosat Statutes, the provision of

special resolution is also applied in case of the dismiss al and
liquidation;------------------------------------------------------------------
104. Under Article 29.1 of the Indosat Statutes, the provision of special
resolution is also applied in case of the dismissal and liquidation; -------------
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105. After the acquisition of STT, the management edifice of Indosat is as
follow: ----------------------------------------------------------------------------------
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PRESIDENT
DIRECTOR
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DEPUTY
PRESIDENT
DIRECTOR
Jabotabek Regional Marketing Information Network Finance Corporate

Corporate Sales Director Technology Director Director Services
Sales Director Director Director
Director
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Head of Head of West Group Head Group Head IT Group Head Cellular
Network Planning &
Group Head Group Head
Jabotabek Java Region Integrated Infrastructure Engineeering Controlling Human Capital
Management
Region Marketing
Head of Group Head Group Head Cost Group Head Group Head Group
Enterprise Management & Treasury Legal Head
Central Java Busine
Group Group Head Information Contract
Head Region ss
Nation National System Strate
Group Head
al Corporate Operation gy
Card Wireless
Sales Head of East Group Head Cost Group Head Group Head
& Access FTM Network Accounting Regulatory
Chann Java & Bali Planning &
Produks
el Nusra Region Engineeering
Manag
ement Group Head Group
Head
CRM Corpor
Group Head Group Head Group Head Group Head
Operation Project Revenue Property & ate
Wholesale and Group Head Facilities Secret
Development Assurance
Carrier Fixed & MIDI Management ary
Group Relations Head of Produks Group Head
Head Northern
Procur Vas Operation Group Head Group Head Risk
Sumatera Region
ement Cellular NOM & Compliance
Group
Head
Group Head Group Head Group Head Intern
al
National Head of
Vas Produks Billing Group Head FTM Audit
Customer Southern Operation NOM
Group Service Sumatera Region
Head
Strate
gic
Group Head Group Head IT
Devel Mail & Project Group Head
opme Messaging
nt & Transmission
Operati Head of NOM
on
Kalimantan Group Head Group Head IT
Region Gaming & Planning Group Head
Content Jabotabek
Technical Operation
Group Head Group Head

Head of Industry & Network Quality &
Sulampapua Compeitive Surveilance
Region Analysis
106. The diagram shows that the Deputy President Director heads an
operational directorate while the President Director heads directorates of
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finance and corporate service; -------------------------------------------------------
107. That since the changes of the organizational structure, the position of
Deputy of President Director and Director of Finance are always occupied
by the representative of ICL; --------------------------------------------------------
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108. That ICL is in consideration of an investor and Singapore is in
consideration of mastering technology better than Indonesia, the position
of Director of Finance and Director of Information are always occupied by
the representative of ICL (The IOR of Indosat, dated 27 August 2007); ------
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109. Besides the changes mentioned above, there are also changes in
procurement mechanism in Indosat. Prior to the presence of STT, the
procurement process is open tender in which procurement performed by
procurement team of Indosat involving user in determining the
specification. After the presence of STT, the former open is not
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implemented anymore (The Investigation Official Report, dated 22 August
2007); -----------------------------------------------------------------------------------
110. That since STT owns Indosat, the procurement function is under the
control of Deputy President Director that is currently occupied by Khaizad
B. Heerdje (The Investigation Official Report, dated 22 August 2007);-------
111. That prior to the control of Khaizad or under Hasnul Suhaimi as a

President Director, the method of network procurement is non turnkey and
it is performed by local company. Otherwise, Khaizad changes it into
turnkey and it is performed by foreign company (The IOR of Wimbo S
Hardjito, dated 25 September 2007); -----------------------------------------------
112. That Khaizad terminates the development method which previously

performed by Hasnul; it is a factor that make Hasnul resign from its
position as a President Director. The resignation of Hasnul had indicated
that Indosat further controlled by the Deputy of President Director while
the President Director remains to be a figurehead of the company (The
Investigation Official Report, dated 22 August 2007);---------------------------
113. The termination caused the absence of decision on the network installment
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and it lasted in the first nine months of 2006; consequently, Indosat
business activity was running slowly and falling behind to other cellular
telecommunication operators (The IOR of Wimbo S Hardjito, dated 25
September 2007); ---------------------------------------------------------------------
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114. That the postponement of the network istallment is the reason for the 4
(four) Directors, Jhoni Swandy Sjam, Wahyu Widjajadi, S. Wimbo S.
Hardjito and Wityasmoro to meet Lee Theng Kiat (A Commisioner of
Indosat) in Singapore to inform that the postponement of the network
installment is able to inflict financial lost to Indosat. The 4 (four) Directors
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of Indosat also judge that Khaizad is not competent to be a leader of
Indosat (The IOR of Wimbo S Hardjito, dated 25 September 2007); ----------
115. Lee Theng Kiat does not take any action in responding to the information
of the 4 (four) Directors (The IOR of Wimbo S Hardjito, dated 25
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September 2007); ---------------------------------------------------------------------
116. The following is the financial highlights of Indosat: -----------------------------
INDOSAT: FINANCIAL HIGHLIGHTS
(In billion rupiah) 2001 2002 2003 2004 2005 2006

Revenue
Statement
Revenue 19,430.1
5,138.10 6,767.00 8,229.60 11,589.80 12,239.40
0
Financial
3,307.30 4,889.60 5,881.70 7,232.00 7,937.90 8,840.70
Responsibilities
Income from
1,830.80 1,877.40 2,347.90 3,198.10 3,651.90 3,398.70
Operation
Revenue (Load)
175.40 -599.40 -795.00 -876.8 -1,299.20 -1,375.80
Other-Nett
Net income
Association 132.30 72.3 33.80 61.50 0.10 -0.20
Company
Income Before
2,138.40 1,350.20 1,586.70 2,382.80 2,352.80 2,022.70
Tax
Net Income -412.20 -776.50 17.80 -724.60 -697.90 -576.10
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The Profit prior to
Extraordinary
Post, Minority
1,604.
Right to the Nett 1,726.3 573.80 1,658 1.654.9 1,446.60
5
Profit
Subsidiaries and
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Profit Prior to
Acquisition
Extraordinary
4,499.90
Post
Minority Right to
the Loss (Nett)
-273.50 -27.20 -22.50 -25.00 -31.40 -36.50
Profit of
Subsidiaries
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Profit Before
-205.90
Acquisition
Nett Profit 1,452.80 340.70 6,082.00 1,633.20 1,623.50 1,410.10
Subscribed
Capital (in 5,177.50 5,177.50 5,177.50 5,283.50 5,356.20 5,433.90
millions of shares)
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Profit per security
280.60 65.80 1,174.70 313.90 309.00 260.90
(in Rupiah)
Dividend per
112.20 29.20 145.50 154.23
share (in Rupiah)
EBITDA 2,842.40 3,661.70 4,385.90 6,016.70 6,732.10 7,051.90
Balance
Receivable 22,348.7 21,852.2 26,059.2 27,872.5
32,787.10 34,228.70
Balance Amount 0 0 0 0
Nett-Fixed Assets 11,759.3 14,093.1 17,243.2
9,468.90 21,564.80 24,963.00
0 0 0
Working Capital 3,323.90 1,805.30 4,034.50 2,080.30 2,095.60 -1,137.80
Total of 11,370.0 11,285.4 13,872.2 14,523.4
18,296.10 18,826.30
Liabilities 0 0 0 0
Minority Rights 239.00 134.50 147.10 164.50 175.70 200.60
Total of Equity 10,739.7 10,432.3 12,039.9 13,184.6
14,315.30 15,201.70
0 0 0 0
Ratio (%)
Profit to Income 35.63 27.74 28.53 30.66 31.51 27.77
Profit to Total of
17.05 18.01 19.50 24.26 25.51 22.36
Equity
Profit to Total
8.19 8.59 9.01 11.47 11.14 9.93
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Assets
EBITDA Margin 55.32 54.11 53.29 57.69 58.09 57.62
Net Profit Margin 28.28 5.03 73.90 15.66 14.01 11.52
Capital Return 13.53 3.27 50.52 12.39 11.34 9.28
Asset Return
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6.50 1.56 23.34 5.86 4.95 4.12
Financial Ratio
(%)
Current Ratio 160.31 155 217.74 146.3 138.58 83.28
Liability Ratio to
59.17 77.2 86.35 72.03 87.34 75.13
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Total of Equity
Total Liability
Ratio to Total of 50.88 51.64 53.23 52.11 55.8 55.00
Assets
Dividend per
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Share (Rp)
Final 112.24 29.23 145.55 154.23 149.32
Date of Payment 29/07/02 1/8/2003 20/07/04 15/07/05 8/8/2006
Cellular
Prepaid
1,736,06 3,341,07 5,600,88 9,214,66 13,836,04 15,878,78
Subscriber (unit
4 2 2 3 6 0
subscriber)
Postpaid
Subscriber (unit 173,475 241,576 361,562 539,944 676,407 825,859
subscriber)
Total Customer 1,909,53 3,582,64 5,962,44 9,754,60 14,512,45 16,704,63
(unit subscriber) 9 8 4 7 3 9
ARPU Prepaid
359,477 368,330 90,459 78,681 58,054 52,713
(Rp)
ARPU Postpaid
117,542 89,033 338,697 269,647 240,810 194,761
(Rp)
ARPU Blended
148,951 111,817 106,386 89,489 67,113 60,023
(Rp)
Source: Indosat Financial Report
5.6 Concerning Exelcomindo;----------------------------------------------------------------
117. PT. Exelcomindo Pratama (hereinafter referred to as XL) was founded in
November 1995 and came on the cellular telecommunication market in
October 1996.--------------------------------------------------------------------------
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118. Until 31 December 2006, the shareholders of XL are:
a. Indocel Holding Sdn. (Subsidiary Telekom Malaysia) 59.63%; -----------
b. Khazanah Nasional Bhd. 16.81%; ---------------------------------------------
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c. Rajawali Corpora 15.97%; ------------------------------------------------------
d. AIF (Indonesia) Limited 7.38%; -----------------------------------------------
e. Public 0.21%; ---------------------------------------------------------------------
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119. Cellular telecommunication offered by XL is: ------------------------------------
a. Jempol, the prepaid card with the economical tariff for sms and call; ----
b. Bebas, the prepaid card for teenager; ------------------------------------------
c. Xplor, the postpaid card for young executives; ------------------------------
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120. The following is the financial highlights of Exelcomindo: ----------------------
EXCELCOMINDO: FINANCIAL HIGHLIGHT
2000 2001 2002 2003 2004 2005
Gross Revenue 1,330.50 2,073.00 2,483.80 2,625.00 3,133.10 3,790.01

Net Income 1,062.00 1,783.60 2,138.70 2,228.70 2,590.70 3,059.13
Financial 688.3 1,088.00 1,385.70 1,645.30 1,931.90 2,489.07
Responsibilities
EBITDA 708.8 1,210.50 1,444.00 1.457.5 1,622.50 1,735.01
Profit 373.7 695.7 753.00 583.40 658.80 570.06
Profit/(Loss) before -396.1 222.10 1,067.20 590.00 -50.20 -313.23
Tax
Nett Profit/(Loss) -281.4 147.10 743.30 400.70 -50.10 -224.09
Per Share Nett - 64,941 328,162 176,920 -22,120 -37.00
Profit/(Loss) (in 124,232
Rupiah)
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Balance Sheet (in
billion rupiah)
Total Assets 2,632.90 3,895.60 4,746.60 5,514.10 6,474.50 9,353.95
Total Current Assets 155.7 257.7 401.1 888.1 802.7 1,370.85
Total Current Liability 1,112.70 749.7 880 1,089.20 895.9 2,292.22
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Not Current Liability 1,722.70 3,201.30 3,178.70 3,336.20 4,540.00 3,432.42
Equity -202.40 -55.4 687.9 1,088.70 1,038.60 3,629.31
Ratios %
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Selling Growth 84.20 55.8 19.8 5.70 19.4 21.00
Profit Growth 1,035.90 86.2 8.2 -22.50 12.9 -13.90
Nett Profit Growth nm nm 405.3 -46.10 nm nm
Nett Income Margin 79.8 86 86.1 84.90 82.7 80.7
Profit Margin 28.1 33.6 30.3 22.20 21 15
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Nett Profit nm 7.1 29.9 15.30 nm nm
Profit Ratio to Total of 14.2 17.9 15.9 10.60 10.2 6.1
Assets
Profit Ratio to Total of nm nm 109.5 53.60 63.4 15.7
Equity
Current Ratio 14 34.4 45.6 81.50 89.6 59.8
Asset Ratio to Equity nm nm 6.9 5.10 6.2 2.6
(x)
Liability Ratio to nm nm 4.8 3.40 4.3 1.1
Equity (x)
Liability Ratio to 2.4 2.6 2.3 2.60 2.8 2.4
EBITDA (x)
Operational Data
Number of subscribers 766 1,223 1,680 2,944 3,791 6,979
(000)
Prepaid 728 1,184 1,639 2,908 3,743 6,802
Postpaid 38 39 41 36 48 176
ARPU (IDR 000)
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Prepaid 184 172 132 96 65 54
Postpaid 449 455 471 500 517 305
Blended 206 183 142 104 70 60
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The Average of
Monthly Chum Rate
(%)
Prepaid 2.10% 2.50% 2.80% 3.50% 10.00% 5.60%
Postpaid 1.10% 2.00% 1.60% 2.90% 1.80% 0.30%
Number of BTS 514 739 950 1,491 2,357 4,324
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Number of BTS 7 13 15 22 28 42
Number of BTS 5 10 11 12 12 10
Source: Excelcom Financial Report
5.7 Other Facts;---------------------------------------------------------------------------------
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Concerning interconnection--------------------------------------------------------------------
121. That the current degree of competition of the cellular industry is less
caused by incumbent operators, in the condition that is able to threat
interconnection relationship to the operator which cut the degree of tariff
(The IOR of Witness: Telecommunication Society, dated 25 September
2007); -----------------------------------------------------------------------------------
122. That although since 2007 the regime of interconnection has been based on
tariff, to date there is no inter-operators PKS that cover the agreement (The
IOR of Witness: Telecommunication Society, dated 25 September 2007); ---
123. That in reality, the operators that search for interconnection do not have
balanced bargaining position with incumbent operator. Consequently, they
have to follow the will of incumbent operator to avoid disconnecting of the
interconnection (The IOR of Witness: Telecommunication Society, dated
25 September 2007). It used to be an interconnection resistance to a new
arrival operator by Telkomsel. Telkomsel requires to meet a traffic for 48
erl that is hard to be accomplished by other operators (The IOR of
Witness: Hutchinson 21 June 2007);-----------------------------------------------
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124. In one of an interconnection agreement between Telkomsel and one of
operators, it is arranged the loading expense, claim, and payment. They are
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mentioned further in the paragraph of the Article that: --------------------------
“The tariff charged against the users of SMS services is subject to the
authority of any party. Therefore, operators can fix their own tariff by
condition that the tariff charged against the users by operator X shall not be
lower than those of Telkomsel’s. As from tariff notification provided by
Telkomsel, the tariff adjustment will be made by Operator X at the furthest
of 3 (three) months, as a time for dissemination in case of Telkomsel
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amends its tariff.” ---------------------------------------------------------------------
However, the provision is revoked after the agreement is amended;----------

125. Another constraint are conditions that require the presence of third party,
appointed by Telkomsel, for developing interconnection link.
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Consequently, the significant cost shall be paid by interconnection
searcher. The ownership and operating rights of the link also belong to the
third party and Telkomsel rather than interconnection searchers. (The IOR
of Witness: Hutchinson , 21 June 2007);------------------------------------------
Concerning Tariff -------------------------------------------------------------------------------
126. Related to the Indonesian purchasing power, per capita income is only
USD 700, the tariff of cellular phone in Indonesia is high in which it
consumes 10-20% of the income (The IOR of Witness:
Telecommunication Society, dated 25 September 2007); -----------------------
127. That incumbent operators are able to cut the prevailing tariff to 50% (The
IOR of Witness: Telecommunication Society, dated 25 September 2007); ---
128. That IDR 100 for tariff of SMS remains to give reasonable benefit to
operators (The IOR of Witness: Telecommunication Society, dated 25
September 2007); ---------------------------------------------------------------------
129. That the vote tariff for co-operator can be cut off 25% (The IOR of
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Witness: Telecommunication Society, dated 25 September 2007); ------------
130. That telecommunication operator charged upon the costumers the

investment cost that lead to high tariff. In fact, operators can charge upon
the vendors rather than customers (The IOR of Witness:
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Telecommunication Society, dated 25 September 2007); -----------------------
131. The report of Morgan Stanley Research Asia/Pacific on

telecommunication on 21 February 2006 showed that per minute
telecommunication tariff in Indonesia is higher compared to other
emerging markets, and it is only lower than Australia, as seen in the
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following graphic:---------------------------------------------------------------------
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Concerning EBITDA ----------------------------------------------------------------------------
132. The report also states that among operators in Asia/Pacific, Telkomsel
enjoys EBITDA margin higher than other operators as it is seen in the
following graphic:---------------------------------------------------------------------
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Concerning the comparison with other operators in other countries---------------------
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133. The comparison of the structure of telecommunication industry and the
performance of finance in Indonesia and other countries are as follow: -------
Market Share of Top
Weighted EBITDA
Range Of EBITDA
Tariff Regulation
Country
Number of Ops
Monthly Chum
ARPU (USD)
Penetration
2 Ops
HHI
Indonesia 79% 31% 9 3.337 8.6% 7.0 44% to 60% 65%

Thailand 79% 70% 4 3.658 2.9% 8.0 21% to 41% 36%
Philippines 95% 52% 3 4.170 3.1% 5.3 68% to 78% 71%
Malaysia 72% 76% 3 3.436 3.7% 18.7 43% to 54% 51%
Pakistan 65% 37% 6 4.710 4.1% 4.0 NA 40%
India 49% 14% 6 2.096 4.0% 8.9 NA 39%
Bangladesh 76% 16% 6 3.739 2.1% 3.6 31% to 53% 42%
China 96% 37% 3 5.194 2.7% 9.5 35% to 52% 47%
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Source: Merrill Lynch, June 2007
ANALYSIS ; -----------------------------------------------------------------------------------------
Legal;--------------------------------------------------------------------------------------------------
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Concerning the Jurisdiction of KPPU
147. KPPU is established to supervise the implementation of the Law No.5/1999 as it
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stated in Article 30 of the Law No.5/1999. The duties and authorities of KPPU is
elucidated further in Article 35 and 36 of the Law No.5/1999. Therefore, KPPU
acts along with its duties and assignments as it regulated by the Law No.5/1999; ---
148. The subject of the Law No.5/1999 is business actor as it defined in Article 1.5 of
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the Law No.5/1999. KPPU can ask information not only the business actor that
become the subject of the regulation of the Law No.5/1999 but also to the parties
that are not qualified as business actors such as government and business
association. 23. -----------------------------------------------------------------------------------
149. The authorities of KPPU imposed toward Temasek Holdings, STT, SingTel ,
STTC, SingTel Mobile, AMHC, AMH, ICL and ICPL (Temasek Group) depend
on whether Temasek Group is a business actor qualified as it is stipulation in
Article 1. 5 of the Law No.5/1999. The following is the analysis to the
accomplishment of substance of Article 1.5 of the Law No.5/1999 to Temasek
Business Group;--------------------------------------------------------------------------------
150. Article 1.5 of the Law No.5/1999 defines business actor as follows: ------------------
“Any individuals or corporations, in the form of corporate body or non

corporate body , are established and domiciled or performing activities within
23
See Article 36.f and 36.h of the Law No.5/1999
the territory of jurisdiction of the Republic of Indonesia, and; independently or
jointly by an agreement perform any business activities.” ----------------------------
151. In order to recognize whether Temasek, STT, STTC, AMHC, AMH, ICL, ICPL,
SingTel , SingTel Mobile (hereinafter referred to as the Temasek Group) are
categorized as business actors or not, the accomplishment of the substances of
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Article 1.5 of the Law No. 5/1999 shall be proved: --------------------------------------
a. The substance of ”any individuals or corporations” ---------------------------------

That Temasek Group, based on its Statutes, is corporation; therefore, this
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substance is accomplished; --------------------------------------------------------------
b. The substance of ”in the form of body or non corporate body ” -------------------
Temasek Group is a corporate body and established under Singaporean law
not Indonesian law. This substance is an alternative substance in which
Temasek Group accomplishes the substance of non corporate body ; -------------
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c. The substance of ”established and domiciled or performing activities within
the territory of jurisdiction of the Republic of Indonesia” ---------------------------
That the Group is established and domiciled in Singapore, but in its capacity
as Business Group, it performs activities within the territory of jurisdiction of
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the Republic Indonesia as it is elucidated as follows: --------------------------------
1. The understanding of business actor in Article 1.5 of the Law No.5/1999

employ functional approach that emphasize on an economic activity
rather than legal 24. In line with such an approach, the body of corporate
is considered to be a material in determining a business actor;---------------
2. The approach is employed in the theory of Single Economic Entity
Doctrine, seeing the relationship between holding company and its
subsidiaries, in which subsidiaries do not have independency in
determining company policy direction as a unity of economic entity. 25
The degree of the independencies of the subsidiaries can be seen from
any factors such as the control of holding company toward the
24
Knud Hansen et al., Undang-undang Larangan Praktek Monopoli danPersaingan Usaha Tidak Sehat (The Law
on the Prohibition of Monopolistic Practices and Unfair Competition)n , Katalis, Jakarta, 2002, page 50
25
See Alison Jones and Brenda Sufrin, EC Competition Law, Text, Cases, and Materials, Oxford University Press,
New York, 2004 page 123
management of subsidiaries, the benefit taken by holding company that
are contributed by the subsidiaries, and the pursuance of the subsidiaries
to the policies of holding company, on marketing and investment as
examples 26; --------------------------------------------------------------------------
3. The consequence of the implementation of Single Economic Entity is
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that a business actor can be asked for its responsibility over the conducts
of other business actors within a unity of economic entity although it is
performed in the outside of a state’s jurisdiction of a business actor.
Therefore the competition law is categorized as extraterritorial 27; --------
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4. The consideration of part “c” in the Law No.5/1999 stresses that anyone
who perform business activity in Indonesia shall be in fair competition.
As a general principle of a competition law, the Law No.5/1999 is vested
with jurisdiction over a competition condition within the territory of the
Republic of Indonesia, without any distinction to whom and where the
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business actor causes impacts to the competition; -----------------------------
5. The expressions of “that perform an activity” or “that perform a business
activity” do not infer that a business actor shall be in the relevant market
. A corporation can perform a business activity in other country by
establishing a company or acquiring other existing companies in a
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country without directly perform business activity in the relevant market
of the country. In other word, a business actor may influence competition
condition although it is absence in the relevant market ; ----------------------
6. The perspective is seen in the body of the Law No.5/1999 that the
terminology of “a business actor” or “a group of business actor” are
used frequently in its Articles. According to Knud Hansen, et.al., the
definition of business actor is 28: --------------------------------------------------
Some independent corporations that are joined into an independent

economic unity. The independent corporations are under one
control, appearing outside as a holding company that make plans
standard for its subsidiaries; ------------------------------------------------
26
Ibid., page 135
27
Single Economic Entity Doctrine becomes a basic of European Community to implement competition law to the
business actor in the outside of the regions. EC, See Alison Jones and Brenda Sufrin, op.cit page 126
28
Knud Hansen et.al.,op.cit, page 52
7. That from the fact founded, Indosat and Telkomsel are controlled by
Temasek through its subsidiaries. The control of Temasek is possible
because Temasek is not a passive investor of SingTel and STT as
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SingTel and STT to Telkomsel and Indosat. Passive investor is defined
as investor that has no voting rights over its shares, has no
representatives in the management of the company, give no directives
for the company policies, no influences to company management, has no
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access to sensitive information of the company. 29 In European Union,
even a passive investment is claimed to be able to reduce competition,
especially in the concentrated market, and to infringe competition 30;-------
8. The control occurs due to the position of Temasek as a Holding
Company of its subsidiaries. Holding Company concentrates the
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ownership of shares in order to influence its specific subsidiaries or
31
branches aiming at controlling them ; ------------------------------------------
9. From the perspective of investment, Temasek Group is a foreign
investment in Indosat and Telkomsel. Under Article 1.1 of the Law No.
25/ 2007 on Investment, the definition of investment is:----------------------
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any investment activity, foreign or domestic investment, that perform
business activity in the territory of the Republic of Indonesia: ----------
10. Article 1.3 further defines that foreign investment is: ------------------------
an investment activity to perform business activity in the territory of

the Republic of Indonesia that is conducted in a whole by foreign
investors or jointly with domestic investors. -------------------------------
11. Referring to the provision, the investment of Temasek Group aims at
performing business activity in the territory of the Republic of Indonesia.
Analytically, the substance is accomplished ------------------------------------
d. The substance of ”independently of jointly by agreement” --------------------------
29
See Jon B. Dubrow, Challenging The Economic Incentives Analysis of Competitive Effects in Acquisitions of
Passive Minority Equity Interests, Antitrust Law journal, 2001, page 120-121
30
See Ariel Ezrachi and David Gilo, EC Competition Law and The Regulation of Passive Investment Among
Competitiors, Oxford Journal of Legal Studies, page 329
31
See Hasim Purba, A Review to Holding Company, Trust, Cartel and Concern, http://www. www.library.usu.ac.id
Temasek, as a business group, together by agreement with other parties
performs business activity in the territory of the Republic of Indonesia.
Temasek Group, along with other shareholders, control Indosat that their
rights and duties are arranged in the Statutes of Indosat. It also occurs to
Telkomsel, in which Temasek Group along with other shareholders, control
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Telkomsel that their rights and duties are arranged in the Statutes of
Telkomsel. Thereby, the substance has been accomplished by Temasek Group:
e. The substance ”performing any business activity in the field of economy”--------

Telkomsel is the biggest cellular operator in Indonesia while Indosat owns
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various business unit in the sector of telecommunication technology in
Indonesia, such as telephony, cellular services, and multimedia. Thereby,
Temasek Group has accomplished this substance. -----------------------------------
The Definition of Majority Shares; -------------------------------------------------------------
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152. Under the provision of Article 46 of the Law No.1/1995 on the Limited
32
Company , share is classified into some variants with the different rights one to
another. Article 27 of the Law No.5/1999 does not explain kind of share within the
term of “majority shares”. Therefore, the definition of majority shares in Article
27 of the Law No.5/1999 needs to be interpreted further 33;------------------------------
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Grammatical Interpretation;---------------------------------------------------------------------
153. According to Indonesian Completed Dictionary (KBBI); the third edition,

National Education Department, Balai Pustaka, Jakarta, 2005; share is (1) Part,
take part; stock. 2. Title deed of the ownership of company’s part of shares which
gives dividend and other beneficial rights on the basis of the amount of paid up
32
The detail of Article 46 of the Law on Limited Company is:
(1)The Statutes states 1 (one) classification of share or more.
(2)Any share in the similar classification provides the same rights to its shareholders.
(3)In case of 1 (one) classification of share, the Statutes determines 1 (one) classification as an ordinary share.
(4)Other than classification of share as it mentioned in paragraph 3, 1 (one) classification of share or more can be
determined in the Statutes.
a. With the exceptional of vote right, conditional, limited, or without vote right;
b. Those that are revocable or changed with other classification of share over a particular period;
c. Those that give rights to its holders to receive dividend accumulatively or non accumulatively; and or,
d. Those that give rights to its holders to receive dividend and after liquidation
33
Particularly, those related to the company which its shares are tradable and fluctuant daily in the stock exchange.
The need of interpretation of the term ”majority share” is suggested by Knud Hansen et.al., in the book “Undang-
undang Larangan Praktek Monopoli and Persaingan Usaha Tidak Sehat (The Law on the Prohibition of Monopoly
Practice and Unfair Competition)”, Katalis, Jakarta, 2002, page 352.
capital; 3. rights owned by individual (shareholders) over a company due to paid
up capital 34; -------------------------------------------------------------------------------------
154. KBBI does not explain the definition of majority share but only the word majority,
that a numbers of people who show particular characters on the basis of specific
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criteria are greater than those who do not 35;------------------------------------------------
155. Based on the combined definition of the words share and majority as it is defined
in KBBI, majority share is an evidence of ownership of limited company’s capital
that are greater in number and show particular characters on the basis of specific
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criteria than those that do not. The definition remains to be unclear in its
interpretation due to the definition of majority in KBBI refer only to people and to
the indefinite phrase “specific criteria”;----------------------------------------------------
156. In Black’s Law Dictionary, Shareholder is “one who owns or holds a shares in a
company, esp. a corporation” 36 and majority shareholder is “a shareholder who
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owns or controls more than half the corporation’s stock” 37; -----------------------------
157. According to Black’s Law Dictionary, the definition of majority shareholder is a

shareholder who owns or controls more than half the corporation’s stock. Such a
definition is too limited if there is more than classification of share in a company; --
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158. If the definition of Black’s Law Dictionary is employed to interpret majority share
in Article 27 of the Law No.5/1999, it will be simply biased by issuing more than
50% without vote right shares to be provided for other parties, while the rights to
control the company are on the less than 50% of extraordinary issued shares or
even only on one share; -----------------------------------------------------------------------
159. Therefore, other interpretations of “majority share” as it mentioned in Article 27

the Law No.5/1999 is more than just a linguistic interpretation; ------------------------
Systematic Interpretation; ------------------------------------------------------------------------

160. The term “share” is also found in the Law No.1/1995 on Limited Company. 38 The
Law defined structures of a limited company, there are shareholder general
34
Kamus Besar Bahasa Indonesia Edisi Ketiga (The Third Edition of the Completed Indonesian Dictionary,
Departemen Pendidikan Nasional (Department of National Education), Balai Pustaka, Jakarta, 2005 page 977
35
Ibid. page 725
36
Bryan A. Garner, Black’s Law Dictionary, Seventh Edition, page 1380
37
Ibid. page 1381
meeting, 39 Board of Commissioner 40, and Management 41. The supreme decision
maker in a company is a shareholder general meeting. The owner of a company
gives a company directive policies that further implemented by Management
under the supervision of Board of Commissioner in its implementation: --------------
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161. Based on the regime of “one share one vote” 42, a decision in shareholder general
meeting can be achieved by simple majority (the votes is to 50%). Thereby, the
control over a company is possible if a business actor owns to 50% of the shares;---
162. In the case of no shareholder owns to 50% of its shares in a company, there will be
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no de jure control. De facto, the bargaining position of the biggest shareholders are
stronger than the other shareholders; therefore, the smaller ones tend to follow the
wills of the biggest; ----------------------------------------------------------------------------
163. Therefore, in the position as it mentioned in number 16, the company majority is
understood as the biggest shareholders in a company. The percentage of share
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ownership is not a criterion in mentioning a company majority , but its distribution
of share ownership; ----------------------------------------------------------------------------
164. In details, the Law on Limited Company states the need of majority shares for
making decision to specific cases, the two third of majority shares for Statutes
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amendment 43 and three forth for business combination, merger, taking over,
dismissal and bankruptcy 44; ------------------------------------------------------------------
165. Regarding to the decision making for problems as it mentioned in number 18, the
share ownership of above 25% is significant because it is able to veto the
decisions in shareholder general meeting (RUPS). It shows that no matter how
much are the shares owned by other shareholders as long as there are shareholders
with its ownership more than 25%, the shareholders are considered to be majority
shares; -------------------------------------------------------------------------------------------
38
Although the latest Law on Limited Company is available, the Law No.1/1995 is still become a reference
because the infringement was conducted in time of the Law No.1/1995 is still valid.
39
Article 1 paragraph (3) of the Law No.1/1995
40
41
42
43
Article 75 paragraph (1) of the Law No.1/ 1995
44
Article 76 of the Law No.1/ 1995
166. The elucidation of shareholders’ votes, as it mentioned in number 15 to 19, shall
be assumed that the condition is normal in that there is no deal among
shareholders to use their votes in shareholder general meeting; -------------------------
Derivative Interpretation; ------------------------------------------------------------------------
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167. According to memory of elucidation, the comprehensive elucidation on majority
shares is not provided, particularly during elucidating Article 27 of the Law
No.5/1999. The memory of elucidation explains nothing to the term “majority
shares” during the arrangement of the Law No.5/1999; ----------------------------------
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The Interpretation of Teleology;---------------------------------------------------------------
168. The definition of majority shares shall be seen on the basis of its social aims. The
aims of the arrangement of the Law No.5/1999 are those mentioned in the
consideration of the Law 45 and Article 3 46. The considerations and the aims of the
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Law No.5/1999 are to avoid the concentration of economic power in the hand of
47
certain business actors ; ---------------------------------------------------------------------
45
The consideration of the Law No.5/1999 is:
a. that the development of economy shall be directed to the establishment of society’s wealth on the basis of
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Pancasila (The five basic principles of the Republic of Indonesia) and the Constitution of 1945;
b. that the democracy economy requires an equal chance of the citizen to participate in the production
process and distribution of goods and/or services fairly, effectively, and efficiently in order to boost
economic growth and normal market operation;
c. that anyone who perform business in Indonesia shall compete fairly in order to avoid the concentration of
economic power to certain business actor by considering the convention ratified by the Republic of
Indonesia over international agreements;
d. that to actualize to what it is mentioned in Article a, b, and c; the Law on the Prohibition of Monopoly
Practice and Unfair Competition is arranged based on the initiative proposal of the House of
Representative;
46
Article 3 of the Law No. 5/1999 states that the objectives of the Law arrangement is to:
a. keep public interest and to boost national economic efficiency as one of efforts to increase people’s
wealth;
b. to accomplish conducive business climate through the regulation of fair competition for guaranteeing a
certainty to perform business fairly for big, middle and small business actors;
c. to avoid monopoly practice and/or unfair competition conducted by business actor; and
d. to establish effectiveness and efficiency of business activity.

47
See Article c of the consideration of the Law No.5/ 1999 and Article 3.c of the Law No. 5/1999 juncto Article
1.2 of the Law No.5/1999 that elucidate that monopoly practice also requires a concentration of economic power.
169. Article 27 of the Law No.5/1999 is issued as a model to support the aims. The
Article states that it is forbidden to be a majority shares ownership in a number of
companies that operate in the same market if it leads to the control of to 50% of
market share s 48; -------------------------------------------------------------------------------
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170. The concentration of economic power as it mentioned in number 2 above is
realized by the centralization of economic decision making in the hand of one
business actor. A decision is achieved effectively if there is a real control of
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business actor over a company that further perform the decisions. From the
perspective of Article 27 of the Law No.5/1999, such companies are deemed to
control market share to 50% so that a control conducted by a business actor will
impact to the relevant market ; ---------------------------------------------------------------
171. Thereby, the centralization of economic decision is accomplished when the control
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over some companies is centralized in the hand of one party and under the context
of Article 27 The Law No.5/1999 it is interpreted as “majority shares.”;-------------
Majority Shares in Others Laws
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172. The Law No.19/2000 on the Amendments of the Law No.19/1997 on the
Imposing Bill for Tax Collection, in its elucidation mentions “majority shares” but
not define majority shares. The elucidation of Article 10 paragraph (4.a) define
that: ----------------------------------------------------------------------------------------------
“Commissioner is commonly known as Board of Commissioner and its

members are called member of commissioner. The specific shareholders are
controlling shareholders or majority shareholders of a public limited
company and the whole of shareholders of limited company.” ----------------------
48
The complete statement of Article 27 of the Law No.5/1999 is:
A business actor is not allowed to own majority shares in some companies that perform similar business activities
at the similar relevant market if such ownership causes:
a. a business actor or a group of business actor control to 50% (fifty percent) of a market share of one kind
of certain goods or services.
b. two or three business actors or a group of business actor that control to 75% (seventy five percent) of a
market share of one kind of certain goods or services.
173. There is no other legislations in Indonesia which defines majority share and some
existing laws defines only primary share or majority shares as it mentions below;---
174. The regulation of BAPEPAM No. IX.H.1 on the Taking Over of public limited
company mentions that:-----------------------------------------------------------------------
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1) A party which possess 25% (twenty five percent) or more, unless the party
is able to prove that it does not control public limited company; or ------------
2) A party which is capable, directly or indirectly, to control public limited

company by:-----------------------------------------------------------------------------
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a) Establishing the appointment and the dismiss all of directors of
commissioner; or -------------------------------------------------------------------
b) Amending the Statutes of Public Limited Company --------------------------
175. The regulation of Central Bank of Indonesia No.8/16/PBI/2006 on Single
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Ownership in Indonesian Banking defines Controlling Shareholders as a corporate
body and/or individual and/or a group of business that:
-
a. Possess 25% (twenty five percent) or more out of shares issued by Bank and
have voting rights-----------------------------------------------------------------------
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b. Possess 25% (twenty five percent) or more out of shares issued by Bank and
have voting rights but it can be proved of controlling a Bank directly or
indirectly. --------------------------------------------------------------------------------
Practices in Some Countries ----------------------------------------------------------------------

176. In other countries, the cross ownership by one business actor is not regulated
specifically. The regulation of the share ownership is generally part of merger
analysis and acquisition which impact negatively to competition. The merger
exists when the first company acquires certain quantity of second company’s
shares and the impact of competition caused by the merger shall be further
analyzed; ----------------------------------------------------------------------------------------
177. In European Union, the percentages of acquired share are not relevant because the
focal of merger analysis is the inception of concentration49. The regulation of
merger in European Union states that concentration exists due to the taking over of
a control 50. A control is known as any possibilities of performing decisive
influence within a company 51. Therefore, European Union merger regime needs
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no verification that the decisive influence is performed or not 52;-----------------------
178. A concentration exists in two ways: de jure and de facto. De jure concentration
exists if a company takes over voting rights majority of other company (positive
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control). In case of the taking over of voting rights is minority shares, the minority
shareholders is able to preclude a proposal needed to be endorsed by super
majority shareholders. Therefore, the taking over of minority shares also have a
control over the taken over-company (negative control) 53; ------------------------------
179. De facto concentration happens if minority shareholders, referring to the presence
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of shareholders at the shareholder general meeting of the previous years, owns
54
majority shares at the shareholder general meeting ; ------------------------------------
180. In European Union, the share acquisition that does not influence the control
change (passive investments) to a company of its competitor is also regulated in its
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competition due to the possibility of creating unfair competition in that market55;---
181. In UK, the merger happened if two companies becomes one because it is
performed under one ownership and control 56. A control is defined as an ability to:
(i) control directly or indirectly (ii) to influence substantially company policies
49
See recital 20 EC Merger Regulation that states the concept of concentration in relation with activities that
creating permanent changes to a market structure. Further, Article 31(1)(b) ECMR states that the inception of
concentration is caused by the taking over of control.
50
Article 31(1)(b) ECMR
51
Article 31(2) ECMR
52
See Commission Consolidated Jurisdictional Notice Under Council Regulation (EC) No.139/2004 on the Control
of Concentration Between Undertakings (“ EC Consolidated Jurisdictional Notice”), par. 16
53
See EC Consolidated Jurisdictional Notice, par. 56-58
54
See EC Consolidated Jurisdictional Notice, par. 59-60
55
The regulation on passive investment is detailed by Ariel Ezrachi and David Gilo in their article “EC
Competition Law and The Regulation of Passive Investment Among Competitors”, Oxford Journal of Legal
Studies, 2006
56
A. Niger Parr, Roger J. Finbow, and Matthew J. Hughes, UK Merger Control: Law and Practice, Second Edition,
Sweet & Maxwell, London, 2005, page 22
(without any controlling interests to the company) and based on the definition,
three levels of controlling are known, there are 57:-----------------------------------------
a. Controlling interest (de jure control);---------------------------------------------------
b. Ability to control Policy (de facto control);--------------------------------------------
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c. Ability to influence policies materially (material influence);------------------------
182. The control of merger in UK similar to those of European Union does not need
proof that the control has already been performed or even shown to perform 58. ------
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183. The controlling interest (de jure control) is widely understood as an ownership of
more than 50% of shares of company’s voting rights, so that enabling shareholders
to perform decisions on the basis of common majority 59. In case of vetoing
decisions that need an agreement of specific majority, the controlling interest
owned by one shareholder does not block other shareholders to own a control over
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the company 60; ---------------------------------------------------------------------------------
184. The ability to control policies (de facto control) is interpreted by competition
agency in UK by referring to two situations 61:-------------------------------------------
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a. In case of the shareholders are able to veto decisions that need an agreement
of supra majority (negative control) ----------------------------------------------------
b. In case of an entity is known vividly as company majority, for example the

policy of an experienced investor in his/her industry, the policy will be most
certainly implemented in anyway. ------------------------------------------------------
185. In UK, the ability to influence policy materially (material influence) is not defined
clearly by competition agency; consequently it should be analyzed case by case.
The competition agency is to see factors that cause material influence such as
shareholder distribution, the pattern of presence and vote-given at the shareholder
57
See Ibid. page 23
58
See Ibid. page 23
59
See Ibid. page 24
60
If “A” owns 51% of shares in a company and “B” owns 25% of shares in the same company so that it is able to
block the decision of specific majority, it is most certainly that “B” has material influence over the company. See
Ibid. page 24
61
See Ibid. page 24
general meeting, the existence of special vote or veto authority owned by specific
shareholders and extraordinary stipulation stated in the Statutes that enabling to
influence company policies 62;----------------------------------------------------------------
186. Usually, competition agency in UK considers 25% voting rights ownership that
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has ability to influence materially (material influence) over the company policies,
although the rest of voting rights are owned only by one party 63; ------------------
187. In United States, Article 7 Clayton Act regulates not only share acquisition but
also an acquisition of other companies’ shares that potentially lessen a competition
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or create monopoly. 64 Article 7 Clayton Act give an exemption to the acquisition
for investment purpose only. Share acquisition intended to perform monopoly
practice is defined in the case of Crane Co. V. The Anaconda Co. 65 : (1) Crane
cannot take over more than 22,6% of Anaconda’s shares (2) Crane does not have
representatives in the management of Anaconda, and (3) Crane is about to
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comply with Article 7 Clayton Act by trying not to reduce competition; -------------
188. In other case, US Department of Justice (“DOJ”) forestall the take over of 19%
Columbia Picture’s shares by Tracinda. Tracinda is owned in whole by Kirk
Kerkorian, Tracinda and Kirk Kerkorian owned jointly 48% of MGM’s shares.
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MGM and Columbia Picture compete each other and operate in the similar
relevant market . Prior to the takeover of 19% Columbia Picture’s shares by
Tracinda, Kirk Kerkorian has already own 5% of Columbia Picture’s shares.
Finally, the court permits to a plan of the takeover on the basis of the shareholder
agreement of Columbia Picture that not allow Tracinda to control Columbia
Picture and to influence management of Colombia Picture, such an acquisition
therefore, is for investment purpose 66; ------------------------------------------------------
189. In addition to the above litigation, DOJ achieves Consent Order in some share
transaction respectively as follow 67:--------------------------------------------------------
62
See Ibid. page 25
63
See Ibid. page 25
64
See Jon B. Dubrow, op.cit, page 116
65
See Ibid. page 117
66
See Ibid. page 118
67
See Ibid. page 119 to 126
- Rockwell/Serck. Rockwell, a company with the market share of 80% in the
United States, purchases 29.7% shares of Serck, its main world competitor and
is about to enter the United States. The DOJ fights against the transaction and
consent order is finally achieved with Rockwell to divest its shares to Serck
for four years period of time. Within such period, Rockwell enact its shares
ownership in Serck as a passive investor by not using its voting rights, not
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placing its representatives in management, and not keeping in touch with
Serck to give policy directives.----------------------------------------------------------
- Gillette/Wilkinson Sword. Gillette agrees to purchase brand and assets of

Wilkinson Sword and take over 23% shares of Eemland, a company that
control Wilkinson Sword worldwide. The DOJ fights against the plan and
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consent order is achieved: Gillete cancels its plan to purchase Wilkinson
Sword but is allowed to own 23% of Eemland’s shares with the condition that
Gillete is not allowed to influence company policies, to nominate
Eemland’s directors or to have Gillette’s directors or management to
assist Eemland in whatever capacity it is.-------------------------------------------
- US West/Continental Cable Group. US West agrees to purchase Continental.
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At the time of agreement, Continental owns 20% shares of Teleport, two
directors in Teleport, and access to confidential information of Teleport.
Teleport is a competitor of US West in the United States. At the time of
consent order achieved, the ownership of Continental in Teleport reduce to
11% and withdraw its directors in Teleport. The consent order is achieved and
US West is obliged to divest its share in Teleport within two years to come
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and in that period US West is not allowed to appoint directors for Teleport
or to participate in director’s meeting or to access sensitive company’s
information.-------------------------------------------------------------------------------
- AT&T/TCI. TCI owns 24% shares of Sprint PCS, a company that competes
with AT&T in wireless communication service. AT&T intends to acquire TCI
in whole but it is considered by the DOJ to reduce competition in the market.
The DOJ finally achieves consent order with AT&T that is willing to release
its ownership in Sprint PCS.-------------------------------------------------------------
Majority Share as a Controller; -----------------------------------------------------------------
190. Based on the description above, the closest meaning of the definition of “majority
share” to interpret Article 27 of the Law No. 5/1995 is a control possessed by a
business actor over other business actors; --------------------------------------------------
191. From the perspective of its values, there is no absolute value that can be counted
to determine the availability of a control. The share ownership with the voting
rights to 50% is almost certainly to give a control to its owner (positive control).
The share ownership under 50% and to 25% is almost certainly to give an ability
to its owner to defend against strategic decisions that need majority agreement
(negative control). Therefore, the share ownership of to 25% or more in one
company also gives significant control over the company, while those with the
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share ownership under 25% does not mean that it automatically has no control
over the company because certain factors need to be taken into account to know
whether such shareholders own decisive influence (EU’s term) of material
influence (UK’s term) over company policies. The influence toward company
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policy shows that such shareholders are able to control the company although their
shares are not controlling shares. ------------------------------------------------------------
Temasek as a Controller in Telkomsel and Indosat -----------------------------------------
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192. Based on the accumulated facts, Temasek through its subsidiaries owns 35% of
Telkomsel shares which have rights to nominate directors and commissioners, as
well as an authority to determine company policy directives especially on budget
endorsement through and to veto general meeting decision on Statutes
amendment, to buy back company shares, to merger, to take over, to dismiss and
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to liquidate a company; -----------------------------------------------------------------------
193. It occurs as well in Indosat, Temasek through its subsidiaries owns 41.94% of
Telkomsel shares which have rights to nominate directors and commissioners, as
well as an authority to determine company policy directives of Indosat. The other
shareholders are the Government of Indonesia 15% and public 43.06%. The shares
are sold in Indonesian and American stock exchanges that always be changing
ownership, therefore, it is almost impossible for the shareholders to perform
together as a result Temasek remains to become an active majority (positive
control) in Indosat;-----------------------------------------------------------------------------
194. Thereby, Temasek through its subsidiaries has a control over Telkomsel and Indosat.------
Economy----------------------------------------------------------------------------------------------
Analysis Basis ;--------------------------------------------------------------------------------------

195. Cross-ownership gives not only direct impact to ownership changing structure but
also to industrial changing structure in which a company is located. In order to
count whether a cross-ownership that has been being analyzed gives a negative
impact to competition or not, competition authority usually observes the changes
of industrial concentration before and after an occurrence of cross-ownership. If
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the level of industrial structure is getting concentrated after cross-ownership, it
indicates that the conduct of cross-ownership gives negative impact to
competition; ------------------------------------------------------------------------------------
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196. It is assumed that a level of industrial concentration indicates market power of a
business actor in that industry. The acceleration of market power eases business
actor fixing tariff (tariff maker); -------------------------------------------------------------
197. Whether business actor uses or not its owned market power can be indicated by:----
i. its high selling price product; ----------------------------------------------------
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ii. its relativity with substitution product; -----------------------------------------
iii. its relativity with production costs;----------------------------------------------
iv. its high profit margin gained by business actor in the relevant market; ----
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198. The negative final impact of cross-ownership to competition is a disadvantage of
costumer or known as customer loss. Customer loss occurs when a selling price
of product is higher than those ought to be affordable in price or output quantity
costumers have is fewer than those of they should be;------------------------------------
199. In an oligopolistic industry, there are dominant players; therefore, an occurrence

of cross-ownership among dominant players in such industry impacts to not only
an acceleration of dominant players but also to the space of market power
acceleration; ------------------------------------------------------------------------------------
200. The high market power dominant player that is relative toward its competitor
eases dominant player determine output and fixe price without any influence from
the decision of its competitor. The decision of dominant player to charge a price
highly to optimize its market power will be a cover and incentive for its
competitor to enjoy the high price. Such phenomena are caused by price
leadership; --------------------------------------------------------------------------------------
201. Tariff leadership in an industry reduces costumer options to have lower prices.
The indication of the presence of tariff leadership is a relative homogeneity of
tariff changing pattern among operators, a high price of selling product, and a high
profit margin of business actor; --------------------------------------------------------------
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202. An analysis scheme of cross ownership impact is in the following scheme: ----------
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The picture 1
The Impact Scheme of Cross-Ownership
Cross Ownership
Konsentrasi Tinggi,
Konsentrasi Timpang
Struktur Industri
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- Produk Inelastis Market Power
- Entry Barier Menguat
Dampak
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Dominant Player: Derajat Kompetisi
Menurun
Industri Oligopoly: Dampak Perilaku

Price Leadersip
Harga Tinggi Harga Tinggi
Pola Perubahan Tarif
Monopolis Profit Tingi:

EBITDA Tinggi
Oligopolis Profit Tingi: Indikator
EBITDA Tinggi
Price Setter: Price Setter:

Harga Menjauh Biaya Harga Menjauh Biaya
Dampak Akhir
Consumer's Loss
METHODOLOGY: --------------------------------------------------------------------------------
THE CONCENTRATION MEASUREMENT -----------------------------------------------
Y
203. The measurement of an industry can be conducted by using several methods. The
measurement of CRn and HHI is a method mostly used by competition agency;-----
204. Concentration Ratio (CRn) is defined as a sum of market share owned by n of a
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highest company. An n means 2, 3, 4, 5, 6 (companies). Usually n that is used is 4,
so that Concentration Ratio is written as CR4. A value of CRn measurement is
around 0% to d. 100%. For example, an industry has a value of CR4 96.8%, it
means that there are four companies in such industry that control 96.8% of market
share of the industry; -------------------------------------------------------------------------
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Herfindahl-Hircshman Index (HHI); --------------------------------------------------------------
205. Another measurement alternative is the one developed by Orris Herfindahl and
Albert Hirchsman. Such a measurement is based on the sum of quadrate of market
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share in a relevant market that is owned by business actor; ----------------------------
206. The method is formulated as follows:-------------------------------------------------------
H Index = ∑ (s )
i
2
(i = 1,2,3..., n)
s is market share stated in percentage of i company while n is a number of

companies within the industry. For example, if there are 4 companies with market
of 5 %, 10%, 15%, and 70%, then upon the formula the value of HHI will be as
follow
H Index = (5)2 + (10)2 + (15)2 + (70)2 = 5250
207. The value of HHI index is 0 to 10,000 and a value of 10,000 means the industrial
structure is monopoly;-------------------------------------------------------------------------
208. As a reference in determining a high and low of the industrial concentration, a
limit number of HHI, used in Horizontal Merger Guideline and published by US-
FTC and US-DOJ 68, is suggested. The uses of the limit is also adopted by some
Competition Commission in several countries 69;------------------------------------------
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209. The HHI value under 1000 is the lowest concentration of an industry, 1000 to
1800 is moderate and more than 1800 is high;---------------------------------------------
210. A serious investigation will be conducted to a merger with a high concentration

(HHI 1800) or around 1000 to 1800 by giving a value changing of HHI for 100
P
points;
Generalized Herfindahl Hirsman Index-----------------------------------------------------------
211. In the condition in which cross-ownership exists among business actors in the
relevant market , it is suggested to use Generalized Herfindahl Hirschman Index
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(GHHI) to measure concentration. This method was firstly developed by Maxwell
70
et. al and later by Campos and Vega ;
212. Based on the derivation of the formula, GHHI’s formula is the following:------------
C
∑ γ ij β
M
∑ ∑
N N ik
GHHI = HHI + i=1
S kS j
∑
j =1 k = j
γ ij β
M
ij
i=1
in which:
n : A number of company
M : A number of Investors or group of shareholders
βij : The share ownership of investor i in the company of j
γij : A degree of investor’s control of i in company j
Sk : A segment market of k company
Sj : A segment market of j company
the equation can be written in the following matrix:
GHHI = S 'φ S
68
Http:www.usdoj.gov/atr/public/guideline/horiz_book/toc.html
69
Gilbreto Vega, Javier Campos; Concentration Measurement under cross-ownership. An Application to the
Spanish electricity sector; Document to De Trabajo 2002-06; Foot Note 2, page 3
70
Spanish electricity sector; Journal of Industry, Competition and Trade, Bank Papers 313-315, 2003
⎡φ 11 L φ 1N ⎤
∑ γ β
M
which φ = ⎢⎢ M O M ⎥⎥ , gained from φ

ij ik
i = 1
kj =
∑ γ β
M
⎢⎣φN 1 L φNN ⎥⎦ i = 1
ij ij
S = Market share
Ф =Cross-ownership coefficient cross-ownership.
Y
213. The degree of control used in analyzing changing structure as a result of cross-
ownership can be observed by the value of a number of shares owned by investor
in certain company as a representation of a simple control degree principle, one
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share one vote. Therefore, control degree is more complex than only share on
vote;----------------------------------------------------------------------------------------------
214. Categorically, a value of GHHI follows HHI. Basically GHHI is a development of
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HHI but it does not change a guideline of value category of industrial
concentration in which the value of GHHI <1000 indicates that the industrial
concentration is low, 1000<value of GHHI<1800 is moderate, and value of
GHHI>1800 is high;---------------------------------------------------------------------------
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The measurement of Customer Loss --------------------------------------------------------------
215. Calculation METHOD; -----------------------------------------------------------------------
a. To calculate customer surplus in Indonesia for each year on the basis of price,
quantity, and a number of annual arch elasticity; ---------------------------------------
b. With the annual arch elasticity data, the quantity of calls are estimated if a
tariff enact as it does in a country to which simulation is referred;-------------------
c. To calculate customer surplus from second step in which customer surplus

occurs if a tariff enact as it does in other countries; ------------------------------------
d. To calculate a number of customer loss in which a difference between

customer surplus in Indonesia and in other countries;---------------------------------
II. THEORY: --------------------------------------------------------------------------------------------
A theory on Oligopolistic market 71------------------------------------------------------------
216. Oligopoly is a model of market structure in which there are so few

producer/companies in a market. A number of companies within the structure of
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oligopoly market are around 2 (two) until 10 (ten). The product in oligopolistic
market can be identical or differentiated. Cellular telecommunication market in
Indonesia is a form of oligopoly in which there are only 3 (three) dominant
companies; --------------------------------------------------------------------------------------
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Picture 2
Kinked Demand Curve
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Titik
keseimbangan
C
Q
217. In an oligopolistic market, the deed of a company is sensitively influence other

companies’ deed. In Kinked Demand Curve model, a company will also lower its
price if its competitors do the same thing, as a consequence demand curve is to be
inelasticity. On the other hand, competitors take opportunities to increase the
selling by giving no reaction when a company raises the price and as a result an
elasticity demand curve is above balance starting point; ---------------------------------
218. The analysis of oligopolistic market is able to be conducted by using a model of

interaction of business actor in oligopolistic market, namely Bertrand,
Stackelberg and Cournot model; ------------------------------------------------------------
71
See Robert S. Pindyck, Microeconomics Sixth Edition, Prentice Hall, New Jersey (2005), page 442-463.
219. The Bertrand oligopolistic model describes a condition of companies which are
responding one to another toward a degree of price fixed by their competitor. A
number of outputs are resulted from a balance of business actor over a price fixed
by its competitor; ------------------------------------------------------------------------------
Y
220. The Stackelberg oligopolistic model describes a behavior of business actor in
determining output value that are not produced at the same time but in a series of
time. With this model, the leader and follower are described; --------------------------
75. To the Cournot model, the company reacted pessimistically to the change output
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his competitor. In other words, when the competitor lowered output, the company
will raise output him, but smaller was compared by the decline output his
competitor. Like that also was the reverse. In the long run, will be created
Cournot equilibrium (the A point), that the size was smaller compared with the
competitive balance (the B point) and bigger was compared by the balance kolusif
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(the C point);
Picture.3
Balance Cournot Model
C
Q2
Company
Reaction
Curve 1
A Company
Reaction
C Curve 2
Q1
76. If oligopolistic companies cooperate each other, creating cartel as an example,

the consumers’ wealth will be low. Following Game Theory or The Prisoners’
Dilemma is also possible. If the companies do not cooperate, they will lose
consumers significantly as a risk due to their incorrect policies on price and
quantity. Consequently, the best way for them is to compete each other. If a
company cooperates/performs an agreement with its competitors, it can increase
price each other and increase their revenues gained from the increasing of
total revenue. In this way, collusive oligopoly causes price balance higher than
those of non-cooperative oligopoly, but the products are low in quality.
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Therefore, collusive oligopoly will impact greatly on the consumers’ wealth; ----
77. In the theory of oligopoly, there is also Tariff Leadership model which describes
that dominant companies have power to be tariff setters. The price fixed by
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dominant companies is followed then by other companies as tariff takers. In
this model, the correlation is only one way because the price change of non
dominant companies’ products will react over dominant companies’ products;----
78. Cournot equilibrium, a theory of oligopoly, is very consistent if the companies

are relatively big so that they own the same power in the market. On the
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contrary, Price-Leadership Model is very consistent in describing company’s
behavior if there is only one dominant company in the market. Other companies
are very small so that they relatively have no power to compete with dominant
companies. Therefore, both models are suitable to be used in an extreme
condition;-------------------------------------------------------------------------------------
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79. In cellular telecommunication industry, any company shall cooperate one to
another, especially on an interconnection agreement with other competitors. In
such condition, a collusion probably occurs such as on tariff fixing, marketing
and others in which they shall compete in the matters; --------------------------------
Determining Cross Ownership Period ------------------------------------------------------------
80. In the relevant market , it is known that SingTel , a subsidiary of Temasek,
purchased 35 % of Telkomsel’s shares in 2001; ----------------------------------------
81. On 15 Desember 2002, STT as a subsidary of Temasek also control the
ownership of Indosat that lead STT to control majority shares; ----------------------
82. The chronology shows that the effectiveness of cross ownership by Temasek
was valid from 15 December 2002;-------------------------------------------------------
83. The analysis of cross ownership impact in the relevant market used annual data
in which the impact of cross ownership would be seen in the data provided in
the end of 2003. The cross ownership period used in this analysis refer to the
2003-2006 data; -----------------------------------------------------------------------------
Revenues of Operators ------------------------------------------------------------------------------
84. The following is a based-revenue table of cellular operator’s market shares for
the period of 2001-2006 of PT. Telkomsel, PT. Indosat, Plc., dan PT.
Excelcomindo:-------------------------------------------------------------------------------
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Table I
The Revenues and Market Share of Cellular Telecommunication
Providers (In Billion Rupiah)
Total
P
Value of
Year Revenue Revenue Revenue Sales in
share share share
Market
share
2001 4.918,22 56.14% 1,770 20.20% 2,073.03 23.66% 8,761.15

2002 7,572.95 58.37% 3,272 25.22% 2,130.41 16.42% 12,975.01
11,146.12 60.37% 5,118 27.72% 2,198.06 11.91% 18,461.76
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2003
2004 14,765.08 59.93% 7,342 29.80% 2,528.48 10.26% 24,635.63
2005 21,132.91 64.56% 8,645 26.41% 2,956.38 9.03% 32,734.25
2006 29,145.19 68.08% 9,228 21.55% 4,437.17 10.36% 42,809.89
AVERAGE 14,780.08 61.24% 5,895.61 25.15% 2,720.59 13.61% 23,396.28
Source: Finance Statement of Telkomsel, XL, Indosat for several years, proceeded
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85. The table shows that PT. Telkomsel has owned the biggest market share in the
relevant market since 2001 respectively with the average of revenue Rp14.78
trillion in 2001-2006 and the market share average 61.24% annually;--------------
86. The market share of Indosat was fluctuated and tends to decrease after 2004.
The average of Indosat annual revenue in the period of 2001-2006 was IDR
5.895 trillion with the average of market share 25.15% annually;-------------------
87. The segment market of XL decreased after 2001 and fluctuated 9-11% in the
period of 2003-2006, 13.61% in 2001-2006. The annual revenue average of XL
is IDR 2.7 trillion;---------------------------------------------------------------------------
Market Concentration; ----------------------------------------------------------------------------
The Indicator of HHI; -----------------------------------------------------------------------------
88. Besides market share, the measurement of Herfindahl Index is able to show a
degree of company concentration in an industry. Based on the data of market
share as displayed in Table III, the value of Herfindahl index is shown in table
IV as follow: ---------------------------------------------------------------------------------
Table 2
The Development of Market Share and Herfindahl Index (HI)
Y
Of Cellular Operator 2001 – 2006
MARKET SHARE
QUADRATE
(SKALE 1 – 10,000)
Telkomsel Indosat XL HHI
Industry
P
2001 3151 408 560 4119
2002 3407 636 270 4312
2003 3645 768 142 4555
2004 3592 888 105 4586
2005 4168 697 82 4947
2006 4635 465 107 5207
Source: Table 1, data is proceeded
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89. The HHI industry is a total of quadrate value of market share from each
operator. The value of HHI indicates the concentration degree of an industry.
The value of HHI that tends to close to 10,000 indicates that the structure of
such industry develop to be more concentrated; ----------------------------------------
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90. The data show that the value of HHI industry in 2001-2006 tends to increase to
10,000 while the value of HHI 4119 in 2001 changed to be 5207 in 2006; ---------
91. According to value limit guideline of HHI in Analysis (number 63) and (number
64) above, the values of HHI cellular service industry shows that such industry
is very concentrated and creates a limitation of competition. In the period of
2001 to 2006, the concentration remains high and tends to concentrate annually; -
BTS Base Transceiver Station (BTS); ------------------------------------------------------------
92. In 2005, Telkomsel owned the biggest BTS in number for almost ten thousand
in all over Indonesia and followed then by INDOSAT and Excelcomindo
respectively; ---------------------------------------------------------------------------------
93. From 2004 to 2005 the growth of BTS INDOSAT was low. INDOSAT only
built 1000 BTS in 2005 while Telkomsel and Excelcomindo more than 2000; ----
Table 3
The Number of BTS of Each Operator
Period 2000-2006
Companies 2000 2001 2002 2003 2004 2005 2006
Telkomsel 1,411 1,995 3,483 4,820 6,205 9,895 16,507
Y
INDOSAT 1,357 1,995 2,736 3,007 4,026 5,702 7,221
Excelcomindo 514 739 950 1,491 2,357 4,324 7,260

Source: Finance Statement of Telkomsel, Indosat and Excelcomindo for several
P
years
94. In a network-based industry, an investment indicates a form of operator’s long
term commitment to perform market ownership. There are two stapes of
competition in this industry, capacity or network development and price. ----------
95. Therefore, the first step in analyzing competition in this industry is the
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development of network. The control of network is a must in order to keep
market share, to widen market coverage and to increase network effects and
they are indicated from the growth of BTS development. ----------------------------
96. Based on the above data, it is seen that the growth of Indosat’s BTS
development is low compare to its competitor although Indosat is a closest
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competitor to the dominant actor. The low aggressiveness of the closest
competitor will give a chance to dominant actors to optimize their market
power. ----------------------------------------------------------------------------------------
PRICE -----------------------------------------------------------------------------------------------
97. The retail selling price of cellular services is varied according to the kind of
cards (prepaid, postpaid), call time, (peak, off peak), destination (PSTN, same
operator, other operator) and others. The following is an average of retail selling
of cellular service (peak time) in 2002 to 2006: ----------------------------------------
Table 4
The average of retail selling price of cellular services (peak time) in 2002to– 2006
PSTN Intra operator Inter operator
Telkomsel
Telkomsel
Telkomsel
Indosat
Indosat
Indosat
XL
XL
XL
Y
Postpaid
518,42 517,84 507,46 813 812,76 811,10 924,95 924,48 913,01
Prepaid*
932,47 942,37 890,41 1500 1499,54 1517,91 1600 1635,76 1772,26
The average of retail selling price of cellular service (peak time) in 2002 - 2006
P
*)The data of quarter II 2002 to quarter IV 2006.
The available data is prices of regular prepaid card (not economic prepaid card such as As
and Jempol).
Source: The Data are proceeded
98. The following pictures describe the development of retail selling price of call to
PSTN, intra operator, and inter operator for three dominant operators:
C O Picture 5
The growth of retail selling price of call to PSTN
460
470
480
490
500
510
520
530
540
0
200
400
600
800
1000
1200
1 /1 /2 0 0 2
4/1/2 00 2
7 /1 /2 0 0 2
1 0/1/2 00 2
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1 /1 /2 0 0 3
4/1/2 00 3
7 /1 /2 0 0 3
Source: Data are proceeded

1 0/1/2 00 3
1 /1 /2 0 0 4
4/1/2 00 4
7 /1 /2 0 0 4
1 0/1/2 00 4
1 /1 /2 0 0 5
4/1/2 00 5
7 /1 /2 0 0 5
Picture 6
1 0/1/2 00 5
Prabayar - PSTN
1 /1 /2 0 0 6
Pascabayar - PSTN
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4/1/2 00 6 7 /1 /2 0 0 6
1 0/1/2 00 6
XL
The development of retail price of inter-operator call

Indosat
Telkomsel
Series3
Series2
Series1
P Y
Pascabayar - intraoperator
813.5
Y
813
812.5
812 Telkomsel
811.5
811 Indosat
810.5
810 XL
809.5
809
P
808.5
1/1/2002
7/1/2002
1/1/2003
7/1/2003
1/1/2004
7/1/2004
1/1/2005
7/1/2005
1/1/2006
7/1/2006
Prabayar - intraoperator
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1,800
1,600
1,400
1,200 Series1
1,000
Series2
800
600 Series3
400
C
200
0
4/1/2002
10/1/2002
4/1/2003
10/1/2003
4/1/2004
10/1/2004
4/1/2005
10/1/2005
4/1/2006
10/1/2006
Picture 7
The development of retail price of inter operator calls
Pascabayar - interoperator
950
940
930
920 Telkomsel
Y
910 Indosat
900 XL
890
880
870
1/1/2002
7/1/2002
1/1/2003
7/1/2003
1/1/2004
7/1/2004
1/1/2005
7/1/2005
1/1/2006
7/1/2006
P
Prabayar - Interoperator
2000
1800
O
1600
1400 Series1
1200
1000 Series2
800
600 Series3
400
200
0
4/1/2002
10/1/2002
4/1/2003
10/1/2003
4/1/2004
10/1/2004
4/1/2005
10/1/2005
4/1/2006
10/1/2006
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99. The above pictures show a price-parallelism for postpaid card. Firstly,
Telkomsel changes the price, followed then by Indosat and XL. There is no
significant price-changing for prepaid card.
100. The following table shows price-changing, in quarter IV of 2006 and quarter I
of 2002:---------------------------------------------------------------------------------------
Table 5
The growth of retail selling price of cellular service (peak time) 2002-2006

Telkomsel
Telkomsel
Telkomsel
Indosat
Indosat
Indosat
XL
XL
XL
Prepaid 5,36 0,00 0,06 3,08
5,41% 8,38% -0,25% 3,08% 4,47%
% % % %
Y
Postpaid 4,40 - - 0,00 0,07 - 0,00 - -
* % 11,15% 21,78% % % 22,00% % 12,43% 17,81%
*) The data in quarter II of 2002 to quarter IV of 2006. The data show retail price of
regular prepaid card (not economic prepaid cards such as As Card and Jempol).
Source: The data are proceeded
P
101. Since quarter I of 2002 to the end of 2006, the retail price of prepaid cellular
service to PSTN has increased 5% for Telkomsel and Indosat, and 8.4% for XL.
Different with two other operators, the price of Telkomsel postpaid increased in
2002 – 2006 for calls to PSTN and intra-operators, while the two other operator
decreased their selling price. The changing shows that Indosat and XL tried to
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narrow price differences between prepaid and postpaid services.
102. In general, the retail price of postpaid increases although its customer also
increase significantly. From the viewpoint of economic of scale, a high margin
growth is belong to operators. It is an interesting phenomenon because it seems
that no competition occurs to fight for consumers and to decrease price. If they
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are competitive companies, each company will try to decrease prices as a
significant factor to fight for consumers from its competitors.
103. According to Price-Leadership Model, a dominant company plays apart in
fixing price while others come after such a price-fixing. It will happen if the
follower companies have no bravery to compete on price because the economic
scale is not relatively competitive. Price–Leadership is a form of tacit collusion
that look like cartel to consumers with the absence of agreement between the
two parties and it simply a strategy of follower company to gain optimum profit
by adjusting price with dominant company.
III. THE ANALYSIS OF CROSS OWNERSHIP IMPACT: -----------------------------
High concentration and Market Ownership Unbalances----------------------------------------
104. The acceleration of concentration and the unbalanced market share ownership
can be measured by market share value, HHI and GHHI.
105. With the single entity doctrine principle, cross ownership of Temasek in
Telkomsel and Indosat made the two operators be a single entity in the relevant
market . The following is a table of revenue and market share of the cellular
telecommunication providers:
Table 6
The Revenues and Market Share of Cellular Telecommunication
Providers (In Billion Rupiahs)
Y
Total
Value of
Year Revenue Revenue Revenue Sales in
share share share
Market
P
share
2001 4,918.22 56.14% 1,770 20.20% 2,073.03 23.66% 8,761.15

2002 7,572.95 58.37% 3,272 25.22% 2,130.41 16.42% 12,975.01
Period of 2003 11,146.12 60.37% 5,118 27.72% 2,198.06 11.91% 18,461.76
Cross- 2004 14,765.08 59.93% 7,342 29.80% 2,528.48 10.26% 24,635.63
Ownership: 2005 21,132.91 64.56% 8,645 26.41% 2,956.38 9.03% 32,734.25
2003-2006 2006
O
29,145.19 68.08% 9,228 21.55% 4,437.17 10.36% 42,809.89
Rata-
14,780.08 61.24% 5,895.61 25.15% 2,720.59 13.61% 23,396.28
Rata
TABLE 7
MARKET SHARE OF CELLULAR TELECOMMUNICATION SERVICES
C
THE PERIOD OF 2001-2006
The
Collected
Market
Market Total Revenue
Year share of
Segments of Revenues of XL
XL
Telkomsel
and Indosat
2001 76.34% 6,688 2,073.03 23.66%

2002 83.58% 10,845 2,130.41 16.42%
Period of 2003 88.09% 16,264 2,198.06 11.91%
Cross- 2004 89.74% 22,107 2,528.48 10.26%
Ownership: 2005 90.97% 29,778 2,956.38 9.03%
2003-2006 2006 89.64% 38,373 4,437.17 10.36%
Average 89.61%
2003-
2006
Source: Table III, The data are proceeded
106. The table shows that Telkomsel and Indosat jointly controlled 88.09% of market
share in the first year of cross-ownership, and increased to 89.64% in 2006 it.
The value of market share in 2003 to 2006 (the cross-ownership period) is
always above the market share of Indosat and Telkomsel in 2001 to 2002
107. The average of market share of Indosat-Telkomsel in cross-ownership period
was 89.61%. It was higher than its second highest market share prior to cross
ownership in 2002 with 83.58%;
Y
108. It is clearly seen that an increasing of Telkomsel and Indosat market share
occurs in the cross-ownership period compare to those prior to cross ownership;
109. The HHI is used as a measurement of market share unbalancing and its
calculation result the values as it described in the following table:
P
Table: 8
The Value of HHI in the Period of 2001-2006
HHI Delta
Telkomsel Indosat XL
Industry HHI
2001 3151 408 560 4119
2002 3407 636 270 4312 193
O
2003 3645 768 142 4555 243 The Period
2004 3592 888 105 4586 30 of Cross-
2005 4168 697 82 4947 361 Ownership:
2006 4635 465 107 5207 260 2003-2006
The Index 4010 704.5 109 4823.75
Value
Average in
C
Cross-
Ownership
Period
110. Based on the index value, the HHI values have increased highly since the croos-
ownership. The values changed from 4312 in 2002 to 4555 in 2003.
111. The value of HHI tends to increase from year to year. It is indicated by delta
value of HHI which is always positive.
112. The average value of HHI in cross-ownership period (2003-2006) was around
4823.73. It is higher than the indicator limit of horizontal merger guideline
published by US-FTC and US DOJ 72. The value of HHI above 3000 is stated as
an industry that causes a limitation to competition 73---------------------------
72 72
Http:www.usdoj.gov/atr/public/guideline/horiz_book/toc.html
73
Spanish electricity sector; Documeeto De Trabajo 2002-06; Foot Note 2, Page 3
113. The value of HHI will be greater and higher in the concentration if cross-
ownership is taken into account to measure concentration in the analysis----
114. The high concentration shown by HHI has not described in whole that the
changes of industrial concentration is caused by cross-ownership. The result can
Y
be measured by using GHHI method---------------------------------
115. The control degree in the measurement of GHHI is approached by the degree of
share ownership as it is mentioned below: ---------------------------
P
Year 2001 Cellular Operators
Telkomsel Satelindo Exelcomindo
The Business INDOSAT 35% 75%* 0
Actor which TELKOM 65% 0 0
Become Other Business Actors 25% 100%
Shareholder:
*Consist of 7.5% that was owned before 2000, 22.5% was from the swap of Telkom’s
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shares, 40% was through Bimagraha
Year 2002 Cellular Operator
Indosat
Telkomsel Exelcomindo
(Satelindo & IM3)
The Business INDOSAT 0 100% 0
Actor which TELKOM 65% 0 0
Become Temasek Group 35%* 0 0
C
Shareholder: Other Business Actors 0 0 100%
*Through SingTel

Indosat
(Satelindo & IM3)
The Business Telkom 65.00% 0 0
Actor which Temasek Group 35.00%* 41.94%** 0
Become Other Business Actors
0.00% 43.06% 100%
Shareholder:
*Through SingTel
** Through STT

Indosat
(Satelindo & IM3)
The Business Telkom 65.0% 0 0
Actor which Temasek Group 35%* 41.94%** 0
Become Other Business Actors
0 43.06% 100%
Shareholder:
*Through SingTel
** Through STT
Telkomsel Indosat Exelcomindo
(Satelindo & IM3)
The Business Telkom 65% 0 0
Actor Temasek Group 35%* 41.07%** 0
(Shareholders): Other Business Actors 0 44.26% 100%
Y
*Through SingTel
** Through STT

Indosat
(Satelindo & IM3)
P
The Business Telkom 65% 0 0
Actor Temasek Group 35%* 40.37%** 0
(Shareholders): Other Business Actors 0 45.19% 100%
* Through SingTel
** Through STT
116. Based on market share and information of the control degree, the method of
O
measurement of GHHI produce the following values: ----------------------
Table 9
The Comparison of HHI and GHHI Values
Year HHI Delta HHI GHHI Delta GHHI
C
2001 4120 5142
2002 4313 193 4313 -829
2003 4555 242 5484 1172
2004 4585 30 5577 93
2005 4947 362 5872 295
2006 5207 260 5987 115
Source: Data Processing
117. Annually, the value of GHHI is getting bigger than its previous year. It indicates
that a structure of cellular industry is being concentrated from year to year and
market share ownership being unbalanced.-------------------
118. Annually, the value of GHHI is bigger than HHI and tends to increase. The total
value of GHHI to HHI indicates that cross-ownership make the industry be
more concentrated compare to the absence of cross-ownership
Picture 2
The Graphic of the Annual HHI and GHHI Value
(The Period of 2001-2006)
6750
5872 5987
5750
5484 5577
5142 5207
Y
4947
4750
4555 4585
4313
3750 4120
HHI
2750
P
GHHI
Equal Size
Batas Highly Concentrated
1750
Batas Moderat Concentrated
750
2001 2002 2003 2004 2005 2006
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119. The exception occurred in 2002, in which the value of HHI was same as the
value of GHHI that is 4313. Besides, the value of GHHI decreased to -829 at
that year so that the value of GHHI, 5142 in 2001, decreased to 4313 in 2001--
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120. --- From the viewpoint of competition, cellular industry was in a better structure in
2002 as it indicated by the decreasing of GHHI’s value, lower than those of the
previous year. It is caused by cross-ownership [between Telkom and Indosat in
Telkomsel and Satelindo] in cellular industry as it stated by the Blue Print of
Government Policy on Telecommunication in Indonesia. According to the
formula, the absence of cross-ownership causes GHHI’s value and HHI’s
remain the same.-----------------------------
121. In 2003, the value of GHHI increased high, from 4313 in 2002 to 5484 in 2003.
The increasing value of GHHI for amount of 1172 was caused by the beginning
of cross-ownership period by Temasek Group with its purchase of Indosat
through its subsidiary, STT. The purchase had Temasek Group controlled 35%
of Telkomsel’s shares and at the same time Temasek Group also controlled
41.94% of Indosat’s shares------------
122. The values of GHHI, annually tended to increase in the cross ownership period,
vividly provides a conclusion that cross-ownership have brought a structure of
cellular industry to be getting concentrated. It is disadvantage to fair
competition. The increasing of concentration will boost market power to its
business actor or other dominants business actors ---------------
Degree of Competition Analysis----------------------------------------------------------
Y
123. The measurement of competition degree conducted by examiner team applies a
model developed by Parker & Roller (1997) that adopt a model of market power
measurement of Bresnahan (1989) . The degree of competition measurement is
a function of demand and cost. The measurement result indicates that
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company’s behavior in Indonesia cellular industry in non competitive. (See: An
analysis of competition degree of Cellular Industry in Indonesia).-------------------
An analysis of Network Competition----------------------------------------------------
124. The decreasing of competition degree can be seen from the decreasing of
competition power in developing network. As a network-based industry,
competition in this industry consists of two stapes, competition in network
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development and price. -------------------------------------------------------------
125. Business Actor that focuses in gaining the competition in the first step will have
market power to control competition in the second stage, competition in price.
The advantage of the winner of the first step is called first mover advantage as it
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described in the model of Stackelberg’s oligopoly ------------------------------------
-
126. Model Stackelberg explains that there is an advantage for first mover in
oligopolistic industry. For example, the demand in the market is explained by
the function of P = a − Q , where P is price and Q is demanded product
quantity, and a>0. In line with Cournot reaction curve, the reaction curve for
a 1
company 2 is Q2 = − Q1 --------------
2 2
127. By considering profit maximization condition, the revenue of company 1 is

2
TR1 = PQ1 = aQ1 − Q1 − Q2 Q1 . Because TR depends on Q2, company 1 has to
anticipate the quantity produced by company 2. Company 1 knows that
a 1
company 2 will produce with the condition of Q2 = − Q1 , so the revenue of
2 2
2 ⎛a 1 ⎞ a 1 2
company 1 is TR1 = PQ1 = aQ1 − Q1 − ⎜ − Q1 ⎟Q1 , or TR1 = Q1 − Q1 .
⎝2 2 ⎠ 2 2
a
Therefore, the marginal revenue o company 1 is MR1 = − Q1 .
2
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a a
128. With the condition of MR1=0, so Q1 = , and Q2 = . In other words, the
2 4
quantity produced by company 2 is fewer than those of company 1 as a first
mover -----------------------------------------------------------------------------------------
129. Based on the Stackelberg model, the company that fall behind in producing its
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product, shall consider the quantity produced by company of its competitor as
given in determining its own production quantity. If that company increase its
production quantity as it should be, the price will decrease. Consequently, the
two companies will be loss. --------------------------------------------------------------
130. In the context of cellular industry in Indonesia, Telkomsel is first mover in this
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industry because Telkomsel is an incumbent operator and having dominant
position, and having wide infrastructure development. It is detailed by the
comparison data of the number of BTS cellular in which Telkomsel owns BTS
much more than its competitors -----------------------------------------------------------
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131. The building of BTS is very crucial in cellular market because it will influence
the quality of cellular service and area coverage. Without having competitive
BTS in number, an operator will not have power of compete with other
operators. The building of BTS is a significant capital expenditure because a
completed and ready to use BTS will cost for about IDR 1 billion.------------------
132. Telkomsel is a first mover in building BTS and consistently being dominant
company in cellular industry. In accordance with Stackelberg model, Indosat
and XL produce limited quantity only in conformity with its reaction function
and a given character of Telkomsel’s production quantity value. --------------------
133. In order to reduce independency to Telkomsel’s production quantity, XL and
Indosat, in their capacities as non first movers, are asked to be more aggressive
in building BTS. Annually, Indosat and XL have to build BTS more than
Telkomsel to balance a number of BTS among operators. By doing it, the
convergences will occurs in cellular industry, decrease Stackelberg’s first-
mover effect and competition close to Cournot’s pattern. ----------------------------
134. The explanation of Stackelberg’s model and characteristic of competition in
cellular market that are related to the availability of BTS is able to give some
important points: ----------------------------------------------------------------------------
• Dominant company in oligopolistic market take part in fixing price.--------------
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• Follower company determine production quantity by considering the quantity
of dominant company as a given variable.
• According to Stackelberg model, an operator that has more BTS significantly
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will have power to be a first mover. ----------------------------------------------------
• Follower operators have to be more aggressive in building BTS so that market

share will be convergence. ---------------------------------------------------------------
• If follower operators are not aggressive in building BTS, the dominant
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company remains to be stronger in market.--------------------------------------------
135. Indosat investment pattern in building BTS is not aggressive. If Indosat keeps
on doing the same, Telkomsel will dominate cellular industry and it would be
possible to see market share divergence in the years to come. ------------------------
136. It can be seen from the market share battle of Telkomsel, Indosat and XL in
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three aspects: Revenue, Subscriber, and BTS -------------------------------------------
Picture 3
Market Share of Telkomsel based on Revenue, Subscriber, and BTS
Market Share of Telkomsel
70%
65%
60%
Revenue of Telkomsel
55% Subscrier of Telkomsel
BTS of Telkomsel
50%
45%
40%
2001 2002 2003 2004 2005 2006
Picture 4
Market Share of Indosat based on Revenue, Subscriber, and BTS
Market Share of Indosat (2001-2006)
50%
45%
40%
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Revenue of Indosat
35% Subcriber of Indosat.
BTS of Indosat
30%
25%
20%
2001 2002 2003 2004 2005 2006
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Picture 5
Market Share of Indosat based on Revenue, Subscriber, and BTS
Market Share of XL 2001-2006
35%
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30%
25%
Revenue of XL
20% Subcriber of XL
BTS XL
15%
10%
5%
2001 2002 2003 2004 2005 2006
137. It is seen in the diagram that Telkomsel is always consistent in keeping its
market share of BTS for around 50-55% during cross-ownership period.
Ironically, at the same period Indosat decreased drastically, started from 2004.
Consequently, Indosat markets share of revenue and a number of subscriber
tends to decrease, while XL kept on increasing its BTS markets share and as a
result its revenue also increased. ----------------------------------------------------------
138. The weakening of Indosat’s performance in keeping BTS market share had been
enjoyed by first mover, Telkomsel rather than XL. First mover only keep its
value of BTS’s market share value at the same level but Telkomsel enjoyed the
increasing of revenue market share. XL that has been more aggressive in
increasing its BTS market share since 2003, enjoyed its revenue market share
only in 2006. ---------------------------------------------------------------------------------
Y
139. It shows that the aggressiveness of follower to directly chase after first mover is
hard to be done. It takes long time to create a condition of head to head
competition between first mover and follower that become a determiner of fair
competition.----------------------------------------------------------------------------------
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140. The needs of huge investment and time to compete with first mover had caused
significant entry barrier in cellular industry. The strategy of government to
create competition and minimize entry barrier by new entrant does not mean
something. The new entrant cannot chase after first mover in a short time. The
number of competitors in this business cannot seen as a presence of competition
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in this business because time is a crucial factor in this case. --------------------------
141. A long time needed by new entrant makes first mover to gain dominant position
with its market power that is easily to accumulate monopolistic profit.. ------------
142. It is in accordance with the empiric research conducted by Nunn and Savari
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2002 to any cellular industries around the world. Both states: ------------------------
…..We examine and test the effect of four market factors: (i) number of competing
firms in the country, (ii) severity of the country’s anti-trust policy, (iii)
monopolist’s lead-time before competition has been introduced and (iv) market
growth rates. The results indicate that the average tariff for cellular services
across international markets significantly exceeds competitive level and may even
exceed cournot-nash oligopolistic prices. Surprisingly, we find that the number
of competitors in the market does not seem to affect firms’ market power…. 74 ----
143. Under such condition, the most appropriate strategy to create competition is by
keeping closest rival and first mover to compete in fighting against controlling
network. In this case the closest rival is Indosat ----------------------------------------
144. The closest rival has to be kept to avoid decreasing competition performance to
first mover. The presence of cross-ownership between first mover and closest
74
Savari and Nun, 2002, ibid
rival will decrease incentive to the owner to keep closest rival remains to be
aggressive in a competitive condition. 75 -------------------------------------------------
145. The decreasing of Indosat’s aggressiveness as a closest rival to Telkomsel is
indicated by the decrease of control to BTS’s market share, as it is seen in the
graphic. ---------------------------------------------------------------------------------------
Y
146. Temasek’s cross ownership has weaken Indosat’s competition performance and
it can be proven. In December 2006, four directors of Indosat reported the
inabilities of Kaizeed, Deputy President Director (as a highest leader of Indosat
at that time) to Commissioner Lee Teng Kiat in Singapore. Unfortunately, the
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report was not followed up by replacing Kaizeed or perform no action over 9
months delay of BTS’s building in 2006. ------------------------------------------------
147. It can be concluded that cross-ownership in cellular industry is far behind
from fair competition because it weakens a competition between Indosat as
a closest rival to Telkomsel as dominant player and Telkomsel.
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Tariff Pattern Analysis ----------------------------------------------------------------------------
Tariff pattern indicate a presence of Tariff Leadership. ----------------------------------------
148. Tariff pattern is implemented in order to examine the consistency of conclusion
and to show that there is a tariff leadership in cellular industry. Tariff leadership
in oligopolistic industry harms consumers although such an industry show an
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elasticity demand. Tariff leadership will cause consumers who move to other
operators remain to face high price compare to the price they have in
competitive market;-------------------------------------------------------------------------
149. The testing to tariff leadership was conducted by examining an average tariff-
changing of prepaid Indosat and Telkomsel from 2002 to 2006 and the result is
as follow: -------------------------------------------------------------------------------------
Paired Samples Test
Paired Differences
95% Confidence
Std. Std. Error terval of the Differenc Sig.
Mean Deviation Mean Lower Upper t df (2-tailed)
Pair 1 INDOSAT -
,547E-05 ,477E-03 ,547E-05 3,41E-05 ,050E-04 1,000 1734 ,317
TELKMSEL
75 See David Gilo, “The Anticompetitive Effect of Passive Investment”; Michigan Law Review, Vol. 99, No. 1.
(Oct., 2000)
Paired Samples Test
Paired Differences
95% Confidence
Std. Std. Errorerval of the Differen Sig.
Y
Pair 1 INDOSAT
,0000 ,1045 509E-03 4,92E-03 920E-03 ,000 1734 1,000
TELKMSE
150. The testing of an average postpaid tariff changing of Indosat and Telkomsel,
daily from 2 April 2002 to 31 December 2006 is as follow:
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Ho:µΔI = µΔT
Paired Samples Test
Paired Differences
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95% Confidence
Std. Std. Error terval of the Differenc Sig.
Pair 1 INDOSAT -
,547E-05 ,477E-03 ,547E-05 3,41E-05 ,050E-04 1,000 1734 ,317
TELKMSEL
Ha:µΔI ≠ µΔT------------------------------------------------------------------------------------
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Paired Samples Test
Paired Differences
95% Confidence
Std. Std. Error erval of the Differen Sig.
Pair 1 INDOSAT
,0000 ,1045 509E-03 4,92E-03 920E-03 ,000 1734 1,000
TELKMSE
151. Based on the measurement above, it is seen that test of t-Statistic to the average
of postpaid tariff-change of Indosat and Telkomsel to the destination of PSTN,
intra-operator and inter-operator are 0.007, 1.0, and 1.0 respectively and the
degree of significances are 0.995, 0.317, and 1.00 (not significant) respectively
with degree of trust for about 95%. If we do not refuse hypothesis (Ho) means
that statistically we conclude that the average of postpaid tariff-changing of
Indosat is the same with the average of postpaid tariff-changing of Telkomsel
for a given period. --------------------------------------------------------------------------
Paired Samples Test
Paired Differences
95% Confidence
Y
Std. Std. Error Interval of the Difference Sig.
Pair 1 INDOSAT -
-8,42E-03 ,4247 1,020E-02 -2,84E-02 1,158E-02 -,826 1734 ,409
TELKMSEL
Paired Samples Test
P
Paired Differences
95% Confidence
Pair 1 INDOSAT -
3,845E-05 1,602E-03 3,845E-05 -3,70E-05 1,139E-04 1,000 1734 ,317
TELKMSEL
Paired Samples Test
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Paired Differences
95% Confidence
Pair 1 INDOSAT -
-7,18E-03 ,2949 7,079E-03 -2,11E-02 6,705E-03 -1,014 1734 ,311
TELKMSEL
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152. The testing of an average prepaid tariff changing of Indosat and Telkomsel,
daily from 2 April 2002 to 31 December 2006 is as follow: --------------------------
Ho:µΔI = µΔT
Paired Samples Test
Paired Differences
95% Confidence
Pair 1 INDOSAT -
-8,42E-03 ,4247 1,020E-02 -2,84E-02 1,158E-02 -,826 1734 ,409
TELKMSEL
Ha:µΔI ≠ µΔT
Paired Samples Test
Paired Differences
95% Confidence
Pair 1 INDOSAT -
3,845E-05 1,602E-03 3,845E-05 -3,70E-05 1,139E-04 1,000 1734 ,317
Y
TELKMSEL
Paired Samples Test
Paired Differences
95% Confidence
Std. Error Interval of the Difference
P
Std. Sig.
Pair 1 INDOSAT -
-7,18E-03 ,2949 7,079E-03 -2,11E-02 6,705E-03 -1,014 1734 ,311
TELKMSEL
153. On the above measurement, it is seen that test of t-Statistic to the average of
postpaid tariff-changing of Indosat and Telkomsel to the destination of PSTN,
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intra-operator and inter-operator are -0.826, 1.0 and -1.014 respectively and the
degree of significances are 0.409, 0.317, and 0.311 (not significant)
respectively with degree of trust for about 95%. If we do not refuse hypothesis
(Ho) means that statistically we conclude that the average of prepaid tariff-
changing of Indosat is the same with the average of postpaid tariff-changing of
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Telkomsel for a given period. -------------------------------------------------------------
Market Power Acceleration Analysis : ---------------------------------------------------------
154. The high market power, assumed to be caused by concentrated structure as a
result of cross-ownership, can be described by several indications such as
high profit margin measured by EBITDA, high selling price compare to
other countries, and the high differences between selling price and
production cost. -------------------------------------------------------------------------
155. According to the Finance Statement of each company, it is seen that the
value of EBITDA is as follow: -------------------------------------------------------
Table 11
The Number of EBITDA and its Nominal Growth of Each Operator
INDOSAT XL
Year TELKOMSEL
Value Value Value
% growth % growth % growth
(In (In (In
million million million
rupiah) rupiah) rupiah)
2001 3,499,000 2,842,400 1,202,205
2002 5,110,000 46.04% 3,661,700 28.82% 1,442,463 19.98%
2003 8,026,000 57.06% 4,385,900 19.78% 1,456,157 0.95%
2004 10,672,000 32.97% 6,016,700 37.18% 1,624,753 11.58%
15,408,000 44.38% 6,732,100 11.89% 1,733,668 6.70%
Y
2005
2006 20,737,000 34.59% 7,051,900 4.75% 2,535,881 46.27%
Source: Finance Statement of Telkomsel, Indosat, XL
156. The EBITDA Margin of each company is as follow: -------------------------------
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Table 12
EBITDA Margin of Each Operator
Ebitda Margin
Value Value Value
2001 71.14% 55.32% 67.40%
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2002 67.48% 54.11% 67.44%
2003 72.01% 53.29% 65.34%
2004 72.28% 57.69% 62.71% Cross-Ownership
2005 72.91% 58.09% 56.67% Period
2006 71.15% 57.62% 54.17%
Average
Period Cross-
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72.09% 56.67% 59.72%
Ownership
Source: Finance Statement of Telkomsel, Indosat, XL. Data proceeded
Table 13
EBITDA Industry
Total Industry Total Industry
Value Revenue Ebitda Ebitda
(IDR 000) (IDR 000) Margin
2001 11,839,990,340 7,543,605,000 63.71%
2002 16,478,718,136 10,214,163,000 61.98%
2003 21,604,441,548 13,868,057,000 64.19%
2004 27,785,881,759 18,313,453,000 65.91% The Period of
2005 35,781,844,531 23,873,768,000 66.72% Cross-Ownership
2006 46,066,260,578 30,324,781,000 65.83%
Average
Cross-Ownership 32,809,607,104 21,595,014,750 65.66%
Period
Source: Finance Statement of Telkomsel, Indosat, XL. Data proceeded
157. Based on the two tables above, it is known that EBITDA of cellular
telecommunication service operators are always 50% and above. It indicates
that companies’ operating are able to contribute the companies 100% more
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than the cost to create cellular service.-----------------------------------------------
158. The EBITDA margin of cellular telecommunication industry is around 64-
66% in cross-ownership period with the average of 65.66%;---------------------
159. Based on the table, Telkomsel is an operator that is able to have a biggest
EBITDA in cross-ownership period with the average of 72.09%. ---------------
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160. In average, the EBITDA margin of XL within the same period was in
second place for amount of 59.72%; -------------------------------------------------
161. Indosat is standing in the last place in having an average of EBITDA margin
in cross-ownership period (56.67%);------------------------------------------------
162. The high value of EBITDA in cross-ownership period, 50% and above,
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shows that business actors in the industry of telecommunication service
have great market power. It is used to create monopolistic profit, twice
higher in number than the production cost ------------------------------------------
163. The high EBITDA finance indicator indicates that there is an excessive
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pricing of cellular tariff. In fact the high EBITDA give a change to cellular
operator decreasing tariff. -------------------------------------------------------------
164. In order to prove whether an excessive pricing occurs or not, there are many
ways to prove it such as tariff comparison for the same product in the
market and cellular tariff in other countries. It also can be done by
comparing with the significant component cost in any call, interconnection
tariff (call to other operator and PTSN) ---------------------------------------------
165. According to the study conducted by LPEM76, there are differences
between average tariff in Indonesia and other countries. The study of LPEM
compares the average of three various kind of tariffs (PSTN, Intra Operator,
inter-operator) for peak time prepaid tariff of three cellular operators in
Indonesia with the cellular tariff of comparative countries that is
extrapolated from the data of International Telecommunication Union (ITU)
76
LPEM, Final Report: Studi Mengenai Kerugian Konsumen Akibat Persaingan Usaha Tidak Sehat di Industri
Telepon Seluler di Indonesia (A Study on the Consumer Loss Due to Unfair Competition in Cellular Phone
Industry), LPEM, Jakarta, 2007.
for the period of 1996-2002. In order to have data of 2002-2006,
extrapolation was conducted by assuming constant growth per year by using
the quantity of the average tariff growth in 1996-2002. The assumption of
rate of exchange Rp/US $ is IDR 9100, and the tariff comparison is as
follows,-----------------------------------------------------------------------------------
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Table 14
Cellular Tariff Comparison in 2002-2006 based on the Study of LPEM (US $)
Countries/Operators 2002 2003 2004 2005 2006

Telkomsel 0.16 0.15
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0.15 0.15 0.14
Indosat 0.15 0.15 0.15 0.15 0.15
XL 0.17 0.16 0.15 0.14 0.14
Asia Selatan 0.22 0.21 0.19 0.18 0.17
ASEAN 0.38 0.38 0.38 0.38 0.38
Korea 0.30 0.28 0.26 0.25 0.23
Hong Kong 0.18 0.14 0.11 0.09 0.07
East Europe 0.09 0.07 0.05 0.04 0.03
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Source: LPEM – FEUI, Data Proceeded.
Details:
1. In regional level, tariff is an average tariff; in country level, tariff that is
valid in the country.
2. South Asia is represented by India and Sri Lanka
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3. ASEAN is represented by Malaysia and Singapore
4. East Europe is represented Belorussia, Estonia, Latvia, Lithuania, Moldova
and Russia.
It can be seen from the table that tariff of Telkomsel, Indosat and XL is higher
than those valid in Hongkong and East Europe. If it is compared to South Asia,
ASEAN, and Korea, the tariff of Telkomsel, Indosat and XL are cheaper.
Nevertheless, the study could be bias because of the extrapolation conducted
toward the comparative ones. If there was a significant efficiency changes in 2002
to 2006 to the cellular operator in that countries, the data could be different in a
whole with the extrapolated data. ----------------------------------------------------------
166. As a comparison, the tariff of Telkomsel, Indosat, and XL can be compared with
the data of Directorate General of Posts and Telecommunication on cellular tariff
in ASEAN countries. The following is the intra operator tariff: ------------------------
Table 15
Tariff Comparison–intra operator (Rp)
Countries Operator Peak Off Peak

Indonesia Telkomsel 1500 300
Indonesia Indosat 1500 1500
Indonesia XL 1248 1248
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Malaysia Celcom 1493 978
Brunei B-Mobile 289
Thailand DTAC 524
India BSN 475
Singapore SingTel 924 462
Vietnam Mobifone 737
Source: Directorate General of Posts and Telecommunication. Data Proceeded
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As seen in the table, the cellular tariff for intra operator call (on-net) in Indonesia
is higher than those of other ASEAN countries. The only country which are
different slightly with Indonesia is Malaysia. At peak-time, tariff in Indonesia is 4
times higher than the tariff in Brunei, twice than Thailand and India, 1.2 times
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than Singapore, and 1.5 than Vietnam. The comparison is conducted by comparing
with the lowest tariff in Indonesia, XL cellular telecommunication provider. If it
compares with the highest tariff in Indonesia, the differences can be wider. ----------
167. Based on the data of Ditjen Postel, the comparison of inter operator tariff is as
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follow: ------------------------------------------------------------------------------------------
Table 16
Tariff Comparison – inter operator (Rp)
Countries Operator Peak Off Peak

Brunei B-Mobile 577
Thailand DTAC 524
India BSN 518
Singapore SingTel 924 462
Source: Directorate General of Posts and Telecommunication . Data Proceeded
The inter operator tariff comparison affirms the high tariff charged by cellular
operators in Indonesia. Different with intra operator tariff, inter operator tariff
charged by cellular operators in Indonesia is higher than those in Malaysia even
if it compares to other countries, inter operator tariff in Indonesia is the highest.
At peak time, tariff in Indonesia is more than 2.5 times higher than those in
Brunei, Thailand and India, and 1.5 times higher than it in Singapore and
Vietnam. --------------------------------------------------------------------------------------
168. The comparison of intra operator and inter operator tariff between Ditjen
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Postel and LPEM is quite the contrary. It is stated that tariff in Indonesia is
lower than ASEAN countries. In fact, cellular operator tariff in Indonesia is
higher than those of ASEAN countries. ---------------------------------------------
169. In order to fix normal tariff of inter operator, interconnection cost among
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operator shall be considered. In connection with that, cellular tariff in
Indonesia shall refer to the interconnecting recommendation of OVUM.
The following is the description of effective tariff along with the amount
recommended by OVUM--------------------------------------------------------------
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Table 17
Tariff Comparison and the Recommendation of Interconnection Tariff
Operator PSTN Other Cellular
Tariff % to Tariff % to
OVUM OVUM
Telkomsel 950 151.03% 1600 178.17%
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Indosat 900 143.08% 1500 167.04%
XL 837 133.07% 1537 171.16%
OVUM 629 898
Source: OVUM, Data is proceeded
Details: The amount recommended by OVUM is total of origination and
termination costs.
According to the description of the data, it can be concluded that the tariff charged
by cellular operator to consumers is higher than the amount of interconnection
recommendation. The worst occurs in the amount of inter operator tariff. For
inter operator tariff, the operators that have highest tariff differences compare to
the amount of interconnecting tariff recommendation are Telkomsel, XL and
Indosat respectively. --------------------------------------------------------------------------
170. From the viewpoint of efficiency, cellular phone is the most interested stuff
and the increasing number of customer of GSM card within the last few
years has proved the evidence. With the concept of economies of scale, it
can be explained that it should be efficiency in a company which bring it an
ability to decrease price but the actual price does not reflect it. If it is
observed from the growth of EBITDA, the efficiency of a company
increases significantly but not in price because the efficiency is used to
highly raise margins. Although the EBITDA increase significantly, the
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cellular tariff charged by operator does not reflect costs from year to year
does. In other words, there is an excessive pricing in the tariff charged by
cellular operators in Indonesia. -------------------------------------------------------
171. From the side of per capita income, Indonesia is smaller than Singapore,
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Malaysia, or Brunei but its cellular tariff is higher than those countries.
Comparing to Brunei, intra operator call is more than 4 times and 2.5 times
for inter operator call. The normal tariff shall be in favor with per capita
income of a country. It is concluded that there is excessive pricing in
cellular tariff in Indonesia. ------------------------------------------------------------
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Analysis of Telkomsel Market Power--------------------------------------------------------------
172. The ability of Telkomsel to use market power is seen from its capacity to
gain high value EBITDA. It is described by the value of EBITDA which
reaches for the average of 71.16% between 2001-2006. As a leading
company, the value is 6.44% above EBITDA o the Margin Industry. ----------
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173. Besides, Morgan Stanley’s estimation on 21 February 2006 (Exhibit 3)
shows that the value of Telkomsel’s EBITDA Margin is above several
cellular operators of the Asian countries. -------------------------------------------
P Y
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The potency of Telkomsel’s tariff decreasing in its capacity as a leader ---------------------
174. The high tariff and its EBITDA margin, as it described above, had
Telkomsel potentially decreased cellular service tariff in its capacity as a
leading operator in telecommunications cellular industry in Indonesia. It is
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measured by static simulation over the normal value of ROE of a company. -
175. The 2006 Telkomsel’s report showed a high ROE, to 55%. It indicates an
excess profit. By the benchmark of ROE 20%-35%, an acceptable value of
ROE of a company, and by assuming that some variables are fixed, an
amount of potential effective tariff quantity can be obtained. The following
table display it : -------------------------------------------------------------------------
A Simulation of Telkomsel Finance with the ROE 20%, 25%, 30%, and 35%
Detail Actual Potencies

ROE=20% ROE=25% ROE=30% ROE=35%
Equity 23073 23073 23073 23073 23073
ROE 55% 20% 25% 30% 35%
Net Revenue 11182 4614.6 5768.25 6921.9 8075.55
Tax 0.314366 0.3143663 0.3143663 0.3143663 0.314366
EBIT 16309 6730.416 8413.02 10095.624 11778.228
Operating cost 12836 12836 12836 12837 12838
Gross revenue 29145 19566.416 21249.02 22932.624 24616.228
Price reduction 32,87% 27,09% 21,32% 15,54%
Details:
Actual Data of 2006
The italic are assumed as fixed variables
176. As it described in the table, with an assumption of an equity amount is fixed,
if ROE of Telkomsel is only 20%, net income will reduce from IDR 11,182
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billion to IDR 4,614.6 billion. If an assumption of tax percentage to EBIT is
fixed, the value EBIT will decrease also from IDR 1,630.9 billion to IDR
6,730.416 billion. By assuming consistently that the value of operating cost
is fixed, gross revenue will also decrease from IDR 2,914.5 billion to IDR
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19,566.42 billion. By assuming that cellular usage structure is fixed, the
value of gross revenue will be 67.13% of the actual gross revenue, so that a
value of potential tariff is 67.13% of the actual price which will gain
potential tariff reduction for 32.87%. ------------------------------------------------
177. By implementing the same method, if ROE of Telkomsel is only 25%,
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30%, and 35%, the price reduction over actual price will be 27.09%,
21.32%, and 15.54% respectively ----------------------------------------------------
Telkomsel Financial Analysis
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OPREV
40000
30000
20000
10000
Observed
Quadratic
0 Exponential
0 1 2 3 4 5 6 7
Sequence
178. The graphic above shows a relationship of revenue achievements of

Telkomsel Operating revenue in 2001 which only around IDR 5,000 billion
and IDR 29,145 billion in 2006. It shows multiple improvement following
quadratic and exponential pattern. The growth of operating revenue follows
quadratic pattern with its equation of Y=a+bX+cX2, in which Y is
operating revenue, X is year, with the value of a=4564.10, b=-18,939, and
c=677,946. It follows exponential pattern with its equation of Y=aebx, in
which Y is operating revenue, X is year, and value of a=3663.10, b=0.3502.
Y
---------------
179. The picture above shows a relative constant and fixed in price. Under a
circumstances of out of date GSM telecommunication technology and the
newly sophisticated telecommunication technology, Telkomsel develops
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harvesting policy in which it optimizes the revenue of the existing
technology. ------------------------------------------------------------------------------
180. In a condition in which revenue increase is exponential and quadratic, the
concerns shall be focused on price that consumers have to pay. Although a
policy of price reduction has been implemented by a company but it remains
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to be superficial due to the high value of Telkomsel ROE. For instance, the
ROE of Telkomsel in 2004 is 45%, 55% in 2005 and 55% in 2006. ------------
TOTAL ASSET
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40000
30000
20000
10000
Observed
Quadratic
0 Exponential
0 1 2 3 4 5 6 7
Sequence
181. The picture above shows a relation of total assets in the frame of time
function. In 2001 the total asset of Telkomsel was only IDR 9,000 billion
and IDR 37,301 billion in 2006. It showed multiple growth s following
quadratic and exponential pattern with equation its equation: Y=a+bX+cX2,
in which Y is total asset, X is year and the value of a=7503.20, b=-259.09,
and c=844.250. The growth of asset follows exponential pattern with its
equation: Y=aebx, in which Y is total assets, X is year and the value of
a=5720.87, b=0.3101. ------------------------------------------------------------------
182. The available data show that the total asset of Telkomsel had grown 4 times
from 2001 to 2006. The growth is boosted by the revenue improvement and
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revenue and the Telkomsel bargaining reinforcement with the third parties
that resulted in easing Telkomsel to have finance facilities. The asset
component of Telkomsel are property, plant and equipment. In 2006, the
amount of them was for amount of IDR 31,706 billion.---------------------------
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183. In such a condition, Telkomsel is able to adapt an advance of
telecommunication technology and strengthening its position as a leader in
cellular telecommunications sector, consequently its competitors will be
getting hard to chase.-------------------------------------------------------------------
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STOCK
30000
20000
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10000
Observed
Quadratic
0 Exponential
0 1 2 3 4 5 6 7
Sequence
184. The picture above shows a relation of shareholders’ equity in the frame of
time function. The shareholders’ equity of Telkomsel in 2001 was only
IDR 5,000 billion and IDR 23,073 billion in 2006, increasing double
following quadratic pattern with its equation: Y=a+bX+cX2, in which Y is
shareholder’ equity, X is year, and the value of a=3750.00, b=1084.21, and
c=353.214 and exponential pattern with its equation: Y=aeb, in which Y is
shareholders’ equity, X is year, and the value of a=4015.13, b=0.2982. --------
185. The growth of shareholders’ equity increased 4 times from 2001 to 2006.
The growth is increased by an accumulation of the net income. Although
Telkomsel had paid dividend for amount of IDR 1,3976 billion from 2002
to 2006, the amount of its shareholders’ equity also increased IDR 15,684
billion from the initial amount IDR 7,189 to IDR 23,073 billion.----------------
The Market Power Empowerment of Telkomsel in Restraining its Competitors-------------
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186. The huge power of Telkomsel is used to restrain its competitors in the
relevant market that decrease competition level. Telkomsel owns power to
threaten other operators that decrease their tariff by delinking the
interconnection relation. ---------------------------------------------------------------
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187. The interconnecting searcher operators have unbalanced bargaining position
with Telkomsel and to follow the will of Telkomsel in order to avoid
delinking of interconnection relation. -----------------------------------------------
188. Such constraints are stated in the agreement between Telkomsel and other
operator on interconnection that arrange SMS tariff of interconnection
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searcher not to be lower than SMS tariff of Telkomsel. Although the
agreement has already revoked it indicates that by its market power
Telkomsel restraints its competitor and arranges SMS tariff.---------------------
189. There is an interconnection constraint conducted by Telkomsel to new
operator to fulfill the traffic as high as 48 Erls, a requirement that is hard to
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be accomplished by new operators. Another constraint is the obligation to
hire third party that is appointed by Telkomsel in building interconnection
link. As a result, it significantly increases an expense for interconnection
searcher. The ownership and operating the link will be possessed by the
third party and Telkomsel and not possessed by interconnection searcher. ---
Final Impact: Customer Loss -----------------------------------------------------------------------

190. The tariff, higher than other countries and cost as well as a high EBITDA
has created fewer actual customer surpluses than customer potential surplus,
the condition recognized as customer loss.------------------------------------------
191. To measure customer loss is by estimating elasticity or slope quantity from
demand function. Industrial demand elasticity is obtained from amount of
tariff that is an average of three types of tariff type (PSTN, intra operator,
inter operator) and weightened average of any tariff charged by operators
and amount, a number of call estimated from total revenue.----------------------
192. The following is a prediction of tariff and quantity represented by cellular
industries within 2002-2006,----------------------------------------------------------
A prediction of price and market quantity

TR P1wa P2wa P3wa P Q
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2002 12,975.01 1172.062 1250.48 1334.994 1252.512 10.95792
2003 18,461.76 1155.699 1231.061 1176.942 1187.901 16.6864
2004 24,635.63 1172.702 1172.559 1167.9 1171.053 22.70211
2005 32,734.25 1153.957 1112.646 1083.231 1116.611 31.0301
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2006 42,809.89 1135.922 1091.517 1043.633 1090.357 41.41704
Where TR is total revenues of cellular, P1wa is a weightened average of PTSN

tariff, P2wa is a weightened average of intra operator, P3wa is a weightened
average of inter operator tariff, and P is mean value with the same amount of the
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average of P1wa, P2wa and P3wa. Q is a value of cellular service quantity
counted by considering the condition of TR = P X Q. -----------------------------------
193. Based on the value of P and Q, demand elasticity can be predicted as

follows:
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Elasticity of average price, tariff of PSTN, intra operator and inter operator
Year Elasticity e PSTN e intra e inter
2003 -10,13 -31.7327 -28.6754 -5.18575
2004 -25,42 21.41552 -8.43809 -44.8707
2005 -7,89 -21.9165 -7.83397 -5.96713
2006 -14,24 -21.0233 -17,542 -9.7775
Average -14,42 -13,3142 -15,6223 -16,4503
194. In average, the demand elasticity is -14.42 that means very elastic but it
could be higher than the actual one due to annual data only available.
Whereas, there could be a demand-shifting caused by the fluctuation of
economics condition or public income. As a result, the actual elasticity
could turn to be far more inelastic. ---------------------------------------------------
195. With this elasticity number, customer loss can be predicted by comparing
tariff and other price of competitive quantities Indonesia that are acceptable
to be a benchmark (prices in other countries, recommendation quantity of
OVUM). The study of customer loss uses an average price of 2006 as
primary data. Nevertheless, the actual elasticity could be far more inelastic
from those of predicted with annual data. The result of customer loss
suffered by consumer is higher than those of counted by using elasticity.------
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196. Based on intra operator tariff, comparing to other countries the consumer
loss is as follow: ------------------------------------------------------------------------
Customer loss
Country P Q
(Billion)
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Indonesia 1091.517 39.22054
Brunei 289 448.8093 195826.1183
Thailand 524 328.8699 104448.8089
India 475 353.8786 121176.1478
Singapore 924 124.7179 13731.23928
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Vietnam 737 220.159 45977.22768
The annual Indonesia costumer loss is IDR 195.8 if the competitive price is as it
valid in Brunei, IDR 104.4 Trillion in Thailand and IDR 121.2 Trillion in India
respectively. ------------------------------------------------------------------------------------
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197. Based on inter operator price, comparing to other countries the consumer
loss is as follows: -----------------------------------------------------------------------
Country P Q Customer loss

(Billion)
Indonesia 1043.633 41.02005
Brunei 577 301.5362 79924.07284
Thailand 524 331.1255 96689.60795
India 518 334.4752 98686.41018
Singapore 924 107.81 8902.51204
Vietnam 819 166.4303 23300.12651
The annual Indonesia costumer loss is IDR 79.9 trillion if the competitive price is
as it valid in Brunei, IDR 96.7 trillion in Thailand and IDR 98.7 Trillion in India
respectively. The lowest Indonesian consumer loss is only 89 Trillion if it is
compared to the valid price in Singapore. -------------------------------------------------
198. If it is compared to the price of PSTN interconnection as it recommended by
OVUM, the consumer loss will reach to IDR 11.9 trillion annually, and if it
is compared to the price of to price of interconnection as it recommended by
OVUM, the consumer loss will reach to IDR 76.8 Trillion
199. A weighted mean value of any tariffs cannot be considered because there is
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no data of “competitive” price which is equivalent to a weighted mean value
used as benchmark. Considering that the mean value is in accordance with
central limit theorem, the result of customer loss calculation with a weighted
mean value produce a value between customer loss calculation and other
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prices, not too high or too low. -------------------------------------------------------
200. Based on the calculation by using some scenarios and benchmarks, from
2003 to the end of 2006, the excessive pricing of cellular service market in
Indonesia caused consumer for at least IDR 35.6 trillion or IDR 783.3
trillion at the farthest. ------------------------------------------------------------------
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201. As another comparison, the research conducted by LPEM 77 described a
customer loss over the excessive pricing charged by cellular operators in
Indonesia. The study compares the retail price of cellular service in
Indonesia with those in neighboring countries that are assumed to have
economic condition equal to Indonesia. The calculation is conducted by
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comparing price as it is demand curve that its inclination represented by
arch elasticity.---------------------------------------------------------------------------
202. The calculation result in the research also shows customer loss in cellular
telecommunication service industry in Indonesia. ---------------------------------
203. Through financial analysis that is based on an acceptable quantity of ROE,
Telkomsel potentially reduce its price as it previously described. Based on
the potency of price reduction counted by the same method, the customer
loss of Telkomsel in 2003 to 2006 can be gained by measuring the
difference between actual revenue and potential revenue:
Table of Customer Loss of Telkomsel from 2001 to 2006

The Customer loss (In Billion rupiah)
Value 2003 2004 2005 2006 Total
of ROE
77
LPEM, Final: A Study on Consumer Loss Due to Unfair Competition in Celular Phone in Indonesia (Studi
Mengenai Kerugian Konsumen Akibat Persaingan Usaha Tidak Sehat di Industri Telepon Seluler di Indonesia),
LPEM, Jakarta, 2007.
20% 3257.32377 3953.197 7289.087 9578.584 24078.19
25% 2485.15471 2936.246 6021.109 7895.98 19338.49
30% 1712.98565 1919.295 4753.131 6213.376 14598.79
35% 940.816592 902.3442 3485.153 4530.772 9859.086
204. With the value of ROE 20% and 25%, from 2002-2006 the total customer
losses of Telkomsel were more than IDR 24 trillion and IDR 19 trillion
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respectively. With the value of ROE 30% and 35%, the total customer loss
of was more than IDR 14.5 trillion and IDR 9.8 trillion.--------------------------
The Prediction of Cellular Industry with the absence of Temasek Cross-
Ownership
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205. The cross-ownership has weaken closest rival from dominant player to
compete tightly. It decreases a competition. With the absence of cross-
ownership, it is predicted that cellular market industry will be more
competitive. It can be seen from many aspects, such as the building of BTS,
market concentration, price fixing, competition, degree of customer loss and
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finance performance. ------------------------------------------------------------------
206. Without building BTS, the closest rival of Telkomsel cannot grab market
share of Telkomsel as a dominant company. --------------------------------------
207. The more closest rival company grab market share of dominant company,
the lower market concentration occurs.----------------------------------------------
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208. The more un-concentrated industrial structure, the lower dependency of
companies to the decision of dominant company. Companies will grab
market share and keep its position so that market price will become lower. ---
209. If companies within oligopolistic market own similar market shares, they
will compete by approaching better to Cournot-Nash pattern. The influence
will decrease price because the function of industrial demand and industrial
demand is getting wider.---------------------------------------------------------------
210. The absence of Cross-Ownership will automatically decrease GHHI to the
lower concentration. As it is shown by the value of GHHI in 2002 in which
cross ownership was absent. The low concentration, caused by competition,
will bring values of HHI or GHHI go down to lower values.---------------------
211. Since companies’ behavior are equal with Cournot-Nash, competitive in
oligopolistic market, the level of GHHI or HHI will go down close to “equal
size” as it described in the picture above, go down to level 3333 if the
amount of the companies are 3. With the model of Parker & Roller, the
value of θ decrease from 0.61 to equal 1/N, or 1/3 because the competition
is in accordance with Cournot-Nash -------------------------------------------------
212. The more competitive, the lower price will be created because of the
changes of structure and behavior. ---------------------------------------------------
213. The lower market price will increase consumer surplus and decrease
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customer loss significantly. It automatically influence the consumption of
Indonesians because it improve public consumption toward other goods that
in macro increase economic growth in other sectors and improve public
utilities; ----------------------------------------------------------------------------------
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IV. Conclusion; -------------------------------------------------------------------------------------------
1. The structure of cross-ownership between Telkom and Indosat in cellular

telecommunication industry in Indonesia has been cancelled by government as a
follow-up of Ministerial Decree No.72/199 in the form of ownership swap
between Telkom and Indosat to Telkomsel and Satelindo in 2001;---------------------
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2. The divestment of Indosat by government in the end of 2002, lead a cross
ownership of Indosat to STT, a subsidiary of Temasek. The result of the analysis
has proved that Temasek has a capacity to control Telkomsel and Indosat, inviting
cross ownership at market of cellular telecommunication in Indonesia formed
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[again]; ------------------------------------------------------------------------------------------
3. Cross-Ownership creates high concentration of industrial structure and market
power as well as decrease competition. The deed of cross-ownership conducted by
Temasek violates Article 27.a of the Law No.5/1999 ; -----------------------------------
4. Although it keep on under tariff cap fixed by government, however, the tariff fixed
by Telkomsel is excessive; -------------------------------------------------------------------
5. The use of market power by Telkomsel, decreasing competition and creating
excessive pricing in cellular telecommunication service in Indonesia violates
Article 17 paragraph (1) and Article 25 paragraph (1) of the Law No.5/1999 ; -------
19. Considering that there was a Examiner Team member, Dr.Ir.Benny Pasaribu that
expressed his opinion. ------------------------------------------------------------------------------
1. Concerning Cross Ownership; ---------------------------------------------------------------
a. I do not find any evidence that Reported Party II, Reported Party III, Reported
Party IV and Reported Party V performed cross ownership because they are
not shareholders of PT. Indosat and PT. Telkomsel; ---------------------------------
b. I do not find any evidence that Reported Party IV and Reported Party V
performed cross ownership because they only have share of PT. Indosat and
PT. Telkomsel but they are not shareholders of PT. Telkomsel;--------------------
c. I do not find any evidence that Reported Party VII performed cross ownership
because they are not shareholders of PT. Telkomsel and in PT. Indosat;-------
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d. I do not find any evidence that Reported Party IX performed cross ownership
because they I do not find evidence that Reported Party IX conducts cross
ownership because they only have shares in PT. Telkomsel, but not in PT.
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Indosat; ------------------------------------------------------------------------------------
e. I do not find any evidence that Reported Party I performed cross ownership
because they do not have share of PT. Telkomsel and PT. Indosat;----------------
2. Concerning majority share ownership (in this case ownership of majority share is
above 50 percents in accordance with the Law No. 1/ 1995 on Limited Company
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Article 15 of the Law No. 8/ 1995 on Capital market, Jurisprudence of the case
No. 05/KPPU-L/2002 on Cineplex, and Expert as it is in Annex):----------------------
a. I do not find evidence of majority share ownership by Reported IV and
Reported VII in PT. Indosat because its share ownership is under 50%, the
Reported Party VI has only 39.96% and Reported Party VII 0.86%; --------------
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b. In my opinion, if the understanding of majority share is the ability of
shareholders to control a company, then I do not find that Reported Party VI
and Reported Party VII control PT. Indosat. In fact, the Government of
Indonesia (represented by State Minister of BUMN) still has shares of A serial
with a Veto right as it is mentioned in the Statutes of PT. Indosat and it is
also a fact that the composition of Board of and Board of Directors are the
proposal of the Government of Indonesia, including the President Director of
PT. Indosat;
c. I do not find evidences of majority share ownership by Reported Party IX in
PT. Telkomsel because its share ownership is under 50%, that is 35%; -----------
d. In my opinion, if the understanding of majority share is an ability of
shareholders to control a company, then I do not find that Reported Party IX
controls PT. Telkomsel. The fact is that PT. Telkom controlled PT. Telkomsel
because PT. Telkom owns majority share, 65% and it is also a fact that the
composition of Board of commissioner and Board of Directors facts its also
that composition and Board of Director PT. Telkomsel are the nomination of
PT Telkom, including its President Commissioner and Managing Director of
PT. Telkomsel; ----------------------------------------------------------------------------
3. Concerning Business Actor and Group of Business---------------------------------------
a. In my opinion, the Law No. 5/1999 on the Prohibition of Monopoly
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Practice and Unfair Competition clearly defines Business Actor as it is
regulated in Article 1.5 that it has no legal basis to use Group of Business
and/or ultimate parent. Therefore, Group of Business is not Business Actor as
it mentioned in Article 1 of the Law.5/199. It also clearly expressed by
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Hikmahanto Juwana, PhD on page 13-14 in its article dated 30 August 2007
on Legal Statement legalized by Notary and submit to KPPU office; -------------
b. I do not find any evidences that PT. Telkomsel is a subsidiary a company
owned by Reported Party IX. In fact, PT. Telkomsel is a subsidiary and
controlled by PT. Telkom as a majority shareholders . So, PT. Telkomsel and
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PT. Indosat are not a group of business as it stated in Article 27.a of the Law
No.15/199 ----------------------------------------------------------------------------------
c. “I do not find any evidence that Reported Party I to IX are business actors as
referred to Article 1 item 5 of the Law No.5/1999. The fact is, the Reported
Parties are corporate bodies that are founded and domiciled not in the
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territorial jurisdiction of the Republic of Indonesia. Several Reported also do
not perform business activity or business transaction in the area of cellular
telecommunication in Indonesia. Although Reported Party VI and VII own
shares in PT. Indosat and Reported Party IX owns shares in PT. Telkomsel,
they are improvable to conduct transaction of cellular telecommunication
goods and/or service in Indonesia. The shareholders are un-provable to
conduct and/or take cellular business decision. The fact, its market also
differs: stock exchange activities in capita market and cellular business in
goods and service market – often called also as “real sector”. There are also
fact that board of commissioner and board of director of PT. Telkomsel and
PT. Indosat that conduct operational activity and take decision on cellular
telecommunications business in Indonesia, not shareholder or the Reporteds.”
4. Concerning Cellular Concentration Industry; ----------------------------------------------
I do not find any evidence that the high industrial concentration of cellular in
Indonesia caused by share ownership of Reported Party VI and Reported Party
VII in PT. Indosat and share ownership of Reported Party IX in PT. Telkomsel.
The fact, in 2004-2006, market shares of PT. Indosat continues to decrease while
market share of PT. Telkomsel controlled by PT. Telkom improves (see item 60
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the Report of Case Follow-up Investigation Result No. 07/KPPU-L/2007). The
high industrial concentration of cellular is calculated on the basis of HHI
(Herfindahl Hirschman Index) exists also in most part countries in the world,
including Asia (data at item 133 the Report of Case Follow-up Investigation
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Result). The Indonesian HHI is lower than other countries such as Thailand,
Philippines, Malaysia, Bangladesh Pakistan, and China. It is normal because
almost all cellular telecommunication industry around the world is highly
regulated. Even several government in most countries in West Europe limit a
number of cellular telecommunication company that make the industrial
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concentration high. (see page 41-42 Legal Opinion of Cr. Cento Veljanovski that
sent to KPPU date 27 August 2007). The Government of Indonesia has given
permission to at least 9 companies, the biggest in Asia; so it is relative
competitive in the world; ---------------------------------------------------------------------
5. Concerning Tariff; -----------------------------------------------------------------------------
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a. I do not find any evidence that the high tariff fixed by PT. Telkomsel and PT.
Indosat as a infringement to Article 27 (a) U No. 5 /1999. If tariff is suspected
as a result of cartel, it shall be proven whether or not cartel is. To prove it,
other Articles that regulate cartel such as Article 4, Article 5 and/or any other
Articles can be applied; ------------------------------------------------------------------
b. I do not find any evidence that movement of a common tariff fixed by PT.
Indosat and PT. Telkomsel is a result of cartel or price fixing. In a tight
competition if one company decrease its tariff, of he companies will follow it
in order not to be abandoned by its customer. Chatib Basri, PhD (Director of
LPEM University of Indonesia) also ever states similar thing in mass media
(see Bisnis Indonesia, 25 September 2007, page TI and Rakyat Merdeka, 24
September 2007); -------------------------------------------------------------------------
c. I do not find any evidence that the high tariff fixed by PT. Telkomsel and PT.
Indosat is caused by share ownership of Reported Party VI and Reported
Party VII in PT. Indosat and by Reported Party IX in PT. Telkomsel. The
facts, in 2002 when Reported Party VI and Reported Party VII purchased PT.
Indosat’s shares and Reported Party IX purchased PT. Telkomsel’s shares, the
tariff decreased (See Result Study of LM-FE Padjajaran University Year 2007
on the Development of Telecommunication Industry I in Indonesia, on page
10, Tables 5.10, Enclosed). The research was conducted by LPEM UI an also
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concluded that from 2002 to 2006 the tariff in Indonesia decreased; --------------
d. I do not find any evidence that the high mentioned tariff results to consumer
loss (CL). Its facts is on the contrary. The decrease of tariff and the increase
of a number of customer in 2002-2006 have produced consumer surplus. In
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order to calculate materially, sufficient data are needed to depict demand
function and supply function. Its fact, the existing power is very limited make
it not applicable to calculate intended demand function and supply function.
The extrapolation of CL in the Report of Case Follow-up Investigation Result
No. 07/KPPU-L/2007 by adopting research result of LPEM UI is wrong. In
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the research conclusion of LPEM UI, it clearly expressed that in 2002-2006
consumer surplus increase. It is mentioned further that if it uses tariff that
valid abroad, it cannot be concluded that CL occurs in Indonesia. The word
“if” is equal to “in case of” or “assumption”. So it will never be concluded that
CL occurs in Indonesia. The usage of other country tariff data in calculating
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CL is wrong. Tariff in other country is formed by 2 (two) economic
instrument, the first is demand function/curve and the second is function/curve
supply; both are influenced by expense structure, technology, public
purchasing power and geographical position of each country. Secondly, the
fact that high or low tariff in other countries is influenced by l by government
as a regulator, that shall consider tariff in other countries. The similar opinion
is also suggested in the study conducted by LM-FE UNPAD, dated 30 August
2007 and by Sri Adiningsih, PhD from UGM, dated 10 August 2007; ------------
e. I do not find any evidence that movement of a common tariff fixed by PT.
Indosat and PT. Telkomsel infringe the Government law because it is within
ceiling and floor price fixed by Government under the formula fixed by
Government. When a tariff is too high, government with its authority
Government decrease it, it is not an authority of KKPU RI; ------------------------
6. Concerning the Authority of KPPU of the Republic of Indonesia;----------------------
I have a notion that KPPU RI unqualified to cancel or take different decision from
and/or law action or policy that have been taken by government when conduct
divestment PT. Indosat through tender is opened that won by Singapore
Technologies Telemedia (STT) in 2002, Because, process early divestment is to
scratch government initiative state's finance at that moment (Read Article 50
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items a and Article 51 UU Nos. 5 /1999 arrange exemption); --------------------------
19. Considering that after completing the Extended Follow-up Investigation, Council
session needs to be performed. Therefore, commission issues the Decision of Business
Competition Commission Number: 60/PEN/KPPU/IX/2007 on session of Council
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Case Commission No: 07/KPPU-L/2007 at the furthest of 30 (thirty) workday as from
28 September 2007 to 14 November 2007 and issues Commission Decision No:
169/PIECE/KPPU/IX/2007 on Assignation of Commission Member as Council of
Commission in the Session of Case Council of Commission Number:07/KPPU-
L/2007; ------------------------------------------------------------------------------------------------
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19. Considering that in regard of referring to Eid al-Fitr 1428 H, then on 2 October 2007,
Commission issues Decision Number: 61/PEN/KPPU/X/2007 on the Adjustment of
Case Filling and Handling in KPPU by determining the adjustment of case filling and
handling Number: 07/KPPU-L/2007 on the suspected Infringement of Article 27 (a)
the Law 5 /1999 that jointly conducted by Business Group Temasek and the suspected
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Infringement of Article 17 and Article 25 (1.b) the Law 5 /1999 conducted by PT
Telekomunikasi Seluler, in the stage of Council of Commission Session, that initialy
from 28 September 2007 to 08 November 2007 are adjusted to become 28 September
2007 to 19 November 2007; -----------------------------------------------------------------------
19. Considering that further, on the basis of Follow-up Investigation Report, Council of
Commission has accepted responses of Temasek on 31 October 2007 that in essence
state the following things: ---------------------------------------------------------
INTRODUCTION; ---------------------------------------------------------------------------------
1. First of all, this answer is written under the law of Indonesian law and not under
international law as well as Article in international agreement. To avoid
hesitation, Temasek wants to clarifies that he reserve all existing rights, inter alia,
in the Articles of an agreement between the Government of Singapore and the
Government of the Republic of Indonesia concerning Promotion and Protection of
Investments and Articles in an agreement between the Government of Brunei
Darussalam, Republic of Indonesia, Malaysia, Philippine Republic, Republic of
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Singapore, and the Kingdom of Thailand on Promotion and Protection of
Investments or in other international stipulation and the plea of is submitted
without prejudicing to that matters; ---------------------------------------------------------
2. Secondly, this plea refers to several documents and not to the whole existing
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documents and submit to KPPU by other Reported Parties, or other witnesses of
third parties whoa re summoned by KPPU to submit evidences upon them. The
case document of this lawsuit of KPPU is publicly to be accessed Indonesian
law consultant of Temasek (Lubis Santosa & Maulana Law Offices) for the first
time in October 2007, and available only in a couple days. Further, the lawsuits
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are great in number and mostly written in Indonesian, therefore translator is
needed because Temasek does not have much time to discern and refer to the
lawsuit of KPPU, Temasek reserves all its rights over the documents in time and
after the forum dismissed; --------------------------------------------------------------------
3. Thirdly, the plea is without prejudice over the objection of Temasek on the
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Jurisdiction and complaint on the basis of ultra vires, the violation of due process,
the law and regulation, and fundamental values in Indonesian law including
Indonesian Constitution. The further description in the part of (The absence of
Shareholders of Majority Shares and (Abuse and Due Process) is as follow; ---------
THE FACTS AS BACKGROUND;-------------------------------------------------------------
4. Different with those of accused by KPPU, Temasek, directly of indirectly or
through its subsidiaries, does no any activities in the relevant market . In this part,
the history and business of Temasek as well as the investment of Reported Party 2
to 9 in the sector of Telecommunication perform or have capacity to control
whatsoever on Indosat or Telkomsel; -------------------------------------------------------
Temasek and Reported Parties 2 to 9;----------------------------------------------------------
5. Temasek is an Asian Investment company that was founded and has a headquarter
in Singapore. Temasek is state-owned company of the Government of Singapore
through Minister of Finance (Incorporated), an entity of “subject (persona)” of
law, separated form the functionary of Minister of Finance; ---------------------------
6. It is founded in 1974, Temasek manages by itself any various portfolio investment
s globally with the values of more than S$160 billion (USD 100 billion),
especially in Singapore, Asia and OECD countries. Temasek’s investment s are in
any various industries such as telecommunications and media, finance service,
property, transportation and logistic, energy and resources, infrastructure,
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engineering and technology, and pharmacy and bioscience. Although Temasek is
state-owned company, it perform its business independently under commercial
basis; --------------------------------------------------------------------------------------------
7. With the various type of industries in which Temasek invests to and also a
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number of its subsidiaries, it is impossible for Temasek to give directives or to
coordinate commercial and operational decisions to direct or indirect subsidiaries,
the things that has never performed by Temasek; -----------------------------------------
8. STT is a company founded in Singapore and owned entirely by Temasek. STTC is
a subsidiary that is owned entirely by STT, it is also founded in Singapore;----------
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9. AMHC is founded in Singapore and a subsidiary that is owned entirely by STTC.
The objective of establishing AMHC is to conduct a joint venture with Qatar
Telecommunications QSC (“Qatar Telecom”), an exclusive telecommunications
operator in Qatar in which 55% of its shares owned by the Government of Qatar.
Qatar Telecom is enlisted at Kuwait Stock Exchange, Abu Dhabi Securities
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Market, Bahrain Stock Exchange, Doha Securities Market and London Stock
Exchange;---------------------------------------------------------------------------------------
10. The joint venture company is founded in Singapore by the name of AMH. Qatar
Telecom controls 25% of AMH shares, while the rest 75% of its shares owned by
AMHC; -----------------------------------------------------------------------------------------
11. AMH has ICL and ICPL. ICL is a company founded in Mauritius and ICPL in
Singapore. ICL and ICPL jointly own 41.94% shares in Indosat. The picture
describing shareholder structure of Indosat is passed to Evidence A; -----------------
12. In this plea, STT, STTC and AMHC is about to be referred to as “STT Group A”.
AMH, ICL and ICPL will be conceived of “STT Group B”; --------------------------
13. SingTel is company that founded and has main office in Singapore. SingTel
enlists in Singapore Exchange and Australian Stock Exchange, and also is biggest
company that enlisted there with market capitalization (market capitalization)
more than S$40 billion. Temasek owns 54.15%
14. SingTel Mobile is a company founded in Singapore and owned entirely by
SingTel . SingTel Mobile controls 35% shares in Telkomsel. The picture
describing shareholder structure of Telkomsel will be passed to Evidence B; -------
15. In its third report, KPPU alleges Temasek, together with Reported Parties 2 to 9
forming “Temasek”. In particular, KPPU states in its allegation that: -----------------
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(a) The Statutes of Reported Parties 2 to 9 show a control of Temasek to
Indosat and Telkomsel. It is based on the authority given to each company
as it stated by their related Statutes to appoint and to dismiss directors of
its subsidiaries;------------------------------------------------------------------------
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(b) In the case, Temasek as a holding company controls its other subsidiaries
through STT and SingTel. It is seen by double position, occupied by director
and management of Temasek and Reported Party 2 to 9; -------------------------
16. All KPPU’s allegations are unreasonable. The companies, suspected to be part
“Temasek Business Group” is a separated corporate body that is managed
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independently and no other “Business Group” at all;-------------------------------------
17. STT Group A and STT Group B have submitted “Commentary on the
Competition Law, the Law Concerning the Prohibition of Monopolistic Practices
and Unfair Competition)” (2nd edition, 2000) written by Knud Hansen
(“Hansen’s Comments”). According to Hansen’s Comments, under the Law of
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Indonesia there must be a certain characteristic of a company prior to be stated as
a group.; ---------------------------------------------------------------------------------------- ;
18. The characteristics have been concluded in the plea of STT Group A and Group
B dated 14 September 2007, paragraph 46 and 27, cited as follows: -------------------
(a) The presumption that subsidiary shall be under the same management of the
holding company, in which plans are arranged connectively with all
subsidiaries;------------------------------------------------------------------------------
(b) The plan of holding company for its subsidiaries must cover center of
subsidiaries’ economic activity of the suspected company, and; -----------------
(c) There must be a prohibition for the presumed subsidiary to refuse its
management policies; ------------------------------------------------------------------
19. The copy of the pleas of STT Group A and STT Group B can be seen in The
lawsuit of KPPU ; -----------------------------------------------------------------------------
20. In other word, the ownership of the same shares is insufficient evidence to state
that a company is part of a Business Group. There must be an evidence that the
management is under the same policy including a coordination of central
economic activities of the Business Group;------------------------------------------------
21. Previously, to state that a Business Group exists, KPPU undergirds its suspicion only
on “ownership relationship” among entities in “Temasek Business Group”. In part B of
the Second Report, KPPU states that: -------------------------------------------------------------
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“This ownership relationship is considered as ‘Temasek Business Group’
by investigator. The Business Group included are Temasek Holdings Pte Ltd
and all subsidiaries as well as Telkomsel and PT Indosat Plc.;-------------------
Although Temasek Holdings Pte Ltd always answer back that it has control
over the decision-making and diary management of its subsidiaries …
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Temasek does not deny that Temasek Holdings is the owner of all
subsidiaries. Later, rational business actor will always try to maximize its
profits including the profits of its subsidiaries. In this context, Temasek
Holdings Pte Ltd has significant interest to the performance of its
subsidiaries to gain maximum profits; -----------------------------------------------
The management of Temasek subsidiaries shall realize to such interests and
perform their obligation to shareholders. Therefore, , the interests of
shareholders automatically become a main focus of management in its
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business activity. This condition constitutes an opinion that shareholders
represent its economic interest in whole; therefore, the anti-trust law sees
ownership structure as it illustrated above a single economic entity; ------------
22. The understanding of KPPU on Business Group is not true. If the requirement of a
separated corporate body to be considered as Business Group is only “ownership
relationship” (and, according to KPPU, even need no majority ownership), then
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all companies that have the same shares of a company will be considered to be
part of Business Group. In logic and in principle, it is also not true; -------------------
23. The affirmation of KPPU that a view of a subsidiary to the interests of its
shareholders in maximizing profits as an evidence of “common economic
interests” is also a mistake. It is admitted by KPPU that all rational business
actors will try to maximize profits from its subsidiaries. All companies will
calculate its the interests of shareholders. If KPPU is right and “shareholders
represent common economy interests”, all companies will be a part of other
Business Groups. In logic and in principle, it is also not true;---------------------------
24. As it is stated in Hansen’s Comments, a Business Group needs an evidence
concerning common management including central economic plan;-------------------
25. In this case, there is no evidence indicating that Reported Parties 2 to 9 under the
same management of Temasek or forming a single economic entity with it
centralized economic activities coordinated by Temasek. The only relationship
between Temasek and Reported Parties 2 to 9 are share ownerships STT and
SingTel by Temasek; -------------------------------------------------------------------------
26. Furthermore, the entity that is suspected as “Temasek Business Group” has
submitted evidences that Temasek does not control, manage, influence or
coordinate its policy and operational decisions. The Board of Directors and
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management of the companies perform their businesses separately from Temasek; -
27. Mr. Goh has stated in written to KPPU on 15 May 2007. It is stated by Mr.Goh in its
statement in paragaraf 33 to 35 that:
“In its policy and practices, Temasek does not direct commercial and
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operational decisions of the companies in which Temasek owns their shares. -
Articles of faith and the policies of Temasek concerning such matters has
been recognized and confessed by international high reputed institutions that
take parts in scrutinizing the steps of Temasek. They acknowledge the
policies and performances of Temasek. Take as an example the Report
Rating Standard & Poor 2006, it states that: ----------------------------------------
“Temasek continues to effort its performance and to establish fair
competition among its companies [related to Temasek] by appointing
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qualified board of directors …. Temasek keeps on staying away from the
decision-making of diary policies ----------------------------------------------------
In line with such a statement, the Report of Moodys Investor Services
Rating also state the same thing about Temasek that: -----------------------------
“In any company in which Temasek has its investment, it is managed by its
management guided by Board of Directors. Temasek stays away from any
commercial and operational decicions of the companies Temasek invests;-----
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28. The copy of Mr. Goh’ statement can be found in The lawsuit of KPPU .
29. In the session of KPPU on 13 August 2007, KPPU expresses some questions aiming at
affirming that Temasek controls or influences board of directors and management of
STT and SingTel as well as its subsidiaries. It is denied by Mr.Goh and testifies as
follows: ------------------------------------------------------------------------------------------------
“Q. Does Temasek involve in the decision-making and management of STT

and SingTel ? -----------------------------------------------------------------------
A. No. Temasek does not involve in business operation and decision making
conducted by board of directors and its management--------------------------
Q. Do STT and SingTel report their investment growth to Temasek
annually? ----------------------------------------------------------------------------
A. No, they do not report to Temasek-----------------------------------------------
Q. As a business actor and Temasek as an owner of SingTel and STT. What
is the obligation of SingTel and STT to Temasek-----------------------------
A. SingTel and STT treat Temasek as the same as other shareholders . -------
Q. Logically, Temasek as an owner has privileges rights to SingTel and
STT. Would you please help us in giving the explanation to this? ----------
A. SingTel and STT have obligation to Temasek as the as the obligation of
other shareholders. -----------------------------------------------------------------
Q. Would you please describe the rights of Temasek as an owner of
SingTel and STT ------------------------------------------------------------------
A. I want to reiterate that both companies treat Temasek the same as other
shareholders, our rights is the same as other companies’ rights -------------
Q. Would you please explain the rights of Temasek as an owner of 100%
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STT shareholders? -----------------------------------------------------------------
A. As I have already reiterated, STT is a company in which we invest. We
see our investment from the perspective of finance. We do not get
involved in the operation and decision of the companies, conducted by
board of directors and management of STT. Our rights does not differs
from other shareholders’ rights. We have rights to attend shareholders
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general meeting RUPS and have voting rights. --------------------------------
Q. Among other names who are already mentioned, do they work for STT
and SingTel ? -----------------------------------------------------------------------
A. There is no name mentioned who serve in board of directors of STT, but
one, Simon Israel. He serves as board of directors of SingTel . However,
he has been serving as board of directors of SingTel before joining
Temasek. ----------------------------------------------------------------------------
Q. Does one of them work for STTC? ----------------------------------------------
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. A. No -----------------------------------------------------------------------------------
Q. Are they working for AMH? ------------------------------------------------------
A. No -------------------------------------------------------------------------------------
Q. Are those mentioned working for AMHC?--------------------------------------
A. No -------------------------------------------------------------------------------------
Q. Are those mentioned working for ICL? ------------------------------------------
A. No -------------------------------------------------------------------------------------
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Q. Are those mentioned working for Indosat? --------------------------------------
A. No -------------------------------------------------------------------------------------
Q. Are those mentioned working for SingTel Mobile? ---------------------------
A. No -------------------------------------------------------------------------------------
Q. Are those mentioned working for Telkomsel? ----------------------------------
A. No -------------------------------------------------------------------------------------
Q. Is it correct that Ho Ching is currently serving as Executive Vice
President in STT and STTC? -----------------------------------------------------
A. No -------------------------------------------------------------------------------------
Q. Do the management of SingTel and STT assigned by Temasek?------------
A. No -------------------------------------------------------------------------------------
Q. Who does assign its director? -----------------------------------------------------
A. Any of the RUPS--------------------------------------------------------------------
Q. The shareholders of STT none but Temasek, it means Temasek appoint
the director of STT?---------------------------------------------------------------
A. No. STT is an independent company, in which the election of director
conducted by the RUPS of STT. These directors are elected by an
election committee of STT and not by Temasek. Temasek only have
voting right in the RUPS ----------------------------------------------------------
The copy of the session of Temasek in KPPU on 13 August 2007 can be seen in The
lawsuit of KPPU . ------------------------------------------------------------------------------------
30. Thereby, Temasek performs no coordination in any decision and policy (on
economy or others) in the company/entity that is assumed as“Temasek Business
Group”. This companies are not under Temasek’s management and central
economic activities directed a guideline of company’s activities. ----------------------
31. On the contrary, there are a lot of evidences that show the fact STT and SingTel
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compete each other in Singapore and other countries around the world. It indicates
that Temasek does not have ability to coordinate with the activities of STT,
SingTel and its subsidiaries to gain economic advantages. -----------------------------
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32. It can be seen in paragraph 58 of the plea of STT Group A and paragraph 34(d) of the
plea of STT Group B, STT and SingTel have already compete each other:-----------------
The fact that Temasek conduct no coordination on central economic

activities as it suspected as part of “Temasek Business Group” is seen
clearly from the tight competition of the companies as well as a the two
chains as it suspected as “Temasek Business Group”. The good Example is
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competition between STT Group A and SingTel : --------------------------------
(a) The indirect telecommunications interest of STT Group A in Singapore
consist of 50% its share (through AMH) in StarHub Ltd. (“Starhub”) and
indirect telecommunications interests in Indonesia that consist of its
share (through AMH/ICL/ICPL) in Indosat. SingTel , listed subsidiary
of Temasek, is a telecommunication operator in Singapore its indirect
telecommunication interests in Indonesia consists of indirect shares in
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Telkomsel. Therefore, STT compete with SingTel not only in Indonesia
but also in Singapore --------------------------------------------------------------
(b) In Singapore, SingTel competes with StarHub. The evidences
concerning their competition are: ------------------------------------------------
(i). In 2005, SingTel brought a lawsuit against StarHub Cable Vision
Ltd (“StarHub Cable”), a subsidiary of StarHub. SingTel alleged
StarHub Cable conducting non accomplishment with a network
lease agreement in which SingTel has agreed to lease its optical
network infrastructure to StarHub Cable. According to SingTel ,
the company had lost its profits because StarHub Cable had not
deliberately complied the agreement by using the infrastructure to
supply properties that exempted from the agreement. The litigation
process between the two parties is conducted and SingTel submit
the lawsuit to Court of Appeal, the Highest Court of Appeal in
Singapore. An amount of damage StarHub has to pay to Starhub to
SingTel is determined by the court. The nature shows the bitter
competition between SingTel and no out-of-court settlement
performed by SingTel and StarHub.
(ii) There is also a regulative intervention in the competition between
SingTel and StarHub. Since liberalization of telecommunication
regime Singapore, Info-communications Development Authority
(“IDA”), the independent telecommunication regulator in
Singapore, has intervened at least 30 disputes reported cases
between SingTel and StarHub concerning allegation and disputes
on the interconnection appealed by the parties. The number of
reported disputes, indicates the presence of fair competition. To
the present time, as far as our knowledge, there is no allegation on
anti-competition in which SingTel and StarHub alleged to
cooperate each other shall be considered by IDA.-----------------------
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(iii) The above description on jurisdiction and regulation process show
there are tight competition between the companies to which
Temasek has interest on the two companies. In the plea of STT
Group A, it is stated that such a nature is real facts of the reality
from separateness and differences of economic interest of the
companies---------------------------------------------------------------------
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(iv) The competition between SingTel and StarHub varies, depending
on the spectrum of the parties’ business. At this time, SingTel has
already include pay television market to compete directly with
business of cable television that has been operated by StarHub
since 1995. No collusive practices between the two operators” -------
33. In paragraph 56 of STT plea, it has been stated that STT Group A operates
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independently separated from SingTel and had no interests in SingTel or its
subsidiaries.-------------------------------------------------------------------------------------------
“Director of and management of STT/STTC/AMHC (if relevant) are not

directors or employee of SingTel , SingTel Mobile, Telkomsel or PT
Telkom because of the independency of the company. STT does not own
shares or indirect interest at all to SingTel , SingTel Mobile, PT Telkom or
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Telkomsel. -------------------------------------------------------------------------------
34. In Paragraf 34 of the plea of STT Group B, it has been stated that there is no similar
policies between STT Group B, SingTel and its subsidiaries :--------------------------------
“The activities of STT Group B and the companies that own its investments,
Indosat and StarHub, do not have the same and similar management or
plans, unity of objectives between STT Group B and Temasek as well as its
interests in SingTel , SingTel Mobile, and Telkomsel. ---------------------------
(a) STT Group B has neither shares nor rights in Telkomsel, PT Telkom,
SingTel , dan SingTel Mobile. Thus, STT Group B does not have
interests in trying to boost up cellular market share of Telkomsel or to
improve the performance of Telkomsel by sacrificing Indosat. -------------
(b) STT Group B firmly denied an assumption that Temasek has used STT
Group B as an instrument to coordinate its economic activities in cellular
industry in Indonesia or other countries. The denial is supported by the
facts that the tight competition between Indosat and Telkomsel in
Indonesia occurs as it is between StarHub and SingTel in Singapore.------
35. Widya Purnama (“Mr. Purnama) as the President Director of Indosat in 2002 to
2005 gives his statement to KPPU (combined with the written plea of STT Group
A). In paragraph 14 and 20 of the statement, he confirms that Indosat and
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Telkomsel had never colluded each other and oppressed by Temasek to regulate and
to fix price: ---------------------------------------------------------------------------------------
“I understand if there are many questions concerning whether or not
collusion in fixing price between Indosat and Telkomsel. In my whole
career in Indosat, there is no collusion between Telkomsel and Indosat.
There are no directives from ICL, STT or Temasek concerning price fixing.
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I have never been asked to cooperate with Telkomsel in my whole career in
Indosat. We compete each other in running business.”----------------------------
The copy of the statement of Mr. Purnama can be found in the lawsuit of KPPU .
36. In paragraph 24 and 26 of Mr. Goh’s statements, he also confirms that Temasek has
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never and had capacity to instruct or to coordinate with the operational decisions s of
STT, SingTel , Indosat and Telkomsel. -----------------------------------------------------------
“Temasek does not instruct or coordinate commercial and/or operational

decisions of SingTel and/or STT, especially those of Indosat or Telkomsel.
By all means, Temasek does not have capacities or ability to establish anti-
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competition in relevant market .”
37. Temasek even does not supervise individual investment s performed by STT and
SingTel . Temasek only concerns on the financial performance of STT and
SingTel as a whole. Temasek does not have rights and deserve to accept detailed
reports from STT, SingTel or their subsidiaries concerning company’s status to
which Temasek had invested such as Indosat and Telkomsel. --------------------------
38. During a session in KPPU on 13 August 2007, Mr Goh explained that Temasek apply
“Total Shareholder Return” to evaluate performances of companies to which Temasek
holds their shares. The performance of a company becomes a basis for Temasek to
invest. In this case, Temasek as a shareholders of STT and SingTel evaluates the
performances of both company by applying Total Shareholder Return without
concerning to the details of individual investment performed by each company.
“Q. In general, does Temasek satisfy with the performance of SingTel and
STT? ---------------------------------------------------------------------------------
A. Yes, we do. --------------------------------------------------------------------------
Q. What are the reasons? --------------------------------------------------------------
A. The criteria applied to evaluate is Total Shareholder Return (TSR). The
performance of the companies is more than the criteria we qualify ---------
Q. Are there any other criteria? ------------------------------------------------------
A. No -------------------------------------------------------------------------------------
Q. Does a value of TSR 20% reflect the investment of SingTel and STT in
telecommunication sector?--------------------------------------------------------
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A. The value of TSR represents the result of business activity of SingTel
and STT as well as business activities of STT. For example, SingTel has
already invested in Australia, India and Thailand. In addition to invest in
Indonesia, STT does it in United States. Thus, the value of TSR is an
accumulated amount of SingTel ’s investment s and separately, an
accumulated amount of STT’s investment. We only see final TSR and
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not the detailed investment performed by SingTel and STT.” --------------
STT Group A; ----------------------------------------------------------------------------------------

39. The evidence provided by STT Group A also support the facts that Temasek does
not control, manage or influence the operational policy and decision made by STT
Group A ----------------------------------------------------------------------------------------
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40. In paragraph 51 to 55, and 57 of the written plea of STT Group A provided for KPPU,
STT Group A has given the following evidences that Temasek does not control,
manage or influence operational policy and decision made by STT Group A: -------------
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Although STT is a subsidiary owned in whole by Temasek, the shares of
Temasek in STT is only part of diversified portfolio of Temasek as an
investment holding company. Temasek does not have control over
business and/or operational decisions of STT. The decisions are made by
Board of directors and team management of STT/ STTC ----------------------
It is proved by acquiring the shares of Indosat by STT. Acquisition is
authorized by STT Board of director without any agreement conditions
from the shareholders ----------------------------------------------------------------
In line with its Statutes and Singaporean Law (the State law in which
every entity we mentioned as STT was founded), business and STT’s
affairs and STTC are managed or at the directives of their own directors.
Directors perform their authorities on behalf of company unless for those
that require approvals from shareholders.-----------------------------------------
Any companies we called STT Group A is an entity/corporate body
separated from Temasek, while STT/STTC has independent business and
operational activity -------------------------------------------------------------------
Directors and management of STT/STTC and director of AMHC (if relevant) are
not directors or employees of Temasek. ------------------------------------------------------
Directors of STT, STTC and AMHC are obliged to conduct independently and in
good will for STT, STTC and/or AMHC (appropriate for each company) under the
law of Singapore in which STT, STTC and AMHC were founded. STT and STTC
have their own Board of directors, from all over the world that consist of respected
and reputed members. ---------------------------------------------------------------------------
41. During the session in KPPU on 18 June 2007, KPPU asked many questions aiming at
affirming that Temasek is a final decision-maker of the policy for STT, STTC and
AMHC. Such an opinion has been clarified. STT Group A gives the following
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testimonies: -------------------------------------------------------------------------------------------
“Q. To whom you make performance evaluation report of each company

under STT and who is a final decision maker of STT?
A. The final decision maker is STT Board of Director -----------------------
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Q. So, the main policy maker in STT is Temasek?----------------------------
A. No. Temasek is a passive investor. Temasek does not involve in
plans, operating and management of STT. ---------------------------------
Q. Does it mean that Temasek has no voting rights in STT?
does not involve in operational plan and management of STT.
Nevertheless, under the law of Singapore, Temasek has voting rights
in STT. There is no Directors or employees of Temasek in Board of
Director and management of STT, STT Communications and Asia
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Mobile Holding Company.”--------------------------------------------------
The copy of the session official report of STT Group A in KPPU on 18 June 2007
has been available in the lawsuit document of KPPU ------------------------------------
42. The representative of STT Group A, Mr.Stephen Geoffrey Miller (“Mr. Miller”),
has also submit its written statement to KPPU on 18 June 2007, in which he stated
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that STT, STTC and AMHC perform their activities separated from Temasek: --------
“Temasek, STT, STTC and AMHC are managed by Boards of Director
and/or their own managements. The member of Board of Director and
management of STT, STTC and AMHC are not directors or employees of
Temasek. Temasek (in one side) and STT, STTC and AMHC (in the other
side) are operated and managed unconnected. --------------------------------------
STT is a substantive company with its authority, investment and business
interest separated one to another in the regions and all over the world.
Temasek does not control the decision on business, planning and operating
of STT, STTC or AMHC. The decisions are made entirely by Boards of
Director and/or managements of STT, STTC or AMHC. STT, STTC and
AMHC have their own boards of director with their worldwide respected
and reputed members.------------------------------------------------------------------
The copy of Miller’s statement has been available in the lawsuit document of KPPU
43. During the session in KPPU on 27 June 2007, STT Group A testified that there are no
directors or employees of Temasek served as directors of STT, STTC and AMHC: -------
“Q: Is there any directors of STT, STTC and AMHC serving in Temasek
Holding?
A: There is no directors of STT, STTC and AMHC serving in Temasek
Holding?-----------------------------------------------------------------------------
Q: Is there any employees of STTC out of nine directors of STTC who are
also employees of Temasek Holding? -------------------------------------------
A: As long as I know there is no employees of Temasek who are stationed in
STTC” -------------------------------------------------------------------------------
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is available in the lawsuit documents of KPPU. ------------------------------------------
44. It is important to note that in the follow-up investigating session of Mr. Goh on 13
August 2007, he has been specifically asked on whether it is correct or not that
Ms. Ho Ching concurrently serves as Chief Executive Officer of Temasek and
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Vice President of STT and STTC. The answer of Mr. Goh is “no”. Although the
evidences have been gained and they are unarguable, KPPU in its third report
keeps on accusing Ms. Ho Ching for concurrently serving as Executive Vice
President STT. It is an effort of KPPU, in its desperation, to provide “facts” for
the shake of justifying its allegations concerning the “control” on the basis of
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allegation on crossed ownership. ------------------------------------------------------------
STT Group B; ---------------------------------------------------------------------------------------
45. The evidences provided by STT Group B to support a summation that Temasek
does not control, arrange, or coordinate operational policies and decisions of STT
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Group B through STT Group A, directly of indirectly ----------------------------------
46. As it is stated in paragraph 25 above, AMH is a joint venture company between
AMHC and Qatar Telecom. Qatar Telecom owned/controlled independently by
Qatar and it is by any means correlated or controlled by Temasek. --------------------
47. According to the decision of AMH, board of director that consists of representatives
from Qatar Telecom and independent director, is responsible to arrange AMH’s
activities AMH. Temasek and its companies in STT Group A do not control or arrange
such operational activities of AMH . In paragraph 63 and 64 plea of STT Group A, has
been expressed matter as follows: -----------------------------------------------------------------
“AMH has its own board of director that is responsible to manage and to
operate AMH. Qatar Telecom has senior representatives in Board of
Director of AMH. At present, the Qatar Telecom Chief Executive Officer is
the Vice Chairman of AMH Board of Director. There are also several
independent directors in AMH Board of Director or those who do not serve
as directors or employees of STT, STTC or AMHC. AMH Board of
Director does not make decision benefited for STT Group A. The
representative of Qatar Telecom and independent directors within AMH
Board of Director will not let it happen.---------------------------------------------
The board of director is also assisted by Management Committee and
Monitoring Committee. Management Committee is responsible to take care
of AMH diary management and to make recommendation to AMH Board of
Director on strategic planning, financing, treasury and merger and
acquisition. Monitoring Committee is responsible to review regular report
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from every company that invested by AMH which this condition are include
also StarHubdan Indosat. Qatar Telecom has representative
(representatives) in both this committee and active members(active
participant) in business AMH”--------------------------------------------------------
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48. In paragraph 32 and 33 the plea of STT group B, STT Group B has testified or given
the following fact that Temasek does not control, arrange or influence policies and
operational decisions:--------------------------------------------------------------------------------
“Temasek does not control to business and/or operational decision from

STT Group B, directly of indirectly (through STT, STTC or AMHC) ----------
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AMH is an independent company which Temasek does not control.------------
(a) AMH is not owned fully (wholly-owned) by Temasek and/or STT. More
or less 25% its share is owned by Qatar Telecom, Qatar Telecom enlisted
in London Stock Exchange and other Mid-east Stock market, which 55%
of its share is owned directly and also indirectly by Qatar. At present
AMH is a provider of communication service in Qatar, and operates as
well in Kuwait, Saudi Arabia, Tunisia, Algeria and Maldiva through
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51% of its subsidiaries. Wataniya (a company that enlisted in Kuwait
Stock Exchange), and in Oman through 55% its subsidiary , Nawras.
Qatar Telecom is an independent corporate body with its substances and
various interests abroad. As long as I am concerned, Temasek does not
have share at all in Qatar Telecom. ----------------------------------------------
(b) AMH has its own board of director separated from those of Temasek,
SingTel and SingTel Mobile. Particularly, Qatar Telecom has senior
representatives at AMH Board of Director. Chief Executive Officer
Qatar Telecom and Board of Director Vice Chairman Qatar Telecom is
its representative in AMH Board of Director. There are also some
directors in AMH Board of Director that not director or employee
Temasek and/or STT, STTC or AMHC. The decision making in AMH is
taken by its board of director. The Director, as it is a director in other
companies in STT Group B, has an obligation to perform a good will and
for the sake of AMH under the law of Singapore, in which AMH is
founded. Board of Director has to put forward the interests of its
shareholders and not for the advantageous of STT, STTC or AMHC
only. The Director, appointed by Qatar Telecom, has to be prudent to
ensure that the decision made by board of director of AMH is
advantageous to AMH, not only to its shareholders .--------------------------
(c) Board of Director is assisted by Management Committee and

Monitoring Committee . Management Committee is responsible to the
daily management of AMH and recommends to the AMH management
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board concerning strategic plan, financing, treasury and merger and
acquisition. Monitoring Committee is responsible to review regular
report of each AMH investee companies, including Indosat. Qatar
Telecom has its representatives in the two committees and they are
active participantw in the business of STT Group B. --------------------------
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(d) Temasek does not make plan for central economic activities of STT
Group B. Such plans are made by Board of Director STT Group B.
Furthermore, Qatar Telecom, which have representatives in the
management of STT Group B and have veto rights relating to certain
decision, will object to any decision that made for benefiting the interests
of Telkomsel on the expense of Indosat. Besides, Qatar Telecom does
not have interests at all in Telkomsel or PT Telkom. Qatar Telecom takes
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part actively in the business of STT Group B and there are no indications
as it alleged/suspected by KPPU in the business activities of STT Group
B. -------------------------------------------------------------------------------------
49. During the session in KPPU on 25 June 2007, STT Group B also provided the
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following facts and testimonies stated that AMH operates separated from AMHC unless
for the approval of shareholders: -----------------------------------------------------------------
-----------------------------------
“Q. Are all AMH decisions consulted with AMHC? -----

A. No. The decisions are made by AMH without consulting with AMHC
and Qatar Telecom. --------------------------------------------------------------
Q: In what case does AMH contact AMHC? ---------------------------------------
A. The contact with AMHC is conducted in case of an acquisition and new
investment performed by AMH. The bank loans by AMH shall
consult AMHC and Qatar Telecom------------------------------
Q. Is there any contact between AMH and AMHC in case of asset disposal? -
A. If AMH wants to sell its material assets, AMH will consult Qatar
Telecom and AMHC as its shareholders.
can be seen in the lawsuit documents of KPPU.------------------------------------------
50. The representative of STT Group, Mr. Anupam Garg (Senior Vice president of
International Business Development STT) (“Mr.Garg”), has submitted his written
statement to KPPU on 25 June 2007. In paragraph 9,10 and 15 he stated that AMH, ICL
and ICPL operate independently: ------------------------------------------------------------------
AMH/ICL/ICPL is managed by their own Board of Directors separated from

Temasek. The members of Board of Director of AMH/ICL/ICPL are not
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directors or employees of Temasek. Temasek (in one side) and
AMH/ICL/ICPL (in other side) are managed independently each other. ------
----------------------------------
Business decisions, planning and operating of AMH/ ICL/ IPL are made
independently by Board of Directors of AMH / ICL/ ICPL, free from the
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influence of Temasek. The Board of Director of AMH, ICL and ICPL
consist of respected and reputed parties worldwide. There are 2 members of
AMH board of director who are not directors or employees of Temasek,
STT, STTC, AMHC or Qatar Telecom. ---------------------------------------------
AMH through its board of directors, also consisted of candidates from Qatar
Telecom, make its own decision. AMH Board of Director does not and
cannot make decision benefiting STT, STTC and AMHC only. Such a deed
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is contradictory with the law of Singapore and Qatar Telecom will not allow
such a thing happen.”-------------------------------------------------------------------
The copy of Mr.Garg’s statement can be found in the lawsuit documents of
KPPU.
51. Mr. Guy Norman (The Manager of Business Development of Qatar Telecom) (“Mr.
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Norman”) has submitted his written statement to KPPU representing STT Group B on
25 June 2007. In paragraph 9 to 14 he stated that director of AMH make decisions for
the interest of AMH and for STT Group A or Temasek:---------------------------------------
“Qatar Telecom has its representatives in AMH Board of Director. Chief

Executive Officer Qatar Telecom and Vice Chairman of Qatar Telecom
Board of Director are its representatives in AMH Board of Director-----------
-----------------
The important decisions are made by AMH Board of Director. The Board of
Director is obliged to prioritize the interest of AMH higher than those of
shareholders’ per head. The director assigned by Qatar Telecom carefully
ascertains the decisions of AMH and its benefit to AMH, not only to STTC.--
The AMH Board of Director, in performing its jobs, is assisted by
Management Committee and Monitoring Committee. Management
Committee is responsible to take care of AMH diary management and to
recommend AMH board of management on (a) the strategy of company
financing and treasuring; (b) Merger and acquisition of company; and (c)
company strategic plan, including any strategic issues of shareholders.
Monitoring Committee is responsible to review regular report of each
AMH’s investee company (one of them is Indosat), to evaluate the financial
and operational performances of investee companies and to observe strategic
issues and shareholder that possibly appear in relation with any investee
company ---------------------------------------------------------------------------------
Qatar Telecom has had representatives, either in Management Committee or
Monitoring Committee. ---------------------------------------------------------------
It is clear that Qatar Telecom is an active member in the business performed
by AMH. Qatar Telecom is sure that AMH is manageable. ----------------------
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I want to affirm that Qatar Telecom invested its funds for amount of US$635
millions in this joint venture. The composition of Management Committee
and the management of AMH provide Qatar Telecom with a certain
protection that the decisions are made independently without any directives
from STTC” -----------------------------------------------------------------------------
The copy of Mr. Norman’s statement is available in the lawsuit documents of
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KPPU.
Singtel; -----------------------------------------------------------------------------------------
52. The operational policies and decisions of SingTel are not controlled, managed or
influenced by Temasek. ----------------------------------------------------------------------------
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53. During the session in KPPU on 4 July 2007, SingTel testified that SingTel and
Temasek only have one same director (Mr Simon Israel – “Mr. Israel”), and when he
was appointed to be part of management of SingTel , he served for no position in
Temasek. ---------------------------------------------------------------------------------------------
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“Q. How many directors of SingTel that served for Temasek? ----------------
A. Only one, and it after he took hold a position in management borad of
SingTel . Nominations Committee proposed some candidate for electing
appropriate one precise. At that moment, Simon [Israel] was not in
Temasek. He used to be a citizen of New Zealand and at present a
citizen of Singapore.”--------------------------------------------------------------
Q: When did he work for SingTel ? -------------------------------------------------
Q. To Temasek?------------------------------------------------------------------------
A. I thing in 2005.
Q. Are there any other management boards who serve in Temasek? -----------
A. Not in the last 3 years. I will check it out later.” -------------------------------
The copy of SingTel ’ official report in KPPU on 4 July 2007 can be found in lawsuit
documents of KPPU. --------------------------------------------------------------------------------
54. Mr. Israel is only 1 of 10 SingTel board of directors and Mr.Israel is not a
candidate proposed by Temasek. The truth is, when Mr. Israel was appointed as
Director of SingTel , at the same time he was not a director Temasek. ----------------
55. During the session on 23 July 2007, in its testimonies SingTel explains that SingTel
board of director is responsible to Temasek as to other shareholder of SingTel :----------
Q: To whom does CEO of SingTel give report? -------------------------------------
A. Board of Director
Q. To whom does Board of Director give report? ------------------------------------
A. Board of Director does not give report to certain party, but they are
responsible to the whole stakeholders such as creditor and shareholder .---------
Q. What does an accountability look like? -------------------------------------------
A. I do not feel that there is specific thing of the shareholders but the form of
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the accountability is to make a company running well.------------------------------
Q. How do shareholders ask accountability from SingTel Board of Director? --
A. There is an annual shareholder general meeting (RUPS) and the
performance is informed to shareholders previously. It is the time to ask the
performance. Usually after RUPS, the director arrange management agenda
for a year to come. -----------------------------------------------------------------------
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Q. Is there any meeting agenda with shareholders apart from RUPS? ------------
A. There is a quarter report, but as long as I know there is no other meeting
outside annual RUPS. --------------------------------------------------------------------
Q. If there is any important issue faced by Board of Director; how is it lifted
to the shareholders? ----------------------------------------------------------------------
A. It it is an important thing, Board of Director will be able to summon up
Extraordinary RUPS.---------------------------------------------------------------------
Q. Who are shareholders? ---------------------------------------------------------------
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A. The total is around 1 million shareholders. SingTel has already been listed
company in Singapore and Australia. There is also an institution as
shareholders -------------------------------------------------------------------------------
Q. What are the institutions? ------------------------------------------------------------
A. I do not know exactly; it look like a funding institution in America.
Majority Shareholder can be seen in annual report of SingTel by 3 May
2007, on page 174 -175. -----------------------------------------------------------------
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Q. Is Temasek a shareholder? ---------------------------------------------------------
A. Yes”-------------------------------------------------------------------------------------
The copy of the official report session of SingTel in KPPU on 23 July 2007 can
be found in lawsuit of KPPU.----------------------------------------------------------------
SingTel Mobile; ------------------------------------------------------------------------------------
56. Through SingTel , Temasek does not control, arrange or coordinate operational policies
and decisions of SingTel Mobile, directly or indirectly. ---------------------------------------
57. SingTel Mobile is a subsidiary that its shares wholly owned by SingTel . However,
SingTel Mobile is a separated corporate body in which its operating is managed by its
own board of director for the interest of SingTel Mobile. -------------------------------------
58. During a session in KPPU on 4 July 2007, SingTel testified that SingTel Mobile and
Temasek does not have the same director (Mr Israel does not hold a position of the
management of SingTel Mobile) ------------------------------------------------------------------
“Q. Is it right that Mr. Simon Israel, Board of Directors SingTel , also has
double
A. Yes, as a member of Board of director. ------------------------------------------
Q. Is there any other Board of Directors that have double position in SingTel
? --------------------------------------------------------------------------------------
A. Ms. Cuah, a member of Board of Director and CEO in SingTel , and
member of the Board Director (as it is Board of Commissioners in
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Indonesia) in SingTel Mobile” -------------------------------------------------------
59. During the session, SingTel also states that Ms.Chua, in its capacities as SingTel
Mobile director, is acting for the interest of SingTel Mobile, not SingTel : ----------------
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“Q: What are the responsibilities of Ms. Cuah in SingTel Mobile? -----------
---
A. She has voting right in SingTel Mobile Board of Directors in making
decision. The Board must take decision in accordance with the interest of
SingTel Mobile---------------------------------------------------------------------
Q. It can be said that Ms.Cuah brings the interest of SingTel and SingTel
Mobile?------------------------------------------------------------------------------
A. No, in its capacity as SingTel Mobile Board of Director, Ms. Cuah must
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prioritize the interests of SingTel Mobile and not only the interest of
shareholders, but also creditor and other stakeholders” -----------------------
60. Furthermore, SingTel also testified and provided facts that SingTel Mobile has
corporate services of SingTel . Concerning final operational decisions, corporate
service is not controlled and influenced by SingTel : -------------------------------------------
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“Q. You said that you give recommendations/guidelines to [SingTel
Mobile] monthly, do you continue giving recommendations to [SingTel
Mobile], while you are hired also by SingTel ? -------------------------------
A. Yes, I am employed by SingTel . I provide management recommendation
as it is asked by [SingTel Mobile]-----------------------------------------------
Q. Is it right that you are paid by SingTel and had fees from giving
consulting services to SingTel Mobile? ----------------------------------------
A. Yes, I am employed by SingTel . The fee of consulting services are paid
by SingTel Mobile to SingTel .--------------------------------------------------
Q. Is the service fee given to SingTel Mobile paid monthly?--------------------
A. I do not know whether it is paid monthly, but it is periodically given by
SingTel Mobile to SingTel over the services I have given to SingTel
Mobile. ------------------------------------------------------------------------------
Q. Does it mean that you do not get fee directly from SingTel Mobile? -------
A. Yes, as I told it previously that I am an employee of SingTel and paid by
SingTel .-----------------------------------------------------------------------------
Q. How many percent are your recommendations implemented by SingTel
Mobile?------------------------------------------------------------------------------
A. I do not know exactly, but around 50% my recommendations are
followed up by SingTel Mobile.-------------------------------------------------
Q. Can you explain? Which recommendation that are not implemented by
SingTel Mobile? -------------------------------------------------------------------
A. We have ever recommended SingTel Mobile to improve its capital
structure by recover ratio debt to equity but SingTel Mobile does not
follow up my recommendation . -------------------------------------------------
Q. Do the recommendations you suggest related to investment of SingTel
Mobile are not followed by Telkomsel? ----------------------------------------
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A. We ever give recommendation on the potency of dividend and business
plan of Telkomsel. -----------------------------------------------------------------
Q. Can you elaborate, what kind of recommendation you suggest at that
time? A. Telkomsel pays dividend. We have ever given recommendation
that company’s capital structure is inefficient due to abundant cash. -------
Q.How do you know that SingTel Mobile do not want to follow your
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suggestion?--------------------------------------------------------------------------
A. SingTel Mobile told it verbally --------------------------------------------------
Q. Why does SingTel Mobile reluctant to implement your suggestion? -------
A.SingTel Mobile does not always inform me the reason. -----------------------
61. During the session in KPPU on 23 July 2007, SingTel Mobile has given
testimonies/facts that SingTel Mobile Board of Director is acting for the interest of
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SingTel Mobile, and not the interest of SingTel or Temasek: --------------------------------
“Q. What is the obligation [SingTel Mobile] to SingTel ? Does [SingTel

Mobile] have to conduct all by request of SingTel ? --------------------------
A. No, Board of directors has obligation to [SingTel Mobile], it means that
they conduct the best for the interest of [SingTel Mobile]-------------------
Q. Does [SingTel Mobile] have obligation to SingTel ? -------------------------
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A. Under the Law of Singapore, our company does not have obligation to
other company, but every company has its own management board,
consequently the obligation is the responsibility of company
management board. ----------------------------------------------------------------
Q. Do you think that [SingTel Mobile] as a company must act for the
benefit of SingTel? ----------------------------------------------------------------
A. No.[SingTel Mobile] must act for the best of its own, and the interest all
stakeholders ------------------------------------------------------------------------
Q. What are the interests of shareholders ?-----------------------------------------
A. The Board of director is acting for the best interest of [SingTel Mobile],
including all its stakeholders”-----------------------------------------------------
The copy of the official report session of SingTel in KPPU on 23 July 2007 can
be found in lawsuit of KPPU.----------------------------------------------------------------
Share Acquisition in Indosat and Telkomsel; -------------------------------------------------

62. Telkomsel is a company that was founded under the law of the Republic of Indonesia.
Telkomsel is also the biggest operator of cellular telecommunications in Indonesia. ------
63. In 2001, SingTel Mobile acquired 17.28% of Telkomsel’s shares from KPN Royal
Dutch Telecommunications and 5% from PT Setdco Megacell Asia (The founder of
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Telkomsel). -------------------------------------------------------------------------------------------
64. In 2002, SingTel Mobile acquired again 12.72% of the shares of PT Telekomunikasi
Indonesia (“Telkom”), so that the total of the shares were 35% in whole. The rest of
Telkomsel’s shares at that moment until present time were owned by Telkom, company
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that was founded in Indonesia time. Telkom is enlisted in Jakarta Stock Exchange,
Surabaya Stock Exchange, New York Stock Exchange and London Stock Exchange, in
which 51.19% of its shares are owned by the Government of Indonesia.
65. Indosat is a company established under the law of the Republic of Indonesia. In 1980,
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the Government of Indonesia got 100% of shares in Indosat that make it State-owned
Enterprise (BUMN). In 1994, Indosat enlisted its shares in Stock Exchange of Jakarta,
Stock Exchange of Surabaya and Stock Exchange of New York. Indosat is the second
biggest cellular operator - ---------------------------------------------------------------------------
66. In the end of 2002, as a result of the tender, the Government of Indonesia divested its
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41.94% Indosat’s shares to STTC. STTC acquired the shares through two special
purpose vehicles, ICL and ICPL. ------------------------------------------------------------------
67. In 2006, in order to establish a joint venture with Qatar Telecom, STTC transferred its
ownership over ICL and ICPL to AMH under an internal agreement. As it is previously
explained, Qatar Telecom controls 25% of the shares in AMH while AMHC controls
75%. AMHC is wholly owned by STTC.---------------------------------------------------------
68. During the process of taking over of shares in Telkomsel and Indosat, Temasek did not
involve in whatever form. Temasek also never involved in deciding to perform the
investment . It has been confirmed by Mr.Goh in its facts/testimonies during the session
in KPPU on 13 Augusts 2007: ---------------------------------------------------------------------
“Q. Would you please affirm? Who did perform investment in the
Indonesian telecommunications company? -------------------------------------
A. STT and SingTel . These companies invested globally. Temasek did not
involve in the decision-making of STT and SingTel to perform
investment at Indosat and Telkomsel. ------------------------------------------
Q. Does Temasek get involved in the decision making for the investment
and management activities of STT and SingTel ? ----------------------------
-----------
A. No. Temasek did not involve in the operational and decision of the
business of the two companies. The decision on investment is made by
board of commissioner and management of each company. -----------------
Q. How is the investment planning of Temasek in telecommunication field
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in Indonesia?
A. I will never answer it ---------------------------------------------------------------
Q. Is there any person who knows it from investment committee? ----------
A. Invesment in Indosat and Telkomsel are performed by SingTel and STT
not by Temasek. --------------------------------------------------------------------
Q. It is preposterous for us that as Managing Director you do not know the
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investment plan. I think that you are stashing away in this investigation.
I request the attorney-in-fact to explain it. -------------------------------------
A. With due respect, I want to explain that investment in Indonesia is
performed by by SingTel and STT and Temasek does not know the
consideration of the companies performing investment in Indonesia. I
want to say that no one is responsible over the telecommunications
investment in Indonesia.“---------------------------------------------------------
69. During the session in KPPU on 4 July 2008, SingTel has given testemonies/facts that
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Temasek did not take part in the decision to perform investment in Telkomsel: -----------
“Q.Does Temasek also get involved with the decision to invest in

Indonesia? ---------------------------------------------------------------------------
A. No. The decision is approved by [SingTel Mobile] with the support of
SingTel , Temasek is not involved” ---------------------------------------------
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70. During the session in KPPU on 27 June 2007, STT Group A also provided the
facts/testimonies that the investment in Indosat was performed by STTC, not STT or
Temasek: ----------------------------------------------------------------------------------------------
“Q. What is the motif of establishing STTC? --------------------------------------

A. To achieved company’s vision and mission. To be a global player and to
invest in telecommunication fields all over the world. ------------------------
Q. Thus. Are STTC and STT under one management?----------------------------
A. STT and STTC are 2 different corporate. STT only has investment s in
STTC…. Historically, the reason of creating this structure is to have
STTC arranged an IPO one day. -------------------------------------------------
Q. Thus, there is no bureaucracy behind the policy making between STTC
and STT? ----------------------------------------------------------------------------
A. STT and STTC are 2 separated corporate. STTC is a corporate that
makes a decision to have investment s for STTC“ -----------------------------
71. In line with the testimony, STT Group B also gives the same testimonies in the session
in KPPU on 25 June 2007:--------------------------------------------------------------------------
Q. Can it be said that investment policy in Indonesia not from AMH?
A. The initial decision on investment in Indosat comes from STTC”-----------
White Paper tahun 2003;--------------------------------------------------------------------------

72. On 4 February 2003, the State Ministry of State-owned Enterprise (“Meneg BUMN”)
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published white paper that describe share divestment of Indosat to ICL/ICPL (“white
paper ”). The copy of White Paper is in the lawsuit case document of KPPU. White
paper particularly consider the question of whether, referring to the shares of SingTel
Mobile in Telkomsel, the plan of taking over the Indosat’s shares by ICL and ICPL
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infringe the Law No.5/99. Its final conclusion is “No!” ----------------------------------------
“E. The rumors of Monopoly. --------------------------------------------------------

Telecommunication is regulated tightly ---------------------------------------------
The telecommunication industry in Indonesia is tightly regulated. The

industry is not only subject unto the Law No.36/1999 and its
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implementation regulation No.52 and 53/2000 on telecommunications
industry but also the Law No.5/1999 Prohibition of Monopolistic Practice
and Unfair Competition. ---------------------------------------------------------------
STT and SingTel are independent in Telecommunication Industry ------------
Temasek owns 67% shares of SingTel and indirectly owns STT. SingTel
owns 35% of Telkomsel’s shares with the limited management
representatives in which Telkom controls the majority (shares) of
Telkomsel. Telkom is owned in majority by the Government of Indonesia.
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SingTel and STT are managed independently and competed in Singapore
and other markets. It should be noted that as a listed company the
shareholders of Indosat are the Government of Indonesia, foreign and
domestic investors.
73. White Paper continuously states as follows: -----------------------------------------------------
“2. Monopoly ----------------------------------------------------------------------------------

• Under the Law No.5/1999, there is a prohibition to own share majority
in some companies that operate in the same field. The ownership of STT
over Indosat through ICL is not majority (less than 50% out of the whole
shares of Indosat). In addition, the ownership of Singaporean company
in Telkomsel is also less than 50%. Furthermore, Mennen BUMN
considers that the regulation is on prohibiting monopolistic practices and
not on majority ownership. -------------------------------------------------------
• Prior to the awarded announcement, there is no objection from public

although government has announces the attendance of STT in
divestment program. ---------------------------------------------------------------
• Telecommunication Industry has already been tightly regulated and
operators may not determine certain policies include in tariff fixing.-------
•For the purpose of divesting Indosat’s shares, Mennen BUMN

established an intradepartmental team that consists of the Minister of
Communication and Indosat management to ascertain that any inputs
have been responded”--------------------------------------------------------------
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74. The conclusions of White Paper argues all KPPU’s allegations under Article 27(a).
Provisional People’s Consultative Assembly/House of Representatives (MPR/DPR) of
the Republic of Indonesia has clearly concluded that: ------------------------------------------
a. Telecommunication industry in Indonesia has been tightly regulated and operators
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cannot determine the policies including tariff fixing.
b. Telkom controls Telkomsel. SingTel only has 35% of Telkomsel’s shares with
few number of voting rights. In majority, Telkom is controlled by the Government
of Indonesia. ------------------------------------------------------------------------------------
c. STT and SingTel are managed in independently and they compete in Singapore
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and other markets.-----------------------------------------------------------------------
d. The phrase “majority share” in Article 27 (a) of the Law No.5/99 shall be
interpreted literally that means more than 50% of shares (in numerical sense). -------
e. The ownership of STT over Indosat through ICL is not majority because it is less
than 50% of Indosat listed shares. -----------------------------------------------------------
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f. SingTel also has less than 50% of Telkomsel’s shares-----------------------------------
75. The conclusion of Menneg BUMN is relevant, not only to the interpretation of
Article 27 (a) of the Law No.5/99(See part (E) below) but also to claims of
Temasek that the lasted jurisdiction process at is ultra vires and infringe legal
procedure. (See part (H) below) -------------------------------------------------------------
76. It is also important to be noted that on the basis of other documents in the lawsuit
of KPPU entitled “Goverment’s Elucidation in the Meeting of the Joint
Commission of the House of Representatives in 2003, that KPPU has consulted
Menneg BUMN on its views. As it is elucidated below, KPPU “need no further
information from Government/Indosat concerning Indosat’s divesting settlement”.
It is seen that KPPU does not raise any issues or objections to the plan of the
acquisition which then the acquisition was performed under the stipulation of the
Law in Indonesia. -----------------------------------------------------------------------------
77. Relevant Paragraph on this matter in the document:
“In accordance with the Law No.5/1999 on the Prohibiton of Monopolistic

Practices and Unfair Competition, especially Article 27 and 28 paragraphs 3,
it can be elucidated that STT is not an owner of 50% Indosat’s shares. The
regulation on acquisition in Article 28.1 of the Law No.5/1999 has not been
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regulated in the Government Decree. The State Minister of BUMN in 23
January 2003 have completed an invitation of KPPU for consulting meeting
and theretofore KPPU does not need further information from
Government/Indosat relating to Indosat’s divestment. Without keeping aside
the discussion, telecommunication industry is industry that tightly regulated
by Government”
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78. In this case, KPPU cannot change its mind. There are reasons to believe that
ICL/ICPL had approvals not only from MPR/DPR of the Republic of Indonesia
but also government institutions and fullfil legislative regulation required to
perform acquisition of Indosat’s shares. KPPU does not have the power or any
basis to start investigation after 4 years the acquisition performed. KPPU tries to
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cancel the approval of government institutions and law and regulations obtained
previously by ICL/ICPL using suspected infringement of Article 27(a), although
significant changes had never happened in the shareholders structure of Indosat
and Telkomsel.---------------------------------------------------------------------------------
Ther is no control in Indosat and Telkomsel; -------------------------------------------------
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79. The principal allegation in the case of KPPU versus Temasek and Reported
Parties 2 to 9 is that Temasek (directly or through Reported Parties 2 to 9) and
Reported Parties 2 to 9 controls Indosat and Telkomsel. Without these claims, all
legal cases to Temasek and Reported Parties 2 to 9 are nun and void. -----------------
80. The claim [of KPPU] is not entirely true. --------------------------------------------------
81. From the viewpoint of Telkomsel, SingTel Mobile is only a minority
shareholders that has right to appoint 2 out of 6 members of Commisioner board
of Telkomsel and the rests are appointed by Telkom. At this time, there are only 5
Commissioners, Telkom remains to entitle to the sixth commissioner. Similar to
this, SingTel Mobile only entitles to appoint 2 out of 5 board of directors of
Telkomsel. Again, Telkom is a right party to appoint the rest. All decisions of
management board of Telkomsel must be made with majority votes, therefore it is
impossible for Temasek, by itself or through Reported 2 to 9, to control
Telkomsel.--------------------------------------------------------------------------------------
82. Out of 9 Director of Indosat, there are only 4 appointed by ICL/ICPL. On the
contrary, the Government of Indonesia has A series of shares in Indosat that make
it owns special voting right and veto right to certain things as stated in the
Statutes. Besides having A series of special shares, the Government of Indonesia
also owns rights to appoint at least one director and commissioner in
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management board of Indosat. By usage, the President Director of Indosat is
appointed by the Government of Indonesia. At present, 5 of 9 directors of Indosat
(including President Director) are the representatives of the Government of
Indonesia.
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83. The facts are the same reason as stated by Mr. Pasaribu when he said that
Temasek and Reported Parties 2 to 9 do not control Indosat and Telkomsel ----------
84. Without considering the facts, KPPU submits surprisingly allegations that
Temasek is able to control Telkomsel and Indosat through Reported 2 to 9. The
evidences used by KPPU as its guidance are bizarre and irrelevant.
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85. Whereas, the evidences passed to KPPU in the preliminary investigation and
follow-up investigation are enough to prove that Temasek and also Reported
Parties 2 to 9 do not control, manage, or influence the operational policies and
decisions of Indosat. --------------------------------------------------------------------------
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The evidences submitted by Temasek; ------------------------------------------------------------
86. During the session in KPPU on 13 May 2007, Mr. Goh states that Temasek does not
have shares in Indosat and Telkomsel, and TEmasek does not also instruct or
coordinate operational policies and decisions of the both companies. ------------------------
“Temasek does not have shares in Indosat or Telkomsel. These companies

are managed and observed by its own management team and management
board. Temasek does not instruct or coordinate commercial decision and
company operating or to take part in their business activity or any other
business activity in the relevant market ” -------------------------------------------
The copy of the session official report in KKPU on 13 May 2007 can be found in
the lawsuit of KPPU.
87. In paragraph 22 and 23 of Mr. Goh’s statements he gave testimonies/facts that

management board of Indosat and Telkomsel performed their activities separated from
Temasek, and Temasek does not have any rights to appoint nominees to be in
management board .---------------------------------------------------------------------------------
“Indosat and Telkomsel are managed and observed by their own

management board and management team. Temasek does not have
representative or nominee in this management board or management team of
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the companies.
88. In addition, Temasek has already got independent certificationfrom Mr.Tham Sai Choy
(“Mr.Tham”), a partner in KPMG Singapore (External Auditor of Temasek), and also a
partner that lead statutory audit of Temasek. Mr.Tham has confirmed in its letter dated
11 October 2007 to KPPU that no single agenda as well as official report of
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management board meeting of Temasek and RUPS has carried out during the last 3
years discussing the performance, management, or operational of Indosat or Telkomsel.
The certificate is quaoted as follows:--------------------------------------------------------------
“I have read all agendas and the board of director official report and annual
RUPS that hold from date 1 August 2004 to 31 August 2007 (“Agenda and
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official report)”.-------------------------------------------------------------------------
No agenda and official report I read discuss performance, management or
operating of PT Indosat Plc. and PT Telekomunikasi Indonesia”----------------
The copy of Mr. Tham’s certificate is enclosed in Annex C -----------------------------
The evidence submitted by STT Group A and STT Group B; --------------------------------
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89. In Paragraf 68 to 76 of the plea of STT Group A, it has been confirmed that Indosat
board of director perform its duty without any influences from STT Group A and STT
Group B, but in reality the Government of Indonesia has significant influenceto
Indosat: ------------------------------------------------------------------------------------------------
“The Indosat Board of directors is responsible fully concerning

management and operational Indosat. According to Article 11(1) in relation
with Article 3 (1) of the Indosat Statutes, the key task of Directors including
obligations to: (a) lead and manage the company to keep it in track with the
company’s objectives that is to carry out network and/or telecommunication
services and to run business information; and (b) to try continuously
boosting efficiency and effectiveness of the company. ----------------------------
The decisions of Indosat board of director are made by deliberation for
general consensus. The Indosat Statutes mentions that anytime an agreement
is unattainable then the decision making is obtained by voting in which
every member of board of director is entitled to releases one vote. Managing
director has an authority to determine a decision in the case of the votes is
even. Written circulating decision need animity from all members of board
of director -------------------------------------------------------------------------------
The representatives of AMH nominated through ICL, are not a majority in
Indosat board of director. Those nominated by the Government of Indonesia
are majority in Indosat board of director, its including managing director.
Under the Statutes of Indosat, the member of Indosat board of director are
elected and dismissed by RUPS with normal majority. AMH (vote it
through ICL and ICPL) can fall behind in votes than other shareholders in
RUPS and AMH cannot act unilaterally. --------------------------------------------
The responsibility of Board Commissioner is observing management of
Indosat: see Article 15 (1) the Statutes of Indosat. ---------------------------------
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The decisions of Indosat board of commissioner are conducted by
deliberation to reach a general consensus, if fails, the decision will be
determined on the basis of majority votes in which every commissioner is
entitled to have one vote. The prominent commissioner has no authority to
determine decisions in the case of the votes are even. In performing
observing activities, Board of commissioner represent shareholders’
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interests and it accounts for the whole shareholders. ------------------------------
Board of directors and other representatives from AMH are not majority in
Indosat Board of commissioner. Considering the authority of the
Government of Indonesia, based on the Indosat Statutes, the member of
Indosat commissioner board are elected and dismissed by RUPS. Five of 10
members of Indosat commissioner board are nominated by the Government
of Indonesia or Independent Commissioner. As the company enlisted in
Jakarta Effect exchange, Surabaya Effect exchange and New York Effect
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exchange, Indosat is obliged to have Independent Commissioner. --------------
In the level of shareholders, the indirect ownership of AMH (through ICL
and ICPL) in Indosat is only 41%. As a consequence, STT/STTC/AMHC
only has indirect shares around 31% (75% of 41%) in Indosat. The Indosat
Statutes required that the decision of Indosat RUPS Indosat is conducted
through normal majority vote of the shareholders. In such cases, the Statutes
required a decision to be made through majority of 66 2/3 or 75% and/or
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only through the votes of shareholders that hold Seri A shares of “Special”
shares owned by the Government of Indonesia. Therefore, whether it is
AMH, ICL or ICPL cannot unilaterally control decision-making processes
in Indosat shareholders level. ---------------------------------------------------------
The allegation that Indosat is part of “Temasek Business Group” is also
inconsistent with the significant influence of the Government of Indonesia
in Indosat.--------------------------------------------------------------------------------
(a) The Government of Indonesia still has more than 14% common shares
in Indosat. -------------------------------------------------------------------------
(b) Apart from its significant ownership over common shares in Indosat,
the position and authority of the Government of Indonesia in Indosat is
strengthened farther with its ownership of “Series A” shares in Indosat.
The A series shares give the Government of Indonesia special voting
right, including veto right to: (a) merger, consolidate, acquire, disband
and liquid Indosat; and (b) to amend the Statutes, including its
purposes and objectives of Indosat, and to improve its capital stock
improvement without having pre-emptive rights.----------------------------
(c) Besides, series A shares also gives the Government of Indonesia rights
to appoint one Director of and one commissioner of Indosat. At this
time, 5 of 9 Director of Indosat (including managing director) are the
representatives of the Government of Indonesia. The major
representatives of the Government of Indonesia in Indosat board of
director (apart from 14% of ownership over common shares in
Indosat), indicate that AMH does not use its rights that usually owned
by majority shares in a company. ----------------------------------------------
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(d) Since the divestment to the present time, the managing director in
board of director of Indosat are always nominated by the Government
of Indonesia, including Mr. Widya Purnama, Mr. Hasnul Suhaimi and
Mr. Johny Swandi Sjam. After the divestment, some articles in the
newspapers report that the Government of Indonesia affirms its rights
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to appoint Indosat managing director and indicates all managing
director candidates to pass fit and proper test. It is a significant
influence of the Government of Indonesia to place its candidate as a
managing director of Indosat. Judicially, there is no rights for the
government of Indonesia to appoint managing director Indosat
unilaterally.
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(e) The half of Indosat Board of commissioner consists of two people who
are nominated by the Government of Indonesia and three independent
comminisoners. The number of representatives of the Government of
Indonesia in Board of commissioner passes its special rights as the
shareholders of A series shares. ------------------------------------------------
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90. Mr. Purnama, a former president director of Indosat, confirms in its statement in
paragraph 13 that: -----------------------------------------------------------------------------------
“STT/ICL has never intervened when I managed Indosat. STT/ICL has

never visited me to direct management of Indosat“ --------------------------------
91. In the session in KPPU on 18 June 2007, STT Group A gives testimonies/facts that
Temasek does not have any involvement in every evaluation and monitoring of the
Indosat’s performances: -----------------------------------------------------------------------------
“Q. What kind of STT policies to STTC, AMHC, ICL and [ICPL] when
Indosat management does not run properly?” ----------------------------------
A. The Indosat performance is the responsibility of Board of Directors and
Board of Commissioner. At the end, the performance will be evaluated
by its shareholders.-----------------------------------------------------------------
Q. Can it be concluded that as a Chief Finance Officer of STT you release
your authority to observe STTC, AMHC, ICL and (ICPL) by entrusting
Indosat management ------------------------------------------------------
A. In our opinion, the current performance of Indosat is better. If the
performance of Indosat is bad, STT can do nothing. STT must cooperate
with other shareholders including the Government of Indonesia to find
the best way to benefit shareholders.
Q. With whom STT discuss the performance of Indosat management? --
A. The answer is the same with the previous one.”
92. During an investigation conducted in KPPU on 25 June 2006, STT Group B
submits evidence that AMH (not STT Group A or Temasek) make decision to
whom Indosat board of director nominated :
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“Q. Do the two directors of AMH and Qatar Telecom get involved in the
elction of Director in Indosat? -------------------------------------------------
A. The representative from Qatar Telecom and AMHC who are also
Directors of AMH involved in the discussion but the decision itself,
applying collective consensus, is made by board of director. --------------
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--------------------
Q. Actually, where (in which level) is the decisions made? AMH or
AMHC? -----------------------------------------------------------------------------
A. The decision is made by AMH. ------------------------------------------------
----
Q. Can it be concluded that in electing Indosat board of director by AMH,
AMHC involve in it? ---------------------------------------------------------------
A. The decision on Indosat board of director is made by AMH. AMHC may
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nominate a candidate but the final decision is on AMH board of
director.”
93. During the investigation, STT Group B submits evidence that only AMH (not STT
Group A or Temasek) get involved in observing the performance of Indosat:
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“Q. Concerning monitoring of Indosat, does AMH consult AMHC? ---------
A. As long as I know, AMHC monitor the performance of AMH, but in
the level of monitoring is only AMH.
Q. How does AMHC monitor the performance of Indosat?
A. AMHC does not monitor the performance of Indosat. There is no
compulsion for AMH to give report to AMHC or Qatar Telecom on the
performance of Indosat.” --------------------------------------------------------
94. During the investigation, STT Group B submits evidence that AMH does not
arrange, manage or influence operational policy and decision of Indosat:
“Q. Does AMH monitor the policy on procurement and tariff in Indosat?-----
A. There is no interference or involvement from AMH. It is a responsibility
of Board of Director Indosat. ----------------------------------------------------
Q. The investigation team gets an information that there is an active
involvement from AMH regarding procurement process in Indosat. -------
A. We are very sorry to hear misled news informed by Investigating Team.
As a matter of fact, all are the responsibility and the authority of Board
of Director without any interferences of AMH.
Q. (We even have been asked) What about if procurement regulation is
conducted along with the shareholders, in this case AMH. Will the price
be cheaper? -----------------------------------------------------------------------
A. Whether Indosat or Starhub is listed public corporation. There is a rule to
obey, including Good Corporate Governance. Therefore, the
involvement of Indosat Board of Director is in everything. ------------------
Q. Is the rumour true? -----------------------------------------------------------------
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A. No. That’s not true. -----------------------------------------------------------------
A. Is the procurement of prepaid voucher from Singapore? ----------------------
A. I will never give answer, but it already confirms that shareholders never
purchase goods to sell to Indosat or to recommend them to procure. All
are in the hand of Indosat Board of Director. There is no AMH’s
interference.-------------------------------------------------------------------------
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Q. Who does form the work division of the Indosat Board of Director? -------
A. The duty of board of director is determined by shareholders based on the
Statutes of Indosat.-----------------------------------------------------------------
Q. Does Director of Marketing have to be from Singapore? ---------------------
A. The Director of Marketing is not always from Singapore, the incumbent
Director of Marketing is from the Government of Indonesia ---------------
---------
Q. Does Director of Finance have to be from Singapore? ------------------------
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A. Director of Finance of Indosat is not always from ICL.-----------------------
Q. Where does the Director of Research and Development come from? -------
A. I have never heard the position .--------------------------------------------------
Q. Is General Manager (“GM”) that works under Director of Marketing is
from Singapore?--------------------------------------------------------------------
Q. I do not know. GM of marketing is part of Director of Marketing
appointed by the Government of Indonesia.
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Q. Who does arrange organization structure of Indosat? Why is ICL only
interested in filling the position of Vice President and not President
Director? ----------------------------------------------------------------------------
A. The form of Board of Director structure has already been available prior
to he presence of ICPL and ICL as shareholders of Indosat. -----------------
Q. Why is Khaizad B Herjee not appointed to be a President Director? --------
A. In reality, the position of President Director is always peoposed by the
Government of Indonesia and be an Indonesian Citizen. ---------------------
Q. Does such condition create a vacuum in Indosat Board of Director? --------
A. We must await the decision from the Government of Indonesia
concerning President Director’s election.
Q. Does ICL understand that the position of Vice President is more
authoritative than President Director in determining a policy? --------------
A. No. President Director has greater role compare to Vice President

because President Director has casting vote in case of a deadlock. The
decision of board of director meeting is also decided by President
Director.
95. In paragraph 16 and 17 of Mr. Garg’s statements and the submitted evidences, it
is described that Indosat Board of Director independently separated from from STT
Group A&B:
“PT Indosat is operated and managed independently by AMH. The Board of
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Director or Manajemen of PT Indosat is different with those of
AMH/ICL/ICP --------------------------------------------------------------------------
Therefore, the operating and management of AMH/ICL/ICP and PT Indosat
are performed separately. They do not form an institute or company group
for their single interest. They are not part of “Temasek Business Group”. -----
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96. ---- In paragraph 18 and 19 of Mr. Miller’s statement who submits evidences that
Indosat Board of Director is operated independently apart from STT Group A&B:
---
“PT Indosat is operated and managed independently by AMH, therefore the
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Board of Director or Management is different. ------------------------------------
Therefore, we want to affirm that operation and management Temasek,
STT/STTC/AMHC, AMH/ICL/ICPL and PT Indosat are separated one to
another. They do not form an institute or company group for their single
interest. They do not form an institute or company group for their single
interest. They are not part of “Temasek Business Group” in which there is
no dependency one to another. -------------------------------------------------------
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The evidences provided on behalf of SingTel and SingTel Mobile--------------------------
97. The policy and operational decision of Telkomsel are not controlled, managed or
influenced by Temasek, SingTel and/or SingTel Mobile.
98. During an investigation conducted in KPPU on 4 July 2007, SingTel submit

evidences that SingTel Mobile (not Temasek) that monitor Telkomsel
performance:
“Q. Does monthly financial statement submitted by SingTel Mobile also

reflect Telkomsel performance? -----------------------------------------------
A. Yes ----------------------------------------------------------------------------------
Q. So, Telkomsel Management reports to SingTel Mobile and they deliver the
report to you? -----------------------------------------
A. SingTel Mobile gets report and they ask my suggestion and
recommendation for anything they may conduct and SingTel Mobile then.
Q. To whom you report your job result? ------------------------------------------------
A. SingTel Mobile is a party that appointed by Telkomsel. -------------------------
Q. I am getting mixed up. Do you give recommendation or do they report? -----
----------
A. I accept the reports. On the basis of it, I give recommendations.----------------
--
Q. To whom are you responsible for? ---------------------------------------------------
A. I give report to SingTel Mobile a party that is appointed by Telkomsel. My
Supervisor is CEO. ---------------------------------------------------------------------
Q. To whom the CEO report to? ---------------------------------------------------------
A. I report to internal CEO and internal CEO report to CEO of SingTel .” --------
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99. During investigation, SingTel also submit evidences that Telkomsel does not
consult SingTel in determining operational policy, including procurement
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agreement: ----------------------------------------------------------------------------------------
“Q. Does SingTel consult if Telkomsel want to procure? -----------------------

A. No. -----------------------------------------------------------------------------------
Q. Who is Widjaja? Director of? -----------------------------------------------------
A. Management team. He helps keeping the investment of SingTel in
Indonesia. ---------------------------------------------------------------------------
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Q. Is it right that he gives recommendation on procuring to Telkomsel? -------
A. Usually not. There is division instead of Board of commissioner, Cap Ex
committee with its member 2 form Telkoms and 1 from SingTel . If
Telkomsel wants to perform acquisition, then required approval from
Cap Ex is needed. SingTel Board of Commissioner is enabled to ask
and clarify problems. --------------------------------------------------------------
Q. Can you specify what Cap Ex is? -------------------------------------------------
A. As far as I know, its member consists of 3 people, 1 from SingTel
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Mobile and 2 from Telkom. It is a sub-committee of Board of
commissioner. They responsibility is approving capital expenditure.------
Q. Thus, Cap Ex has 3 commissaries, 2 from Telkom and 1 from SingTel
Mobile? ------------------------------------------------------------------------------
A. Exactly.-------------------------------------------------------------------------------
Q. Its duty is to approve Cap Ex? ----------------------------------------------------
A. That’s right. --------------------------------------------------------------------------
Q. Including procurement?-----------------------------------------------------------
--------
A. It is not at actual process. The amounts are approved by Board of
Commissioner and then Telkomsel Board of Director performs actual
procurement. ------------------------------------------------------------------------
Q. Does Cap Ex committee consult you? -------------------------------------------
A. No. Widaja is part of my team. If Board of Director has an affairs they
will ask my opinion.----------------------------------------------------
Q. Do committee member of Cap Ex consult SingTel ? --------------------------
A. No. Cap Ex does it by itself. If they need an assistant, they will ask may
team /Widjaja to get information and we will give re-information to
SingTel Mobile a party appointed by Cap Ex and, if agree they decide
it. -------------------------------------------------------------------------------------
Q. Will he consult your team before the member of Cap Ex make decision?
----------------------------------------------------------------------------------------
A. No. We only provide information they need and then Cap Ex decide it by
itself. We only help parties assigned by SingTel Mobile. Telkom has its
own aid.” ----------------------------------------------------------------------------
100. During the investigation on 23 June 2007, SingTel also submits evidences that
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Telkomsel do not consult SingTel in determining operational policy, including
procurement agreement:
“Q. Has ever Did SingTel consulted when Telkomsel want to conduct
goods acquirement?----------------------------------------------------------------
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A. No. SingTel does not involve. If a question appear, it will be brought to
Telkomsel Board of commissioner ----------------------------------------------
Q. Who does arrange handset procurement? ---------------------------------------
A. Decision is made by CEO of the whole companies.--------------------
Q. In your opinion, is there any possibility of Telkomsel to follow
agreement if it is not a subsidiary. -----------------------------------------------
A. Yes. That’s right. Telkomsel is not a subsidiary of SingTel or SingTel
Mobile because it owns only 35%. But usually in telco industry telco,
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Vodafone for instance, has many affiliated company and public can join
to procure. It same as alliance in which is no shareholders, they join for
the sake of economic scale. -------------------------------------------------------
Q. Such as those which you spelled out members mentioned on procurement
handset? -----------------------------------------------------------------------------
A. Exactly. This is the question on economic of scale. We are not a majority
shareholders, and surrendered to CEO and the boards to determine do
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they want to participate. -----------------------------------------------------------
Q. Does SingTel or SingTel Mobile agree to the probation of the
cooperation?
A. If it gives profits to many parties, I think they will like. -----------------------
Q. Are there any specific written permission? --------------------------------------
A. The direct discussion between CEO’s as business partners. Finally,
procurements are performed by individual companies and so do the
contract but the negotiation is done jointly among them. ---------------------
Q. I worry that there is a possibility of pressure from SingTel pressure,
assure or force others to perform it.
A. No. We are minority investor. And public realize that it is a good idea for
their profits. They see this from their point of view. --------------------------
Q. For your notes.This procurement agreement is not always bad. Telkomsel
gets good price. It will be regretted if SingTel Mobile gets better price
than Telkomsel.---------------------------------------------------------------------
A. In its implementation, it does not happen. If Telkomsel gets profit, they
approve it. ---------------------------------------------------------------------------
Q. Prove that there is no transfer pricing.
A. But Telkom as a majority shareholder never object it.
Q. Frankly speaking, we get information that SingTel Mobile is minority
but it controls Telkomsel which lead to a question, what is the profit of
Telkomsel and does this operation benefit to SingTel and does SingTel
make decision on procurement and tariff or even transfer pricing. ---------
A. Information that you got is not true. We are not in a controlling position.
Telkomsel board of commissioner controls it. Procurement is performed
by Board of directors and it is the responsibility of the party assigned by
Telkomsel.” -------------------------------------------------------------------------
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101. During an investigation conducted in KPPU on 4 July 2007, SingTel
Mobile submitted evidences that the involvement of SingTel Mobile with
Telkomsel is limited only to nominate boards in Telkomsel and monitor Telkomsel
performance:
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“Q. What does SingTel Mobile do to Telkomsel apart from nominating
someone to be member of Board of commissioner/Board of Director?-----
A. Only that. ---------------------------------------------------------------------------
Q. Is it true that to nominate a person conducted only toward the Telkomsel
Annual General Meeting? The general meeting is once in a year and not
every year you can nominate your candidate. Thus, it seems that you do
not do other things?
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A. SingTel Mobile as a shareholder has interests in Telkomsel. SingTel can
nominate 2 of 5 people to be member of Board of Director and 2 of 6
people for Board of commissioner. But SingTel Mobile is committed to
Telkomsel daily work performance. ---------------------------------------------
Q. Does SingTel Mobile monitor the performance of Telkomsel?
A. That’s right. -------------------------------------------------------------------------
Q. How many times are you committed? -------------------------------------------
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A. The function is bought from SingTel . I am so sure but not many. ----------
Q. What is the work procedure standard of monitoring and evaluating
Telkomsel?
A. We monitor upon the basis of approved budget agreed by Telkomsel
Board of commissioner from and if there are differences, we inform
SingTel Mobile that is appointed to be in Board of commissioner, and it
within the discretion of SingTel Mobile.
Q. Who does conduct tender? Do you monitor it? ---------------------------------
A. Tender is conducted by using Telkomsel as intermediary. The director in
charge is not a party assigned by SingTel Mobile.----------------------------
Q. In deciding intermediary, does SingTel Mobile have role? The selection
of most favorable vendor? --------------------------------------------------------
A. No. SingTel Mobile does not have role. Telkomsel does it and they use
their way. ---------------------------------------------------------------------------
102. During an investigation conducted in KPPU on 23 July 2007, SingTel Mobile

submitted evidences that SingTel Mobile (through corporate service agreement of
SingTel , not Temasek) monitor the performance of Telkomsel: -------------------------
Q. What kind of services from SingTel to Telkomsel?-----------------------------------

A. The service from SingTel to SingTel Mobile is performing monitoring in the
investment . --------------------------------------------------------------------------------
Q. What are things included in investment monitoring ? -------------------------------
A. Including observes SingTel Mobile party appointed in Board of commissioner.
To check/analysis, to report/problem and, giving recommendation to SingTel
Mobile appointed in Board of commissioner. The final decision is made by
SingTel Mobile and its views depend on balloting result of the boards. ----------
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Q. Can you be more specific on the report accepted by SingTel Mobile from
Telkomsel? --------------------------------------------------------------------------------
A. Annually, Telkomsel Board of Director gives report. Report check and
analyzed by me and I last give recommendation to party that is appointed by
SingTel Mobile at Board of commissioner. And also ad hoc affairs submitted
by Board of commissioner. The matter will be studied and recommended. ------
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During the investigation, SingTel Mobile also submits evidences that
SingTel Mobile is staying away from determining tariff policy of
Telkomsel: --------------------------------------------------------------------------
“Q. If we analysis economically, the tariff of Telkomsel is high. Does

SingTel Mobile realize it?--------------------------------------------------------
A. No. SingTel Mobile does not involve in tariff fixing. It is fixed by
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Telkomsel Board of Director .----------------------------------------------------
Q. So it is fixed by Board of Director? ----------------------------------------------
A. Exactly. The Director of commerce has a flexibility to perform short-
term advertising, but it is delivered to the policy of President Director
assigned by Telkom. ---------------------------------------------------------------
Q. Is there any SingTel boards from the parties appointed in Telkomsel
Board of commissioner? ----------------------------------------------------------
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A. No. ------------------------------------------------------------------------------------
Q. Is there any Temasek boards from the parties appointed in Telkomsel
Board of commissioner? ----------------------------------------------------------
A. No. ------------------------------------------------------------------------------------
Q. We limit Temasek Group as a company that owns shares, directly or
indirectly. Thus, how do you know that they are not in one company
mentioned in this definition? -----------------------------------------------------
A. Since the very beginning we disagree with the term Temasek Group. -------
Q. We do not ask your agreement. We believe that among the companies
where Temasek directly or indirectly hold shares it is part of a group.----
A. We disagree but however the people are our employee. -----------------------
Q. We don not care whether you agree or not. Do they serve as boards in
one of Temasek Group? -----------------------------------------------------------
A. No. They are SingTel employee. -------------------------------------------------
Q. To the 2 people appointed in Telkomsel Board of Director, the questions
is the same. Is one of them or both in Temasek Boards or related to
Temasek?----------------------------------------------------------------------------
A. No. They are employees of Telkomsel nominated by SingTel Mobile.-----
Q. In your opinion, is one of them or both employee to a company related to
Temasek, apart from a company that hire them --------------------------------
A. No. -----------------------------------------------------------------------------------
Q. SingTel Mobile does not worry with Telkomsel tariff ?------------------
A. SingTel Mobile is not committed to the daily performance. The Board of
Director fixes the tariff. -----------------------------------------------------------
Q. Is there any SingTel Mobile policy concerning dividend from
Telkomsel? --------------------------------------------------------------------------
A. There is no SingTel Mobile policy concerning Telkomsel dividend. -------
Q. What do you mean?-----------------------------------------------------------------
A. SingTel Mobile does not determine policy for Telkomsel. -------------------
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Q. So, what is your policy? Are all dividends are paid or the profits
obtained are re-invested?----------------------------------------------------------
A. We have no special policy. --------------------------------------------------------
Q. Shall be the whole dividends paid? -----------------------------------------------
A. We have no policy for Telkomsel to pay all profits as dividend or to be
kept to be re-invested. -------------------------------------------------------------
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Q. It means that you never ask whether the dividend will be re-invested or
not?-----------------------------------------------------------------------------------
A. Dividend is determined by Board of commissioner and it depends on
GM. ----------------------------------------------------------------------------------
Q. Thus. T can be concluded that if there is no policy you never ask whether
the dividend will be kept by Telkomsel to be re-invested or not? -----------
A. As far as I know, It’s correct. But we also never ask on the profits paid as
dividends. It is decided by Board of commissioner.---------------------------
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Q. Thus. What is your opinion on your appointment about that? ----------------
A. Our Minority is only in Board of commissioner. -------------------------------
Q. But you have big influences here. You have 35% shares and you appoint
2 people in Board of commissioner. ---------------------------------------------
A. We are only minority and out appointing relied on Telkomsel interests.” --
103. ---------------------------------------------------------------------------------------------------- A
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s it mentioned in paragraph 53-55, Temasek and Reported Parties 2 to 9 do not get
involved in monitoring or evaluating of Indosat or Telkomsel performances. The
evidences indicate that Temasek and Reported Parties 2 to 9 have no information on
the performance or management policy of Indosat and Telkomsel, therefore the
debate on the cooperation of Temasek (direct or through Reported Parties 2 to 9)
and Reported Parties 2 to 9 to manage operational policy and decision of Indosat
and Telkomsel is groundless. ------------------------------------------------------------------
THE ABSENCE OF JUSRISDICTION;-------------------------------------------------------
104. Based on Article 1 (18) of the Law No.5/99, KPPU is given an authority to
monitor only “business actor that perform its business activity so that they do not
practice monopoly and/or unfair competition .”
Pasal 1 (5) Undang-Undang No.5/99 menjelaskan apa itu “pelaku bisnis” : ---------------------
105. Article 1 (5) of the Law No.5/99 defines “business people” :
“Business actor is an individual everyone or corporate, whether it is

corporate body or corporate body founded and domiciled or conduct
activities in the territory of jurisdiction of the Republic of Indonesia, either
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its own or together through agreement, carry out various of business
activities in the field of economy.” ---------------------------------------------------
106. It is contradictory with the statement of KPPU in part A.1 on analysis of the third
report, none of Temasek or Reported Parties 2 to 9 are business actors as it is
described in Article 1 (5) of the Law No.5/99. Temasek is not in a jurisdiction of
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KPPU.
107. As it is known that Temasek and Reported Parties 2 to 9 are founded and
domiciled in Singapore (ICL is founded in Mauritius), not in Indonesia.
108. Therefore, in order to have Temasek accorded with the definition of business
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actor in as it is in Article 1 (5), KPPU in third report, put it only in economic
doctrine stated that the activity of Temasek Business Group is bounded in the
territory of Indonesia.
109. Meanwhile, the argument of KPPU on this matter is far beyond the truth. A series
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of KPPU’s reasons are as follows:
(a) Temasek and its subsidiaries called “Temasek Business Group” considered as
a single economic entity. With this reason, according to Article 1 (5) UU
No.5/99 any deed of Temasek’s subsidiaries can be justified to Temasek --------
(b) Temasek Business Group is committed with its activities in Indonesia due to
its control over Indosat and Telkomsel. ------------------------------------------------
(c) Another alternative from part (b) above is the reason why Temasek Business
Group is committed with its activities in Indonesia simply because Temasek
Business Group invest in Indosat and Telkomsel. ------------------------------------
110. The three statements are groundless.
111. It needs to be concerned that Mr. Pasaribu has concluded that “business actor” is
clearly defined in Article 1 (5) the Law No. 5/99, therefore the usage of “business
group” or “ultimate parent” in determining jurisdiction is not clear. -------------------
112. In an expert report on 27 August 2007, Professor Hikmahanto Juwana (“Professor
Hikmahanto”), a jurist that is proposed by STT Group A, has a notion that the
doctrine of single economic entity is unknown to the law of Indonesia. According
to Professor Hikmahanto, even if the concept exists, it can be accomplished only
by the following requirements: (i) there is common management between ultimate
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holding company and subsidiaries ; (ii) the plan of holding company also covers
economic activities of its subsidiaries; and (iii) subsidiaries are not allowed to
argue to the action set in company management. The fact of share ownership is
not enough to accomplish the requirement. The copy of Professor Hikmahanto’s
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testimonies can be found in the lawsuit of KPPU. ---------------------------------------
113. Besides, by referring to the performance of anti monopoly authority in other

countries, KPPU has indirectly agreed that the Law No. 5/99 shall be assumed to
be in line with the law principle internationally and the standard applied by the
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more sophisticated system of competition law.
114. Temasek has submitted an expert opinion of Dr Frank Montag (“Dr Montag”), a
partner in antitrust, competition and trade (ACT) group in Freshfields Bruckhaus
Deringer, one of the biggest business law firm in the world. Having its residence
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in Brussel, Dr Montag focuses its practices on the law of competition in Europe
and Germany. For years, Dr Montag considered to be one of competition expert in
Europe by Chambers Global, European Legal 500, Global Competition Review,
Global Counsel magazine and Juve. The copy of Dr Montag’s opinion is enclosed
as an evidence D. -----------------------------------------------------------------------------
The application of single economic entity doctrine;-----------------------------------------

115. As it is stated by Dr. Montag that under the law of European Union and Germany,
the holding company and its subsidiaries remains to be a single economic entity
only if the subsidiaries do not have freedom to act and to get absolute economy.
When a subsidiary has an economic independency supported by its holding
company, the two must be considered to be separated economic entity. -------------
116. Dr Montag states that the problem of economic independency, or autonomy, can
alter certain fact in every case. Specially, the relevance of share ownership in
subsidiaries, board of directors the composition of both companies, and how far
holding company influences policy or instructs its subsidiaries. Particularly, in the
case of joint venture. The company is not called common economic entity as one
of the holding company, unless the holding company enjoy certain rights enabling
to control, or unless both holding company coordinates their decision relating to
joint venture. So, joint venture in fact is not autonomous -------------------------------
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117. As it is mentioned in item 88 to 91 above, Minister of BUMN has considered (and
agree) with the structure of share ownership of Indosat and Telkomsel concerning
to acquisition by ICL/ICPL to the share of Indosat. It is important to know that in
its consideration Minister of BUMN does not assume that Temasek and Reported
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Parties 2 to 9 are Business Group. The white paper clearly mentions that “SingTel
and STT are managed independently and compete in Singapore and in other
markets.” The presupposition of KPPU about “Temasek Business Group” does
not only fight against fact but also disagree with the previous conclusion stated by
other government institution and hearings before member of parliament
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(MPR/DPR). -----------------------------------------------------------------------------------
118. In such a condition, KPPU failed to prove the assumption that Temasek is a single
economic entity with Reported Parties 2 to 9. --------------------------------------------
The pretext of the control taking over of Indosat and Telkomsel; -----------------------------
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119. Although there is a contradiction to the fact that Temasek and Reported Parties 2
to 9 considered as single economic entity, the problem is that Temasek or
Reported Parties 2 to 9 do not control Telkomsel and Indosat.--------------------------
120. KPPU tries to prove the presence of control based on fact that SingTel and STT
are not passive investor in Telkomsel and Indosat, and Temasek is acting as
controlling company.--------------------------------------------------------------------------
121. However, such factors are not adequate supportive evidences to prove the
allegation that Temasek and/or Reported Parties 2 to 9 controls Indosat and
Telkomsel. The fact that the shareholders are not passive investors cannot be
compared to company control in whatever reasons. -------------------------------------
122. KPPU supports its consideration from the article written by Ezrachi and Gilo that
written “in European Union, even passive investments is considered to minimize
competition, especially in a concentrated market that infringe the law of
competition.” First of all, it is not relevant related to Indosat and Telkomsel that
are controlled by ICL/ICPL and later by SingTel Mobile. This article does not
justify an assumption expressed by KPPU, either on page of reference or in any
other parts. The conclusion of the article states that passive investment can cause
anti-competition effect when the relevant market is concentrated. Such effects do
not always occurs in the competition law of European Union. Indeed, the main
purpose of the article is to identify similar transaction that is not argued under the
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regulation of competition law in European Union, as it is expressed clearly in the
article’s abstract: “The article identifies a coverage of transactions that potentially
affect competition; however they remain unchallenged under current regulation.”
78
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123. It is seen that the assumption of KPPU on effect of minority investment at Indosat
and Telkomsel based on article is (i) not relevant at all, and (ii) the statements and
the assumption of KPPU is contradictory. -------------------------------------------------
124. Holding company is not automatically having a control over its direct and indirect
subsidiaries. Additionally, the indirect subsidiary is able to decide to perform its
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own investment. -------------------------------------------------------------------------------
125. Therefore, KPPU cannot easily assume that minority investment in Indosat and
Telkomsel give by itself a control to such companies. The available evidences
show the facts; especially those relating the amount of share ownership and
shareholders involvement or holding company are under the management of
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subsidiary and investee companies. ---------------------------------------------------------
126. In aquo case: -----------------------------------------------------------------------------------
(a) ICL and ICPL only control 41.94% of Indosat shares, whereas SingTel
Mobile only owns 35% of Telkomsel shares; ICL/ICPL and SingTel Mobile
are only minority shareholders in the two companies. ----------------------------
(b) The statutes of Telkomsel and Indosat do not give SingTel Mobile and
ICL/ICPL veto right to influence the business strategy decision of the both
companies. There is no agreement between SingTel Mobile and ICL/ICPL,
and also other shareholders in Telkomsel and Indosat to let them possess
veto rights. ------------------------------------------------------------------------------
(c) Out of 9 members of Indosat board of directors, there are only 4 nominated
by ICL/ICPL. ICL/ICPL only nominates 6 of 10 members of Indosat
commissioner board which the rest are accomplished by one independent
commissioner and one by Qatar Telecom through ICL. Temasek nominates
none for the Indosat board of directors and commissioner, and none of the
directors and commissioner become members of Temasek board of director --
(d) Out of 5 current members of Telkomsel board of directors, there are only 2
nominated by SingTel Mobile. SingTel Mobile only nominates 2 of 5
members of Telkomsel commissioner board. Temasek nominates none for
78
ibid p. 327.
the Indosat board of directors and commissioners, and none of the directors
and commissioner become members of Temasek board of director -------------
(e) The fact is that neither Temasek nor Reported Parties 2 to 9 controls,
manages and influences the policy and decision made by Indosat and
Telkomsel one way or another. ------------------------------------------------------
127. The facts conclude that ICL/ICPL and SingTel Mobile do not have control to
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Indosat and Telkomsel. -----------------------------------------------------------------------
128. In fact, there is a body that control Indosat and Telkomsel, It is not Temasek but
the Government of Indonesia ----------------------------------------------------------------
(a) In addition to its share ownership in Indosat, the Government of Indonesia
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holds A series shares in the companies, as a consequence it has special
voting and veto rights over the strategic problems as it stated by the Statutes.
The Government of Indonesia also has rights to select at least one director
and one commissioner in Indosat. At this time, 5 of 9 Indosat directors
(including president director) and two of board of commissioner of Indosat
are the representatives of the Government of Indonesia. In 2002, when the
divestment of Indosat shares to STTC, President Director of Indosat agreed
to be always appointed by the Government of Indonesia under the
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agreement with STTC. -----------------------------------------------------------------
(b) Related to Telkomsel, the majority shareholders (65% shares) is Telkom.
Telkom appoints 3 of 5 Telkomsel directors and 3 of 5 Commissioner
Telkomsel. The majority shareholder of Telkom is the Government of
Indonesia. --------------------------------------------------------------------------------
129. The facts that the Jakarta Post Newspaper on 25 October 2007 wrote an
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awkwardness in the investigation of KPPU: ----------------------------------------------
“The government controls PT Telkom, which in turn owns 65% of Telkomsel,
the country's largest cellular operator, and consequently appoints the majority
of its directors and commissioners. ------------------------------------------------------
Temasek, through its subsidiaries, owns only 18.9% of Telkomsel. ----------------
On the other hand, Temasek, also through its subsidiaries, holds 30.61% of
Indosat, the country's second largest mobile operator, with 14.29% owned by
the Indonesia government, 10.20% by the Qatari government and 44.89% by
the investing public, including foreign institutional investors. -----------------------
Even though the Indonesian government owns only 14.29% of Indosat, it

succeeded in appointing five of the nine members of the board of directors,
including the president director. More than half if its nine-member board of
commissioners were either representatives of the government or independent
commissioners. -----------------------------------------------------------------------------
The government holds a golden share (A share) in Indosat which gives it veto
power over important corporate decisions.----------------------------------------------
What then is the logic of the KPPU findings? Wouldn't those allegations also
insult the intelligence of the investing public, including foreign institutional
portfolio investors, who own 44.89% of Indosat and 47.77% of Telkomsel? ------
If the conclusion of the investigation team is true, which theoretically should be
the case because, as the vanguard and defender of fair business competition, the
KPPU is supposed to come out with an assessment that has logic and makes
economic sense, that would be worrisome indeed. ------------------------------------
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But the question then is how could Temasek, despite its cross-ownership at
Indosat and Telkomsel, control both companies and dictate their prices while
the Indonesian government simply sat back and relaxed, acting as a seemingly
innocent bystander.-------------------------------------------------------------------------
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What then is the function of government-appointed directors and
commissioners at both cellular operators, and why did the Telecommunications
Regulatory Body close its eyes to the alleged price fixing? --------------------------
Has the government been ignorant or grossly incompetent in recruiting and

appointing directors and commissioners? -----------------------------------------------
Is the way the government treats and oversees Indosat and Telkomsel typical of
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its management and supervision of the other 128 state companies? -----------------
It is Telkomsel, which is 65% controlled by state-owned Telkom, that would

benefit the most if Temasek deliberately hampered Indosat's business growth,
as the KPPU team concluded. What is the logic of this? It simply insults the
intelligence of even the man on the street, because Temasek indirectly holds
only 18.9% of Telkomsel. -----------------------------------------------------------------
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These are just some of a layman's questions about the logic of the most
important conclusions of the KPPU report.”
The copy of this article is enclosed as an Evidence E ------------------------------------
130. Mr. Pasaribu also finds that Telkomsel is a subsidiary of Telkom (and not SingTel
Mobile).-----------------------------------------------------------------------------------------
131. Therefore, either Temasek or Reported 2 to 9 excluded from the definition of
performing activities in Indonesia, as it is mentioned in Article 1 (5) of the Law
No. 5/99., on the presence of control over Indosat and/or Telkomsel.
The fact concerning investments in Indosat and Telkomsel;-------------------------------

132. Another KPPU’s arguments is on controlling Indosat and Telkomsel. KPPU bases
its argument on the ties of Temasek Business Group with the activities in
Indonesia due to its investment in Indosat and Telkomsel. ------------------------------
133. The allegation is groundless. According to Professor Hikmahanto Juwana, law
expert that propossed by STT Group A, states in its report delivered to KPPU:----
“I want to affirm that explanation KPPU on term “business actor” during
preliminary investigation is wrong. In my opinion, foreign corporations
cannot be qualified as business actor because they have to perform their
activities directly in Indonesia. -------------------------------------------------------
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STT, STTC,AMHC,AMH, ICL and ICPL only have shares in Indosat Plc.,
directly or indirectly, and KPPU cannot prove that they get involved in any
operational decision. Under Competition Law, such companies cannot be
qualified as performing activities and be mentioned as business actor.” --------
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134. If KPPU interprets correctly “managing activities in the territory of the Republic
of Indonesia”, the Article 1 (5) cannot be implemented and make any investors (in
any form of investment) to be “business actor”, under the requirement of Article
1(5). The result is illogical caused by KPPU’s complicated interpretation.-----------
135. In its dissenting opinion, Mr. Pasaribu concludes that shareholders in Indonesian
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company cannot be compared to the deeds of performing business activities. The
first investment in Indosat and Telkomsel is activities in capital market not in
cellular market. To find a jurisdiction, the evidences of Temasek and/or Reported
2-9 in the business activity or business transaction of cellular telecommunication
in Indonesia. In this case, the evidences are not found. ----------------------------------
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136. In the third report, citing the definition of “Investment” in the Law No.25/2007 on
investment is defined in Article 1 (1) as follows: ----------------------------------------
“Investment is any kind of activities on investing, either by domestic or foreign
investors to perform business in the territory of the Republic of Indonesia.” -----------
137. The third report also cites Article 1 (3) of the Law No.25/2007 on investment:------
138. “Foreign investment” is an activity of investing to perform business in the
territory of the Republic of Indonesia by foreign investor, either foreign capital in
whole or joint venture with the domestic investor.’---------------------------------------
139. KPPU bases on this rule to conclude that “The Investment of Temasek Business
Group aims at creating business acess to the territory of the Republic of
Indonesia.” (See paragraphs 9-11 of the Analysis of Third Report) --------------------
140. The conclusion of KPPU: --------------------------------------------------------------------
(a) The two stipulation cited by KPPU depicts a clear difference between
“investing activity” in one side and business implementation in Indonesia on
the other hand. However, KPPU has already concluded both different
concepts without explaining why the allegation to the investment of
“Temasek Business Group” “intended” to perform business in Indonesia. -----
(b) The description of KPPU is in the contrary on its own. In one side, there is
clear differences between passive and active investors, and on the other it
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implicitly state that any investment will be automatically classified as
business activities in Indonesia. ------------------------------------------------------
(c) The Law on Limited Corporation (the Law No.1/1995 amended with the
Law No.40/2007) and the law on Investment does not recognize controlling
company as a form of businesses. Investment Coordinating Body (“BKPM”)
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has clearly positioned in this problems. In 2004, BKPM canceled a
regulation (THE DECREE OF THE HEAD OF INVESTMENT
COORDINATING BODY NUMBER57/SK/2004 YEAR 2004 ON THE
GUIDELINE OF INVESTMENT APPLICATION THAT FOUNDED IN
ORDER TO BOOST DOMESTIC INVESTMENT AND FOREIGN
INVESTMENT) that permit establishing holding company under the law of
investment. Further, as it is cited by Ratnawati Prasodjo, former Director of
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General Corporate Body department of justice (now Department of Law and
Human Rights) and one drafter of the Law of Corporation. The Law of
Corporation does not recognize share ownership or investment in other
company as a form of business.-------------------------------------------------------
141. In accordance with that, it is clear that Temasek and also Reported Parties 2 to 9
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are not business actors under the meaning of Article 1 (5). Due to the reason, the
statement of KPPU has already been null and void since its inception-----------------
THE ABSENCE OF MAJORITY SHAREHOLDERS ; --------------------------------------
142. Although, it opposes against the opinion above, Temasek can be considered as
business actor under Article 1 (5) of the Law No.5/99; its facts shows an
infringement of Article 27 (a) of the Law. -------------------------------------------------
143. Article 27 (a) of the Law No.5/99 states:--------------------------------------------------
“Business actor is prohibited to have majority shares at some similar
companies that conduct business activity in the common field at the
commone relevant market , or establish some companies that have business
activities at common relevant market , if the ownership resulted: --------------
(a) one business actor or one group of business actor control more than
50% (five percents) market share of one goods or certain service.” ----
144. Article 27 (a) only prohibits ownership of majority shareholders in some

companies, under certain conditions. This Article does not prohibit an ownership
from other type of majority shares. ---------------------------------------------------------
145. As it told previously, Temasek or one of Reported Parties 2 to 9 have “majority
shares” in Indosat or Telkomsel. ICL/ICPL only has 41.94% of majority shares in
Indosat and even SingTel Mobile has smaller majority shares in Telkomsel, 35%.
Precondition is important in applying Article 27 (a) not accomplished. ---------------
146. State Minister of BUMN has clearly stated that the interests of shareholders
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ICL/ICPL and SingTel Mobile at Indosat and Telkomsel does not meet
qualification as majority shareholders. As it is stated in paragraph 90 and 91
above, the White Paper states clearly that “Telkom controls the majority of
Telkomsel” and “The ownership of STT in Indosat through ICL (ICPL) is not
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majority (less than 50% from the enlisted shares in Indosat). The ownership of
Singaporean company in Telkomsel also less than 50%.” In other word, MENEG
BUMN and also parliament in Indonesia has taken into consider to choose the
word for Article 27 (a) and interpreted majority shareholders in number (less than
50%). --------------------------------------------------------------------------------------------
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147. ICL/ICPL and SingTel Mobile do not have more than 50% of share in Indosat
and Telkomsel. Therefore, it does not accomplish Article 27 (a).----------------------
148. In order to avoid problem, KPPU defines “majority share” in Article 27 as
“majority ” of a company. Besides, KPPU also interprets “majority” widely
including de facto control to a company’s policy. KPPU states that any ownership
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more than 25% of the majority shares inflict problems to its majority shareholders
below 25%. -------------------------------------------------------------------------------------
149. There are two reasons why the conclusion is not true. First, the description of
KPPU on “majority share” is not consistencies at all either its source definition or
the intention of its form. It is not also supported by argument that KPPU trusts.
Second, in KPPU’s broad construction, Indosat and Telkomsel are not controlled
by Temasek or one of the Reported Parties 2 to 9. ---------------------------------------
The Fair Forming of “majority share” in Article 27;-----------------------------------------

150. The interpretation of KPPU on “majority share” is indefensible, either from the
perspective of Indonesian of from anti-trust law in other jurisdictions. ----------------
151. Based on Indonesian law, Professor Hikmahanto Juwana, the law expert proposed
by STT Group A, states in its report delivered to KPPU: -------------------------------
“The conclusion I can take from the meaning of “own majority shares” is
majority shareholders must have more than 50% (fifty percent) of
company’s sold shares and paid up capital. -----------------------------------------
Under Article 27 of Competition Law, ICL and ICPL (direct shareholders in
Indosat) only have 40.8% of Indosat shares, STT, STTC, AMHC, AMH,
ICL and ICPL. Therefore, they cannot be called “own majority shares” of
Indosat.
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.........
The concept of significant influence is not recognized in Indonesian
corporation law and for this reason, the meaning of “own majority shares”
cannot be determined by using the concept.
The KPPU’s approach on majority share in Second Report is inaccurate and
it is not applicable judicially. In my opinion, as t mentioned in the beginning
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of the paragraph, “majority shares” is majority shareholders above 50%
(fifty percent) of company’s sold shares and paid up capital. It is importance
to be underlined that significant influence is not relevant test according
under the law of Indonesia in determining whether majority share exists, and
it is judge’s fault that to determine a decisions is part of KPPU.” ---------------
152. The conclusion of Professor Hikmahanto Juwana is based from the definition of
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“majority share” in Indonesian corporation law. He explains laws in its report as
follows: -----------------------------------------------------------------------------------------
“Pivotal reference laws are as follows: ----------------------------------------------
a. The Law No. 1/ 1995 on Limited Corporation (“UUPT”)----------------------
b. The Law No. 8/ 1995 on Capital Market (“UUPM”)
c. The Law No. 19/2003 State-Owned Company (“the Law of BUMN”) ------
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“Usable reference Law are as follows:-----------------------------------------------
a. The Law No. 1/ 1995 on Limited Corporation (“UUPT”)----------------------
b. The Law No. 8/ 1995 on Capital Market (“UUPM”)
c. The Law No. 19/2003 State-Owned Company (“the Law of BUMN”) ------
a. Based on UUPT, the definition of “own majority shares” is not found.
b. Based on UUPM, elucidation Article 15 paragraph 2 explained: ----------
“Share Majority is shareholders that have more than 50% (fifty

percent) of company’s subscribed capital and remit.” -------------------
The explanation of UUPM is interpreted that majority shareholders
is shareholders that have more than 50% of sold share and paid up
capital.---------------------------------------------------------------------------
c. Based on the Law of BUMN , the meaning of “own majority shares” is
not used. Nevertheless, there is an equal meaning. In the meaning of “a
large part of” can be seen in Article 1 number 1 and 2 of the Law of
BUMN .-----------------------------------------------------------------------------
Article 1 (1) is:---------------------------------------------------------------------

“State-owned Enterprise, hereinafter referred to as BUMN, is a
corporate with its capital owned by state through direct equity of
dissociated national wealth.” ---------------------------------------------------
In which Article 1 (2) further states: -------------------------------------------
“Company, hereinafter referred to as Persero, is a limited company of
BUMN with its capital divided into shares owned in whole or at least
51 % (fifty percent) by the Republic of Indonesia aiming at having
profits.”----------------------------------------------------------------------------
153. It is common that words in law are not ambiguous. As it expressed by Prof Dr Jimly
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Asshidiqie, the Chief of Constitution Court, in Concerning Laws, if its legal
requirement is clear, a court must apply the rule in accordance with existence
whatever result it is. If law is clearly showed (express verbis) there will be no space
for the court to interpret inversely. In this case, the term of majority share has been
self explanatory and not ambiguous that make ti no space for other interpretation. ----
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154. There is a similar perspective with international law on anti-trust. The most
acceptable interpretation of “majority shares” is the percentage of majority
shareholders. Dr. Frank Montag in his capacity as an expert said in his report that
irregularity and exclusion of prohibition in Article 27, by comparing to the
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antimonopoly Law in other jurisdictions, requires an understanding of majority
shares”. Based on international anti-trust regulation and the scheme of the Law
No.5/99 as a whole, the function of creating this Article is to have a similar
perception on Indonesian law such as the obligation of shareholders to have more
than 50% of paid up capital in the sense of controlling. ------------------------------------
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155. The KKPU’s argument is based on the grammatical, systematical and teleological
perspective of Article 27. The same goes for understanding regulation and practices
in other countries:--------------------------------------------------------------------------------
a) KPPU admits that “grammatical” understanding of Article 27 interprets “majority

shares” as a holder of more than half of company’s shares. Yet, KPPU refuses such
an understanding. Relating to a number of more than one share classifications in a
company, the understanding is too narrow 79. The understanding is applicable if it
needs de facto statement on whose controls a company. The problem is on the
understanding of majority shareholder. The rejection of KPPU on the grammatical
interpretation is a test for lawmaker bodies. -------------------------------------------------
b) The systematical and teleological interpretation of KPPU in Article 27 relied on

wide understanding of company 80 decision maker. The interpretation is its own
willingness and relied on the intention to refuse to what has been gauged clearly in
79
Third report, Analysis, paragraph 7 -13
80
ibid, paragraph 14-20 and 22 -25
the regulation. Legislative Body can select to put “majority shares” as a de facto
control but it is not conducted.-----------------------------------------------------------------
c) Based on the discussion and observing other regulation on majority shareholder,

KPPU conclude that no available legislative regulation defining majority
shareholder but controlling shareholders 81. If it happens, Article 27 of the Law
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No.5/99 supports Temasek in control of the shareholder and not a percentage of
shareholders. Therefore, it is better to write it as the existence of “controlling
shareholding” in some companies rather than majority shareholder. ---------------------
d) KPPU gives coherent statement that in European Union, share acquisition that does
not cause control changing in competitor’s company is arranged by an “unfair
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competition law” 82. The statement is imprecise because there is no such a law.
There are also no such Ezrachi and Gilo Artcile, which then directed by KPPU
regarding to such a law. It is true that cases of share acquisition and the effect of its
consequences might be regulated by Article 81 and 82 of European Union
agreement in which the conditions of the Article have been accomplished but it
gives no clues for the interpretation of Article 27 of the Law No.5/1999 that has
different stipulation. The Law No.5/1999 contains wide stipulation as it Article 81
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and 82: it is regulated (particularly) in Article 4-16 and Article 25. The conclusion
is that the Articles in Ezrachi and Gilo resemble to with the Law No.5/1999 on the
kernel of the problem and not different regulation of Article 27 that has no
similarity with Article 81 or Article 82. ----------------------------------------------------
e) The discussion of KPPU on controlling merger in other territory of jurisdiction 83 is
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very irrelevant, because it discusses other competition issues. Since the very
beginning it leads to share acquisition: they then apply ex ante regulation. As early
as 2001 to 2002, Article 27 was exercised as ex post to shareholders. Every
jurisdiction on merger prohibition is only applicable to a company that has
performed merger or the company to merger infringes competition. 84 Anti-
competitive effects in Article 27 is not explicitly found, and KPPU also does not
mention such conditions in its legal analysis. The different perspective on law and
the different implementation, no supportive understanding on “majority shares” in
Article 27 cannot be found. Finally, Dr Montag states that the understanding
illustrated at extraordinary occurrence in Article 27 by comparing to stipulation of
modern anti-trust system, then it is suggested to adapted original understanding in
arranging shareholding requirement.
81
ibid, paragraph 26-29
82
ibid, paragraph 34
83
Ibid, paragraph 30-22 and 35-43
84
In UK, merger is allowed only if Competition Commission determine that the merger “result of expected to result
the decrease of competition in any market of goods and services in UK.” (Part 35(2)(a) Enterprise Act 2002).
Under the merger regulation of European Commission, merger is prohibited if “intentionally disturb the
effectiveness of market competition especially if it results strong dominant position” (Article 2(3) of Regulation
139/2004/EC.
156. KPPU intend to justify its interpretation to Article 27(a) of the Law No.5/1999 by
stating the following reasons: ------------------------------------------------------------------
(a) If Article 27(a) applied literally only when there are majority shareholders,
it will not prevent loss to competition and public interest caused by a
conspiracy among minority shareholders that control some companies.--------
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(b) The elucidation of the Law. No.5/1999 determines that one the objectives is
to prevent economic concentration. Therefore, Article 27 (a) must be read
as a measurement to economic concentration.
(c) The legislative banking regulation and capital market depict “controlling”
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company/shareholders as a unity with shares ownership of less than 50% in
company.---------------------------------------------------------------------------------
157. The following proposed reasons are groundless -----------------------------------

(a) If minority shareholders conspire to lessen competition in the market, this
conspiracy can create cartel. It can be attacked by Article 11, a trust by
Article 12 or Article 4 of the Law No.5/1999.------------------------------------
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(b) The Law No.5/99 does not prohibit market concentration. The Law No.5/99
prohibit abuse of the concentration. It elucidated in Article 25 of the Law
No.5/99.----------------------------------------------------------------------------------
Article 25 permit a group of business actor to hold 75% or more of

available market without any abuse. In its own case of KPPU, group of
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business actor may control of 75% or more of the market through its
ownership of minority shares in some companies.
In the case, Article 27 must be read as an exemption to public freedom
regulation that is specifically regulated in Article 25 – in which Article 25
allow group of business actor control 75% or more of the market, Article
27 (a) prohibit such control, if is is performed by group of business actor
(literal understanding) with majority shareholders in separated competitor’s
company.---------------------------------------------------------------------------------
(c) First, legislation delivers to KPPU to use word “owner of majority shares”
and not “majority shareholders”. Second, the statute is used in the different
purpose from the Law No.5/99 and the usage is not proper even it can be
made as analogy. In so many activities, KPPU does not concern to
Indonesian legislation as it mentioned by Professor Hikmahanto in its report
(see above); the legislation intend to be in line with the Law No.5/99 and
clearly illustrates that “majority shareholders ” must be interpreted as the
share owner 50% bigger in a company.---------------------------------------------
158. The discussion of KPPU has already been misdirection in its effort to implement
Article 27 as a stipulation of retroactive controlling merger. As a whole it is null
and void. The Law No.5/99 consists of the rule of controlling merger: as it
regulated in Article 28 and 29. Article 27 is not available as law that regulate
controlling merger, and this stipulation basically differs from the stipulation of
controlling merger. It highlights problem that any effort to put on the concept of
controlling merger is irrelevant with the construction that is prohibited to some
different types, in the framework of structural condition of ownership of majority
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share. Furthermore, the implementation of Article 27 by KPPU retroactively to
replace Article 28 and 29 boost basic problems on justice and legal insecurity ------
159. Mr Pasaribu also has already (dispassionately) agreed in its statement that oppose
against the statement of KPPU that literal interpretation must be given to the
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phrase “majority share”. ---------------------------------------------------------------------
There is no de facto control of any Indosat or Telkomsel activities----------------------------
160. Even if KPPU implements correctly the meaning of “majority shares” in Article
27. KPPU remain to show de facto controlling of Indosat and Telkomsel by
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Temasek.----------------------------------------------------------------------------------------
161. Temasek and Reported Parties 2 to 9 do not control Indosat or Telkomsel. As it
mentioned in paragraph ## above [shareholders that control Indosat is the
Government of Indonesia and even Telkomsel is not controlled by Temasek or
one of the Reported Parties 2 to 9. Telkom is controlling PT Telkomsel with its
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65% of shares]. --------------------------------------------------------------------------------
162. Based on the reason, Mr Pasaribu in its opinion adversatively with KPPU, refuses
allegation of KPPU that base on Article 27. Temasek states that Mr. Pasaribu is
entitled to state his opinion. -----------------------------------------------------------------
THERE IS NO MARKET SHARE CONTROL IF MORE THAN 50%----------------

163. If KPPU disagree with the opinion submitted by Temasek that Temasek does not
have “majority shares” in Indosat and Telkomsel, component in Article 27 (a) of
the Law 5/99 that must beproven later is: --------------------------------------------------
“a business actor or a group of business actor control more than 50% (fifty
percents) market share of the type of certain goods or services.” ---------------
164. In the First Report, KPPU rely on the study of Research Institute of LPEM-FE UI
“Study on the loss of customer to the business competition in cellular telephone
industry in Indonesia, 2007” (“Report LPEM”) concluded that “Telkomsel and
Indosat control more than 50% (fifty percent) of market cellular
telecommunication in Indonesia.”-----------------------------------------------------------
165. The Second Report states that “Telkomsel and PT Indosat, Plc., jointly control 89%
market share or more or less 50% from compartment psar cellular
telecommunications in Indonesia.”------------------------------------------------------------
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166. The Second report mention that compartment of alliance market of Indosat and
Telkomsel is more than 50%. Further investigation must be conducted to determine
whether or not Temasek infringed Article 27 (a) the Law No. 5/99. --------------------
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167. In the Third Report, KPPU found that in 2006, on the basis of customer amount,
Telkomsel controls 57.79% of the relevant market while Indosat 26.18%. Based on
the business revenues of the same year, Telkomsel controlled 68.08% of the
relevant market and Indosat 21.55%. The allegation of KPPU mentions that
Temasek through Telkomsel and Indosat control more than 50% of the relevant
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market in 2006. 85 --------------------------------------------------------------------------------
168. There is some dissociated assumptions in allegation of KPPU: ---------------------------
a) The definition of KPPU on relevant market is true;-------------------------------
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b) The calculation of KPPU on market share of Indosat and Telkomsel is true;
and
c) Temasek controls Indosat and Telkomsel and also their market share .---------
169. The assumption is not true. Each of them handles its own business. ---------------------
The Untrue of Market Definition --------------------------------------------------------------------

170. KPPU defines relevant market as “service of cellular telecommunications in any
regions of Indonesia.” --------------------------------------------------------------------------
171. Temasek does not agree with definition in which it is too narrow and keeping aside
the substitution of cellular service, especially fixed wireless access (“FWA”). ---------
85
It is clearly seen that the Table number 3 and 6 provided by KPPU in paragraph 35 and 60 of the Third Report
mentioned that since 2004, alliance market segment of Telkomsel and Indosat is more than 50%.
172. Based on the report prepared by Spectrum Strategy Consultants on 27 August 2007
(“Spectrum Report”), the definition of KPPU on relevant market is not true.
Paragraph 2.1 of Spectrum Report states: ----------------------------------------------------
We believe that relevant market in this case should be interpreted as market

for service basic technology combined mobile and fixed wireless access
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(“FWA”) if not combined fixed and mobile market itself.”-----------------------
173. Spectrum Report gives some reasons for supporting its statement.-----------------------
174. Firstly, FWA service is a direct subtitusition of GSM service from customer’s point
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of view. Although FWA service provides only limited coverage (in which mobile
service provides fully national coverage full [of]), FWA service can consider as
the replacement for mobile service, its reason shall be as follows: -----------------------
a) Area distribution of limited mobility will be bigger and determined by area

code. Area with enormous number of customer of limited mobility in Jakarta
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and its area is using one area code. It means that mobile service has a little bit
benefit in this area.
b) The recognition of service call-forwarding of FWA operator allow customer to
receive call outside the coverage area of FWA service. The FWA service is
similar to the previous mobile service in which it is only going into effect to
limit call-forward outside restricted area, usually area low-usage.-----------------
c) In Indonesia, for an exemption of “Mudik (Going hometown annually, its
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performed prior to Eid al-Fitr)” period, it is less than 1% of people perform
interregional by land, ship, and air monthly. Besides, there is no real need for
most Indonesian people performing full mobility, especially since the
customers have a call-forwarding to contact its relatives in the area outside
their residence.
175. Secondly, most analyse and industry actor consider TWA as part of mobile market,
either in Indonesia and other regional market area: -----------------------------------------
a) The comment and analysis on Indonesian market mostly describe the

influence of FWA service in mobile services market competition. The FWA
operators offer great discount at standard mobile tariff with low capital
expenditure and interconnection costs as well as license.
b) There is a similar regulation perspective in other global markets. The

regulation in India and China (in which FWA service has similar market share
with Indonesia) implicitly treat FWA service as part of mobile services
market in any regulation announcement. ----------------------------------------------
c) The operators in Indonesia treat mobile service and FWA in common market
share . An operator, Bakrie for instance, prefer not to change their FWA
license to full mobile service for the shake of profits, low interconnection bill,
and license expense. Operators do not see the limitation of mobility offered by
FWA service will put them in advantageous position.
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176. Responding to the reason, Spectrum Report concludes:------------------------------------
“Some analysis have been offered concerning relevant market, including fixed
services such as in mobile market and fixed service tends to be concentrated by
the awareness of fixed-mobile products and mobile substitution. In order to have
single definition on fixed and mobile service market, the discussion of inter-states
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needs to be arranged --------------------------------------------------------------------------
Therefore, the exact market analysis on mobile market shall also involve service
of FWA and mobile.” -------------------------------------------------------------------------
177. The report of Dr Cento Veljanovski in Case Associates on [10 August 2007]
(“Report CA”) takes similar conclusion. According to CA Report, there are
differences between service of cellular telecommunications and FWA: -----------------
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“We do not find that the difference is a basis for not putting telecommunications
FWA service into relevant product market, or an exemption remains to be
consistence with the evidence on hand.” ---------------------------------------------------
178. The reason stated in CA Report CA for this conclusion is:-----------------------------------
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a. Some coverage area of FWA are not nationwide coverage therefore, most
operators of FWA have area codes consisting of significant population
proportion, Jakarta as an example.------------------------------------------------------
b. The limitation of area code for most FWA operators that provide the service
latter and it enables them to have larger geographical coverage area. -------------
c. The regulation is feasible and included through Mobile Virtual Network
Operator in which regulation can be made with other cellular operators to put
in the way of FWA operator covering nationwide service.--------------------------
179. Report CA stated that KPPU has failed to justify its statement on the intention of
competition assessment of crossed-ownership regulation. FWA and cellular
telecommunication service are not in common relevant product market. The reasons
stated in CA Report are: ------------------------------------------------------------------------
a) The facts indicate that FWA operators compete directly and tightly with other
cellular operators. In an area consisting 2 network types, the FWA operators
provide effective and competitive cellular price. It is considered by consumer
as a substitution of cellular service. Cellular operator and industrial analyst
have explained publicly.-------------------------------------------------------------------
b) There are evidences that prove that FWA service has captured many
customers in certain areas. Jakarta as an example. The customers of FWA
reach to 50% or more than the whole customers of cellular services.
c) For cellular user in Indonesia, mobility is not an important assessment. In

2007, more than 80% cellular calls in Indonesia are local calls, 90% to 95%
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in urban and rural areas. There is even no national roaming.
180. It has been explained in report of Analysis Consulting Limited on 19 September

2007 (“the First analysis Report”) that FWA service is a potential competition for
cellular operators (on page 6): -----------------------------------------------------------------
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“KPPU considers to define market as not only operator of cellular but also Public
Switched Telephone Network operator (PSTN) and fixed wireless access
(“FWA”) for limited mobility service. KPPU defines economic market as “service
of cellular telecommunication within the areas of Indonesia,” on the analysis basis
of benefit, characteristic and service price along with the geographical region
offering from operators. We adopt this market definition to discuss a competition
to take part. It must be noted that FWA service becomes a potential competition to
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cellular service operator with 2 reasons to state. Firstly, a few years ago in India a
regulator was able to change license structure to allow FWA operator provide full
mobility service to compete directly with cellular service. Secondly, although
there is no change in license structure, improving investment on the current FWA
operator is important. The marketing also increase because it attracts customer to
enjoy limited mobility service.” ------------------------------------------------------------
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181. If KPPU defines relevant market wrongly, the decision KPPU will be null and
void.
“ In defining relevant market, KPPU must have reasons and analysis by attaching
evidences. By following international custom, KPPU has wrongly define relevant
market and any decisions will be null and void.” -----------------------------------------
182. KPPU makes mistake in defining relevant market. If KPPU fails to amend the
mistakes and to give opportunity to the parties answering and providing claimed
evidence to amend, the decision of KPPU will be null and void at High Court level
or Supreme Court. -------------------------------------------------------------------------------
The calculation mistake of Indosat and Telkomsel’s market shares -----------------------
183. In the First Report, KPPU states that market share of Indosat and Telkomsel (based
on business revenues) are 26.79% and 63.15%. According to the First Report taken
from the report of LPEM. If KPPU bases on the description of LPEM in taking
conclusion, (in the Second Report) that Indosat and Telkomsel “jointly control 89%
market share or at least more than 50% of the of market share of cellular
telecommunications” To the common effect, the Third Report states that the
average of market share of Indosat and Telkomsel during the period of 2003-2006
was 89.61%. Since it is controlled by Indosat and Telkomsel in 2002, their market
share improve from only 83.58%. ------------------------------------------------------------
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184. Yet, KPPU fails to explain of why business revenues of Indosat and Telkomsel are
used to calculate their market share when at the same time acceptable and fair way
to calculate market share on the basis of customer domicile in market share and the
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number of customers can be conducted. 86 ---------------------------------------------------
185. By using available information in Third Report on the customer basis, the average
market share of Indosat and Telkomsel (based on the number of customer) for the
period of 2004-2006 was only 83.54%. In fact, the Third Report indicates clearly
that market shares of Indosat and Telkomsel (based on the number of customer)
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have decreased slowly from 85.85% in 2004 to 81.97% in 2006.-------------------------
186. Even in the case of revenues, market share stated in the Report of LPEM is different
with those in the First Analysis Report), Spectrum Report and CA Report. The three
Reports determine that alliance market share of Indosat and Telkomsel is smaller
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than the Report of LPEM. It can be said that allocation of market share in the
Report of LPEM is not suitable with the allocation of market share stated by the
three notable international telecommunication companies. --------------------------------
The incorrect assumption to Temasek concerning market share of Indosat and

Telkomsel
187. The market shares of Indosat and Telkomsel cannot be assumed as Temasek market
share -----------------------------------------------------------------------------------------------
188. As it mentioned above, Temasek will not control neither Indosat nor Telkomsel.
Therefore, there is no basic assumption able to state that market share of Indosat or
Telkomsel are also Temasek market share .--------------------------------------------------
189. Maximally, the assumption that market share of Indosat or Telkomsel is the same as
Temasek’s limited only to a proportional number of its indirect share ownership in
86
See paragraph 106 Analysis part of Third Report
Indosat or Telkomsel. The method is a calculating method used frequently in the
last research that refer to one of paragraph entitled “Temasek does not running
monopoly: Study” published by Jakarta Post on 3 August 2007: -------------------------
“To nail to the counter to recent allegation provided by KPPU, the last research
concludes that Singapore’s Temasek Holdings does not practice monopoly to
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mobile telecommunication market in Indonesia. ------------------------------------------
“Concerning opinions from many point of views that Temasek does not infringe
Article 27 of anti-trust law,” Centre for Strategic and senior economist of
International Studies (CSIS), and also former member of KPPU, Pande
Radjasilalahi express it in the seminar on competition law in Jakarta. -----------------
The Study, headed by Pande and uses the latest data and calculation of mobile
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telecommunication industry, states that market share of State-owned Enterprise
of Singapore (seen from the viewpoint of operating revenues) valued only 20.12%
of the total industries in 2006, and tended to decrease since 2004. ---------------------
“Market share of Temasek in industry of mobile telecommunication Indonesia,
with the operating revenues, decreased from 21.56% in 2004 to 21.11% in 2005
and then to 20.12% in 2006,” he said. ------------------------------------------------------
He also mentions that gross added value of the company including variable, such
as employee’s salary, Temasek holds 19.79% of segment market. “Viewpoint of
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gross added value also used by KPPU and concerning to this, I find that Temasek
does not have market share majority,” he said. -------------------------------------------
Meanwhile, based on a number of customers as the most used variables in
determining whether monopoly practices occur or not, Temasek only controlled
for around 19.18% of market through its subsidiaries in 2006.” -----------------------
The copy of this article is in Annex F.------------------------------------------------------
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190. Under such condition, it is clear that Temasek does not have “more than 50% (fifty
percent) of market share” of relevant market. The substance of Article body 27 (a)
of the Law No.5/99 is not accomplished, the allegation to Temasek is null and void --
THE ABSENCE OF ANTI-COMPETITIVE EFFECTS

Allegation OF KPPU -----------------------------------------------------------------------------------
191. In the three of reports, KPPU concludes that Temasek crossed ownership to Indosat
and Telkomsel have negatively influence to competition nature in the relevant
market. Referring to this condition, KPPU claims a number of important matters: ----
(a) The claim that relevant market is highly concentrated and continued
increasing in the last few time --------------------------------------------------------
(b) The variation of claim of Telkomsel finance statement is good. -----------------
(c) The claim that the performance of Indosat is bad since the share acquisition
by ICL/ICPL ----------------------------------------------------------------------------
(d) The claim stated that Telkomsel has caused bad performance of Indosat. -----
(e) The claim that market characterized by the price leadership of Telkomsel. ----
(f) The claim that the tariff of Telkomsel is excessive --------------------------------
(g) The claim that the absence of “crossed ownership” makes better competition
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nature in the market --------------------------------------------------------------------
192. Any assumption is not true and in turned it will be handled. Initially, it must be
performed an observation on the development of cellular telecommunication market
in Indonesia to put the discussion of KPPU in the appropriate factual context. ---------
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The competition of cellular telecommunication market in Indonesia ------------------------
193. It is stated in the First Analysis Report that there is evidence proving “mobile
market in Indonesia is fair”. In achieving this conclusion, the consideration of First
Analysis Report shall be as follows:----------------------------------------------------------
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(a). This Market has 4 active actors and 3 actors that have permit and plan to
widen the market. This is competition resistance to the market power by
Indosat and Telkomsel.
(b). The mobile customer basis in Indonesia has decreased 871% since 2001 and
increase double since 2004. For the year of 2007, Goldman Sachs predicts
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that 26 million of new customers will be capture. The growth rate is fair
compare to other countries. It means that Indosat and Telkomsel do not boost
their market power aiming at constraining other operators capture new
customers. The high growth rate is evidence that market power is not
mobilize. So far, it has no loss impact for the growth.
(c).The tariff of three-minute call in peak time is lower than neighboring
countries. Philippine and Vietnam have seen the decrease of tariff in
Indonesia. The price rate in Thailand and Malaysia increased although US
dollar price exchanges decreased. Last year, Goldman Sachs also mentioned
that vote tariffs decreased to 20-30%. Consequently, customers in Indonesia
have enjoyed the low mean value for a number of years that bring to the
improvement of market penetration.
(d). Since 2002, the users of cellular phone have grown stably, except in 2005.
The evidence indicates that the industry in Indonesia gives its advantage for
the customers, especially new users. Yet, the new users are not as enthusiastic
as the establish users, Indonesia does not see the decrease of user. It estimates
the existence of stable growth in the market penetration. This decrease has
been experience by other country.
194. In the First Analysis Report also found an evidence of aggressive competition
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among operators in Indonesia. The followings are factors used as consideration in
Analysis Report: ---------------------------------------------------------------------------------
(a) The market share of Indosat has decreased in the last two years. Most of
Indosat market share has been lessen and moved to Excelcomindo and
Mobile-8. The Indosat collective market shares of Indosat and Terkomsel
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have been decreased 3% in 2005 to 2006. Market share of Telkomsel is
leading boosted by its superior network coverage. If other operators
implement their plans to expand coverage power, it is possible to capture
new bigger customers. ----------------------------------------------------------------
(b) The users of Indosat and Telkomsel usually overpay for each minute local
call during peak hours in weekdays. It is charge only by established
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operators while the newcomer operators offered lower tariff to convince
new customers. With the lower tariff, the newcomer operators not only
persuade customers to leave their previous operators but also capture
market. The tariffs reflect value and broad covering operators (in the sense
of coverage and customers) could obtain more value for the usage and offer
on-net calling to largest base. --------------------------------------------------------
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(c) Excelcomindo and Mobile-8 have introduced promotions and offers to
heighten a number of customers and users. As a matter of fact,
Excelcomindo and Mobile-8 aggressively target new customers. It shows
that there is a growth barrier in the market. -----------------------------------------
195. Spectrum Report provides common conclusion that “The last condition of mobile
market in Indonesia is competitive, at least compared to other market.” The
following are factors considered in the Spectrum Report:
(a) A number of mobile operators in Indonesian market are bigger than emerging
and regional markets. The number of established operators indicates a
competition rate in the market. ----------------------------------------------------------
(b) The combination of Indosat and Telkomsel market share, two powerful
operators in Indonesia, could be compare to market share of other two big
operators in a different market. The combination of market share of the two
leading-edge operators in Indonesia shall not generate worriedness over the
anti-competitive practice compared to other more competed market as
assumed. ------------------------------------------------------------------------------------
(c) HHI of Indonesian market is lower than comparable markets and it means that
competition level in Indonesian market is higher. Particularly, HHI of
Indonesian market is lower than HHI of Chinese and the Philippines market.
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The degree of comparison in both markets is considered reasonable
competitive by analyst. HHI also reflects the improvement of competitive
market since STT has shares in Indosat. -----------------------------------------------
(d) Indonesian market is highly developed compare to other markets of the same
growth. It indicates that mobile operators in Indonesia aggressively develop
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their market and its market and no anti-competitive conduct in the market. ------
(e) The extrapolation conducted in the Report of LPEM on consumer loss is not
true, the following are the reasons:------------------------------------------------------
(1) The Report of LPEM use data extrapolation of pricing from THAT
fly by night; ---------------------------------------------------------------------
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(2) The Report of LPEM has inconsistent data source;-----------------------
(3) The Report of LPEM uses unweighted average of PSTN, on-net and
off-net tariff; --------------------------------------------------------------------
(4) The Report of LPEM uses comparison that disagree with market
majority post-paid; -------------------------------------------------------------
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(5) The Report of LPEM uses comparison that disagree with developed
market;---------------------------------------------------------------------------
(6) The Report of LPEM is made ineffectively by using headline pricing

as a comparison with other markets; and-----------------------------------
(7) The Report of LPEM leans on inaccurate market data. -------------------
The whole extrapolation of customer loss of the Report of LPEM is not true and
no other evidence that prove consumer loss.-----------------------------------------------
(f) The average revenue per user (“ARPU”) from mobile operators as a
percentage of gross domestic product (“GDP”) per capita in Indonesia is the
lowest in the region. It proves that Indonesian GDP per capita is lower than
other markets. It indicates a competition in which ARPU describe the
percentages of GDP per capita. It is clearly that Indonesian customers are
spending comparable or lower proportions of GDP per capita in service mobile
than customers in other markets. --------------------------------------------------------
(g) Indonesia has the higher churn rates than its regional peers. It shows a strong
indication of a competition in the market and a substantial movement from
customers among operators possibly caused marginal price changes or ongoing
promotions.---------------------------------------------------------------------------------
(h) The operators in Indonesia receive a comparison or low return over their assets
than operators in other markets. Although operators in Indonesia obtain high
margin revenues before interest, taxes, depreciation and amortization
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(“EBITDA”), the margin EBITDA in Indonesia increases because the method
of calculation implemented. EBITDA is not a benchmark in counting
profitability for the capital-intensive in Indonesian mobile market. The other
measurement is better as a consideration in return on assets (“RoA”) of
Indonesian market. Significantly, mobile market in Indonesia is less beneficial
than other country. A few profits expected because Indonesia has sovereign
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rating for foreign currency long-term debts. Therefore, the higher RoA is
needed to assure reinvestment, high quality service and sustainable expansion
of the network. -----------------------------------------------------------------------------
196. Consider the degree of price competition in the market. The CA Report found
“evidence of past and increasing price competition)” on the basis of following
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facts:
(a) The high ARPU indicated by a high tariff and/or a high usage by customer.
The ARPU of the three main cellular operators in Indonesia decreased
significant in 2002 to 2006 – Telkomsel 42%, Indosat more than 50% and
Excelcomindo 65%. The price competition excitement identified as a main
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reason of the decrease of ARPU. The data source is the finance statements of
the two operators and comment of industrial analysts. ----------------------------
(b) The decrease of price showed by other benchmark, Average Revenue per
Minute (“ARPM”). ARPM is more specific indicator on average prices of
ARPU. The research conducted by Deutsche Bank found that in 2005 and first
quarter of 2006, ARPM three cellular operators in Indonesia decrease in
significant. Research concludes that there are “more than 20% accumulated
vote tariff reductions in 2004-2006” on the calculation of ARPM. At this
moment, The ARPM of Indonesia is below the average and among the lowest
in Asia.--------------------------------------------------------------------------------------
(c) In fourth quarter of 2006, Indonesia was one of countries that has the highest
monthly churn rate among other countries in Asia. The churn rates is not
counted explicitly, either customers rotate to select various tariff offered by
one mobile operator or among available mobile operators. There is no
constraint for customers to move from one operator to another. --------------------
(d) The three operators adopt different pricing strategies such as Indosat IM3 with
flat tariff, As Card Telkomsel with differential tariff for daily different time,
Excelcomindo with differential tariff for different free tariff area. The financial
statement of the operators indicate the introduction of new price is always
connected to the parameter of wide coverage including the introduction of
new single national tariff, flat tariff, starter packs, free subscribing expense,
lengthen off-peak period and special offer. The evidence indicates that cellular
operators tightly compete one to another by cutting price. Between June 2004
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and September 2005, Credit Suisse reports that there is a cutting under of ten-
fold for starter package aiming at increasing customer, penetrating mobile, and
responding to shrinkage of customer caused by competition among operators. --
(e) There are other growths toward the shrinkage of price: ----------------------------
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• In 2004, Excelcomindo perform re-branded and re-positions itself.
Excelcomindo used to consider as an operator that provide high tariff.
• In the end of 2005, cellular operators introduced off-peak tariff as the

result of decreasing substantial price.----------------------------------------------
• Cellular operators decrease monthly subscription expense or even freeing
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it.----------------------------------------------------------------------------------------
• Cellular operators introduce flat tariff. --------------------------------------------
(f) There is evidence that main operators respond to the price and package
change. For example, in 2005, Telkomsel responded within a month to the
offer of Indosat and Indosat respond to the offer made by Telkomsel.-------------
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(g) The peak tariff for well establish and predefine packages is hard to change
dramatically in mobile market development but in mid 2006, the peak tariff of
starter pack decreased. One of the reasons is competitive pressure conscription
from FWA operators cut the tariff nearly to fix cellular. The competition
predicted to be tense as FWA recently allocate a better spectrum and lower
price in structure than 2G and 3G-operator Some FWA operator also has
strengthened their financial position. Bakrie Telecom, as an example, obtained
huge credit syndications in June 2007 and used the liquid to start its service in
Indonesia.-----------------------------------------------------------------------------------
(h) The 3G Hutchinson Service was launch in March 2007 and Hutchinson has
adopted aggressive pricing strategy that fixes its prices close to those of FWA.
Other operators respond to Hutchinson price by arranging promotion. ------------
(i) There is a regulation for maximum prepaid tariff. Minister of Tourism and
Post and Telecommunication Department establish the tariff of airtime,
subscribing expense and interconnection price. Regulator body can prevent
price competition. For example, marketing strategy of Mobile-8 has
encumbered by BRTI. BRTI does not allow Mobile-8 to case document
mobile. The FWA service in Mobile-8 is unable to offer excitement coverage
with FWA in local area and mobile outside local area.-------------------------------
197. It is understandable that market for service of cellular telecommunication compete

tightly one to another in Indonesia. Since 2001, the growth has been high and
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operators compete aggressively. Comparing to proportional regional market,
Indonesian market is not concentrate anymore by the presence of many licensed
operators. Pricing competition has led into lower and innovative tariff for the
consumers. The fluctuant price indicated a competition. Based on these facts and
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market evidence allegations of KPPU must be considered
Market Concentration -----------------------------------------------------------------------------

198. The starting point of KPPU is a claim on the calculation of HHI in certain market
(cellular telecommunication market), market structure turns to be more
concentrated since 2001. 87
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199. In fact, it has explained in the report of Consulting Limited analysis on 24
October 2007 (Second Analysis Report), KPPU get the calculation result by
releasing one of operators from the market, Mobile 88. If Mobile market 88 is
included in the calculation of HHI, the result indicates that HHI does not increase
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significantly for the last years. It remains to be stable. The result emerges
particularly from the calculation of HHI by using a number of customers with the
0.407 for tn 2002 it is almost identical 0.405 for 2006. According to the comment
of Second Analysis Report, KPPU has already justified the choice with revenues
by measuring market concentration. The copy of Second Analysis Report is
enclosed as Written Proof G
200. Mr. Pasaribu also finds that HHI rate in Indonesia is normal and in fact, it is lower
than other countries.
201. KPPU tries to support analysis HHI by using other calculation, Generalized
Herfindahl-Hirschmann Index (GHHI) 88. This method is not commonly used in
economic field as well as in the countries that regulate antitrust and anti-
monopoly. As it is described in the Second Analysis Report, the calculation of
87
Third Report, Analysis, paragraph 109-113
88
Ibid paragraph 115-122
KPPU or GHHI is incorrect because the calculation is using ownership percentage
of ICL/ICPL and SingTel Mobile in Indosat and Telkomsel that have power to
control company. It disregards writer’s comment on Second Analysis Report, the
article to which KPPU refer to that share ownership does not reflect control to a
company. In the aquo case, the certain case of share ownership structure in
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Indosat and Telkomsel indicate that the controlling party is the Government of
Indonesia (due to its share ownership, A Series shares and its special right) and
Telkom. The factors should be considered to have competent value of GHHI.
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202. This condition indicates that the conclusion taken by GHHI KPPU result nothing.
Telkomsel Financial Performance --------------------------------------------------------------

203. As an additional claim to the whole market, KKPU continues providing a number
of claims that Telkomsel has EBITDA higher than its closest competitor, Indosat
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and Exelcomindo89 and has high Return on Equity (ROE)90. The operational
revenues, total assets and the capital shareholders increase multiply since 2002.
91 The claims seem to support the statement on Telkomsel’s market power and its
involvement in a high tariff.
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204. As a matter of fact, this statement is absolutely incorrect for the reason detailed
explained in Second Analysis Report. The Report explains:
a. The high margin of EBITDA is not an indication of market share controlling

but it simply means a company in an industry with a high upfront requirement
of capital expenditure, in which it is normal for telecommunications cellular
operator around the world. Furthermore, EBITDA margin of Telkomsel did
not increase in 2001 -2006. However, it shows market stability rather than
market power within the period---------------------------------------------------------
b. ROE does not give indication whether a tariff is high or not because it only
considering company’s influence. The claim of KPPU that “applicable ROE”
is 20-35% is not supported by precedent or economic analysis. It is only a raw
statement. As it is written in the analysis, it is impossible to mention a
standard of ROE for company enlisted in international capital standard with
those Telkom, a holding company of Telkomsel.
c. The improvement of Telkomsel operational revenues, total assets and
shareholders capital are not caused by anti-trust of Telkomsel (especially by
89
90
91
Temasek) but they are boosted by exponential growth of cellular
telecommunication market in Indonesia which move to the fast improvement
of investment and the high growth of customer. The claim of revenues growth
is based only to a crude rate and avoiding inflation rate 58% by that time.
Price can only be stated excessive if it is related to expense. Not only
operating expenses are considered in a number of expense calculations, but
also customer growth and usage and for that reason, decision making on price
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rate cannot be conducted.
205. In such a situation, the finance performance of Telkomsel during the period of
2001-2006 does not support KKPU’s statement on competitive condition in the
market of cellular telecommunication in Indonesia.
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Indosat Market Performance
206. Turning from Telkomsel to Indosat, KPPU states [suspect] that the performance
of Indosat had been decreased during the period of 2001-2006.92
207. Nevertheless, the existing evidence indicates the fluctuation of Indosat’s

performance during that period caused by the merger of Satelindo with IM3 in
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2003. Johnny Swandi Sjam, President Director of Indosat, for and on behalf of
board of director of Indosat wrote in paragraph 4 of his letter dated 13 August
2007:
“The following is an explanation concerning to Indosat’s performance. Since
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2001, Indosat has gone through several structural changes, whether it is in
business activity or company structure. By the year of 2001, the main business
activity of Indosat is international telecommunication. Responding to the
growth of technology, the integration of mobility and bandwith, Indosat
changed its vision by becoming integrated telecommunication operator
focusing on cellular. Indosat obtained the ownership of Satelindo in 2002
and established celluler subsidiary in 2001. Another significant change is a
merger of Satelindo, IM3 and Indosat in the end of 2003. As a rule of
merger, the changes of Indosat business activity take several years to be
able to be implemented in some aspects of business activity such as a
structure of business activity, network integration, organization and
corporate culture. -------------------------------------------------------------------------
Since merger agreement was signed in the end of 2003, the changing process in
the structure of organization, corporate culture, identity/company’s name, legal
agreements/contractual, especially in network and infrastructure finished in
general around 2006. It has influenced sale service of Indosat and had the
performance of Indosat fluctuated to the middle of 2006. During that period,
no operator but Indosat went through significant changes. ----------------------
92
Ibid, paragraph 130-147
Apart from the condition mentioned above, concerning the business scale
and company of Satelindo, IM3 and Indosat that have wide business
coverage, such a changing process is smoothly and short in time. The
intended business scale is in the sense of a number of customers which
remains increase significantly amid the tight of competition. Comparing to
other provider that do not perform structural changes as Indosat does,
their performances should be better.--------------------------------------------------
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Since the middle of the 2006, Indosat started to get a momentum to capture its
customer and revenues. The improvements of its performance are reflected in
the selling price of Indosat shares IDR 7.650 in July 2007 or hit a ceiling price
since its IPO.”-------------------------------------------------------------------------------
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The result Analysis of KPPU does not clearly mention the significant changes in
evaluating Indosat. The copy of Johnny Swandi Sjam’s letter can be seen in
KPPU.-------------------------------------------------------------------------------------------
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208. The Spectrum Report also shows good Indosat performance, especially in the last
period. In Chapter 4 of Spectrum Report, it is written that:
“The performance of Indosat has varied since 2003. Some challenges occured
as from the merger of Satelindo and IM3 although it was anticipated in the
Memorandum of Information of Indosat. It was published prior to acquisition
process. Furthermore, Indosat has improved its involvement in an area of
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CDMA competition in the side law and coverage network, if it is competed with
Telkomsel-------------------------------------
Apart from the time of Indosat’s weakening performance, it is relative fast
for Indosat to reach a turning point and significantly improves its
operational performance and finance. It can be seen as follows:
• EBIT
• BITDA
• Earnings Improvement
• Share price performance ---------------------------------------------------------------
It needs to be keeping in mind that the improvement was obvious before

the presence of anticompetitive report. The rating agents have also been
revised their rating and Reported Party positive estimation to Indosat. -------------
The decrease of market share after the acquisition is actually smaller than
those prior to the acquisition process beside competition improvement in
the end of 2002. ----------------------------------------------------------------------------
The turning point of Indosat is to finish a large part of network integration,

adaptation, and the recovery of weakening performance in time of integration
period, is shorter than Celcom in Malaysia. The case study of Celcom
illustrates that a dynamic market of a similar nature and with fewer
resistance from those faced by Indosat, Indosat has shorter time to be in a
turning point as it happens in the stronger position of a market.”--------------
209. Besides facing various challenges, Spectrum Report indicates that, after STT
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acquires Indosat shares, the combination of market share of Satelindo and IM3 do
not decrease drastically and even increase in the last quarter: Part 4.6.
210. Spectrum Report in Part 4.5 states that Indosat does not have bad performance, on
the contrary Indosat won some awards in good innovation and majemen including
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“Best Managed Company, Indonesia” from Euromoney in 2004 and “Best
Managed Companies” and “Best Corporate Governance” from Finance Asia in
2005.
211. Based on CA Report, the allegation of KPUU that Indosat have bad performance
comparing to other operators is not acceptable, because:
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a) The bad finance statement of Indosat results tight capital restriction and
disability to perform investment in proportion to Telkomsel. Specifically, the
finance statement of Indosat in 2002 could not respond the market changing
nature by developing its network or responding by introducing its operating
result due to big debt obligation. Besides, there are agreements defined for
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Satelindo as part of its debt restructuring.
b) Indosat has operated two separated networks, IM3 and Satelindo. These
networks are integrated into one network to increase a number of customers
and to improve service quality and, to lessen operating cost. Unfortunately
both networks do not run well result on the decrease of service quality,
revenues, market share and, consumer perception.
c) Apart from it, Indosat’s performance is better than Excelcomindo for rollout
network. The performance of Indosat increases caused by the introduction of
high speed 3G/HSDPA in which Indosat is the first operator that operates it.
212. The First Analysis Report also admits the series of event. In page 29-30 it is
expressed:
“Many explanations are available concerning the result of the operator at the
moment. The division of Indosat mobile cellular is slower than a broad market
in the recent that make Indosat loses its market share due to the problems on
network integration after the merger of Satelindo and IM3. Since 2005
Indosat find it difficulties to run its integration plan in key area, Java island.
As a consequence, Indosat is unable to launch nationwide marketing activities
until first quarter of 2006, make it left by 1.5 million customers in the first
quarter of 2006. Based on the company’s data, the problem was over in 2006
and some nationwide marketing campaign launched to capture new customer.
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The marketing cost increase significantly, from IDR 360,05 billion in 2005 to
IDR 468,92 billion in 2006, increase 30% compare to the previous year that
only 3%. It is related to the improvement of capital expenditure and also to
state that this expenditure would not be conducted if the suspected
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infringement was true, quod non, that the performance of Indosat was
sacrificed for Telkomsel.” --------------------------------------------------------------
213. It is clear that the performance of Indosat is not bad. Remembering structural
reform that been done, Indosat have a good performance and have won some
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award.
The allegation of the involvelment of Temasek in the Performance of Indosat

214. Furthermore, if Indosat has bad performance during 2001-2006, KPPU provide
either evidence that Temasek give permission to Indosat for not competing in the
market nor the relationship of Temasek ownership in STT and SingTel with the
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allegation of Indosat’s bad performance. Without any crucial matters, the
allegation to Temasek will be null and void.
215. It’s stated in the CA Report (page39-40)
“In my opinion, KPPU is not only obliged to prove that the things (for
example the bad performance of Indosat and less competitive) really happen
in relation with capital ownership of Temasek and/or its subsidiaries in both
cellular operators. Specifically, KPPU is obliged to prove:
1. That there is directly a joint control to Telkomsel and Indosat by Temasek
and/or its subsidiary or simultaneous control to commercial strategy of
both cellular operators. -------------------------------------------------------------
2. That there is prima facie evidence concerning the coordination between

Telkomsel and Indosat causing an anticompetitive as it is intended, and ----
3. It is especially a direct result of the indirect ownership by Temasek and/or

its subsidiaries in Telkomsel and Indosat. ---------------------------------------
216. KPPU cannot provide evidence on the relationship between Temasek indirect
ownership in Indosat and Telkomsel and allegation of less competitive by Indosat.
Without any crucial relationship, the allegation of KPPU is meaning nothing. The
CA Report, page 40, states:
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“The main weakness of the allegation of KPPU is its failure to give analysis
or to provide evidence on the direct relationship between ownership structure
in Indosat and Telkomsel and allegation of anti-competitive consequence as it
explained above.”------------------------------------------------------------------------
217. KPPU states that Vice President Director of Indosat Mr Khaizad B. Heerdje (“Mr
Khaizad”), nominated by ICL, allegedly break procurement policy arranged by
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Mr. Hasnul Suhaimi (“Mr. Hasnul”) President Director (at that time) influences
Indosat operating while Mr. Lee Theng Kiat is assumed to do nothing although
there are complain from 4 (four) Directors of Indosat concerning the policy and
leadership of Mr Khaizad.
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218. The statement of KPPU is inconsistent with the evidence, Mr. Sjam is one of 4
(four) Directors who propose complain to Mr. Khaizad and President Director of
Indosat. He give evidence on 27 August 2007 that procurement above
USD5.000.000 must be approved by President Director and below it must be
proposed to the meeting of board of director and as it prescribed by the rule The
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statement of KPPU that Mr. Khaizad unilaterally displaces and changes
procurement policy Mr. Hasnul is groundless.
219. The evidence that Mr. Sjam is supported by evidence given by the representative
of MSOE, Mr. Roes Ariwidjaya (“Mr. Ariwidjaya”), by then a commissioner of
Indosat. During the session in KPPU on 19 July 2007, Mr. Ariwidjaya gave
evidence that procurement policy of Mr. Hasnul is not applied due to some
different opinion in board of director and not the taking control over the
procurement policy by Mr. Khaizad. The copy of investigation of Mr. Roes
Ariwidjaya is in the official report document of KPPU.
220. Apart from unproven claim, KPPU give no result or progress but raw allegation
that Temasek constrained Indosat to optimize its performance. 93 It is
insufficient to accomplish verification of obligation on the suspected infringement
of anti-trust to Temasek.
93
Ibid paragraph 146
221. That, the available evidence in general shows the opposite that Telkomsel and
Indosat have already competed and been competing dynamically each other.
Therefore, Spectrum Report concludes that “in cellular mobile market, Indosat
has already compete aggressively with Telkomsel in operating area.”, with the
following evidence:
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(a) Indosat has already competed aggressively with Telkomsel in the case of
pricing including certain PSTN, and off-net tariff, Indosat, even tariff offered
by Indosat is lower than Excelcomindo. It proves that Indosat have competed
aggressively with Telkomsel in the case of a number of customers and it is not
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intentionally fix high tariff. The Report of LPEM concluded that there is a
regulation on tariff between Indosat and Telkomsel. It is not true considering
that there are many weaknesses in the analysis. -------------------------------------
(b) Since 2002, there were several innovative products introduced to market. It
includes larger and cheaper package, lower denomination of refill voucher for
prepaid customer, micro prepaid scheme and, promotion various bonus as it is
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for SMS. The overflow innovative product launched by Indonesian operators
is one of competition result in the market. The tight competition has provided
various product for consumers and triggered new product innovation offering
better direct access for middle to low market share ---------------------------------
(c) Indosat and Telkomsel have improved amount of money amount they spent
substantially for marketing and advertising since 2003in which the expense of
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marketing cost of Indosat also improves profits percentage. It indicates that
both operators acknowledge tight competition in the market. Every expense
spent for marketing produce customer’s improvement. Although the sale
economically states that marketing cost of Telkomsel for every customer
improvement should be decreased, it is clearly an improvement trend. It
means that Telkomsel capture customers aggressively through marketing.
Indosat also obtains big improvement in the sense of marketing expense for
every customer improvement in 2006; increase treble for every customer
improvement. The facts that both operators have already performed huge
investment in marketing prove that cellular market is very competitive.---------
(d) Indosat and Telkomsel also perform marketing campaigns as competitive

tools. In so many cases, Indosat nearly always respond to the marketing
campaign of Telkomsel. It is extraordinary concerning resistances of network
and IT to which Indosat has to deal with.---------------------------------------------
(e) Indosat and Telkomsel have launched various initiatives to maintain their old
customer including loyal customer program related to refill system and new
voucher purchasing. As an example, Telkomsel launches Telkomsel Point in
2006 later Indosat shortly responds it competitively to counterbalance the
offer of Telkomsel. ----------------------------------------------------------------------
(f) Indosat capital expenditure is relatively big in percentage from its profits and
it significantly higher than Telkomsel. It indicates that Indosat competitively
develop its network coverage counterbalance the network of Telkomsel.
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Although Excelcomindo spend larger percentages from its profits for capital
expenditure than Indosat, it remains fair considering that Excelcomindo is
relatively new player.--------------------------------------------------------------------
(g) Indosat and Telkomsel have maintained high capital expenditure since 2002. It
indicates that every operator performs huge investment in the market.
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Especially, Indosat keeps on margin quantity in capital expenditure as the
profit percentage to Telkomsel since 2002 when it has taken over by STT. -----
222. Thereby, the statement of KPPU is not only based on speculation but also raw
statement that is directly opposite with the evidence in the market.
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The allegation of Price Leadership by Telkomsel ------------------------------------------------
223. In its Third Report, KPPU depicts a situation that in oligopoly theory known as
Price Leadership. According to KPPU, when a market actor has very dominant
position to market and relatively to its competitor, relevant market actor can
determine unilaterally market price avoiding a price given by its competitor. 22
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224. KPPU then accuses Telkomsel for being a price leader. In its conclusion KPPU
states the following reasons:
(a) Since 2001Telkomsel owns (i) the biggest market in the relevant market ; (ii)
the widest BTS network; and (iii) the biggest average profits among Indosat,
Excelcomindo and Telkomsel for period the period of 2001-2006.23 --------------
(b) Price comparison of Telkomsel, Indosat and Excelcomindo in one side and the
analysis of tariff pattern in the other show that the two has price-parallelism,
Indosat and Excelcomindo in particular. Both operators are following price
change fixed by Telkomsel for in the postpaid market . 24 --------------------------
(c) Telkomsel is a price leader in which Indosat and Excelcommindo have no

ability to compete in price. Effectively, there is a collusive conducts among
22
ibid, paragraph 148-153
23
ibid, paragraph 85, 92, 178-180.
24
ibid, paragraph 99-101. In paragraph 99,analysis, KPPU admits that “For the prepaid card, price change is not
significant at all.” KPPU can explain nothing although prepaid and postpaid customers depend on BTS network (in
which Telkomsel has wide network), the suspected/allegation price-parallelism occurs only in postpaid market not
the prepaid on.
the three operators to create a look-like cartel condition in order to dominate
market. 25--
225. The analysis and logic of KPPU are obviously wrong. In its inception, the
evidence of KPPU is opposed against the statement mentioning other operators
come after the price fixing of Telkomsel. Table 5 shows the growth of cellular
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service retail price at peak-time in 2002-2006. This table indicates the differences
of pricing strategies arranged by the pertinent operators, Telkomsel, Indosat and
Excelcomindo. It is confirmed by the following comments:
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“As it is seen since first quarter in 2002 to year-end of 2006, the retail
price of postpaid cellular service for a call to PSTN is around 5% for
Telkomsel and Indosat, and 8,4% for XL.
Difference from two other operators, Telkomsel postpaid selling price
increased during 2002 – 2006 for a call to PSTN and other operators, in
the contrary both other operators decrease their selling price. From this
change, it is seen that Indosat and Excelcomindo try to thin price
differences between prepaid and postpaid products.” ---------------------------
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226. It confirms well (a) that Indosat and XL keeps off in following the price; and (b)
that it opposes against the statement of KPPU, the two companies in reality
involved in price competition with Telkomsel.
227. Secondly, the tariff pattern analysis of KPPU in Analysis section, paragraph 148-
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153, only show statistically significant correlation of price proving nothing about
price-leadership by Telkomsel.
228. Thirdly, the similarity of price change really occurs so far resulted not from price-
leadership, but rather from different sources. Later, the analysis of KPPU cannot
indicate that Telkomsel always leads price. As it shown in the Second Analysis
Report:
“Though KPPU admits that the price pattern is not homogeneity between
documented service of prepaid and postpaid. The record is not available on
whether operators spend similar cost to cut price to the same direction. For
instance, operators face similar changes in the sense of labor and material
expense in Indonesia in which goods cost affects capital expenditure cost (i.e.
equipments cost) and operational expenditure cost (i.e. cost electricity and
25
ibid, paragraph 102-103.
energy). Thereby, by the cost changes, they coincidently go through similar
impacts and it will be burden for consumers at various level from time to
time.” Furthermore, the analysis of tariff pattern in paragraph 148-153 (Third
Report) only indicates significant statistic and price correlation but not
indicate a position of Telkomsel as a leader in improving tariff. To depict
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price leadership, KPPU has to conduct regression analysis that will control
variable effects such as expenses that affected any goods and indicate a
relationship between tariff improvement by Telkomsel and other operators.”
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229. That it is proven per se as it is in the EU anti-trust regulation that “conduct
parallelism can not be considered as verification of an argument unless the
argument is the only elucidation of the conduct (The Case C-89/85 Ahlstroms v
Commission [1993] ECR I-1307).” Thereby, if KPPU can prove the collusion that
it is the only possible elucidation of the price change similarity, KPPU cannot
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maintain its statement on price leadership (or logically on “following tariff” by
Indosat and Telkomsel).
230. At its fact, Mr Pasaribu in his dissenting opinion states that price parallelism per
se cannot prove the collusion. According to Pasaribu:
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“In a competitive nature, if a company decrease tariff, other company must follow
it to prevent consumer loss.”
231. KPPU also fails to consider the differences of price strategies conducted by
Telkomsel, Indosat and XL that have their own key aspects such as peak period,
calling prices, roaming rates, SMS, MMS, and expense of GPRS. Such a different
strategy is inconsistent with those of alleged by KPPU on collusive conducts and
market failure in general.
232. Therefore, the allegation of KPPU on the position of Telkomsel as a price leader
in a relevant market is unacceptable, considering that it opposes against the case
of KPPU per se and no objective evidence available to support the fact.
The Suspicion on Excessive Tariff -------------------------------------------------------------------

233. Starting from the incorrect conclusion that Telkomsel is a price leader, KPPU
then accuses Telkomsel unilaterally for maintaining excessive tariff in Indonesian
market. KPPU alleges that price for postpaid service has increased between in
2002 and 2006 although a number of customers increase significantly.
Considering it from the concept of economic scale, it illustrates high margin
growth for operators and lack of competition in the relevant market. 26
234. The claims also weakened by an elementary fault in which KPPU does not
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consider inflation. Tariff adjustment for reflecting inflation is, in the contrary,
opposing against the claim of KPPU, in fact the price is significantly decrease
since 2002. It is seen in the Second Analysis Report:
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“KPPU states that the price has increased since period 2002 to 2006.
Economy grew in the scale of customer’s growth along with the increase of
prices that is considered to be lack of competition by KPPU. KPPU uses
nominal price but it is real price paid by consumer annually. During the period
2002 to 2006, inflation increased higher than the price increase. It means that
price of telecommunication service has been decreased significantly over the
inflation. For example, since Telkomsel increased postpaid cellular call retail
price to PSTN for 5% during the period of 2002-2006, the flat rate measured
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by price of consumer index (consumer price index) increased 5% in that
period. Since the price of cellular service price increase fewer than the level of
goods price in general its real price actually decrease much during that
period.”-------------------------------------------------------------------------------------
235. KPPU is also incorrect when it compares the price in Indonesia with it in other
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country and it is baseless to conclude the high tariff in Indonesia. The Second
Analysis Report states:
“In general, international price comparison is hard to be applied for some

reasons. Firstly, total cost of cellular service has several components such as
activation fee, handset cost, monthly fee (for postpaid service), termination
expense of calling-party-pays countries, and expense difference charged
against the country of calling-party-pays countries for call in the different time
and network
Operator in every country may select to get back at expense that has been
spent in many ways such as subsidizing handset cost and obtain through
investment, offering significant discount on-net etc. Considering such
differences, the comparison of one element of service fee such as fee obtained
from one minute peak-hour call might be disproportionate comparison.----------
To explain tariff differences, international comparison usually compares
monthly fee and a service package expense such as a number of certain
minutes for every call plus activation portion and equipments. The
comparison process of package price also generates its own problems such as
determining a pattern to compare. Nevertheless, KPPU does not try to
26
ibid, paragraph 102-103.
compare a package expense of a number of countries and merely focuses on
the comparison of one certain tariff and as it mention above that it cannot be
used to base a comparison.” -------------------------------------------------------------
236. The following illustration is to show the difficulties of implementing the adopted
method:
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“KPPU makes comparison by referring to the price made by Directorate
General of Post and Telecommunication that relatively high for Indonesia. As
it mentioned above, the comparison of an element of cellular service expense
has not yet completed because it does not consider the whole expenses. As an
example Indonesia, that becoming a calling-party-pays country where there is
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part of expenses given to other operator used to terminate call. Singapore is a
country of calling-party-pays that getting the call expense from caller party
and call receiver party. Therfore, the tariff that charged to Singapore is only
expense paid by the caller party. The fact is that the operator of caller party
will charge it to the call receiver party with a common number of expenses.
Basically, it has duplicated of total call expenses in Indonesia, where the call
receiver party does not pay to receive a call.” ----------------------------------------
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237. In fact, based on the Second Analysis Report, KPPU has used not only unclear
conceptual method but also providing data that cannot be used by KPPU itself.
“KPPU cites several numbers in the Report of LPEM to make international

tariff comparison in Indonesia from 2002 to 2006. As it is noted by KPPU,
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LPEM does not have actual data of international price for those years which
then the price is extrapolated based on the price, higher than it should be, in
several countries from 1996 to 2002. As it expressed by KPPU, it may be
changes happened from 2002 to 2006 that will affects to actual price compare
to those of projected ones. We conclude that the changes means projected
price is not better than price estimation during those years. Consequently, the
price cannot be used as a basis of inter-states comparison.” ------------------------
238. Lastly, KPPU does not satisfactorily consider the fact that tariff in Indonesia is
strictly regulated and none of the regulation infringed by Telkomsel and other
operators.
239. Although KPPU admits that tariff in Indonesia is regulated under the Decree of
the Minister Post and Telecommunication No. 27/PR.301/MPPT-98 on Service
Tariff for Prepaid Mobile Phone Service (“KM 27/98”) and the Decree of the
Minister of Transportation No. 79/1998 on about Service Tariff for Prepaid
Mobile Phone Service (“KM 79/98”). KPPU then vaguely states that the decision
is not persisted any longer and that “cellular operator is waiting for regulation on
the calculation of tariff rate.”
240. Nevertheless, something that KPPU has overruled is the fact that the regulation
already available, there are KM 27/98 and KM 79/98. The regulation is competent
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to be use. The KM 27/98 and KM 79/98 regulate admissible maximum tariff in
cellular industry that are established by Ministers in their consideration. Based on
the regulation, there is no statement that Telkomsel or other operator have
exceeded maximum tariff as it regulated in KM 27/98 and KM 79/98. Without
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any infringement to the regulation, how does KPPU allege that the tariff charged
by Telkomsel excessively?
241. During the arrangement of the allegation, KPPU actively try to take over an
authority delegated by the Government of Indonesia to the ministers by
determining admissible tariff. The conduct of KPPU is not admissible. The fact is
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opposed against what KPU has alleged. Temasek has a notion that the ministers
are authorities to determine fair and competitive price for market in Indonesia.
242. In this case, the plea of Temasek is confirmed by CA by concluding (page 67) that
“cellular price/tariff of Indonesia is not excessive compared to international
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standard”.
243. The Report of CA is based on the following things for coming to the first
conclusion:
(a) The research supported by International Development Research Centre

Canada and applied International Telecommunications union (“ITU”)
approach indicates that cellular tariff in Indonesia is lower compared to
cellular other tariff in its vicinities countries. In 2005, ITU data show three-
minute off-peak call of cellular tariff in Indonesia is the cheapest among Asian
and East European countries. Latvia is the only country with lower tariff. It
also occurs in 2004.
(b) Research conducted by World Bank concludes that cellular tariff in Indonesia
is far from the average of low-middle income countries and under the average
of East Asia/Pacific. In 2006, the price of the Indonesian basket of mobile
services is USD 5.9 lower compared to the average price of the basket for
low-middle income group and USD 0.7 lower compared to the average
applied in East Asia/Pacific countries. -------------------------------------------------
(c) Research Merrill Lynch shows that ARPU in Indonesia is under the average
number of the developing Asian markets. ---------------------------------------------
244. That the allegation of KPPU on the excessive tariff in the relevant market has
made based on distrusted data and incorrect conceptual method. The objective
evidence display it clearly that the price in Indonesia has decreased is since the
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crossed ownership of Temasek in Indosat and Telkomsel. None of operators in the
relevant market have infringed effective tariff regulation. Thereby, an allegation
of KPPU on the excessive cellular tariff is groundless and unacceptable.
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245. That on 13 July 2003, Telkomsel gave evidences that tariff determined by board
of director in which SingTel Mobile is not a majority in board of director. The
fact is that SingTel Mobile as a shareholder only supervise business performance
of Telkomsel as a whole.
Question : Does SingTel have role to determine price?
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Answer : Something to recall is the differences between price and tariff
where tariff is always determined by prevailing regulation and policy. Tariff is
fixed by board of director while commissioner and shareholders only agree to the
result of business performance achieved by management team.”
The copy of official repot of Telkomsel’s investigation is in document of case of
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KPPU.
246. It is confirmed by Pasaribu found that KPPU has failed to causality prove
between crossed ownership in Indosat and Telkomsel and an allegation of high
tariff. The facts, according to Pasaribu, tariff in Indonesia has been decreased
since the crossed ownership period.
The Allegation on Consumer Loss --------------------------------------------------------------

247. In paragraph 190-204 in the Analysis Article of the Third Report, KPPU
compares tariff in Indonesia to “competitive tariff” in other countries. Combined
with the KPPU previous finding in paragraph 175 in the Analysis Article that the
ROE of Telkomsel is 55%, the conclusion is taken:
“With the average of ROE 20%-25%, the entire consumer loss of Telkom from
2002 to 2006 is more than Rp24 Trillion and Rp19 Trillion. With the ROE 30%
and 35%, the entire consumer loss of Telkom from 2002 to 2006 more than
Rp14.5 Trillion and Rp9.8 Trillion.”
248. Nevertheless, the calculation method of KPPU on consumer loss is incorrect and
the result shall be disqualified. The Second Analysis Report states:
“Consumer Surplus is counted from the differences between price consumer
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pay and the price that ought to be paid by consumer and counted with the
numbers under demand curve (symbolizes the willingness to pay) and the paid
price. As it used in this context, it reflects consumer deposit realized by
consumer that the price is lower. It is expressed that consumers in Indonesia
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spend much more than they have to if there is no crossed ownership and it is
determined on the basis of price paid by consumer in other countries. There
are two mistakes in the analysis of (KPPU) that leads to the disqualified
conclusion.
Firstly, as it explained above that comparing price with other countries is
difficult to be done due to many elements of tariff such as intra-operator peak
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rate. Secondly, in order to perform consumer surplus analysis, tariff
comparison could not explain whole of it, KPPU shall consider
competitive differences, inflation rate and especial costs in any country.
It is difficult to conclude that if there is no crossed ownership in Indonesia,
consumer will have price in the same amount as it in Thailand or Singapore.
No factual indication that the competition in those countries are higher than
in Indonesia. Therefore, competition is only one factor to consider tariff
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differences. --------------------------------------------------------------------------------
Finally, the statement basis of KPPU is also arguable by the fact that price
varies in certain countries caused by some specific industrial factors that
cannot represent contra factual condition in Indonesia. The example of
industry specific factors includes mobile termination rate, network
development cost, and revenues and the gain and usage of spectrum. It is true,
according to Mastel, that cellular service quality in Indonesia is better
than Thailand, Philippine, Cambodia, and Laos. A better quality service
increases the cost. Example of specific factor of a country is company capital
cost and labor condition in each country. Thereby, it is no reason to say that
price level in other country is able to represent the price level in Indonesia
which has more competed as a result the count of consumer surplus means
nothing.” -----------------------------------------------------------------------------------
249. That there is no evidence of consumer loss caused by the deed of anti-trust in
Indonesian cellular market.
250. In accordance with the statement of Mr. Pasaribu in his dissenting opinion that the
findings of KPP on the costumer loss are not acceptable. Firstly, the calculation in
the LPEM Report is marked up in number. Secondly, the use of other countries’
tariff to calculate Indonesian consumer loss is not permissible. Thirdly, the tariff
in Indonesia is in the coverage of valid regulation.
Contra Factual Case
251. The statement of KPPU on the absence of cross ownership in Indosat and
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Telkomsel creates better competition. Such a statement is supported by no
evidence.
252. That Second Analysis Report states:
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(a) The allegation of KPPU that the absence of Tease’s cross ownership will
create a more competitive market (especially the development of Indosat
network will not be constrained) has ignored the evidence on the problem of
network integration faced by Indosat.--------------------------------------------------
(b) Indosat investment give a significant positive impact toward share price and
market become more competitive apart from the allegation of cross
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ownership. It opposes against the statement alleged by KPPU.
(c) The allegation of KPPU that the absence of cross ownership of Temasek will
lead market to be more competitive under Cournot-Nash method (creating
competitive prices as the consequences) is a complicated theory to predict a
result. ---------------------------------------------------------------------------------------
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(d) The allegation of KPPU that Cournot-Nash competition method causes the
three operators control equal market share (for instance one third of market)
has ignored the fact that the three operators (the old and the new ones)
perform investment in the market to develop their market portion. There is no
evidence proving that the absence of cross ownership lead to equal possession
of market share. Considering that any operator in the same country tend to
focusing in different market share, indicated by price, network launching with
different speed, the different step of implementing new technology will come
to different results and it cannot be denied. ------------------------------------------
253. The CA Report also concludes the following things:
a. KPPU implicitly assumes that Indosat substantially performs higher

investment to create lower tariff for Indosat and Telkomsel only if there is no
indirect ownership of Temasek. Yet, it is impossible to occur.Whether Indosat
or Telkomsel is the biggest operators that have same incentive to coordinate
their activities. Both of them will face similar or even bigger problems on
capital limit and finance. That the risk of coordination and collusive conducts
will be increase if there is no indirect of cross ownership by Temasek.-----------
b. The momentum for Telkomsel to develop and to keep its highest standing has
little impact in the problem of ownership and suspected of jointly practices.
The possession of wide coverage telecommunication network has put
Telkomsel to be a biggest operator. The fact supported by accurate economic
theory and empirical proof of the cellular structure not only in already
developed Asian market but also in the developing ones. ---------------------------
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c. The research conducted to European and Asian cellular market concludes that
if Indonesian cellular market developed without indirect cross ownership of
Temasek, market growth remains the same as it is today. -------------------------
d. KPPU states that its notion is the finding of theory and the commercial
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explanation. Yet, the competition consideration basis is inconsistent with the
commercial pressure on the base of cellular operator ownership. It is illogical
to state that the shareholders are about to invest their money in the biggest
operators in Indonesia by sacrificing one of them in one side and let another
develop in the other side. The rational strategic do the opposite, using
Telkomsel to capture a market share for high class and Indosat for other
market shares in order to increase revenue. The theory proposed by KPPU
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reduces the prospective growth of Indosat and Telkomsel as well as increasing
competitive threat from other operators.-----------------------------------------------
e. The most possible contra factual case is that the release of Temasek and/or its
subsidiaries will not boost competition or have Indosat to change its
expenditures and to develop network. The effect of cross ownership of
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Temasek is de minimis and it has no relationship with the decrease of
competition in the relevant market.-----------------------------------------------------
254. Thereby, there is no evidence to support KPPU’s statement on contra factual case.
KPPU states that there will be higher competition in the relevant market. On the
contrary, economic analysis shows any possibility of no difference to the
competition in the market, with or without cross ownership in Indosat and
Telkomsel. No evidence is provided by KPPU to argue the analysis in the CA
Report and make it fails to prove a notion of cross ownership of Indosat and
Temasek. The decrease of competition in the relevant market is also not proved.
THE ABUSE AND VIOLATION OF DUE PROCESS -------------------------------------

255. The verbal process of Temasek and its procedures is ultra vires. It violates the
Law No.5/1999, stipulation of due process reserved by Article 28 D (1) UUD
1945 (“Constitution”), ICCPR and Regulation of KPPU NO.1/2006. KPPU bases
its improper evidence to come to the conclusion in the First, Second and Third
Reports. The verbal process is improper and come to the incorrect decision.
The verbal process is Ultra vires and it abuses verbal process ----------------------------
256. KPPU alleges Temasek to infringe Article 27 (a) the Law No.5/99 means the case
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is proposed, discussed, and approved by the Government of Indonesia.
257. As it described in paragraph 88-91 above, in 2003 the Government of Indonesia,

in White Paper, decided that the ownership of SingTel in Telkomsel and
acquisition of ICL or ICPL in do not infringe the Law No.5/99. Prior to the
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acquisition, Minister of BUMN (MENEG BUMN) had learned and verified that
the acquisition was in line with the valid law including the Law No.5/99. There is
no basis at all for KPPU to have the structure of share ownership retroactive or
conversely since the substance has not change since 2003. KPPU is inconsistent
in interpreting the Law No.5/99 on acquisition differs from government’s
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interpretation such as on “majority share” that literally means the ownership of
more than 50% share of a company.
258. As it stated above, the conclusion in White Paper has argue the element proposed
in the allegation of KPPU:
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(a) Telecommunication Industry in Indonesia is highly regulated and operator
can’t determine tariff policy. ------------------------------------------------------------
(b) Telkom is controlling Telkomsel. SingTel only owns 35% of Telkomsel’s

shares with the limited authority. In majority, the dominant share of Telkom
owned by the Government of Indonesia. ----------------------------------------------
(c) STT and SingTel managed independently and enable them to compete each
other in Singapore and other markets. -------------------------------------------------
(d) The understanding of majority shares in Article 27 (a) the Law No.5/1999
shall be interpreted literally namely “the ownership of more than 50%
shares”.-------------------------------------------------------------------------------------
(e) The ownership of STT in Indosat through ICL is not majority ownership in
which its shares are under 50% of Indosat’s shares enlisted in stock
exchanged.---------------------------------------------------------------------------------
(f) SingTel only owns less than 50% of Telkomsel’s shares. ---------------------------
259. Further and the most important thing is that MENEG BUMN consulted KPPU in
2003 on the implementation of the Law No.5/99 (Article 27 and 28 in particular)
related to the plan of Indosat’s shares divestment to ICL/ICPL. See the paper
dated 2003 entitled “Government’s Elucidation in the meeting with DPR” that is
available in case document of KPPU, as it is mentioned in paragraph 94 above.
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KPPU states no ojection at all. If an investigation is conducted on the basis of the
infringement of Article 27 (a) it is ultra vires and it is an abuse of verbal process
and law in Indonesia. Especially it is regarding to the facts trelated to Article 27
(a) on “majority shares” and “cross ownership”. It does not change since 2003. ---
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260. In his opinion Mr. Pasaribu state that KPUU has no authority to revoke the
decision of the Government of Indonesia concerning Indosat’s shares divestment
through open tender that it finally awarded to ICL/ICPL. He stresses that the
decision is a Government’s initiatives and political decision concerning finance
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condition at that time. -----------------------------------------------------------------------
261. It is true, there is no basis for KPPU to deviate the decision of the Government of
Indonesia by starting an investigation to the acquisition on the same basis because
the acquisition itself has been considered, calculated and supported by the
Government. The acquisition is possible to be performed by ICL/ICPL with the
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approval of government and the accomplishment of the Law as well as cryptic
approval of KPPU through the consultation of government with its competition
commission.-----------------------------------------------------------------------------------
The infringement of the Law No. 5/99

262. Article 38 No.5/1999 states:----------------------------------------------------------------
(1) Anyone who knows a conduct or properly suspected conduct that infringe
the Law may report writtenly to the Commision with clear information
about the infringement by enclosing identity of the reporting.
(2) The party suffered financial loss caused by the infringement of the Law
may report in written to the Commission along with clear information about
the infringement by enclosing identity of the reporting.
(3) The Reporting identity as it meant in (1) must be kept confidentially.
(4) The procedures of proposing a report as it meant in (1) and (2) is arranged
furthermore by the Commission.
263. Article 39 (1) No.5/1999 states:------------------------------------------------------------

“Based on the report as it meant in Article 38(1) and (2), the Commission is
obliged to perform Preliminary Investigation for the furthest of 30 (thirty)
days after receiving the report, the Commission is obliged to determine
whether it is necessary or not to perform Follow-up Investigation.”
264. In the letter of Arief Poyuono, Chairperson of FSP-BUMN (The Labor Union of
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State-owned Company) dated 4 April 2007 published in
http://bumnbersatunews.shoutpost.com, states:-----------------------------------------
“On 18 October 2006, FSP BUMN submitting a report to KPPU for the
suspected monopolistic practices (tender conspiracy) suspected to be
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conducted by Temasek Holding, Indosat, STT, SingTel in telecommunication
business in Indonesia.”
265. Therefore, the decision of KPPU to perform preliminary investigation to
Temasek, as it proved by the Convocation No.112/KPPU/TP-PP/IV/2007, issued
after 6 (six) month since the date of submittal of FSP-BUMN Report.---------------
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266. Further, the decision to perform follow-up investigation to Temasek, as it is
proved in Second Report issued on 22 May 2007, after 7 (seven) months since the
date of submittal of FSP-BUMN Report.--------------------------------------------------
267. Thereby, it is clear that there is an infringement to Article 39 (1) of the Law
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No.5/1999 states that KPPU has to decide the need of follow-up investigation for
a time of 30 (thirty) days after receiving the Report. ------------------------------------
268. http://bumnbersatunews.shoutpost.com also states:-------------------------------------
“Therefore, on 2 April 2007 FSP BUMN United revoked the Report to KPPU
on the suspected monopolistic practice conducted by Temasek Holding. It also
revokes any propositions, the evidence argumentation related to the Report” -----
269. The revoke of FSP BUMN Report was on 2 April 2007 and on 26 April 2007
KPPU kept on deciding to perform preliminary investigation.------------------------
270. Although under Article 40 of the Law No.5/1999 KPPU has an authority to
perform an investigation in its own initiatives, the clarification on whether the
process is in the initiative of KPPU or the Report of FSP BUMN is not necessary.
If it is a follow up of the FSP BUMN report, we have a notion that KPPU is
obliged to stop its investigation since the report has been revoked. If the process is
in the initiative of KPPU, KPPU shall explain why the number of case is the same
as the number registered to FSP BUMN.--------------------------------------------------
271. As an addition, Temasek received the Third Report from KPPU overshooting the
mark of time period that states in the Law about the time period of report delivery.
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Article 43 of the Law No.5/99, states:-----------------------------------------------------
(1) The Commission is obliged to complete follow-up investigation at the

furthest of 60 (sixty) days since the conduct of follow-up investigation as it
meant in Article 39 (1). ----------------------------------------------------------------
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(2) When it is needed, the time period of follow up investigation as it meant on
(1) is lengthen at longest 30 (thirty) days.------------------------------------------
(3) The Commission is obliged to decide whether the infringement to the

Law occurs or not at longest 30 (thirty) days as from the completion of
follow-up investigation as it meant in (1) and (2). ------------------------------
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272. Article 48 of the Regulation of KPPU No.1/2006, states:
“(1) Prior to the end of Follow-up Investigation, the team of Follow-up

Investigation conclude whether the evidence of infringement is available or not.” --
273. Article 49 of the Regulation of KPPU No.1/2006, states:
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“The conclusion, as it meant in Article 48, is composed in the form of The Report
of Follow-up Investigation Result” ---------------------------------------------------------
274. KPPU should issue Third Report before the stage of follow-up investigation
completed. The last day of the follow-up investigation is 27 September 2007.
KPPU should issue its decision at the latest on the date. Yet, Temasek was only
informed while Third Report accepted on 3 October 2007. The copy of letter of
Lubis Santosa & Maulana No.452/LSM-PC-TR/L/X/2007 dated 4 October 2007
shows that Temasek submit an objection to the delay and the non-compliance of
KPPU Regulation No.1/2006, enclosed as Written Proof H.---------
275. Further, the Third Report is supposedly confidential until it officially announced
publicly and informed to the Reported Party. It is mentioned clearly by Article of
the Law 43 No.5/99:
(3). The Commission is obliged to decide whether the infringement to the law
occurs or not at the furthest 30 (thirty) days as from the completion of
follow-up investigation as it meant in (1) or (2). -----------------------------------
(4). The decision of Commission as it meant in (3) has to be read in a session

open for public and informed later to the business actor.”-----------------------
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276. However, prior to the decision of follow-up investigation, the Third Report has
been disclosed publicly before it is officially informed by the Reported Party
Party. An article in Singapore Starits Times reports:
“JAKARTA - IN the latest twist to the long- running Indosat saga, an
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Indonesian regulatory body is citing the sudden resignation of a top company
executive to back up its claims that Temasek Holdings broke the country's
antitrust laws. ------------------------------------------------------------------------------
It is alleging this even though the executive, Mr Hasnul Suhaimi, has denied it.
The resignation of Mr Hasnul was the latest in a series of leaks splashed in

the Indonesian press from a supposedly confidential report that alleges
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Temasek Holdings has broken laws. ---------------------------------------------------
…
The anti-monopoly watchdog Business Competition Supervisory Commission
(KPPU) raised the issue of Mr Hasnul's resignation in its case against
Temasek, which has stakes in two telephone companies, Indosat and
Telkomsel, in an arrangement that the KPPU said violates Indonesia's anti-
monopoly laws.
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…
The KPPU is Reported Party party to be using Mr Hasnul's resignation to
prove that Temasek interfered in the running of Indosat and thus breached the
anti-monopoly law. ------------------------------------------------------------------------
Quoting the team's confidential report, the Kontan newspaper said that Mr
Hasnul stepped down because his Singapuraan deputy, Dr Kaizad Heerje,
was in fact running the company. ------------------------------------------------------
'The president director is only acting as a symbol while the deputy president
director controls Indosat,' it said, quoting the report which has not been
officially released.-------------------------------------------------------------------------
Dr Kaizad was also said to have changed Indosat's procurement systems,

something previously handled by Mr Hasnul. -----------------------------------------
Dr Kaizad, who was appointed deputy president director of Indosat in

December 2005, is a former senior vice-president of ST Telemedia. ---------------
Mr Hasnul, who is now the president director of another telco, was not
available for comment but he told Kontan that he did not resign because of his
deputy. --------------------------------------------------------------------------------------
'I left the company because I felt that I could no longer offer any contribution
that would be of value to the company's needs,' he said. -----------------------------
…
Indonesia's media has been reporting the details of the KPPU investigation
with excerpts from its official report even though it has yet to be officially
released. ------------------------------------------------------------------------------------
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According to the reports, Temasek has been found to have breached
regulations and has been summoned to appear before a five-man council to
respond to the findings. -------------------------------------------------------------------
The KPPU is not expected to issue a ruling before next month.---------------------

'If, after that, Temasek does not accept the decision, they can take the case to a
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district court,' commission chairman Mohamad Iqbal was quoted as saying by
AFP on Monday.---------------------------------------------------------------------------
If a district court ruled against it, Temasek could then appeal to Indonesia's
Supreme Court, he added.” --------------------------------------------------------------
The copy of article in Singapura Straits Times dated 24 October 2007 is enclosed
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as Written Proof I. -----------------------------------------------------------------------------
277. The report in Bisnis Indonesia dated 23 October 2007 also confirmed that KPPU
alone leaked the information of related verbal process to press:
“In the follow-up investigation document, KPPU conclude that Temasek has
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infringed the Law No.5/99 regarding cross ownership in Indosat dan
Telkomsel. ----------------------------------------------------------------------------------
The Chairman of KPPU, Mohammad Iqbal expressed the follow up
investigation conclude that there is indication of infringement conducted by
Temasek.------------------------------------------------------------------------------------
“The essence of its conclusion is that we find indication of the

infringement to the Law of Anti-trust in Indonesia conducted Temasek
and it potentially inflicts financial loss to Government and consumers,” he
told to Bisnis Indonesia yesterday.----------------------------------------------------
The conclusion is recently sent by Commision Asembly to the Reported

Party. ---------------------------------------------------------------------------------------
The data revealed by KPPU show that there are ten Reported Party Party
in the case concerning nine business group under Temasek and
Telkomsel.----------------------------------------------------------------------------------
The chairperson of Indonesian Telemetics Society (Mastel), Wigrantoro Roes

Setiyadi have seen that the indications are insufficient. ------------------------------
KPPU shall display evidence that Temasek infringes the regulation and not
only give Temasek indication.”----------------------------------------------------------
The copy of the article dated 23 October 2007 is enclosed in Evidence I.-------------
278. The following up illustration of the public statement arranged by KPPU can be
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read in paragraph 331-374 as follows.-----------------------------------------------------
279. Therefore, the verbal process of Temasek is improper and it opposes the Law No.
5/99. Consequently, whatever decision resulted through this verbal process will be
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invalid. KPPU shall close down verbal process of Temasek.
The infringement to Due Process of Articles in Constitution and KPPU Regulation No.
1/2006 -----------------------------------------------------------------------------------------------------
280. The in time progress process is also infringe the guarantee of due process
promised by Temasek under the Cosntitution and KPPU Regulation No. 1/2006.--
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281. According to Professor Hikmahanto:-----------------------------------------------------
“Not considering the due process of law may have the consequences of
nullifying the Preliminary Examination Decree and all other following
examinations decree. Of course, the nullification has to be done by a court.
Consequently, any Business Actor who is suspected of violation has to be
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notified and given an opportunity to defend itself, failing which the KPPU’s
Preliminary Examination to which the Preliminary Report relates and all other
following examinations should be nullified.”------------------------------------------
282. Article 28D(1) of the Constitution states:-------------------------------------------------
“Every person shall be entitled to the acknowledgment, guarantee, protection

and certainty of law in a just manner and shall be entitled to equal treatment
before the law.” --------------------------------------------------------------------------
283. Article 2(1) of KPPU Regulation No. 1/2006 also guarantee that due process of
the law will be monitored and also transparent:------------------------------------------
“The Chairman of the Commission has the task to facilitate all activities in
handling cases based on the principles of transparency, effectiveness, and due
process of the law.”----------------------------------------------------------------------
284. Something than cannot be separated is the condition of two essences for security,
justice and certainty (1) whether the party is informed about the case (2) and
judges in this case is impartial. The two fundamental securities have been
violated.----------
Right to watch over allegations ----------------------------------------------------------------

285. The aim of establishment of judicial body or quasi-judicial worldwide is the
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same-to guarantee the enforcement of law certainty. In the end, the strict
mechanism (laws in particular) is put in the space for guaranteeing any parties
present before judicial body and watch over allegations.
286. The assumption of right has an important role in which administrative partay
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and/or crime sanction can be force to the parties in the end of a process. The
fundamental right is in Article 28D(1) of the Constitution and KPPU Regulation
No. 1/2006. It depends on the first task of prosecuting authority which is to
guarantee the party alleged, understanding what are they alleged for, so that the
party is able to watch over allegations.----------------------------------------------------
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287. KPPU as a prosecuting authority and Temasek as a party alleged for violating
law, the two are very bewildering. Temasek has never been informed on its
allegation or on the evidence to support the allegation. To this day, Temasek has
never known a number of its allegations, a party who submits the allegation, and
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the contenr of the allegation. ---------------------------------------------------------------
288. Further, we understand that there are allegations coincided with those to
Telkomsel, which have same number as in on going process. Yet, with the
acceptance of the Third Report, Temasek finds that there is no information on the
allegation of Telkomsel or other supporting evidence although the information
has a relationship with the on going process. --------------------------------------------
289. Without such a vital information, Temasek, remorsefully cannot help KPPU in its
investigation. It comes to the interesting conclusion that the decision of KPPU is
made on the basis of incomplete information, we said it incomplete, therefore, it
will be easily revoke in the appeal.---------------------------------------------------------
290. Basically, the deed of KPPU’s verbal process is not only opposed against the
objective awareness of justice and morality but also against KPPU Regulation
No.1/2006.-- -----------------------------------------------------------------------------------
291. Article 65 (2) of KPPU Regulation No.1/2006 guarantee two things: (1) law
enforcement monitoring (2) procedural transparency. It is stated:--------------------
“ In any stage of investigation and the session of Council of Commission , the

Reported Party Party is entitled to:----------------------------------------------------------
a. obtain an information on the Suspected Infringement Report; -------------------
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b. obtain an information on the determining of Preliminary Investigation; --------
c. obtain an information on the status of Reported Party Party, agreement

and/or activities suspected to infringe and the laws suspected to be infringed
by the Reported Party Party; ----------------------------------------------------------
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d. obtain an information on the determining of the case to be continued or
discontinued to Follow-up Investigation;--------------------------------------------
e. perform an investigation to the written proof used as a basis of

Investigation Conclusion;------------------------------------------------------------
f. submit answer over a suspected infringement allegation ;--------------------
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g. change upon the behavior in Preliminary Investigation; --------------------------
h. have a copy of Decision;---------------------------------------------------------------
i. accompanied by legal adviser or attorney-in-fact in every stape of

investigation and the Council Session.-----------------------------------------------
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292. The usage of “In any stage of investigation and the session of Council of
Commission” in Article 65 (2) clarify that the rights mentioned in Article 65 (2)
given to the Reported Party since the report was made. Yet, the Reported Party
party has rights to, inter alia, “obtain information of Suspected Infringement
Report” and “obtain information on the determining of Preliminary
Investigation.” Any interpretation stating that the rights, as it mentioned in Article
65 (2), given only to the Repoted after Follow-up Investigation completed is
inattentive to Article 65 (2) as it is mentioned and as it is meant.----------------------
293. Article 65 (2) (e) and (f) give the Reported Party rights to “perform and
investigation to the written proof used as a basis of Investigation Conclusion” and
to “submit answers over a suspected infringement”. Nevertheless, although KPPU
has issued First Report and Second Report to Temasek, Temasek is not (to the
issue of Third Report and investigation on important case document of KPPU
document) given an access to the “written proof used as a basis of Investigation
Conclusion”. It violates Article 65 (2) (e).------------------------------------------------
294. Without having any chance to observe written proof that weigh against itself, it is
impossible for Temasek to understand the characteristic meaning of the suspicion
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that alleged on it or to submit evidence to fight against the allegations. Article 65
(2) (f) has also been violated.---------------------------------------------------------------
295. In fact, KPPU itself is not sure with the allegation alleged to Temasek and
Reported Party 2 to 9. It can be seen from the effort of KPPU to pick fault to
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Temasek during investigating process of Follow-up Investigation. KPPU asked
illogical questions on 27 (a) of the Law No.5/99 that enable it to have information
used then as a basis to prosecute in the future. The following is the questions of
KPPU to Mr. Goh during Temasek investigation on 13 August 2007: ---------------
Question 7-8 --------------------------------------------------------------------------------------
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“Q. Could you explain the development of investment of Temasek in Indonesia in
the last three years and its future development? --------------------------------------
A. Could you explain the relevance of the question?-------------------------------------
Q. It is very relevant. Investigation team needs such an information to
comprehend whether Temasek investment is success or not? Does the success
of Temasek give an impact to the competition?” -------------------------------------
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Question 10 -------------------------------------------------------------------------------------
“Q. What is the plan of Temasek investment in telecommunication field in
Indonesia and other regions for three years to come? --------------------------------
A. I am about to explain one by one. Temasek does not have investment in
telecommunication field in Indonesia. With all respects, to my understanding
the investigation is to explain telecommunication and not investment of
Temasek in other regions.”
Questions 59-61 --------------------------------------------------------------------------------

“Q. What is the plans of Temasek investment in telecommunication field in
Indonesia?----------------------------------------------------------------------------------
A. I cannot answer it. ------------------------------------------------------------------------
Q. Is there anyone able to answer the question? -----------------------------------------
A. With all my respects, I see no relevance with your question. ----------------------
Q. It is very relevant because it is an investment plan impacted to
telecommunication industry in Indonesia.”--------------------------------------------
Questions 98-100 -------------------------------------------------------------------------------

“Q. Is there any previous discussion concerning the investment plan discussed
through government access related to the last visit of Lee Kuan Yew to
Indonesia. --------------------------------------------------------------------------------
A. No. ------------------------------------------------------------------------------------------
Q. Is there any possibility of Temasek to move its investment from
telecommunication to banking? ------------------------------------------------------------
A. We do not have investment in telecommunication sector in Indonesia. ------------
Q. It is very important question because we have to map any investment sector. ----
A. It notes further that investing decision is based on their own will. If there is a
possible investment in banking, it shall be separated from telecommunication
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investment. It is a separated decision.”----------------------------------------------------
Questions 114 ------------------------------------------------------------------------------------
“Q. Is it possible to hire a same auditor for the last five years? -------------------------
A. I do not know.”----------------------------------------------------------------------------
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296. During Follow-up Investigation of SingTel Mobile, KPPU ask some irrelevant
questions as follows:
(a) Questions on the investment profit of SingTel Mobile in Telkomsel:----------------

(i) What is the satisfied percentage of SingTel Mobile’s performance namely a
reference to re-investing? (Question 17) --------------------------------------------
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(ii) What does Telkomsel gain from the investment? ----------------------------------
(iii) Does it repay your investment? (Question 19)--------------------------------------
(iv) If you sell the investment, what did you get?
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(v) Compare to other investments, how is the performance of Telkomsel?
(Question 23)----------------------------------------------------------------------------
(vi) Does SingTel Mobile realize that there is EBITDA tariff? (Question 28) -----
(vii) Are you satisfied with the investment? (Question 33) -----------------------------
(viii) How much is the revenue percentage of SingTel that is gained from
SingTel Mobile? (Question 50) ------------------------------------------------------
(ix) How much is the revenue percentage of Telkomsel from the total revenue
of SingTel Mobile? (Question 56) ---------------------------------------------------
(b) Questions of pricing strategy of Telkomsel: -----------------------------------------------
(i) Can I say that commissioner of SingTel Mobile never join issue with tariff?
(Question 42)----------------------------------------------------------------------------
(ii) Is SingTel Mobile discussing only on profit? (Question 35) ---------------------
(c) Questions on the history of acquisition of SingTel Mobile’s shares from

Telkomsel.--------------------------------------------------------------------------------------
(i) Are there any documented evidence that KPPU initiate selling shares to
SingTel ? (Question 121) --------------------------------------------------------------
(ii) Why did you buy KPN’s shares? (Question 135) ----------------------------------
(d) Questions on profit re-investment to Telkomsel: -----------------------------------------
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(i) Does SingTel Mobile propose re-investing profits? (Question 140) ------------
(ii) Is there any SingTel Mobile’s policy on dividend of Telkomsel? (Question

135)---------------------------------------------------------------------------------------
297. It is not surprising that none of the questions and the answers above are matching
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and find a way to enter Third Report.
298. Further, the objective of Third Report is to report completely to evidence gathered
by follow-up investigation team and how they accomplish element of Article 27
(a) of the Law No.5/99: Article 48 and 49 of KPPU Regulation No.1/2006.
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299. That (a) Reported Party must have equal opportunity to self defence and (b) equal
the principle of process and transparency as it mentioned in KPPU Regulation
No.1/2006. It is clear that Third Report shall consist of sufficient information
enabling Reported Party to deny allegations to it. Third Report must also describe
why Article 27 (a) has been accomplished and provided comprehensive
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conclusion of the material facts so that Reported Party is able prepare its. Third
Report should be able to identify sources of whole information to rely on. In fact,
Third Report has been failed in proving the case.
300. Third Report does show material facts in whole or asymmetrical including those
facts supporting and not supporting KPPU. In some cases, Third Report is failed
in providing facts that support its statement. The following is the lack of Third
Report:
(a) Anything but in some cases, Third Report is failed in mentioning the sources
of information to rely on, the references to be cited, and the cross-references
correspondence to case document up important documents of KPPU. ----------
1. In paragraph 17-21 Part IV of the Third Report, KPPU does not state an
authority that support the statements in order to come to conclusion that
appropriated geographical market is the region of Indonesia.----------------
2. In paragraph 104-105 Part V of the Third Report, KPPU does not state
an authority that support the statements on the organizational structure
of Indosat before and after acquisition of STT. --------------------------------
3. In paragraph 182 Analysis Part of the Third Report, KPPU state

“available data” but KPPU cannot identify the form of the data. ------------
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4. In paragraph 188 Analysis Part of the Third Report, KPPU state “the
document of agreement between Telkomsel and one of the operator
regarding interconnection” but KPPU cannot identify kind of the
document. ---------------------------------------------------------------------------
5. In paragraph 189 Analysis Part of the Third Report, KPPU does not state
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an authority that support the statements “there are many constraints
concerning interconnection faced by new operators because Telkomsel
creates a condition to make operators get difficulties to meet one to
another”. KPPU also attents to the fact that there is a newly business
actor entering telecommunication sector in Indonesia.------------------------
6. In paragraph 200 Analysis Part of the Third Report, KPPU state a
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scenario and benchmark based calculation but KPPU cannot identify the
kind of calculation.-----------------------------------------------------------------
(b) Third Report fails to identify the facts or evidence to support the statement
that Temasek control Indosat and Telkomsel. --------------------------------------
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(c) Third Report (anything but Mr. Pasaribu’s rejecting statements) does not
obviously consider Analysis, Spectrum and Case Associate Reports. ----------
(d) Third Report is failed in identifying any supporting facts and evidences that
Temasek through Reported Party party 2 to 9 has been fixed Telkomel’s
tariff. -------------------------------------------------------------------------------------
(e) Third Report does not consider pricing strategy implemented by Telkomsel,
Indosat and Excelcomindo but conclude that the tariff charged is excessive,
avoiding cap on tariff regulated by government. ----------------------------------
301. KPPU obviously neglects protective process offered to Temasek that stated in the
Constitution and KPPU Regulation No.1/2006. As the lack of transparence in a
series of process, any decisions of KPPU shall be revoked.----------------------
Bias and its Form---------------------------------------------------------------------------

302. A crucial question appears concerning the properness of process and the behavior
of certain KPPU’s members who influence the result investigation. The bona fides
process and individuals as well as their fairness and integrity are doubtful.----------
303. To start with, the investigation seems to be started from the information on 18
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October 2007 by the State-owned Enterprise Worker Union (“FSP-BUMN”).
Apart from the fact that FSP-BUMN withdrew its report on Temasek, on or
around 2 April 2007, KPPU kept on deciding on 26 April 2007 to continue an
investigation to Temasek. Although the deadlines admitted by Article 39 (1) of
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the Law No.5/99 to perform preliminary investigation has been overdue: See
paragraph 282-287 above. -----------------------------------------------------------------
304. Although KPPU gave no reason over its decision to continue an investigation to
Temasek, it was reported that Mr. Poyuono withdrew its report on Temasek as he
did not want FSP-BUMN to be used by Altimo (subsidiary of Alfa
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Telecommunications JSC). Altimo is a telecommunication division of Alfa Group
Consortium (“Alfa”), a Russian corporate owned by Russian conglomerate that
has a plan to control telecommunication shares in Indonesia. An article entitled
“Project Indosat” in Strait Times, 5 Mei 2007 edition wrote: ---------------------
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“The complaints against Temasek were filed last October by the Federation of
State-Owned Enterprises Employees' Union (FSP).---------------------------------
IA-ITB coordinator Musarman told The Straits Times: 'That is why they'll
press on with the investigations even though the FSP has withdrawn their
complaints.”
FSP withdrew its complaints on April 2. At that time, its president Arief
Poyuono had said that it had a weak case and could not prove that Temasek
had violated anti-trust law.
More recently, he disclosed to The Straits Times that the move was made
because he had heard about Altimo's alleged plans and did not want to be
made use of. ---------------------------------------------------------------------------------
He asked: “What is the point of buying back Indosat only to give it away to
another foreign company?” -----------------------------------------------------------------
305. This is not the first time this allegation making bow. The Jakarta Business Times
reported on 4 May 2007:---------------------------------------------------------
“Some light has been shed on the recent media and public siege on ST Telemedia
over its stake in Indosat, Indonesia’s second largest telecommunications
company.
According to various sources, the Singapore company may be the target of a
pressure campaign by parties keen to edge it out of Indonesia’s lucrative
telecom turf.
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The Indonesian daily Koran Tempo has, in fact, named Russian
conglomerate Alfa Group as the company behind the campaign. The paper
this week ran several reports detailing come of its aggressive lobbying of key
government and political leaders aimed allegedly at pressuring ST Telemedia
to sell its stake, either directly to the Russian group indirectly through the
Indonesian government. ------------
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The group is said to be eyeing the 42 per cent stake in Indosat held by Asia
Mobile, a subsidiary of St Telemedia.---------------------------------------------------
According to some sources, the detailed maneuver behind Alfa has been
started since the last two weeks prior to thought of publishing completed
report to selected mass media by non government parties.-------------------------
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In accordance with what a source suggested, an institution for information
analysis and business technology called Alfa as a party behind the effort of
obtaining Indosat’ shares.
...
In early November, Russian newspaper called Tribuna wrote that an internal
document from Alfa called “Project Indosat has been obtained. The report,
in which part of the article was translated into English by Russian media
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monitoring agent WPS, stated that Alfa planned to take over 42% of ST
Telemedia shares in Indosat. The project was involving Indonesian politician
and bureaucrats.
...
Last month, FSP-BUMN suddenly cancelled its plan to submit the allegation by
reason of FSP was lack of evidence to prove its allegation and even the President
of FSP admitted to make mistakes in this case.
Mr. Arief stated later that the changes occurred soon after FSP found that a
pressuring campaign had be done by Altimo. Athough it was not stressed that
there was no other parties outside FSP boosting to submit its initial allegation,
Mr. Arief admitted that FSP had no intention to have itself used by other
parties.”
306. The suspicion appeared when Mr. Poyuono was willing to testify that Mohammad
Iqbal (“Iqbal”), Chairperson of KPPU, had any contact with Altimo Group. The
report of The Jakarta Post on 24 May 2007:
“The KPPU’s apparent zeal in pursuing the case has sparked speculation that the
KPPU could have been bribed, especially after copies of a purported KPPU
proposal to Altimo, a subsidiary of Russia’s Alfa Group, seeking money to
support the Temasek investigation, were widely distributed this month.
Altimo has been reported to be interested in acquiring a stake in Indosat.

…
Another document setting out an apparent master plan, called the “Indosat
Project”, to wrest control of the Telcom from Temesaek, has also been circled
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among journalists. This document details a purported Altimo plan to offer a
loan to the government to enable it to buy back all of STT’s shares in Indosat in
return for a portion of the shares.
The document proposes a black propaganda campaign against Temasek.

Earlier this month, Altimo vice president for corporate communications Kirill
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Babaev denied all the allegations and claimed he was a victim of a smear
campaign.
Altimo opened a representative office in Jakarta in December and plans to invest
US$2 billion in the country’s telecoms industry.
[FSP]-BUMN chairman Arief Poyuono said the investigation by the KPPU had
been tainted by the involvement of Altimo, and added that he could prove this.
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‘I will report the bribed to the Corruption Eradication Commission, and I’m
ready to testify under oath. I can prove beyond a shadow of doubt that Altimo
has been communicating with Iqbal,’ he said.”
“KPPU was enthusiastic to continue the case with the speculation that KPPU
could be bribed. The suspicion was supported by the existence of a copy of
KPPU’s proposal to Altimo, a subsidiary of Russian Alfa Group, to have some
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money for financing investigation to Temasek. The copy is about to be circulated
this month.
Altimo expressed its interest to have Indosat’s shares.
...
Other document states the arrangement of detail master plan, called
“Indosat Project”, to take the control of Telkom from Temasek. The
document has been circulated among journalists and it explained the plan of
Altimo offering government debts for taking over the whole shares of STT in
Indosat and Altimo deserves to have some portion of shares in return.---------
The document proposed a black campaign to Temasek. The document proposes

that there is a black campaign to Temasek. At the early of this month, Vice
President of Altimo for corporate communication, Kirill Babaev denied the entire
allegation and claimed that he was the victim of destroying campaign.--------------
In December, Altimo opened its representative office in Indonesia and planned to

invest US$2 billion in telecommunication industry. ------------------------------------
The Chairperson of FSP-BUMN, Arief Poyuono states that the investigation of

KPPU has been sullied by the involvement of Altimo. He is even able to prove it.
‘I will report to Corruption Eradication Commission (KPK) the bribery and I am
ready to testify under oath. I can prove unhestatingly that Altimo had a contact
with Iqbal,”he said”. --------------------------------------------------------------------
307. So far, it was seen when FSP BUMN wrote to KPPU in July 2007 on the reason
of the withdrawal. The letter was found in the document of KPPU. The letter is
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begun, inter alia as follows:---------------------------------------------------
“In the early of April 2007, the Chairperson of FSP BUMN Union and its legal
representative met with Suharto (Regional Director strategic & business
development of Altimo Central and South East Asia) in Suharto’s office in GKBI
building Jalan Sudirman Jakarta.-------------------------------------------------------
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There were many problems to be solved in that meeting.-------------------------------
- Suharto asked Chairperson of FSP BUMN Union to cancel press conference

proposal regarding the withdrawal of FSP BUMN Report to KPPU.
- At that time, Suharto asked someone to come, according to Suharto he is

Muhamad Iqbal (the Chairperson of KPPU), and hesitated the formation of
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preliminary investigation. Suharto stated that he prefers Nawir Messi to
Benny Pasaribu as a chair of preliminary investigation team.”
308. In other words, if the allegation in the letter is correct, there is a conspiracy
between Alfa ans senior member of KPPU (including at least one of the members
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of investigation team) to manipulate the investigation result of KPPU.----------
309. It is a serious allegation to KPU. If the allegation is correct, the ongoing process
of Temasek in KPPU is wholly improper and it has to be brought to a close
promptly. At least, KPPU shall have to investigate the allegation but there is no
evidence proved and an effort to discuss it with Mr. Puyono to clarify the
allegation. There is no public or media statement performed by KPPU to
straighten the note.-----------------------------------------------------------------------
310. To make the situation getting worse, a series of bias statement made by Iqbal
alone to mass media to add fuel to the flame.----------------------------------------
311. In early February 2007, Iqbal stated a statement to prove his preconceived
judgment that Temasek was guilty. In the report in Investor Daily, 6 February
2007, Iqbal said:--------------------------------------------------------------------------
“To date, there are many dirty competition indications in telecommunication

sector, cross ownership as an example. ---------------------------------------------------
As an evidence telecommunication tariff in Indonesia, it is higher than other
countries.” -----------------------------------------------------------------------------------
312. The statement was made prior to the implementation of preliminary investigation
to Temasek. It is ridiculous for a Chairperson of KPPU to publicly states that
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there is “a cut throat competition in telecommunication sector”, before a formal
investigation being conducted. KPPU should be impartial and Iqbal in his
capacity of the chair of the on going investigation may not states such a
statement.----------------------------------------------------------------------------------
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313. In Rakyat Merdeka, 25 March 2007, Iqbal said:” We [KPPU] has accepted reports
on the illegal competition of Temasek with its cross ownership in Indosat and
Telkomsel.” ----------------------------------------------------------------------------
314. Only two days before the first report sent to Temasek and preliminary
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investigation to Temasek started, Iqbal stated that KPPU has calculated the loss
that has to be paid by Temasek. Thereby, it indicates implicitly that the guilty of
Temasek has been decided and the investigation performed was only a formality.
In Rakyat Merdeka, 24 April 2007, Iqbal said:-------------------------------------
“As a result of our examination, there is a suspicion of unhealthy competition. We
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are currently calculating the loss of the state. There is an impact on the price
that consumers have to pay. Our telephone rate is higher than those of
Singapore and Malaysia.” -----------------------------------------------------------------
315. Iqbal kept on stating harmful statements to Temasek in time of follow up

investigation process was on going.---------------------------------------------------
316. In Koran Tempo, 24 May 2007, Iqbal said: “In the preliminary investigation, our
team has found sufficient evidence of infringement indication that Temasek
practiced monopoly.” ------------------------------------------------------
317. The same statement goes for in Indo Pos, 24 May 2007. Iqbal was reported to
state “after preliminary investigation, we accumulate sufficient evidence that there
is a monopolistic practices performed by Temasek.”-------------------------------
318. It is also in the Jakarta Post, 24 May 2007, Iqbal was reported to state:----
“There are evidences discovered, including the fact that there is a cross ownership
by Temasek in Indosat and Telkomsel, which violates article No.27 of the 1999
Antimonopoly Law”. --------------------------------------------------------------------
We have also found indications of lack of competition between Telkomsel and

Indosat. This is reflected by the similarity of the rates of their mobile
telecommunication products. This indicates a possibility of strategic control by
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their parent company, Temasek.” --------------------------------------------------------
319. On 26 May 2007, Bisnis Indonesia reported that Iqbal said:-------------------
“The suspicion has become more intense. It is a fact that there is a cross-
ownership of Temasek in two Indonesian telecommunication companies: Indosat
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and Telkomsel”. ----------------------------------------------------------------------------
KPPU reckons that there’s no healthy competition between both

telecommunications companies yet.”------------------------------------------------------
320. On 7 June 2007, Rakyat Merdeka reported that Iqbal said: “I am sure by
removing cross ownership, competition will be fairer.” ---------------------------
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321. According to Koran Tempo, 8 June 2007, Iqbal said:“Crossownership has created
conflict of interest among the shareholders.”-------------------------------
322. In Trust on 11-17 June 2007, Iqbal was reported that “KPPU finds an
infringement of the Anti-trust Law by Temasek.”----------------------------------
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323. In Gatra 20 June 2007, Iqbal said : -----------------------------------------------
“The cross ownership of Temasek Holding through its subsidiaries: STT in

Indosat and SingTel that owns 35% of Telkomsel’s shares has violated Article 27
of Law No. 5/1999 with regard to Prohibition of Monopoly and Unhealthy
Competition. That is why we will summon SingTel and STT for further
clarification.”------
324. Wall Street Journal on 21 June 2007 reported that Iqbal said “there is indication
of the lack of competition between Telkomsel and Indosat.”---------
325. Bisnis Indonesia on 6 September 2007 reported that Iqbal said:----------------
“The [KPPU] team has found sufficient evidence of monopoly practice and
unhealthy competition committed by Temasek Group in Indonesia’s
telecommunication industry.”---------------------------------------------------------------
326. In Iqbal’s opinions, the indications of monopolistic practice has been obviously
seen and some evidence are needed to ratify the allegation. The statement was
published by Kontan on 12 September 2007: “there is a negative indication, and
we just need to ratify it with evidence.” It is clearly a priori judgement and
classical example of reversely conduct, finding evidence from a conclusion.---
327. In Indo Pos on 12 September 2007, Iqbal openly stated his choice that KPPU will
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not change its mind on the guilty of Temasek: --------------------------------
“Early November is the deadline for us to make the verdict. I hope there will not
be any changes.”-----------------------------------------------------------------------------
328. His opinion was re-stated in Rakyat Merdeka on 16 September 2007: ---------------
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“After that, we went through the commission hearing, So, we can expect the
verdict to be made in early November 2007. I hope there will be no changes.”----
329. Recently, on 22 October 2007, in Thomson Financial Iqbal stated that the last
thing to be done by KPPU is to determine sanctions for Temasek; the guilty of
Temasek has been decided.-------------------------------------------------------------
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“A panel of investigators is planning to decide on sanctions against Temasek in
mid-November, [Iqbal] said.----------------------------------------------------------------
‘If, after that, they [Temasek] do not accept the decision, they can take the case to
a district court,’ said Iqbal.”-----------------------------------------------------------------
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330. The fact that Iqbal stated such comments before an investigation to Temasek
being conducted has put the case in trouble. Iqbal is a Chairperson of KPPU and
his statements are able to influence the performance of KPPU’s investigation
team. Besides, it also omits presumption of innocence.-----------------------------
331. Mr. Nawir Messi (“Mr. Messi”) is a chair of follow up investigation team on
Temasek. He made a statement depicting an opinion that has been previously
created, suspicion that Temasek is guilty. The New Straits Times on 7 June 2007
stated:--------------------------------------------------------------------------------------
“Nawir Messi, vice chairman of the Business Competition and Supervisory

Commission (KPPU), said last month the body had found ‘strong suspicions to
bring this case to an advanced investigation’.” --------------------------------------
332. Such a statement made by Mr. Messi is surprising concerning his capacity as a
chair of preliminary and follow up investigation teams of Temasek. He shall not
discuss and report a meeting report publicly before it is concluded.------------
333. Iqbal also spoke distinctly about the type of sanction imposed to Temasek.
Although under the Law No.5/99 KPPU has right to decide wide coverage of
sanction, Iqbal has focused only to certain sanction ---- an order to have Temasek
released its shares in Indosat and Telkomsel. It is perfectly embedding with
Altimo that has a plan to buy at bargain the shares in telecommunication sector.
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There is no explanation stated by Iqbal on why releasing shares is the only
effective sanction.------------------------------------------------------------------------
334. Iqbal has made his own decision, as it has been known since early February 2007.
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In Investor Daily on 6 Februari 2007, Iqbal said:----------------------------
“KPPU does not want to lessen Temasek’s ownership [in either company].
Instead, (Temasek) should choose between Telkomel or Indosat.”--------------------
335. Again, in Tempo May 2007, Iqbal was reported that he said:-------------------
“It’s to them whether they want to sell the shares of Telkomsel or Indosat.”--------
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336. In Koran Tempo on 16 May 2007, Iqbal said:-------------------------------------
“If Temasek is proven guilty, Temasek should let go one of its ownerships in the
biggest telecommunication companies in Indonesia, Telkomsel and PT Indosat.”
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337. On 26 June 2007 Kontan reported that Iqbal said:-------------------------------
“If Temasek proven guilty, Temasek should sell one of the companies.”-----------
338. In Warta Ekonomi, July 2007 Iqbal said: ----------------------------------------
“If the suspicion is proven, Temasek should let go one of its shares, either Indosat
or Telkomsel.”---------------------------------------------------------------------------------
339. In Investor Daily on 22 August 2007, Iqbal said:---------------------------------
“If it were proven that a violation took place, Iqbal said, the commission has the
authority to put a stop to the anti-competition behavior. In doing so, KPPU will
ask Temasek to let go one of its shares in the cellular company, i.e. PT Telkomsel
or PT Indosat.”-------------------------------------------------------------------------------
340. In Kontan on 10 August 2007, Iqbal said that it Temasek found guilty,-------
“Temasek will have to let go one of its shares.”------------------------------------------

341. In an article of Trust Magazine, dated 24 – 30 September 2007, Iqbal expressed
such a following statement:-------------------------------------------------------------
“The directive of KPPU’s decision lead to two possibilities namely violates a law
or not. If there is a violation to the law, KPPU may impose administrative fine.
An imposing of fine can be valid for another business actor for not conducting the
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same deed. Concerning that the case is crossownership, its order is divestment of
one of the company. KPPU may also impose financial fine. Whether it is
punishable or not and however much a number of money will be, it depends on
the decision of extraordinary commission.”------------------------------------------
342. In his statements, as it cited above, Iqbal ignores the facts that Temasek does not
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have shares at all in Indosat an Telkomsel. Besides, Temasek is also not a party
that decide to invest in both companies.----------------------------------------
343. The “solution” suggested by Mr. Iqbal is also awkward due to its similarity with
the suspected plan of Altimo. It is the only sanction enabling Altimo obtain part
of shares of Indosat and Telkomsel.---------------------------------------------------
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344. When the three facts are combined with the suspected conspiracy of KPPU with
Altimo, it is plausible to wonder the independency and impartiality of part of
members of KPPU. They are in their capacity as members of investigation team
that are able to influence investigation result. --------------------------------------
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345. The conclusion is also supported by the incidents recently blow up by mass media
that Mr. Iqbal and Mr. Messi has been reported to the Police. The news describes
a tape of phone call between Mr. Iqbal and the representative of Altimo.
346. An article in Detik Newspaper on 23 August 2007 mentioned the following

things:----------------------------------------------------------------------------------------
“The Chairperson of KPPU, Muhammad Iqbal, will be reported to police

headquarter. Iqbal is alleged for abusing his authority in during the investigation
toward a case of cellular communication monopoly by Temasek Holding.”---------
”KPPU has been used by Altimo Alfa Group, a Russian telecommunication
company that intends to have Temasek’s shares in Indosat,” the Coordinator of
Sates Commission Watch, MA Husein said in Menteng Hotel UI, Central Jakarta.
Thursday (23/8/2007).”------------------------------------------------------------------
“According to Husein, Iqbal compels to investigate Temasek and then alleges for
conducting monopolistic practice. “Tomorrow, Iqbal and another member of
KPPU, Nawir Messi, will be reported to police headquarter by us,” he said.----
Husein admits to have a tape of phone call between Iqbal and Suharto (Altimo
representative). The record tells an arrangement to be applied during an
investigation performed by KPPU on the suspected monopolistic practice
conducted by Temasek. Unfortunately, Hussein cannot sound off the record to
journalists.-------------------------------------------------------------------------------------
”We do apologize for not having informed yet the report publicly before our
report is verified in the police headquarters.” Husein said. Husein also alleges
Iqbal and Nawir to have been bribed by Altimo. He said that each of them
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receives IDR 5 billion. The fee will be added if the investigation is over and
Temasek is stated guilty. Husein added that an injunction of KPPU required by
Altimo is to punish Temasek to release its shares in Indosat at the latest of one
month.”-----------------------------------------------------------------------------------------
347. In the same day, State Commision Watch performed press release concerning
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suspected bribery received by Mr. Iqbal and Messi. Consequently, they should be
reported to body authority:--------------------------------------------------------------
• In this case, it is suspected that KPPU has been used by Altimo Alfa Group, a
Russian telecommunication company intended to purchase Temasek’s shares
in Indosat.--------------------------------------------------------------------------------
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• The decision of KPPU Chairperson to insist conducting follow up
investigation to Temasek is a strong evidence that KPPU, or at least its
Chairperson, has prioritized the business interest of Altimo. The investigation
to Temasek itself is ended with the conclusion that Temasek is found guilty
for conducting monopolistic practice.-------------------------------------------------
• At the moment, Muhammad Iqbal is trying hard to prove the guilty of
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Temasek by presenting a series of discussion and seminar to propagandize
that Temasek has conducted monopolistic practice in cellular
telecommunication industry in Indonesia. The deed of Iqbal is unethical
because KPPU’s investigation team has not issued any decision at all.--------
• Muhammad Iqbal tries to create public opinion prior to the issuance of
KPPU’s decision in order to obtain public support when KPPU decides to find
Temasek guilty.---------------------------------------------------------------------------
• On Friday 24 August, we are about to report to the Police KPPU’s
chairperson, Muhammad Iqbal and his member Nawir Messi. The report will
be submitted concerning a strong indication of bribery conducted by Altimo to
Muhamad Iqbal and Nawir Messi for amount of IDR 5 Billion (around
US$555,000) each, plus “success fee” if Temasek is found guilty.---------------
• One of initials evidence we are going to submit is a tape phone call between
Muhammad Iqbal and Suharto (the representative of Altimo in Indonesia) on
the plan to investigate suspected monopoly practice conducted by Temasek.
The phone call occurred around March or April 2007.---------------------------
• The record cannot be sounded off to the media prior to be officially verified
by the Police.------------------------------------------------------------------------------
• Based on our on hand information, the details of decision expected by Altimo
are as follows:-----------------------------------------------------------------------------
• Temasek is found guilty for monopolistic practice in cellular

telecommunication industry in Indonesia.---------------------------------------
• The monopolistic practice has caused consumer loss of GSM for amount
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of USD 5,000,000.-------------------------------------------------------------------
• Thereby, KPPU sanctions Temasek to pay fine for amount of USD
5,000,000 (KPPU does not sanction Indosat to pay fine because Altimo is
about to purchase Indosat’s shares soon after Temasek is found guilty).----
• KPPU sanctions Temasek and compel it sell its shares in Indosat at the
latest of one month. -----------------------------------------------------------------
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348. Further, in an article of The Strait Times daily on 5 September 2007, it was stated
that Mr. Iqbal and Mr.Messi have been reported to the Police:------------
“A NON-GOVERNMENTAL organization has filed a police report accusing the

head of Indonesia's anti-trust watchdog of corruption and conspiracy in
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connection with his probe against Singapore's Temasek Holdings.”-----------------
In its report filed late last week, State Commission Watch , alleged Mr
Muhammad Iqbal, the head of the Business Competition Supervisory Commission
(KPPU), of underhanded dealings with Russian conglomerate Alfa Group in his
efforts to investigate Temasek for allegedly breaking anti-monopoly laws.----------
Mr Iqbal's probe against Temasek, the NGO said in its report, was intended to
help Alfa get hold of shares in Indosat.---------------------------------------------------
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KNW coordinator Ahmad Hussein told The Straits times that his group has
evidence of a recording of an alleged conversation between Mr Iqbal and Alfa's
representative in Indonesia, Mr Suharto.----------------------------------------------
He said: 'The conversation was about KPPU's investigation of Temasek. We feel

this is improper and we want the police to investigate the matter.’---------------
Mr. Ahmad alleged that the Alfa group, whose telecommunications subsidiary
Altimo, has an office in Jakarta, had bribed KPPU officials to probe Temasek for
allegedly breaking anti-monopoly laws.”--------------------------------------------------
349. Further, in a media report in Trust dated 24-30 September 2007, Iqbal said:
“It is a matter of competition; a public case. When the case has passed a process
of clarification, bundling and so on, the process then finished. It it not a civil suit,
it is a competition case. The allegation is the infringement of the Law No.5/99. If
a reporting party withdraws its report, there must be something wrong with its
report. The reporting party reports something and then withdraws it, it is useless.
The reporting party (FSP BUMN) is not serious or there are other things behind it.
Besides, they have been withdrawn. It is ridiculous to say that a party has
compelled KPPU to accelerate a process and it is asked to cancel it now. What’s
wrong? It because of one party closes its relationship with Altimo and takes side
to Temasek, it does not mean that KPPU can be a scapegoat.”------------------------
350. Based on the news above, it is a firm reason for Temasek to question the
imparsiality of Council of Commission in the aquo case.---------------------------
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351. Temasek also questions over the decision of KPPU to expel Mr. Pasaribu, as the
only member of team who disagree with the decision taken by follow up
investigation team, from the the Council of Commission that investigate the aquo
case. In our knowledge, the expression of dissenting opinion and the expel of
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member of follow up investigation team are groundless and KPPU does not ever
state its decision to expel its member.------------------------------------------------
352. An article in the Jakarta Post daily newspaper on 25 October 2007 also drew
attention to the decision of KPPU expelling Mr. Pasaribu from the follow up
investigation team and also the fact that Iqbal has been been uncharacteristically
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vocal in the press about his views on Temasek’s “guilt” in the course of the
investigation:------------------------------------------------------------------------------
“The events that led to the KPPU investigation of Temasek, Indosat and
Telkomsel were controversial and full of political intrigue right from the outset.
The KPPU also seemed to have departed from its standard procedures and
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practices in handling the case.--------------------------------------------------------------
Departing from the KPPU’s normal practice, Benny Pasaribu, a member of the
KPPU investigation team who disagreed with the conclusions of the team, was
not included in the five-member panel of judges.----------------------------------------
Very rarely has the KPPU chairman talked to the media about a case still under
investigation. But over the past few months Muhammad Iqbal has often been
quoted in the media about the case even though he was not a member of the
investigation team.”--------------------------------------------------------------------------
353. Besides, KPPU has not expressed any decision at all to focus its investigation
only to Temasek, and not to the Government of Indonesia, that in fact, controls
over Telkomsel owns significant share in Indosat (A series shares that has right to
control company significantly). It triggers public protest such as comes from
university students and worker union of Indonesia, as it reported by Channel
News Asia on 24 October 2007 as follows:---------------------------------------------
“JAKARTA: An alliance of Indonesian university students and a labor union

have jointly sent a petition to Indonesia's president and parliament calling
for the removal of the head of the anti-trust watchdog the KPPU.----------
The petition also called for the replacement of all members of the KPPU, also
known as the Business Competition Supervisory Committee. ----------------
It alleged that KPPU members have created uncertainties in the business

environment by wrongfully prosecuting state-owned enterprises for alleged
anti-competition practices.------------------------------------------------------------
…
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The groups listed three recent cases of mishandling by the KPPU. One of
them is the current probe on Singapore investment company Temasek
Holdings and its subsidiaries, Singapore Technologies Telemedia and
Singapore Telecom.------
The KPPU has alleged Temasek of violating Indonesia's anti-monopoly laws
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through its two subsidiaries, which have stakes in Indonesian telecom
operators Indosat and Telkomsel.-------------------------------------------------------
As the Indonesian government has stakes in both Indosat and Telkomsel, the
petition said the KPPU should investigate the government along with
Temasek Holdings for cross-ownership.”------------------------------------------
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354. The copy of the whole article cited above is also enclosed as Written Proof J.---
355. Although various allegations and speculations have been expressed by many
parties and reported by mass media, therefore KPPU that is involved in this case
seems to be indifferent and to keep quiet as well as to give no clarification at all
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toward its suspected involvement in this case.---------------------------------------
356. Whether it is correct or incorrect that there is bias in the settlement of this case,
basically KPPU’s investigation has biased. Therefore, whatever decision
aggrieving Temasek will be spoilage. In this case, KPPU shall discontinue the
investigation of the case promptly.---------------------------------------------------
KPPU consider improper evidence--------------------------------------------------------

357. That KPPU has considered improper evidence in its First and Second Reports that
arises a question on the validity of the KPPU’s Reports.---------------------
358. In the verification of case document of KPPU on 4 to 18 October 2007, it can be

seen that the Report of LPEM to which KPPU refer to is not signed and published
only on 10 May 2007. Yet, the First Report has been issued by KPPU on 26 April
2007.---------------------------------------------------------------------------------------
359. Thereby, KPPU bases its consideration only to the draft of LPEM Report.
Concerning that the draft is not a newly version of LPEM Report, the findings in
the documents cannot be used as the lattest or official version of LPEM Report.
360. In fact, in a public discussion performed by Centre for Strategic and International
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Studies (CSIS) on 20 September 2007, Mr.Chatib Basri, the Director of LPEM-
FEUI clarified that LPEM-FEUI has never conducted special research on
telecommunication sector in Indonesia. The Draft of LPEM Report referred by
KPPU is a research that is not projected to become a report because it has not
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been finished or completed. Further, Mr. Chatib Basri also stated that two
paragraphs in the draft of LPEM Report referred by KPPU have been ignored or
not enclosed by a certain party. He also said that if the draft of LPEM Report has
finished or completed, the report might conclude no tariff fixing among operators.
361. The interpretation of the draft of LPEM Report by KPPU inits First Report is
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incorrect so that its conclusion is null and void.---------------------------------------
362. Besides, there is no indication that KPPU has based its consideration of Second
Report issued on 22 May 2007 on the different LPEM Report. With the same
reason, the conclusion in Second Report is also null and void.------------------------
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363. In this case, it needs to be mentioned that State Commission Watch expressed its
report on Mr. Iqbal, Messi and several KPPU members around 12 September
2007 concerning “false evidence” for the case, namely the draft of LPEM Report
as it enclosed as Written Proof K, in the copy of report to the Police submitted by
State Commission Watch.---------------------------------------------------------------
364. The suspicion of the usage of “false evidence” by KPPU is supported by the fact
that the document of LPEM Report mentioned above, although it is enclosed as
document C13, there is no date available in the Report of LPEM as well as in the
acceptance of the document by KPPU, as for the whole documents in the same
list. --------------------------------------------------------------------------------------------
365. Referring to this condition, the consideration taken from the draft Report of
LPEM by KPPU is misleading and the conclusion of First and Second Reports are
null and void. Thereby , the case to Temasek shall be discontinued.-------------
The Law No.5/99 and KPPU Regulation No. 1/2006 violate the principle of due
process of law as it guaranteed by the Constitution 1945.
366. In the hierarchy of laws in Indonesia, the Constitution of 1945 is the fundamental
laws of the Republic of Indonesia. In Article 28D of the Constitution 1945 it is
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stated that the state guarantee the enforcement of due process of law including the
enforcement of judicial power and quasi-judicial in Indonesia. Yet, some
stipulations in the Law No. 5/99 and KPPU Regulation No. 1/2006 as well as its
implementation are opposed against human rights although they are guaranteed
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by the Constitution 1945, such as in the following things:---------------------------
(a) Article 38(3) of Law No. 5/99 states that the identity of the reporter (i.e.
complainant) must be kept secret from a reported party. However, the copy of
report from the Reporter Party has been kept as a secret too from the Reported
Party.---------------------------------------------------------------------------------------
(b) Article 43(3) of the Law No. 5/99 obligates the Commission to decide
whether an infringement occurs or not at the latest of 30 (thirty) days since
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follow up investigation has been completed. Therefore, in such a shortest
time, Reported Party is expected to be able to observe the whole document in
the case document of KPPU, to interpret it (if necessary), and to prepare
answers over the suspected infringement. The Commission shall divide the 30
(thirty) days so that there will be sufficient time for the Commission to
consider the case and to state a decision before the 30 (thirty) days stated by
the Law is overdue. ------------------------------
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(c) Article 45(2) The Law No. 5/99 obliges District Court to issue a decision on
the objection to the decision of KPPU in as from the illogical time that only
30 days since the start of the examining of the objection.--------------------
(d) Based on the interpretation of Commission to the Article 65 of the KPPU
Regulation No. 1/2006, the reported party is entitled to observe the documents
and to check through evidence for prosecution after follow up investigation
completed.---------------------------------------------------------------------------------
(e) Based on the interpretation of Commission to the Article 65 of the KPPU
Regulation No. 1/2006, the reported party is given only a short time that
makes it impossible to observe and check through the whole documents or
evidence in the case document of KPPU. The copy of the letter sent by
Temasek on 4 October 2007 to KPPU on the objection of KPPU to the short
period of time given by KPPU has been enclosed as Annex H.-------------------
(f) Article 5 (4) of MA Regulation No.3/2005 on the Procedures of Submitting
Objection toward KPPU’s Decision, indicates that Reported Party that submits
objection to the Court cannot add further evidence if it is not previously
submitted to KPPU.----------------------------------------------------------------------
367. Any pointers mentioned above are the examples of deeds that is opposed to the
principle of due process of law as it guaranteed its enforcement by the
Constitution of the Republic of Indonesia. Thereby, the Law No.5/1999 cannot be
implemented basically so that any decision issued has to be revoked since it has
violated the basic principle of justice and moral as it is guaranteed by the
Constitution.------------------------------------------------------------------------------
CONCLUSION------------------------------------------------------------------------------
368. The case of KPPU against Temasek does not have strong foundation.--------
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369. The Allegation of KPPU do not have legal basis and facts.--------------------
370. The most important thing is that KPPU has ignored the fact that the Government
of Indonesia and other regulatory bodies (including MSOE?) as well as People’s
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Consultative Assmbly (MPR) have agreed to the acquisition of Indosat, therefore
the cross ownership has been in line with Indonesian laws (including the Law No.
5/99).--------------------------------------------------------------------------------------
371. In particular, the White Paper/Indonesian Parliament (MPR/DPR) considers that

“majority shares” as it meant in Article 27 (a), means the ownership of more than
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50% of the whole shares. Thereby, the shares owned by SingTel Mobile and
ICL/ICPL in Telkomsel and Indosat are not majority shares, considering that the
number of shares are less than 50%. The White Paper/Indonesian Parliament also
admits and accepts that SingTel /SingTel Mobile and STT/ICL/ICPL are
managed independently. They are entities separately one to another and even
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SingTel and STT compete each other in Singapore and other markets.----------
372. KPPU also significantly gets involved in the process of consultation with
government and proposed no objection at all to the process of acquisition. Under
the approval of Government and other regulatory bodies, the acquisition is
performed and caused then to the changes of share ownership structures that
actually remains the same until today. Therefore, the on going investigation under
the Law No. 5/99 has been beyond the authority (ultra vires) and reflecting abuse
of an investigation process.------------------------------------------------------------
373. Further, the investigation conducted is opposed against the justice and law as it
guaranteed by the Indonesian laws including the Constitution 1945. Besides, the
investigation has been contaminated by the allegation of impropriety conducted
by the Chairperson of KPPU and at least one other members of KPPU who
involve in follow up investigation process. The process has been tarred by biased,
ill-considered and rely on premature statements made by the Chairperson of
KPPU and his member which then lead to the previously predicted decision.-------
374. Based on such matters above, Temasek is hereby begging the investigation to be
discontinued.----------------------------------------------------------------------------------
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Commission has accepted responses of AMH, ICL, ICPL on 1 November 2007 that in
essence state the following things:-----------------------------------------------------------------
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References
I. INTRODUCTION
1. We are acting for and on behalf of Asia Mobile Holdings Pte Ltd
(“ST Telemedia”), STT Communications Ltd (“STTC”) and Asia
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Mobile Holding Company Pte. Ltd. Indonesia Communications
Limited (“ICL”) and Indonesia Communications Pte Ltd (“ICPL”)
to submit answer to the allegations stated in Follow up
Investigation Report (“LPL”) of the Commission for the
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Supervision of Business Competition (“KPPU”) that has already
been accepted on 3 October 2007. For writing fluency, STT, STTC
and AMHC henceforth jointly will be conceived as “STT”.
2. This defense statement submitted (“Second statement of STT”) is

addition of, and must be concurrently read with defense statement
that has been beforehand submitted by STT, STTC and AMHC to
KPPU on 13 September 2007 (“First statement of STT”), and the
content of both defense statements used by STT as part of the
whole defenses to the allegations of KPPU. All references used in
First statement of STT will also be into effect in Second statement
of STT, unless it expressed on the contrary.
II. THE BACKGROUND OF CASE INVESTIGATION

PROCEDURES
3. On 18 October 2006 the Federation of State-owned Enterprise A letter
Worker Union (“FSP BUMN”) submitted a report to KPPU that from FSP
suspects a monopolistic practice conducted by Temasek Holdings BUMN to
(Private) Limited (“Temasek”). KPPU,
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dated 18
July 2007,
is available
in the case
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document
of KPPU
4. The report was then withdrawn by FSP BUMN on 2 April 2007 A letter
with the reason of as it elaborated in the letter sent to KPPU on 18 from FSP
July 2007. BUMN to
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KPPU,
dated 17
July 2007,
is available
in the case
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document
of KPPU
5. STT knows that KPPU summons Temasek to attend preliminary

investigation referring to the suspected infringement of the Law
No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair
Competition (“the Law on Anti-monopoly”).
6. Further, KPPU issued Preliminary Investigation Report (“LPP”),

dated 23 May 2007. The following parties are called the Reported
Parties, apart from Temasek:
(a) ST Telemedia
(b) STTC
(c) AMHC
(d) Asia Mobile Holdings Pte Ltd (“AMH”)
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(e) Indonesia Communications Limited (“ICL”)
(f) Indonesia Communications Pte Ltd (“ICPL”)
(g) Singapore Telecommunications Ltd (“SingTel ”);
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(h) Singapore Telecom Mobile Pte. Ltd. (“SingTel Mobile”);
and
(i) PT Telecommunications Selular (“Telkomsel”).
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7. Nevertheless, LPP was not delivered to STT on that date. On 5
June 2007, STT accepted peremptory writ to meet Investigation
team of KPPU. It is for the first time STT accepted a notification
from KPPU that STT was suspected to infringe the Law of Anti-
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monopoly. Afterwards, around 7 or 8 June 2007, the LPP was
delivered to STT.
8. On 18 and 27 June 2007, Mr. Stephen Geoffrey Miller (“Mr.

Miller”) met KPPU represented STT. Mr. Stephen Geoffrey Miller
occupied an office as Chief Financial Officer and Senior Vice
President of STTC. Mr. Miller also submitted a brief statement is
written.
9. On 13 September 2007, STT submitted First Statement of STT,

submitted a letter to KPPU to be permitted to check through the
KPPU case document in the end of Preliminary Investigation stage.
The request was rejected by KPPU by reason of it is permitted only
in the end of Follow-up Investigation.
(a) The statement of Mr. Widya Purnama. He was Managing
Director of PT Indosat Plc. (“Indosat”) from 2002 to 2004.
(b) The report from an expert of Spectrum Strategy Consultants

(“Spectrum”) entitled “Independent Review of Competition
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in the Indonesian Mobile Market and Indosat’s
Performance.”
(c) The opinion of an expert, Professor Hikmahanto Juwana,
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Ph.D (“Professor Hikmahanto”). He is from University of
Indonesia.
10. Follow Up Investigation should have been completed and issued

the Report of Follow Up Investigation (“LPL”) on 27 September
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2007. On 27 September 2007, the attorney-in-fact of STT
submitted a letter to KPPU to ask checking through the case
document of KPPU.
11. It was newly on 3 October 2007 that KPPU delivered the Report of
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Follow up Investigation (RFI). The RFI decided that the Reported
Parties is part of “Temasek Business Group” that conducted
collusion to lessen competition in the relevant market through PT
Indosat Tbk (“Indosat”) and Telkomsel by keeping the tariff high.
The RFI did not consider at all the statements, answers and
evidences submitted by STT during the step of Follow up
Investigation.
12. On 5 October 2007, the attorney-in-fact s of STT checked through

the case document of KPPU.
III. THE SUBMISSION OF ANSWER/EVIDENCE BY STT

DURING THE STAPE OF FOLLOW UP INVESTIGATION
A. The Summary of KPPU’s Allegations after the step of
Preliminary Investigation
13. The followings are KPPU’s allegations after the stage of
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Preliminary Investigation completed:
1. “Temasek Holding (Private) Limited, through Singapore

Telecommunication Ltd, Singapore Technologies Telemedia
Pte. Ltd., STT Communication Ltd., Singapore Telecom Mobile
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Pte. Ltd., and Indonesia Communication Limited own shares
of 35% in Telkomsel and 40.77% in PT. Indosat, Plc.
2. Telkomsel and PT. Indosat, Plc., jointly control 89% of

market shares or at least more than 50% of market shares in
market of cellular telecommunication service all over
Indonesia.
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3. Based on economic data, it is seen that the performance of PT.
Indosat, Plc, is not good as other operators’ performances.
4. The crossed ownership of Temasek Business Group in

Telkomsel and PT. Indosat, Plc., has caused lack of
competition among Telkomsel, that owns the biggest market
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shares and PT. Indosat, Plc., as the second biggest shares in
market of cellular telecommunication service all over
Indonesia.”
B. The Summary of Answers/Evidences of STT in the stage of

First
14. The first allegation is incorrect because STT only owns 75% of statement
AMH’s shares and AMH’s ownership to Indosat is 40.77%. It of STT
means that the indirect ownership of STT in Indosat is only around
31%. As it is affirmed by KPPU that SingTel ’s ownership in
Telkomsel is 35%. The ownership of STT in Indonesia’s
telecommunication operator is only indirect ownership (through
AMH, ICL and ICPL). STT does not have any interest or rights in
PT Telkom or Telkomsel. Therefore, the ownership of Temasek
and/or SingTel in Telkomsel cannot be related to STT. The
fundamental thing to consider is that STT not part of what it called
as “Temasek Business Group”, because STT is not under Temasek
management and its main economic activities is not controlled by
Temasek.
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15. The second allegation cannot be proven because the only STT’s First
investment in Indonesia’s telecommunication operator is regarding statement
their indirect ownership (through AMH, ICL and ICPL) in Indosat. of STT
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STT does not have any interest or rights in PT Telkom or
Telkomsel. Furthermore, Indosat does not have control (in any
way) in more than 50% of market shares in cellular
telecommunication market. KPPU has also failed to explain how
did they determined the relevant market or measured the market
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share of Indosat, though the measurement is inconsistence with the
existed market definition.
16. The third allegation is incorrect, because all objective indicators
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showed the increase of Indosat performance since 2002.
17. The fourth allegation is not based on fact because all indicators
show a high competition between Telkomsel and Indosat in any
aspect, such as price competition, high “churn rate” and product
innovation. Further, a lot of evidence showed in a whole the high
competitiveness of telecommunication market in Indonesia.
18. The report made by independent expert from Spectrum finds no

allegation basis of KPPU and concludes that Indosat and
Telkomsel competing directly in many ways. The tariff fixing at
the present time is also competitive.
19. In its expert report, Professor Hikmahanto concludes as follows:

(a) STT does not have majority share in Indosat.
(b) STT cannot be considered as business actor under Anti-

monopoly Law.
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(c) KPPU has to show the abuse of dominant position to prove that
Article 27 of Anti-monopoly Law has been infringed. Further,
KPPU must also prove the causality between ownership of
majority shares and the domination of market shares.
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(d) The analysis of KPPU on “relevant market” in the Report of
Preliminary Investigation is incorrect.
20. Concerning the allegations to STT, KPPU cannot prove that the
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elements in Article 27 (a) of Anti-monopoly Law have been
accomplished:
a. KPPU can not prove that STT has “majority share” in

Indosat – STT does not have more than 50% of Indosat’s
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shares.
b. KPPU is also incorrect in concluding that STT “controls

more than 50% of market shares.” The only ownership of
STT in Indosat is its indirect ownership (through AMH,
ICL and ICPL). STT does not hold an ownership or rights
in PT Telkomsel. Indosat, in whatever ways, does not
control more than 50% of cellular telecommunication
market in Indonesia.
c. Article 27 of Anti-monopoly Law only applies to “business

actor” and STT is not a business actor as it is defined in
Anti-monopoly Law. A business actor shall be founded or
domiciled in the Republic of Indonesia, and STT was not
founded or domiciled in the Republic of Indonesia. STT
also does not perform economic activities in Indonesia.
21. KPPU does not comply with valid regulation in conducting its
investigation. KPPU is negligent to inform or involve STT in the
preliminary investigation process. By doing it, KPPU has omitted
the opportunity of STT to arrange comments and to submit answers
during preliminary investigation step. Further, KPPU should start
its investigation within 30 days since the report is accepted and
discontinue its investigation when the report was withdrawn. In
this case, KPPU starts its investigation several months after the
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first reports completed and continue its investigation even though
the report has been withdrawn.
22. Further, the investment of STT in Indosat has been conducted
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transparently, approved and executed by the Government of
Indonesia. ST Telemedia even has been invited by the
Government of Indonesia to take part in an open tender of the sales
of Indosat’s shares. The sales is observed by functionaries of the
Government of Indonesia and IMF. The process has been
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accomplished wholly the procedures stated by the Government of
Indonesia, in this case acted through the Ministry of State-owned
Enterprise of Indonesia (“The Minister of BUMN”), as it is proven
in the Divestment Document of the Minister of BUMN on the
Indosat divestment process on 4 February 2003 (”Divestment
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Document”). Based on an independent evaluation to the submitted
documents tender, the Government of Indonesia itself appointed
ST Telemedia as a new investor of Indosat.
23. At that moment, SingTel has held an ownership in Telkomsel. The

Government of Indonesia has considered it and concluded that the
divestment would not infringe Article 27.
IV. THE ALLEGATIONS IN THE REPORT OF FOLLOW UP

INVESTIGATION
24. In LPL, allegations of KPPU change in sudden:
“1. Temasek Holdings Pte. Ltd (hereinafter referred to as

Temasek) owns a majority share in two companies that
conducting business activity in the same field and in common
relevant market that make it infringes Article 27(a) of the Law
No.5/1999.
[“Allegation 1”]
2. PT. Telecommunications Cellular (hereinafter referred to as
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Telkomsel) maintains its high cellular tariff that make it
infringes Article 17 (1) of the Law No.5/1999.
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3. Telkomsel abuses its dominant position to limit market and
technology development that make it infringes Article 25 (1.b)
of the Law No.5/1999.
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25. Although there is no allegation specifically addressed to STT, the
allegations seem to state that:
(a) The first to the ninth Reported Parties are “Temasek
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Business Group” as a “single economic entity”.
(b) KPPU has a jurisdiction toward STT because Temasek

Business Group performs its business in Indonesia through
Indosat and Telkomsel as its control.
(c) Temasek Business Group has “majority share” in Indosat

and Telkomsel with its control as a shareholder.
(d) Temasek Business Group controls more than 50% of market

shares in the relevant product market, a cellular market.
(e) The cross ownership of Temasek Business Group has

decreased competition in the market which then causes
consumer loss.
26. In its defense statement, STT will conclude expressly that:
(a) There is no corporate body known as Temasek Business

Group legally or economically.
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(b) STT, STTC and AMHC are not “business actors” and
KPPU does not have jurisdiction on them;
(c) STT does not have “majority share” in Indosat in whatever
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bases.
(d) Fundamentally, the conclusion of KPPU is incorrect

because KPPU has stated wrongly that relevant product
market is not competitive.
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(e) STT does not control more than 50% of relevant product
market.
(f) There is no evidence indicating that crossed ownership

causes the decrease of competition between Indosat and
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Telkomsel.
(g) The conclusion of RFI that Temasek through SingTel and

STT controls economic activities of Indosat and Telkomsel
is illogical. It fully disregards the Government of Indonesia
the ownership of majority share owned in Telkomsel and
the control to Telkomsel and Indosat. If the RFI states that
Temasek controls these companies, it means that the
representatives of the Government of Indonesia in
Telkomsel/Indosat do not work properly. It is surprising to
know that KPPU comes up with such conclusion without ay
single evidence.
(h) KPPU does not have an authority to make allegations as it

described in RFI because it has been considered previously
by DPR and KPPU. It also comes up with a conclusion that
there is no infringement to the Article 27 of Anti-monopoly
Law.
(i) The RFI has intentionally disregarded plenty of evidences

in the case document of KPPU that actually it is opposed
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against its conclusion. In fact, the RFI is a deviation of law
and prevailing evidence.
(j) The RFI is very partial and KPPU seems to have

intentionally deviated from the evidences to come to its
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conclusion. The consideration to the evidence in the case
document of KPPU is conducted partially.
(k) KPPU has made STT a subject of unfair treatment,

infringed legal process and the principles of justice under
the Indonesian laws.
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V. THERE IS NO TEMASEK BUSINESS GROUP
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27. STT will show in the defense statement that KPPU cannot prove
the elements of Article 27. Nevertheless, before discussing it STT
will show beforehand that all basic cases of KPPU concerning the
existence of a single economic entity known as Temasek Business
Group is simply fictitious.
A. KPPU is careless in considering legal condition to define

“Business Group"
28. The Statutes of each company, AMH and Indosat in one side, and LPL, Facts,
Sing Tel and Telkomsel in other side, arranges shareholders’ rights Paragraph
to nominate director in board of directors. As a consequence, 77 to 84
KPPU concludes in item 77 to 84 in the RFI that Temasek has an
‘authority” to its subsidiaries. According to KPPU, there are some
directors who also take hold as a member of board of directors in
more than one subsidiary. KPPU has diverted an evidence to be
able to reach a conclusion as what it wants by mentioning that
there is a Business Group known as.
29. There is no law to be infringed or no impropriety if shareholders
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with their significant ownership deserves to have right to nominate
directors in its subsidiaries.
30. Paragraph 5(c)(6) of the Analysis Article in the RFI cited Hansen’s
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opinion in coming to the conclusion of the existence of Business
Group Temasek, as it mentioned below:
“Some self-supporting corporations that join into

one self support economic unity. The self-supporting
corporation is under one common head that shows
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outside as a holding company that makes similar
plans for its subsidiaries.”
First
31. Yet, the RFI really disregards First Statement of AMH that statement
encloses the citation of Knud Hansen on the requirements to be of STT,
item 46
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fulfilled by a group of entity, known later as Business Group. The
requirements are:
(a) The so-called subsidiary, it must stay in an integrated

management of holding company, arranges an integrated
plan for all its subsidiaries;
(b) The plans of holding company to its subsidiaries must cover

main economic activity of the so-called subsidiaries; and
(c) The so-called subsidiary is prohibited to disobey the rules

arranged by the management of holding company.
32. In LPL, the only clue of KPPU to support its opinion on Temasek
Business Group is the capacity of Temasek as a shareholder of
STT and SingTel . KPPU does not have evidence to prove that
either STT or SingTel (or their subsidiaries) stay in the same
management of a holding company. The holding company controls
the main economic activity and its subsidiaries are prohibited to
digress from the rules of the holding company’s management.
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33. Further, Professor Hikmahanto, in its second expert opinion The Second
clarifies that there is no legal basis for KPPU to treat the Reported opinion of
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Parties as an entity known as Temasek Business Group: an expert,
Professor
Hikmahant
o
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“I concerned about that KPPU gives reference to Temasek
Business Group as one entity including: Temasek Holdings, Pte.
Ltd., Singapore Technologies Telemedia, Pte. Ltd., STT
Communications, Ltd., Asia Mobile Holdings Company, Pte. Ltd.,
Asia Mobile Holdings, Pte. Ltd., Indonesia Communications
Limited, Indonesia Communications, Pte. Ltd., Singapore
Telecommunications, Ltd., Singapore Telecom Mobile, Pte. Ltd.
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In my opinion, under Indonesian law, it is judicially incorrect
because I comprehend that each of corporate body above is
separated one to another that cannot assumed as an entity.
Indonesian Law will treat each of corporate bodies as a
separated of independent corporate body.
Therefore, all references cited by KPPU to Temasek Business

Group is judicially incorrect. I do not find any evidence that
support the Report of KPPU on the existence of Temasek
Business Group. KPPU should treat and mention each of the
corporate body as a separated corporate or independent
corporate body.”
B. KPPU Ignores the evidence that Temasek does not control

STT
34 In the First Statement of STT, respond statement and evidence The First
have been in detail submitted to indicate that Temasek does not Statement,
control directly or indirectly business and/or operational decision item 49 to
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of STT. None of the evidence is mentioned in RFI and none of 58
the team members of KPPU Follow-up Investigation, but Dr. Ir.
Benny Pasaribu, M.Ec, has disregarded all evidence and response
statement submitted by STT.
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35. Although ST Telemedia is a subsidiary of Temasek, the Temasek’s
share in ST Telemedia is only part of portfolio diversification.
Temasek does not perform business operation and/or operational
decision STT. The decisions are made by board of director and
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management team of ST Telemedia/STTC.
36. It is seen by the way of ST Telemedia acquires shares of Indosat.

The acquisition approved by board of director STTC, without any
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approval from shareholder.
37. In accordance with its Statutes and the law of Singapore (the law
which is valid in the country where any entity of STT is founded),
the business and affairs of ST Telemedia and STTC are managed
by its own directors. This Directors perform their authorities on
behalf of company, unless if there is specific requirement for the of
shareholder approval
38. Members of STT are corporate bodies separated from Temasek and
ST Telemedia/STTC. They have their own business and substantial
operation. For example, ST Telemedia/STTC also has significant
number of shares in Global Crossing Limited, a network operator
of integrated global IP-based that is based in the United States and
in Tele Choice International Limited, a company listed in
Singapore Exchange Limited. Under independent management, the
corporate bodies have been listed themselves in various stock
exchanges and subjected to transparent regulation of corporate
governance of capital market.
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39. There are no directors and management team of ST
Telemedia/STTC/AMHC (as they are related) and director of
AMHC who serve as directors or employees of Temasek.
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40. There are also no directors and management team of ST
Telemedia/STTC/AMHC (as they are related) and director of
AMHC who serve as directors or employees of Temasek SingTel,
SingTel Mobile, Telkomsel or PT Telkom due to the
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independency of the companies. STT does not have share or
indirect ownership in SingTel , SingTel Mobile, PT Telkom or
Telkomsel. Therefore, STT does not have interest to prefer
increasing cell phone market shares of Telkomsel to Indosat. The
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only investment of STT in Indonesian telecommunication cellular
operator is (through AMH, ICL and ICPL) in Indosat,
consequently STT has to boost the performance and value of
Indosat for its own interest.
C. KPPU is neglecting the Representatives of STT
41. On 18 June 2007, Mr. Miller appeared before KPPU and his The
written statement clearly states that STT is separated from Statement
Temasek: of Mr.
Miller in
the case
document
of KPPU
“8. We also emphatically deny the existence of “Temasek Business
Group” as it is alleged. Temasek does not control business
decision, plans and the operation of STT, STTC and AMHC.
10. And more importantly, we do not have any shares at all in

Telkomsel. Thus, we really do not prefer enlarging market share of
Telkomsel to PT. Indosat. The only investment we have in
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Indonesia is in PT. Indosat and our single interest is to improve the
performance and value of PT Indosat.
What is called “Temasek Business Group” is actually absent.
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(a) STT, STTC and AMHC
11. There is no entity called “Temasek Business Group”. Each of

Temasek, STT, STTC, and AMHC is an independent corporate
body. Each of us is not part of “Temasek Business Group” as it is
alleged.
(a) STT, STTC and AMHC
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12. Temasek, STT, STTC and AMHC are managed by their
own board of directors and/or management teams. The
members of board of director and management team of STT,
STTC and AMHC are not director or employees of Temasek.
Temasek (in one side) and STT, STTC and AMHC (in the
other) are managed separately one to another.
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13. STT is an independent company with its various
investments and business interests all over the world. Temasek
does not control the business decisions, plans and operating of
STT, STTC or AMHC. The decisions are drawn fully by board
of director and/or management team of STT, STTC or AMHC.
Each of STT, STTC and AMHC has its own board of director
stuffed by worldwide reputed members.”
D. KPPU is neglecting the presence of competition between

StarHub and SingTel
42. The RFI is wholly neglecting the evidence of the presence of

competition between StarHub and SingTel, as the current
telecommunication operators in Singapore.
43. In 2003, SingTel sued StarHub Cable Vision Ltd. (“StarHub The
Cable”), a subsidiary of StarHub. The litigation process was Highlight
running severely and ended with the submittal of appeal by of Finance
SingTel to Court of Appeal, the highest court of appeal in Statement
Singapore. of StarHub
and Straits
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Times’
article,
dated 4
September
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2007,
exhibited in
the First
Statement
of STT
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44. The RFI also entirely disregards an evidence of the existence of
intervention of policy making institution in the dispute of SingTel
versus StarHub. Since the period liberalization of
telecommunication regime occurred in Singapore, Info-
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communications Development Authority (“IDA”), a Singaporean
independent telecommunication regulating agency, has to intervene
at least 30 dispute cases of SingTel and StarHub. A number of
disputes reflected a level of fair competition.
E. The deviation in LPL
45. Firstly, KPPU is incorrect in mentioning that Ms.Ho Ching of LPL, Facts
Temasek is an Executive Vice President of STT and STTC Paragraph
78 (d)
46. It is absolutely wrong because Ms. Ho Ching serves no single

position in either STT or STTC. Furthermore, it has be asked by
KPPU in one of sessions with the representatives of Temasek,
Mr.Goh Yiong Siang (“Mr Goh ”):
“Question: Is it true that Ho Ching serves as an The Follow

Executive Vice President in STT and STTC at the Up
moment?
Investigatio
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Answer: No.” n over Mr.
Goh that is
available in
the
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document
case of
KPPU
47. Secondly, it is more general. Mr Goh expresses a statement
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referring to the policy of Temasek that Temasek does not ever
instruct or coordinate the commercial and operational decisions
with its subsidiaries:
“35. “It is a policy of Temasek for not instructing or The
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coordinating commercial or operational decisions s Statement
with the companies to which Temasek has its shares.
Thus far, the policy remains to be implemented. of Mr. Goh
in
36. Such strong and firm principles have been
acknowledged by reliable international institution. The paragraph
institutions are carefully monitoring the deeds of 33 to 35 in
Temasek by confirming the policy and practices of
Temasek. The Rating Report 2006 issued by Standard the case
& Poor’s stated as follows: document
“Temasek seeks to ensure good governance, of KPPU
performance, and competitiveness at each TLC
through ensuring a high quality board of
directors…Temasek refrains from involvement in
day-to-day decision-making.”
37. The same goes for the Rating Report of Moodys

Investor Services:
“Each [Temasek] investee company is managed by

their respective management team and guided by their
board of directors. Temasek is not involved in the
daily commercial or operational decisions of its
investee companies.”
48. In his investigating, Mr.Goh Yiong Siang categorically explains

that Temasek does not interfere in the decision making of Temasek
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investee companies, including STT.
“14. “Question: Does Temasek get involved in the The Follow

investment decision making and management activity Up
of STT and SingTel ?
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Investigatio
Answer: No, Temasek does not involve in operational n over Mr.
fields and business decision in both companies. The
decision on investment is taken by board of Goh that is
commissioner and management of each company.” available in
“27. Do STT and SingTel report their investment the
development to Temasek annually?
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document
Answer: No, they do not report to Temasek.” case of
“30. It is important for us to have a copy of Temasek’s KPPU

Statutes. Would you please explain the rights of
Temasek in its capacity as an owner of SingTel and
STT?
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Answer: I want to repeat. Both companies treat
Temasek as they do to other shareholders, our rights is
the same as our rights in investee companies. We
reserve rights as it is conducted by other shareholders
to buy more shares or to sell or to maintain our shares.
“31. Question: Would you please explain the rights of

Temasek in its capacity as 100% shareholders to STT?
Answer: As I have already told. STT is our investee

company. We see our investment from financial point
of view. We do not involve in the making and
operational decision of the company because they
have been performed by the board of directors and
management of STT. Our Rights is not different with
other shareholders. We are entitled to attend
shareholder meeting and to have voting right.”
83. Question: Are there any names serving to STT

and SingTel ?
Answer: None of them serves as member of STT

Board of Director STT, but Simon Israel. He is a
member of board of directors in SingTel. Yet, he has
been there before joining Temasek.
84. Question: Is one or the other serving for

STTCom?
Y
Answer: Nobody.
85. Question: Is one or the other serving for AMH?
Answer: Nobody.
86. Question: Is one or the other serving for AMHC?
P
Answer: Nobody.
87. Question: Is one or the other serving for ICL?
Answer: Nobody.
88. Question: Is one or the other serving for Indosat?
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Answer: Nobody.
89. Question: Is one or the other serving for SingTel

Mobile?
Answer: Nobody.
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90. Question: Is one or the other serving for
Telkomsel?
Answer: Nobody.
49. Although the evidences are contended with, the RFI does not show
them that make it conceals the truth
50. Thirdly, in its meeting with KPPU on 19 July 2007, Mr.Roes Meeting
Aryawijaya (“Mr.Roes”), the Commissioner of Indosat who is Official
nominated by Minister of BUMN, clearly confirmed that ST Report
Telemedia and SingTel competes each other: between
KPPU and
The
Ministry of
State-
Owned
Enterprise
(BUMN)
page 3 that
is available
Y
in the case
document
of KPPU
P
“21. Question: Is Temasek influencing the decision in
Indosat?
Answer: As far as I know. It is negative.
22. Question: Do you mean the institution?STT or

ICL?
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Answer: STT is very influencing, STT competed
tightly with SingTel , concerning the capacity of
SingTel as a becomes shareholder in
Telkomsel.”
51. Mr. Roes also shows evidence on the selection of director in
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Telkomsel. It is fully transparent process:
“41. Question: How is the mechanism of electing

board of director in Telkomsel?
Answer: The proposal to elect board of director is

arranged inn Shareholder General Meeting
(RUPS), in this case the commissioner of
Telkomse., Tantri Abeng proposed several
candidates to State Minister of BUMN, at that
time, Mr. Sugiharto.”
52. Fourthly, in item 78 of RFI also incorrect in mentioning that Mr.

Peter Seah, Mr. Sum Soon Lim and Mr. Vincent Perez are the
Director on AMHC, that (ii) Mr. Sum Soon Lin is one of the
directors in AMH, that (iii) Mr. Miller is the CFO of AMHC and
ICPL. Furthermore, there is no person by name George Chow
Yow Tong inside the board or management of ST Telemedia,
STTC and AMHC. It was very surprising that the RFI has done
some fiction in the effort to get a wrong conclusion.
Y
53. Finally, the allegation of KPPU concerning the influences of Meeting
Temasek Business Group to Indosat and Telkomsel by Official
coordinating their actions is inconsistent with the evidence Report
accumulated by KPPU from Dr. Ir. Bambang P. Adiwiyoto, M. Sc. between
P
(member BRTI), in his meeting with KPPU on 10 July 2007: KPPU,
BRTI and
Directorate
General
Posts and
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Telecommu
nication
that is
available in
the case
C
document
of KPPU
“Nevertheless, Telkomsel and Indosat is competed, if

it is seen from the perspective of technology”
54. Practically, Mr.Hasnul Suhaimi (“HS”), the CEO of The

Excelcommindo (“Excel”), informed by KPPU to have leaved Official
Indosat in an unfavorable condition, also confirmed in the follow- Report of
up investigation of KPPU on 9 August 2007 that: Follow Up
Investigatio
n to
Suhaimi,
on page 5
that is
available in
the case
document
of KPPU
Y
“Marginally, the market in Indonesia is still more
competitive compared to the market abroad. In my
opinion, the condition of cellular phone in Indonesia
is over competitive. To my prediction, tariff will be in
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consumers’ side.”
F. It is understandable that shareholders propose to name

directors
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55. In LPL, KPPU also states in item 102 to 109 that it is possible for
ICL have any control to Indosat with its authority to nominate
directors in Indosat, Deputy managing director, Director of Finance
and Information and Director of Information and Technology (IT)
in particular.
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56. Once again, KPPU diverts the evidence for the sake of coming to
its conclusion. Although ICL is entitled to nominate director and
commissioner of Indosat, the appointment of both positions shall
be approved by shareholders of Indosat. Deputy Managing
director also has to report to managing director, a Chief Executive
of Indosat, and in reality the managing director is always
nominated by the Government of Indonesia.
57. Further, Managing director of Indosat, Mr.Johnny Swandi Sjam The

who is nominated by the Government of Indonesia, mentions that Official
is nothing wrong with ICL to nominate director. It has also
nothing to do with the nominated directors including Director of Report of
Finance and Director of Information and Technology: Follow Up
“45. Question: Which post does ICL remain to hold? Investigatio

Answer: Deputy, Director of Finance and IT. n to
46. Question: To whom the position of ICL is given when the Swandy
Director of Network is occupied by an Sjam,
Indonesian citizen?
dated 27
Answer: Director of Operation. August
Y
47. Question: Why should Director of Finance always be taken 2007,
by ICL? available in
Answer: As long as I know, the finance management the case
generally held by the investor.
document
P
48. Question: Why IT Director always held by ICL? of KPPU
Answen: For all I know, Singapore is dominant in IT.’’
58. In displaying the facts, the RFI does not refer to the statement of
Mr. Johnny Swandi Sjam. It disregards the fact that nomination is
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approved through the transparent balloting by the whole
shareholders during RUPS
59. There is no law infringing or improper for a shareholder with its

significant ownership nominating director for its subsidiary. Under
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the Statutes of Indosat, any shareholder that has at least 25% of
share may propose to be included in the agenda of annual RUPS
(including the proposal to nominate Board of commissioner and
board of director in Indosat). It is untrue to tell that the
shareholders of Indosat (other than the Government of Indonesia as
the owner of dwiwarna shares) are able to appoint directly board of
directors or commissioner. Shareholders have rights to nominate
candidate to be members of Board of commissioner or board of
director and appointed then by an agreement of shareholders during
RUPS. STT does not have more than 50% ownership in Indosat,
therefore STT cannot do it alone and it is possible to be defeated
during RUPS.
G. The deviation of KPPU over the evidence concerning the
procurement in Indosat
60. The evidence held by KPPU to prove ‘a control’ allegedly
Y
conducted by STT is by relating it with procurement. The evidence
is wholly misinterpreted and it is clearly unable to prove a form of
domination at all.
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61. In item 104 to 115 Part IV of LPL, the Deputy of managing
director who perform operational activities of Indosat, procurement
included is alleged, in this case to Mr.Khaizad B. Heerjee
(“Mr.Heerjee”). Hereunder we cite:
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111. Prior to the management led by Khaizad, the method LPL, Part
of procuring network is non turnkey under the IV,
management of Hasnul Suhaimi (Managing
director) and it is that conducted by local Paragraph
company. It changes to become turn key and 111 to 114
conducted by foreign under Khaizad management
(IOR of Wimbo S Hardjito date 25 September
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2007);------------------------------------------------------------
112. That cancellation (by Khaizad) to the development

method applied by Hasnul, is one of the factors
that make Hasnul resigned. It also indicates that
the control of Indosat is in the hand of deputy
managing director, let the managing director be a
symbol. (IOR dated 22 August 2007);
113. The Cancellation leads to the absence of

procurement decision to develop network. Such a
condition was taking place in the first 9 (nine)
month of 2006. It caused the business activities of
Indosat is constrained and felt behind other
operators. (IOR of Wimbo S Hardjito date 25
September 2007);
114. That the delay of network development is the basis

of 4 (four) board of director of Indosat, Jhoni
Swandy Sjam, Apocalypse Widjajadi, S. Wimbo S.
Hardjito and Wityasmoro to meet Lee Theng Kiat
(Commissary Indosat) in Singapore to explain the
delay of network development that will be
detrimental Indosat. In other hand 4 (four) board
of director of Indosat their assessments that
Khaizad is incompetent to become a leader in
Indosat (IOR of Wimbo S Hardjito date 25
September 2007);
Y
115. To the information given by 4 (four) board of
director, Lee Theng Kiat does not take action at all
(IOR of Wimbo S Hardjito dated 25 September
2007).”
P
62. In the first place, there is a suspicion that Mr.Heerjee is a party
appointed by ICL to control procurement process and to overrule
the managing director. When the four Indonesian went to
Singapore to submit their objection, Mr.Lee Theng Kiat
(“Mr.Lee”) is suspected to do nothing. All of the facts are
provided by Mr.Wimbo S Hardjito (“Mr.Wimbo”).
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63. The RFI absolutely fails to use evidence that directly and clearly
submitted by STT, from Mr.Widya Purnama and one of the four
“dissatisfied” directors. Mr.Johnny Swandi Sjam told very
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different information.
64. Mr.Widya Purnama worked in Indosat in 1983-2004 and assigned

by the Government of Indonesia and served as managing director
of Indosat from June 2002 to September 2004. The relevant parts
of his written statement to KPPU are as follow:
“8. Since June 2003, majority member of board of

directors are Indonesians (5 of 7 directors are
Indonesians). Director of Finance is more international,
including some Singaporean people and Independent
Commissioner.
…The directors from Indonesia are majority when I was a

Managing Director; the deputy director was from
Singapore as well as Director of Finance. Nevertheless, all
the Directors report to me. I lead a meeting every
Mondays where we hold a consultation prior to the
approval of my direction and everything to be performed.
10. This is effective structure. Our Indonesian directors

covers the areas that need local understanding such as
sales and marketing, business development, regulation,
legal and human resource. The directors from Singapore
submit their newest business understanding and finance
Y
aspects of reorganizing Indosat. I remember the successful
package of refinancing our loan. The assessment/rating of
Indosat loan increased and we reach the biggest
transaction ever in Indonesian market since Asian
financial crisis. The most important thing is Indosat find a
way to boost.
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13. STT/ICL does not ever take part in how I run
Indosat. STT/ICL never dictate me on how Indosat
shall be managed or controlled”
65. Referring to Mr.Johnny Swandi Sjam, in his view, the board of

director as a whole decides whether a certain program shall be
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performed in turn key or non turn key. The deputy of managing
director does not control the procurement and the board of director
work in collegial way:
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33. Question: Who does make the policy
program of changing it to turnkey project?
Answer: As far as I know board of director

through board of directors meeting in 2006.
34. Question: How about procurement?
Answer: For procurement above USD 5

million, the approval of managing director
is needed.
35. Question: What about procurement under

USD 5 million?
Answer: There is a rule on it concerning its

authorization.
36. Question: Since 2007, are there any

procurement above USD 5 million?
Answer: Since June 2007 (I have been a

managing director), at least there were 2
procurements above USD 5 million.
.Network Procurement, which is for filter
and CDMA.
37. Question: The procurement that only need

Deputy’s approval?
Y
Answer: As I recall, the procurement
around USD 1million to USD 5 million. But
I am not sure the exact number.
38. Question: Shall Managing director know or

approve procurement proposal?
P
Answer: To approve a procurement above
USD 5 million
39. Question: In other hand, what is the

authority of Deputy that need no approval
from managing director?
O
Answer: All the things usually conducted in Collegial,
in the sense of discussed in the meeting of board of
director
The testimony of Mr.Jhonny Swandi Sjam that cited above are
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conducted in collegial, in line with the Statutes of Indosat, for
example, stating that all decisions of the board of director meeting
conducted by deliberation for general consensus, and otherwise
succeed by majority votes
66. The RFI also really disregards that this evidence is justified by Mr.
Roes, who were and who are an Indosat Commissioner:
“28 Is it true that after Mr.Hasnul retiring the position The

is automatically occupied by Mr. Khaizad, but Official
the proposal of Bapak Hasnul is refused? Is it
true? Report of
Follow Up
No. There are many different opinions. The
proposal of Mr.Hasnul was tried to be applied Investigatio
in the company; nevertheless, in field, in n to Mr.
managerial level, there were many oppositions
against him. The board of director prefer to low Roes, dated
pricing to consumer. 19 July
2007,
available in
the case
document
Y
of KPPU
67. Further, Mr. Roes explains that the long vacuum position left by An
Hasnul is not caused by STT: interview
P
with Mr.
Roes, on
page 7 of
the case
document
O
of KPPU
30. Question: As a commissioner, according to Mr. Roes, is

the atmosphere in the mid manager level is such bad
that the vacuum for the position is far too long?
Answer: It due to the lack of Minister of BMN to take
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action. Besides, it is also caused by the resistance of
mid level manager, 750 people.
31. Question: Does it happen due to the refusal of STT?
Answer: No
68. The opinions of Mr. Widya Purnama, Mr.Johnny Swandi Sjam and
Mr.Roes Aryawijaya differ much with those given by KPPU.
Although it has been mentioned that Mr.Johnny Swandi Sjam is
one of directors who is suspected of expressing his complaint to
Mr Lee, RFI is really negligence in explaining why RFI only rely
on the evidence provided by Mr.Wimbo and not from Mr.Johnny
Swandi Sjam.
69. Although Mr.Heerjee is possible not to agree with managing
director in a certain problem it does not mean that AMH controls
board of director of Indosat. Directors can be in a regular way
agreeing or not agreeing with something, and that it does not mean
Y
that just because one director is insistent on a certain problem, such
a director control board of directors.
70. KPPU prefers to consider the evidence provided by “a management
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staff of PT. Indosat (who was asked not to disclose the identity)” to
those from Mr.Johnny Swandi Sjam. It is surprising that KPPU
based its report on the evidence from an eyewitness who wish not
disclose the identity. Without mentioning identity in the official
report, such a witness is unreliable because he/she cannot explain
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the fact owned of opposes it from the evidence. Such evidence is
null and void.
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71. Concerning to the resignation of Mr. Hasnul, an article in Article
Detik.com on 5 July 2006 stated that he resigned for a personal dated 5
reason without any pressure on him. Further, officially Mr.Hasnul July 2006
is appointed as managing director of Excelcomindo on 1 in
September 2006 during RUPS of Excelcomindo. Although STT Detik.com
does not know the private reason of Mr.Hasnul behind his
resignation, the evidence submitted by Mr.Roes Aryawijaya
indicates that Mr.Hasnul did not resign but it was caused by the
intervention of Vice Managing Director.
“Why should be a vacuum in top management of The

Indosat, is caused by the refusal of STT? Official
No. The problem is in Indonesia itself. Report of

Investigatio
n of Mr.
Roes that is
available in
the case
Y
document
of KPPU
72. The failure of KPPU in evaluating relevant evidence in its case Letter from
P
document, clearly indicate that RFI was prepared to come to a the
conclusion of the infringement of Article 27 by ignoring existing Ministry of
evidence. It is regrettable that there is no serious effort shown by BUMN,
KPPU to evaluate evidence in LPL. Annex 1
As it is reported in annual report of Indosat for a fiscal year ended
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73.
on 31 December 2006, the revenues of Indosat within nine months
respectively (since April 2006) recorded to reach two-digit growth
to 30%.
“The revenues of Indosat within nine months respectively
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(since April 2006) recorded to reach two-digit growth to
30% after passing slow growth for almost five quarters.
Operating income of Indosat in 2006 was around IDR 12.2
trillion, rose to 5.6% to those of the previous years. The
margin of Indosat’s EBITDA within a year remained to be
healthy and framed in the previous market guidance between
57%-59%. In the end of December 2006, Indosat recorded
almost 16.7 million cellular customers, raise to go up to
21%, although the churn rate was high and compulsory
abolition as an enactment of prepaid registration
compulsory in early year.”
Caused by the problems mentioned above, the statement of

74.
KPPU in item 145 of RFI describing that the decrease of
Indosat’s performance due to the nine-month delayed of BTS in
2006 is incorrect.
H. The Conclusion of Follow-up Investigation is Illogical

Because the Decision State that the Government of
Indonesia is not competent
STT always appreciate the active role of the Government of

75.
Indonesia either in Indosat’s board of director or commissioner.
Y
The managing director is usually a representative of board of
director. Mr. Roes Aryawijaya, used to be a Indosat
commissioner in 2003, is a Deputy of Minister of BUMN at the
moment. In this case, if RFI states that STT controls Indosat for
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the sake of Temasek, it automatically indicate that the
Government of Indonesia and its representative do not have any
influence at all to STT. It is an aspersion to the Government of
Indonesia.
O
76. KPPU realizes fully that the Government of Indonesia is a
significant shareholder either in Indosat or Telkomsel.
Unfortunately, the facts are ignored in LPL. Another interview has
ever been conducted by KPPU and the result of the interview with
Deputy Minister of BUMN, Mr.Roes Aryawijaya that should be
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cited:
“2. How are the composition of board of director and The

commissioner in each company, Indosat and Official
Telkomsel?
Report of
Indosat : 4 board of directors are from STT, 5 from Investigatio
Telkom, 4 commissioners are from Telkom and 6 from
STT. While in Telkomsel there are 3 board of directors n of Mr.
from SingTel and 2 from Telkom. Roes that is
3. Is STT dominant during decision making? available in
the case
In the decision making we always concerns good
corporate governance and avoids implementing voting document
mechanism. We do that in the meeting of Indosat board
of KPPU
of director and commissioner.
77. In the part where KPPU discusses allegation on ‘”authority”
Temasek, KPPU has eliminated the fact that Deputy Minister has
explained not only in selecting a number of director and
commissioner in Telkomsel and Indosat by the Government of
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Indonesia but also in becoming active participant to control
initiatives and to attend a numbers of meetings
78. If the ability to elect director and commissioner as well as double
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position people is the evidence of “controlling of the holding
company”, it means that the Government of Indonesia not only
controls either Indosat or Telkomsel but also infringe Article 27 of
Anti-monopoly Law. The facts show that (i) the Government of
Indonesia (acted via Minister of BUMN) is a shareholder either in
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Indosat and Telkom (that has more than 50% of Telkomsel’s shares
and control it); (ii) the higher officials from the Minstry of BUMN
serve as commissioner in Indosat and Telkom; (iii) people assigned
by Ministry are those serving as member of board of directors.
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79. STT always appreciates the active role of the Government of
Indonesia and its representatives in management Indosat. The
conclusion of RFI, that Temasek (that only has indirect minority
ownership in Indosat or Telkomsel) “controlling” either Indosat or
Telkomsel is unreasonable. Logically, it concludes that the
directors and commissioners appointed by the Government of
Indonesia are subject to Temasek. It is surprising that KPPU has
come to conclusion without any evidences to support.
80. It is opposed against the fact, between evidence in the case

document of KPPU and the “Government’s Elucidation”. It is
stated that, on page 14 of the case document of KPPU, the
“majority” share of Telkomsel “owned and controlled” by PT
Telkom Plc., and Further, that STT and SingTel are separated each
other.
SingTel has 35% of Telkomsel’s shares with the

limited management representation, in which the
majority share of Telkomsel is owned and controlled
Y
by PT Telkom Plc. SingTel also is a public
corporation that bring interests not only for Temasek
as a shareholder but also public interest. Either
SingTel or STT is managed by separated management
team and competed freely in fixed access of cellular
area, and internet service in Singapore. Concerning
STT and Indosat, it is important to recall that that
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Indosat is also a public corporation, bring interests not
only to STT but also to shareholders (government with
15%, overseas public shareholder/NYSE 30%, and
domestic shareholders less than 13%).
STT and SingTel are owned by Temasek with their own

independency. The competition between them must be
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subject to law and legislative regulation that go into
effect in Indonesia either in the field of
telecommunications, business competition, or capital
market.
81. From the Government’s Elucidation, it is clear that the divestment
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in Indosat has been considered carefully by member of House of
Representatives (DPR) in Indonesia. The more importantly, DRY
has obviously seen that there is no problem concerning cross
ownership because the majority shares in Telkomsel are owned and
controlled by the Government of Indonesia.
82. It shows that RFI is partial. The RFI does not take well-balanced
approach, in which RFI considers and conducts an evaluation to
the evidence that explained and advocated the position of STT. On
the contrary, RFI even disregards the evidence provided by DRY.
KPPU does not consider this as fairly and precisely.
VI. THE ALLEGATIONS OF THE INFRINGEMENT TO

ARTICLE 27 ANTI-MONOPOLY LAW
83. Article 27 of Anti-monopoly Law states:
“business actor is prohibited to have majority share in several

same kind of companies that conduct perform business in the same
Y
relevant market, if the ownership causes:
a. One business actor or a group of business actor controlling

more than 50% (fifty percent) of market share of the certain
similar goods or services.”
P
84. KPPU can not prove the whole elements of Article 27:
(a) STT is not a business actor.
(b) STT does not have majority share in Indosat or Telkomsel.
(c) STT does not control more than 50% of the relevant
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market.
(d) STT does not abuse dominant position.
85. Firstly, KPPU thinks that the whole Temasek Businesses Group RFI,
has to be considered as a single economic entity. Secondly, the Analysis,
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Temasek Business Group is suspected “to control” some entities in page 5
Indonesia, Indosat and Telkomsel. Thirdly, Business Group
Temasek is suspected to use its influences in Indonesia, therefore
KPPU has an authority to apply jurisdiction extra-territorial to
Temasek Business Group, in accordance with practices suspected
implemented by European Union.
86. The following defense statement indicates that KPPU has not only
distorted evidence but also legal interpretation in its effort to come
to groundless conclusion in LPL.
A. STT is not a business actor
87. RFI is intentionally not to mention defense statement of STT that

companies within STT are not entities under the jurisdiction of
Y
KPPU.
P
88. The definition of jurisdiction is a fundamental condition to start
investigation of KPPU.
89. Jurisdiction scope of KPPU as it is stated in Article 1(18) of Anti-
O
monopoly Law, mentioning that KPPU will, for example, “monitor
business actor who perform their business activity” (enhanced to
emphasis).
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90. In consequence, an entity is only under jurisdiction of KPPU if the
entity is ”business actor” as referred to Anti-monopoly Law. The
term ”business actor” is defined explicitly in Article 1 (5) of Anti-
monopoly Law as, ”individual or corporate body ... that is founded
and is domiciled or to conduct activity in the territorial jurisdiction
of the Republic of Indonesia, either by itself or jointly under
agreement, carrying out various business activities in the field of
economy.” (enhanced to emphasis)
91. During Preliminary Investigation, the Reported Party is identified

as ”Temasek Business Group”. Although LPP, further jointly refer
to the Reported Party as ”Temasek Business Group”, STT note that
LPP clearly defines any entity suspected to form ”Business
Group” as separated ”Reported Party”.
92. In LPL, the companies to which we refer to as STT is conceived as
the Reported Party. Nevertheless, as it is mentioned above, there is
no certain allegation addressed to them. At the moment, the
allegation is addressed to Temasek. It is obvious that even KPPU
Y
“confuse” to which party the investigation is conducted to.
93. Under Article 1(5) of Anti-monopoly Law, STT clearly excluded

from the definition of “business actor”.
P
First of all, STT is not “founded” or “domiciled” in Indonesia.
94.
95. Further, the most important thing, as it is intended by Article 1(5),

STT does not “perform any activity” in Indonesia. All “activities”
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in Indonesia are performed by Indosat. STT is couldn’t considered
to “conduct” activities because the business of Indosat is managed
by its own board of directors for benefitting Indosat, therefore STT
does not take any operational decision in the business of cellular
telecommunication of Indosat. Based on the above reason, the
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status of STT toward Indosat limited only as indirect shareholder
of 30% Indosat’s shares.
96. The Follow-up Investigation of KPPU is relied on bias The Report

interpretation of Article 1(5) Anti-monopoly Law. After referring of
to the definition of “business actor” in Article 1(5), RFI further Preliminar
states (in item (A)(2)) that: y
Investigatio
n
…Any activity of business actor that are not founded

and not domiciled in the territorial jurisdiction of the
Republic of Indonesia but its activity impacted the
competition in the territorial jurisdiction of the
Republic of Indonesia is subjected to the stipulation in
the Law No. 5/1999.
(enhanced to emphasis)
Y
97. With all respect, this statement deviates from the definition of
“business actor”, according to Article 1(5). The concept of
“activity that have impact to the competition in… Indonesia” is
broader than the condition of “performing activities in …
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Indonesia,” according to Article 1(5). The last sentence signifies
an active involvement in Indonesia, but not for the first. The
conduct of equalizing the two different concepts has distorted the
actual meaning of Article 1(5) Anti-monopoly Law, therefore, it
has unfairly extended its jurisdiction that actually beyond its
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authority.
98. Our analysis above is supported by the evidence of Professor

Hikmahanto in his first expert statement. It is stated that :
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“In my opinion, foreign corporate to qualify as Business Actor
shall perform “business activity”. This activity shall be seen in
the context of direct capital investment (direct investment) that
not simply indirect capital investment (indirect investment), due
to another sentence to follow of Article 1(5) that state “carry out
4. Is foreign corporate body that only possessing shares in

Indonesian company and has no involvement in whatever activity
or operational decision can be assumed to conduct “business
activity”?
In my opinion, it is not. It simply owns shares and not performs

any business activity or operational decision in the sense of
indirect investment. For this reason, such a foreign corporate
body can not be considered as business actor under Anti-
monopoly Law.
5. Can a foreign corporate body that is not founded

and domiciled in Indonesia and only has for around
41% of the entire shares in Indonesian company be
considered as Business Actor under Anti-monopoly
Law ?
In my opinion, such foreign corporate body cannot be

considered as Business Actor. There are four things
Y
constituting my opinion. Firstly, such a foreign
corporate does not perform “business activity in the
field of economy” as it is required by Article 1(5) Anti-
monopoly Law. Secondly, the activity conducted is only
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limited to own shares and not to conduct direct capital
investment (indirect investment). Thirdly, it is Indosat’s
board of director with its member that have obligation
to Indosat to conduct based on Indosat’s best interests,
that perform operational cellular telecommunications
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(see Article 11 (1) and (2) AD). As it is determined in
the Statutes of Indosat that the decision of board of
director is taken with the deliberation to agree. In this
case it is null and void. It must be noted that board of
director that nominated by ICL is few in number or
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minority. The majority of director’s members’ board,
including managing director, is whom nominated by
the Government of Indonesia. Fourthly, the
corporation was not founded or domiciled in
Indonesia.
6. Can STT, STTC, AMHC, AMH, ICL and ICPL be considered

as Business Actor, when they are not founded and domiciled in
Indonesia?
I have a notion that the definition of KPPU on “Business Actor”

in its Report on the Result of Preliminary Investigation 94 is
incorrect. In my opinion, in order to consider foreign corporate
body a Business Actor, such a corporate body must directly
conduct “business activity” in Indonesia.
STT, STTC, AMHC, AMH, ICL and ICPL hold shares directly or
indirectly in Indosat and KPPU does not prove that the
companies do not make operational decisions for Indosat. In
consequence, this companies can not be assumed to conduct
business activity, and it is not Business Actor under Anti-
monopoly Law.
99. RFI has ignored the evidence from Professor Hikmahanto. Its
Y
failure in considering evidence shows the RFI is partial.
100. The conduct of equalizing the two different concepts of “activity”

and “impact” in RFI is distorting an actual definition of Article
P
1(5) of the Law and it is unfairly extended the jurisdiction scope of
KPPU.
101. The Item (A) (2) of LPP refers to consideration of (c) of the Law
and it emphasizes that “anyone who perform business in Indonesia
O
must stay in healthy and fair competition nature” (enhanced to
emphasis). The reference “to perform actual business in
Indonesia” has supported the interpretation of STT, and those of
KPPU to the term of “business actor”.
C
102. The term “to perform business in Indonesia”, is similar to
“performs activity in … Indonesia”, it requires a positive
involvement in business/activity in Indonesia. The two concepts is
narrower than those offered by KPPU on “activity that impacted
competition nature in Indonesia.”
103. In Indonesian law interpretation, there is only one member of

KPPU, Dr. Ir. Benny Pasaribu that seems to consider the evidence
in the case document of KPPU:
“I do not find any evidence that Reported Party I to
Reported Party IX are business actors as referred to
Article 1 item 5 of the Law No.5/1999. The fact is, The
Reported Parties are corporate bodies that are
founded and domiciled not in the territorial
jurisdiction of the Republic of Indonesia. Several
Y
Reported Parties also do not perform business activity
or business transaction in the area of cellular
telecommunication in Indonesia. Although Reported
Party VI and Reported Party VII own shares in PT.
Indosat and Reported Party IX owns shares in PT.
Telkomsel, they are improvable to conduct transaction
P
of cellular telecommunication goods and/or service in
Indonesia. The shareholders are improvable to conduct
and/or take cellular business decision. The fact, its
market also differs: stock exchange activities in
capita market and cellular business in goods and
service market – often called also as “real sector”.
There are also fact that board of commissioner and
board of director of PT. Telkomsel and PT. Indosat
O
that conduct operational activity and take decision on
cellular telecommunications business in Indonesia, not
shareholder or the Reported Parties.”
C
104. Further, there is no international law principle that permitted KPPU The Report
to use extraterritorial jurisdiction to STT. As it is mentioned by of expert,
Professor Hikmahanto in his second expert statement: Professor
Hikmahant
o, page 2
In international law theory, there are 4 principles in applying a

jurisdiction; first, territorial jurisdiction; second, personal
jurisdiction; third, jurisdiction according to the protective
principle; and fourth, jurisdiction according to the universal
principle.
105. KPPU cannot use territorial jurisdiction because Indonesian law The Second
does not admit single economic entity. In whatever case, there is expert
no evidence that Temasek Business Group is a single economic Statement
entity. The previous evidence indicates that so-called companies in of
Temasek Business Group have their own management separately Professor
one to another and competed one among them. Hikmahant
o
Y
106.
KPPU also cannot use personal jurisdiction because STT is not founded
under Indonesian law and not an Indonesia entity. KPPU can not use
universal jurisdiction because the jurisdiction is only enforced to
international crime such as hijacking and humanity crime. It cannot to
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enforce jurisdiction to protect the interests of a country because the
enforcement must be based on the suspected action conducted
intentionally certain targeted country. Furthermore, this action must
results remarkable impacts to certain targeted country. In this case,
KPPU can not show any single evidence showing that STT (or other
Reported Parties) intentionally conduct to cause remarkable impacts to
O
Indonesia as a country.
B. STT does not have “Majority Shares”
C
107. The objective of allegation 1 is that Temasek owns “majority
share” in 2 providers of telecommunication services in Indonesia
through its subsidiaries. It is incorrect.
(i) KPPU equalizes the term “Minority” shareholder and

“Majority” shareholder
108. The actual understanding of “majority share” is an ownership more The expert
than 50% of shares in a company. In general, the words ‘majority’ Statement
and ‘minority’ are exclusive. It means one only can hold majority of
ownership of share. In the expert statement, exhibited in the Professor
defense of STT, Professor Hikmahanto emphasizes that in the Law Hikmahant
No. 19 /2003 on State-owned Enterprise (“The Law of BUMN”) o page 2,
and the Law No. 8/1995 on capital market, the two laws define the item 4(c)
term of majority shareholder and they could be a best guidance in exhibited
determining the definition of the term in this context. as First
Y
STT
Statement
The elucidation of Article 15 (2) of the Law No.8/1995 on Capita

109. The expert
P
Market defines “majority shareholder” as:
Statement
“Majority share is shareholder that has more than 50% (fifty percent) of
of subscribed and paid-up capital.”
Professor
Hikmahant
o page 2,
O
item 4(b)
exhibited
as First
STT
C
Statement
Article 1 (1) of the Law of BUMN mentions as follows:

110. The expert
“1. “State-owned Enterprise, hereinafter referred to
Statement
as BUMN, is a corporate with its capital owned by
state through direct equity of dissociated national of
wealth.”.
Professor
Hikmahant
o page 2,
item 4(c)
exhibited
as First
STT
Statement
111. Article 1 (2) of the Law of BUMN mentions as follows: The expert
Statement
“2. “Company, hereinafter referred to as Persero, is a
limited company of BUMN with its capital divided into of
shares owned in whole or at least 51 % (fifty percent) Professor
Y
by the Republic of Indonesia aiming at having profits.”
Hikmahant
o page 2,
item 4(b)
exhibited
P
as First
STT
Statement
(ii) “Grammatical” misinterpretation of KPPU toward Article 27
O
112. The first “interpretation” of KPPU, a grammatical interpretation. It
consults two different dictionaries but only the second dictionary,
C
Black’s Law Dictionary provides a term of “majority shareholder”:
“shareholder that has or controls more than half of LPL,

company share”
Analysis,
item 10
113. STT as a whole agrees with this definition due to its consistency LPL,
with the interpretation rules in Indonesian Civil Code. It is defined Analysis ,
that if a meaning of a statement is clear, then the simple and clear item 18
meaning that must be applied. As it is mentioned in the second
expert statement of Professor Hikmahanto:
The Second
Furthermore, under the regulation of interpretation (Article
1342 of Civil Codes), if the intention of a statement is clear, then expert
the simple and generally accepted interpretation shall be Statement
applied. In this case, the meaning of “majority” is clear,
consequently it has to be applied in which its meaning “more of
than 50%”. Therefore, “majority shareholder” must be Professor
interpreted as a shareholder of more than 50%.
Hikmahant
o
Y
114. Nevertheless, RFI refuses the approach arguing that there is
“different type of share”. It is possible that someone may controls
more than 50% of voting right in a company without controlling
P
more than a half of the same shares. RFI does not cite any
evidence that indicate that Temasek controls more than 50% voting
right either in Telkomsel or Indosat. The content of RFI in
whatever reason is illogical. The definition wants to say that
Temasek is able to control voting rights of other important
O
shareholders such as the Government of Indonesia.
C
115. Although someone approaches the definition of “majority
shareholder” in voting rights is not in the sense of amount of
shares, it must be noted that STT remains not to hold majority
either in voting rights or in a number of shares in Indosat. Thus,
any definition applied, STT remains to be under 50%. STT is only
an indirect shareholder and has no voting rights in Indosat.
116. RFI ignores the fact that mostly used words in Article 27 do not
prohibit a shareholder to increase its level of “domination”. Article
27 mentions majority ownership. Even when lawmaker refers to
controlling, the lawmaker has already conducted using simple
language, for example in Article 17 and 18 of Anti-monopoly Law.
CHAPTER IV
Y
PROHIBITED ACTIVITIES
First Part
P
Monopoly
Article 17
(1) Business actor is prohibited to conduct a

domination to the production and/or goods
marketing and/or service that can result the
O
creation of monopolistic practices and/or
unfair business competition.
(2) Business actor is suspected or assumed to

conduct domination over the production and/or
marketing of goods and/or service as referred
C
to in (1) if:
a. the relevant goods and/or service do not have

their substitution; or
b. causes entry barrier to other business actors in

the competition of common goods and/or
service; or
c. One business actor or one group of business

actor control more than 50% (fifty percents) of
market shares in one type and/or certain of
goods and/or services.
Part Two
Monopsony
Article 18
(1) Business actor is prohibited to control

acceptance supply or become a single buyer to
the goods and/ or service in the relevant market
that possible to cause the creation of
Y
monopolistic practices and/or unfair business
competition.
d. Business actor is suspected or assumed to

control acceptance supply or to become a
single buyer as referred to in (1) if one business
actor or one group of business actor control
P
more than 50% (fifty percents) of market
shares in one type and/or certain of goods
and/or services.
(iii) “Disorganized” interpretation of KPPU toward Article 27
O
117. The “systematic interpretation” of KPPU toward Article 27 has
created ambiguity to the concept of ‘majority’ that is able to
influence decision making in a company. For example, in its
C
“systematic interpretation”, KPPU tells that a share ownership of
25% is able to consider as share majority ownership because with
such an ownership it is able to veto certain decisions. This is
absolutely incorrect. It does not mean that if one party has ability
to restraint certain decision making in a company, the party is
considered to be a “majority shareholder” in company.
118. Further, if the statements of KPPU in paragraph 18 and 29 of RFI

are applied, it will come to illogical conclusion with the following
reasons:
(a) In the case of Telkomsel, Sing Tel (that only has indirect
ownership for 35% in Telkomsel) will be considered a
“control holder” in Telkomsel. If it is true, the “control
holder” shall be Telkom and Sing Tel due to their positon
as “majority shareholders” in Telkomsel.
Y
(b) In the case of Indosat, KPPU is negligence to reckon
Dwiwarna shares as the ownership of the Government of
Indonesia in which the shares give the Government of
Indonesia rights to veto certain things that require special
majority.
P
119. Although in certain level the whole shareholders are possible to be
influencing shareholders in a company by performing their voting
rights, such an ‘influence’ is not understood as ‘majority share’.
O
Each of this concept is different, and the regulation will use one of
the this words to submit a different thing. RFI intentionally brings
the word “majority share” to an ambiguous meaning that make
KPPU ignores the actual meaning of a rule.
C
The second expert statement of Professor Hikmahanto is:
120. The Second
“Such an interpretation cannot be implemented in this case because
expert
in PT Indosat, there is one special share called dwiwarna shares. It
is indicating that the owner of the shares. If the biggest shareholder Statement
is majority share (controlling shareholder), it cannot be stated that
the Government of Indonesia as the shareholder of dwiwarna shares of
is the biggest shareholder/majority shareholder.” Professor
Hikmahant
o
(iv) Derivative Interpretation
121. KPPU admits by itself that such an interpretation is unhelpful in

defining the term “majority share”.
Y
(v) The teleological misinterpretation
P
122. The interpretation of teleology of Article 27, as it meant by KPPU RFI,
in paragraph 22 to 23 of LPL, is to avoid a concentration of Analysis
economic power in a single entity. The test of power concentration
is in paragraph 24 of LPL:
O
“Concentration of economic power, as it referred to
number 2 above, is implemented through the centralization
of economic decision making in the hand of one particular
business actor. A decision can be effectively obtained if
there is a real control owned by a business actor in a
company. The company will implement the decisions. In the
C
context of Article 27 of the Law No.5/1999, such a company
has more than 50 % of market shares so that a control
conducted by a business in it will affect to the relevant
market.”
123. It is seen from paragraph 47 of RFI that KPPU has already

concluded that Temasek positively control Indosat on the basis of
(i) Temasek’s ownership of 41.94% Indosat’s shares; (ii) the rights
of Temasek to nominate directors and commissioners; and (iii) the
authority of Temasek to specify the corporate policy of Indosat. It
is to be informed that the conclusion of KPPU above is wrong and
groundless for the following reasons:
124. In accordance with the statement of KPPU in LPL, the ownership
of more than 50% voting means give the owner a control or in
KPPU’s word, an active control. STT (and Temasek) does not have
more than 50% voting right in Indosat. STT only has 31% of
Y
indirect ownership in Indosat. Thereby, it is incorrect if KPPU said
that Temasek has 41.94% of shares in Indosat. Even if it is true that
Temasek has 41.94% of ownership in Indosat (that is not true), the
assumed ownership of Temasek is still below 50%.
P
125. Further, it is untrue to say that Temasek has rights to nominate
director and commissioner in Indosat. Under the Statutes of
Indosat, the only Indosat’s shareholders with voting right that may
O
nominate Indosat’s directors or commissioners. Consequently,
neither Temasek nor STT can nominate directors or
commissioners. Out of 10 Reported Parties there are ICL and ICPL
that have right to nominate directors and commissioner in their
C
capacity as direct shareholders in Indosat. Nevertheless, the right to
nominate director or commissioner is also available for every
Indosat shareholder Indosat that meet minimum requirement of
total shares on hand but it is not exclusively valid to ICL and ICPL.
The whole share ownership of ICL and ICPL is less than 50%,
therefore their votes can be defeated and have no ability to act
unilaterally.
126. KPPU really ignores to consider that the Government of Indonesia

(as another and significant shareholder in Indosat) has right to
nominate director and commissioner in board of director and
commissioner. The Government of Indonesia, as the single and
special holder of Indosat’s dwiwarna shares, has not only to
nominate but also to appoint at least one board of director and
commissioner of Indosat. Further, the current majority of Indosat
board of director is nominated by the Government of Indonesia
(including the managing director). The Government of Indonesia is
able to use its extensive veto right to the things that need special
Y
majority. The Government of Indonesia also has ability, in certain
level, to perform a significant control to Indosat (refer to the
opinion of KPPU on the term controlling), while STT (with its
indirect ownership of 31% shares) cannot act unilaterally to
P
determine corporate policy of Indosat.
127. The second expert statement of Professor Hikmahanto states that The Second
there is no evidence to be proved concerning the concentration of expert
economic power. Statement
O
of
”I do not agree with teleological interpretation in the Report Professor
because the concentration of economy power cannot be Hikmahant
implemented to determine who the majority shareholder is
according to Article 27. The economic power concentration o
differs in determining who the majority shareholder is. ...
C
Further, I do not find single evidence in the Report on
concentration of economy power in STT.”
(vi) The confidence of KPPU over an irrelevant law
128. The first regulation cited by KPPU is the elucidation of Article 10

(4) of the Law No.19 /2003. It actually supports the opinion that it
is different between controlling concepts and ownership of
majority share. The sentences cited by KPPU are:
“The understanding of commissioner adhere in the LPL,

sense of human and of corporate, both known as
Analysis,
commissioner member and commissioner council
respectively. What is meant by certain shareholder is a
controlling shareholder or majority shareholder of a
limited, public and the whole shareholders of limited Point 26
closed company”
129. It is not necessary to use the both phrase “controlling shareholder”
Y
and “majority shareholder” if they are same in meaning. It seems
that the regulation gives broader meaning for the phrase of
majority shareholder by placing specifically majority shareholder
and controlling shareholder into one concept. Nevertheless, they
P
are different concept in reality, and Article 27 is limited only to
relate to ”majority shareholder ” and not to “controlling
shareholder ”.
130. Article 1 (1) and Article 1 (2) of the Law No. 19 /2003 on State- The Second
O
owned Enterprise also further indicates that “majority” mean more Expert
than 50%. As it is expressed by Professor Hikmahanto in his first Statement
and second expert statements : of
Professor
Hikmahant
C
o
“The Law No.19 /2003 on State-owned Enterprise (“the Law of

BUMN”) using no term ”majority share”. Yet, it is found in the Law
of BUMN an interpretable similar term, “a large part of”. The term
“a large part of” can be found in Article 1 (1) and (2) of the Law of
BUMN.
Article 1 (1) states as follow:

“State-owned Enterprise, hereinafter referred to as BUMN, is a
corporate with its capital owned by state through direct equity of
dissociated national wealth.”
Meanwhile Article 1 (2) states as follow:

“Company, hereinafter referred to as Persero, is a limited company
of BUMN with its capital divided into shares owned in whole or at
least 51 % (fifty percent) by the Republic of Indonesia aiming at
having profits.” ------------------------------------------------------------------
Based on aforementioned explanation, the conclusion I can

take on meaning of the phrase “have majority share” in Article
27 is to have more than 50% (fifty percent) of share of
subscribed and paid-up capital of a company.”
131. Two other regulations cited by KPPU is BAPEPAM Regulation LPL,
Y
No. IX.H.1 and Central Bank (Indonesia Bank) Regulation No. Analysis ,
8/16/PBI/2006 that define specifically ‘controller shareholder’ item 28 to
(both definition are little bit different), and not define ‘majority 29
shareholder’. This not at all relevant. The irrelevant law cited by
KPPU is described in the second expert statement of Professor
P
Hikmahanto:
”9. Do you agree with Report that refer to BAPEPAM Regulation No.
IX.H.1 (item 28) in identifying the meaning of majority share?
O
I disagree with that. The BAPEPAM Regulation No. IX.H.1
to define meaning of “majority share” particularly
formulates the meaning of “controlling party” in public
company in the sense of taking over of public company. The
meaning of “have majority share” as referred to Article 27
C
differ from the meaning of “the party of controller”.
Therefore, BAPEPAM Regulation No. IX.H.1 is not
relevant to be implemented in finding the meaning of The Second
”majority share”. Expert
10. Do you agree with the Report that refers to Central Bank Statement
(Indonesia Bank) Regulation No.8/16/PBI/2006 (item 29) in of
identifying the meaning of majority share? Professor
As it is mentioned above, the regulation defines meaning of Hikmahant
the term ”controller shareholder” differ from meaning of the o
term ”have majority share” as it is elaborated in Article 27
of Competition Law.
132. RFI states that there is no the Laws and regulations that define LPL,
majority shareholder. It is untrue. The Law No. 8 /1995, shown by Analysis,
Professor Hikmahanto, explains what the meaning (of) “majority item 27
share” is?
Y
“The Law No. 8 /1995 on Capital market (“the Law on Capital
market”)
The elucidation of Article 15 paragraphs (2) of the Law on

Capital market states that “share majority” is:
P
“Share majority is shareholder that has more than 50%
(fifty percents) of subscribed and paid-up capital of a
company.”
Based on the elucidation of Capital market Law, mentioned

above, it can be interpreted that “have majority share” to have
more than 50% (fifty percent)of subscribed and paid-up capital of
a company.”
O
(vii) The misapplication of foreign law and regulation by KPPU
C
133. Concerning merger regulation, the references used in RFI are the
laws of European Union (“EU”), UK (“UK”) and the United States
(”US”) that discuss about share acquisition. It is different with the
way KPPU enforce Article 27, in this case, to punish the existing
shareholders.
134. No single law regulation in the foreign law cited by in RFI defines
“majority shares. It is surprisingly that KPPU deviate the foreign
law in its effort to bias the actual meaning in Indonesian laws.
135. EC Merger Regulation cited by KPPU, (a basis of UK Merger LPL,

Regulation) for example, defines ‘concentration’ and not majority Analysis,
ownership. Paragraph
30
“Without lessen the intention of Article 4 (5) and Article 22, the
Y
Regulation goes into effect to all concentrations in a sense of
community dimension as referred to in this Article.”
A concentration is defined in Article 3 of EC Merger Regulation

136. as:
P
“A concentration is assumed happened where there is
change of defense control as consequence of:
O
(a) merger from two or more independent and previous
effort or part of effort; or
(b) Acquisition, that conducted by one people or more that

has controlled at least one effort, or by one effort or
more, either by effect purchasing or asset, by contract
or by different way, with direct or indirect domination
C
from all or some of a or more other effort.”
137. It is absolutely different with the ownership concept of ‘majority

share’. It discusses a merger or taking over rather than on existing
ownership and it is measured by “controlling” and not by
’majority’ ownership.
138. Part 7 of Clayton Act in United States, another regulations cited by

KPPU, is very different with Article 27. The regulation states:
“Nobody that conduct commerce or another activity that LPL,
influence commerce can acquired , directly or indirectly, all
Analysis,
or every part of share or capital other share and nobody
that at one's feet of Federal Trade Commission can acquired item 41
all or every part of asset owned by others that also conduct
commerce or other activity that influence commerce, that in
Y
line with commerce or activity and giving influence in any
country part, effect of acquisition are lessening competition
in substantial, or tend to result monopolies.”
P
139. Once again, there are two important differences. First, Clayton Act
discusses on share acquisition, and not existing ownership. Second,
Clayton Act uses the phrase ‘all or any particular part of share’, a
concept wider than ’majority share’. Concerning this, it is
ridiculous to implement regulations that sounded differently in its
O
effort to interpret the meaning of Article 27 of Anti-monopoly
Law. And so do all cases that interpret this Law will apply
different testing from the testing of “majority share”. Therefore, it
is irrelevant for the purpose.
C
140. KPPU shall realize that Article 28 and 29 (in Part IV of the Law
No.5) discuss on merger, consolidation and taking over. Article 27
is found in Part III of the Law No.5 and in relation with the
existing share ownership. Nevertheless, RFI remains to make it
unclear for the actual meaning of “majority”:
”By implementing the concept of “controlling”, KPPU seems to

apply Article 28 and 29 of Competition Law that have not be
implemented yet, await for the Government Decree to enforce
the Articles (Article 28 and 29 of the Competition Law). The
Article 28 and 29 will be interpreted differently from Article 27.
It can be seen from the following facts :
a. Article 27 is put under Part Three entitling “Share
Ownership”, while Article 28 and 29 is put under Part
Four entitling “Merger, Acquisition, and Taking Over.”
b. Article 28 and 29 are addressed to anticipate monopolistic

action that are proved by the fact that government must be
informed beforehand on merger of corporate body or share
acquisition. Nevertheless, the application of Article 27can
be triggered after majority shareholder causes the taking
over of more than 50% market share.
Second
Y
Expert
Statement
of
Professor
Hikmahant
P
o
(viii) KPPU has ignored the facts that the definition of majority
shares has been considered by KPPU and DPR in 2003
O
141. The Government of Indonesia, in the Divestment Document on Divestment
divestment process of Indosat, dated 4 February 2003, conducted Document
special consideration to Anti-monopoly Law and concluded that: of the
Governme
C
nt on the
divestment
of Indosat,
in the first
Statement
of STT
Under Anti-monopoly Law No. 5/1999, a majority

ownership in many companies that conduct common
business activity is prohibited. The ownership of STT
I in Indosat through ICL and not a majority
shareholder (less than 50% of the listed Indosat’s
shares). In addition, the ownership of a Singaporean
company in Telkomsel is also less than 50%. Further,
Minister of BUMN is sure that the law prohibits
monopolistic practices, and not majority ownership
…Telecommunications Industry is arranged tightly and

operators cannot determine policies including on tariff.
P Y
142. STT also notes that there is another important document on share
divestment of Indosat in the case document of KPPU, a document
entitling “Government Elucidation in the hearing with DPR’s
Commission” on the share sales.
O
143. This is a follow-up meeting on Indosat’s shares sale. The date of
the document was 2003. The most importantly is on page 11 that
states:
“Concerning the Law No.5/1999 on the Prohibition The

of Monopolistic Practice and Unfair Competition,
C
Elucidation
particularly Article 27 and 28 (3), it can be elucidated
that STT is not a shareholder of more than 50% of of
Indosat’s share. While the stipulation on the Taking
Governme
over in Article 28 (1) of the Law No.5/1999 has not bee
regulated in the Government Regulation and nt in the
Government Decree. Furthermore, the Ministry of
Commissio
BUMN on 23 January 200 has meet the invitation of
consultative meeting with the Commission for n Joined
Supervision of Business Competition (KPPU), and
Meeting of
until present KPPU need no further information from
the Government/Indosat concerning the divestment f the House
Indosat. Without keeping aside the information
of
above, telecommunication industry is “highly
regulated” by the Government.” Representa
tives,
available in
the case
document
of KPPU
144. From the citation, it is clear that KPPU is not only knows the
divestment process but also firmly invited to present its opinion
whether the process infringe Article 27 or not. KPPU states that
Y
there is no problem concerning the STT’s interests in Indosat.
Unfortunately, it has not been four years yet, KPPU takes a
different position. It shows that KPPU is inconsistent.
P
145. It must be noted that the participation of ICL (a subsidiary that Approval
entirely owned by ST Telemedia) in Indosat divestment is also of BKPM
approved by Indonesia Investment Coordinating Body (BKPM) in dated 7
its decision No.14/V/PMA/2003 dated 7 February 2003. By February
offending to the decision of the investment at the moment, KPPU 2003
O
has gone far beyond its authority. As it is expressed by Dr. Ir. The
Benny Pasaribu: different
“I have a notion that KPPU RI does not have the power or opinion
competency to cancel, to take different decision, to take a legal
with the
action or to make a policy over the decision that had been taken by
the government concerning the divestment of PT. Indosat, through majority
C
open tender and awarded given to Singapore Technologies
members of
Telemedia (STT) in 2002. Because, the initial process of
divestment was initiated by Government and the policy was a Commissio
political decision of Government relating to the financial condition
n Council
at that time. (Read Article 50 items a and Article 51 of the Law
No.5/1999 that regulate the exemption” with Benny
Pasaribu
146. By offending the investment of ST Telemedia, under Article 27,

particularly the first statement of the Government of Indonesia
mentioning that Article 27 was infringed, it will create a serious
worry among international investors.
C. There is no evidence of controlling more than 50%

market share
147. The only evidence given by KPPU about market share is in
paragraph 105 of its analysis part. The followings are the market
shares of Telkomsel and Indosat:
P Y
148.
C O
The table shows that Indosat has less than 50% of market shares of
cellular telecommunication, and the ownership of STT is possibly
less than that. Due to the position of STT that does not have an
ownership in Telkom and/or Telkomsel, the further analysis
concerning STT does not need to be done. It is because STT cannot
control more than 50% of the cellular telecommunication market
unilaterally.
D. KPPU does not find an evidence of dominant position
abuse
149. Professor Hikmahanto states in his first expert statement that is The First
Report of
presented along with the first Statement of STT that it is not an
Expert
Y
infringement of the Law of Anti-monopoly simply because of its Opinion,
Prof.
dominant position resulted from the ownership of several
Hikmahant
companies. The abuse of dominant position that causes an o, page 7,
paragraph
infringement of the Anti-monopoly Law. KPPU has ignored to
1, in the
P
consider such a condition. First
Statement
of STT
150. According to Professor Hikmahanto, Article 27 (a) of the Anti- The First
Report of
monopoly Law shall be read on the basis of Rule of Reason of
Expert
Article 27 (a) of Anti-monopoly Law is a part of Dominant Opinion,
O
Prof.
Position and in this case; Article 27 (a) of Anti-monopoly Law
Hikmahant
must be read together with specific abuse of Dominant Position o, page 8,
paragraph
prohibited by Article 25 of Anti-monopoly Law. Wide perspective
1, in the
reading of Article 27 (a) of Anti-monopoly Law that the existence First
Statement
of Dominant Position merely breaking the law lead to
of STT
C
misinterpretation an ambiguity of Article 25 of Anti-monopoly
Law because Article 25 of Anti-monopoly Law enforced only if
Dominant Position is abused.
151. Therefore, KPPU shall prove its allegations that STT has obviously
utilized its ownership to lessen a level of competition in the
market. Majority ownership itself is not an infringement to the
Law. KPPU shall prove the existence of dominant position abuse.
KPPU must also prove the causality between share ownership of
STT and allegation of lessening competition. The misused of
dominant position could be seen as infringement. It is stated that
KPPU has not proved this case yet.
152. Besides, the mandate of KPPU is only to investigate to the abuse of The First
dominant position and not the existence of dominant position itself. Report of
Expert
Opinion,
Prof.
Hikmahant
o, page 9 to
10in the
Y
first
Statement
of STT
(a) Article 4 of the Presidential Decree No. 75 /1999, a legal Presidentia
P
regulation that define mission of KPPU. It is stated that the
l decree
tasks of KPPU is to conduct an assessment whether it abuses
dominant position or not, as it regulated by Article 25 to number 75
Article 28 of the Anti-monopoly Law .
year 1999,
item 4, in
the First
O
Statement
of STT
(b) Article 1 (9) of KPPU Regulation No. 1/2006, that arrange the the
Procedures of Case Handling in KPPU, states that ”An
regulation
infringement is an agreement and/or activity of dominant
position abuse that cause monopoly practice and/or unfair of KPPU
C
competition.”
No.1/ 2006,
Article 1
(9), in the
first
KPPU’s
statement
KPPU -1
153 The allegation of abuse in RFI is only Allegation 2 and Allegation
3, but the two allegations are concerning the Telkomsel policy of
price structure. There is no allegation of abuse to Indosat as well
its shareholders. With the absence of the allegation, there is no
infringement to Article 27(a) of the Anti-monopoly Law.
Therefore, there is no basis fro KPPU to follow up the
investigation.
VII. ECONOMIC ANALYSIS AND FINANCE
Y
154. In this part we will discuss economic analysis and finance of
KPPU and then we have a notion that:
(a) The definition of market by KPU is incorrect.
(b) Competing Market.
(c)
P
(i) The BTS Investment is not an indication of competition
level in the market
(ii) Price charged by operator is a competitive price
(iii) The increase of concentration is not caused by STT
(iv) STT does not enjoy the expanding of market power.
(v) KPPU ignores to prove that Indosat and Telkomsel are
competed each other.
O
(d) The allegation of abuse by Telkomsel is not related to STT
(e) The calculation of KPPU on consumer loss is untrue.
A. The Wrong Definition of Market by KPPU.
(i) KPPU applies wrong definition on Market
C
155. RFI concludes wrongly that product market shall be limited to
LPL,
GSM, excluded CDMA (wireless fixed) or limited access. The
Analysis,
geographical market shall be defined as the entire area all over
Part IV,
Indonesia.
Paragraph
. 6 to 16
(market
product)
and 17 to
21
(Geographi
cal market)
156. RFI ignores clear expert statement that geographical market is The report
defined correctly as Indonesia and product market is covering AMH,
Y
FWA service. In a developing country like Indonesia, wireless and Paragraph
FWA is actually substituted each other. The expert statement is 65 to 77;
available in Spectrum Report presented by STT, the Study of CSE Paragraph
is presented by AMH and the Analysis Study presented by 2.1 the
P
Temasek. KPPU does not discuss the single reports in coming to First
the conclusion. KPPU comes to its conclusion that market shall be Statement
treated separately. of STT
O
157. In checking through the case document of KPPU, STT also obtains
a report from Institute of Economic and Social Research, Faculty
of Economic University of Indonesia (“LPEM Study”). The study
of LPEM is also used by KPPU in other part of LPL.
C
158. Nevertheless, KPPU does not mention the fact that Report of
LPEM also finds an existence of competition between technology
CDMA and GSM, and the two products are substituted each other.
We cited and underlined the relevant parts of the LPEM Report of
LPEM as follow:
“Market structure in this industry is also determined by a The report

platform used. An old operator like TELKOM develops
of LPEM
TelkomFlexi that based on CDMA and INDOSAT with
StarOne. Thereby, in cellular operator industry, CDMA Chapter 2,
and GSM competing each other to capture consumer.
paragraph
Such competition is called competition for market that is
followed then with competition in the market. It means, 2.1 in the
determining the most used platform and then capture
case
consumers as many as possible. Document
of KPPU
159. The opinion is also confirmed by the team of Follow- up

Investigation of KPPU to Mr.Mas Wigrantoro from
Y
Telecommunication Community (Masyarakat Telekomunikasi):
P
28. Question: In your opinion, are FWA and GSM The official
competitor?
report of
Answer: Yes, within an area code. It is inconsistent. Investigatio
How can be FWA mobile?”
n to Mas
Wigrantor
O
o date 25
September
2007
KPPU’s
case
C
document
160.
Professor Hikmahanto states in his first expert statement:
”In determining relevant market, KPPU must conduct

evidence based and logical analysis. Under
international best practices, if KPPU is wrong in
defining relevant market, then its decision can be
revoked.”
161. RFI has made mistake in defining market. It is defined on baseless

evidence. It is a severe fault because it influences entire process of
investigation.
(ii) KPPU has calculated wrong market share
Y
162. If the market does not define precisely, the market share calculated
to market player will also be different.
163. There are some references for calculating market shares, and it
P
varies along with the product (for example CDMA/GSM),
geography and set of measurement (such as revenue/a number of
customers).
O
164. As it is explained above, STT does not have any control or
ownership to Telkom and/or Telkomsel, that is why calculating any
part of Telkomsel’s market shares to STAT is incorrect.
C
165. It is incorrect to calculate market shares of STAT to Temasek for
instance, since Temasek has no influence in any form in the way
ST manage its indirect investment in Indosat.
(iii) KPPU only takes 3 Operators in it Analysis
166. Finally, it must be noted that KPPU only calculate market shares of The RFI,
three operator, reckon market share from 3 operators, Telkomsel, Analysis,
Indosat and Excelcomindo: Paragraph
105
The RFI,
Analysis ,
Y
item 105
P
167. Nevertheless, according to Spectrum Associates there are nine
operators in Indonesian market:
O
“The number of cellular telephone in Indonesian market is The Report
bigger than the newly established and equalized regional
of Case
market. The operators are (written in descending order of
consumer market shares) Telkomsel, Indosat, Excelcomindo, Associates,
TelkomFlexi, Mobile 8, Bakrie, StarOne, Hutchison 3 and
C
Paragraph
NTS (used to be Lippo).”
2.2, in the
First
Statement
of STT
168. It is higher than other regional market:

The Report
of Case
Associates,
Paragraph
Y
2.2, in the
First
Statement
of STT
P
B. The Competitive Market
O
169. RFI develops its analysis, in part B of Analysis, on the basis of the
fact that cellular communication market in Indonesia in reality is
not competitive.
170. In the following sub heading, C to G, we discuss some facts and
C
arguments cited by KPPU to support its assumption. We also
emphasize a number of indicators that miscalculated by KPPU.
They are about to conclude that relevant market, even if it is
limited to cellular phone, is very competitive.
C. BTS Investment is not an indicator of competition level

in the market
171. RFI concludes that Indosat’s investment in BTS is not as

aggressive as its competitors. KPPU observes the data until the
year of 2006 and conclude:
“Based on the above data, the growth of Indosat BTS is The RFI,
sluggish compare to its competitor. Actually, Indosat is in the
Analysis,
closest position to a dominant player. The sluggish growth of
the closest competitor had made dominant player optimize its item 96
market power.
There are important problems regarding this argumentation:

172.
(i) The number of BTS station is not automatically a
best indicator of competition; and
Y
(ii) It is untrue to say that Indosat investment in BTS is
not as aggressive as its competitors.
(i) The number of BTS station is not automatically a best

indicator of competition
P
173. Firstly, it is not clear whether a number of BTS stations is a
indication of competition in market. Finally, customer usually
more interests in service level from an operator than a number of
its BTS stations.
O
174. The analysis in Spectrum Report displays a number of competition
indicators and they are compared with the regional reference in
order to determine whether the market is competitive or not. These
C
portions are also explained in the First Statement of STT. None of
the evidence is discussed by KPPU.
175. First, there are some mobile telephone operators with significant Spectrum
market share (more than 1%) in Indonesia. The neighboring Report ,
countries that have 3 to 6 operators with significant market shares, Paragraph
Indonesia has 9 and 6 of them have more than 5% market shares. 2.2, The
First
Statement
of STAT
176. Market power concentration between two most topmost operators Spectrum
are not different significantly with other regional markets. In China Report ,
and Philippine, two most topmost operators control 96% and 95% Paragraph
of market shares each. In Indonesia, the two most topmost 2.2, The
operators enjoy only 75% market shares. Therefore, there is First
nothing special concerning industrial structure or distribution of Statement
market shares between market leading operators. Industrial of STAT
structure does not relate at all to share ownership.
177. There is no evidence that Indonesian operators conducts “price Spectrum
Y
increase”, a classic abuse from market force that permit operators Report ,
to enjoy advantage above normal advantage. A good way to Paragraph
measure price increase is by identify percentage from the average 2.2, The
of earnings that expended by Indonesia consumers in mobile First
P
telephone service. This condition can be measured with ratio Statement
Average Revenue per User (“ARPU”) to Gross Domestic Product of STAT
(“GDP”) per capita. In an analysis to India, Bangladesh, Chinese,
Indonesia, Philippine, Thailand and Malaysia by Merrill Lynch in
2007, ARPU to GDP per capita from India is the very top at 17%
O
while Indonesia only expends 7% from GDP per capita they in
mobile telephone shop. Growing low comparison ARPU in
percentage to GDP that means consumers do not expend more
compared to to their earnings. Consumers Indonesia so accept
advantages from competition in [the] market as it is shown in
C
numbers above.
178. According to Spectrum, since 2002, Indonesia market has sprang

up with significant from 11 million customers become 66 million
customers. Compared to other markets by penetration level of a
similar nature, Indonesia market has grown in line with or faster
than markets is, although has been required from operators in
Indonesia to extend network in more islands / in all Indonesia. This
condition means that operators in Indonesia have been in
aggressive develop market. It’s explained that Indonesia market
operates in competitive way.
179. Indonesia has sprung up quicker compared to other market which Spectrum
was in growth step in common. This condition explains that mobile Report ,
telephone operators in Indonesia have been in aggressive Paragraph
developing their position in market compared to operators in other 2.2, The
markets. Speed of market growth also makes old player fact less First
important – customer amount that has been owned by an operator Statement
less important with obtainable new customer amount by operator in of STAT
market that expands.
Y
180. Finally, if monopolies exist, not will happen that consumer will
often change cellular operator on a regular basis. Nevertheless, in
Indonesia, commutation level is the very top (even till fold
P
duplicate in comparison with country by next level of the very top
commutation) in comparison with 51 countries around the world,
that mean consumer in Indonesia often change operator:-
Enclosure 10: Churn rate monthly in markets that just emerge,

181. Spectrum
O
Kuartal 1 Tahun 2007 (%)
Report ,
Paragraph
8 .6 %
2.2, The
First
Monthly Churn
C
Statement
4 .1 % 4 .0 %
3 .7 %
3 .1 % 2 .9 %
of STAT
2 .7 %
2 .1 %
Malaysia
India
Thailand
Philippines
Indonesia
Bangladesh
China
Pakistan
Source: Merrill Lynch
182. Furthermore, for period after 2002 (2002 is year where ST

Telemedia takes over first ownership in Indosat) churn rate
Indonesia quicker level are compared to its other country in
regional, that growing clarify that consumer has choice among
operators and they are execute its choice:
Enclosure 11: Churn rate monthly in markets that just emerge,
183. 2001-2007 Report
Spectrum,
10%
Indonesia
paragraph
Malaysia
8% 2.8
Y
India
Monthly churn rate %
6% Philippines
Thailand
4%
China
P
Pakistan
2%
0%
2001 2002 2003 2004 2005 2006 2007
Year
2007
O
source: Merrill Lynch, 2005, 2007
184. All indicators that cited above discussed how operators struggling
to get customer. It was very surprising when all of those indicators
haven’t considered by KPPU, which even more interested to use
C
investment at BTS as [the] indication from competition level.
(ii) The Decision of Indosat Investment referring to the

investment of BTS is valid and sensible
185. Nevertheless, data expresses as follows:

The RFI,
Analysis,
Paragraph
93
186.
P Y
It's clear here that a number of invested BTS of Indosat increased
from 2000 to 2006, from 1,357 to 7.221. In an absolute term, the
growth is more than 5 times. In such condition it is hard to say that
the investment is low.
O
187. Further, there is a strong business reason for not extending network
carelessly. BTS is a huge investment and it causes company’s
profit reduction due to its depreciation. In one side, the directive
question of KPPU is a criticism to Indosat for its low profit and on
C
the other hand KPPU criticizes it for its low investment. In reality,
high investment is paid by low profit in the short-term. It is stated
by Mr.Johnny Swandi Sjam in the Official Report of Follow-Up
Investigation on 14 September 2007:
”25. Question: Why did Return on Equity of Indosat The official

decrease in 2006?
report of
Answer: In 2006, we were developing, there Follow-Up
was a depreciation cost that reduces net
income, but after finishing the integration, the Investigatio
net incomes increased. The decrease is caused n to
by high depreciation cost caused by
integration.” Johnny
Swandi
Sjam dated
14
September
2007 in the
case KPPU
Y
188. The analysis of RFI is insufficient due to the ignorance that
Indosat is planning to invest 3.500 BTS in 2007:
P
”19. Question: How is the method of BTS The official
procurement Indosat? report of
Follow-Up
Answer: Up to 2006, the program implemented
Investigatio
O
is separated programs; most of them are turn-
n of
key. Usually, the building of BTS is performed
Johnny
by vendor and the radio is installed by big
Swandi
vendors such as Siemens, Alcatel, Ericsson, etc.
Sjam dated
Considering that we have been developing
14
C
huge networks (around 3,500 BTSs) since
September
2007, we decided to perform some of the works
2007 in the
under turn-key project.”
case
document
KPPU
189. Regarding the criticism of KPPU that Indosat does not have
enough BTS to compete, it must be noted that Indosat has
already had 7,221 BTS and its competitors, Hutchison one of
them, thought that they are able to compete by targeting to
have 2,100 BTS in 2011:-
”33 Question: How many BTS PT Hutchison CP

Telecommunications has been built?
Answer: Around 1,000 BTS. We have built them

since the end of 2005 and we are targeting 2,100
BTS until 2011.”
Y
190. All evidences accepted by KPPU in step of its Follow-Up
Investigation are not reflected in LPL. If the fact is included,
description will be more well-balanced that Indosat has
P
invested much for BTS but it is equilibrated by the investment
for gaining more profit. Indosat also has planned to expand
greatly in 2007. The addition of 3,500 BTS has increased its
network for about 50%. The absence of consideration to the
important evidence has shown that KPPU comes to its
conclusion without considering the proofs.
O
D. The Price Charged by Operators is competitive price
(i) The basic measurement of KPPU is incorrect.
C
191. The defense of STT is also harmed by the negligence of KPPU The RFI,
to present the data sources so that it makes STT hard to verify Analysis,
and to defend. For instance, there are more than 20 detailed Paragraph
diagrams in paragraph 56 to 59 in Part V relating to cellular 56 to 59
tariff of the operators but the sources are not mentioned.
Concerning the allegation of monopolistic practices in fixing
high tariff, Telkomsel in particular, it is necessary for STT to
know data sources presented by KPPU. According to STT, the
tariff is not high; KPPU could make mistakes in referring to
the incorrect tariff rate.
192. The prices cited by KPPU are as follows:-

The RFI,
Paragraph
165
193.
P Y
The table is an average tariff. Nevertheless, the table is not
reliable to be a comparison because there are two tariff types,
“on-net” and “off-net”. The “on-net” tariff refers to price level
paid by cellular users who perform a call to other cellular users
within the same network. On the contrary, “off-net” tariff
O
refers to price level paid by cellular users who perform a call
to other network. The basic difference is in a call to other
network in which interconnection fee shall be paid.
Interconnection fee is arranged tightly by government, and
C
service providers have less authority on this. Thus, if
significant comparison is going to be made, the “on-net” tariff
is suitable. Furthermore, there are various discount packages
offered by service providers. To comprehend the price paid by
consumer, the right basic comparison is not based on ”on-net”
tariff but the average of “on-net” tariff paid by customer after
all discounts are calculated.
(ii) The mistake made by KPPU concerning Price Analysis
194. The tables provided by KPPU in paragraph 97 to 101 do not

show whether KPPU compares tariff or price. Tariff is not a
price indicator due to the discount and free minutes call
offered in all tariff packages.
195. The only fraudulence touched by KPPU referring to the price
is in two following paragraphs:
Y
“In general, the retail price of postpaid increases although
its customer also increase significantly. From the viewpoint
of economic scale, a high margin growth belongs to
operators. It is an interesting phenomenon because it seems
that there is no competition to capture consumers through
P
price decrease. If there are competitive companies, each
company will try to decrease price as a significant factor to
capture consumers from its competitors.”
“According to Price-Leadership Model, a dominant

company fixing price while others comes after such a price-
fixing. It will happen if the follower companies have no
bravery to compete on price because the economic scale is
O
not relatively competitive. Price–Leadership is a form of
tacit collusion that looks like a cartel to consumers with the
absence of agreement between the two parties and it simply
a strategy of a follower company to gain optimum profit by
adjusting price with dominant company."
C
196. It must be attended that in reality there is no basis to tell that
there is no competition in capturing consumers or decreasing
price. The replacement rated cited above shows a competition
to grab customer.
197. The Spectrum Report also submits evidence to the existences Spectrum
of price competition by comparing wide range of tariff Report,
between prepaid and postpaid segments indicating that the Paragraph
tariff of Indosat is lower than Telkomsel, even in some cases 3.1, the
more than 50%. First
Statement
of STAT
198. There are no evidences submitted by Spectrum that are

considered by KPPU in its report. It clearly shows that the
analysis of the case is incorrect.
199. The judgment of KPPU is that the choice of Indosat to follow

the price fixed by Telkomsel remains to be a tacit collusion.
Suppose it is true, it has nothing to do with STT. The decision
Y
is from Indosat board of director.
200. In this case, it is only a matter of logic that Indosat cannot

compete with Telkomsel in price without decreasing its profit.
P
It also strengthens other KPPU’s complaints concerning low
profit of Indosat. Concerning its allegations, KPPU shall be
consistent whether accusing Indosat for imposing high price
(in line with the price of Telkomsel) or for gaining low profit.
KPPU cannot accuse both at the same time.
O
201. It must be attended further that although the price fixed by Indosat
and Telkomsel is the same, it does not mean that it is an anti
competition behavior. According to Dr Chatib Basri, the Head of
C
LPEM FE UI, the price uniformity is not concurrently a pricing
indication:
“In a discussion hosted by Centre for Strategic and Singapore
International Studies last Thursday, the Head LPEM, Institute of
Mr. Chatib Basri, refuses the report that the studies Internation
conducted by his researchers strengthen the al Affairs
allegation of KPPU to Temasek. Webpage
‘Our executive research summary clearly tells that

equation in price pattern fixed by operators is not
always interpreted as an indication of price fixing,’
he said.”
202. The same opinion suggested by Dr. Chatib Basri in is interview
with Tempo Magazine. He said that the price similarity is only an
indication of competition and not a conclusive evidence anti
competition behavior:
Y
“Chatib explains that similar tariff pattern is not always Article
interpreted as price fixing or collusive result. In the
Tempo,
United States, the price fixing independently, unilaterally,
and considering consensus parallelism is not assumed as 20 Septemb
P
Antitrust. .
er 07
Therefore, he affirms that statistic movement of mobile
tariff between Telkomsel and Indosat cannot be concluded
as cartel of the two companies.
The similar tariff Movement is possible to occurs due to

the competition in the industry, so that it shall be seen
O
carefully whether Telkomsel and Indosat formulating
cartel tariff in telecommunications industry,” said Chatib
in the public discussion entitled “Enforcing Business rule
in the Globalization Era: The Case of Telecommunications
Sector in Indonesia” in Centre for Strategic and
International Studies.
C
Chatib admit that he does not know why KPPU comes to
such a conclusion. “We do not for sure conclude that
there is price fixing (or cartel) conducted by both
company," he said.”
203. STT has also assessed an independent report compiled by Dr Sri

Adiningsih (“Dr Adiningsih”) dated August 2007, in the case
document of KPPU, concluding that although its industrial
structure is benefiting incumbent players, there is no indication of
collusion and price competition:-
“Although many new entries are entering market, the The Report
incumbent operator that have dominant position of Dr.
remain to have big market share either in fixed line
wireless or cellular because incumbency advantage is Adiningsih,
going into effect in telecommunication industry in on page 8
which incumbent has wide network and infrastructure
as an advantage. Therefore, it is hard for new entries in the
to compete in the relevant market. Considering the
Letter of
geography and huge population of Indonesia that have
not been served by the telecommunication service, it AMH
attracts new operators to enter fixed line wireless and
dated 25
cellular market. Low price is a common platform
offered by new entries to capture consumers which September
Y
leads then to the price war. It can be seen from the
2007
various advertisements in mass media. The new
operator, tight competition makes the service vary,
increasing consumers and quality of services. Under
such condition, public gain advantages from the new
development and competition among operators. It
P
indicates that the market structure of
telecommunication in Indonesia is tight oligopoly but
price war among operators is possible to occur. The
worries to the existence of collusion in this industry are
invisible in the market.”
204. Dr Adiningsih also emphasizes its evidence that in reality there is a
O
price competition in any level among business actors:-
“In other hand, tariff promotion also conducted by The Report

operator, for example PT Exelcomindo Pratama
of Dr.
decreasing its tariff for about IDR 149 per 30 second,
C
while Simpati (PT Telkomsel) impose IDR 300 per Adiningsih,
minute for a call about 23.00 to 07.00. PT Indosat
on page 5
(Mentari) even gives free call from 00.00 to 05.00. It
indicates that today, telecommunication industry in in the
fixed wireless network and cellular in Indonesia is in
Letter of
‘tariff war’ and operators just maximize their network
capacities. Consequently, tariff war remains to keep on AMH
going until network capacities are fully used (Nathan
dated 25
& Atmira). The recent growth shows intensive tariff
war among operators through the offering of various September
advantages such as free roaming, the same price of
2007
inter local and local call, pulse bonus, and others.
Compare to the previous condition, tariff war among
operators has made the decrease of cellular tariff as it
is described in Table 7. The tendency of the decrease
of cellular tariff indicate that the competition among
cellular operators is growing tightens.”
E. The Development of Concentration

(i) The size of concentration
205. Referring to concentration, KPPU seems to use two different The RFI,
measurements, Concentration Ratio (“CRn”) and Herfindahl- analysis,
Y
Hirschman Index (“HHI”). item 57
206. Therefore, these measurements are not choices due to the same The RFI,
variable used, market share. CRn is a total of market share Analysis
P
controlled by the ‘n’ top companies. HHI is a square of market item 58
share of all business actors in the industry. In this case, CRn and to59
HHI actually do not give the real choice of concentration
measurement. The main indication shown by CRn and HHI is
huge market shares.
O
207. Therefore, as it has been mentioned previously that a big market
share will not automatically show losses. It could be caused by the
C
characteristic of its industry. The losses arise only if there is
collusion among the actors. In this case, the only loss shown by
HHI is as follows:
“Oligopoly theory, as it is cournot equilibrium, is very The RFI,

consistent only if companies in the market are the same
Analysis ,
in size which also have the same market power. On the
contrary, Price-Leadership Model is very consistent to Paragraph
explain company behavior if there is a dominant
78 to 79
company in the market. Other companies are small and
have no power to fight against dominant company.
Both model is actually compatible to be used in the
extreme situation.
In cellular telecommunication industry, every company

must have agreement, especially concerning
interconnection agreement with other company
(competitor). It tends to create collusion in the field in
which competition shall occur such as price fixing
(tariff), marketing, and others.”
208. It must be noted that all judgments of KPPU are based on market
structure. Telkomsel owns the biggest market share and other
Y
companies must sign interconnection agreement. There is a
tendency of collusion. In fact, KPPU does not identify the
evidence collusive behavior.
P
209. Indosat does not have power to face the reality that Telkomsel
owns the biggest market share. It is a characteristic of an industry
that anytime a party enters an industry; it will do the best to
O
compete. The same goes for the interconnection agreement. KPPU
seem to argue that Indosat operates in an industry as it mentioned
above and all shareholders have to be responsible to the allegation
of infringement of Anti-monopoly Law by Telkomsel. It is
illogical.
C
(ii) The increase of concentration
210. KPPU has a notion in its analysis that market concentration have The RFI,
increased from 2002 to 2006. It is based on the observation of Analysis,
KPPU that there was an improvement of generated HHI and HHI item IV,
(“GHHI“). STT cannot prove the accuracy of HHI and GHHI item 104 to
measurement conducted by KPPU because the sources are not 121.
mentioned as “data processed“. There are no clues where does the
raw data come from. Although we refer to the numbers provided
by KPPU, it does not mean that we us agree to its accuracy.
The argument of KPPU in this matter is available in item 122:
211.
“The values of GHHI that tend to increase annually in The LPL,
Y
the cross ownership period give a conclusion that
Analysis,
cross-ownership have concentrated the structure of
cellular industry. It is unprofitable to the fair Chapter
competition. The concentration increases in the
IV, item
oligopoly structure”
122
P
212. KPPU states that there is equality in the crossed ownership period
and the increase of GHHI, the crossed ownership has caused the
increase of GHHI. It is illogical. In the same period, the
Government of Indonesia has also ownerships in both companies
O
and the representatives in Board of commissioners. Consequently,
it is illogical for KPPU (without any evidence as a basis) to suspect
Temasek crossed ownership as a cause of the increase of
competition and not the ownership of the Government of
Indonesia.
C
213. Because HHI is controlled by market share, then it is seen that the
only player increases its market share at that moment is Telkomsel:
The LPL,
Y
Analysis ,
Chapter
IV, item
105
P
214. The HHI is not related to Indosat. The increase of HHI is
controlled fully by the increase of Telkomsel market share. In fact,
the contributions of Indosat to HHI actually decrease from 888 in
O
2004 to 465 in 2006:
The LPL,
Analysis,
Chapter
C
IV, Item
109
215. If Indosat itself contribute nothing in the increasing of HHI, the

shareholders cannot be asked to get involved in the increasing of
HHI in by whatever reasons.
216. The most important thing is that KPPU has ignored the fixed
evidences that STT has played insignificant role in Indosat’s main
decisions. The agenda of Indosat is controlled more by board of
director and board of commissioner (See evidence from Mr.Roes
Aryawijaya as cited above). If the illogical conclusion of RFI is
trusted, the Government of Indonesia is the only party to be
Y
responsible.
(iii) The concentration rate is put in a perspective
P
217. KPPU states that concentrated industry must be placed in its
perspective. When it is compared to the regional countries, the HHI
O
is not so high:
C
The Report
of 1CA,
Paragraph
2.3 in the
First
Statement
of AMH
218. In paragraph 112 of LPL, it must be noted that according to the LPL,
diagram above, the HHI for Indonesia is 3,337 differs from the one Analysis,
suggested by KPPU, 4823.73. It is caused by other mistakes done item 112
KPPU in defining market because KPPU only considers 3 service
providers (see above) KPPU will have larger market share each of
them, and the HHI resulted from the square of market share will
express the mistake.
Y
F. The increasing of Market Power
219. In item 154 to 171, KPPU analyzes the increase of market power
P
improvement, as it is measured by the increase of EBITDA.
Again, without any elucidation on how the data “is proceeded”,
STT is harmed because STT cannot give opinion concerning the
data provided by KPPU.
O
220. The first problem is that Indosat is a diversified business in which
Telkomsel and Excelkomindo focus on cellular services. The
EBITDA number of Indosat expresses the EBITDA of all its
C
businesses namely junction fixed, cellular, wireless junction and
MIDI, while the numbers Telkomsel and Excelkomindo only
express cellular business. As far as this numbers are used as a
comparison, there will no accurate comparison. In this case,
statement of KPPU saying that EBITDA of cellular operators is
always more than 50% is not accurate entirely.
221. The arguments of KPPU can be summarized as follows,
”The high market power that is suspected caused by The RFI,

concentrated structure because cross-ownership can
Analysis,
be addressed by some indications. For example the
height of the rate of profit margin measured by part IV,
EBITDA. The high selling price compared to other
item 154
country, and the difference of the selling price and
expenditure cost.”
222. According to KPPU, the operators are getting high EBITDA, they
must t have high profit, and the high profit achievement is
compared to other countries.
Y
223. The mistake of the argument is the assumption of EBITDA as a
good measurement of profit rate. EBITDA is Earning Before
Interest, Tax, Depreciation, and Amortization. In the other hand,
profit refers to earnings after interest, tax, depreciation and
P
amortization. Finally, profit represents to what is obtained by
company after all expenses are reckoned, whereas EBITDA does
not reckon all expenses.
224. KPPU ignores in reckoning depreciation in stating profit rate.
O
Indonesia is a big country and many BTS shall be built to provide
sufficient coverage networks. In general, one BTS symbolizes a
very huge investment and the depreciation must be reckoned to
assess the profit rate of a company.
C
225. The important differentiation between EBITDA and profit has have
been explained in Follow up Investigation of KPPU to Hasnul
Suhaimi, the Managing director of Excelcommindo:
15. Question: What is your opinion about excessive profit Official

caused by the high tariff?
Report of
Answer: The cellular industry is growing fast. I am sure Hasnul
that the operator cash flow is still negative and the only
operator that has positive cash flow is Telkomsel due to Suhaimi
its USD 1.5 billion investment. The cash flow of XL is dated
negative because its investment, minus 3 trillions. In the
year of 2007 as an example, the Ebitda of XL is 3.3, 9 August
while our investment is 6.3 trillions. It is a plan of XL to 2007 in the
have long term investment. It is not sweet as it imagine, I
wonder why many operators enter cellular market in case
Indonesia. document
of KPPU
226. The expensive investment of BTS stations has caused negative

cash flow. The profit seems to be plenty if it is seen only from
EBITDA. Such a measurement is misleading because substantial
Y
operating cost invested in BTS is not reckoned and it will be
reckoned by every investor. Excelcomindo clearly states that its
investment ‘is not as good as imagined’, and it proves that the
request of KPPU to have business actor build BTS is not a wise
P
suggestion. Once again, KPPU has already ignored to attach the
evidences in its LPL.
227. It shall be noted as well that the real measurement on whether

excessive profit shall be based on business income. The business
O
income is recognized also as ‘super-normal profit’ or profit outside
what are usually expected from a business. In consequence, in
order to measure business income, KPPU has to determine first the
normal rate of return of mobile cell phone operator in Indonesia.
C
There is no measurement conducted for that.
228. KPPU states in paragraph 162 of RFI:-
”The high values of Ebitda in the cross-ownership period that The RFI,
is always above 50% indicating that business actors in
Analysis,
telecommunication service industries have big market power.
The market power owned are for creating monopolistic item 162
advantages that exceed double than the costs.”
229. Such a statement is groundless because (i) the EBITDA margin is

based on inconsistent input among business actors, (ii) there is no
reason to state that 50% of the EBITDA margin indicating
“sufficient” market force (iii) there is no measurement of
monopolistic profit (business income) as it is explained above.
230. In consequence, the conclusion of KPPU stating that there is
excessive profit in the mobile cell phone sector in Indonesia
groundless. At least, KPPU ignores to reckon two important
factors, depreciation and normal profit, the two factors reckoned
Y
prior to conclude that business income available in an industry.
G. The allegations of an abuse by “Telkomsel”
P
231. The item 172 to 189, KPPU discusses market force of Telkomsel
and its abuse allegation. The market force of Telkomsel is seen
from the height of EBITDA (the mistake of this analysis has been
explained above).
O
232. Initially, we will show that Mr. Roes Aryawijaya in its meeting The
with KPPU on 19 July 2007 state that the performance of Indosat is Meeting
getting better after the investment of STT in Indosat. Therefore, Report of
Indosat cannot be sacrificed for Telkomsel. the
Ministry of
C
BUMN on
page 4 of
the case
document
of KPPU
47. Question: Which company performance is better, before or

after the purchasing STT in Indosat?
Answer: For Ebitda, it was 53% before and 57 % after
acquisition. The increase of Ebitda margin is supported
also by the technological development of MIDI.
233. Another serious allegation is that Telkomsel has used its market The RFI,
power for “constraining” its competitors by misusing its bargaining Analysis,
position on interconnection fee. part IV,
item 185 to
189
234. It has nothing to do with Indosat. It has been expressed clearly in
Y
the Follow up Investigation of KPPU to Mr.Lioe Phan Koen, the
General Manager of ICR PT Hutchison CP Telecommunications
(“Hutchison”):
P
1. Question: According to the information we have, initially
PT Hutchison CP Telecommunications find The
interconnection resistance? Official
Answer: Yes, but it has already finished by the mediation
of BRTI. Report of
2. Question: Would you tell me more detail? Follow up
Answer: When we would have an interconnection, we had
Investigatio
O
to sign an agreement that must be approved by BRTI. The
rules on interconnection should be done by fulfilling n to Lioe
certain requirements such as 48 ERL for its traffic.
3. Question: Is the requirement made by incumbent company? Phan Koen
Answer: Yes, the requirement is made in its DPI by dated 21
incumbent company.
4. Question: As long as the requirement is wholly conducted, June 2007
there will be no new entry operating?
C
that is
Answer: Yes.
5. Question: So, is it impossible for new business actor or available in
companies to pass the requirement? the case
Answer: Yes.
6. Question: Do you think that the requirement constraint new document
business actors? of KPPU
Answer: Yes.
7. Question: Does the requirement have a technical
justification?
Answer: There is a technical quantification but actually
there is no single business actor is able to fulfill it. As long
as I know, there is no such a requirement in Ministerial
Decree.
8. Question: So, if the requirement cannot be fulfilled the
interconnection is not approved?
Answer: It does not mean that it is unapproved but delayed
until the business actor fulfills the requirement.
9. Question: Do all incumbent operators require such a
requirement?
Answer: Such a requirement is asked by PT Telekomunikasi
Selular and in my opinion XL also leads to the same policy
as it is done by PT Telecommunications Cellular.
20. Question: How about Indosat?
Answer: Indosat does not require such requirement.
Y
235. The involvement of Indosat has been clear denied by Hutchinson in
an interview with KPPU. Therefore, KPPU does not only ignore
such important evidence in the RFI but also KPPU keeps on
P
defending its argument that the abuse conducted by Telkomsel
should be controlled by Temasek through its crossed ownership.
H. Inaccuracy of consumer loss quantification
O
236. In paragraph 205 to 213 of RFI, KPPU states its argument that
Temasek crossed ownership has caused consumer loss. The
quantification conducted by KPPU is doubtful.
C
237. As it is explained in the part that discussing excessive profit, KPPU
shall conduct correct development from the curve of margin costs
of each supplier, and it covers the measurement of depreciation and
normal profit.
238. Further, KPPU has to understand the excessive profit resulted from
the allegation of Temasek’s crossed ownership. KPPU need to
establish a clear causality between crossed ownership of Temasek
and consumer loss. It is not conducted by KPPU. It is difficult to
be done because at least, there must be two factors (based on RFI)
contribute to the consumer loss (with the assumption that there is
consumer loss):-----------
(a) The unilateral anti-competition of Telkomsel; and
(b) The industrial structure that tends to be monopolistic. (It is

the elucidation of Dr. Adiningsih on the current condition).
239. It is reflected from RFI that KPPU uses tariff rate of other
countries as references in determining consumer loss in Indonesia.
In this case, KPPU relies much on the report of LPEM.
Y
240. Therefore, the use of mobile cellular phone structure in other
countries as a comparison is only possible under the condition that
the supply and demands can be compared. In facts, it is not. In a
P
small country, for example, the lower price is possible by reducing
marginal cost for not investing in BTS.
241. In this case, it must be noted that Dr. Chatib Basri, the Head of
LPEM FE UI qualifies the Report of LPEM only in the following
O
things:
Commenting to the price rate in Indonesia as a An article in

second highest in Asia, he said that international Jakarta Post
comparison is hard to perform due to the different
C
cost structure of each country. dated
24 September
The Head of LPEM-UI, Chatib Basri, agrees that it
is hard to compare due to its complexities. 2007
“I know other research concluding that comparing to

other countries in South Asia, our price is higher.
Nevertheless, the problem is not as simple as that
because we have to quantify its cost structure and
economic scale," he said.
Chatib tells that the find no price fixing conducted

by industrial actors although it is reported by
media.
242. In this case, the Report of LPEM as a reference of KPPU to

quantify consumer loss is not reliable. Therefore, as it is
predicted, the, RFI relies on the Report of LPEM without any deep
observation to include it as an evidence.
VIII. THE INFRINGEMENT TO THE LAW
Y
243. STT also finds some important evidences in the case document of
KPPU concerning the termination of report by FSP BUMN in
which it is not discussed or mentioned in the report of KPPU. The
termination of report by FSP BUMN is initiated by Arief Poyuono,
the chairperson of FSP BUMN. The letter to KPPU is about the
P
worries, truth and integrity of the whole investigation of the case.
A. The investigation of KPPU is stained
O
244. The most worrying thing is the statement of Arief Poyuono in the
meeting with Suharto, an Altimo’s representative, describing that
the investigation process of KPPU is influenced by Altimo:
“1. That in the beginning of April 2007, the Chief of The letter
C
United FSP BUMN with his Attorney-in-fact met
of FSP
Suharto (Regional Director Strategic & Business
Development of Altimo Central and South East Asia) at BUMN to
the office of Suharto in Wisma GKBI at Jalan
KPPU date
Sudirman Jakarta. There were some thing come out
from the meeting: 18 July
-That Suharto asked the Chairperson of United FSP 2007

BUMN to cancel press conference plan on the
withdrawal of United FSP BUMN’s report to KPPU.
-At that moment, Suharto called someone, Muhamed

Iqbal (the Chairperson of KPPU) and ask the
forming of Preliminary investigation team. Suharto
prefers Nawir Messi to Benny Pasaribu as the
Chairperson of Preliminary Investigation Team.”
245. The meeting is also reflected in the media report and read by STT
stating that the investigation of KPPU is influenced by Altimo.
246. The most surprising is that the election of Nawir Messi is
influenced by Altimo. Therefore, there is no explanation
concerning the election of Nawir Messi as a chairperson of
Preliminary Investigation of KPPU. According to Altimo, Dr. Ir.
Y
Benny Pasaribu as a member of KPPU, cannot be influence. In 3
October 2007, Benny Pasaribu is the only member that has
different opinion with the Council Commission when RFI released.
P
247. It is strange that RFI does not discuss this evidence questioning the
credibility and integrity of the investigation
B. KPPU keeps on continuing the investigation although

the report has been withdrawn
O
248. It must be noted also that in the different part of the letter, the
affirmation of STT is stated that KPPU continues its investigation
long after the report is withdrawn.
C
249. FSP BUMN submitted the report on 18 October 2006 and the
report is accompanied by two additional reports on 17 November
2006 and 22 December 2006.
250. According to Anti-monopoly law, in 30 days since the acceptance

of the report, KPPU is obliged to specify whether the investigation
must be conducted or not. The period has to end on 30 November
2006.
251. According to Article 43(3) of the regulation of KPPU, the step of

Follow up investigation must be finished in 60 days since the
acceptance of the report and it is possible to be extended for the 30
days to come.
252. However, as it is known that RFI is issued on 3 October 2007, a
year after the early report.
C. KPPU has constrained the defense of STT
Y
(i) STT is not given a chance in the Preliminary Investigation
253. KPPU also has constrained the efforts of STT to advocate during
P
investigation process. It was started when STT was summoned for
the first time for a session in the Follow-up Investigation on June
2007, without any Preliminary investigation at all previously.
254. Based on Article 1, Item 14 of the KPPU regulation:
O
“Preliminary investigation is a couple of activity that
conducted by Preliminary investigation team to report
the suspected infringement and to conclude whether
Follow up Investigation needs to be performed or not.”
C
255. Therefore, based on the Regulation of KPPU, the Preliminary
Investigation shall be performed in order to decide whether Follow
up Investigation shall conducted or not for our client. Our clients is
not given a chance to get involved in the Preliminary Investigation
so that their important rights has been neglected. The rights to
mentioned are:
a) To have the result of Preliminary investigation (Article 34

of KPPU Regulation)
b) To inform the mistake and to be given opportunity to

changes its behavior before stipulating Follow up
Investigation (Article 29 paragraph (2) of the Regulation of
KPPU)
256. The negligence of the rights of our client has resulted to the
important implication of STT. Firstly, STT has no information
concerning the allegation to STT prior to be a party in the Follow
up Investigation. Secondly, it means that STT has no opportunity
Y
to discuss special deed KPPU wants from STT. Thirdly, STT shall
be displayed evidences that are owned by KPPU in order to make
STT write appropriate defenses.
P
(ii) STT is not given a suitable access to observe the case
document of KPPU
257. The case document of KPPU consists of many materials needed by

STT to be learnt in order to be able to advocate correctly. It is
O
important because the RFI intentionally eliminates or not discuss
all relevant evidences that there is no infringement to Article 27.
258. In this case, STT objects strongly to the procedure used by KPPU
to in refusing to the material in the case document of KPPU. It has
C
been submitted to KPPU on 27 September 2007.
259. It can be seen clearly in Article 65 paragraph (2) of KPPU

regulation that our client should be given a permit to scrutinize the
evidences from KPPU in each step of investigation:
“In any step of investigation and the session of

Council Commission, the Reported Party is entitled to:
e. scrutinize evidences used as the Investigation

Summary.”
260. On the contrary, KPPU refuses the request of STT on 20 July 2007
to give an access to case document of KPPU by stating that STT is
only permitted to see case document of KPPU in the step of “Final
Investigation”. Even if the opinion of KPPU is correct (in which
we cannot accept it), KPPU ought to consider that there are many
documents that shall be learnt, therefore KPPU must give enough
time to STT.
Y
261. The situation is worsened by the fact that KPPU has summarized
its Follow up Investigation on 27 September 2007 and KPPU
delivers it to STT on 3 October 2007. KPPU finally permits STT to
P
study the evidences in case document of KPPU on 5 October 2007
for only 2 hours. Further, upon our request KPPU then permits
STT to check its document for 2 following day.
262. The situations in which STT is permitted to study the case
O
document of KPPU shows that KPPU is not serious in giving
opportunity to STT for advocating itself.
(a) Firstly, the evidences are huge in number. The evidences
C
consist of 4 document boxes and 17 document folders.
Most of the documents are written in Indonesian. All
Reported Parties (unless Telkomsel) are foreigners,
therefore the documents shall be translated and give it to
clients before giving instructions concerning to the case.
(b) Secondly, the access to the case document of KPPU is

passed on the dates on the eve of Eid al-Fitr that make it
impossible to find translators.
(c) Thirdly, most of the evidences are related to economy and

law. The expert consultants on anti-monopoly and economy
are needed in order to have STT comprehend KPPU’s case
document.
(d) Fourthly, STT asks an access to certain documents

mentioned by KPPU in its footnotes of the report. The
documents are articles from journal (such as Tinjauan
terhadap Holding Company, Trust, Cartel dan Concern by
Hashim Purba) and the passages of other textbook (for
example UK Merger Control: Law and Practice). However,
Y
KPPU refuses to give access to STT by saying that there
are ‘public document’. Although STT can find documents
is if there are much times, STT does not see the reason of
KPPU to refuse a direct access of STT, unless to lessen the
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available time of prepare its defense.
(e) Finally, STT cannot translate the whole documents because

of the limitation of time, and KPPU refuses to give
opportunity to STT to defense further after 2 November
O
2007. There is no reason for KPPU to confine the Reported
Party to check the case document.
(iii) KPPU has collided with the obligation of keeping the

confidentiality.
C
263. STT also very worries to the fact that some members of KPPU,
including its Chairperson have informed journalists that the
Reported parties are responsible prior to hearing to the defense of
the Reported Parties. It violates KPPU’s Ethical Conduct and the
deniable to the justice of the Reported parties.
264. The neutrality of KPPU is questioned. The media have reported Refer to
sue to the Chairperson of KPPU. Indonesian Development Press
Monitoring Group alleges that the Chairperson of KPPU is Reports in
influenced by Altimo to investigate Temasek. The deeds of the the First
Chairperson has generated problem on the neutrality of KPPU. In Statement
a statement to The Jakarta Post on 21 March 2007, the Chairperson of STT
states openly that he disagrees with the decision of the Government
An article
of Indonesia to divest Indosat because it is one of the important Hukumonli
state’s assets. The statement of Chairperson, along with bias ne.com
allegations to Chairperson, clearly expresses the problem of date 28
KPPU’s neutrality. The complaint toward the neutrality of KPPU Augusts
keeps on going based on mass media report on 29 August 2007 to 2007 in the
Y
the activity and influence of Altimo. First
Statement
of STT
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An Article
in Jakarta
post date
29 August
2007Article
O
the Jakarta
Post in the
First
Statement
of STT
C
265. Since the investigation is started, the open statement of KPPU is
public consumption, and all express its opponent to STT and other
Reported Parties.
(a) On 6 February 2007, in Investor Daily dated 6 An article

February 2007, the Chairperson of KPPU stated: date 6
February
“Today, there are many indication of unfair
competition in telecommunications sector, 2007 in
crossed ownership as an example. It is proved Investor
that telephone tariff in Indonesia at this time is
more expensive than those of other countries.” Daily
(b) On 24 May 2007, the Chairperson of KPPU told An article

journalist that KPPU had found “the lack of date 24
competition between Telkomsel and Indosat”. All May 2007
the statements were made before Temasek is from
contacted for being interviewed in the investigation. Agency
France-
(c) On May 2007, Nawir Messi, the Vice Chairperson
Press in the
of KPPU told Reuters that KPPU has “strong
First
Y
suspicions to bring this case to higher
Statement
investigation.”
of
An article
P
date 7 June
2007 in
Business
times in the
First
O
Statement
of
266. The statements to journalist oppose Article 5 (4) of KPPU’s Decree Code of
No. 8/KPPU/Piece/XI/2000 on ethical conducts and working Conduct of
C
mechanism KPPU: KPPU
“The Commission Member is prohibited to give

information to the public because it is able to influence
the decision of Commission over the case that is being
handled.”
267. The statements of KPPU to journalist is premature and able

influence KPPU’s neutrality that is in charge to decide a case. Even
a head of District Court in Indonesian has never stated opinions on
the substances of ongoing legal process.
268. In fact, even Dr. Ir.Benny Pasaribu, a team member Follow up

investigation has questioned a legitimization of the legal process
and hesitated RFI:
(a) In an article of Seputar Indonesia on 24 October An article
2007, a former Chairperson of KPPU, Sutrisno date 24
Iwantono states that in this case, “monopoly is not October
proved because the share ownership is less 50%.” 2007 from
Y
He also suggested that KPPU has implemented Seputar
inappropriate rules of law. Jakarta
(b) An article in AntaraNews on 25 October 2007, a

member of Commission VI of House of
P
An article
Representative (DPR), Hasto Kristianto reacted to
date 25
the “strong controversy related to the decision of
October
KPPU” and the process of KPPU is not
2007 from
“transparent”.
Antara
O
(c) In article AntaraNews on 25 October 2007, a News
member of Follow up investigation team, Dr. Ir.
Benny Pasaribu states that the substance of RFI is
“irrelevant and not rely on the objective idea.” He
also comments that the procedure of KPPU “is not
C
favorable” and questions the premature statements
of KPPU to media.
D. KPPU does not investigate Evidences
269. We are worrying to the objectivity of KPPU investigation from the

beginning. We are considering the reports in some media referring
to RFI that make us hesitate to the objectivity of the team.
(i) KPPU is negligent to scrutinize the study conducted by

LPEM
270. One of the studies cited by KPPU is a study conducted by LPEM.
KPPU relies on the measurement of LPEM concerning consumer
loss.
Y
271. As it is mentioned in Part VII above that the study of LPEM is
used by KPPU to determine consumer loss. Dr. Chatib Basri also
indicates that the study does not support an opinion that price
uniformity among operators is an indication of anti-competition
P
behavior because such behavior is consistent with the condition of
competition. He also criticize the way KPPU omitted some
significant substances in summarizing the report of LPEM:
“In his opinion: currently the sentence used from executive An Article
O
summary is “an indication of tariff uniformity is an early in tempo
step to identify price fixing". But, there is another
sentence following it, “nevertheless, it does not identify dated 20
price fixing". The last sentence is omitted by KPPU.” September
2007
C
272. STT is very surprised to know that KPPU tries to make a statement
describing wrongly the report of expert in order to strengthen the
allegation to STT by eliminating some part of the content. It
indicates that the investigation process is not neutral but preparing
a conclusion previously.
(ii) The criticism of Dr. Ir. Benny Pasaribu to the Follow up

Investigation
273. The severe criticism from Dr. Ir. Benny Pasaribu is on the
appropriate investigation. There is an obligation among members
for not discussing the investigation openly but the Chairperson of
KPPU breaks it by informing to mass media:-
Article
“He also questions the attitude of the Chairperson of
AntaraNew
KPPU for frequently exposed it to media, as if there
s dated 25
has been guilty parties.
October
Benny said that the result of the meeting agrees for not
Y
2007
exposing publicly before there is a decision.
274. Intentionally, KPPU seems to backdates its report to make it as if

fulfill the regulation of KPPU although the fact is the opposite:
P
“He said, in other hand conclusion making has been Article
done beyond permitted boundary. Nevertheless, after AntaraNew
the conclusion is agreed, the date of the conclusion is
backdated. “Judicially, it is forbidden. The same goes for s dated 25
the forming of Commission Council, in which it is also October
O
backdated.”
2007
275. If it is true, such dishonesty is worried. The dissenting opinion of

Dr. Ir. Benny Pasaribu is not backdated. It was 29 September 2007
or the deadline.
C
276. Finally, it is seen that the members of Follow up Investigation has
no enough time to observe the evidences:
“Benny said that the discussion of RFI is limited. Due to Article

AntaraNew
the limitation of time, the members of RFI only revise
s dated 25
the draft of the conclusion. “In my opinion, the
substance is irrelevant and no objective rationale. It is October
better for me to have dissenting opinion than to revise and 2007
sign it.”
277. The comment of Dr. Ir. Benny Pasaribu affirms many worries of
STT such as a suspicion to its members, especially Chairperson of
KPPU for not conducting properly. The team of Follow up
Investigation does not consider objectively all evidences submitted
to them during Follow up investigation.
E. KPPU has treated STT discriminatively
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278. Finally, it must be noted that KPPU treats STT discriminately. It is
seen in the way KPPU interpret the phrase “majority” differ from
the its allegations to Sing Tel in one side and STT on the other.
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279. Referring to SingTel indirect ownership in Telkomsel, 35%, LPL,
KPPU has an argument that SingTel conducts ‘negative Paragraph
operation’ for enabling them to restrain certain decisions that 46
require special majority approval although their shares is less than
50%.
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280. Nevertheless, if the testing of ‘negative operation’ is misused to
Indosat, it is clearly then that through ” Dwiwarna Share” the
Government of Indonesia also is able to “restrain” important
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decisions requiring majority approval. If we apply “negative
operation” parameter, the Government of Indonesia ought to
become majority shareholder of Indosat.
281. Concerning Indosat, KPPU thinks that Temasek has ‘positive

control’ because Temasek has 41.94% of shares while other
shareholders that purchase the share in public stock exchange have
no power to act collectively.
282. Nevertheless, if “positive control” parameter applied in the case of

Telkomsel, Telkom should be the majority shareholder in
Telkomsel with its 65% of shares.
283. The clearest indication of the discriminative behavior is in the

implementation of different benchmark of justice to different
parties. KPPU has been wrongly applies law just for getting a
conclusion that “Temasek” is a majority shareholder in Indosat and
Telkomsel. But, if KPPU tests it correctly, it will come up with the
conclusion that the Government of Indonesia and Telkom are the
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majority shareholders of Indosat and Telkomsel. In fact, there is
only Temasek that is being investigated and not the Government of
Indonesia or Telkomsel. It is a clear indication of discriminative
treatment.
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IX. CONCLUSION
284. The biggest problem in RFI of KPPU is:
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(a) KPPU consistently and intentionally does not cite and
consider all evidences that have been already available for
this case; there are evidences oppose against the opinion of
KPPU concerning the investigation of STT and other
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Reported Parties
(b) KPPU does not intentionally cite the evidence or facts

correctly
(c) KPPU does not implement applicable and proper law.
285. The unconsidered evidences are very important and the brief
summary on our defense statement, based on the evidences shall be
as follows:
(a) There is no Temasek Business Group. (Part V)
(b) The substances of Article 27 are not fulfilled. KPPU does

not apply Article 27 properly. (Part VI)
(c) Minister of BUMN has consulted KPPU on 23 January
2003 on the early divestment and other things referring to
the implementation of Article 27. At this time, KPPU does
not have right to question again the divestment. (Part VI)
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(d) The business and economic Analysis of KPPU is incorrect..
(Part VII)
(e) There is an evidence of mistakes and partisanship

conducted by the Follow up Investigation Team and
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Commission Council, including the criticism of Dr. Ir.
Benny Pasaribu, a member of KPPU. (Part VIII)
286. This defense statement depicts STT implemented defense

considering that KPPU has restrain STT to advocate properly such
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as the delay of issuing RFI for more than one week, the rejection of
accesses to case document of KPPU up to the eve of Eid al-Fitr
(concerning the difficulties of finding translator at that time) and
the rejection of mentioning the information sources in its report
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clearly.
287. STT asks all investigation to be terminated. There is no evidence in

RFI that show the fault of STT. The investigation processes is an
abuse of law process.
288. If the investigation of STT is not terminated, STT is entitled to

submit further defense statement if needed, because STT cannot
observed thoroughly all documents in the case document of KPPU
that have not entirely translated yet.
289. This defense Statement is relied on Indonesian law and not be

based on international law or related international agreement. STT
maintains all its rights under international law or any valid
international agreement.
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Commission has accepted responses of AMH, ICL, ICPL on 2 November 2007 that in
essence state the following matters: -------------------------------------------------------------
---------------------------------
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References
I. INTRODUCTION
1. We are acting for and on behalf of Asia Mobile Holdings Pte., RFI
Ltd (“AMHPL”), Indonesia Communications Limited (“ICL”)
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and Indonesia Communications Pte., Ltd (“ICPL”) to submit
answer to the accusations stated in Follow up Investigation
Report (“RFI ”) of the Commission for the Supervision of
Business Competition (“KPPU”) that has already been accepted
on 3 October 2007. For writing fluency, AMHPL, ICL and ICPL
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henceforth jointly will be conceived as “AMH”.
2. This defense statement submitted (“The Second Statement of

AMH”) is addition of, and must be concurrently read with
defense statement that has been beforehand submitted by AMH
to KPPU on 10 September 2007 (“The First Statement of
AMH”), and the content of both defense statements used by STT
as part of the whole defenses to the accusations of KPPU. All
references used in the First Statement of AMH will also be into
effect in the Second Statement of AMH, unless it expressed on
the contrary.
3. AMHPL is a joint venture of Qatar Telecom (Qtel) Q.S.C.

(“Qatar Telecom”) that owns 25% of shares, and STT
Communications Ltd (“STTC”) that, through Asia Mobile
Holding Company Pte Ltd (“AMHC”), owns the rest for about
75%. ICL and ICPL are subsidiaries of AMHPL
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II. THE BACKGROUND OF CASE INVESTIGATION
PROCEDURES
4. On 18 October 2006 the Federation of State-owned Enterprise A letter

Worker Union (“FSP BUMN”) submitted a report to KPPU that from FSP
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suspects a monopolistic practice conducted by Temasek Holdings BUMN to
(Private) Limited (“Temasek”). KPPU,
dated 17
July 2007, is
available in
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the case
document of
KPPU
5. The report was then withdrawn by FSP BUMN on 2 April 2007 A letter
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by reason of as it elaborated in the letter sent to KPPU on 18 July from FSP
2007. BUMN to
KPPU,
dated 17
July 2007, is
available in
the case
document of
KPPU
6. AMH knows that KPPU summons Temasek to attend
preliminary investigation referring to the suspected infringement
of the Law No. 5/1999 on the Prohibition of Monopolistic
Practices and Unfair Competition (“the Law of Anti-trust”).
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The Report of KPPU dated 26 April 2007 was also exhibited.
7. Further, KPPU issued Preliminary Investigation Report (“LPP”),
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dated 23 May 2007. The following parties are called the
Reported, apart from Temasek:
(i) Singapore Technologies Telemedia Pte Ltd (“STT”)
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(ii) STTC
(iii) AMHC
(iv) AMHPL
(v) ICL
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(vi) ICPL
(vii) Singapore Telecommunications Pte Ltd (“SingTel”);
(viii) Singapore Telecom Mobile Pte Ltd (“Singtel Mobile”);

and
(ix) PT Telekomunikasi Selular (“Telkomsel”).
8. Nevertheless, LPP was not delivered to AMH on that date. On 5

June 2007, AMH accepted peremptory writ to meet Investigation
team of KPPU. It is for the first time AMH accepted a
notification from KPPU that AMH was suspected to infringe the
Law of Anti-trust. Afterwards, around 7 or 8 June 2007, the LPP
was delivered to AMH.
9. On 25 and 11 July 2007, Mr. Guy Norman and Mr. Anupam
Garg met KPPU. Mr. Guy Norman represented Qatar Telecom
while Mr. Anupam Garg is a representative of AMH. Each of
them submitted a brief statement is written to KPPU.
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10. On 20 July 2007, the attorney-in-fact of AMH submitted a letter
to KPPU to be permitted to check through the KPPU case
document in the end of Preliminary Investigation phase. The
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request was rejected by KPPU due to it is permitted only in the
end of Follow-up Investigation.
11. On 14 August 2007, the attorney-in-fact of AMH submitted a

letter to KPPU with the objection that there is an infringement to
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Article 39 of KPPU Regulation No.1 that obliges KPPU starts its
investigation within 30 days as from the acceptance of the
objection.
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12. On 14 September 2007, AMH submitted a written statement and
evidence to KPPU concerning the refusal of all suspicions. AMH
also submitted an independent expert statement prepared by
CASE Associates entitle “A Competition in the Cellular
Telecommunication Market in Indonesia”, as well as a letter from
Indosat board of director (“BOD”) to AMH on the accusation in
LPP and independent expert statement, Dr. Sri Adiningsih,
entitled “Persaingan dalam Industri Telepon Selular di Indonesia
(A Competition in the industry of Cellular phone in Indonesia)”.
13. Follow-up Investigation has to be completed, and RFI (“RFI ”)

has to be issued on 27 September 2007. On 27 September 2007,
the attorney-in-fact of AMH submitted a letter to KPPU ask a
permission to check through the case document of KPPU.
14. On 3 October 2007 KPPU delivered RFI . RFI decided that all
Reported Parties are part of “Temasek Business Group”
(“Temasek Business Group”) that through PT Indosat Tbk
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(“Indosat”) and Telkomsel, has cooperated to lessen competition
in the pertinent market by pressing the performance of Indosat in
maintaining high tariff. RFI did not consider at all any response
and evidences submitted by AMH during the phase of Follow-up
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Investigation.
15. On 5 October 2007, an attorney-in-fact AMH checked through

the bundle of case document of KPPU.
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III. THE SUBMISSION OF ANSWER/EVIDENCE BY AMH
DURING THE PHASE OF FOLLOW UP
INVESTIGATION
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A. The Summary of KPPU’s Accusations after the phase of
16. The followings are KPPU’s accusations after the phase of

Preliminary Investigation completed:
“1. “Temasek Holding (Private) Limited,

through Singapore Telecomunication Ltd,
Singapore Technologies Telemedia Pte. Ltd.,
STT Communication Ltd., Singapore Telecom
Mobile Pte. Ltd., and Indonesia
Communication Limited own shares of 35%
in Telkomsel and 40.77% in PT. Indosat, Plc.
2. Telkomsel and PT. Indosat, Plc., jointly

control 89% of market shares or at least more
than 50% of market shares in market of
cellular telecommunication service all over
Indonesia.
3. Based on economic data, it is seen that the

performance of PT. Indosat, Plc., is not good
as other operators’ performances.
4. The crossed ownership of Temasek Business
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Group in Telkomsel and PT. Indosat, Plc.,
has caused lack of competition among
Telkomsel, that owns the biggest market
shares and PT. Indosat, Plc., as the second
biggest shares in market of cellular
telecommunication service all over
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Indonesia.”
B. The Summary of Answers/Evidences of AMH in the phase

of Preliminary Investigation
17. The first accusation is based on the assumption that AMH is part The First
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of Temasek Business Group predicted to have 35% of Statement of
Telkomsel’s shares and 40.77% of Indosat’s shares. It is AMH
incorrect to treat AMH as part of Temasek Business Group, even
if it exists AMH is not under the common management of
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Temasek as well as a concentration of economic activity
controlled by Temasek. The companies of AMHPL’s investees,
Indosat and StarHub Ltd (“StarHub”), the two
telecommunication operators in Singapore, compete tightly with
other competitors in Indonesia and Singapore, Telkomsel and
SingTel (the leading telecommunication operator in Singapore),
as well as other competitors.
18. The second accusation cannot be proven because Indosat does

not have more than 50% of market shares in cellular The First
telecommunication market. Indosat does not jointly control 89% Statement of
of market shares with Telkomsel because AMH does not have AMH
portion in the alleged Temasek Business Group, only if the entity
exists. Further , KPPU provides no clear definition of the market
in which KPPU thinks uncompetitive.
19. The third accusation is groundless as the performance of Indosat The First
is getting better. The investment of AMH in Indonesia is only in Statement of
Indosat, therefore its interests are to boost the performance and AMH
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value of Indosat.
20. The fourth accusation is groundless as KKPU does not

accomplish the stipulation in Article 27.
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The First
Statement of
AMH
(i) KPPU cannot prove that AMH is a “majority

shareholder” in Indosat. ICL and ICPL jointly hold only
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41% of Indosat’s shares. Therefore, AMH does not have
more than 50% of shares in Indosat.
(ii) KPPU is incorrect in concluding that Indosat “controls

more than 50% of market shares.”
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(iii) In whatever case, the majority ownership of Indosat’s
shares alone does not cause the infringement of Anti-
trust Law, due to the findings required to show that there
is an abuse od Indosat’s dominant position and causal
relationship between the ownership of market shares by
Indosat with the abuse of dominant position. KPPU
cannot prove that there is an abuse of dominant position.
(iv) KPPU has only an authority to ‘business actor’ and its

relationship with the infringement investigation of Article
27 of Anti-trust Law and none of corporate body in AMH
is business actor under Anti-trust Law. A business actor
shall be founded or domiciled in the Republic of
Indonesia, and AMH does not fulfill even one of the
elements. AMH also does not perform economic
activities in Indonesia. AMH is only a shareholder and it
does not make operational decision in Indosat.
21. In whatever case, KPPU failed to inform and to involve AMH in
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the preliminary investigation as well as not to give chance to
AMH to prepare a defense at all in the phase of a session. Under
Article 65 (2) of KPPU Regulation No.1/2006, the failure is
absolutely a serious infringement to the rights of Reported Parties
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to receive an information concerning its status and to prepare a
defense. KPPU is obliged to determine the need or not follow up
investigation performed within 30 days as from the acceptance of
the report. In this case, KPPU start its investigation for months
prior to the acceptance of the firs report and even kept on
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performing investigation although the report had been
withdrawn.
22. The independent expert’s statement prepared by CASE
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Associates consists of a detailed economic analysis and the study
on the accusation in LPP. It finally concluded the followings:
(a) KPPU gives no direct or indirect evidence that lack of

competition existed due to the interest of Temasek
ownership and/or its subsidiaries in Telkomsel and
Indosat.
(b) KPPU gives no direct or indirect evidence that the

different performance of Indosat toward Telkomsel is
relatively caused, if any, by the interest of Temasek
ownership and/or its subsidiaries in Telkomsel and
Indosat.
23. The statement of Indosat board of director Indosat which in
major appointed by the Government of Indonesia is also difficult
to be understood, that AMH does not involve in Indosat
management and that the severe competition between Indosat and
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Telkomsel is present.
IV. THE ACCUSATIONS IN THE REPORT OF FOLLOW UP

INVESTIGATION
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24. In RFI , accusations of KPPU change in sudden:
1.”Temasek Holdings Pte. Ltd (hereinafter referred to as

Temasek) owns a majority share in two companies that
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conducting business activity in the same field and in
common pertinent market that make it infringes Article
27(a) of the Law No.5/1999.”
2. “PT. Telekomunikasi Selular (hereinafter referred to as

Telkomsel) maintains its high cellular tariff that make it
infringes Article 17 (1) of the Law No.5/1999.”
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3. “Telkomsel abuses its dominant position to limit
market and technology development that make it
infringes Article 25 (1.b) of the Law No.5/1999.”
25. Although there is no accusation addressed to AMH in particular,

the accusations seem to state that:
(f) The first to the ninth Reported Party are “Temasek

Business Group” as a “single economic entity”.
(g) KPPU has a jurisdiction toward STT because Temasek

Business Group performs its business in Indonesia
through Indosat and Telkomsel as its control.
(h) Temasek Business Group has “majority share” in Indosat

and Telkomsel with its control as a shareholder.
(i) Temasek Business Group controls more than 50% of
market shares in the pertinent product market, a cellular
market.
(j) The cross ownership of Temasek Business Group has
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decreased competition in the market which then causes
consumer loss.
26. In its defense statement, AMH will conclude expressly that:
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a) There is no corporate body known as Temasek Business
Group legally or economically.
b) AMHPL, ICL and ICPL are not “business actors” and KPPU
does not have jurisdiction on them;
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c) In whatever case, AMH does not have “majority share” in
Indosat.
d) Fundamentally, the conclusion of KPPU is incorrect because
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KPPU has stated wrongly that pertinent product market is
not competitive.
e) AMH does not control more than 50% of relevant product

market.
f) There is no evidence indicating that crossed ownership

causes the decrease of competition between Indosat and
Telkomsel.
g) RFI is illogical to come up with its conclusion, due to the

ignorance in a whole the ownership of the Government of
Indonesia in Telkomsel, and its level of control to both
Telkomsel and Indosat.
h) KPPU does not have an authority to make accusations as it

described in RFI because it has been considered previously
by DPR and KPPU. It also comes up with a conclusion that
there is no infringement to the Article 27 of Anti-trust Law.
i) RFI has intentionally disregarded plenty of evidences in the
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case document of KPPU that actually it is opposed against its
conclusion. In fact, RFI is a deviation of law and prevailing
evidence.
j) KPPU has made AMH a subject of unfair treatment,
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infringed legal process and the principles of justice under the
Indonesian laws.
V. THERE IS NO TEMASEK BUSINESS GROUP
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27. AMH will show in the defense statement that KPPU cannot
prove the elements of Article 27. Nevertheless, before discussing
it AMH will show beforehand that all basic cases of KPPU
concerning the existence of a single economic entity known as
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Temasek Business Group is simply fictions.
A. KPPU is careless in considering legal condition to define

“Business Group"
28. The Statutes of each company, AMH and Indosat in one side, and RFI , Facts,
Sing Tel and Telkomsel in other side, arranges shareholders’ Paragraph
rights to nominate director in board of directors. As a 77 to 84
consequence, KPPU concludes in item 77 to 84 in RFI that
Temasek has an ‘authority” to its subsidiaries. According to
KPPU, there are some directors who also take hold as a member
of board of directors in more than one subsidiary. KPPU has
diverted an evidence to be able to reach a conclusion as what it
wants by mentioning that there is a Business Group known as.
29. There is no law to be infringed or no impropriety if shareholders
with their significant ownership deserves to have right to
nominate directors in its subsidiaries.
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30. Paragraph 5(c)(6) of the Analysis Article in RFI cited Hansen’s
opinion in coming to the conclusion of the existence of Business
Group Temasek, as it mentioned below:
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“Some self-supporting corporation that join into one
self-supporting economic unity. The self-supporting
corporation is under one common head that shows
outside as a holding company that makes similar
plans for its subsidiaries.”
31. Yet, RFI really disregards First Statement of AMH that encloses The First
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the citation of Knud Hansen on the requirements to be fulfilled Statement of
by a group of entity, known later as Business Group. The AMH,
requirements are: paragraph
27
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(d) The so-called subsidiary, it must stay in an integrated
management of holding company, arranges an integrated
plan for all its subsidiaries;
(e) The plans of holding company to its subsidiaries must

cover main economic activity of the so-called
subsidiaries; and
(f) The so-called subsidiary is prohibited to disobey the rules

arranged by the management of holding company.
32. In RFI , the only clue of KPPU to support its opinion on

Temasek Business Group is the capacity of Temasek as a
shareholder of AMH and SingTel. KPPU does not have evidence
to prove that either AMH or SingTel (or their subsidiaries) stay
in the same management of a holding company. The holding
company controls the main economic activity and its subsidiaries
are prohibited to digress from the rules of the holding company’s
management.
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B. KPPU ignores the evidence that Temasek does not
control AMH
33. In the First Statement of AMH, respond statement and evidence The First
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have been in detail submitted to indicate that Temasek does not Statement of
control directly or indirectly (through STT, STTC or AMHC) AMH ,
business and/or operational decision of AMH. None of the paragraph
evidence is mentioned in RFI and none of the team members of
KPPU Follow-up Investigation, but Dr. Ir. Benny Pasaribu,
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M.Ec, has disregarded all evidence and response statement
submitted by AMH.
34. AMHPL is not owned in whole by Temasek and/or STT. The
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Around 25% of its shares are owned by Qatar Telecom. Qatar Statement of
Telecom is listed in London Stock Exchange, Bahrain Stock Mr.Guy
Exchange, and Abu Dhabi Stock Exchange. Further , the 55% of Norman to
its shares is owned directly or indirectly by the Government of KPPU
Qatar. Qatar Telecom is a leading provider of exhibited in
telecommunication service in Qatar. It operates as well in the First
Kuwait, Saudi Arabia, Tunisian, Algeria, and Maladewa through Statement of
their subsidiaries with 51% of shares, Wataniya (a listed AMH
company in Kuwaiti Stock Exchange), and Nawras in Oman with
55% of shares. Qatar Telecom is an independent company and
has absolute authority and interest worldwide.
35. AMHPL is a joint venture and invests its capital in

telecommunication fields in East Asia-Pasific. AMHPL (through
ICL and ICPL) controls around 41% of shares in Indosat and
around 49% in StarHub. On 25 July 2007, also acquired 49% of
Shenington’s shares (Shenington Investments Pte Ltd) with its
investment in Cambodia and Laos. It shows a sustainable
investment of AMHPL.
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36. In May 2007, AMHPL obtained loan facility for amount of
US$1,160,000,000 from the bank syndication in the form of Article on
external fiduciary loan. AMHPL also obtained financial support page 36, 2
from shareholders. It indicates further the absolute authority of June 2007
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AMH. Issue of
Ifrasia
(Internation
al Financing
Review
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Asia)
exhibited in
the First
Statement of
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AMH
37. AMHPL has its own board of director, separated from Temasek’s The
and/or SingTel, SingTel Mobile’s board of directors and Statement of
employee. Qatar Telecom has a senior representatives in Mr.Guy
AMHPL’s board of director. The Chief Executive Officer is from Norman to
Qatar Telecom while the Vice-Chairman of Qatar Telecom board KPPU
of director is its representatives in the AMHPL board of director. exhibited in
the First
Statement of
AMH
38. The decision making of AMHPL is done by its own board of

director. The directors, as other directors within AMH’s
companies, are responsible to AMHPL by performing their job
fairly and for the interests of AMHPL under the law of Singapore
in which AMHP was founded. The board of director is obliged to
prefer AMHPL’s interests to the interests of head per head’s
shareholders. They have to make decisions only for benefitting
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STT, STTC or AMHC. The director appointed by Qatar
Telecom, in due diligence exercise, has to make sure that the
decision made by AMHPL board of director benefit AMHPL, not
only shareholders.
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39. The board of director is backed up by Committee of Management The
and Monitoring. Management Committee is responsible to the Statement of
daily management of AMH and to make recommendation to Mr.Guy
AMH board of director on planning, finance, treasury, as well as Norman to
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merger and acquisition activities. The Monitoring Committee is KPPU in
responsible to monitor regular report of any investee companies paragraph
of AMH, Indosat included. Qatar Telecom has its representatives 11 to 15 and
in the two Committees and an active player in the business o exhibited in
AMH.
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the First
Statement of
AMH
C. KPPU is neglecting the presence of competition

between StarHub and SingTel
40. RFI is wholly neglecting the evidence of the presence of

competition between StarHub and SingTel, as the current
telecommunication operators in Singapore.
41. In 2003, SingTel sued StarHub Cable Vision Ltd. (“StarHub Highlighted
Cable”), a subsidiary of StarHub. The litigation process was from
running severely and ended with the submittal of appeal by Finance
Singtel to Court of Appeal, the highest court of appeal in Statement of
Singapore. StarHub
and Straits
Times’
article,
dated 4
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September
2007,
exhibited in
the First
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Statement of
STT
42. RFI also entirely disregards an evidence of the existence of

intervention of policy making institution in the dispute of
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SingTel versus StarHub. Since the period liberalization of
telecommunication regime occurred in Singapore, Info-
communications Development Authority (“IDA”), a Singaporean
independent telecommunication regulating agency, has to
intervene at least 30 dispute cases of SingTel and StarHub. A
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number of disputes reflected a level of fair competition.
D. KPPU is neglecting the evidence provided by AMH

representative, Anupam Garg
43. KPPU is neglecting the existence of AMHPL, whether as a

separated corporate body or as substantive company with its own
rights. AMHPL’s shareholders, Qatar Telecom and AMHC, even
are not drawn in the organizational structure as it is seen in
paragraph 45 of RFI .
44. RFI is also ignoring a written statements made by Anupam

Garg, a AMH representative, during investigation:-
“AMH/CL/ICPL is managed by its own board of
director separated from Temasek. The member of
The
board of director AMHIICLICPL is neither director
nor employee of Temasek. Temasek (in one side) and Statement of
AMH/ICLIICPL (in the other) are managed
Anupam
separately one to another.
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Garg that is
The business, planning, operational decisions are
drawn fully by board of AMH/ICL/ICPL director available in
and/or management team and separated from the
Temasek. Each of AMH, ICL and ICPL has its own
board of director stuffed by worldwide reputed document
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members. There are 2 member of AMH board of case of
director who are not director or employee of
Temasek, STT, STTC, AMHC or Qatar Telecom. KPPU
AMH decides its own decision through the board of

director, in which its members area the selective
people of Qatar Telecom. The board of director of
AMH does not make decisions that not only STT,
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STTC and AMHC. IT opposed against the law of
Singapore and consequently Qatar Telecom does not
it happen.”
E KPPU is ignoring the evidence of Qatar Telecom and

its representative, Guy Norman
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45. KPPU is ignoring the existence of Qatar Telecom as a
shareholder of more than 25% of AMHPL’s shares, a company
that is unseen in the organizational structure in paragraph 45 of
RFI.
46. The statement of Mr. Guy Norman, a Qatar Telecom

representative, described the independency of AMH. It is ignored
in RFI :
“Qatar Telecom has a representative in the AMH

board of director AMH. The Chief Executive Officer
of Qatar Telecom and the Vice-Chairman of Qatar
Telecom board of directors are its senior
representatives in the AMH board of director.
The strategic decisions are made through AMH
board of director and obliged to carry the interest of
AMH and not the interest of head per head’s
shareholder. The directors appointed by Qatar
Telecom, in due diligence exercise, make sure to the
decisions made by AMH will be benefitting not only
STTC but also AMH.
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The board of director is backed up by Committee of
Management and Monitoring. Management
Committee is responsible to the daily management of
AMH and to make recommendation to AMH board of
director on (a) financing, and company treasury
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strategy; (b) merger and acquisition activities; and
(c) company strategic planning including any
problem concerning shareholders’ strategy. The
Monitoring Committee is responsible to monitor
regular report of any investee companies of AMH,
(one of them is Indosat), to analyze finance and
operational of company performance as well as any
problem concerning shareholders’ strategy that
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probably occurs in any investee companies.
Qatar Telecom has its representatives in both

Management and Monitoring Committee.
It is cleat that Qatar Telecom is an active player in

AMH business. Qatar Telecom is sure that AMH is
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managed well.
I just want to show that Qatar Telecom has invested

US$635 million in this joint venture. The
composition of Management and AMH board of
director enable Qatar Telecom an insurance that
the decisions are made independently and not
dictated by STTC.”
F The deviation in RFI
47. Firstly, KPPU is incorrect in mentioning that Ms.Ho Ching of RFI , Facts
Temasek is an Executive Vice President of STT and STTC. Paragraph
78 (d)
48. It is wrong because Ms. Ho Ching serves no single position in

either STT or STTC. Furthermore, it has be asked by KPPU in
one of sessions with the representatives of Temasek, Mr.Goh
Yiong Siang (“Mr Goh ”):
“Question : Is it true that Ho Ching serves as an The Follow

Executive Vice President in STT and STTC at the Up
moment?
Investigatio
Y
Answer : No.” n over Mr.
Goh that is
available in
the
P
document
case of
KPPU
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49. Secondly, it is more general. Mr Goh expresses a statement
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referring to the policy of Temasek that Temasek does not ever
instruct or coordinate the commercial and operational decisions
with its subsidiaries:
“35. “It is a policy of Temasek for not instructings or The

coordinating commercial or operational decisions s Statement of
with the companies to which Temasek has its shares.
Thus far, the policy remains to be implemented. Mr. Goh in
paragraph
36. Such strong and firm principles have been
acknowledged by reliable international institution. 33 to 35 in
The institutions are carefully monitoring the deeds of the case
Temasek by confirming the policy and practices of
Temasek. The Rating Report 2006 issued by Standard document of
& Poor’s stated as follows: “Temasek seeks to KPPU
ensure good governance, performance, and
competitiveness at each TLC through ensuring a high
quality board of directors…Temasek refrains from
involvement in day-to-day decision-making.”
37. The same goes for the Rating Report of Moodys
Investor Services:
“Each [Temasek] investee company is managed by

their respective management team and guided by
their board of directors. Temasek is not involved in
the daily commercial or operational decisions of its
Y
investee companies.”
50. In his investigating, Mr.Goh Yiong Siang categorically explains
P
that Temasek does not intervere in the decision making of
Temasek investee companies, including AMH.
“14. “Question: Does Temasek get involved in the The Follow

investment decision making and management activity Up
of STT and SingTel?
O
Investigatio
Answer: No, Temasek does not involve in operational n over Mr.
fields and business decision in both companies. The
decision on investment is taken by board of Goh that is
commissioner and management of each company ...” available in
“27. Do STT and SingTel report their investment the
C
development to Temasek annually? document
Answer: No, they do not report to Temasek.” case of
“30. It is important for us to have a copy of KPPU

TEmasek’s Statutes. Would you please explain the
rights of Temasek in its capacity as an owner of
SingTel and STT?
Answer: I want to repeat. Both companies treat

Temasek as they do to other shareholders, our rights
is the same as our rights in investee companies. We
reserve rights as it is conducted by other
shareholders to buy more shares or to sell or to
maintain our shares.
“31. Question :. Would you please explain the rights

of Temasek in its capacity as 100% shareholders to
STT?
Answer: As I have already told. STT is our investee

company. We see our investment from financial point
of view. We do not involve in the making and
operational decision of the company because they
have been performed by the board of directors and
management of STT. Our Rights is not different with
other shareholders. We are entitled to attend
shareholder meeting and to have voting right.”
83. Question: Are there any names serving to STT
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and SingTel?
Answer: None of them serves as member of STT

Board of Director STT, but Simon Israel. He is a
member of board of directors in SingTel. Yet, he has
been there before joining Temasek.
P
84. Question : Is one or the other serving for STT
Com?
Answer: Nobody.
85. Question : Is one or the other serving for AMH?
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Answer: Nobody.
86. Question : Is one or the other serving for

AMHC?
Answer: Nobody.
87. Question : Is one or the other serving for ICL?
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Answer: There is no.
88. Question : : Is one or the other serving for

Indosat?
Answer: Nobody.
89. Question : : Is one or the other serving for

SingTel Mobile?
Answer: There is no.
90. Question :: Is one or the other serving for

Telkomsel?
Answer: Nobody.
51. Although the evidences are contended with, the RFI does not
show them that make it conceals the truth.
52. Thirdly, in its meeting with KPPU on 19 July 2007, Mr. Roes Meeting
Aryawijaya (“Mr.Roes”), the Commissioner of Indosat who is Official
nominated by Minister of BUMN, clearly confirmed that ST Report
Telemedia and Singtel competes each other: between
Y
KPPU and
The
Ministry of
State-
P
Owned
Enterprise
(BUMN)
page 5 that
is available
in the case
O
document of
KPPU
C
“21. Question: Is Temasek influencing the decision
in Indosat ? As far as I know. It is negative.
To make it sure, would you please ask Mr.
Setianto.
22. Do you mean the institution? STT or ICL?

STT is very influencing, STT competed tightly
with SingTel, concerning the capacity of
SingTel as a shareholder in Telkomsel.”
53. Mr. Roes also shows evidence on the selection of director in

Telkomsel. It is fully transparent process:
“41. How is the mechanism of electing board of director in

Telkomsel? The proposal to elect board of director
is arranged in Shareholder General Meeting (RUPS),
in this case the commissioner of Telkomse., Tantri
Abeng proposed several candidates to State Minister
of BUMN, at that time, Mr. Sugiharto.”
54. Fourthly, RFI in item 78 also incorrect in mentioning that
Stephen Geoffrey Miller is CFO of AMHC and ICPL and that
Sheikh Mohammed is a Commissioner of Telkomsel. Sheikh
Mohammed is nominated by Qatar Telekom as an Indosat
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Commissioner, and Qatar Telecom does not have any interest at
all in Telkomsel.
55. Finally, the accusation of KPPU concerning the influences of Meeting
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Temasek Business Group to Indosat and Telkomsel by Official
coordinating their actions is inconsistent with the evidence Report
accumulated by KPPU from Dr. Ir. Bambang P. Adiwiyoto, M. between
Sc. (member BRTI), in his meeting with KPPU on 10 July 2007: KPPU,
BRTI and
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Directorate
General
Posts and
Telecommu
nication
C
that is
available in
the case
document of
KPPU
Nevertheless, Telkomsel and Indosat is competed, if it

is seen from the perspective of technology”
56. Practically, Mr.Hasnul Suhaimi (“HS”), the CEO of The Official

Excelcommindo (“Excel”), informed by KPPU to have leaved Report of
Indosat in an unfavorable condition, also confirmed in the Follow Up
follow-up investigation of KPPU on 9 August 2007 that: Investigatio
n to
Suhaimi, on
page 5 that
is available
in the case
document of
KPPU
Y
“Marginally, the market in Indonesia is still more
competitive compared to the market abroad. In my
opinion, the condition of cellular phone in
Indonesia is over competitive. To my prediction,
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tariff will be in consumers’ side.”
G It is understandable that shareholders propose to name

directors
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57. In RFI, KPPU also states in item 102 to 109 that it is possible for
ICL have any control to Indosat with its authority to nominate
directors in Indosat, Deputy managing director, Director of
Finance and Information and Director of Information and
Technology (IT) in particular.
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58. Once again, KPPU diverts the evidence for the shake of coming
to its conclusion. Although ICL is entitled to nominate director
and commissioner of Indosat, the appointment of both positions
shall be approved by shareholders of Indosat. Deputy Managing
director also has to report to managing director, a Chief
Executive of Indosat, and in reality the managing director is
always nominated by the Government of Indonesia.
59. Further , Managing director of Indosat, Mr.Johnny Swandi Sjam

who is nominated by the Government of Indonesia, mentions that
is nothing wrong with ICL to nominate director. He has also
nothing to do with the nominated directors including Director of
Finance and Director of Information and Technology:
“45. Question : Which post does ICL remain to hold? The Official
Report of
Answer: Deputy, Director of Finance and IT.
Follow Up
46. Question : To whom the position of ICL is given when Investigatio
the Director of Network is occupied by an
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Indonesian citizen? n to
Swandy
Answer: Director of Operation.
Sjam, dated
47. Question : Why should Director of Finance always be
taken by ICL? 27 August
P
2007,
Answer: As I known, investor usually handle the finance
available in
48. Question : Why IT Director are always hold by ICL? the case
Answer: For all I know, Singapore is dominant in IT.’’ document of
KPPU
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60. In displaying the facts, RFI does not refer to the statement of Mr.
Johnny Swandi Sjam. It disregards the fact that nomination is
approved through the transparent balloting by the whole
shareholders during RUPS.
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61. There is no law infringing or improper for a shareholder with its
significant ownership nominating director for its subsidiary.
H. The deviation of KPPU over the evidence concerning

the procurement in Indosat
62. The evidence held by KPPU to prove ‘a control’ allegedly

conducted by STT is by relating it with procurement. The
evidence is wholly misinterpreted and it proves a form of
domination at all.
63. In item 104 to 115 Part IV of RFI , the Deputy of managing

director who perform operational activities of Indosat,
procurement included is accused, in this case to Mr.Khaizad B.
Heerjee (“Mr.Heerjee”). Hereunder we cite:
“111. Prior to the management led by Khaizad, the RFI , Part

method of procuring network is non turn key IV,
Y
under the management of Hasnul Suhaimi
(Managing director) and it is that conducted by Paragraph
local company. It changes to become turnkey 111 to 114
and conducted by foreign under Khaizad
management (IOR of Wimbo S Hardjito date 25
September 2007); --------------------------------------------
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112. That cancellation (by Khaizad) to the
development method applied by Hasnul, is one
factor that make Hasnul resign. It also indicates
that the control of Indosat is in the hand of
deputy managing director, let the managing
director be a symbol. (IOR dated 22 August
2007);
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113. The Cancellation leads to the absence of
procurement decision to develop network. Such
a condition was taking place in the first 9 (nine)
month of 2006. It caused the business activities
of Indosat is hindered and felt behind other
operators. (IOR of Wimbo S Hardjito date 25
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September 2007);
114. That the delay of network development is the

basis of 4 (four) board of director of Indosat,
Jhoni Swandy Sjam, Apocalypse Widjajadi, S.
Wimbo S. Hardjito and Wityasmoro to meet Lee
Theng Kiat (Commissary Indosat) in Singapore
to explain the delay of network development that
will be detrimental Indosat. In other hand 4
(four) board of director of Indosat give their
assessment that Khaizad is incompetent to
become a leader in Indosat (IOR of Wimbo S
Hardjito date 25 September 2007);
115. To the information given by 4 (four) board of

director, Lee Theng Kiat does not take action at
all (IOR of Wimbo S Hardjito dated 25
September 2007).”
64. In the first place, there is a suspicion that Mr.Heerjee is a party

appointed by ICL to control procurement process and to overrule
successfully the managing director. When the four Indonesian
went to Singapore to meet Mr.Lee Theng Kiat (“Mr.Lee”), he is
suspected to do nothing. All the facts are provided by
Mr.Wimbo S Hardjito (“Mr.Wimbo”).
Y
65. RFI absolutely fails to use evidence that directly and clearly
submitted from one of the four “dissatisfied” directors,
Mr.Johnny Swandi Sjam which told very different information.
In his view, the board of director as a whole decides whether a
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certain program shall be performed in turnkey or non turnkey.
The deputy of managing director does not control the
procurement and the board of director work in collegial way:
21. Question : Who does make the policy
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program of changing it to turnkey
project?
Answer : As far as I know board of

director through board of directors
meeting in 2006.
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34. Question : How about procurement ?
Answer : For a procurement above USD 5

million, the approval of managing
director is needed.
35. Question : What about a procurement

under USD 5 million?
Answer : There is a rule on it concerning

its authorization.
36. Question : Since 2007, are there any

procurement above USD 5 million?
Answer : Since June 2007 (I have been a

managing director), at least there were 2
procurements above USD 5 million.
Network Procurement, filter and CDMA.
37. Question : The procurement that only

need Deputy’s approval?
Answer : As I recall, the procurement
around USD 1million to USD 5 million.
But I am not sure the exact number.
38. Question : Shall Managing director know

or approve procurement proposal?
Y
Answer :To approve a procurement
above USD 5 million
39. Question : In other hand, what is the

authority of Deputy that need no
approval from managing director?
P
Answer : All the things usually conducted
in Collegial, in the sense of discussed in
the meeting of board of director
66. The testimony of Mr.Jhonny Swandi Sjam that cited above are
conducted in collegial, in line with the Statutes of Indosat, for
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example, stating that all decisions of the board of director
meeting conducted by deliberation for general consensus, and
otherwise succeed by majority votes.
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67. RFI also really disregards that this evidence is justified by Mr.
Roes, who were an Indosat Commissioner:
“28 Is it true that after Mr.Hasnul retiring the The Official

position is automatically occupied by Mr. Report of
Khaizad, but the proposal of Bapak Hasnul is
refused? Is it true? Follow Up
Investigatio
No. There are many different opinions. The
proposal of Mr.Hasnul was tried to be n to Mr.
applied in the company; nevertheless, in field, Roes, dated
in managerial level, there were many
oppositions against him. The board of 19 July
director prefer to low pricing to consumer. 2007,
available in
the case
document of
KPPU
68. Further, Mr. Roes explains that the long period of vacuum An
position left by Hasnul is not caused by STT: interview
with Mr.
Roes, on
Y
page 7 of the
case
document of
KPPU
P
30. Question : As a commissioner, according to Mr.
Roes, is the atmosphere in the mid manager level
is such bad that the vacuum for the position is far
too long?
Answer: It due to the lack of Minister of BMN to
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take action. Besides, it is also caused by the
resistance of mid level manager, 750 people.
31. Question : Does it happen due to the refusal of

STT?
Answer : No
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69. The opinions of Mr. Widya Purnama, Mr.Johnny Swandi Sjam
and Mr.Roes Aryawijaya differ much with those given by KPPU.
Although it has been mentioned that Mr.Johnny Swandi Sjam is
one of directors who is suspected of expressing his complaint to
Mr Lee, RFI is really negligence in explaining why RFI only
rely on the evidence provided by Mr.Wimbo and not from
Mr.Johnny Swandi Sjam.
Although Mr.Heerjee is possible not to agree with managing

director in a certain problem it does not mean that AMH controls
board of director of Indosat. Directors can be in a regular way
agree or not to agree with something and that it does not mean
that just because one director is insistent on a certain problem,
such a director control board of directors.
70. KPPU prefers to consider the evidence provided by “a The Official
management staff of PT. Indosat (who asks not to disclose the Report of
identity)” to those from Mr.Johnny Swandi Sjam. It is surprising Investigatio
that KPPU based its report on the evidence from an eyewitness n, date 22
Y
who wish not disclose the identity. Without mentioning identity August 2007
in the official report, such a witness is unreliable because he/she in the case
cannot explain the fact owned of opposes it from the evidence. document of
Such evidence is null and void. KPPU
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71. That the Government of Indonesia has replaced Mr.Wimbo as A Letter
one of Indosat directors based on the proposal of Ministrial of from the
BUMN. AMH give a same comment with Ministrial of BUMN. Ministry of
Therefore, Mr. Wimbo may be not carrying well to AMH in this BUMN,
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case, and KPPU should not enters such a consideration in its Annex 1
proof.
72. Concerning to the resignation of Mr. Hasnul, an article in An Article

Detik.com on 5 July 2006 stated that he resigned for a personal on 5 Juyi
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reason without any pressure on him. Further, officially 2006 in
Mr.Hasnul is appointed as managing director of Excelcomindo Detik.com,
on 1 September 2006 during RUPS (AGM) of Excelcomindo. Annex 2
Although STT does not know the private reason of Mr.Hasnul
behind his resignation, the evidence submitted by Mr. Roes
Aryawijaya indicates that Mr.Hasnul did not resign by the
intervention of Vice Managing Director.
73. Even if Hasnul has resigned, the Government of Indonesia can

use its right under Article 20(3) or Article 21(1) of Indosat
Statutes, to nominate the appointment of new Managing Director
or asks to perform RUPS regarding to the problem. The
following is the Investigation Official Report of Roes:
“Why should be a vacuum in top management of The Official
Indosat, is caused by the refusal of STT? Report of
No. The problem is in Indonesia itself. Investigatio

n of Mr.
Y
Roes that is
available in
the case
document of
P
KPPU
74. The Government of Indonesia does not nominate for Managing Letter fro
Director until the date of Annual RUPS of Indosat on 5 June the Ministry
2007. The proposal for the nomination is enclosed. of BUMN,
Annex 1
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75. The failure of KPPU in evaluating relevant evidence in its case
document, clearly indicate that RFI was prepared to come to a
conclusion of the infringement of Article 27 by ignoring existing
evidence.
C
I. The conclusion of RFI is illogical because the decision
conclude that the Government of Indonesia is
incompetent
76. KPPU realizes fully that the Government of Indonesia is a

significant shareholder either in Indosat or Telkomsel.
Unfortunately, the facts are ignored in RFI. Another
investigation has ever been conducted by KPPU was
investigation with Deputy Minister of BUMN, Mr. Roes
Aryawijaya that should be cited:
“2. How are the composition of board of director The Official

and commissioner in each company, Indosat Report of
and Telkomsel? Investigatio
Indosat : 4 board of directors are from STT, 5 n of Mr.

from Telkom, 4 commissioners are from Roes, dated
Telkom and 6 from STT. While in Telkomsel
there are 3 board of directors from SingTel 19 July 2007
and 2 from Telkom. in the case
Y
3. Is STT dominant during decision making? document of
KPPU
In the decision making we always concerns
good corporate governance and avoids
implementing voting mechanism. We do that
P
in the meeting of Indosat board of director
and commissioner.
77. In the part where KPPU discusses accusation on ‘”authority” of

Temasek, KPPU has eliminated the fact that Deputy Minister has
O
explained not only in selecting a number of director and
commissioner in Telkomsel and Indosat by the Government of
Indonesia but also in becoming active participant to control
initiatives and to attend a numbers of meetings.
C
78. If the ability to elect director and commissioner as well as double
position people is the evidence of “controlling of the holding
company”, then the facts show that (i) the Government of
Indonesia (acted via Minister of BUMN) is a shareholder either
in Indosat and Telkom (that has more than 50% of Telkomsel’s
shares and control it); (ii) the higher officials from the Ministry
of BUMN serve as commissioner in Indosat and Telkom; (iii)
people assigned by Ministry are those serving as member of
board of directors, shown that Government of Indonesia control
both Indosat and Telkomsel.
79. The conclusion of RFI’s stating that Temasek (that only has
indirect minority ownership in Indosat or Telkomsel) “control”
either Indosat or Telkomsel is unreasonable. Logically, it
concludes that the directors and commissioners appointed by the
Government of Indonesia. It is surprising that KPPU has come
to conclusion without any evidences to support.
80. It is opposed against the fact, between evidence in the case
Y
document of KPPU and the “Government’s Elucidation”. It is
stated that, on page 14 of the case document of KPPU, the
“majority” share of Telkomsel “owned and controlled” by PT
Telkom Plc., and further, that STT and SingTel are separated
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each other.
SingTel has 35% of Telkomsel’s shares with the

limited management representation, in which the
majority share of Telkomsel is owned and controlled
by PT Telkom Plc. SingTel also is a public
O
corporation that bring interests not only for
Temasek as a shareholder but also public interest.
Either SingTel or STT is managed by separated
management team and competed freely in fixed
access of cellular area, and internet service in
Singapore. Concerning STT and Indosat, it is
important to recall that that Indosat is also a public
C
corporation, bring interests not only to STT but also
to shareholders (government with 15%, overseas
public shareholder/NYSE 30%, and domestic
shareholders less than 13%).
STT and/or SingTel are owned by Temasek with each

part are independence and competition between them
must be subject to law and legislative regulation that
go into effect in Indonesia either in the field of
telecommunications, business competition, or capital
market.
81. From the Government’s Elucidation, it is clear that the

divestment in Indosat has been considered carefully by member
of House of Representatives (DPR) in Indonesia. The more
importantly, DPR has obviously seen that there is no problem
concerning cross ownership because the majority shares in
Telkomsel are owned and controlled by the Government of
Indonesia.
82. It shows that RFI is partial. RFI does not take well-balanced
approach, in which RFI considers and conducts an evaluation to
the evidence that explains and alleviates the position of AMH.
Y
On the contrary, RFI even disregards the evidence provided by
DPR. KPPU does not consider this case fairly and precisely.
P
VI. THE ACCUSATIONS OF THE INFRINGEMENT TO
ARTICLE 27 ANTI-TRUST LAW
83. Article 27 of Anti-trust Law states:
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“Business actor 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 causes
C
a. One business actor or a group of business
actor control more than 50% (fifty percent) of
the market share of a certain type of goods or
services.”
84. KPPU cannot prove the whole elements of Article 27
(e) AMH is not a business actor.
(f) AMH does not have majority share in Indosat or

Telkomsel.
(g) AMH does not control more than 50% of the relevant
market.
(h) AMH does not abuse dominant position.

85. Firstly, KPPU thinks that the whole Temasek Businesses Group RFI ,
have to be considered as a single economic entity. Secondly, the Analysis,
Temasek Business Group is suspected “to control” some entities Paragraph 5
in Indonesia, Indosat and Telkomsel. Thirdly, Business Group
Y
Temasek is suspected to use its influences in Indonesia, therefore
KPPU has an authority to apply jurisdiction extra-territorial to
Temasek Business Group, in accordance with practices suspected
implemented by European Union.
P
86. The following defense statements indicate that KPPU has not
only distorted evidence but also legal interpretation in its effort to
come to groundless conclusion in RFI.
O
A. AMH is not a business actor
87. RFI is failing to mention defense statement of AMH that

companies within AMH are not entities under the jurisdiction of
KPPU.
C
88. The definition of jurisdiction is a fundamental condition to start
investigation of KPPU.
89. Jurisdiction scope of KPPU as it is stated in Article 1(18) of

Anti-trust Law, mentioning that KPPU will, for example,
“monitor business actor who perform their business activity”
(enhanced to emphasis).
90. In consequence, an entity is only under jurisdiction of KPPU if

the entity is a”business actor” as referred to Anti-trust Law. The
term ”business actor” is defined explicitly in Article 1 (5) of
Anti-trust Law as, ”individual or corporate body ... that is
founded and is domiciled or to conduct activity in the territorial
jurisdiction of the Republic of Indonesia, either by itself or
jointly under agreement, carrying out various business activities
in the field of economy.” (enhanced to emphasis)
91. During Preliminary Investigation, the Reported Party is identified
Y
as ”Temasek Business Group”. Although RPI, further jointly
refer to the Reported Party as ”Temasek Business Group”, AMH
note that LPP clearly defines any entity suspected to form
”Business Group” as separated ”Reported”.
P
92. In RFI, the companies to which we refer to as AMH is conceived
as the Reported. Nevertheless, as it is mentioned above, there is
no certain accusation addressed to them. At the moment, the
accusation is addressed to Temasek. It is obvious that even
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KPPU “confuse” to which party the investigation is conducted to.
93. Under Article 1(5) of Anti-trust Law, AMHPL, ICL and ICPL
clearly excluded from the definition of “business actor”.
C
94. First of all, AMHPL, ICL and ICPL is not “founded” or
“domiciled” in Indonesia.
95. Further, the most important thing, as it is intended by Article

1(5), AMH does not “perform any activity” in Indonesia. All
“activities” in Indonesia are performed by Indosat. AMH is
unutterable “conduct” activities because the business of Indosat
is managed by its own board of directors for benefiting Indosat,
therefore AMH does not take any operational decision in the
business of cellular telecommunication of Indosat. Based on the
above reason, the status of AMH toward Indosat limited only as
indirect shareholder of 30% Indosat’s shares. .
96. The Following up Investigation of KPPU is relied on bias The Report
interpretation of Article 1(5) Anti-trust Law. After referring to of
the definition of “business actor” in Article 1(5), RFI further Preliminary
states (in item (A)(2)) that: Investigatio
Y
n
…Any activity of business actor that are not founded

and not domiciled in the territorial jurisdiction of the
Republic of Indonesia but its activity impacted the
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competition in the territorial jurisdiction of the
Republic of Indonesia is subjected to the stipulation
in the Law No. 5/1999.
97. With all respect, this statement deviates from the definition of
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“business actor”, according to Article 1(5). The concept of
“activity that have impact to the competition in… Indonesia” is
broader than the condition of “performing activities in …
Indonesia,” according to Article 1(5). The last sentence signifies
an active involvement in Indonesia, but not for the first. The
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conduct of equalizing the two different concept has distorted the
actual meaning of Article 1(5) Anti-trust Law, therefore, it has
unfairly extended its jurisdiction that actually beyond its
authority.
98. The Item (A)(2) of LPP refers to consideration of (c) of the Law
and it emphasizes that “anyone who perform business in
Indonesia must stay in healthy and fair competition nature”
(enhanced to emphasis). The reference “to perform actual
business in Indonesia” has supported the interpretation of AMH
and those of KPPU to the term of “business actor”.
99. The term “to perform business in Indonesia”, is similar to

“performs activity in … Indonesia”, it requires a positive
involvement in business/activity in Indonesia. The two concepts
is narrower than those offered by KPPU on “activity that
impacted competition nature in Indonesia.”
100.
Y
In international law theory, there are 4 principles in applying a
jurisdiction:-
(a) territorial jurisdiction,
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(b) personal jurisdiction,
(c) jurisdiction according to the protective principle and
(d) jurisdiction according to the universal principle.
O
Ian Brownline, Principles of Public International Law (Edition
ke-5: 1998) page 303-7
101. The two basic are not applicable because AMH is not Indonesian
or in its region. Jurisdiction Universal are also not applicable
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because AMH does not conduct any international crime resulted
on this.
102. Causality Doctrine only goes into effect in particular limited

circumstance, that is if it can be indicated that
(a) its application must be relied on the deed that is suspected

to conduct intentionally to the visited.
(b) The cundact must have extra ordinary visited country
103. KPPU cannot prove even on of these conditions. KPPU does not
affirm any evidence of AMH's deeds addressed to Indonesia.
Second, KPPU also does not prove “any extraordinary
consequences” for Indonesia.
104. In Indonesian law interpretation, there is only one member of

KPPU, Dr. Ir. Benny Pasaribu that seems to consider the
Y
evidence in the case document of KPPU:
“I do not find any evidence that Reported Party I to

Reported Party IX are business actors as referred to
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Article 1 item 5 of the Law No.5/1999. The fact is,
The Reported Parties are corporate bodies that are
founded and domiciled not in the territorial
jurisdiction of the Republic of Indonesia. Several
Reported Parties also do not perform business
activity or business transaction in the area of
cellular telecommunication in Indonesia. Although
Reported Party VI and Reported Party VII own
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shares in PT. Indosat and Reported Party IX owns
shares in PT. Telkomsel, they are improvable to
conduct transaction of cellular telecommunication
goods and/or service in Indonesia. The
shareholders are improvable to conduct and/or take
cellular business decision. The fact, its market also
differs: stock exchange activities in capita market
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and cellular business in goods and service market –
often called also as “real sector”. There are also
fact that board of commissioner and board of
director of PT. Telkomsel and PT. Indosat that
conduct operational activity and take decision on
cellular telecommunications business in Indonesia,
not shareholder or the Reported Parties.”
B. AMH does not have “Majority Shares”
105. The objective of suspicion 1 is that Temasek owns “majority

share” in 2 providers of telecommunication services in Indonesia
through its subsidiaries. It is incorrect.
(i) KPPU equalizes the term “Minority” shareholder and

“Majority” shareholder
106. The actual understanding of “majority share” is an ownership The Report
more than 50% of shares in a company. In general, the words of expert,
‘majority’ and ‘minority’ are exclusive. It means one only can Professor
hold majority ownership of share. In the expert statement, Hikmahanto
Y
exhibited in the defense of STT, Professor Hikmahanto , page 2, 4(c)
emphasizes that in the Law No. 19 /2003 on State-owned exhibited in
Enterprise (“The Law of BUMN”) and the Law No. 8/1995 on the First
capital market, the two laws define the term of majority Statement of
P
shareholder and they could be a best guidance in determining the STT
definition of the term in this context. available in
the case
document of
KPPU
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107. The elucidation of Article 15 (2) of the Law No.8/1995 on
Capita Market defines “majority shareholder” as:
“Majority share is shareholder that has more than 50% (fifty

The Report
percent) of subscribed and paid-up capital.”
of expert,
C
Professor
Hikmahanto
, page 2, 4(c)
exhibited in
the First
Statement of
STT
available in
the case
document of
KPPU
108. Further , there is no international law principle that permit KPPU The Report
to use extrateritorial jurisdiction to STT. As it is mentioned by of expert,
Professor
Professor Hikmahanto in his second expert statement: Hikmahanto
, page 2, 4(c)
In the expert report of Professor Hikmahanto attached in the
exhibited in
statement of STT in the case document of KPPU, Professor
the First
Hikmahanto emphasizes that the law on BUMN defines State-
Statement of
Y
owned Company (“BUMN”) as a corporate law which part or in
STT
a whole capital owned by the state.
available in
the case
document of
P
KPPU
109. Article 1 (1) of the Law of BUMN mentions as follows:
“1. State-owned Enterprise, Further referred to as BUMN, is a The Report
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corporate with its capital owned by state through direct of expert,
equity of dissociated national wealth.”
Professor
Hikmahanto
, page 2, 4(c)
exhibited in
C
the First
Statement of
STT
available in
the case
document of
KPPU
110. Article 1 (2) of the Law of BUMN mentions as follows:
“2. Company, hereinafter referred to as Persero, is a The expert

limited company of BUMN with its capital Statement of
divided into shares owned in whole or at least 51
% (fifty percent) by the Republic of Indonesia Professor
aiming at having profits.” Hikmahanto
page 3, item
4(c)
exhibited as
First STT
Statement
Y
(ii) “Grammatical” misinterpretation of KPPU toward Article 27
111. The first “interpretation” of KPPU, a grammatical interpretation.

It consults two different dictionaries but only the second
P
dictionary, Black’s Law Dictionary provides a term of “majority
shareholder”:
“a shareholder who owns or controls more than half RFI ,

a corporation’s stock” Analysis,
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Paragraph
10
112. AMH as a whole agrees with this definition. Nevertheless, RFI RFI ,
refuses the approach arguing that there is “different type of Analysis,
C
share”. It is possible that someone may controls more than 50% Paragraph
of voting right in a company without controlling more than a half 18
of the same shares. Even if this definition can not be
implemented because of differentiation of share class, the reason
was that it can not be implemented if one of share holder has less
than 50% of all shares and has special right, or share holder that
has more than 50% of share, but has rights that removed. Basic
of this thing is that ‘the majority’ is not reflection of voting right.
AMH aim to highlight that its all share in Indosat is common
share that has same right with other share that belong to other
share holder, except A series share that belong to Government of
Indonesia. Because of AMH doesn’t have bigger right, this is
show that AMH can not be a majority share holder. RFI does not
cite any evidence that indicate that Temasek controls more than
50% voting right either in Telkomsel or Indosat. The content of
RFI in whatever reason is illogical. The definition wants to say
that Temasek is able to control voting rights of other important
shareholders such as the Government of Indonesia
Y
113. Although someone approaches the definition of “majority
shareholder” in voting rights is not in the sense of amount of
shares, it must be noted that AMH remains not to hold majority
either in voting rights or in a number of shares in Indosat. Thus,
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any definition applied, AMH remains to be under 50%. AMH is
only an indirect shareholder and has no voting rights in Indosat.
114. RFI ignores the fact that mostly used words in Article 27 do not
prohibit a shareholder to increase its level of “domination”.
O
Article 27 mentions majority ownership. Even when lawmaker
will refer to the those of concerning controlling, the lawmaker
has already conducted using simple language, for example in
Article 17 and 18 of Anti-trust Law.
C
” CHAPTER IV
PROHIBITED ACTIVITIES
First Part
Monopoly
Article 17
(3) Business actor is prohibited to conduct a

domination to the production and/or goods
marketing and/or service that can result the
creation of monopolistic practices and/or
unfair business competition.

conduct domination over the production
and/or marketing of goods and/or service as
referred to in (1) if:
a. the pertinent goods and/or service do not

have their substitution; or
b. causes entry barrier to other business actors
Y
in the competition of common goods and/or
service; or
c. one business actor or one group of business

actor control more than 50% (fifty percents)
of market shares in one type and/or certain of
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goods and/or services
Part Two
Monopsony
Article 18
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(2) Business actor is prohibited to control
acceptance supply or become a single buyer
to the goods and/ or service in the pertinent
market that possible to cause the creation of
monopolistic practices and/or unfair business
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competition.

control acceptance supply or to become a
single buyer as referred to in (1) if one
business actor or one group of business actor
control more than 50% (fifty percents) of
market shares in one type and/or certain of
goods and/or services
(iii) “Disorganized” interpretation of KPPU toward Article 27
115. The “systematic interpretation” of KPPU toward Article 27 has

created ambiguity to the concept of ‘majority’ that is able to
influence decision making in a company. For example, in its
“systematic interpretation”, KPPU tells that a share ownership of
25% is able to consider as share majority ownership because with
such an ownership it is able to veto certain decisions. This is
incorrect. It does not mean that if one party has ability to hinder
certain decision making in a company, the party is considered a
“majority shareholder” in company.
116. Further, if the statements of KPPU in paragraph 18 and 29 of RFI
Y
are applied, it will come to illogical conclusion with the
following reasons:
(c) In the case of Telkomsel, Sing Tel (that only has indirect
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ownership for 35% in Telkomsel) will be considered a
“controlling holder” in Telkomsel. If it is true, the
“controlling holder” shall be Telkom and Sing Tel due to
their positon as “majority shareholders” in Telkomsel.
(d) In the case of Indosat, KPPU is negligence to consider A

series share of the Government of Indonesia in which the
O
shares give the Government of Indonesia rights to veto
certain things that require special majority.
117. Although in certain level the whole shareholders are possible to

be influencing shareholders in a company by performing their
voting rights, such an ‘influence’ is not understood as ‘majority
C
share’. Each of these concepts is different, and the regulation will
use one of the words to submit a different thing. RFI
intentionally brings the word “majority share” to an ambiguous
meaning that make KPPU ignores the actual meaning of a rule.
(iv) Historical Interpretation
118. KPPU admits by itself that such an interpretation is unhelpful in

defining the term “majority share”.
(v) The teleological misinterpretation
119. The interpretation of teleology of Article 27, as it meant by RFI,

KPPU in paragraph 22 to 23 of RFI, is to avoid a Analysis,
concentration of economic power in a single entity. The test
of power concentration is in paragraph 24 of RFI : page 63 of
“Concentration of economic power, as it referred to number RFI

2 above, is implemented through the centralization of
economic decision making in the hand of one particular
business actor. A decision can be effectively obtained if
there is a real control owned by a business actor in a
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company. The company will implement the decisions. In the
context of Article 27 of the Law No.5/1999, such companies
have more than 50 % of market shares so that a control
conducted by a business in it will affect to the pertinent
market.”
P
120. It is seen from paragraph 47 of RFI that KPPU has already
concluded that Temasek positively control Indosat on the basis of
(i) Temasek’s ownership of 41.94% Indosat’s shares; (ii) the
rights of Temasek to nominate directors and commissioners; and
(iii) the authority of Temasek to specify the corporate policy of
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Indosat. It is to be informed that the conclusion of KPPU above
is wrong and groundless for the following reasons:
121. In accordance with the statement of KPPU in RFI, the ownership
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of more than 50% of voting rights aims at give a control through
its owner and it is appointed by KPPU as positive control. AMH
(and Temasek) does not have more than 50% voting right in
Indosat. Temasek only has 31% of indirect ownership in Indosat.
Thereby, it is incorrect if KPPU said that Temasek has 41.94% of
shares in Indosat. Even if it is true that Temasek has 41.94% of
ownership in Indosat (that is not true), the assumed ownership of
Temasek is still below 50%.
122. Further, it is untrue to say that Temasek has rights to nominate

director and commissioner in Indosat. Consequently, neither
Temasek nor STT can nominate directors or commissioners. Out
of 10 Reported Parties, there are ICL and ICPL that have right to
nominate directors and commissioner in their capacity as direct
shareholders in Indosat. Nevertheless, the right to nominate
director or commissioner is also available for every Indosat
shareholder Indosat that meet minimum requirement (10%) of
total shares on hand but it is not exclusively valid to ICL and
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ICPL. The whole share ownership of ICL and ICPL is less than
50%, therefore their votes can be defeated and have no ability to
act unilaterally.
P
123. In mentioning that AMH has an ability to determine corporation
policy of Indosat, KPPU has failed at all to consider that the
Government of Indonesia (as other shareholder of Indosat) also
has an ability to influence Indosat. The majority of Indosat board
director are assigned by the Government of Indonesia (including
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Managing Director) and the Government of Indonesia is a holder
of A Series Shares that give it veto right to things that need
special majority, the Government of Indonesia (KPPU's
definition) also has an ability to execute control in the significant
level to Indosat, and AMH will not be able to act in unilaterally
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to determine the corporation's policy of Indosat.
(vi) The implementation of irrelevant law by KPPU
124. The first regulation cited by KPPU is the elucidation of Article

10 (4) of the Law No.19 /2003. It actually supports the opinion
that it is different between controlling concepts and ownership of
majority share. The sentences cited by KPPU are:
“The understanding of commissioner adhere in the RFI ,

sense of human and of corporate, both known as Analysis,
commissioner member and commissioner Council
respectively. What is meant by certain shareholder is Paragraph
a controlling shareholder or majority shareholder of 26 page 64
a limited, public and the whole shareholders of
limited closed company”
125. It is not necessary to use the both phrase “controlling
shareholder” and “majority shareholder” if they are same in
meaning.
Nevertheless, they are different concept in reality, and Article 27
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is limited only to relate to ”majority shareholder ” and not to
“controlling shareholder
126. Two other regulations cited by KPPU is BAPEPAM Regulation RFI ,
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No. IX.H.1 and Central Bank (Indonesia Bank) Regulation No. Analysis,
8/16/PBI/2006 that define specifically ‘controller shareholder’ Paragraph
(both definition are little bit different), and not define ‘majority 28-9 page
shareholder’. This not at all relevant. 64
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127. RFI states that there are no Laws and regulations that define RFI ,
majority shareholder. It is untrue. RFI wholly ignores the Analysis,
evidence cited above by Professor Hikmahanto: Paragraph
27 page 64
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(vii) The misapplication of foreign law and regulation by
KPPU
128. Concerning merger regulation, the references used in RFI are the
laws of European Union (“EU”), UK (“UK”) and the United
States (”US”) that discuss about share acquisition. It is different
with the way KPPU enforce Article 27, in this case, to punish the
existing shareholders.
129. No single law regulation in the foreign law cited by in RFI

defines “majority shares”. It is surprisingly that KPPU deviate
the foreign law in its effort to bias the actual meaning in
Indonesian laws.
130. EC Merger Regulation cited by KPPU, (a basis of UK Merger RFI ,
Regulation) for example, defines ‘concentration’ and not Analysis,
majority ownership. Paragraph
30
Y
“Without lessen the intention of Article 4 (5) and
Article 22, the Regulation goes into effect to all
concentrations in a sense of community dimension as
referred to in this Article.”
P
131. A concentration is defined in Article 3 of EC Merger Regulation
as:
“A concentration is assumed happened where there
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is change of defense control as consequence of:
(a) merger from two or more independent and

previous effort or part of effort; or
(b) Acquisition, that conducted by one people or

more that has controlled at least one effort, or by one
effort or more, either by effect purchasing or asset,
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by contract or by different way, with direct or
indirect domination from all or some of a or more
other effort.”
132. It is absolutely different with the ownership concept of ‘majority

share’. It discusses a merger or taking over rather than on
existing ownership and it is measured by “controlling” and not
by ’majority’ ownership.
133. Part 7 of Clayton Act in United States, another regulations cited

by KPPU, is very different with Article 27. The regulation states:
“Nobody that conduct commerce or another activity RFI ,

that influence commerce can acquisition, directly or Analysis,
indirectly, all or every part of share or other capital
share and nobody that at one's feet of Federal Trade Paragraph
Commission Jurisdiction can acquisition all or every
part of asset owned by others that also conduct 41
commerce or activity other that influence commerce,
that in line with commerce or activity other that
influence commerce in any country part, effect of
acquisition can lessen competition in substantial, or
tend to result monopolies.”
Y
134. Once again, there are two important differences. First, Clayton
Act discusses on share acquisition, and not existing ownership.
Second, Clayton Act uses the phrase ‘all or any particular part of
share’, a concept wider than ’majority share’. Concerning this, it
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is ridiculous to implement regulations that sounded differently in
its effort to interpret the meaning of Article 27 of Anti-trust Law.
And so do all cases that interpret this Law will apply different
testing from the testing of “majority share”. Therefore, it is
irrelevant for the purpose.
O
135. KPPU shall realize that Article 28 and 29 (in Part IV of the Law
No.5) discuss on merger, consolidation and acquisition. Article
27 is found in Part III of the Law No.5 and in relation with the
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existing share ownership. Nevertheless, RFI remains to make it
unclear for the actual meaning of “majority”:
(viii) KPPU has ignored the facts that the definition of majority
shares has been considered by KPPU and DPR in 2003
136. The Government of Indonesia, in the Divestment Document on The White

divestment process of Indosat, dated 4 February 2003, conducted Paper of the
special consideration to Anti-trust Law and concluded that: Government
of Indonesia
on
Divestment
of Indosat
exhibited in
the First
Statement of
STT
Under Anti-trust No. 5/1999, a majority ownership in

many companies that conduct common business
Y
activity is prohibited. The ownership of STT in
Indosat through ICL and not a majority shareholder
(less than 50% of the listed Indosat’s shares). In
addition, the ownership of a Singaporean company in
Telkomsel is also less than 50%. Further , Minister
of BUMN is sure that the law prohibits monopolistic
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practices, and not majority ownership
…Telecommunications Industry is arranged tightly

and operators cannot determine policies including on
tariff.
O
137. AMH also notes that there is another important document on
share divestment of Indosat in the case document of KPPU, a
document entitling “Government Elucidation in the hearing with
“the Commission and House of Representatives” on the share
sales.
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138. This is a follow-up meeting on Indosat’s shares sale. The date of
the document was 2003. The most importantly is on page 11 that
states:
The
“Concerning the Law No.5/1999 on the Prohibition
of Monopolistic Practice and Unfair Competition, Elucidation
particularly Article 27 and 28 (3), it can be
of
elucidated that STT is not a shareholder of more
than 50% of Indosat’s share. While the stipulation Government
on the Taking over in Article 28 (1) of the Law
in the
No.5/1999 has not be regulated in the Government
Regulation and Government Decree. Furthermore, Commission
the Ministry of BUMN on 23 January 2003 has
Joined
meet the invitation of consultative meeting with the
Commission for Supervision of Business Meeting of
Competition (KPPU), and until present KPPU need
the House of
no further information from the
Government/Indosat concerning the divestment of Representat
Indosat. Without keeping aside the information
ives,
above, telecommunication industry is “highly
regulated” by the Government.” available in
the case
document of
Y
KPPU
139. From the citation, it is clear that KPPU is not only knows the
divestment process but also firmly invited to present its opinion
P
whether the process infringe Article 27 or not. KPPU states that
there is no problem concerning the STT’s interests in Indosat.
Unfortunately, it has not been four years yet, KPPU takes a
different position. It shows that KPPU is inconsistent.
O
140. It must be noted that the participation of ICL (a subsidiary that Dissenting
entirely owned by ST Telemedia) in Indosat divestment is also Opinion of
approved by Indonesia Investment Coordinating Body (BKPM) Dr. Ir.
in its decision No.14/V/PMA/2003 dated 7 February 2003. By Benny
offending to the decision of the investment at the moment, KPPU Pasaribu
C
has gone far beyond its authority. As it is expressed by Dr. Ir.
Benny Pasaribu:
“I have a notion that KPPU RI does not have the

power to be competent to cancel, to take different
decision, to take a legal action or to make a policy
over the decision that had been taken by the
government concerning the divestment of PT.
Indosat, through open tender and awarded given to
Singapore Technologies Telemedia (STT) in 2002.
Because, the initial process of divestment was
initiated by Government and the policy was a
political decision of Government relating to the
financial condition at that time. (Read Article 50
items a and Article 51 of the Law No.5/1999 that
regulate the exemption”
141. Although AMH was absence when the divestment exist¸ AMH is
rights router of ST Telecommunications and joint venture with
the Government of Qatar. The agreement was signed by
expecting that it will be protected. By offending the investment
after the initial statement told it so, a serious problem will be
faced by Indonesia concerning the uneasiness of foreign investor
Y
to the legal security in Indonesia.
C. There is no evidence of controlling more than 50%

market share
P
142. The only evidence given by KPPU about market share is in
paragraph 105 of its analysis part. The followings are the market
shares of Telkomsel and Indosat:
C
143.
O The table shows that Indosat has less than 50% of market shares
of cellular telecommunication, and the ownership of AMH is
possibly less than that. Due to the position of AMH that does not
have an ownership in Telkom and/or Telkomsel, the further
analysis concerning AMH does not need to be done.
D. KPPU does not find an evidence of dominant position

abuse
144. Professor Hikmahanto states in his first expert statement that is The First
presented along with the first Statement of STT that it is not an Report of
infringement of the Law of Anti-trust simply because of its Expert
dominant position resulted from the ownership of several Opinion,
Y
companies. The abuse of dominant position that causes an Prof.
infringement of the Anti-trust Law. Hikmahanto
, page 8,
paragraph
P
1, in the
case
document of
KPPU has
ignored to
consider
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such a
condition.KP
PU
145. According to Professor Hikmahanto, Article 27 (a) of the Anti- The First
C
trust Law shall be read on the basis of Rule of Reason of Article Report of
27 (a) of Anti-trust Law is a part of Dominant Position and in this Expert
case; Article 27 (a) of Anti-trust Law must be read together with Opinion,
specific abuse of Dominant Position prohibited by Article 25 of Prof.
Anti-trust Law. Wide perspective reading of Article 27 (a) of Hikmahanto
Anti-trust Law that the existence of Dominant Position merely , page 8,
breaking the law lead to misinterpretation an ambiguity of Article paragraph
25 of Anti-trust Law because Article 25 of Anti-trust Law 1, in the
enforced only if Dominant Position is abused. case
document of
KPPU
146. Therefore, KPPU shall prove its accusations that Temasek has
obviously utilized its ownership to lessen a level of competition
in the market. Majority ownership itself is not an infringement to
the Law. KPPU shall prove the existence of dominant position
abuse. KPPU must also prove the causality between share
ownership of Temasek and accusation of lessening competition.
If the dominant position is abused, it is an infringement. It is
Y
stated that KPPU has not proved this case yet.
147. Besides, the mandate of KPPU is only to investigate the abuse of Report
dominant position and not the existence of dominant position Hikmahanto
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itself. , page 8 - 10,
in case
document
KPPU
The Report
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of
Hikmahanto
, page 8 to
10 in the
C
case
document of
KPPU
(a)) Article 4 of the Presidential Decree No. 75 /1999, a Presidential
legal regulation that limited mission of KPPU. It is Decree No.
stated that the tasks of KPPU is to conduct an 75/1999.
assessment whether it abuses dominant position or Article 4, in
not, as it regulated by Article 25 to Article 28 of the the case
Anti-trust Law . document of

KPPU
(b))Article 1 (9) of KPPU Regulation No. 1/2006, that arrange

the Procedures of Case Handling in KPPU, states that ”An
infringement is an agreement and/or activity of dominant
position abuse that cause monopoly practice and/or unfair
competition.”
148. The accusation of abuse in RFI is only Accusation 2
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and Accusation 3, but the two accusations are
concerning the Telkomsel policy of price structure.
There is no accusation of abuse to Indosat as well its
shareholders. With the absence of the accusation,
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there is no infringement to Article 27(a) of the Anti-
trust Law. Therefore, there is no basis from KPPU to
follow up the investigation.
VII. ECONOMIC AND FINANCIAL ANALYSIS
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149. In this part we discuss economic analysis and finance of KPPU
and then we have a notion that:
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d. The definition of market by KPU is incorrect.
e. The market is competitive
(i) The BTS Invesment is not an indication of competition

level in the market
(ii) Price charged by operator is a competitive price
(iii) The increase of concentration is not for AMH
(iv) AMH does not enjoy the expanding of market power
(v) KPPU ignores to prove that Indosat and Telkomsel

compete each other.
f. The accusation of abuse by Telkomsel is not related to AMH

g. The calculation of KPPU on consumer loss is untrue.
Y
150. As a starting point, KPPU keeps on assuming that there is Paragraph
coordination between Telkomsel and Indosat that is “engineered” 2.1 of the
by Temasek. Unfortunately, KPPU has failed to identify the 2CA
concrete incentives for Temasek to get involve to such deed. Report,
Annex 3
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151. It is stated as well by DR. Cento in his second opinion that has
evaluated carefully RFI in his second Report. (“Report 2CA”).
AMH uses the independent conclusion from Dr. Cento as part of
its defense.
O
A. The Wrong Definition of Market by KPPU
(i) KPPU applies wrong definition on Market
C
152. RFI concludes wrongly that product market shall be limited to RFI ,
GSM, excluded CDMA (wireless fixed) or fixed access. The Analysis,
geographical market shall be defined as the entire area all over Paragraph 6
Indonesia. to 16
(Product
Market) and
17 to 21
(Geographic
al Market)
153. RFI ignores a clear expert statement that geographical market is The
defined correctly as Indonesia and product market is covering Statement of
fixed wireless service (FWA). In a developing country like AMH,
Indonesia, wireless and fixed wireless is actually substituted each Paragraph
other. The expert statement is available in Spectrum Report 88 to 96;
presented by AMH; the Study of CSE is presented by AMH and Spectrum
the Analysis Study presented by Temasek. KPPU does not Report
discuss the single reports in coming to the conclusion. KPPU Paragraph
comes to its conclusion that market shall be treated separately. 2.1 that is
Y
available in
the case
document of
KPPU
P
154. In checking through the case document of KPPU, AMH also Report of
obtains a report from Institute of Economic and Social Research, LPEM in
Faculty of Economic University of Indonesia (“LPEM Study”). the case
The study of LPEM is also used by KPPU in other part of RFI. document of
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KPPU
155. Nevertheless, KPPU does not mention the fact that Report of
LPEM also finds an existence of competition between
technology CDMA and GSM, and the two products are
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substituted each other. We cited and underlined the relevant parts
of the LPEM Report of LPEM as follow:
“Market structure in this industry is also determined The Report

by a platform used. An old operator like TELKOM of LPEM,
develops TelkomFlexi that based on CDMA and
INDOSAT with StarOne. Thereby, in cellular operator Chapter 2,
industry, CDMA and GSM competes each other to paragraph
capture consumer. Such competition is called
competition for market that is followed then with 2.1 in the
competition in the market. It means, determining the case
most used platform and then capture consumers as
many as possible. document of
KPPU
156. The opinion is also confirmed by the team of Follow- up

Investigation of KPPU to Mr.Mas Wigrantoro (“Mr. Mas”) from
Telecommunication Community (“MASTEL”)
28. Question: In your opinion, are FWA and GSM The Official
competitor? Report of
Answer: Yes. Within an area code. It is Follow Up
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inconsistent in a policy, how can be FWA mobile?” Investigatio
n of KPPU
to Mr. Mas
dated 25
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September
2007 in the
case
document of
KPPU
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157. Professor Hikmahanto states in his first expert statement:
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”In determining relevant market, KPPU must
conduct evidence based and logical analysis. Under
international best practices, if KPPU is wrong in
defining pertinent market, then its decision can be
revoked.”
158. RFI has made mistake in defining market. It is defined on

baseless evidence. It is a severe fault because it influences entire
process of investigation.
(ii) KPPU has calculated wrong market share
159. If the market does not define precisely, the market share
calculated to market player will also be different.
160. There are some permutations for calculating market shares, and it
varies along with the product (for example CDMA/GSM),
geography and set of measurement (such as revenue/a number of
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customers).
161. As it is explained above, AMH does not have any control or

ownership to Telkom and/or Telkomsel that is why calculating
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any part of Telkomsel’s market shares to AMH is incorrect.
162. It is incorrect to calculate market shares of AMH to Temasek for
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instance, since Temasek has no influence in any form in the way
AMH manage its indirect investment in Indosat.
(iii) KPPU only takes 3 Operators in its Analysis
C
163. Finally, it must be noted that KPPU only calculate market shares
of three operators, reckon market share from 3 operators,
Telkomsel, Indosat and Excelcomindo:-
164. RFI ,
Analysis,
Paragraph
105, page 82
165. Nevertheless, according to Spectrum Associates there are 6

cellular operators with CDMA permit and 6 with 2G/2G permit
in Indonesian market:
The Report
of Case
Associates,
Paragraph
Y
3.3, in the
First
Statement of
AMH
P
166. KPPU does not consider market shares of the player. The
calculation of KPPU is based on the assumption that the whole
market is shared only to three players and it is wrong.
O
B. The Competitive Market
167. RFI develops its analysis, in part B of Analysis, on the basis of
C
the fact that cellular communication market in Indonesia in
reality is not competitive.
168. In the following sub heading, C to G, we discuss some facts and

arguments cited by KPPU to support its assumption. We also
emphasize a number of indicators that miscalculated by KPPU.
They are about to conclude that relevant market, even if it is
limited to cellular phone, is very competitive.
C. BTS Investment is not an indicator of competition level

in the market
169. RFI concludes that Indosat’s investment in BTS is not as

aggressive as its competitors. KPPU observes the data until the
year of 2006 and conclude:
“Based on the above data, the growth of Indosat BTS RFI ,

is sluggish compare to its competitor. Actually, Indosat Analysis,
is in the closest position to a dominant player. The
Part IIIA,
Y
sluggish growth of the closest competitor had made
dominant player optimize its market power. Paragraph
96
170. There are important problems regarding this argumentation:-
P
(iii) The number of BTS station is not automatically a
best indicator of competition; and
(iv) Indosat’s decision concerning the BTS

investment was legal and logical.
(i) The number of BTS station is not automatically a best
O
indicator of competition;
171. Firstly, it is not clear whether a number of BTS stations are an

indication of competition in market. Finally, customer usually
C
more interests in service level from an operator than stations
amount BTS
172. The report of Case Associates is related to some competitive

indicator, and none of them used by KPPU.
173. ARPU (Average Revenue Per User) of the three main cellular
operators in Indonesia decreased significant in 2002 to 2006. It
was because of aggressive effort to develop of their basis
costumer by offering low prices
The Report
of 1CA,
paragraph
6.4, in the
Y
First
Statement of
AMH
P
O
174. Indonesia was one of countries that has the highest monthly The Report
churn rate among other countries in Asia of 1CA,
paragraph
6.4, in the
First
C
Statement of
AMH
The Report
of 1CA,
paragraph
6.4, in the
First
Statement of
AMH
175. Finally, if there is a monopolistic power, it has to be proved with
the high income of users, reflecting premium price that may be
imposed by abuse of such a position. However, a comparison of
Indonesia’s ARPU rates with other countries in the region shows
Y
that it is on the lower end of the spectrum:
F ig u r e 6 .9 : A v e r a g e r e v e n u e p e r u s e r , Q 1 2 0 0 7
1CA,
$20.00
$18.00
$18.43
paragraph
P
$15.51
$16.00
$14.00
6.4, in the
$12.00
First
$10.00 $9.55
$8.85 $9.09
$8.17
$8.00
$6.91 Statement of
$6.00 $5.57
$4.00 $3.58
$4.00
AMH
$2.00
$0.00
O
n s a ia na il
e sh ta ne si ss nd di
a
i az sia
ad kis pi ne ila In Ch Br ay
gl ilip do Ru a al
n Pa In Th M
Ba Ph
S o u rc e : M e rrill L y n c h .
176. Based on these three measures alone, it is clear that prices in the
cellular market have declined since 2002, mobile subscribers
C
have a choice between operators and exercise this choice
regularly, and finally there is no indication that Indonesian
operators enjoy larger revenues per customer than other countries
in the region. 1CA goes even further and explores a number of
other metrics that reflect the competition on the Indonesian
market. Thus competition is alive and well in the Indonesian
Cellular Market and there is no indication whatsoever of any
abuse of market position.
(ii) Indosat’s decisions in relation to BTS investments are

legitimate and sensible.
177. Despite KPPU’s claim that Indosat is not investing sufficiently in

BTS, the data itself reflects the following:-
RFI ,
Analysis,
Paragraph
93
Y
178. It is clear that a number of BTS invested by Indosat certainly
increase from 2000 to 2006, grew from 1,357 to 7,221. In the
absolute term, the growth of more than 5 times is not a low
P
investment.
179. Further, there is a powerful business reason for not extending

network carelessly. BTS is a huge investment and reduce great
profits resulted from the depreciation result big reduction to
O
advantage [of] a company because of its deprived measurement.
The objective of KPPU’s investigation, in one side, criticizes
Indosat for getting lower profit and on the other hand, for having
low investment. In reality, high investment produces low profit,
at least for a short term. It is explained by Mr.Johnny Swandi
C
Sjam the official report of Further Investigation on 14 September
2007:
”25. Question: Why did Return on equity of

Indosat decrease in 2006?
Answer: In 2006, we were developing, there

was high deprivation that reduced income net
but after the integration was performed the
net income increased. The decrease was
caused by high deprivation cost from the
integration.”
180. The analysis of RFI is insufficient and it ignores evidence that

Indosat planned to invest for 3,500 BTS’s in 2007:
”19. Question: How did the procurement pattern The Official
of BTS in Indosat? Report of
Answer: Until 2006, we applied separated Follow Up

program, but we used turn-key project for Investigatio
BTS at the moment. It usually the
Y
development/procurement of BTS Tower are n to
performed by vendor tower and then the radio Mr.Johnny
is installed by big vendors such as Siemens,
Alcatel, Ericsson, etc. Concerning that, we Swandi
have been developing huge network (around Sjam, l
3.500 BTSs) since 2007, we decide to perform
P
the work by turnkey project.”
181. Concerning KPPU’s criticism toward Indosat that has no

sufficient BTS so that Indosat cannot compete, It must be noted
that Indosat possesses 7,221 BTSs and other competitors such as
Hutchison thinks of being ready to compete by targeting 2,100
O
BTSs in 2011:-
33 Question: How many BTS have been built by The Follow

PT Hutchison CP Telecommunications? Up
C
Answer: Around 1,000 BTS. We have been Investigatio
developing them since the end of 2005 and we n of LPK,
target them for about 2,100 BTS until 2011.”
dated 21
June 2007 in
the case
document of
KPPU
182. Finally, even if we continue with the assumption that (i) that the Paragraph
growth of Indosat’s BTS development is low compare to its 2.1 Report
competitor (ii) that it has a bad effect to the performance of 2CA, Annex
Indosat, KPPU has failed to explain that it is a best interest for 3
Temasek, with the assumption that Temasek tries maximize its
profit.
183. The building of BTS is the best way maximizing operator profit,
Temasek’s interest to ensure that either Indosat and Ttelkomsel
build as much station as can, because to benefiting Temasek as in
direct investor.
Y
184. All evidences accepted by KPPU in step of its Further
Investigation are not reflected in RFI. If the facts are included,
description will be more well-balanced that Indosat has invested
P
much for BTS but it is equilibrated by the investment for gaining
more profit. Indosat also has planned to expand greatly in 2007.
The addition of 3,500 BTSs increases its network for about 50%.
The absence of consideration to the important evidence has
shown that KPPU comes to its conclusion without considering
O
the proofs.
185. The seriousness of Indosat (as it is proved in the statement of

Mr.Johnny) on the development of BTS to boost its network is in
line with improvement of capital expenditure of the company.
C
D. The Price Charged by Operators is competitive price
(i) The basic measurement of KPPU is incorrect.
186. The defense of AMH is also harmed by the negligence of KPPU RFI ,
to present correctly the sources of its data so that it makes it Analysis,
difficult to verify and to defend. For example, there are more Paragraph
than 20 detailed diagrams and in paragraph 56 to 59 in Part V 56 to 59
relating to cellular tariff of the operators without mentioning
sources. Concerning the accusation is on monopolistic practices
in fixing high tariff, Telkomsel in particular, it is necessary for
AMH to know data sources of KPPU. According to AMH, the
tariff is not high and it probably KPPU is making mistake in
referring the data sources.
187. The prices cited by KPPU are as follow:-
RFI,
Y
Paragraph
165,
P
O
188. The table is an average tariff. Nevertheless, the table is not
reliable to be a comparison because there are two tariff types,
“on-net” and “off-net”. The “on-net” tariff refers to price level
C
paid by cellular users who perform a call to other cellular users
within the same network. On the contrary, “off-net” tariff refers
to price level paid by cellular users who perform a call to other
network. The basic difference is in a call to other network in
which interconnection fee shall be paid. Interconnection fee is
arranged tightly by government, and service providers have less
authority on this. Thus, if significant comparison is going to be
made, the “on-net” tariff is suitable. Furthermore, there are
various discount packages offered by service providers. To
comprehend the price paid by consumer, the right basic
comparison is not based on ”on-net” tariff but the average of
“on-net” tariff paid by customer after all discounts are calculated.
(ii) The mistake of KPPU in Price Analysis

189. The KPPU tables in paragraph 97 to 101 do not show whether
KPPU compares tariff or price. Tariff is not such a price indicator
due to the discount and free minutes call offered in all tariff
packages.
Y
190. The only fraudulence touched by KPPU referring to price is
in two following paragraphs:
P
“In general, the retail price of postpaid increases
although its subscribers also increase significantly. From
the point of view of economic of scale, a high margin
growth is belonging to operators. It is an interesting
phenomenon because it seems that no competition occurs
O
to fight for consumers and to decrease price. If they are
competitive companies, each company will try to decrease
prices as a significant factor to fight for consumers from
its competitors.”
“According to Price-Leadership Model, a dominant company

plays apart in fixing price while others come after such a price-
C
fixing. It will happen if the follower companies have no bravery
to compete on price because the economic scale is not relatively
competitive. Price–Leadership is a form of tacit collusion that
looks like cartel to consumers with the absence of agreement
between the two parties and it simply a strategy of follower
company to gain optimum profit by adjusting price with
dominant company."
191. There is no basis to say that there is no competition to capture

customers or to decrease price. The price change level cited
above shows a competition to grab customers.
192. The Report of Case Associate 1CA also gives an evidence to

show that there is no reason to trust that the price in Indonesia is
fixed by anti-competitive. (See pa. 46 to 64). It is not considered
by KPPU.
193. Firstly, compare to the international rate, the average price of

cellular in Indonesia is the lowest among OECD.
Y
Report
1CA,
Paragraph
6.4 in the
P
First
Statement of
AMH
C
194.
O The Report of Case Associate 1CA also learns tariff changing

and general evidence of tariff competition based on the acts of
competitors are:
“Operator financial statement indicates that there

have already happened several times new price
offering refer to the level of price parameter
including new price launching, tariff fixed, starter
pack, free for registration expense, lengthening off
peak hour and other interesting offers for example
Report
1CA,
Paragraph
6.4 in the
First
Statement of
Indosat Mentari double free-talk (table 6.16).” AMH
Evidence indicates that operator cellular is tightly

competing by to decrease price, especially starter
packs 84 The Credit Suisse reports that in the period
of June 2004 and September 2005, there were 10 (ten)
time of decreasing price from IDR. 50.000 to IDR
5.000 for starter pack. 85
It is designed to boost a number of customers and
Y
cellular penetration and to respond the lost customers
in the competition with other operators. Telkomsel is
reported launched new edition of starter pack called
“Sympathy 10HOKI” offered new ten advantages’ on
P
15 March 2005, aiming at speeding up the growth of
SimPATI and to boost up the rate of movement
(churn rate).’86.”
O
195. KPPU’s opinion stating that Indosat chooses to follow
Telkomsel’s price independently without any discussion
among them, Indosat remains to be accused for “conducting
collusion”. Firstly, such argument was not logically
C
supported. If it is true, it has nothing to do with AMH. It is a
decision made by Indosat board of director.
196. In this case, Indosat cannot compete in price with Telkomsel

without lessening its profit. It strengthen the accusation of KPPU
to Indosat that Indosat gains low profits. KPPU shall be
consistence in its accusation. One of them is on KPPU’s blame to
Indosat for imposing high price (in line with price Telkomsel) or
KPPU alleges it for making insufficient profit. KPPU cannot
accuse simultaneously to Indosat with two contrary accusations.
197. AMH has also assessed an independent report compiled by Dr The Report
Sri Adiningsih (“Dr. Adiningsih”) dated August 2007, in the case of Dr.
document of KPPU, concluding that although its industrial Adiningsih,
structure is benefiting incumbent players, there is no indication on page 8 in
of collusion and price competition:- the Letter of
AMH dated
25
Y
September
2007
“Although many new entries are entering market,
P
the incumbent operator that have dominant position
remain to have big market share either in fixed line
wireless or cellular because incumbency advantage
is going into effect in telecommunication industry in
which incumbent has wide network and
infrastructure as an advantage. Therefore, it is hard
for new entries to compete in the pertinent market.
Considering the geography and huge population of
O
Indonesia that have not been served by the
telecommunication service, it attracts new operators
to enter fixed line wireless and cellular market. Low
price is a common platform offered by new entries to
capture consumers which leads then to the price war.
It can be seen from the various advertisements in
mass media. The new operator, tight competition
C
makes the service vary, increasing consumers and
quality of services. Under such condition, public gain
advantages from the new development and
competition among operators. It indicates that the
market structure of telecommunication in Indonesia
is tight oligopoly but price war among operators is
possible to occur. The worries to the existence of
collusion in this industry are invisible in the market.”
198. Dr Adiningsih also emphasizes its evidence that in reality there is

a price competition in any level among business actors:
“In other hand, tariff promotion also conducted by The Report

operator, for example PT Exelcomindo Pratama of Dr.
decrease its tariff for about IDR 149 per 30 second,
while Simpati (PT Telkomsel) impose IDR 300 per Adiningsih,
minute for a call between 23.00 to 07.00. PT Indosat on page 5 in
(Mentari) even gives free call about 00.00 to 05.00. It
indicates that today, telecommunication industry in the Letter of
fixed wireless network and cellular in Indonesia is in
‘tariff war’ and operators just maximize their AMH dated
network capacities. Consequently, tariff war remain
25
to keep on going until network capacities are fully
used (Nathan & Atmira). The recent growth shows September
intensive tariff war among operators through the
2007
offering of various advantages such as free roaming,
the same price of inter local and local call, pulse
Y
bonus, and others. Compare to the previous
condition, tariff war among operators has made the
decrease of cellular tariff as it is described in Table 7.
The tendency of the decrease of cellular tariff
indicate that the competition among cellular
operators is growing tightens.”
P
(iii) The failure of presenting the relationship of high tariff with
cross ownership
O
199. Concerning the allegations of KPPU on excessive tariff Paragraph
conducted by Telkomsel, KPPU limits only to Telkomsel, and 2.4, 2CA,
not to other providers. For this case, KPPU's arguments fail Enclosure 3
prove to find the relationship between Temasek's cross-
C
ownership and price.
200. Dr. Cento sees the fact that it is seldom to find anti-trust Paragraph
behaviour intending to create excessive price. Broader analysis is 2.4, 2CA,
needed more than what has conducted by KPPU. Dr. Cento Annex3
mentions that by using EBITDA and selective comparison with
other countries as a benchmark is incorrect.
201. It is due to reciprocal evidence, affirmed in the Report of Case Paragraph

Associate 1CA indicating that Indonesia is one country among 2.4, 2CA,
other low income countries that has the lowest cell phone price, it Annex3
is ignored by KPPU. When KPPU uses other countries as
comparison, there are no adjustment on other structural factors in
Indonesia made by KPPU that have no relation with the cross-
ownership of Temasek.
E. The Increase of Concentration
Y
(i) The concentration measurement
202. Concerning to concentration, KPPU seems to use two different RFI ,

measurement, Concentration Ratio (“CRn”) and Herfindahl- Analysis,
Paragraph
P
Hirschman Index (“HHI”).
57
203. Such measurement is not a good choice actually because they use RFI ,
common variable, market share. CRn is a total of market shares Analysis,
controlled by ‘n’ topmost companies; HHI is a square of market Paragraph
O
share for all business actors in industry. In this case, CRn and 58 to 59
HHI actually do not give truthfully choice of concentration
measurement. Posed at main Indication by CRn and HHI is big
market share.
C
204. As it is stated before that big market share will not bring
disadvantages. It happens because of its character of the industry.
The advantages appear only if there is collusion among business
actors. The only loss shown by HII is as follow:
“Oligopoly Theory that like cournot equilibrium very RFI ,

consistence if companies in market have big that Analysis,
relative same, so also have strength that relative
same in market. On the contrary, Price-Leadership Paragraph
Model very consistent explains company behavior if 78 to 79
there has been only one dominant company in market
is... very small other company till relative powerless
to vie with dominant company. In consequence, both
model actually compatible used in the situation that
extreme.
“In cellular telecommunication industry, each

company must establish an agreement,
interconnection agreement with other company
(competitor). Such condition tends to open an
opportunity to conduct collusion in the fields to
which it should be a competition such as pricing,
marketing and others.”
Y
205. It must be noted that according to KPPU, the presence of
collusion is possible to happen because of its market structure.
There is only one dominant company, Telkomsel that has the
P
biggest market shares. The collusion is suspected to occur when
telecommunication companies shall sign an interconnection
agreement. Unfortunately, KPPU cannot identify the evidence of
collusive behavior.
O
206. Indosat has no power to compete with Telkomsel relating to its
market shares. Yet, it is normal in an industry because it shows
that any parties that enter into an industry have to do the best by
itself to compete. An interconnection agreement is also normal in
C
an industry. The argumentation of KPPU is that Indosat is
operating in an industry as it mentioned above and the
shareholders have to responsible to the suspected infringement of
Anti-trust law by Telkomsel.
(ii) The increase of Concentration
207. KPPU performs market research and the result shows that market RFI ,
concentration increase in 2002-2006. It occurs due to the Analysis,
improvement of HHI and GHHI. Unfortunately, AMH cannot Paragraph
analyze the accuracy to the measurement of HHI and GHII 104 to 121.
because KPPU does not state the data source, raw and proceeded
data. In this part, we refer to the KPPU’s statistic data but it does
not mean that we agree to the result of the analysis.
208. Arguments of KPPU can be summarized as follows:
The values of GHHI, annually tended to increase in RFI , Part

the cross ownership period, vividly provides a IV,
Y
conclusion that cross-ownership have brought a
structure of cellular industry to be getting Paragraph
concentrated. It is disadvantage to fair compatition. 122
The increasing of concentration will boost tor
oligopolistic structure.
P
209. KPPU states that there is a similarity between the period of cross-
ownership and the increasing of GHHI. The cross ownership has
increased GHHI. Such an opinion is hard to understand. At the
same period, the Government of Indonesia had also ownership in
two companies.
O
210. HHI is controlled by market share and it will be seen that the
only market player that increase within that period was
Telkomsel:
C
RFI ,
Analysis,
Paragraph
105
211. It means that the increase of HHI does not relate to Indosat. The
increase of HHI was controlled wholly by the market share of
Telkomsel. In reality, the contribution of Indosat to HHI actually
decreased from 8888 in 2004 to 465 in 2006.
RFI , Part
IV,
paragraph
109
212.
P Y
If Indosat does not give any contribution to the enhancement of
HHI, the shareholders cannot be entangled in any way to increase
this HHI.
O
213. The most important thing is that KPPU has ignored confirmed
evidence that AMH plays insignificant roles in the major
decision of Indosat and its agenda Control much Indosat by
board of director and commissioner Indosat. (See the evidence
from Mr. Roes Aryawijaya). If the illogical conclusion is trusted,
C
the Government of Indonesia is the only party that is responsible
for it
(iii) The level of concentration is placed in one perspective
214. Finally, the high intended concentration numbers must be placed The Report
in its perspective. The Report of Case Associate 1CA has of Case
underlined that the market shares combined of Telkomsel and Associates
Indosat equal to matured markets in Europe and the different of 2CR in
phase markets in Asia. paragraph
2.5, Annex 3
215. The mature markets, as in Europe, it usually has biggest operator The Report
controlling for 40% of all customers, and in most matured market of Case
in Europe, it reaches 80%. The second largest operator in this Associates
country has 20% of market shares or less. of 2CR in
paragraph
2.5, Annex
3
Y
216. It also happens in Asian developing markets. In China, The Report
Philippine and Korea for example, the biggest operator have of Case
more than 80% of market shares. In Thailand, Bangladesh and Associates
Malaysia, the two biggest operators have more than 70% of the of 2CR in
P
market shares combined. paragraph
2.5, Annex 3
217. It indicates that a high HHI is caused by the structure of the

industry itself. Although it is probably a little bit pushed by
cross-ownership of Temasek to Indosat and Telkomsel, it tends
O
to structure than industry itself.
(iv) The use of HHI Generalized
C
218. KPPU also uses GHHI to equip its HHI's based analysis. The 2 CR,
main difference between the two measurement is that GHHI Paragraph
considers market concentration 3.1, Annex
3
219. Therefore, the main problem of measurement is the difficulties of

measuring correctly the control reflection of shareholders to a
company. The equation in RFI uses an assumption that control is
measured by the principle of “one share one vote” and based its
assumption on the shares predicted to be owned by Temasek but
it opposes with the fact that the Government of Indonesia has
shares with special votes in Telkomsel and Indosat that giving
the special control in both companies.
220. The main criticism of Dr. Cento to the GHHI is that GHHI fails
to calculate the definition of law and institution that determine
the real control. Therefore, the other dimension given by this
measurement to HHI that usually has doubted values.
Y
F. Market Power Improvement
221. On items 154 up to 171, KPPU analysis of market force
P
improvement, as it is measured from improvement EBITDA.
Again, without existence of explanation on how data “to
process”, AMH is harmed without can pass an opinion to the
accurate calculation or data extraction that presented by KPPU
O
222. The first Problem is that Indosat is business that diversified,
where Telkomsel and Excelkomindo focus at cellular services.
That is why, EBITDA numbers for Indosat express EBITDA
from its all businesses, that is junction fixed, cellular, wireless
junction and MIDI, whereas numbers of Telkomsel and
C
Excelkomindo will only express cellular business. If this
numbers used as the comparison, the comparison will not be
accurate. In this case, statement of KPPU that EBITDA of from
cellular operators always exceed 50% it is not accurate entirely,
as elementary from unequal comparison.
223. It must be noted that Dr. Cento has underlined that EBITDA The Report
could have limited value in comparing to operators profitability. of Case
It is various depend on the maximum phase that companies stay Associate
in its investment cycle, and tend to be higher in the developing 2CR,
markets where investors ask higher capital return for their Paragraph
investment. Therefore, relying only on this numbers is wrong. 3.4, Annex 3
224.
Arguments of KPPU can be summarized as follows:
”The high market power that is suspected caused by RFI, Part
Y
concentrated structure because of cross-ownership IV,
can be addressed by some indications. For example
the height of the rate of profit margin measured by Paragraph
EBITDA. The high selling price compared to other 154
country, and the difference of the selling price and
expenditure cost.”
P
225. KPPU thinks that if operators obtain high EBITA, it
automatically the profit gained is also high and the profit is
higher compare to other countries
226. The argumentation of KPPU on EBITDA is incorrect. KPPU
O
assumes that EBITDA is a good measurement to count profits.
EBITDA is earning before Interest, Tax Depreciation, and
Amortization. Profits represent what a company has gained after
all costs are calculated while EBITDA does not calculate costs at
C
all.
227. KPPU ignores to calculate deprivation in fixing profit rates.

Indonesia is a huge country and many BTS shall be built to have
sufficient network coverage. A BTS reflects huge investment and
it has to be calculated to find the deprivation in order to calculate
company profits rate.
228. The most important differences between EBITDA and profits

have been clearly explained by Hasnul Suhaimi, the Managing
Director of Excelommindo during KPPU’s Follow up
investigation.
15. Question: How is your opinion about excessive profit

The
gained from the high tariff?
Investigatio
Answer: Cellular industry is developing faster. I am n Official
sure that the cash flow of each operator is still Report
negative. The only positive cash flow is Telkomsel for Hasnul
its USD 1.5 billion investment. The cash flow of XL is Suhaimi
negative due to its 3 trillion investments. In 2007 for terdate 9
Y
example, EBITDA of XL was 3.3, while our August
investment was 6.3 trillion. It is long-term investment 2007i in case
of XL. It is not a beautiful as people thought. I wonder document
why many operators enter cellular market in Indonesia. ofKPPU
P
the
Investigatio
n Official
Report
Hasnul
O
Suhaimi 0nl
9 August
2007i in case
document of
C
KPPU
229. The expensive investment in BTS stations causes negative cash

flow. The profits seem to be high if it is calculated from
EBITDA, and it is misleading. The substantial cost invested in
this business is in the development of BTS, and it is carefully
calculated by investor. Excelcomindo clearly states that its
investment “is not good as it is thought”. It shows that KPPU
suggestion to Indosat, for building BTS in order to be able to
compete, is not a wise suggestion. Once again KPPU has ignored
to consider the evidence in its RFI.
230. KPPU states in paragraph 162 of RFI:-

”The high values of EBITDA in the cross-ownership RFI,
period that is always above 50% indicating that business Analysis ,
actors in telecommunication service industries have big
market power. The market power owned are for creating item 162
monopolistic advantages that exceed double than the
costs.”
Y
231. Such a statement is groundless because (i) the EBITDA margin is
based on inconsistent input among business actors, (ii) there is no
reason to state that 50% of the EBITDA margin indicating
P
“sufficient” market force (iii) there is no measurement of
monopolistic profit (business income) as it is explained above.
232. In consequence, the conclusion of KPPU stating that there is

excessive profit in the mobile cell phone sector in Indonesia
O
groundless. At least, KPPU ignores to reckon two important
factors, depreciation and normal profit, the two factors reckoned
prior to conclude that business income available in an industry.
G. The allegations of an abuse by “Telkomsel”
C
233. In item 172 to 189, KPPU discusses market force of Telkomsel
and its abuse allegation. The market force of Telkomsel is seen
from the height of EBITDA (the mistake of this analysis has been
explained above).
234. Initially, we will show that Mr. Roes Aryawijaya in its meeting The Meeting
with KPPU on 19 July 2007 state that the performance of Indosat Report of
is getting better after the investment of STT in Indosat. the Ministry
Therefore, Indosat cannot be sacrificed for Telkomsel. of BUMN
on page 4 of
the case
document of
KPPU
47. 47. Question: Which company performance is better,
before or after the purchasing STT in Indosat?
Answer: For EBITDA, it was 53% before and 57 %

after acquisition. The increase of EBITDA
margin is supported also by the technological
Y
development of MIDI.
235. Other big Allegation is that Telkomsel has used its market force The RFI,
for “hinder” the competitors, specially by misuse offer strength Analysis,
that the of referring to interconnection expense part IV,
P
item 185 to
189
236. It was not have connection with Indosat. It explained clearly in

KPPU’s interview with Mr. Lioe Phan Koen, General Manager
of ICR of PT Hutchison CP Telecommunications
O
(“HUTCHISON”)
1. Question: According to the information we have, initially

Of follow-up
PT Hutchison CP Telecommunications find
interconnection resistance? investigatio
Answer: Yes, but it has already finished by the mediation
C
n to LPK
of BRTI.
2. Question: Would you tell me more detail? date 21 June
Answer: When we would have an interconnection, we
2007 in case
had to sign an agreement that must be approved by
BRTI. The rules on interconnection should be done by document of
fulfilling certain requirements such as 48 ERL for its
KPPU
traffic.
3. Question: Is the requirement made by incumbent
company?
Answer: Yes, the requirement is made in its DPI by
incumbent company.
4. Question: As long as the requirement is wholly conducted,
there will be no new entry operating?
Answer : Yes.
5. Question: So, is it impossible for new business actor or
companies to pass the requirement?
Answer : Yes.
6. Question: Do you think that the requirement constraint
new business actors?
Answer : Yes.
7. Question: Does the requirement have a technical
justification?
Answer: There is a technical quantification but actually
there is no single business actor is able to fulfill it. As long
as I know, there is no such a requirement in Ministerial
Decree.
8. Question: So, if the requirement cannot be fulfilled the
interconnection is not approved?
Answer: It does not mean that it is unapproved but
Y
delayed until the business actor fulfills the requirement.
9. Question: Do all incumbent operators require such a
requirement?
Answer: Such a requirement is asked by PT
Telekomunikasi Selular and in my opinion XL also leads
to the same policy as it is done by PT Telecommunications
P
Cellular.
20. Question : How about Indosat ?
Answer : Indosat does not require such

requirement .
O
237. Involvement Indosat has been in clear denied by Hutchinson in
an interview that conducted by KPPU. Although, KPPU not only
already negligence to load this important evidence in RFI , but
C
KPPU even fixed with its argument that abuse that conducted by
Telkomsel must be in anyway controlled by Temasek crossed
ownership allegation.
H. Inaccuracy of consumer loss quantification
238. In paragraph 205 to 213 of RFI, KPPU states its argument that
Temasek crossed ownership has caused consumer loss. But
KPPU didn’t mentioned numbers of consumer loss.
(i) Inaccuracy of theoretical approach
239. The main basis used by KPPU in measuring consumer loss (in
paragraph 190 to 200 of RFI) is to use other countries prices as
benchmarks and the Report of LPEM FE UI (in paragraph 201 to
203 RFI).
240. The first problem is whether the theoretical approach Report of
Y
implemented to determine consumer loss is true or not. The LPEM in
report of LPEM uses framework of ‘Structure-Conduct- case
Performance’ (“SCP”) as an analysis and it is one of Report used document of
by KPPU to quantify consumer loss. KPPU;
P
RFI,
Analysis,
paragraph
201.
O
241. According to the Report of LPEM, the task is to:
“Analyze Structure-Conduct-Performance cellular Report of

telecommunication sub-industry in Ind LPEM,
paragraph
C
onesia.”
1.2, in case
document of
KPPU
242. The model is criticized internationally by Chicago School of The opinion

Economics. Dr. Adiningsih writes a newly report on it and we of an expert
cite as well. The report analyzes theoretical approach in the Dr.
context of our case. Adiningsih,
Enclosure 4
243. According to theory of SCP, the industrial structure will form The opinion
business actors’ conducts that influence later to their of an expert
performances. It is a theory benefiting regulator because it Dr.
expresses that industrial structure is not perfect. Like in Adiningsih,
oligopoly, the players probably conduct collusion which gives paragraph
them super- normal profits (known as business income or 2.1,
monopolistic profits) but causes consumer loss. This theory is Enclosure 4
usually used to support a proposition that a presence of economy
is a presence of economic loss. In this case, the conclusion of
KPPU that high EBITDA claimed by cellular operators is a proof
Y
of their market shares (paragraph 162 RFI) is based on this
theory.
244. This Theory has been criticized sharply by Chicago School with The opinion
P
the reason that in many industries, what is described as of an expert
‘monopolistic profit’ is usually a company that enjoys efficiently Dr.
competitive excellence over the less efficient producers. In Adiningsih,
reality, such companies cannot use their power to fix real price paragraph
due to competitive treatment. Such a company shall keep on 2.1,
O
innovating to make it a leader. In this case, there is no ‘real Enclosure 4
wealth loss, because all companies get ‘normal’ profit and not
‘economic’ profit.
C
245. Dr. Adiningsih compares a great number of price and non-price
competitions among player, and concludes:
• The liberalization of telecommunication industry has The opinion

brought to a dynamics business competition in cellular of an expert
phone industry in Indonesia. The tight competition leads Dr.
to price war directly and indirectly (converted). Such a Adiningsih,
price competition, for a long term will direct to perfect Part
competition balance, or more known as Bertrand balance. Conclusion,
• In addition to price competition, competition is also Enclosure 4

tightening by the developing of innovative product. The
tight competition results to intensive promotion and the
changing of life style. It creates then a need of mobile
phone for the consumer who previously does not need it.
Therefore, the consumer develops faster and market scale
bigger than those of other countries.
• The monopolistic structure does not always produce

welfare loss. Monopolistic market with high potential
entrant pressure could perform like a perfect competition
Y
market. In this case, some indicators show that industrial
structure of cellular market in Indonesia tends to be
directed to contestable market structure. In such market
structure, this Structure known by the name of contestable
P
market structure. In such market structure, the
government's duty is to keep market access open as wide
as possible. Besides, the Government needs to evaluate
any producer strategy, using rule of reason approach.
O
246. KPPU does not seem to have ever considered the mistake of the
theory. By assuming market shares per se shows that there is
consumer loss. It is absolutely possible to consider that the
C
market is ‘contestable market’, then there will be no consumer
loss produced since there is no single player is able to influence
price significantly. Dr. Adiningsih has a notion that Indonesian
cellular market has such kind of characteristic. The evidence,
either mentioned in her Report or the Report of Case Associates
1CA and 2CA, are taken from public sources and it supports the
statement.
(ii) Inaccurate calculating method
247. The starting point of KPPU is to determine correctly contra- The Report
factual problems. The problem has to consider possible market 2CR,

structure to prospectively exist without a cross-ownership of paragraph
Temasek. 2.2,
Enclosure 3
248. The first assumption of KPPU in its calculation is that without The Report
Temasek’s cross-ownership, the price tends to decrease to the 2CR,
competitive level. Yet, the assumption is not accurate if the main paragraph
actor of the claimed unbalancing is the market structure itself 2.2,
Y
Enclosure 3
249. The second mistake is to identify consumer loss exactly, liable to The Report
the conduct of claimed anti-competitive. The accurate data to 2CR,
exercise is to calculate exactly consumer loss (an it depends on paragraph
P
contra-factual, and not merely price in other market) and put it 3.4,
into which part of consumer loss caused by cross-ownership and Enclosure 3
the imperfect of other markets (such as market structure) and
other abuses (such as anti-competitive pricing by Telkomsel as it
is alleged). As it is underlined by Dr. Cento, this is an analysis
O
that is backed up by part of abundant data that is not included by
KPPU in RFI .
250. Finally, the method used by KPPU, to compare price with other
C
market in Asia, has been criticized by Dr. Cento. It includes:
The Report
• assuming implicitly that the differences between
2CR,
fixation of price and actual price (keeping aside the
paragraph
problem in its calculation) can be wholly liable to the
3.5,
cross-ownership of Temasek (that is not a problem
Enclosure 3
here );
• ignoring facts that omitting Temasek’s cross-

ownership will not omit excessive price in the
market that remains to be very concentrated; ;
• ignoring facts, that interconnection costs or termination

will be influenced by the changing or ownership because
it depends on the ending of monopoly.
• Hereinafter, the prediction of consumer loss is very
controversial. It because KPPU does not adjust different
factor in the countries used as bench mark. The Analysis
of KPPU assumes:
Y
• that demand in all comparative countries is the same as in
Indonesia . It is not realistic due to the difference rate of
income in that countries;
• that the cost to provide cellular telecommunication in
P
all countries are the same. Again, it is not realistic
due to the different step of the establishment of
network in any countries.”
251. Further, it depends on the estimation of market elasticity on The Report
O
demand, by assuming that the supply and demand condition in all 2CR,
comparative countries are equal to Indonesia. It includes the Paragraph
assumption that the cost of provide cellular telecommunication 3.5,
service in the comparative countries are equal to Indonesia. Enclosure 3
C
252. The approach using the Report of LPEM is questionable. Based
on paragraph 1.4, in the research methodology:
“Starting from a hypothesis that a tariff of cellular phone The Report

service (GSM) in the market structure of national of LPEM ,
telecommunication service market is higher than it should
be, it is suspected to be a consumer loss.” case
document of
KPPU
253. The Report of LPEM is started with a premise that there is a

consumer loss. Further, the report uses SCP framework to
explain the loss that is predicted to exist. The fact, the report does
not describe contra factual approach to which price in Indonesian
market, and the conclusion cannot be used as a precise prediction
on consumer loss. The Head of LPEM FE UI comments on this
that is cited in part VIII below.
VIII.
THE INFRINGEMENT TO THE LAW
Y
254. AMH also finds some important evidences in the case document
of KPPU concerning the termination of report by FSP BUMN in
which it is not discussed or mentioned in the report of KPPU.
P
The termination of report by FSP BUMN is initiated by Arief
Poyuono, the chairperson of FSP BUMN. The letter to KPPU is
about the worries, truth and integrity of the whole investigation
of the case.
O
A. The investigation of KPPU is stained
255. The most worry is the statement of Arief Poyuono in the meeting
C
with Suharto, an Altimo’s representative, describing that the
investigation process of KPPU is influenced by Altimo:
“1. That in the beginning of April 2007, the Chief of The letter of
United FSP BUMN with his Attorney-in-fact met
FSP BUMN
Suharto (Regional Director Strategic & Business
Development of Altimo Central and South East Asia) to KPPU
at the office of Suharto in Wisma GKBI at Jalan
date 18 July
Sudirman Jakarta. There were some thing come out
from the meeting: 2007
-That Suharto asked the Chairperson of United FSP

BUMN to cancel press conference plan on the
withdrawal of United FSP BUMN’s report to KPPU.
-At that moment, Suharto called someone,

Muhamed Iqbal (the Chairperson of KPPU) and
ask the forming of Preliminary investigation team.
Suharto prefers Nawir Messi to Benny Pasaribu as
the Chairperson of Preliminary Investigation
Team.”
256. It is unusual that Follow-up Investigation Report does not discuss

the evidence that directly questioning the partiality and integrity
of the investigation. Surprisingly, when the document appears
Y
from the Reporting party that its report starting this
“investigation”.
B. KPPU keeps on continuing the investigation although
P
the report has been withdrawn
257. It must be noted also that in the different part of the letter, the
affirmation of STT is stated that KPPU continues its
investigation long after the report is withdrawn.
O
258. FSP BUMN submitted the report on 18 October 2006 and the
report is accompanied by two additional reports on 17 November
2006 and 22 December 2006.
C
259. According to Anti-trust law, in 30 days since the acceptance of
the report, KPPU is obliged to specify whether the investigation
must be conducted or not. The period has to end on 30
November 2006.
260. According to Article 43(3) of the regulation of KPPU, the step of

Follow up investigation must be finished in 60 days since the
acceptance of the report and it is possible to be extended for the
30 days to come.
261. However, as it is known that RFI is issued on 3 October 2007, a

year after the early report.
C. KPPU has constrained the defense of AMH
(i) AMH is not given a chance in the Preliminary

Investigation
Y
262. KPPU also has constrained the efforts of AMH to advocate
during investigation process. It was started when AMH was
summoned for the first time for a session in the Further
P
Investigation on June 2007, without any Preliminary
investigation at all previously.
263. Based on Article 1, Item 14 of the KPPU regulation:
O
“Preliminary investigation is a couple of activity that
conducted by Preliminary investigation team to report
the suspected infringement and to conclude whether
Follow up Investigation needs to be performed or
not.”
C
264. Therefore, based on the Regulation of KPPU, the Preliminary
Investigation shall be performed in order to decide whether
Follow up Investigation shall conducted or not for our client. Our
clients are not given a chance to get involved in the Preliminary
Investigation so that their important rights have been neglected.
The rights to mentioned are:
c) To have the result of Preliminary investigation (Article 34

of KPPU Regulation)
d) To inform the mistake and to be given opportunity to

changes its behavior before stipulating Further
Investigation (Article 29 paragraph (2) of the Regulation
of KPPU)
265. The negligence of the rights of our client has resulted to the
important implication of AMH. Firstly, AMH has no information
concerning the allegation to AMH prior to be a party in the
Further Investigation. Secondly, it means that AMH has no
Y
opportunity to discuss special deed KPPU wants from AMH.
Thirdly, AMH shall be displayed evidences that are owned by
KPPU in order to make AMH write appropriate defenses.
P
(ii) AMH is not given a suitable access to observe the case
document of KPPU
266. The case document of KPPU consists of many materials needed

by AMH to be learnt in order to be able to advocate correctly. It
O
is important because the RFI intentionally eliminates or not
discuss all relevant evidences that there is no infringement to
Article 27.
267. In this case, AMH objects strongly to the procedure used by
C
KPPU to in refusing to the material in the case document of
KPPU. It has been submitted to KPPU on 27 September 2007.
268. It can be seen clearly in Article 65 paragraph (2) of KPPU

regulation that our client should be given a permit to scrutinize
the evidences from KPPU in each step of investigation:
“In any step of investigation and the session of

Council Commission, the Reported Party is entitled
to:
e. scrutinize evidences used as the Investigation

Summary.”
269. On the contrary, KPPU refuses the request of AMH on 20 July
2007 to give an access to case document of KPPU by stating that
AMH is only permitted to see case document of KPPU in the
step of “Final Investigation”. Even if the opinion of KPPU is
Y
correct (in which we cannot accept it), KPPU ought to consider
that there are many documents that shall be learnt, therefore
KPPU must give enough time to AMH.
P
270. The situation is worsened by the fact that KPPU has summarized
its Further Investigation on 27 September 2007 and KPPU
delivers it to AMH on 3 October 2007. KPPU finally permits
AMH to study the evidences in case document of KPPU on 5
October 2007 for only 2 hours. Further, upon our request KPPU
O
then permits AMH to check its document for 2 following day.
But there were no access toward document that that was given
after, although there were request from us.
C
271. The situations in which AMH is permitted to study the case
document of KPPU shows that KPPU is not serious in giving
opportunity to AMH for advocating itself.
(f) Firstly, the evidences are huge in number. The evidences

consist of 4 document boxes and 17 document folders.
Most of the documents are written in Indonesian. All
Reported Parties (unless Telkomsel) are foreigners,
therefore the documents shall be translated and give it to
clients before giving instructions concerning to the case.
(g) Secondly, the access to the case document of KPPU is

passed on the dates on the eve of Idul Fitri that make it
impossible to find translators.
(h) Thirdly, most of the evidences are related to economy and
law. The expert consultants on anti-trust and economy are
needed in order to have AMH comprehend contain of
KPPU’s case document.
Y
(i) Fourthly, AMH asks an access to certain documents
mentioned by KPPU in its footnotes of the report. The
documents are articles from journal (for example
Tinjauan terhadap Holding Company, Trust, Cartel and
P
Concern by Hashim Purba) and the passages of other
textbook (for example UK Merger Control: Law and
Practice). However, KPPU refuses to give access to
AMH by saying that there are ‘public document’.
Although AMH can find documents is if there are much
O
times, AMH does not see the reason of KPPU to refuse a
direct access of AMH, unless to lessen the available time
of prepare its defense.
(j) Finally, STT cannot translate the whole documents

because of the limitation of time, and KPPU refuses to
C
give opportunity to AMH to defense further after 2
November 2007. There is no reason for KPPU to confine
the Reported Party to check the case document.
(iii) KPPU has collided with the obligation of keeping the

confidentiality
272. AMH also very worries to the fact that some members of KPPU,
including its Chairperson have informed journalists that the
Reported parties are responsible prior to hearing to the defense of
the Reported Parties. It violates KPPU’s Ethical Conduct and the
deniable to the justice of the Reported parties.
273. Since the investigation is started, the open statement of KPPU is
public consumption, and all express its opponent to STT and
other Reported Parties.
Y
a. On 6 February 2007, in Investor Daily dated 6 February Article
2007, the Chairperson of KPPU stated: dated 6
February
“Today, there are many indication of unfair
competition in telecommunications sector, 2007 from
P
crossed ownership as an example. It is proved Investor
that telephone tariff in Indonesia at this time is
more expensive than Singapore and Daily,
Malaysia.” Enclosure 5
Article date
b. In article Harian Rakyat on 24 April 2007, Iqbal stated : 24 May
O
2007 from
“There is a lot of indication on unfair Agency
competition in telecommunications sector,
cross ownership as one of example. Telephone France-
tariff in Indonesia at this time is much more Press in The
expensive compare to Singapore and
C
Malaysia.” First
Statement of
19. On 24 May 2007, the Chairperson of KPPU told journalist
AMH
that KPPU have found “lack of competition between Telkomsel
and Indosat”. Even, all statements are made before any Article date
information to Temasek concerning investigation conducted to 7 June 2007
Temasek. from
Business
a. On May 2007, Nawir Messi, Vice Chairman of KPPU
times in the
told Reuters that KPPU has “strong suspicions to bring
First
this case to a higher investigation level.”
Statement of
AMH
274. The statements to journalist oppose Article 5 (4) of KPPU’s Ethical

Decree No. 8/KPPU/Piece/XI/2000 on ethical conducts and Conduct
working mechanism KPPU: and
Mechanism
of KPPU
Enclosure 6
Y
“The Commission Member is prohibited to give information
to the public because it is able to influence the decision of
Commission over the case that is being handled.”
275. The statements of KPPU to journalist is premature and able
P
influence KPPU’s neutrality that is in charge to decide a case.
276. In fact, even Dr. Ir.Benny Pasaribu, a team member Follow up

investigation has questioned a legitimization of the legal process
and hesitated RFI:
O
1. In an article of Seputar Indonesia on 24 October 2007, a former
Chairperson of KPPU, Sutrisno Iwantono states that in this case,
“monopoly is not proved because the share ownership is less
50%.”
C
2. An article in Antara News on 25 October 2007, a member of
Commission VI of House of Representative (DPR), Hasto
Kristianto reacted to the “strong controversy related to the decision
of KPPU” and the process of KPPU is not “transparent”and had
potential to threaten the climate of investment. Article
dated 25
3. In article in Ekonomi & Bisnis on 25 October 2007, a
October
member of Further Investigation team, Dr. Ir. Benny Pasaribu
states that the substance of RFI is “irrelevant and not rely on 2007,
the objective idea.” He also comments that the procedure of Enclosure 7
KPPU “is not favourable” and questions the premature
statements of KPPU to media.
D. KPPU does not investigate Evidences
277. We are worrying to the objectivity of KPPU investigation from

the beginning. We are considering the reports in some media
Y
referring to RFI that make us hesitate to the objectivity of the
team.
(i) KPPU is negligent to scrutinize the study conducted by
P
LPEM
278. One of the studies cited by KPPU is a study conducted by LPEM.

KPPU relies on the measurement of LPEM concerning consumer
loss.
O
279. It is interesting to note that the head of LPEM has publicly
inform that the proof of Oligopoly is very weak and need deeper
study on the structure of company cost prior to come to the
C
conclusion:
Commenting to the price rate in Indonesia as a second

Article
highest in Asia, he said that international comparison is
Jakarta Post
hard to perform due to the different cost structure of each
date 24
country.
September
The Head of LPEM-UI, Chatib Basri, agrees that it is hard
2007,
to compare due to its complexities.
Enclosure 8
“I know other research concluding that comparing to other
countries in South Asia, our price is higher. Nevertheless,
the problem is not as simple as that because we have to
quantify its cost structure and economic scale," he said.
Chatib tells that the find no price fixing conducted by

industrial actors although it is reported by media.
280. In one of public forum, he also abolished the view that LPEM
report supported the view that there is co-operation between
Indosat and Telkomsel. He also criticize the way KPPU omitted
some significant substances in summarizing the report of LPEM:
Y
“In his opinion: currently the sentence used from An Article
executive summary is “an indication of tariff uniformity in tempo
is an early step to identify price fixing". But, there is
another sentence following it, “nevertheless, it does not date 20
P
identify price fixing". The last sentence is omitted by september
KPPU.”
2007
“Chatib explains that similar tariff pattern is not
always interpreted as price fixing or collusive result. In
the United States, the price fixing independently,
unilaterally, and considering consensus parallelism is
not assumed as Antitrust. .
O
Therefore, he affirms that statistic movement of mobile
tariff between Telkomsel and Indosat cannot be
concluded as cartel of the two companies.
The similar tariff Movement is possible to occurs due to

the competition in the industry, so that it shall be seen
C
carefully whether Telkomsel and Indosat formulating
cartel tariff in telecommunications industry,” said
Chatib in the public discussion entitled “Enforcing
Business rule in the Globalization Era: The Case of
Telecommunications Sector in Indonesia” in Centre for
Strategic and International Studies.
Chatib admit that he does not know why KPPU comes to

such a conclusion. “We do not for sure conclude that
there is price fixing (or cartel) conducted by both
company," he said.”
281. KPPU cites the report without entering qualifications made by

the Head of LPEM FE UI. Particularly, one of KPPU’s
conclusions that the tariff similarity supports the suspect that
there is cooperation. In the assumption of KPPU, quantifying
consumer loss through the practice in other countries is valid.
Therefore, such propositions are those qualified by the
Chairperson of KPPU.
(ii) The criticism of Dr. Ir. Benny Pasaribu to the Further

Investigation
Y
282. The severe criticism from Dr. Ir. Benny Pasaribu is on the Article
appropriate investigation. There is an obligation among members Antara
for not discussing the investigation openly but the Chairperson of dated 25
P
KPPU breaks it by informing to mass media:- October
2007,
Enclosure
10
O
“He also questions the attitude of the Chairperson of
KPPU for frequently exposed it to media, as if there has
been guilty parties.
Benny said that the result of the meeting agrees for not
exposing publicly before there is a decision.
C
283. Intentionally, KPPU seems to backdates its report to make it as if
fulfill the regulation of KPPU although the fact is the opposite:-
“He said, in other hand conclusion making has been done

beyond permitted boundary. Nevertheless, after the
conclusion is agreed, the date of the conclusion is
backdated. “Judicially, it is forbidden. The same goes
for the forming of Commission Council, in which it is
also backdated.”
284. If it is true, such dishonesty is worried. The dissenting opinion of

Dr. Ir. Benny Pasaribu is not backdated. It was 29 September
2007 or the deadline.
285. Finally, it is seen that the members of Further Investigation has
no enough time to observe the evidences:
“Benny said that the discussion of RFI is limited. Due to the
Y
limitation of time, the members of RFI only revise the draft of
the conclusion. “In my opinion, the substance is irrelevant and
no objective rationale. It is better for me to have dissenting
opinion than to revise and sign it.”
286. The comment of Dr. Ir. Benny Pasaribu affirms several of
P
worries of AMH such as a suspicion to its members, especially
Chairperson of KPPU for not conducting properly. The team of
Further Investigation does not consider objectively all evidences
submitted to them during Follow up investigation.
O
287. E. KPPU has treated AMH discriminatively
288. Finally, it must be noted that KPPU treats AMH discriminately.

It is seen in the way KPPU interpret the phrase “majority” differ
C
from its allegations to Sing Tel in one side and AMH on the
other.
289. Referring to SingTel indirect ownership in Telkomsel, 35%, RFI,

KPPU has an argument that SingTel conducts ‘negative Paragraph
operation’ for enabling them to restrain certain decisions that 46
require special majority approval although their shares is less
than 50%.
290. Nevertheless, if the testing of ‘negative operation’ is misused to

Indosat, it is clearly then that through ” Dwiwarna Share”, the
Government of Indonesia also is able to “restrain” important
decisions requiring majority approval. If we apply “negative
operation” parameter, the Government of Indonesia ought to
become majority shareholder of Indosat.
291. Concerning Indosat, KPPU thinks that Temasek has ‘positive RFI ,
control’ because Temasek has 41.94% of shares while other Paragraph
shareholders that purchase the share in public stock exchange 47
Y
have no power to act collectively.
292. Nevertheless, if “positive control” parameter applied in the case

of Telkomsel, Government of Indonesia should be the majority
P
shareholder in Telkomsel with its 65% of shares and has stronger
power to act collectively rather than SingTel.
293. The clearest indication of the discriminative behavior is in the

implementation of different benchmark of justice to different
O
parties. KPPU has been wrongly applies law just for getting a
conclusion that “Temasek” is a majority shareholder in Indosat
and Telkomsel. But, if KPPU tests it correctly, it will come up
with the conclusion that the Government of Indonesia and
C
Telkom are the majority shareholders of Indosat and Telkomsel.
In fact, there is only Temasek that is being investigated and not
the Government of Indonesia or Telkomsel. It is a clear
indication of discriminative treatment.
IX. CONCLUSION
294. The biggest problem in RFI of KPPU is:
i. The failure in quoting and showing proof that could be

accessed but went conversely towards the case against AMH
and other Reported Parties.
ii. KPPU does not consider factual evidence

iii. Law distortion occurred again.
295. The unconsidered evidences are very important and the brief
summary on our defense statement, based on the evidences shall
be as follows:
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(f) There is no Temasek Business Group. (Part V)
(g) The substances of Article 27 are not fulfilled. KPPU does
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not apply Article 27 properly. (Part VI)
(h) Minister of BUMN has consulted KPPU on 23 January

2003 on the early divestment and other things referring to
the implementation of Article 27. At this time, KPPU
does not have right to question again the divestment.
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(Part VI)
(i) The business and economic Analysis of KPPU is

incorrect. (Part VII)
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(j) There is an evidence of mistakes and partisanship
conducted by the Further Investigation Team and
Commission Council, including the criticism of Dr. Ir.
Benny Pasaribu, a member of KPPU. (Part VIII)
296. This defense statement depicts AMH implementable defense

considering that KPPU has restrain AMH to advocate properly
such as the delay of issuing RFI for more than one week, the
rejection of accesses to case document of KPPU up to the eve of
Idul Fitri (concerning the difficulties of finding translator at that
time) and the rejection of mentioning the information sources in
its report clearly.
297. AMH asks all investigation to be terminated. There is no

evidence in RFI that show the fault of AMH. The investigation
processes is an abuse of law process.
298. If the investigation of AMH is not terminated, AMH is entitled to

submit further defense statement if needed, because AMH cannot
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observed thoroughly all documents in the case document of
KPPU that have not entirely translated yet.
299. This defense Statement is relied on Indonesian law and not be
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based on international law or related international agreement.
AMH maintains all its rights under international law or any valid
international agreement.
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19. Considering that further, on the basis of Further Investigation Report, Commission
Assembly has accepted responses of SINGTEL and ST Mobile on 30 October 2007
that in essence state the following things: -------------------------------------------------------
----------------------------------------
Introduction -----------------------------------------------------------------------------------------
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1. Singapore Telecommunications Limited (“SingTel”) and Singapore Telecom
Mobile Pte Ltd (“ST Mobile”) under investigation of the Commission for the
Supervision of Business Competition (“KPPU”) Indonesia on the suspected
infringement of Article 27(a) of the Law No.5/1999 on (“Anti-trust Law”).
Based on the Report of the Follow-up Investigation team No.
60/PEN/KPPU/IX/2007 (“Report”) dated 27 September 2007, accepted by
SingTel and ST Mobile on 3 October 2007, KPPU concludes that Temasek
Holdings Pte. Ltd (hereinafter referred to as “Temasek”) has infringed Article
27(a) Anti-trust Law through “Temasek Business Group” in which the group
covers SingTel and ST Mobile. Further, the report concludes as follows: ----------
(a) KPPU has owns jurisdiction over Temasek as well as “Temasek Business
Group ” based on Article 1(5) of Anti-trust Law because the corporate
bodies perform their businesses in the territory of the Republic of Indonesia.
The party to be referred as “Temasek Business Group” covers SingTel and
ST Mobile;-------------------------------------------------------------------------------
(b) Temasek owns majority shares in two companies that operate in the same
field and in the common pertinent market that make it infringes Article 27
(a) the Law No. 5/1999 due to; -------------------------------------------------------
(i) Temasek owns and controls PT Indosat Plc., (“Indosat”) through
Singapore Technologies Telemedia Pte Ltd (“STT”) and owns and
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controls PT. Telecommunication Selular (“Telkomsel”) through
SingTel and ST Mobile; and --------------------------------------------------
(ii) Such cross-ownership and control create high concentration of
industrial structure and market power as well as low competition in
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cellular service in Indonesia. ---------------------------------------------------
Its fact, as it revealed in this plea, all accusations submitted and conclusion to be
taken to SingTel and ST Mobile do not have legal basis and facts. ------------------
2. The defense made based on Article 53 of KPPU Regulation No.1/2006 on the
Procedures of Case Handling in KPPU (hereinafter referred to as KPPU
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Regulation No.1 / 2006). The main objective of submitting the defense is to
reaffirms the position of SingTel and ST Mobile before KPPU and to deny
assertively conclusion of the Report, none but. The main points can concluded
as follow: -------------------------------------------------------------------------------------
(a) The investigation process is null and void because KPPU does not hold in
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respect to due process of law of SingTel and ST Mobile during the process
of investigation of the case ----------------------------------------------------------
(b) The Report does not provide a whole description on the facts of the case.
Conversely, the Report selectively presents and haphazardly relates facts,
assumption and, theory for benefitting the suspicion of KPPU; and
systematically keeps aside or distorts the whole evidences and analysis that
oppose against the suspicion. Thus, the Report significantly hinders the
ability of SingTel and ST Mobile to protect and to plead them. ---------------
(c) SingTel and ST Mobile are not under the jurisdiction of KPPU because
either SingTel or ST Mobile is not “business actor” in the understanding of
Article 1(5) of the Anti-trust Law; -------------------------------------------------
(d) Article 27 (a) of Anti-trust Law is not valid to SingTel and/or ST Mobile.
The Report fails to prove the elements in the Article infringed by
Temasek, for what is known as “Temasek Business Group”, SingTel and
ST Mobile;-----------------------------------------------------------------------------
(e) “Temasek Business Group” is never present. Temasek controls the
business and operation of neither SingTel nor ST Mobile.----------------------
(f) Besides, Telkomsel is not controlled by Temasek through SingTel and/or
ST Mobile, because SingTel and/or ST Mobile do not control Telkomsel.
Conversely, PT Telecommunication Indonesia Plc., (Telkom), a majority
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shareholder, controls Telkomsel;
(g) Indonesian cellular market is competitive and no evidences at all showing
anti-competitive behavior of Telkomsel or Indosat or both of them; ----------
INVESTIGATION PROCESS IS NULL AND VOID BECAUSE KPPU DOES
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NOT HOLD IN RESPECT THE BASIC RIGHTS AND DUE PROCESS OF
LAW OF SINGTEL AND ST MOBILE DURING THE PROCESS OF THE
INVESTIGATION OF THE CASE. ------------------------------------------------------------
3. SingTel and ST Mobile notice that Indonesia is a constitutional state
(Rechstaat), and not authoritative state (Machstaat) and that the Constitution
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1945 of Indonesia (as it has been amended) obligates (i) the establishment of
independent judicial system to enforce law and justice. (Article 24 of the
Constitution), and (ii) anyone has rights to have legal security and to be equally
treated before law. (Article 28D Constitution), namely: -------------------------------
“The judicial power is an independent power to exercise judicature for
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enforcing law and justice.” (Article 24 of the Constitution) ----------------------
“Anyone is entitled to have acknowledgement, guarantee, protection, and
fair legal security as well as equal treatment before law.” (Article 28D of
Constitution) 95 --------------------------------------------------------------------------
4. Besides, it is publicly admitted that to enforce law and justice and to protect
legal security, the entire legal process shall be exercised with the principle of
due process of law. Especially, International Covenant on Civil and Political
Rights (“ICCPR”), in which the Republic of Indonesia is a party 96. Article 26
of ICCPR, particularly states:--------------------------------------------------------------
“All men shall be equal before law and without being discriminated is
entitled to have equal legal protection. In this case, the law prohibits the
presence of any kind of discrimination and guarantee equal protection across
the board of discrimination based on race, skin color, sex, language,
religion, ideology, citizenship or nationality or social, wealth, birth status or
other status.
95
See the Constitution of the Republic of Indonesia, third and fourth Amendment.
96
It has been ratified by the Law No.12/2005
5. Especially, concerning foreign investor, Article 14.a the Law of Investment
Modal No. 25/2007 determine the right of investor over legal security as follow: -
“Any investor is entitled to have: a. right security, legal security, and
protection;..”
6. Especially, as Singaporean entities that perform their investment in Indonesia,
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the rights of SingTel and SingTel mobile to have due process of law is
assertively admitted in the agreement of the Government of Malaysia, the
Republic of Philippines, the Republic of Singapore and the Kingdom of
Thailand on Promotion and Investment Protection dated 15 December 1987 (as
it amended by protocol on 12 September 1996) (ASEAN Investment
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Agreement) as follow: ---------------------------------------------------------------------
Article IV
TREATMENT
1. Each Contracting Party shall, within its territory ensure full protection of
the investments made in accordance with its legislation by investors of the
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other Contracting Parties and shall not impair by unjustified or
discriminatory measures the management, maintenance, use, enjoyment,
extension, disposition or liquidation of such investments.
2. All investments made by investors of any Contracting Party shall enjoy

fair and equitable treatment in the territory of any other Contracting
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Party. This treatment shall be no less favorable than that granted to
investor of the most-favored- nation.
Article VI
EXPROPRIATION AND COMPENSATION
1. Investments of nationals or companies of any Contracting Party shall not be

subject to expropriation nationalization or any measure equivalent thereto
(in the article referred to as "expropriation"), except for public use, or
public purpose, or in the public interest, and-under due process of law, on
a non-discriminatory basis and upon payment of adequate compensation.
Such compensation shall amount to the market value of the investments
affected, immediately before the measure of dispossession became public
knowledge and it shall be freely transferable in freely-usable currencies
from the host country. The compensation shall be settled and paid without
unreasonable delay. The national or company affected shall have the right,
under the law of Contracting Party making the expropriation, to prompt
review by a judicial body or some other independent authority of that
Contracting Party in accordance with principles set out in this paragraph.
2. Where a Contracting Party expropriates the assets of a company which is
incorporated or constituted under the law in force in its territory, and in
which nationals or companies of another Contracting Party own shares, it
shall apply the provisions of paragraph 1 of this Article so as to ensure the
compensation provided for in that Paragraph to such nationals or
companies to the extend of their interest in the assets expropriated.
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7. We note that as an independent state commission, KPPU shall be subject to the
principle of state governance as it detailed in the Law No.28/1999 on the
Governing of State that is free from Corruption, Collusion and Nepotism (as it
cited below). Especially, KPPU shall be subject to the principle of legal
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security:---------------------------------------------------------------------------------------
Article 3
The General principles of governing of state: --------------------------------------
1. The principle of legal security; ----------------------------------------------------
2. The principle of well-regulated state governance; ------------------------------
3. The principle of public interest; ---------------------------------------------------
4. The principle of openness; ---------------------------------------------------------
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5. The principle of proportionality ---------------------------------------------------
6. The principle of professionalism; and --------------------------------------------
7. The principle of accountability.----------------------------------------------------
8. KPPU itself has admitted that Anti-trust Law obliges the right of due process of
law. In Article 2(1) of KPPU Regulation No.1/2006, it is stated that: ---------------
“The Chairperson of Commission has tasks to facilitate all case handling
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activity under the principle of transparency, effectiveness and” [enhance to
emphasize]-------------------------------------------------------------------------------
9. Besides, SingTel and ST Mobile refer to the expert’s statement on Article 27
of Anti-trust Law by Hikmahanto Juwana (“Hikmahanto”) 97, the Professor of
Law at University of Indonesia who specialize himself in business and
competition law in Indonesia, is proposed on behalf of STT for this legal
process. According to Hikmahanto, an infringement to due process of law
conducted by KPPU had the findings and court decision been null and void. ------
10. Unfortunately, in any step of judicial procedure, the right to have due process of
law of SingTel and ST Mobile been contravened. So far, the legal process
conducted by KPPU is not transparent and fail to enforce due process of law,
professionalisms and proportionalities.---------------------------------------------------
SingTel and ST Mobile does not have an opportunity to have their opinion been
heard during preliminary investigation. -------------------------------------------------------
97
Registered in the KPPU case document No. C60
11. SingTel and ST Mobile are not summoned; therefore, their opinions are not
heard during preliminary investigation. There are only Temasek and Telkomsel
that have their opinion been heard. SingTel and ST Mobile have no chance to
have their opinion been heard in the preliminary investigation. ----------------------
KPPU does not give proper opportunity to SingTel and ST Mobile to deny the
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suspicion to them during the process of further investigation. ----------------------------
12. SingTel and ST Mobile are not given proper time to prepare their reply over the
serious suspicion alleged to them and their defense over the Report. SingTel and
ST mobile noted that the early Convocation was received in the afternoon on 22
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June 2007 98 to be invited for investigation on 4 July 2007. Further, SingTel
received Report on 3 October 2007 and the investigation before Assembly of
KPPU scheduled on 25 October 2007 99. SingTel and ST Mobile are
Singaporean corporate bodies that are not under jurisdiction of KPPU.
Therefore, most of the case document written in Indonesian language and the
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allegations to them are dealing with the Law of Indonesia, we have to find a
legal adviser in Indonesia. Relating to Idul Fitri, most of Indonesian were in
holiday and we only had eight workdays (around 10 to 25 October, including
Eid-al Fitr on 12, 15 and 16 October) to examine the case of document before
submitting defense or opinion on 25 October 2007. We had already asked to
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delay in a week to this investigation process but KPPU only agreed to replace
the date to 30 October 2007 100, so that we had extended time for 3 workdays to
prepare our defense. We want to note that SingTel and ST Mobile cannot expect
to present their response to the evidence properly in such a short time.
Especially it considers that (i) the Report itself is not completed and distorted in
its content, as it is detailed in this defense, and (ii) the short time available to
examine case document, we are only able to copy less than 50% of the whole
existing case document (excluded case document that is unavailable for us). ------
SingTel and ST Mobile are not informed properly on their allegation ------------------
13. There is no transparency at all during the investigation on the allegation to
SingTel and ST Mobile. The first summons to them only mentioned that
SingTel and ST Mobile were about to be investigated for the possibilities to
98
Letter of KPPU No. 265/KPPU/TP-PL/VI/2007 (Document No. A87) and No. 266/KPPU/TP-
PL/VI/2007 (Document No. A88)
99
Letter of KPPU No. 347/AK/KMK/X/2007
100
Letter of KPPU No. 368/AK/KMK/X/2007, dated 25 October 2007.
conduct infringement to Article 27(a) Anti-trust Law. The early enclosed Report
only analysis the infringement to Article 27 by Temasek, Telkomsel and
Indosat. The information on what and how SingTel suspected to infringe Article
27 is not completed. ------------------------------------------------------------------------
14. SingTel and ST Mobile do not engage at all in the Preliminary Investigation and
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know nothing on the problem to be investigated or the summons addressed to
them. SingTel and ST Mobile have only what is stated in the Report of
Preliminary Investigation enclosed to Convocation 101, that it unofficial
translation enclosed along with this letter in Annex 1, in which its related part
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are as follow: --------------------------------------------------------------------------------
“Although Temasek Holdings Pte Ltd keep on denying to have a control of
decision making and diary management of its subsidiaries as it is described
in the diagram above, but its party cannot deny that Temasek Holdings Pte
Ltd is the owner of entire subsidiaries. Besides, the rational, business actor
yang, always try to maximize profits, including its subsidiaries. In this
context, Temasek Holding Pte Ltd has significant interests to the
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performance of its subsidiaries in order to have maximum profits.--------------
The management of Temasek’s subsidiaries should know the interest and it a
form of responsibility to the shareholders. On that account, the interest of
shareholders is automatically a main focus of their diary management. It is
a basis of the opinion that share ownership represents economic interest, so
that the law of anti-trust sees that ownership structure, as it explained
above, as a single economic entity.---------------------------------------------------
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Therefore, further investigation needed to comprehend the influence of
Temasek Holdings Pte Ltd to it entire subsidiaries 102….--------------------------
SingTel and SingTel Mobile are very significant operators in cellular
industry within Asia Pacific. It is seen from number customers in general
and the revenues from gained from that areas. The information has been
indeed by the management of Telkomsel and influenced to the policy of
Telkomsel 103… --------------------------------------------------------------------------
Meanwhile, based on what have been mentioned above, there are sufficient
preliminary evidence show that Temasek through its subsidiaries control
Telkomsel and PT. Indosat Plc. So that it creates lack of competition in the
market of cellular telecommunication in all over Indonesia, in which
Temasek Business Group, on the basis of such thing, is suspected to have
infringed Article 17 (a) of the Law No. 5/1999 104.”--------------------------------
15. As it is seen from the citation above, SingTel and ST Mobile are not informed
on what is suspected to be an infringement under the law of Indonesia. The
Report of Preliminary Investigation shows only “Temasek Business Group” that
101
Citation of KPPU’s Decision KPPU No. 23/PEN/KPPU/V/2007
102
Preliminary Investigation Report , part IV (b), page 5 to 7.
103
Preliminary Investigation Report , part IV (c), page 5.
104
Preliminary Investigation Report , part V.
has infringed Article 27(a) of Law of Anti-trust, without any explanation on
how SingTel and/or ST Mobile are responsible to such infringement. Especially,
there is no clue at all on whom will be responsible or what kind of conducts or
ignorance that makes KPPU sure that they are infringement under the law of
Indonesia.-------------------------------------------------------------------------------------
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16. The team of further investigation conducted lack transparency along with the
worst due process of law during the investigation to the case. The investigation
conducted in the way that makes SingTel and ST Mobile nearly give no correct
and completed response of the allegation addressed to their parties. During
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investigation conducted on 4 July 2007 105 and on 23 July 2007 106, SingTel and
ST Mobile questioned on their roles in the business affair of Telkomsel. The
questions directed to how SingTel and/or ST Mobile generally engaged in the
business management of Telkomsel, with the targets mostly to be questioned
were board of commissioner and board of directors of Telkomsel. The questions
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also on whether Temasek uses its control to SingTel, ST Mobile and/or
Telkomsel. However, KPPU does not tell exactly to the representatives of
SingTel and ST Mobile on what have been conducted by SingTel and/or ST
Mobile so that they infringe Anti-trust Law. --------------------------------------------
17. Besides, during the process of investigation, there were many questions
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presented to the representative of SingTel and ST Mobile had no relationship at
all with Article 27. For instance, in the investigation on 23 July 2007 before
KPPU, the representative of SingTel were questioned whether there is an
opportunity of SingTel’s subsidiaries in India and Bangladesh arrange
something jointly, and in how much the price is. In a separated investigation at
the same date, the representative of ST Mobiles questioned with the following
questions that have no relationship with the allegations of Article 27(a): -----------
(a) The questions on the production share obtained from the investment of
SingTel Mobile in Telkomsel:- -------------------------------------------------------
(i) According to ST Mobile, concerning the performance of Telkomsel,
how many percent does satisfy SingTel Mobile, return of investment
for example? (Question 17) --------------------------------------------------
(ii) How much is the return on investment for Telkomsel?-------------------
(iii) Is the investment having break even? (Question 19)----------------------
(iv) If you want to sell the investment, what will you get?--------------------
105
See Investigation Official Report SingTel (Document No. B21) and ST Mobile (Document No. B22)
106
See Investigation Official Report of SingTel (Document No. B34) and ST Mobile (Document No.
B35)
(v) Compare to the investment of ST Mobile in other places, how is the
RoI of Telkomsel? (Question 23)--------------------------------------------
(vi) Does SingTel Mobile know on the value of EBITDA? (Question 28) -
(vii) In your opinion, how is the performance of Telkomsel recently? Is it
satisfying or not? (Question 33) ---------------------------------------------
(viii) How many percent are the revenue contributions of SingTel that
given by ST Mobile to SingTel? (Question 50) ---------------------------
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(ix) Can you explain a number of revenue of ST Mobile from the income
of cellular, how much are the share of Telkomsel? (Question 56) ------
(b) The questions on the price fixing strategy of Telkomsel:- ------------------------
(i) I can say that there is no concern at all on tariff. (Question 42) ---------
(ii) Do you care with the consumer’s wealth?----------------------------------
(iii) Is ST Mobile simply concern on the RoI, not on other things lain?
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(Question 35)-------------------------------------------------------------------
(c) The questions on the story of acquisition of SingTel Mobile in Telkomsel:-
(i) Who did initiate to buy Telkomsel’s share in ST Mobile? (Question
121)------------------------------------------------------------------------------
(ii) What is the consideration of ST Mobile to buy KPN’s shares in
Telkomsel? (Question 135)---------------------------------------------------
(d) The questions on the profit return investment to Telkomsel:- --------------------
(i) Is SingTel Mobile as a substantial shareholder 35% of share and an
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authority to nominate two commissioner and director, through the
two nominees have ever suggested investing the profit? (Question
140)------------------------------------------------------------------------------
(ii) We want to know, where does we can see the policy of ST Mobile
on dividend of Tekomsel? (Question 146)---------------------------------
18. We note that it is not important for KPPU to place information on a single
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problem mentioned above in the Report, in which it affirms that the questions
are not relevant at all and has no relationship with the decision-making on
Article 27(a). Respectfully, SingTel and ST Mobile think that such irrelevant
questions are not professional and null. -------------------------------------------------
19. Yet, SingTel and ST Mobile have cooperated as good as possible with KPPU,
expecting to be informed in the end on the allegations contends to SingTel and
ST Mobile. -----------------------------------------------------------------------------------
KPPU discriminatively treats SingTel and ST Mobile by not giving much time to
examine the case document of in the Further Investigation.
20. Instead of understand the problem they are dealing with, SingTel and ST Mobile
is entitled to know the basic of allegation accused to their parties. Before and
during investigation on 4 July 2007 107, SingTel and ST Mobile had ever asked
access to KPPU to examine case document. Any request was always refused, as
107
See Letter from SingTel (Document No. A106) and ST Mobile (Document No. A107), both are on 29
June 2007.
it is described in document No.B31 of KPPU investigation case document; Asia
Mobile Holdings Pte. Ltd (Reported V), Indonesia Communications Limited
(Reported VI) and Indonesia Communications Pte. Ltd (Reported VII) was
given accesses to examine the case document on 16 July 2007 or during the
Further investigation was performed. Thus, KPPU has conducted
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discriminatively to SingTel and ST Mobile during Further Investigation
performed.------------------------------------------------------------------------------------
21. Even after the Report was issued, SingTel and ST Mobile were not given an
access to part of the document in the investigation case document although they
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had asked for it. 108. It is an infringement of due process of law, causes improper
asymmetric information, and harms the preparation of SingTel’s defense. ---------
KPPU did not issue Report in the deadline as it is obliged by Anti-trust Law. --------
22. The ability of SingTel and ST Mobile to self defend is disrupted when KPPU
did not issue the Report in the deadline as it obliged by Article 43(1) to (3) of
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Anti-trust Law. It states:--------------------------------------------------------------------
“(1) The Commission is obliged to complete further investigation at the
latest of 60 (sixty) days since the conduct of further investigation as it
meant in Article 39 (1). (1). -----------------------------------------------------
(2) When it is needed, the time period of further investigation as it meant on
(1) is lengthen at longest 30 (thirty) days --------------------------------------
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(3) The Commission is obliged to decide whether the infringement to the
Law occurs or not at longest 30 (thirty) days as from the completion
of further investigation as it meant in (1) and (2). ------------------------- [enhanced to
Together with Article 48 and 49 of KPPU Regulation No.1/2006 that states: ------
“(1) Prior to the end of Follow-up Investigation, the team of Further
Investigation conclude whether the evidence of infringement is
available or not.” --------------------------------------------------------------- [enhanced to
(1) “The conclusion, as it meant in Article 48, is composed in the form
of The Report of Follow-up Investigation Result”. ----------------------
(2) The further investigation team submits the Report of further
investigation Result, along with letter, document or other written proofs to
Commission “The conclusion, as it meant in Article 48, is composed in the
form of The Report of Further Investigation Result” the infringement
occurs and conducted by the Reported” [enhanced to emphasize]. --------------
Based on it mention above, KPPU shall have issued the Report of Further
investigation prior to Further investigation be completed. The last date of
Further investigation period was 27 September 2007. Thereby, KPPU shall have
issued report at the furthest of 27 September 2007. However, SingTel and ST
108
See a letter from Hadiputranto, Hadinoto & Partners No. RFB 69445-v1dated 10 October 2007 and No.
MF 70388-v1 dated 22 October 2007.
Mobile were only been informed and received on Report on 3 October 2007.
The delay of Report issue had been an infringement to the procedures of case
handling of KPPU and it harms our right to plead. Supposed the Report issued
on time, we should have three additional workdays to examine the case
document and prepare the defense prior to the holiday of Idul Fitri. -----------------
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23. The reality is different with the statement made in the investigation on 23 July
2007 109, KPPU decide that they would not summon the representative of
SingTel and ST Mobile to be questioned further and keep on arranging the
Report although SingTel and ST Mobile still need to know what they had
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conducted or not conducted as infringement---- ----------------------------------------
24. In short, in the end of Follow-up investigation period, SingTel and ST Mobile
remain to be blank with the allegations contended to them, therefore they are not
in a position to prepare their defense accurately to reply the allegation.
Therefore, SingTel and ST Mobile make only general defense principally on the
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element of Article 27 while waiting to the character and detail of the allegations.-
25. As it usually occurs, SingTel and ST Mobile are never been informed to the
allegations accused to them before they received Report. It is important for us to
repeat that, (i) if the Report was issued in the period of time as is proper, the
Reported should have three additional workdays to respond the Report, (ii) the
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period of time available was 27 days in between of issuing the Report and at
that date our session cover Idul Fitri’s holidays for about 10 days, in time when
many offices closed (iii) KPPU refused to give extended time for at least one
week to prepare our response but 3 workdays only given. We assume that it is
not fair to give such a short time to SingTel and ST Mobile to prepare their
response to the investigation of KPPU that has been lasting for more than 120
days -------------------------------------------------------------------------------------------
26. Our capability to plead has been harm further during case document
investigation. SingTel and ST Mobile are only given one session (on 9 October)
to examine abundant case document. By the kindness of STT’s legal adviser,
STT, SingTel and ST Mobile are able to follow their investigation session,
SingTel and ST Mobile got two sessions to examine the case document.
Although they have additional time in the investigation, they cannot maximize it
109
See Investigation Official Report of SingTel ST Mobile (Document No. B35), Investigation statement
No. 173.
because they spent their 90% of time to copy document and not to examine due
to huge of the case document. SingTel and ST Mobile are only able to copy not
more than 50% of the available documents.
27. It is more seriously. KPPU does not give access to part of the unrestricted
documents, as it mentioned in the letter of our legal adviser, Hadiputranto,
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Hadinoto and Partners on 10 and 22 October 2007. Specially, KPPU does not
access to the references cited in the Report. The refusal had harmed the ability
of SingTel and ST Mobile to plead because, (i) to write this defense, SingTel
and ST Mobile had to work hard to find other documents that are not available
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from other sources and, (ii) later, in the objection phase, KPPU would keep the
document not to be submitted, by reason of that document was excluded of
KPPU’s case document. Although SingTel and ST Mobile were able to obtain
the document from other sources, they would be restricted to use it during the
objection to the evidence. ------------------------------------------------------------------
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The Chair of Investigation Team and the Chairperson of KPPU has conducted
against due process of law. ------------------------------------------------------------------------
28. We note that in the further investigation, Mr. Nawir Messi, the Chair of
Investigation team and Mr. M. Iqbal, Chairperson of KPPU, has reported to
press a statement that, (i) the allegation to Temasek and the other Reported has
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been proved and further is simply accumulating other additional evidences or
(ii) there are strong prima facie to support the allegation 110. Mr. Messi and Mr.
Iqbal do not ever withdraw or give a correction to their statements so that
SingTel and ST Mobile have to take a decision that the statements are correct
or in the meaning of the men. Under Article 2(1) of KPPU Regulation
No.1/2006, such statements show inconsistency of Mr. Iqbal because the
statements show a bias that is able to support that the allegation of the Reported
is true. Besides, the statements have created public opinion that the Reported are
guilty, that decreasing their chance to have fair judicature if the case is
submitted into Court. -----------------------------------------------------------------------
Improper Commission Assembly Composition -----------------------------------------------
110
Indonesian anti-trust agency investigates Temasek, Business Times Singapore 7 June 2007, document
C70, Indonesia’s watchdog probes Singapore’s Temasek, Agence France Presse, 24 May 2007, document
C69. Temasek denies anti-competitive behavior in Indonesia, Strait Times, 7 June 2007, C70. There are also
parties that do not agree KPPU investigates Temasek, Kontan Daily Kontan, 14 September 2007 (exhibited in
the defence as Annex # 19), An interview of Muhammad Iqbal with Trust, 24 September 2007 ((exhibited in
the defence as Annex # 20)
29. SingTel and SingTel Mobile note that from three of five Commission Assembly are
former member of Further Investigation team that approved theReport. The only
one team member who disagrees is Mr. Benny Pasaribu but he does not participate
in the Assembly. SingTel and ST Mobile herewith protest against the composition
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of the Assembly. With such a composition, KPPU's decision will not be fair in this
case. It is because (i) Commission Assembly does not take part Benny Pasaribu who
give different opinion (ii) the commission assembly which support the Report are
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the majority of Commission Assembly, it is clear that this composition has been
biased to strengthen the Report.---------------------------------------------------------------
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THE REPORT DOES NOT PROVIDE A WHOLE DESCRIPTION ON THE FACTS OF THE CASE.
CONVERSELY, THE REPORT SELECTIVELY PRESENTS AND HAPHAZARDLY RELATES FACTS,
ASSUMPTION AND, THEORY FOR BENEFITTING THE SUSPICION OF KPPU; AND
SYSTEMATICALLY KEEPS ASIDE OR DISTORTS THE WHOLE EVIDENCES AND ANALYSIS
THAT OPPOSE AGAINST THE SUSPICION. THUS, THE REPORT SIGNIFICANTLY HINDERS
THE ABILITY OF SINGTEL AND ST MOBILE TO PROTECT AND TO PLEAD THEM ---------------
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30. The objective of the Report is to give completed notes on the evidences
collected by further investigation team and how the evidences fulfill the
elements of Article in Anti-trust Law. In other hand, any written proof ought to
be consistent one to another (not opposed) and in line with adagium unus testis
nullus testis. Every fact ought to be supported at least by two evidences; in
which one evidence is not a fact. The requirement is generally known as due
process of law and it is particularly subject to the rules of Anti-trust Law of and
KPPU Regulation No.1/2006
“Before the terminations of further investigation, member team this
investigation must conclude there is or not evidence that has resulted an
infringement ...” (Article 48 of KPPU Regulation No.1/2006"------------------- “
The conclusion within the meaning of Article 48 is compiled in the form of Report
of Further investigation ….team then submits this Report of Further investigation
along with letter, documents or other written proofs to Commission. Afterwards, the
decision is taken to identify whether or not an infringement conducted by Reported”
(Article 49 of KPPU Regulation No.1/2006).------------------------------------------------
“Investigation written proof of Commission are:-----------------------------------
a. witness’ statement -------------------------------------------------------------------
b. expert’s statement -------------------------------------------------------------------
c. letters and /or documents -----------------------------------------------------------
d. indication -----------------------------------------------------------------------------
e. business actor’s explanation” ------------------------------------------------------
(Article 42 of Anti-trust Law)---------------------------------------------------------
“Commission Assembly must decides valid or not a proof is, and decides its
verification value based on at least (two) valid written proof” (Article 64
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verse 2 of KPPU Regulation No.1/2006). -------------------------------------------
31. Besides, by considering that (a) Reported must have fair opportunity to argue
the conclusion Further investigation team during Commission Assembly
investigation takes place and (b) transparent principle and due process of law
such as those discussed above; it is clear that the Report must contain complete
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information in order to have Reported argued the Report. Report must load
complete logic on the elements of Law that must be fulfilled in order to have
Reported Party tested it and, if needed, argue the elements. Report must give
complete and deep summary in order to have the Reported analyzed the facts for
defense purpose. The Report has to give correct identification on the sources of
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the whole facts that used as basis of the argumentation in order to have the
Reported tested the sources. Unfortunately, the Report has failed to fulfill all the
requirements.---------------------------------------------------------------------------------
32. Firstly, the Report does not express completely and fairly all facts related to this
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case. Systematically, the Report consists of advantageous fact and exempted
disadvantages ones. In some cases, the Report does not show a supportive fact
to what it is affirmed. This approach produces a bias to a case. Besides, it means
that the Reported, including SingTel and ST Mobile, must grope to find facts
that are exempted from KPPU's thick case document in the limited time
provided by KPPU. The following are examples on the lack of the Report. --------
(a) Generally, unless for a few things straggled in the Report, Report does not
mention its source correctly. The place where the source is cited, Report
does not give document code for this source, that is why it is difficult for
Reported to search a source in the case document of KPPU. For example: ----
i. Directorate General Post and Telecommunication is cited on page 8, 9,
10, 11 of the Report as data sources on cellular industry but the Report
does not mention document code in which Directorate General given
these data.
ii. Report gives reference that refers to the report of OVUM, but it does not
identify document code of this report. When SingTel and ST Mobile
examine the bundle of KPPU, the Report is not filed in one of bundles of
KPPU and SingTel and ST Mobile has to ask the staff of KPPU to bring
the document to the investigation room.-----------------------------------------
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(b) KPPU defines majority share as a control owned by a corporation to other
company, and that Temasek controls Telkomsel. Nevertheless, KPPU does
not show a fact or evidence for supporting allegation of the control. Thus,
SingTel does not know how to answer KPPU unless by answering and
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negating simplistically; ----------------------------------------------------------------
(c) KPPU assumes that Indosat has the lowest roll-out Base Station Transceiver
(“BTS”) among its main competitor for years, this condition is considered to
be lack of competition that have Telkomsel consolidated its market power.
Nevertheless, the Report disregards different texts on rollout of Indosat that
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is explained in the report submitted by Case Associates, a Consultants
analysis and Spectrum Consulting. In other hand, KPPU does not show
whether it occurs and, if it does, how Temasek influences the policy of
Indosat concerning the development of BTS;---------------------------------------
(d) KPPU postulates without paying attention that the tariff fixed by Telkomsel
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is still under the price that determined by Government, and it is said that the
tariff is excessive. Nevertheless, KPPU does not give any reason on how or
why the tariff is assumed to be excessive, though it is under price
determined by government. In other hand, there is no explanation from
KPPU until now on how SingTel and/or ST Mobile and/or Temasek in any
case are responsible to the excessive tariff fixed by Telkomsel.
(e) In other hand, KPPU predicts pricecompetition in the market is not
acceptable and other market players follows the price fixed by a leading
market , this proposal does not consider various kinds of product. It can be
related to definition of top duration, market segment of prepaid and
postpaid, tariff roaming, tariff roaming SMS and MMS and GPRS – in
which they are different one to another as time goes by. The KPPU's
confirmation on a price equivalence is not supported by fact, KPPU cannot
display whether it occurs or not and, if it does, how can SingTel and/or
SingTel Mobile be responsible to the allegation of price equivalence by
Telkomsel and/or Indosat. -------------------------------------------------------------
(f) Besides, SingTel and ST Mobile surprised with the allegation stated by
KPPU that Telkomsel have anti-competitive behavior, such as through its
interconnectivity and network infrastructures. KPPU affirms that incumbent
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operator is able to threat interconnection operator that decrease tariff.
Nevertheless, KPPU does not give any elucidation on where Telkomsel has
limited access to certain operator network infrastructure as it is alleged; and
KPPU does not show how Temasek and/or SingTel and/or ST Mobile has
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influenced or control Telkomsel in a way as it is alleged. The most
importantly, KPPU's notes show that during the investigation take place, on
4 and 23 July, the representative of SingTel ands/or ST Mobile is never
been questioned on this problem.
The further elucidation on how the Report make mistake in presenting fact and
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haphazardly relates facts, assumption and unprovable theory can be seen in
defiance
SINGTEL AND ST MOBILE ARE NOT UNDER THE JURISDICTION OF KPPU BECAUSE
EITHER SINGTEL OR ST MOBILE ARE NOT “BUSINESS ACTOR IN THE UNDERSTANDING OF
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ARTICLE 1(5) ANTI-TRUST LAW;-------------------------------------------------------------------
33. Article 1(5) Anti-trust Law, define business actor as follows: ------------------------
“Any individuals or corporations, in the form of corporate body or non
corporate body, are established and domiciled or performing activities
within the territory of jurisdiction of the Republic of Indonesia, and;
independently or jointly by an agreement perform any business activities.” ---
34. The elements of Article 1(5) are clear. As Hikmahanto states it, this Article 1(5)
only covers two possibilities: --------------------------------------------------------------
(a) Corporate body or not corporate body founded based on the law of
Indonesia and domiciled or perform business activity in the legal territory of
Indonesia --------------------------------------------------------------------------------
(b) Corporate body or not corporate body founded based on the law of
Indonesia and domiciled or perform business activity in the legal territory of
Indonesia 111.-----------------------------------------------------------------------------
35. Based on the interpretation of one definition above, none of the element in
Article 1(5) met and therefore SingTel is not under the jurisdiction of KPPU, -----
111
Hikmahanto, Expert Statement on Article 27 of the Law No.5/1999 on the Prohibition of Monopolistic
Practices and Unfair Competition (“Expert Statement”), page 5 to 6.
36. SingTel is a company listed in stock exchange. It is founded under the law of
Singapore and domiciled Singapore. It is founded and domiciled in the
Republic of Indonesia. SingTel has no branches in Indonesia. As it is
mentioned below, we disagree that there is”Temasek Business Group”. We
must note that not all party suspected as member this group living in Singapore.
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For example, Indonesia Communications Limited living in Mauritius and if we
follow the logic presented in the Report, Indosat and Telkomsel (that actually is
a corporate body Indonesia that is founded and domiciled in Indonesia) are
taken part in this group.
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37. Besides, SingTel does not have share in a company actively participated in the
market. While ST Mobile owns only its minority share in Telkomsel. We note
Hikmahanto in which he states that share ownership alone is not a business
activity, even less is minority shares because business activity requires
operational decisions that is usually conducted by company management.
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Therefore, KPPU does not have jurisdiction over SingTel or ST Mobile.-----------
38. We notes that KPPU’s insistent suggestions in its Report on the doctrine of
single economic entity that business actor is considered to be responsible over
the conducts of other business actor if the two are forming single economic
entity. KPPU try to state that Telkomsel and Temasek establish Temasek that
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allegedly through SingTel and/or ST Mobile, controls single economic entity
due to Telkomsel. ---------------------------------------------------------------------------
39. In responding to this, the first thing SingTel and ST Mobile do is citing
Hikmahanto’s view that there is no doctrine of “single economic interest”112
under Indonesian law. Therefore, KPPU cannot depend on this unless KPPU can
prove that Indonesian law confesses this doctrine. -------------------------------------
40. Secondly, SingTel and ST Mobile note that Hikmahanto also said on the
concept of, if the concept exist, then under the Indonesian law, the test can be
completed only if, (i) there is a joint management of the holding company and
its subsidiaries; (ii) the holding company planning covers a centralized
economic activity of the subsidiary and; (iii) subsidiary is prohibited to disagree
with the decision of management. In short, there must be a total control of the
holding company toward a core economic activity of subsidiary as it is pointed
112
Hikmahanto, Expert Statement, page 12 to 14.
by Hikmahanto (it is true according to SingTel and ST Mobile), the share
ownership alone is not enough to completed this rule 113. Besides, as it detailed
below,(1) the testing to verify “single economic entity” under Singaporean law
and jurisdiction that is tightly investigated and; (2) the testing is no completed. --
41. Apart from the fact, whether the testing is applied under Indonesian,
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Singaporean or one of the investigated jurisdictions, the evidence in KPPU
displays that Temasek does not use its control or even material influence to
Telkomsel (as it is mentioned below, Telkomsel has testified that it is not
relevant to asked whether initiative to the policy is from SingTel or Telkomsel.
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It is also mentioned below that Telkom stated the control to Telkomsel is in its
authority relating to the decision of Capex Committee) and ST Mobile does not
control or give influence material to Telkomsel. Thereby, KPPU cannot state
that its party owns a jurisdiction over ST Mobile, SingTel and/or Temasek under
Article 1(5) of the Anti-trust law. ---------------------------------------------------------
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42. Besides, the cites the definition of “foreign investment” in the Law No. 40/2007
on Foreign Investment as states “an investment activity to perform business
activity in the territory of the Republic of Indonesia …”. Thus, “Temasek
Business Group” means to perform business in Indonesia (paragraph 10 and 11
on page 59-60). ------------------------------------------------------------------------------
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43. In responding to that, SingTel and ST Mobile are sure that the Report has
provided misinterpreted Indonesian law on foreign investment by the reason
below:-----------------------------------------------------------------------------------------
a. Article 1.1 of the Law No. 40/2007 refers to separated conducts namely, “to
invest” and “to perform business in Indonesia”. The Article does not infer
that investment is the same as to perform business. Conversely, it infers the
objective of conduct namely to invest is to perform business. Thus, it is
incorrect if the Report states that the law implicitly equalizes to invest with
to perform business. --------------------------------------------------------------------
b. We have to note that the Report does not consider that the entire regulation
of foreign investment in Indonesia is valid only in direct investment.
Indonesian Investment Coordinating Body (BKPM) gives a permit and
monitor direct foreign investment. In this case, BKPM and the Law of
113
Ibid.
Investment are valid to ST Mobile in Telkomsel. Yet, it is neither the
investment of SingTel in ST Mobile nor Temasek in SingTel.-------------------
c. Besides, it is inconsistent and contradictory if the Report equalizes to
perform business to investment, since the Report admits the difference of
active and passive investors. It is unlikely the Report admits the differences
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if it is explicitly stated that the entire investment or in its eventual has on the
investor perform its own business. ---------------------------------------------------
d. The Law on Limited Company(No. 1/1995, replaced by No. 40/2007)) and
the Law on Foreign Investment does not admit company shareholders
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(holding company) as a business field. As it stated by Ratnawati Prasodjo,
the former Director of Civil Department of Justice (at present: Department
of Law and Human Rights) and one of the lawmaker of the Law on Limited
Company, does not admit own share in other company as a business
activity. Even the Law No. 40/ 2007 is applied to clarify that the Law on
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Limited Company does not admit the concept of holding company. ------------
ARTICLE 27(A) ANTI-TRUST LAW IS NOT VALID TO SINGTEL AND/OR ST MOBILE. THE
REPORT FAILS TO PROVE THAT THERE ATE ELEMENTS IN THIS ARTICLE HAS BEEN
INFRINGED BY TEMASEK, WHAT IS KNOWN AS “TEMASEK BUSINESS GROUP ”, SINGTEL
AND ST MOBILE -------------------------------------------------------------------------------------
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44. The position of SingTel and ST Mobile since their initial stages is KPPU does
not have jurisdiction over SingTel or ST Mobile to conduct the investigation.
The distinct reading of Anti-trust Law infers that KPPU does not have
jurisdiction over the party that only becomes shareholder. ----------------------------
45. Besides, there is no indication at all that SingTel and/or ST Mobile infringe
Article 27(a). A world notable expert of law competition, Professor Claus-Dieter
Ehlermann (“Ehlermann”), has proposed and unquestionable argument, to
SingTel and ST Mobile it is precisely, on the clear understanding of Article 27.
Ehlermann examines on how Article 27(a) of Anti-trust Law shall be
comprehended in accordance with the international law principle and
competition law standard regime of European Community (“EC”), Germany
England (“UK”) and the United States of America (“US”) (“the examined
jurisdiction”). According to Professor Ehlermann, in which his report enclosed
in this defiance in Annex 3, the majority of share ownership requirement in a
number of companies in Article 27(a) mustbe interpreted literally. Wilmer
Cutler Pickering Hale and Dorr LLP (“WilmerHale”), one of notable anti-trust
law and competition practitioner in the United States of America and Europe,
has made an opinion, that enhanced in this letter in Annex 1 (“Opinion
WilmerHale”) supportin the view of Ehlermann 114. Hikmahanto also supports
the interpretation of Article 27(a) fully. It is a simple truth that either SingTel or
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ST Mobile do not have majority shares in Telkomsel and the fundamental
requirement of Article 27(a) is not fulfilled. The allegation to Singtel and ST
Mobile that be based on Article 27(a) shall be null and void. -------------------------
46. Furthermore, the Report ignores different opinions proposed by the Reported.
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No less than three independent experts, Spectrum Strategy Consultants
(Spectrum), Case Associates (Case) and Analysis Consulting (Analysis) 115 have
given different analyzes to this case. The integrity and pointed analyzes of this
firms are unquestionable. Even the Report does not try respond to the different
views. -----------------------------------------------------------------------------------------
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47. On the chance of Commission Assembly would repair the mistake of follow-up
investigation team, we herewith propose one independent expert statement from
NERA economic consulting (“NERA”) a reputed international economy
consultant firm. According to NERA, it seems that there is no evidence of anti-
competition behavior or loss of consumer in Indonesian cellular market in
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Indonesia. Even the evidence indicates that market is competed and market
result is better than market in other 16 countries in the case of demography,
economy and Telecommunication (comparative countries) -------------------------
114
The opinion of Wilmer Hale, in page 2.
115
NERA Economic Consulting, an international economic consultant, has been hired by SingTel and ST
Mobile to express its independent expert statement to the mobile service market condition in Indonesia
in general and its independent expert analysis to the allegation of the company and the suspected
infringement to the Indonesian Anti-trust law.
Spectrum Strategy Consultants, an outstanding management consultant focuses in the
telecommunication sector and media worldwide, and has presented its independent study to the
competition condition in the Indonesian mobile market; assigned by STT, STT Communications Ltd
and Asia Mobile Holding Company Pte Ltd.
Analysis Consulting, a company that provides consultation on strategy and management and
information and initial support to any telecommunication sector, It and media. They submit its
completed report asked by Temasek Holdings (“Analysis”).
Case Associates is an international office of economist on economic competition and regulation based
in England. They are hired by Asia Mobile Holdings Pte Ltd (“AMH”), Indonesia Communication Ltd
(“ICL”) and Indonesia Communication Pte Ltd (“ICPL”) to perform its an independent assessment to
the competition in telecommunication sector in Indonesia. This analysis is based in a whole on the
publicly accepted information.
48. We also propose two additional reports, it has been also proposed by society and
we obtained from public forum, the Analysis of Mr. Pande Raja Silalahi, former
member of KPPU (Annex 6) and the Report of Lembaga Manajemen Faculty of
economics UNPAD (Annex 7). -----------------------------------------------------------
49. The incorrect enforcement of substantive law competition in the Report reflects
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in the treatment of KPPU to the rights of SingTel and ST Mobile's due process
of law. Since the corporate body is summoned in the step of legal process, some
fundamental rights of SingTel and ST Mobile are unappreciated.--------------------
50. Shortly, the Report cannot provide evidence to support its allegations. The
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whole stuffs, considered as evidence, are inconsistent one to another. The
Report also fails to consider facts to be in contradiction with its conclusion. -------
SingTel and ST Mobile do not have majority share in Telkomsel. -----------------------
51. The following part of this defense is submitted by assumption that KPPU, in
opposition to the early defense of SingTel and ST Mobile, find that its party has
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jurisdiction over SingTel and/or ST Mobile. Article 27 Anti-trust Laws specify
as follows: ------------------------------------------------------------------------------------
“Business actor is prohibited to have majority shares at some similar
companies that conduct business activity in the common field at the
common pertinent market, or establish some companies that have business
activities at common pertinent market, if the ownership resulted: ------------
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(a) one business actor or one group of business actor control more
than 50% (five percents) market share of one goods or certain
service.” ------------------------------------------------------------------------
(b) two or three business actors or group of business actor that control
more than 75% (seventy five percents) of certain goods type or
service certain.” [enhance to emphasis] -----------------------------------
52. We note that the Report does not question whether ST Mobile has more than
35% of Telkomsel shares or not and that its remaining (65%) is owned by
Telkom. ---------------------------------------------------------------------------------------
53. It has reaffirmed that SingTel and ST Mobile is being investigated on suspected
infringement of Article 27(a). We submit that the understanding of Article 27(a)
is clear and interpretation is not need at all. The Article prohibits single business
actor to own majority shares in some companies where by the ownership
creating a control to more than 50% of market shares of certain goods or
service.----------------------------------------------------------------------------------------
54. Therefore, any investigation based on Article 27(a) shall concerned to three
main prerequisites: (i) share ownership majority; (ii) in some companies in the
common market; (iii) which companies control more than half pertinent market
shares. The three of the rules must be read concurrently in order to have Article
27(a) been applied. --------------------------------------------------------------------------
55. With all respect, we state that clear meaning of ‘majority share’ is an ownership
of more than 50% of shares issued by company. The understanding further, is
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clear that business actor must own direct shares in a company and SingTel has
not any shares in Telkomsel. As the same manner as KPPU has already shown
it, ST Mobile only own 35% of shares in Telkomsel, while the 65% remaining
are owned by Telkom. Then, it is clear that Telkom own majority share of
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Telokomsel. ----------------------------------------------------------------------------------
Majority share shall mean majority share. ------------------------------------------------------
56. Although the meaning of Article 27(a) has been clear, KPPU has tried to
interpret this Article extensively. It show by stating that the most appropriate
definition of “majority share” in Article 27 of Anti-trust Law is the presence of
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control owned by one business actor to other business actors, so minority
ownership is possible to be entering the understanding of “majority”. We have a
notion that such creative interpretation is clearly in contradiction with the
principle of law..-----------------------------------------------------------------------------
57. We note that KPPU agrees that literal definition of majority shareholder is an
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owner of share who has more than half of company's shares; it is the clear
meaning of the term. Nevertheless, KPPU postulates that non-literal
interpretation to the majority share in Article 27 of Anti-trust Law is needed if
the rule is comprehended literally, and then rule is easily to be infringed by
issuing shares without vote rights, in which more than 50% shares are given or
owned by other parties. While the whole control of the company given to the
special shares less than 50% of the shares of even given to just one share. 116. ----
58. We note that clear meaning of majority has been clear also for KPPU, as the
same manner as it is seen in its decision in the case Cineplex 21 where KPPU
contend that due to Reported own 98% and 70% of shares of two companies in
which both are performing cinema in the common pertinent market in Surabaya.
Then the party infringes Article 27(a) of the Anti-trust law 117. This meaning is
116
Report, page 52, page 12.
117
KPPU’s Decision No. 05/KPPU/2002, paragraph 21.25 and 23.11.
also clear in the views of former KPPU's members such as Mr. Pande Silalahi 118
119 120
and Mr. Sutrisno Iwantono and company law expert, Mr. Frans Winarta ,
state publicly that 50% is not majority.. -------------------------------------------------
59. We also refer to the opinion of Mrs. Ratnawati Prasodjo, in expert's statement ,
on page 2 – 3 enclosed in this defense as Annex 5),in which Article 27(a) shall
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be understood in accordance with its said meaning: the expression majority be
understood as control over more than 50% ownership shares -----------------------
60. We note that Hikmahanto support the position in which “majority share” in
Article 27(a) refer to more than 50% shares in a company. Concerning this,
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Hikmahanto stand firmly to elucidation of Article 15(2) of the Law No.8 / 1995
on Capital Market, and Article 1(1) and (2) of the Law No. 19 / 2003 on
BUMN, where the two refer to “majority share” as more than 50% of company's
shares 121. Hence 40.8% of share owned by Indonesia Communications Limited
and Indonesia Communications Pte.Ltd (become shareholders direct in Indosat)
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is excluded the understanding of Article 27. On the basis of the definite
Analysis, we also states that there is a reason, even stronger, for a view that
share ownership as high as 35% of ST Mobile in Telkomsel cannot generate
Article 27. ------------------------------------------------------------------------------------
61. If the meaning a rule in Law is clear, it may not be any interpretation. In this
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case, SingTel and ST Mobile refer to the opinion of Prof Dr Jimly Asshidiqie, a
Head of Judges of Constitution Court, in its book Perihal Hukum (Regarding
Law), page 252-254 (enclosed in as defense as Annex 27) that said if a rule of
law is clear, whatever decision made by the court shall be applied. If the law
has been verbally expressed (“expressis verbis”) there is no space in court to
interpret others.. -----------------------------------------------------------------------------
No Indonesian Law available to interpret “Majority” broadly ---------------------------
118
See Temasek does not practice monopoly: A Study, the Jakarta Post, Friday 3 August 2007, document
C57, The integrity of KPPU is in the floating line in Indosat case, the Jakarta Post, Wednesday 15 Augustus
2007, document C62.
119
See The Former of KPPU’s chairperson: No Cross Shares of STT in Indosat and Telkomsel (Mantan
Chairperson KPPU: Tidak ada Saham Silang STT di Indosat and Telkomsel), Investor Daily, 17 September
2007, exhibited in the defence as Annex # 26.
120
Slide No. 11 and 12 of the presentation of The Role of Law in Business: Recycling Market Structure to
establish Fair Competition (Peranan Hukum dalam Usaha untuk Merekayasa Ulang Struktur Pasar Guna
Menciptakan Persaingan Usaha yang Sehat), by Frans Hendrawinarta, exhibited in the defense as an Annex #
8.
121
Hikmahanto, Expert Statement, page 1 to 3.
62. Thus, the Report does not acknowledge that “majority” means majority. On the
contrary, the Report continuously copes agree that majority shall be interpreted
widely and creatively to cover minority (share) as well. In justifying its
interpretation, the Report misread or misstate the rule of law and other
regulations in Indonesia (they all are not related in this case at all) and the
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standard of international anti-trust, as the same manner as SingTel and ST
Mobile is about to discuss hereunder: ----------------------------------------------------
(a) According to the Report if KPPU permits Article 27(a) remain to be limited
for share ownership majority, then its party cannot prevent detrimental
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impact to competition and society due to conspiracy of minority
shareholders that actually control some company. We herewith state that
that the truth is conversely: Anti-trust Law gives KPPU sufficient rules to
offend such conspiracy, that is: -------------------------------------------------------
i. If minority shareholders keep on dominating through its subsidiaries,
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it is logic that its party has to arrange its subsidiaries in order to be in
active conspiring to monopolize market. If minority shareholders
conspire to lessen competition in the market, this conspiracy can
create cartel. Article 11, a trust by Article 12 or Article 4 of the Law
No.5/1999, can attack it. ------------------------------------------------------
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ii. The Report relies on illogical truth that if minority shareholders with
a control power want to dominate market through its subsidiaries
(for example two subsidiaries), it will dominate through one
subsidiary and intentionally destroys other subsidiaries. In a case
(that is impossible), as it is referred clearly be the Report, the first
and prioritized subsidiary is handled with Article 25, an article
prohibiting dominant abuse, or other articles of Anti-trust Law that
prohibit unilateral conduct such Article 17 to Article 21 of Anti-trust
Laws.. ---------------------------------------------------------------------------
(b) The Report cites Anti-trust Law to support its broad interpretation of
majority. The Article cited is Article 27(a) that shall be read as a way to
prevent an existence of economic power concentration. We, herewith state
that it is a misreading to read such an Anti-trust Law, because::-----------------
i. Anti-trust Law does not prohibit per se market share concentration in
a group or company. On the contrary, it prohibits concentration
abuse; if it is true conversely, the Law of Anti-trust shall prohibit in
per-se monopoly, oligopoly, cartel, trusts, monopsony, oligopsony,
and market domination.-------------------------------------------------------
ii. Article 25 of Anti-trust Laws allows a group of business actor to
control more than 75% of market shares of a product as long as no
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dominant position abuse. The Law of Anti-trust does not define a
parameter of a group of business actor, nevertheless KPPU admit
that a group of business actor many ways is possible to use its
control over its subsidiaries although the share ownership of the
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group is not majority. Thus, it clears in reality that Article 25 of
Anti-trust Law does not prohibit per ser a control of a group through
its minority shareholders. -----------------------------------------------------
iii. In the case, Article 27 must be read as an exemption to public
freedom regulation that is specifically regulated in Article 25 Anti-
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trust Law. Article 25 permit a group of business actor to most of
market, but Article 27 (a) prohibit such control, if is performed by
group of business actor (literal understanding) with majority
shareholders in separated competitor’s company. -------------------------
(c) The Report cites the laws of Banking and Capital Market to support its
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view. We states that such laws are not related with this case. Consequently,
it is improper to cite or even compare it. --------------------------------------------
i. BAPEPAM Regulation No. IX.H.1 on Acquisition of Listed
Company (Regulation IX.H.1) stated that to take over public
company, the new controlling public is obliged to bid to tender for
all remaining of public company share. Therefore, the objective of
the condition will be fundamentally different with those of Article
27(a). The Regulation IX.H.1 uses controlling that is defined as to
protect other shareholders for not obliging controlling shareholder
bid to tender other shares, in which the bid requires bidder to
disclose the plan of the company. If the controlling shareholder bid
to tender and other shareholders accept to agree to sell their shares,
the controlling shareholder will be a single shareholder. Thus,
Regulation IX.H.1 really permits controlling shareholders to become
majority shareholder.----------------------------------------------------------
The objective limiting majority in Article 27(a) differs from
Regulation IX.H.1. The Party to be protected under Article 27(a)
really differs from a part protected under Regulation IX.H.1. The last
tries to protect investor and to boost market efficiency, market for
products of pertinent company. ----------------------------------------------
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Besides, the Report does not mention the admittance of Regulation
IX.H.1 to have a company controlled by more than one controlling
shareholders. Point 2.d of the Regulation states that the tender bid
regulation is not valid to shares owned by “other controlling party”
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in the same company. Thus, it is clearly that the expression of
controlling shareholders in Regulation IX.H.1 does not imply at all
to control a company. ---------------------------------------------------------
ii. Report does not mention at all that Regulation of Bank Indonesia
8/16/PBI/2006 is issued aiming at facilitating the smaller banks
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restructure, merger and consolidation as examples. It is enough to
say that the objective of the regulation is in contradiction with
Article 27(a). In brief, the regulation is to promote concentration in
the market of banking services. ----------------------------------------------
In this case, we cited the introduction of the regulation; -----------------
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Considering -----------------------------------------------------------
a. that to create health and solid Indonesian banking
structure banking consolidation steps is needed:
b. that to boost banking consolidation the banking
ownership restructurings through the implementation
of single ownership in Indonesian banking;..
iii. Besides, SingTel and ST Mobile need to note that the expression
controlling party in banking regulation is initially from the
regulation of Central Bank of Indonesia (BI) No. 5/25/PBI/2003
(Regulation No. 5/25/PBI/2003). Under the regulation, the party
nominates to be a controlling shareholder shall pass fit and proper
test of BI. Therefore, the objective of the requirement in this
regulation differs principally with those of Article 27(a). In the
Regulation No. 8/16/PBI/2006, using shareholder’s term that
controlled and its limitation protect the depositor's party from their
bank being controlled by the party that did not fill the condition with
requirement is that the party that controlled ought to passed fit and
proper test. Clearly, if the party that controlled could pass fit and
proper test, then they could continue to as shareholders. ---------------
-------------------
The aim of the threshold of the article majority 27 (a) really was
different from the Regulation IX.H.1. The party that make an effort
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to be protected by the article 27 (a) really was different from the
party that made an effort to be protected by the Regulation No.
5/25/PBI/2003. The party that mentioned last, made an effort to
protect the suppliers and bank liquidity and the party mentioned first
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made an effort to protect the competition in the relevant market that
is the market for the company's product involved.-----------------------
----------
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Thus, SingTel and ST Mobile states that the regulation mentioned
above are specific regulations with specific objectives. The terms
can be overlapped one to another. -------------------------------------------
63. Once again, emphasizing literal definition of “majority share” shall be
consistently implemented along with the aim of Article 27(a) while broad
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interpretation of KPPU deviates from the clear rule. As it is said by Ehlermann,
the expression of “majority share” is clear and not ambiguous, the authoritative
of anti-trust may not distort the plain language (’the expression”majority
shares” is clear and unambiguous: an antitrust authority should not distort
plain language, no matter what its purported aim might be”) 122. WilmerHale
follows the views of Ehlermann that the approach used by KPPU is the
antithesis of established principle in the American anti-trust 123. ---------------------
International Standard requires Literal Interpretation on the word Majority ------------
64. After failing to prove that Indonesian law support the interpretation of Article
27(a) extensively, the Report tries to indicate that the interpretation will be in
accordance under the standard competition law in the outstanding jurisdictions.
In this case, the report of Ehlermann is clear in interpreting literally the word
majority. -------------------------------------------------------------------------------------
122
Ehlermann, Expert Statement of SingTel and ST Mobile, page 84.
123
WilmerHale, page 3.
65. The detail Analysis of Ehlermann to the Article 27 as compared to several
jurisdictions of competition law and the principle of international law principle
bring it to some conclusion: 124: -----------------------------------------------------------
(a) Article 27 must be applied – as he written – as prohibition per se. If it does,
then the requirement of Article 27, that is (i) “majority shares”; (ii) “some
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companies (iii) “common area in a pertinent market”; and (iv) structural
market requirement jointly read literally. Based on this analysis, any
allegation to Sing Tel or ST Mobile cannot be justified because no single
entity has majority shares in some companies; -------------------------------------
(b) In case of non-literal interpretation to ‘majority shares” is applied, then
Article 27 must be interpreted as entering actual loss impact requirement
into competition. By reading it, KPPU shall prove the loss impacts; and-------
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(c) Two approaches above are standing alone – namely, the prohibition per se
of Article 27 cannot be combined by non-literal interpretation of the
‘majority share’. ------------------------------------------------------------------------
66. We think that Article 27(a) is infringement per se that need no testing on the
impact to the market. Yet, as Ehlermann argued, if KPPU insists to implement
broader and incorrect interpretation in the phrase “majority share”, then Article
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27(a) shall be read as entering substantive test on the loss impact of competition.
Any other interpretations will infringe the principle of international law and
advance competition standard regime in the investigated jurisdiction. --------------
67. KKPU with its long analysis in Part B of the Report on, Economy, tries (and in
our opinion, fails) to show that cellular telecommunication market in
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Indonesia is not competitive and the loss thrust to consumer. It is not crucial for
KPPU to indicate the loss against competition and to present economic analysis. -
68. Ehlermann notes that there is no equality between Article 27 and the European
jurisdiction to consider, the closest equality with the infringement per se in
Article 27 is Article 8 of US Act, corporate structure that apply strict liability of
the director or official of the competing corporate 125. He notes that United Sates
court judicial does not want to read consistently a rule of law beyond its literal
expression. The refusal is justifiable due to such strict interpretation of a
provision entailing strict liability is a well-established principle of statutory
interpretation. The Courts do not add words to, or expand concepts in, statutes
just to make them more effective where strict liability is at issue. To do this
124
Ehlermann, SingTel and ST Mobile, Expert Statement, page 83 to 86.
125
would infringe the fundamental principles of separation of governmental powers
as well as the principle of legal certainty.’) 126
69. Ehlermann has performed functional comparison of Article 27 with the relevant
law in his opinion in the examined jurisdiction. Ehlermann considers that
Article 27 is Part 3 of the Chapter V of Anti-trust Law, that covers “Dominant
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Position”, and then the most relevant comparison is dominant position abuse
and the law on monopolization 127. -------------------------------------------------------
70. Based on the functional comparison in which he has performed to the law in the
examined jurisdiction, Ehlermann concludes: -------------------------------------------
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(a) That the laws only prohibit dominant abuse (in EC, England and Germany)
or the implementation or acquiring monopolistic power by breaking the law
(in the United States). Possessing high market position itself is not illegal in
such jurisdiction 128; --------------------------------------------------------------------
(b) That the law is on unilateral conduct, against the unification law, only to
conduct abuse has occurred in the market. The authority has no jurisdiction
to control the possible future abuse 129. This prospective Analysis is possible
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based on the unification controlling law and to apply the same analysis to
Article 27 is illogical. It because Article 27, from the perspective of
function is different with unification controlling law in which Article 27 is
applied ex post that is to the situation in which market ahs already existed,
while unification controlling is ante; and -------------------------------------------
(c) Therefore, although the interpretation of majority share in Article 27(a)
means controlling of even material influence is acceptable (in which we
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deny it) related to the competition law regime international standard in
Europe and the United States of America, it is only possible if the control
or influence has been abuse and loss the competition in the market. -----------
71. We note that KPPU in its Report has referred to the unification regulation if
European Union, England and the United States of America to support its
argument that “majority share” shall be read as control– particularly shareholder
can give determining influence (on the EU’s term) or material influence (on
UK’s term) on the directive policy of a company. Especially, KPPU refers to
Article 31(1) (b) of EC Merger Regulation that state that a concentration arises
because of controlling. KPPU insists that based on the law of EC, control means
capacity to use an influence to determine a company and no evidence
requirement that the decisive influence has been used or about to use 130. -----------
126
127
128
129
130
Ehlermann, Expert Statement of SingTel and ST Mobile, page 54, page 31.
72. Ehlermann does not questions that controlling concept or material influence of
the holding company over subsidiaries exist and related in the law on
unification control in the examined jurisdiction. Di EU, England and Germany
one of many factors that trigger the requirements to report transaction to the
authoritative party based on the unification law is the changes or acquiring
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“control” in a corporation. In this context, control in defined broadly and not
only covers acquiring shares ownership majority but also transaction that
produce ability to decisive influence of other corporations 131-------------------------
73. As an example, Ehlermann refers to Article 37 of the German Law 1958 on Act
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Against Restraint of Competition (“ARC”) that require an information in which
any corporation enables a corporation or some corporation use the “significant
competition influence” directly or indirectly to other corporation (Part
37(1)(No. 5) ARC) 132. ---------------------------------------------------------------------
74. Yet, Ehlermann insists that it is a mistake to widen the meaning of “ownership
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majority” in Article 27 so that it means significant competition influence or
material to Telkomesl because of some reason as follows:
(a) Firstly, he thinks that basically unification law is a mechanism of ex ante
control, while Article 27 apply to any available situation. Unification law is
true in determining that wider distance of transaction meet a requirements as
unification, Article 27 shall be interpreted by way of depending more on
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similar functional rules. 133; ------------------------------------------------------------
(b) Secondly, German unification law assertively defines acquiring significant
competition as a punishable unification. The authoritative party shall have
not of rewrite such a simple language of the law to come to such conclusion.
There is nothing identical in Anti-trust Law (even less Article 27) that can
be defined by KPPU 134;----------------------------------------------------------------
(c) Thirdly, German Unification Law also defines between acquiring control,
share ownership majority (defined as share ownership for at least 50%)
significant influence. 135. --------------------------------------------------------------
(d) Finally, the facts do not support the allegation that SingTel and/or ST
Mobile have a significant competition influence over Telkomsel. The
existing indication show the opposite, namely: i) Ehlermann understands
that management Telkomsel does not require shareholders to agree before
Telkomsel enter new market (apart from material acquisition); and (ii)
majority shareholders of Telkomsel is an incumbent of fixed line telephony
131
132
133
134
135
operator in Indonesia and, therefore it is experience in telecommunication
sector. 136. -------------------------------------------------------------------------------
75. As it is stated above and below, Ehlermann thinks that we all agree entirely that
Article 27 conceptually and functionally is different with the unification
controlling law. Therefore, It is illogical that material influence and decisive
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influence is taken and inserted in the definition of “majority share” in Article
27(a). Significantly, Ehlermann also show that wider interpretation to Article 27
beyond its literal reading seems to be risky to be a substitute of an
implementation (postponed) of the rule Part IV, Chapter V entitled “Merger,
Consolidation and taking over” (Article 28 and 29). To the present time, the
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rule of law have not been valid due to the regulation required by Article 28(3)
and 29(3) have not been available yet. 137. We state retroactive implementation
of the law infringe legal certainty and give no justice to SingTel and ST Mobile. -
76. Continuing the analysis of Ehlermann on the invalidity of analogy on the rule of
unification control for the case, WilmerHale suggests that, in whatever thing, the
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evaluation to unification control ex post facto by the Report is inconsistent with
the principle of unification control in UK and the United States of America. In
England, a study on ex post of unification is enabled to conduct for four months
since Office of Fair Trading (“OFT”) detects a transaction. 138 It is not, OFT only
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examines ex post transaction if during unification, the information is misleading
or fake in the sense of material document. ---------------------------------------------
77. After studying the report and the existing problems, WilmerHale concludes that
the report does not inform the impact of Temasek indirect investment in
Telkomsel and Indosat. The lack of competition in the market after the
investment is not proved. The Report only tells that the market structure and
performance of cellular telecommunication service in Indonesia has been more
concentrated since 2002. The market position of Telkomsel increased but not for
Indosat. Market becomes to be oligopolistic, with the price of cellular
telecommunications higher than those of price in some other countries are.
Report only finds that relevant market is oligopoly with consistent behavior with
136
137
138
WilmerHale, page 7.
oligopolistic market structure. WilmerHale furthermore said that such a market
structure has been formed before Temasek invest in Telkomsel and Indosat.. 139 ---
78. As it is shown further by WilmerHale, the Report does not result any findings
that competition in cellular telecommunication in Indonesia less strong than it
should be after the indirect takeover of Temasek on Telkomsel and Indosat. The
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finding is very crucial based on Article 7 of Clayton Act. For example, the
Report does not get findings on the increase of price after the investment of
Temasek in Indosat on December 2002. At the same time, Indosat was unable to
compete to grab customer and even Indosat have conducted other way to lessen
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its significant competition referring to investment of Temasek in Telkomsel.
For such reason, WilmerHale concludes that the analysis of KPPU does not
complete Article 7 Clayton Acts. Further, SingTel and ST Mobile describe
further KPPU's failure in determining causality relationship between allegedly
cross ownership and the substantive loss to competition in market. According to
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us, market is really competitive, this conclusion is based on our research that
relied on related competition index and supported by empiric data. -----------------
79. “Majority Share” must be comprehended as control owned by a business player
to other business player. KPPU has acted (1) in opposite to Indonesian law
principles in interpreting rule of law(2) in opposition to principle and law
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standard international in law of competition. WilmerHale concludes that
extension of Article 27 in the Report exceed its text. 140.-------------------------------
Legal certainty forbid any interpreting Article 27(a) beyond its plain meaning -------
80. Furthermore, KPPU must obey to the legal principle and try not to add or extend
Article 27. By doing it KPPU will deserve to have crime sanction as Article 1.1
Code of Law concerned. -------------------------------------------------------------------
“A conduct cannot be sentenced by crime sanction, unless it is under
existing regulation of law.” -------------------------------------------------------
81. In this case, although a crime rule may be interpreted, the interpretation shall be
strict; grammatical interpretation must first priority method. Furthermore, (i)
analogy, as it is applied in the Report by citing some article from other
regulations, capital market and banking regulation, is not admissible. (ii) if
extensive interpretation will be applied. it shall be limited and it does not deviate
139
WlmerHale, page 10.
140
WilmerHale, page 5.
general understanding or which all individual shares in a society. In this case,
we share our opinion that the extensive interpretation of majority is inapplicable
since it is considered minority in its interpretation. It is biased from the concept
of majority which all individual shares in a society.------------------------------------
82. Although KPPU state on administrative sanction and not crime sanction, the
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expression of "majority" shall be equal because, (i) KPPU shall be subject to the
principles of legal certainty as a state governing body; (ii) KPPU is not
legislative body that authoritatively make new law and; (iii) applying the
expression of “majority” contradictive between the regime of administrative and
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crime law infringe the legal entities, justice and equal treatment before law.-------
83. In brief, it can be said that there is no fundamental thing to extend literal
definition of “majority shares” in Article 27(a) under Indonesia law or
competition law in the observed jurisdictions law. If Article 27(a) is not
interpreted literally, KPPU can say that SingTel and/or ST Mobile have created
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loss in the competition. Unfortunately, there is no fact that Temasek through
SingTel or ST Mobile use its significant influence to the Telkomsel. Majority
shareholder of Telkomsel is PT Telkom and Telkom that has privilege to use its
significant influence. KPPU insist to read Article 27 in its own way and it give
bad precedence to the law in Indonesia.--------------------------------------------------
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Either SingTel or ST Mobile do not have shares in several companies in Indonesia ----
84. Article 27 requires Reported that own shares in “several” company that run
business activity in the pertinent market. The bodies that operate in market are
only Telkomsel and Indosat. Thus, according to Ehlermann, Article 27(a) cannot
be applied to SingTel and/or ST Mobile because none of them runs business
activity in the relevant market. 141 --------------------------------------------------------
85. SingTel does not have share in any company but Telkomsel, in the relevant
market and, it automatically cannot control any market shares. It can be seen
from the Annual Repot of Singtel and financial statement of ST Mobile that are
submitted to KPPU on 4 July 2007. 142 ST Mobile only has minority share in
one company in the market. It is clear that KPPU has not yet and been able to
141
Ehlermann, Expert Statement of SingTel and ST Mobile, page 22 to page 25.
142
See Singtel Annual Reports of 2006/2007,2005/2006 and 2004/2005, 2003/2004 and 2002/2003 and
Finance Statement of ST Mobile for the fiscal year ended on 31 March 2006, 31 March 2005, 31 March 2004,
31 March 2003 and 31 March 2002, submitted to KPPU on 4 July 2007.
prove the elements of Article 27(a) infringed by ST Mobile. Just from this
reason, the allegation to SingTel and ST Mobile have to revoked--------------------
Either SingTel or ST Mobile does not have shares in cellular market in Indonesia
86. KPPU must prove the control of more than 50% of market share in the relevant
market. Besides, the relevant market must be correctly defined. In the ongoing
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case, the pertinent geographical market is limited only in Indonesia.
Consequently, telephony of ST Mobile in Singapore and in other place is
irrelevant, since Indosat and Telkomsel do not operate outside. 143 -------------------
87. Case also shows obviously that PT Telkom has controlling share in Telkomsel
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and its share market is between 50% to less than 60%. Even by taking a most
advantageous definition (for KPPU) maximum, market shares of Indosat,
around 25%. By having two reasons, it is impossible for Temasek to control
more than 50% of market share. 144.
THERE IS NO “TEMASEK BUSINESS GROUP”. IF ANY, THEN SINGTEL AND ST MOBILE
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ARE NOT PART OF IT, BECAUSE EITHER SINGTEL OR ST MOBILE IS NOT CONTROLLED BY
TEMASEK. ---------------------------------------------------------------------------------------------
88. We wonder to contain of the Report. In it, it is mentioned that SingTel, ST
Mobile and other Reported belong to what is so-called “Temasek Business
Group. ” “Temasek Business Group” is not a corporate body and it is groundless
to say the Reported are part of the single economic entity. ----------------------------
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89. In this case, SingTel and ST Mobile refer to Annex 4 of KPPU's report. The
annex is repot on Singaporean company law and regulation (“Report of
Company Law”) written by C.R. Rajah, S.C. (“Rajah”), one of notable,
experienced and senior lawyers and expert of law company in Singapore. Rajah
states assertively that in this category under Singapore law, Temasek, SingTel
and ST Mobile (and his own corporation) is a separated body/operation. 145.-------
90. According to Rajah, “It is a fundamental principle of Singaporean law that after
it is founded, legally a company and those who own and/or manage it separated.
It also goes into effect although only one person owns and manages a
company.” In other hand, Rajah states that it is in a situation in which
Singaporean can assume that the responsibility of owners (or board of directors)
143
Ehlermann, Expert Statement of SingTel and ST Mobile, page 20 to 21.
144
Case, A Competition in the market of cellular telecommunication in Indonesia, Preliminary Economic
Assesment (Persaingan di Pasar Telekomunikasi Seluler Indonesia, Penilaian Ekonomi Awal )(“Case”),
page 36 to 37.
145
Rajah, The Report of Enterprise Law , page 46.
very limited. In deception, case or where company is run only as interest of
controlling party and it practically is not separated (appointed the veil of
incorporation), it can be considered. It is hard to prove it and it is rare in fact. -----
91. There is no deception conducted by SingTel and/or ST Mobile. The two
companies are also not run as a device of controlling party. Therefore, an
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accusation to Temasek and SingTel or Temasek and ST Mobile as a single
economic entity is indefensible. -----------------------------------------------------------
92. We note that, on the assessment of Ehlermann to the observed jurisdiction law,
the relevant testing to prove that two companies is one body under competition
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law is similar to those in Singapore, namely where a subsidiary is under the
control of holding company not freely performing its own behavior in the
market and in holding company and subsidiary company assumed to be a single
body.
93. Referring to the law that arrange multilateral behavior, Ehlermann notes that’s
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in all observed jurisdictions, an agreement among corporation that limit
146
competition is prohibited Nevertheless he explains that, holding company
and subsidiary considered as single economic entity, an agreement among them
cannot be assumed to infringe the rule that arrange multilateral behavior
company --------------------------------------------------------------------------------------
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94. Prof Ehlermann states that none of law system in observed jurisdiction assume
that minority ownership gives control or influence to holding company so that a
competition authority assume that market position and the behavior of
subsidiary must be investigated along with its holding company 147. Based on
that, Ehlermann concludes that none of observed jurisdiction assumes Temasek
indirect ownership of minority share gives acceptable control to Indosat or
Telkomsel so that anti-trust authority considers Temasek Business Group as one
single economic entity that its market position and behavior are one. 148.
95. As it is described above, Ehlermann indicates that “control” according to the
laws on unification controlling is defined broader and not only cover acquisition
of majority share ownership but also transaction that produce an ability of its
146
Ehlermann, Expert Statement of SingTel and ST Mobile, page 54, 57 and 58.
147
148
decisive influence to othercorporations. 149 Nevertheless, it is wholly
inappropriate to import this wider concept of control into other areas of
competition law. For example, if “control” for the purposes of the single
economic entity doctrine was understood in the same broad way as in merger
control, this would result in agreements between a parent and a subsidiary in
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which it has a minority shareholding escaping fundamental competition law
rules designed to control the multilateral (anticompetitive) behavior of
companies..-----------------------------------------------------------------------------------
96. In consequence, under the law of Singapore and observed jurisdiction, there is no
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fundamental allegation for Temasek and SingTel or Temasek and ST Mobile to
be considered as Single Corporation. The term “Temasek Business Group”
(seems to be created by KPPU) is never presence and have no significance at all.
All requester in this investigation are separated under the law and fact. . -----------
97. As the same manner as noted above, Hikmahanto affirms that there is no
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doctrine of “single economy interest” in Indonesian law. In addition, if any, the
test shall be strictly conducted. ------------------------------------------------------------
98. In whatever case, all evidences before KPPU indicate that Temasek actually
using no control or even significant influence to SingTel or ST Mobile. Besides,
all existing evidences show absolutely that SingTel does not control or use
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significant influence to Telkomsel and ST Mobile does not control or use
significant influence to Telkomsel. -------------------------------------------------------
TELKOMSEL IS NOT CONTROLLED BY TEMASEK THROUGH SINGTEL
AND/OR ST MOBILE, BECAUSE SINGTEL AND/OR ST MOBILE IS NOT
CONTROLLED TELKOMSEL. ON THE CONTRARY, PT
TELECOMMUNICATION INDONESIA PLC (TELKOM), MAJORITY
SHAREHOLDERS, CONTROL TELKOMSEL.------------------------------------------------
Temasek does not control or give no decisive influence to SingTel.

99. As it mentioned above, that there is no cheat or fraud conduct and to prove that
Temasek and SingTel is single economic entity, it shall be proved first that
SingTel is operated only as a device of Temasek's business and interest. As well
as to be proved, that SingTel does not have own existence/separated operation.---
149
100. In the beginning it must be shown that, Temasek, apart from its ownership of
more than 50% to SingTel, Temasek does not control or does have important
and decisive influence to SingTel.. -------------------------------------------------------
101. The only fact owned by KPPU so-called in Report as evidence of the control of
Temasek to SingTel is as follows: --------------------------------------------------------
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a. That Temasek, under the Statuettes of SingTel Article 59(c), Article 96 (a),
Article 102 and Articles 103, Temasek, as a shareholder in SingTel has an
authority to appoint and to dismiss members of SingTel board of director.
The Report cites the Statutes without analyzing it in the framework of
relevant law, Singaporean company law, and;--------------------------------------
b. That Mr. Simon Israel is a member of board of director of Temasek and
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SingTel. ----------------------------------------------------------------------------------
102. Referring to (a) the above mentioned, it must be affirmed that under the Statutes
of SingTel, the shareholders of SingTel, with normal decision of someone to be
a Director due to a vacant for the position (casual) or be an additional Director
(See Article 103 of SingTel Statutes ) (for example if a Director passed away
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during his/her tenure). Normal Nomination to be a member of SingTel board of
directors is in accordance with Code of Corporate Governance) that determined
by Bursa Singapore (SGX) in accordance with Regulation 710 of Registration
Manual) (“Code”). According to Code, as it elaborated by Rajah, a Nominating
Committee (NC), consists of at least three directors (that its majority, including
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Chairperson is required to be independent) propose suitable candidates for board
of directors (”Board of Directors”) SingTel, approves the nomination. The
Chairperson of NC shall be a director who are not direct or indirectly related to
shareholders substantial (those shareholders with the interest of 5% or more
with company voting right). 150. Its fact, all members of NCCommittee are
independent.----------------------------------------------------------------------------------
103. Referring to (b) above, it shall be emphasized that Simon Israel is only one of
10 members of SingTel board of directors. SingTel board of director makes
decision based on majority votes. 151 It is clear that Mr. Simon Israel is possible
to lose out nine other SingTel Directors. Further, Mr. Israel is not candidate
(nominee) from Temasek. In fact, when Mr. Israel nominated as a director of
SingTel on 4 July 2003, he is not a director of Temasek. He only nominated as
director Temasek on 1 August 2005 and directors executive Temasek as from 1
150
Rajah, The Report of Enterprise Law, page 41.
151
See part 106 of the Memorandum and New Statutes of Singapore Telecommunications Limited, submitted
to KPPU on 4 July 2007
July 2006. Therefore, structurally Temasek can not give material influence to
the board of SingTel,directors's decisions. It has been elaborated before
KPPU's Question and answer session. We do not know basically, but if any,
why does KPPU not mind to the facts. ---------------------------------------------------
104. Further, any allegation that Temasek conduct control to the SingTel or ST
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Mobile is bias. Rajah affirms that Temasek does not have right legally to give
instruction to or to break the decisions of SingTel (or ST Mobile) director
relating to management (including operation and diary business policy) of
SingTel (or ST Mobile). KPPU does not indicate evidence that show it
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conversely. For this reason, the finding of KPPU that Temasek give major effect
to the decisions of SingTel or ST Mobile board of directors are groundless and
ignores to examine the evidence before it. -----------------------------------------------
104. Further, any allegation that Temasek conduct control to the SingTel or ST
Mobile is bias. Rajah affirms that Temasek does not have right legally to give
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instruction to or to break the decisions of SingTel (or ST Mobile) director
relating to management (including operation and diary business policy) of
SingTel (or ST Mobile).152 KPPU does not indicate that an evidence that show it
conversely. For this reason, the finding of KPPU that Temasek give major effect
to the decisions of SingTel or ST Mobile board of directors are groundless and
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ignores to examine the evidence before it. -----------------------------------------------
105. Rajah states that in any matter the directors of SingTel have to work for the sake
of SingTel. The interest of company is not only limited to the interest of their
each shareholders in person and covers the interest of employees and
creditors. 153 This is the barrier hereinafter at the instance of Temasek can
influence decision by board of directors of SingTel ------------------------------------
106. The obstacle of Temasek to influence SingTel, as Rajah affirms it, related to
limitation of votes that is required in Company Law (Chop 20) and the Statutes
of SingTel and also on diary management decision. 154 In fact, SingTel does not
consult Temasek and Temasek does not have an obligation to ask an approval to
the business strategy and invesment of SingTel. KPPU never states the
evidence conversely.
152
Rajah, The Report of Enterprise Law , page 20 and 45.
153
Rajah, The Report of Enterprise Law , page 45.
154
Rajah, The Report of Enterprise Law , page 24 and 26.
107. The allegation that Temasek control SingTel busines is groundless. KPPU fails
to prove that Temasek influences SingTel. KPPU also fails in proving that
SingTel does not have its own operation. It is a serious accusation to SingTel as
a biggest enlisted company in Bursa Singapore (“SGX”), SOX, and Bursa
Australia (“ASX”). It is annoying for SingTel to have such kind of allegation
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and KPPU allegeds it without providing evidence.
Temasek does not control or influence ST Mobile -------------------------------------------
108. We mention our position as it written in paragraph 99, that there is no cheat or
fraud conduct and to prove that Temasek and SingTel is single economic entity,
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it shall be proved first that SingTel is operated only as a device of Temasek's
business and interest. As well as to be proved, that SingTel does not have own
existence/separated operation. -------------------------------------------------------------
109. Temasek does not have share in ST Mobile that make Temasek is absent to
nominate members for ST Mobileboard of director. As it is mentioned above,
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Rajah affirm that legally, Temasek does not have right to give instruction or
cancel the decision of ST Mobile directors relating to management (including
daily operation and business policy) of ST Mobile. Consequently, Temasek does
not stay in a position to influence the decisions of ST Mobile board of director
policy and operation of ST Mobile, including the investment of ST Mobile in
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Telkomsel. There is no evidence for KPPU to state that conversely. It shall be
decided that Temasek does not control or influence ST Mobile and both
company because they are separated entities in legally and economically.----------
Temasek does not control and influent Telkomsel -------------------------------------------
110. Hikmahanto said on the concept of, if the concept any, then under the
Indonesian, the test can be completed only if (i) there is a joint management of
the holding company and its subsidiaries; (ii) the holding company planning
covers a centralized economic activity of the subsidiary and; (iii) subsidiary is
prohibited to disagree with the decision of management. In briefly, it must be
perfect domination by holding company to the operation of subsidiary. We note
that KPPU currently does not give any evidence about (i), (ii), (iii). We
hereinafter note that KPPU does not give evidence stating that Temasek
influences Telkomsel.
111. KPPU affirms in the Report that Mr. Simon Israel is member of Temasek and
SingTel board of directors. Mr. Lim Chuan Roh is management member of
SingTel. And candidates of SingTel to be post as board of commissioner
Telkomsel, Mr. Leong Shin Loong is commissioner of ST Mobile and member
of Board of commissioner of Telkomsel, Mrs. Chua Sock Koong is
management member of ST Mobile and SingTel 155. This is not wholly correct
because Leong Shin Loon NOT MEMBER of ST Mobileboard directors.
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However, this fact does not prove that Temasek controls Telkomsel and no
wonder if KPPU cannot explain explanation on how Temasek controls
Telkomsel. In fact none of them become director of Temasek and board of
directors member or board of commissioner Telkomsel, there is no overlap in
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the management of both company referred.
112. Temasek does not have share in ST Mobile or Telkomsel. That is Temasek not
have voting right concerning policy and/or activity of Telkomsel. To avoid
hesitating, there is no contractual arrangement between Temasek and SingTel,
Temasek and ST Mobile and/or Temasek and Telkomsel related to performance
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and/or business of Telkomsel. Further, Temasek is not in a position to and not
influence to any one policy or operation of Telkomsel. Once again, there is no
evidence for KPPU state it conversely.---------------------------------------------------
ST Mobile does not control or influence Telkomsel------------------------------------------
113. Is reality that test for verification that ST Mobile and Telkomsel is “single
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economy entity” in Indonesian law, as the same manner as expressed by
Hikmahanto, not fulfilled. We note that KPPU does not give evidence even
states that (i) that the of plan ST Mobile including Telkomsel single economic
activity, or (ii) that Telkomsel is prohibited to challenge this management
policy. We state that KPPU even is not ready to give evidence that ST Mobile
influence Telkomsel.------------------------------------------------------------------------
114. The only fact owned by KPPU is as follows:--------------------------------------------
a. That ST Mobile as shareholders Telkomsel own authority to nominate two
Telkomsel board of director under Article 10(1) Telkomsel’s Statutes and
two Telkomsel board of under Article 13(3) of Telkomsel Statutes. ------------
b. That there are positions that are interconnected between ST Mobile and
Telkomsel;-------------------------------------------------------------------------------
c. Since 2002 up to present, the position of Director of Commercial and
Director of Operation are always nominated by ST Mobile.----------------------
115. We inform that the Report ignores evidences and facts that make it opposes
against its analysis, as follows: ------------------------------------------------------------
155
Report , page 28.
116. Referring to (a) above, we state that actually there is an evidence that ST Mobile
does not influence Telkomsel. As minority shareholders, ST Mobile is entitled
to nominate only 2 of 6 members in Telkomsel’s Board of Commissioner
whereas Telkom is entitled to nominate majority (that is 4 from 6 members).
Currently, there are 5 Commissioner. That is, PT Telkom controls majority of
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the member of Telkomsel Board of commissioner.. ------------------------------------
117. The same goes for ST Mobile. ST Mobile is only entitled to nominates 2 of 5
members in Telkomsel board of director. Again, PT Telkom controls majority
of members of Telkomsel board of director.---------------------------------------------
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118. All decisions of Telkomsel Board of commissioner and board of director
(“Telkomse Council l”) are taken by voting from majority member of related
Council. Due to the candidates of ST Mobile are not majority of Telkomsel
council, structurally, ST Mobile is not in a position to control one of the
decision taken by the council such as PT Telkom, but based on its ability to lift
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majority from member Board of commissioner and board of director.
119. Under Indonesia law, candidates of ST Mobile for Telkomsel Council is
required to perform their duties for the sake of Telkomsel and avoid placing
themselves in their position in which the duties for Telkomsel oppose against
other interests, Mr. Lim and Mr. Leong really know and ready to complete their
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role each as director and commissioner of Telkomsel. There is no evidence that
the candidates of ST Mobile for Telkomsel Council ever abuse their duties.
120. Mr. Lim Chan Poh and Mr. Leong Shin Loon is only 2 of 5 commissaries in
Board of commissioner of Telkomsel, whereas Mr. Yuan Kuan Moon and Mr.
Mo Boon Teck Alan is only 2 of 5 directors in board of directors Telkomsel. As
the same manner as has been noted KPPU that at least 4 members are obliged to
fulfill quorum for board of directors meeting and board of commissioner. That
is, candidates of ST Mobile will always become minority cannot influence the
decision and policy made by board of directors or commissioner. -------------------
121. Concerning to material argument of KPPU that since 2002 up to present, the
position of Director of Commercial and Operation are always nominated by ST
Mobile, it is actually not true. ST Mobile is entitled to nominate two positions
in Telkomsel Management. In the beginning, ST Mobile nominates Director of
Planning and Development, and Director of Operation. Only recently, ST
Mobile nominates Director of Commercial and Director of Operation. SingTel
and ST cannot see how can it will be as evidence that ST Mobile has ability to
control Telkomsel. Telkomsel is managed by board of directors Telkomsel.
Board of director must approve all business policies, operation and strategy
before they are applied. As it is admitted by KPPU, Telkom own majority in
both Telkomsel council. --------------------------------------------------------------------
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122. Hereinafter SingTel and ST Mobile note that ironically KPPU does not mention
that important posts of Managing Director and Director of Finance since 2002
up to present always occupied by candidates of Telkom as it are its rights as
majority shareholders to have it. Concerning to this condition, SingTel and ST
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Mobile note that Article 11.3 of Telkomsels’s Statutes states that, if Managing
Director or if he/she absent or then two other Directors nominated by majority
shareholders that have rights and authority to act deputizing board of director
and to sign documents on behalf of Corporation and be representative of
Corporation in and extrajudicial of any kind and in all occurrence, binding
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corporation with other party and perform all action, both on management or
ownership.------------------------------------------------------------------------------------
SingTel does not control and influence Telkomsel -------------------------------------------
123. The test to prove that SingTel and Telkomsel is “single economic interest” in
Indonesia law, such expressed by Hikmahanto, have not fulfilled yet. In fact,
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SingTel and ST Mobile admit that KPPU even cannot propose evidence that
SingTel control Telkomsel
124 KPPU in its Report thinks that SingTel has authority for “deciding company
policy especially approval for budget through “Capex Committee” based on the
followings: -----------------------------------------------------------------------------------
That the approval of annual budget on, related to capital expenditure,
shall pass Capex Committee that consisted of three personnel, from
Telkom (2 personnel) and SingTel (1 personnel) (The IOR of SingTel,
dated 4 July 2007, The IOR of SingTel, dated 11 July 2007). SingTel
intervenes keenly Capex Committee through its staff posted for it (The
IOR of Telkom, dated 24 July 2007) and Capex Committee may consult
with the team of SingTel, one of them is Mr. Widjaja Suki (The IOR of
Telkom, dated 4 July 2007);).
Mr. Widjaja Suki evaluates the parameter applied in the proposal. In
case of parameter error caused by human error, the correction is made
immediately by Mr. Widjaja, but in case of parameter error caused by
market situation, Mr. Widjaja Suki is to consult SingTel Mobile’s
appointed members of Capex Committee (The IOR of SingTel Mobile,
dated 4 July 2007); -----------------------------------------------------------------
The budget realization is approved by Capex Committee quarterly in
accordance with the needs submitted by any departments (The IOR of
SingTel Mobile, dated 4 July 207);
Mr. Widjadja Suki and Mr. Quah Kung, the personnel assigned by
SingTel, monitors the implementation of approved annual budget. They
later recommend it to the SingTel Mobile’s appointed commissioners of
Telkomsel. In performing his assignment, Mr. Widjaja Suki may perform
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a communication with management staffs of Telkomsel’s business
control such as Mr. Jaka Susanta to whom Mr. Widjaja Suki perform a
contact and communication intensively (The IOR of SingTel Mobile,
dated 4 July 2007); -----------------------------------------------------------------
SingTel intensively advises the SingTel’s appointed Commissioners of
Telkomsel on business vision plan of Telkomsel (The IOR of SingTel
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Mobile, dated 4 July 2007); 156 ----------------------------------------------------
Report has wrong Fact in telling the Fact on Telkomsel Capex Committee ------------
125 We firmly refuse the interpretation of KPPU on the evidence that given by
representative of SingTel before KPPU during investigation on 4 July 2007 and
23 July 2997 such cited above. Hereinafter in an Investigation Official Report of
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Telkom on 24 July 2007, stating there is no told that Singtel’s staff assigns
actively to influence Capex Committee. It is not true. ---------------------------------
126. First of all, we must emphasize that budget for capital expenditure approved
along with annual budget is arranged. Annual Budget is first proposed by
management of Telkomsel to board of director for having until it finally
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submitted by board of director to Telkomsel’s Board of Commissioner for an
approval. With the majority of in both board of director of commissioner of
Telkomsel, PT Telkom stays in the only one conducive position to control the
annual budget.--------------------------
127. Its fact, based on the Investigation Official Report of Telkom on 24 July 2007, it
is clear that if there is a party possessing an influence on the decision of Capex
Committee, is PT Telkom. We elaborate hereunder part of relevant Investigation
Official Report that relevant, in which its Managing Director, under oath,
answer the following questions: -----------------------------------------------------------
23
Question: How decision-making processes are taken in Capex Committee?
Answer: The initial proposal is from Telkomsel board of director.
24.
156
Report , page 35, page 87 to 92.
Question: How are about the existence of SingTel representatives?
Answer: In my Experience as a member of Capex Committee that the
decision remains to be in Telkom and as far as I know, currently Telkom
controls the decision of Capex Committee more.
25.
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Question: Does SingTel ever influence the decision of Capex Committee,
directly or through staff of Capex Committee?
Answer: Naturally, it does not, of course.
26.
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Question: I mean its effectivity?
Answer: Actually, if it is seen from its effectiveness, Telkom controlled more.
27.
Question: In your opinion how much are the influence of each party, between
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the representative of Telkom and SingTel?
Answer: Formally, it is 65% and 35%.
28.
Question: If it focuses on the decision of Capex Committee, how many percent
is the influence of each party, between representative of Telkom and SingTel?
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Answer: It maybe I am able to depict that Telkomsel is operated under the
directives of Telkom and for several strategic things Telkomsel shall be in
follow it. Although, there are sometimes different opinion exists such as
concerning SLI and Backbone.
29.
Question: For such things, is there any objection from SingTel?
Answer: Yes. SingTel object to that but the decision remain to be won by
Telkom. We want to affirm that for the things that are not strategic, Telkom
always wins it. Nevertheless, for the company operation I know much on that.
It is better to you to as Telkomsel board of director.
The same goes for part of the following interview, taken from Investigation
Official Report of Telkomsel on 13 July 2007. It clearly indicates that
Telkomsel is taking care of the policy proposal (if any) of SingTel. ----------------
24.
Question: Is there any policy of SingTel adopted by Telkomsel? -------------------
Answer: Telkomsel, in arranging the policy, does not consider the source of
the policy whether it is from SingTel or Telkom. We emphasize on
the professionalism and independency--------------------------------------
The position of SingTel and ST Mobile remain to be the same as SingTel
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and ST Mobile submit it to KPPU during investigation, that either SingTel
or ST Mobile does not give big influence to the capital expenditure
ofTelkomsel. ----------------------------------------------------------------------------
128. We understand if KPPU alleges that Capex Committe must pass the approval of
annual capital expenditure 157. It is not true. The representative of SingTel or ST
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Mobile tells the same thing even during investigation. In the investigation
session of SingTel on 4 July 2007, when the representative of ST Mobile are
questioned on whether all procurement proposal submitted to Capex
Committee, and the answers is ”yes” (see question 44 of Investigation Official
Reports of ST Mobile on 4 July 2007). Answer: It relates, not for having an
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approval of the budget arrangement on capital expenditure by Capex Committe
but for the disbursement of per-in quarter of the proposal of capital expenditure
(the elucidation of Mr. Widjaja Suki, Deputy Director (Business
Management)of International Group, SingTel, in his investigation of ST Mobile
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on 4 July 2007 affirming to this condition. Mr. Suki tells, ”There is a routine
thing, such as office stationary that need no approval of CAPEX Committee;
that need an approval of CAPEX Committee relates to implementation of annual
budget that has been approved related to network” (See question 49,
Investigation Official Report of ST Mobile on 4 July 2007). However, as the
same manner as mentioned hereunder, the approval of Capex Committe is not
final. The disbursement has to be approved by Board of commissioner. Capex
Committee------------------------------------------------------------------------------------
129. As the same manner as mentioned above, SingTel and ST Mobile refuses
KPPU's allegation that ”Capex Committee gives an approval for budget
realization quarterly based on the requirement submitted by each department
(Investigation Official Report of SingTel Mobile di on 4 July 2007)” 158. The
quarter disbursement proposal for capital expenditure prepared by Director of
157
Report , page 35, page 87.
158
Report , page 36, page 89.
Operation in line with the fiscal year approved by Board of commissioner for
that year, and from the income of Marketing and Telkomsel's Sales and
personnel of working unit. The proposal is submitted further to be studied by
Capex Committee. Capex Committee gives recommendation to Board of
commissioner whether the proposal is approved or not. However, it is needed to
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concern that, it is opposed to the allegation of KPPU, the final decision whether
it is approved or not, for the quarter withdrawal is conducted Telkomsel’s Board
of Commissioner and not by Capex Committee. During the investigation of ST
Mobile on 4 July 2007, the representatives of SingTel, Mr. Slattery has coped to
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clarify this problem. The followings are question asked to and the answer.
70.
Question: Is there any committee from Telkomsel apart from Capital
Expenditure Committee?
Answer: Yes it is. There are several committees from Telkomsel, but the
decision is in board of director.
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It is also an example of resolution of Telkomsel Commissioner, that Capex
Committee recommended, but the approval remains to be in the commissioner
of Telkomsel.
-------------------------------------------------------------------------------------------------
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130. We refuse KPPU's allegation that “SingTel has actively influenced Capex
Committee through the staff assigned for that problems”. As the same manner as
it has been admitted by KPPU, Capex Committee consists of 2 Telkom's
candidates and 1 from ST Mobile. Capex Committee's recommendation is based
on the majority votes; the nomination of ST Mobile had much influence to the
material.
131. KPUU has alleged that”Capex Committee can consult team with SingTel; one
of them is Mr. Widjaja Suki. Mr. Quah Kung Yang and Mr. Widjaja Suki are
two of SingTel team members that always support candidate of ST Mobile to be
Capex Committee (see the objective of the conversation below). They do not
support member Telkom nominate. (See: IOR of SingTel on 4 July 2007). The
members nominated by Telkom have their own supporters. While ST Mobile's
candidates are able to ask Mr. Quah and/or Mr. Suki for information and/or
elucidation to all proposals of quarterly withdrawal, they made their own
decision. It is clearly told by Mr. Quah, during SingTel investigation on 4 July
2007. To refresh the memory of KPPU, hereunder SingTel and ST Mobile
specify questions and comments.-----
KPPU: Does the Committee of Ex Capex consult you?
Answer: :No. Widjaja is part of team. When the document proposed to Board
of commissioners by the team, the team can ask the opinion of SingTel and ST
Mobile, if board of commissioner cannot do that.
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KPPU: Do members of Committee Cap consult SingTel?
Answer: No. Chap Ex that mention it. If they need support, they may ask my
team/Widjaja to get information, and SingTel and ST Mobile give feedback to
candidate of STM about Cap Ex and they decide by themselves.
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KPPU: Thus, before the team member makes a decision, does he consult
your team?
Answer: No. We support it by giving them information they need. After that,
it is up to Cap Ex to decide. We only support candidates of STM. Telkom's
candidates have their own supporters.
The allegation of KPPU is as follows:----------------------------------------------------
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“Mr. Widjaja Suki has helped Capex Committee in evaluating about the
possible suggestions of capex. Mr. Widjaja Suki also conducts parameter
evaluation used in capex proposal. If the measurement of the parameter is
not true caused by human error, Mr. Widjaja Suki must immediately revise
it, but if it is caused market condition, Mr. Widjaja Suki must consult
member of Capex College nominated by SingTel Mobile (IOR of the SingTel
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on 4 July 2007) ” [enhanced to emphasis]. ----------------------------------------
The allegation of KPPU that Mr. Suki revises the measurement of parameter
used in the proposal of Capex is incorrect and gains no support in the
testimonies made by the representatives of ST Mobile to KPPU on 4 July 2007.
The following are questions asked by Chairperson of KPPU Mr. Suki
concerning capex's suggestion given to Capex committee to be learnt.--------------
62. KPPU: How often does the parameter not match with budget?
Answer: We often find parameter that does not match with the budget.
64. KPPU: What is the cause of inappropriate?
Answer: Sometimes it caused by human error but sometimes market
condition. 65. KPPU: What do you do if you find such mistakes?
Answer: If the mistake is caused by human error, they will revise it, but if it
is caused by market condition, I consult Mr. Leon Mr. Leong.
66. KPPU: Thus, if the mistake is caused market, it must be discussed with Mr.
Leong?
Answer: Yes, it has.
I do feel that I have authority for that, because if there is any deviation on it I
must inform commissioner of SingTel nomination to finish the problem.
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Finally, the decision-making is in Mr. Leon (commissioner nominated by ST
Mobile) to be considered.
132. Base on what are mentioned above, it is clear that, where proposal capex
submitted by the staff of Telkomsel is not fulfilled the budget caused human
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error in documentation, “they”, that is, Telkomsel's staff in charged, revise the
document, and not by Mr. Suki. -----------------------------------------------------------
133. KPPU also ever told that, “if the parameter is not true caused by market
condition, Mr. Widjaja Suki shall consult members of Capex Committee
assigned by SingTel Mobile (IOR of SingTel date 4 July 2007). It is untrue.
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Based on the note above, it is clearly that proposal of capex does not meet the
budget because of market changes; Mr. Suki will advise the candidates of ST
Mobile about Capex Committee so they can make a decision by notification
about proposal of capex----
134. Further, Temasek, SingTel, or ST Mobile does not give major effect to the
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decision of Telkomsel's daily expenditure. All daily expenditures are limited
arranged. IOR of ST Mobile on 4 July 2007). Board of Commissioner in which
ST Mobile has no majority vote agrees the limitations.
135. We understand that KPPU also alleged that “Based on the approved annual
budget, SingTel has assigned its two staff, Mr. Widjaja Suki and Mr. Quah
Kung Yang to monitor the implementation and give recommendation to the
commissioner of Telkomsel appointed by SingTel Mobile... SingTel also has
actively suggested Telkomsel's commissioner appointed by SingTel Mobile
concerning business vision and plan of Telkomsel (IOR of SingTel on 4 July
2007). SingTel does not ever have rights to assign its staff to monitor the
problem of Telkomsel, by itself and its facts. SingTel only perform part of the
agreement with ST Mobile concerning the purchasing of corporation service
limited to human resource management, finance and accounting, and investment
monitoring by ST Mobile from SingTel. The following is information given to
KPPU by SingTel and ST Mobile mention information that given by Mr. Quah
to KPPU during the investigation of the SingTel on 4 July 2007 until now. ------
----------------------------
30. Are there any other management teams and is it the same as management
team of ST Mobile?
Answer: The structure of SingTel for the purpose of efficiency is that certain
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functions in subsidiary performed by SingTel as service provider, namely
services of subsidiary company purchasing perform the functions of like
customer service, law, human resource, finance and treasury.
31. KPPU: Can it be told that the function of STM performed by SingTel in
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general is the function of corporation?
Answer: Yes. Such function can be called as the function of General
Corporation. In case of ST Mobile, cellular business is still performed by ST
Mobile but the Corporation Function, ST Mobile buys them from SingTel.
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136. Regulation is accepted commercially. They avoid duplicating function,
economizing fare, and enabling role specialization. Mr. Suki and Mr. Quah
monitor Telkomsel annual budget implementation as part of function of
investment monitoring commissioned to them as agents of ST Mobile. They
also monitor the implementation of Telkomsel and recommend candidates ST
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Mobile in Telkomsel's boards of director and commissioner. Mr. Quah and Mr.
Suki do not take part in making the decision in Telkom; it clearly that the
members are those who are in charge in making decision.
137. The members nominated by ST Mobile at the boards of Telkomsel can consider
the recommendation to Mr. Quah and Mr. Suki, but they make decision
independently. They are professional who are qualified and professional expert
required to make decision independently and perform their task for the interest
of Telkomsel. It is shown that the candidate of ST Mobile in the Board of
Telkomsel had ever refused the recommendation Mr. Quah and Mr. Suki. We
refer to examples that containing the letter submitted by SingTel to KPPU on 23
July 2007.
138. KPPU also alleges, “In getting tasks done, Mr. Widjaja Suki can directly contact
Telkomsel’s management member in business monitoring, one of them is Mr.
Jaka Susanta (IOR of SingTel Mobile date 4 July 2007)”. We inform that it is
not an action of SingTel in influencing Telkomsel. In a big business like
Telkomsel, candidates of ST Mobile at any times qualify and ask in order to Mr.
Suki getting the explanation from Telkomsel that enabling candidates make
decisions on the basis of sufficient information approved by Telkomesl boards.
In the context of gathering information, Mr. Suki contacts Telkomsel in
Division of Business Monitoring. Mr. Quah and Mr. Suki do not give instruction
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or influence Telkomsel employees or board member. Mr. Quah and Mr. Suki are
in their capacity as consultants. There is no evidence in KPPU that suggest it
conversely. ----------------------------------------------------------------------------------
Especially, Temasek, SingTel, or ST Mobile does not monitor or influence the policies
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and decisions of Telkomsel on procurement and pricing.---------------------------------------
Either Temasek or SingTel or ST Mobile does not influence the decisions of Telkomsel
to the joint procurement and joint procurement is not per-se anti competitive.
139. Temasek, SingTel or ST Mobile does not take part in the procurement process
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for Telkomsel. Procurement is managed by Department of Research and
Development, head by Telkomsel nomination. -----------------------------------------
140. We comprehend that KPPU has concluded in its Report that Telkomsel does not
engage in joint procurement with a company affiliated to SingTel but only share
information with the company. KPPU does not allege that such conduct is null
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and void or imprecise. In a matter, and because questions about joint
procurement takes much time during Investigation of SingTel on 23 July 2007,
NERA has submitted joint procurement and conclude that joint procurement is
conducted for getting the discount on the basis of volume in vies as long as
input in the production process is not anti competitive. On the contrary, discount
based on volume is the usual aspect and healthy to the process competed to the
prosperity of customer. 159.-----------------------------------------------------------------
Temasek, SingTel or ST Mobile do not influence the Telkomsel decision on tariff. ---------
141. Either Temasek or SingTel/ST Mobile cannot influence Telkomsel policy

including pricing policy. KPPU admit that cellular telecommunication tariff is a
policy of operator based on the main formula and tariff structure regulated by
government as it is stated in Article 28 the Law No.36/1999 160. Under Article
28 Law No.36/1999, tariff of telecommunication network and
159
NERA, page 36 to 45.
160
Report , page 47.
telecommunication service has to be regulated by network (“Telecommunication
Law”) 161 and service operators by referring to the formula regulated by
government. The government regulated telecommunication industry through
Department of Transportation (“MOC”) and Department of Communication and
Information (“MOCI”). KPPU also admit that cellular telecommunication
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operators have met the regulation in ceiling price and tariff. Both are part of
regulation in the Law No.36/1999 on communication 70. 162. -------------------------
142. In formulating tariff, as it required by government, board of director in which
Temasek, and SingTel/ST Mobile have no significant votes, is determined. It
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has been confirmed by the representative of ST Mobile, Mr. Sean Slattery,
during investigation of ST Mobile on 23 July 2007 and also Telkomsel
representative during Telkomsel its investigation on 13 July 2007, as it
mentioned below.----------------------------------------------------------------------------
Investigation of ST Mobile ----------------------------------------------------------------
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27. KPPU: There is a trend that in analyzing economical tariff, Telkomsel
keeps on being a Leader in this industry. Telkomsel keeps the
tariff high, does SingTel Mobile know about it?----------------------
Answer: Telkomsel board of director fixes Tariff; SingTel Mobile does
not take part ----------------------------------------------------------------
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143. None of the management member of SingTel gives suggestion and
recommendation on pricing to anybody in Telkomsel, including those assigned
ST Mobile in board of director and commissioner of Telkomsel. PT Telkom as
majority shareholders elected majority of board of director in Telkomsel.
Therefore, none of party may have right to suggest material influence on
Telkomsel’s tariff, but PT Telkom, not Temasek, SingTel or ST Mobile. No
supporting suggestion that Temasek, SingTel or ST Mobile have material
influence to the pricing policy of Telkomsel.--------------------------------------------
CELLULAR MARKET IN INDONESIA IS COMPETITIVE AND NO EVIDENCE SHOW THAT THERE
IS ANTI COMPETITION AND BEHAVIOR ANTI-COMPETITION BY TELKOMSEL OR INDOSAT OR
BOTH OF THEM
144. It needs to be concerned that since SingTel and ST Mobile do not infringe
Article 27, level of competition evaluation in Indonesian market is not needed
161
See the Decree of Minister of Communication No. KM 20/ 2001 and the Decree of Communication
Minister No. KM 21/ 2001on the Regulation of Communication Service as it has been amended (“Kep
21/2001”) (it is exhibited in the defence as Annex #35).
162
Report , page 12.
any longer. The following analysis is for completeness only and not to
emphasize the fault of the allegations addressed to the under investigation
parties. ----------------------------------------------------------------------------------------
145. Further, only if (as for an argument) KPPU is allowed to misinterpret plain
words (in which we deny), KPPU has to prove that ant- competition behavior
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exist and such behavior relates to the allegation of cross ownership. ----------------
146. As it is stated in the defense, six expert’s statements issued or submitted before
the investigation, all indicate that there is no evidence of anti-competition
behavior, in Indonesian market of telecommunication service, whether in entry
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163
barrier, market shares price, revenues and expenditures. . The following is the
findings of investigation indicator of the related competition: ------------------------
147. The Performance of Stock Exchange. The allegation of KPPU is not
supported by stock exchange performance. Analysis on average income of
Telkom and Indosat from 2 January 2003 to 15 August 2007 that Indosat, PT
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Indosat (STT), gained higher majority shareholders than Telkomsel, and Telkom
(TLK), in NYSE and drew ahead the percentage performance growth in the
Dow Jones Industrial Average (INDU). If there is a fact that cellular operation
of Indosat decrease in its performance for the interest of Telkomsel, as it is
alleged by KPPU, the stock exchange shall reflect this strategy, and another
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things assumed to be equal. The fact does not seem like that and it does not
throw by KPPU 164. --------------------------------------------------------------------------
148. Entry Barrier. The entry barrier to enter market is high. It decreases the
possibility of collusive practice. 165 The restraint is low to middle and cellular
service providers in have high churn rate based on international standard (an
indicator of significant number of flitting carrier) 166. These factors indicate
competitive markets in Indonesia. --------------------------------------------------------
149. Market share. The trend of market shares in Indonesia is inconsistent with
market behavior but it does not show market failure. 167 It is due to high monthly
churn rate that hits cellular service providers in Indonesia based on international
163
As an example, NERA, page 3.
164
NERA, page 34.
165
NERA, page 158.
166
NERA, page 7.
167
NERA, part 7.1.1.
standard an indicator of significant number of flitting carrier, 168 and it should be
seen as a positive indicator of competition. 169. ------------------------------------------
150. Pricing. Telkomsel, Indosat and PT Excelcomindo Pratama Plc.,
(“Excelcomindo”) seem to implement different pricing strategy in some pivotal
aspects such as off peak period, calling prices, roaming rates, SMS, MMS, and
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GPRS price in which they are inconsistent with the alleged collusive behavior or
market failure. Instead of price competition of the new operators, the pricing
trend and service offering are inconsistent with the observe behavior in
market. 170. ------------------------------------------------------------------------------------
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151. According to NERA, “mere parallelism of conduct among putatively competing
forms does not establish the presence of a conspiracy: in competitive, markets,
one would expect forms to respond similarly to common changes in their
environment” 171. KPPU should see the better performance than to show the
behavior of the competitor. ----------------------------------------------------------------
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152. Market Dedication: Based on the data, Telkomsel, Indosat and Excelcomindo
seem to be for their own market and do competition to maintain and to attract
new consumers because they invest bigger in network coverage and marketing,
indicating that market is competitive and inconsistent with collusion 172.
Especially, either Telkomsel or Indosat has spent much more money in network
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and marketing. Indosat improves a number of base stations with the average of
27% per year. In marketing cost, the two companies have increased drastically
since 2002 173. --------------------------------------------------------------------------------
153. The trend is also observed by Spectrum. The capital expenditure of Indosat and
Telkomsel has remained high since 2002, indicating that the two companies
have invested consistently in the market 174. In reality, the capital expenditure of
Indosat increases significantly higher than Telkomsel and relatively highest in
Indonesian market. Indosat widens its network coverage and it indicates
competition. High investment and keep on growing business shows that the
climate in competitive. New innovative products that give better access to low
168
NERA, page 7.
169
NERA, page 173.
170
NERA, part 7.2.1.
171
NERA, page 3
172
NERA, part 7.2.2.
173
NERA, page 102.
174
Spectrum, part 3.7.
income consumer, 175 also an indication of high competition level in the market.
Either Indosat or Telkomsel has improved marketing and advertisement costs
since 2003. -----------------------------------------------------------------------------------
154. It indicates that the two operators admit the high competition in the market. 176 In
fact, Indosat has expended its revenues higher than Telkomsel, shows that
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Indosat keeps on competing aggressively 177. Indosat and Telkomsel has
launched some customer retentive initiatives that shows high competition of t
the two due to the awareness of the operators on the threat of their customer
basis in the market with the high churn rate 178. The high churn rate is an
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indicator the competition is high competition because of the success of market –
and cellular market in Indonesia has the highest churn rates this regions. ----------
155. Profitability: The profitability, as it is measured in which the income is higher
than capital expenditure, Telkomsel in this case is better than Indosat and
Excelcomindo. Therefore, the analysis reveals that the lower of Indosat
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profitability is caused by high cost although per customer operational is close to
179
what has been spent by Telkomsel . The new comers such as HCTP that enter
market by competitive pricing along with innovative offering service influence
the profitability in Indonesia. The ability of HCTP to enter market and compete
effectively with the incumbent operators is an indication of the competition in
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the market 180. Finally, SingTel and ST Mobile stress that KPPU does not give
any reasons explain how high profitability is caused by cross ownership. ----------
156. Benchmark Analysis. Based on the comparison between competition indicators
such as cellular price, rate of customer growth, market concentration, customer
churn, and margin (“EBITDA”) in Indonesia and 16 other countries, with
economic indicators such as, demography and Telecommunication, there is no
evidence indicating that market result in general lower than the comparative
countries. Its fact, for certain size----market concentration, changing of
concentration, cellular (3 minutes call in peak and off-peak, customer churn and
175
Spectrum, part 3.2.
176
Spectrum, part 3.3.
177
Spectrum, part 3.3.
178
Spectrum, part 3.5.
179
NERA, part 7.2.3.
180
NERA, page 6 and 145
rate of customer growth, the product market is better than comparative
countries 181. ---------------------------------------------------------------------------------
157. Case sees the comparison of international price, direct and indirect evidence of
competition price, he concludes that fair competition between Telkomsel and
Indosat exist. --------------------------------------------------------------------------------
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158. Based on the research by World Bank, cellular price in Indonesia is lower than
the average price in the middle countries and low average for the regions in East
Asia /Pacific. Secondly, common measurement of competition price is Average
Revenue per User (“ARPU”). The high ARPU indicates the tariff is higher
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and/or that the usage of customer is high. Case shows that the ARPU of
prominent cellular operators decrease actually around 2002 and 2006 –
Telkomsel is around 42%, Indosat more than 50%, and Excelcomindo around
65% 182. ---------------------------------------------------------------------------------------
159. As the evidence of price competition and non-price competition, Case writes
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that there are different prepaid and postpaid provided to different group of
customer. The financial statement shows new prices offering concerning various
products. Besides, cellular operator has been competing to decrease in various
tariff, especially what they called as ‘starter-packs’ 183. -------------------------------
160. EBITDA. Indonesia has high EBITDA rate compares to other countries; it is
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not an evidence of market failure and not also a competition concerned. 184. -------
161. Comparing certain indicators among countries can create problem, as it is
EBITDA, the data are developed by using methodology and difference approach
so that the comparison cannot be conducted unless other important factors are
not measured which actually able to explain the differences. ------------------------
162. Indonesia has high EBITDA rate, comparing EBITDA either other countries can
come to the bias conclusion if we are not careful in comparing it. The
measurement of profitability, such as EBITDA, can be sensitive to different
standard accounting and tax in any countries. For example, some countries
permits tax abatement but for other are conversely. Tax treatment and other
support in investment also varies in some countries. -----------------------------------
181
NERA, part 7.2.3.
182
Case, page 50.
183
Case, page 60.
184
NERA, page 138.
163. Secondly, prepaid customer is a significant customer in Indonesia and it
produces higher average margin per customer, as it in Indonesia. The
phenomenon is usually called “low-ARPU high-AMPU”.-----------------------------
164. Therefore, the fact that margin of EBITDA in Indonesia is higher than
international standard, and it is not a market failure and evidence of market
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failure and not also a competition concerned. The rate of profitability in
Indonesia is influenced by newcomer such as HCTP that enter market by
competitive pricing along with innovative offering service. The ability of HCTP
to enter market and compete effectively with the incumbent operators is an
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indication of the competition in the market. ---------------------------------------------
KPPU Analysis is basically defected.------------------------------------------------------------------
165. Report Case and Analysis discuss two KPPU allegations KPPU – that cross-
ownership of Temasek has caused (i) Indosat performance in cellular market
decrease and (ii) lack of competition between Indosat and Telkomsel. To prove
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the allegations, KPPU shall determines, (i) direct cross ownership by Temasek
to Indosat and Telkomsel in the sense of simultaneously control to the
commercial strategy; (ii) the clear evidence of the coordination between
Telkomsel and Indosat that causes anti competition product as is is alleged; and
(iii) the product of such anti competition is the direct result of Temasek indirect
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and/or ownership to its subsidiaries, Telkomsel and Indosat 185. ---------------------
166. The central flaw of the KPPU’s allegations is its failure to analyze or provide to
any evidence of a link between the ownership structure of Indosat and
Telkomsel, and the alleged anticompetitive effects described above.’ 186.’ ----------
167. KPPU cannot prove case hypothesis –if Temasek does not directly own the
shares in Telkomsel and Indosat, will it cause differences to the competitive
factors in the market? The postulate or argument of KPPU is illogical. The
shareholders will not invest and buying shares in two the biggest operators with
potential significant growth. 187. ----------------------------------------------------------
168. According to Case, the presence or absence of will not influence at all to such
factors. The momentum of Telkomsel growth currently has little issue on the
cross ownership and it can be explain by the effect of network. The theory and
185
Case, page 38 and 39.
186
Case, page 39.
187
Case, page 41.
empiric evidence of cellular market in developing or developed market
supported it. 188. -----------------------------------------------------------------------------
169. KPPU does not try to explain the relevance of the element and issues needed to
decide infringement based on competition law and anti-trust. The certain
analysis aspect seems not to be relevant with the problem that is faced. ------------
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170. Market Concentration. For one thing, market concentration that has been
described widely by KPPU in its Report is not something strange. In cellular
industry involving huge investment, market concentration is not extraordinary.
According to NERA: 189
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“Specifically, the market concentration for mobile services in Indonesia
is not atypical by international standards, although concentration is high
relative to other industries. This, however, is not unexpected, as large
fixed costs in the mobile sector limit the number of carriers that the
market can support.” ---------------------------------------------------------------
171. Consumer wealth. Secondly, it is related to concentrated issue, the theory
presented by KPPU is advance, based on a diagram suggested by the Report, to
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show that cross ownership causes loss consumer 190, that the alleged cross
ownership has created consumer loss 191.-------------------------------------------------
172. The theory is defected. This theory cannot explain how much cross ownerships
needed to cause consumer loss, even more if it is measured that Telkomsel has
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owns around 65% of cellular service market shares in Indonesia before on 15
December 2002. The implication of the diagram that is each value of ownership
will cause consumer loss. ------------------------------------------------------------------
173. On page 86 of the Report, KPPU uses price elasticity estimation price elasticity
of demand in 2006 to measure consumer’s wealth added resulted to the
deduction of price hypothesis of price in Indonesia to price valid in other
countries “that is considered to be competitive”. NERA notes that there are a
number of problem with this analysis. ---------------------------------------------------
174. Firstly, the analysis does not indicate that consumer surplus consumer or
customer decrease in Indonesia in the same period. Analysis shows that what
kind of consumer surplus that will happen if the prices in other countries are
lower than Indonesia. Decreasing price will increase consumer wealth as it is
188
Case, page 40.
189
NERA, page 5.
190
Report , page 59.
191
NERA, page 27 and 51.
cited from NERA, (“unexceptional”)” 192. It does not implicate that prices in
Indonesia is too high or the prices reflected power of market players.---------------
175. Benny Pasaribu in his opinion states (point 5d), customer surplus has increased
significantly since 2002 and tariff had decreased, from 9.6 million mobile
customers in 2002 to 63.6 million in 2006. Based on price and demand data in
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the Report, NERA predict the changing of consumer surplus customer within
the same period is IDR. 17 trillion 193.---------------------------------------------------
176. Thirdly, the elasticity predicted by KPPU is incorrect because within the period
of the research, demand curve of cellular service move outside due to many
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factors such as developing of network, revenue growth, and preferences. The
prediction of KPPU assumes that the quantity change is caused by price change
and it is not true. Thirdly, as it shown by NERA, a realistic elasticity curves is
significantly different with the prediction of KPPU 194. --------------------------------
177. Market concentration – The formula is engineered. KPPU assumes that
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whatever high the concentration market is, it always relate to the increase of
market power. This assumption is incorrect – market power is not always
mentioned by concentration, but also elasticity of demand and supply. ------------
178. Secondly, GHHI is seldom used by anti-trust authority I US. The following is
the accuracy of the result of GHHI, cited from NERA: 195 -----------------------------
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“In order to measure the GHHI one has to determine the “exact degree”
of control exercised by the firm’s shareholders. Determining the exact
degree of control exercised by a firm’s shareholders is a complex
undertaking that requires detailed analysis of each firm’s governance
rules and structures. The findings can vary significantly based on
different methodologies to measure the degree of control. Hence, the
GHHI results are unlikely to be robust and are sensitive to the underlying
assumptions regarding the degree of control exercised by the firm’s
shareholders.” -----------------------------------------------------------------------
We do not have evidence whether KPPU analyze in detail any rule and
regulation structure of the company and even examine accurately. ------------------
179. The usage of GHHI to show market concentration is the same as engineered the
results. The formula in GHHI add one component non-negative to HHI explain
cross ownership among common market. Considering that the component is
192
NERA, page 53.
193
NERA, page 52.
194
NERA, page 54.
195
NERA, page 82.
always zero if there is no cross ownership, GHHI will automatically be same
size as HHI 196. -------------------------------------------------------------------------------
180. The data of KPPU on HHI shows that a constant increase to concerned years
and it deviates from the statistic result of NERA. The differences are caused by
the method o measuring market shares. KPPU uses income while NERA uses
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customer. The usage is theoretically able to defend and the problem is the most
suitable to be implemented present days. If the product is homogenous,
customer is preferred. It has been used by US Federal Trade Communications
Commission. European Court of Justice uses either customer or income 197. -------
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181. The most part of cellular market in Indonesia is prepaid package; such package
is homogenous. Income in this market does not slightly differ and the
competitor tends to compete based on customer. At least, market shares shall be
based on customer. --------------------------------------------------------------------------
182. A number of decisive competitors. According to KPPU, Telkomsel has profit
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as first mover and only Indosat as its closest competitor may use competitive
pressure to take aside Telkomsel from its position. KPPU ascertain that a
number of competitors do not mention a wide area of competition in cellular
market. Such an opinion is wholly denied by NERA – because the empiric
evidence strongly state that a number of competitor and its wide area shows a
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fairness of market competition level. All newer players give Telkomsel and
Indosat pressures. The empirical evidence from NERA also show that the newer
player is successful in the market. 198.-----------------------------------------------------
183. Price parallelism is a trend of competitive market. Fact of price parallelism is
not by itself means anti- competition behavior. In one side, such behavior is a
price-fixing and in the other hand a consequences of effectively competitive
market in which companies are price-takers. Price market can be altered along
the time because of costs or demand. -----------------------------------------------------
184. We cite Bell Atlantic Corporation, et al. versus William Twombly, et al., United
States Supreme Court, , August 2006 as cited for the report of NERA: -------------
(“As a matter of substantive antitrust law, it has long been clear that mere
parallel conduct, even consciously parallel conduct, does not violate
Section 1. See, e.g., Theatre Enters., Inc. vs. Paramount Film Distrib.
196
NERA, page 85
197
NERA, page 124
198
NERA, page 38.
Corp., 346 U.S. 537, 541 (1954). Indeed, such conduct is commonplace
and often efficient. Of course, parallel conduct can result from an
agreement between competitors, and such an agreement could violate
Section 1. However, an allegation of agreement under Section 1 must rest
on something more than allegations of parallel conduct, lest commonplace
and efficient economic behavior provide a sufficient basis for costly
litigation over largely groundless claims. -----------------------------------------
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While a showing of parallel “business behavior is admissible
circumstantial evidence from which the fact finder may infer
agreement,” it falls short of “conclusively establish[ing] agreement or .
. . itself constitut[ing] a Sherman Act offense.” Id., at 540–541. Even
“conscious parallelism,” a common reaction of “firms in a
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concentrated market [that] recogniz[e] their shared economic interests
and their interdependence with respect to price and output decisions”
is “not in itself unlawful.” Brooke Group Ltd. vs. Brown & Williamson
Tobacco Corp., 509 U. S. 209, 227 (1993).”) -------------------------------------
185. According to KPPU, the sign of price parallelism is seen in the prepaid service.
It compares levels of price per minute average and not a number of competitive
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differences between price-fixing plans of its operator. Although the operators
increase the prices at the same time it is not anti-competition behavior because
the increase of price could be a response to the increase to cost or changes in the
condition of common demand, cross company in the market exists.199. ------------
186. There is no price fixing. It is stated that the level of prices for Telkomsel,
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Indosat and Excelcomindo are getting increase. With such a statement, KPPU
concludes that there is collusion because in the converse fact, a competition will
pressure prices. The postulate of the argument is defected. The postulate seems
to refer to the prices average per minute for the offer of car service, without
considering different unmeasured price based on minutes (such as data
download, customer fee, activation fee etc.) and many non-price attributes as it
in car plan (such as special tariff in busy or non-busy time) -------------------------
187. In measuring price average, KPPU also seem not to consider price plan for one
operator based on a number of its customer. It distorts further the analysis of
KPPU. Finally, the finding of collusion is inconsistent with the basic allegation
of collusion between Telkomsel and Indosat, because the allegation assumes the
participation of Excelcomindo in the alleged cartel. No evidence before KPPU
199
NERA, page 133 and 134.
about the existence of any cartel, or any positive evidence from Excelcomindo
concerning it 200. -----------------------------------------------------------------------------
188. To summarize how the position of SingTel and ST Mobile on the price fixing,
none is stating better than Benny Pasaribu: ----------------------------------------------
“I found no any evidence that tariff parallelism fixed by PT Indosat and
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PT Telkomsel was a result of cartel or price arrangement. In tight
competition, it is normal if one company decrease tariff and followed by
other companies for not the customers leave. Chatib Basri, Ph.D.
(Director LPEM University of Indonesia) made a same statement in
mass media (see Bisnis Indonesia, 25 September 2007, page T1 and
Rakyat Merdeka September 2007) 201. -------------------------------------------
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189. Roll Out Base Transceiver Station. The rollout of Indosat is lower than
Telkomsel. Therefore, Indosat does not compete in the market. Firstly, Indosat’s
rollout can be compared with those of Excelcomindo. Excelcomindo is not
alleged guilty to its negligent 202. Secondly, based on indirect share ownership,
Temasek perform rationally and tries to maximize its profit and it enlarge rollout
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for the two companies or reduce Telkomsel competitiveness increase the
competitiveness of Indosat. The reducibility of competitiveness decrease
maximizing profit and it is in contrast with the theory of cross ownership. ---------
190. Further, the use of rollout of BTS as a benchmark of competition is no wholly
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correct. Comparing rollout has no significant meaning statistically in
competition. According to the data of KPPU, Indosat owns customers higher per
BTS than Telkomsel in 2005 an 2006. Its fact, the roll-out BTS of Indosat and
Telkomsel cover the same geographical market, and KPPU seems to punish
Indosat because the that Indosat has fewer BTS. As NERA indicates, in this
context, Indosat is more efficient than Telkomsel 203. Spectrum thinks that
Indosat spent capital expenditure in percentage higher than Telkomsel that
shows Indosat compete aggressively 204.--------------------------------------------------
191. According to Case, the network of Indosat is smaller than Telkomsel, it is not an
evidence of the anti-competition behavior. The reason why Indosat’s rollout is
fewer because Indosat is in a financial crisis and it can change the market by
itself by enlarging its network and responding to its result. The lack
200
NERA, page 133.
201
Report , The opinion of Benny Pasaribu, page 2.
202
NERA, page 141.
203
NERA, page 142
204
Spectrum, part 3.3.
performance of Indosat is also influenced by integration of IM3 and Saltelindo
into one network. This integration does not work well and the lack of services
influence market shares and customer perception. The market indicators in the
end of Q1-2007 show the increase of Indosat performance. 205. ----------------------
192. The increase of the newest Telkomsel market shares (measured by income and
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customer) less than the decrease of Indosat market shares, as it is shown in the
Written Proof 1, and Written Proof 2 on page 7 and 8 of the report Analysis
and Telkomsel does not have full profit from the lack performance of
Indosat. The percentage of indirect Temasek to Telkomsel is smaller than to
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Indosat. 206. ---------------------------------------------------------------------------------------
193. Telkomsel and interconnectivity. There is no constructive evidence that
Telkomsel abuses access in the network infrastructure. SingTel and/or ST
Mobile do not take part in such information and both of them are not questioned
on that during the Further investigation. Only when SingTel and ST Mobile
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examined the notes of KPPU last week and SingTel and ST Mobile firstly
known from the theory of KPPU, once again it only bases on the anecdote
evidence of Mastel. The account of Mastel in this side is not vividly to SingTel
207
and ST Mobile, and Mastel is not investigated. .------------------------------------
194. The theory of KPPU irrational. The statement of SingTel and ST Mobile are
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simple: Theory of KPPU does not imply economic meaning. The analysis of
NERA supports this position. If Temasek really control Telkomsel and Indosat
and think that one of the manage one company for benefitting other companies,
it will be an advantageous strategy, managing Telkomsel for the profit of
Indosat, in which it indirect 208 is higher. Based on the Telkomsel profit rated
data in 2003 and 2006, it is shown that the increase of Temasek income, from
the increase of Telkomsel profit that is allegedly to be caused by the decrease of
Indosat income. 209. Economically, it is nothing for Temasek to manage
Indosat 210. As it indicate by NERA, another defected in KPPU theory of
collusion is an assumption that other Indosat investors, that own 66% in average
205
Case, page 42 and 43.
206
Analysis, page 10.
207
NERA, page 166 and 194
208
NERA, page 4.
209
NERA, page 32.
210
NERA, part 8.
will tolerate the los. It is impossible, including established investors like Bank
of New York, than own around 8% of Indosat shares 211. ------------------------------
195. Summarily, the theory of KPPU is groundless. The theory is improper under
Indonesian and international standard law. According to NERA, the allegation
is fights against economic principles and no evidence support.-----------------------
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THE PUNISHMENT TO SINGTEL AND ST MOBILE AT ANY FORMS WILL INFRINGE
INDONESIAN AND INTERNATIONAL LAWS ----------------------------------------------------------
196. Firstly, (i) Temasek, SingTel and/or ST Mobile are not in the definition
suggested by Article 27(a), and (ii) the elements in Article 27(a) are not
completed. -----------------------------------------------------------------------------------
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197. We have to note as well that the law of Anti-trust gives KPPU authority to
perform a divestment of share, merger and consolidation under Article 28 that is
not subject of the case. Therefore, any instruction regarding divestment is an
infringement to the law of Anti-trust that make it be appropriation, invalid under
international law. It would happen although Temasek, SingTel or ST Mobile is
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responsible to the infringement of Article 27(a) (in which we deny)-----------------
198. Ehlermann explains in detail that any legal action to an infringement shall be
proportional. We do not have discussion unless if SingTel and/or ST Mobile are
responsible to the infringement of Article 27(a) (in which we deny), openly and
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properly. It is because in the report stated that SingTel and/or ST Mobile have
infringed Article 27(a). Furthermore, SingTel and ST Mobile also do not have
an indication or understanding on the guidelines or consideration of KPPU to
consider potential sanctions under Anti-trust Law. It shows the difficulties of
SingTel and ST Mobile in discussing restoration of right.-----------------------------
199. Ehlermann notes that under the law of EC, England Germany and the United
States of America, under competition law, an instruction to take over to part or
in a whole of corporation unilateral has not ever happen previously212. Such an
authority has just submitted to European Commission under the newest
amendment of EC law and it is not used yet until present time. Based on
Germany law, expert argued on whether the edict on the divestment of share is
possible or not. In whatever reason, Federal Commission Office (“FCO”) has
not instructed an investment of share. It also happens in England. Only in
211
NERA, page 34.
212
United States that an instruction to the investment of share, in a spectacular
situation, that the instruction of share had ever applied. -------------------------------
200. We note that the references in the Report (page 66 to 68) to show the divestment
minority ownership for some cases in the United States of America is
groundless and misleading and cannot be implemented in Indonesia, as it is
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described below:-----------------------------------------------------------------------------
a) The cases cannot be applied at all. The single source in the report for the
case is an article “Challenging the Economic Incentives Analysis of
Competitive Effects in Acquisition of Passive Minority Equity Interest” by
John B. Dubrow (enclosed in the Defense as Annex 9). This article and the
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case concerning the usage of Article 7 of Clayton Act (cited below) is
different with Article 27(a) because (i) it does not look like Article 27(a),
Part 7 applied for either minority share or majority (in part or I a whole ),
and (ii) Part 7 is subject to rule of reason, while Article 27(a) is a
prohibition per se: ----------------------------------------------------------------------
No person shall acquire the whole or any part of the stock or other
capital share .. of one or more persons engaged in commerce or in
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any activity affecting commerce, where in any line of commerce or in
any activity affecting commerce in any Article of the country, the
effect of such acquisition, of such stocks or assets or the use of such
stock by the voting or granting of proxies or otherwise, may be
substantially to lessen competition, or to tend to create a monopoly. .-
b) Its fact, Mr. Dubrow uses these cases to postulate that the practice of DOJ
and FTC in such cases is groundless. (Part 7 of Clayton Act,) as follows:-----
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(While there are circumstances in which a truly passive, minority
equity interest in a competitor can give rise to anticompetitive
concerns, the agencies, in particular the DOJ, have challenged
passive minority equity acquisitions in ways that ignore and
effectively eviscerate the investment-only exemption contained the
Clayton Act. This prosecutorial abandonment of the investment only
exemption is troubling, especially because it has been effectuated
through several consent orders, rather than litigated matters in
which the theory of anticompetitive harm could be fully tested...
(Pages 114-115)) --------------------------------------------------------------
c) If we analysis, for just an argument, the case cited by KPPU, cannot be
applied analogically to the case all are related to divestment of share,
directly or indirectly. SingTel and ST Mobile do not compete in the cellular
service in Indonesia, it should be clear that there is no divestment can be
applied in Telkomsel. ------------------------------------------------------------------
d) Mr. Dubrow is very critical to challenge share minority ownership. As it is
mentioned in part C of his article (Tempering Economic Theory with Real-
World Facts) the theory maybe failed because it does not reflect fact issues
such as (i) uncompleted information that will restraint effectively cross
ownership for competition (ii) incentive management that will fight against
the objective (iii) other factor that make cross ownership cannot realize its
profit.. ------------------------------------------------------------------------------------
201. According to Report, there no ground at all to guarantee or justify divestment in
this case against SingTel or ST Mobile, in the competition law jurisdiction. ------
202. It is important to emphasize that all regulation have been completed in acquisition
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of ST Mobile to Telkomsel. Especially a letter of BKPM, dated 19 July 2002
informing to Telkomsel that BKPM approved the structure of Telkomsel
ownership regarding the acquisition of ST Mobile that have ST Mobile own
35% share and Telkom 65% shares .-----------------------------------------------------
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203. STT has given statement as a response to KPPU, that STT has acquired
ownership in Indosat openly, advertised and transparent with the approval of the
Government of Indonesia, that consider and revoke potential infringement that
might happen from the perspective of competition. Its fact, STT has stated that
STT was invited by the Government of Indonesia to participate in open tender
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of Indosat’s shares 213. The selling was under the monitor of the officer of
Government of Indonesia IMF and had passed the procedures required by the
Government of Indonesia, through Department of BUMN, as it is proved in the
White Paper of Department of BUMN on the divestment of Indosat, dated 4
February 2003 214.----------------------------------------------------------------------------
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204. Based on the facts, it is not fair if KPPU alleges that the ownership structure of
Telkomsel and Indosat is not in accordance with Indonesian law. The result that
is not expected is destroying investment climate in Indonesia and restraint
foreign to invest in Indonesia. -------------------------------------------------------------
Conclusion--------------------------------------------------------------------------------------------
205. The investigation process conducted by KPPU ignores fundamental standard of
legal process. SingTel and ST Mobile were told that the two have been
investigated for infringing Article 27(a). Yet, the two companies were not
informed how they infringe of the mistake they made to the rule of competition
law. KPPU has not ever permitted to examine the completely case document. In
the session in KPPU, the representative of SingTel and ST Mobile have been
questioned irrelevant with the allegation and asked to reveal documents that are
213
The statement of STT, page 23.
214
The statement of STT, page 24.
not relevant with the investigation. The right of SingTel and ST Mobile during
investigation and also legal process have been neglected. -----------------------------
206. According to the understanding of SingTel and ST Mobile, the allegation to
SingTel and ST Mobile is an infringement of Article 27(a). Article 27(a)
requires majority of share ownership in some companies control more than half
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of pertinent market shares. SingTel and ST Mobile asked permission to remind
the fact in this case. Firstly, SingTel does not own shares in some company’s
shares in any relevant market. Secondly, ST Mobile owns minority shares in one
company. It should be clear even before investigation is started. For the reason
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unknown by SingTel and ST Mobile, the investigation is not only started, but
also extended and the representative of SingTel and ST Mobile are obliged to
answer questions irrelevant with Article 27.---------------------------------------------
207. KPPU has read Article 27(a) by using the concept of material influence. We are
sure that the interpretation is wrong in law. There is groundless to read and to
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interpret Article 27. The reading is a bias common norm or regulation
interpretation, and it is not in line with the international practice. The regulation
on absolute accountability shall be interpreted assertively. ---------------------------
208. The broad interpretation in whatever condition cannot be applied on SingTel
and/or ST Mobile. Even by taking a KPPU case sample – assuming that
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influence material is irrelevant with the analysis of Article 27, then without any
single evidence show that Temasek and/or SingTel and/or ST Mobile is
materially influence Telkomsel or one to another. Regardless to Analysis, in
which it will be used, it is the tasks of KPPU to prove it. ----------------------------
209. The facts, the provisional report of KPPU fails or cannot prove the method of
any form showing that cross ownership by Temasek to Indosat and Telkomsel
is the cause of the loss endangering competition in the market. KPPU cannot
prove the anti-competitive behavior shown by Telkomsel and/or Indosat,
especially related to the allegation of Temasek ownership. The Report of NERA
shows that the basis used by KPPU to analyze economy is fundamentally
defected, and many international economists indicate that cellular market in
Indonesia is very competitive. Telkomsel and Indosat cannot be considered as
anti competition just because KPPU state and consider it so. -------------------------
210. In its conclusion: ----------------------------------------------------------------------------
I. SingTel and ST Mobile submit that the investigation on the infringement of
Article 27(a) of the Anti-trust Law is groundless, unfair and ask
Commission Assembly of KPPU to cancel this investigation. -------------------
II. Due to the absence of Temasek Business Group, SingTel and ST Mobile
state that the use of Article 27(a) to Temasek is groundless. ---------------------
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III. SingTel and ST Mobile inform that the use of Article 27(a) to Temasek or
Temasek Business Group is able to harm the share of ST Mobile in
Telkomsel. If it happen, ST Mobile will fixed hold its rights as an investor
under Indonesian and international law, including the rights to submit
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lawsuit.
19. Considering that further, on the basis of Further Investigation Report, Council of
Commission has accepted responses of Telkomsel on 23 October 2007 that in essence
state the following matters:
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Description -------------------------------------------------------------------------------------------
1. Statement KPPU:
Temasek Holding has majority share in two operators that perform similar activity
that make it infringe Article 27 (a) the Law No. 5/1999
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Statement Telkomsel:
The statement is untrue, because Temasek does not have share in two operators
(Telkomsel and Indosat). It proves that Singtel Mobile owns Telkomsel 35%.
The statement is backed up from the expert’s statement of, Hikmahanto Juwono
page. 12-13 on unified economic interest and ultimate parent
2. The Elucidation of Telkomsel:
It is untrue. In fixing tariff, Telkomsel always refer to the prevailing regulation.
Besides, in the Law 36/99 is also stated that the formula for calculating tariff is
determined by the Government.
In the following elucidations, we will elaborate further the statements above.
See Annex from UBS for revenue per minute, supported by the data and analysis
presented by Asia Mobile Holding by Dr. Cento Veijanovski page 46 to 71. And the
item of Telkomsel’s answer No. 126
That the suspected infringement of Article 17 paragraph (1) of the Law No.5/1999
conducted by Telkomsel, is in the process of verification of KPPU’s Investigation
team, had used the principle of “Per-Se Illegal” that can be seen in the sentence “by
implementing/keeping high tariff, Telkomsel then has infringed Article 17
paragraph (1)”;
The usage of such principle of verification “Per-Se Illegal” is incorrect, because in
conducting an evidence to the suspected infringement of Article 17 paragraph (1),
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the Law No. 5/1999 shall implement the principle of “Rule of Reason” in which
KPPU does not only prove, - quad non -, the existence of market control by
Telkomsel, but also monopolistic practice or unfair competition caused by market
control by Telkomsel.
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Therefore, KPPU should, before concluding whether Telkomsel infringes the rule
of Article 17 paragraph (1), prove whether Telkomsel:
- Conducts unfair competition and restrains public interest (refer to Article 1
number 2 of the Law No. 5 /1999); or
- Conducts unfair or violates law or restrains competition (refer to Article 1
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number 6 of the Law No. 5 / 1999).
Even in its conclusion KPPU states that Telkomsel does not infringes the valid rule
concerning tariff fixing.
Have conducted unfair competition/ violated law / restrained competition.
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From the Report of Follow-up Case Investigation Result of KPPU No.07/KPPU-
L/2007 on 27 September 2007, KPPU cannot prove that Telkomsel has conducted
the intended activities. In fact, the Report of Follow-up Case Investigation Result
and investigation official reports used as one of reference to arrange a report,
Telkomsel concludes the following matters:
a. The competition of cellular telecommunication is fair and over competitive
(i) that many operator-cellular telecommunication operators newly emerge

in Indonesia such as Indosat, XL, Sampoerna, Hutchison, NTS, Mobile 8,
in which if citing the opinion of Benny Pasaribu (Dissenting Opinion item
4), a number of cellular operators in Indonesia is the highest in Asia and
more competitive in the world.
(ii) XL in its investigation in KPPU (IOR of XL on 9 August 2007) states

the following matters:
(a) that market in Indonesia is relatively more competitive than market

abroad, even over competition;
(b) that the competition to capture new customer is more aggressive
(c) that the competition in developing network performed by XL is good,

YLKI in its investigation in KPPU (IOR of YLKI on 24 September
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2007) stated that cellular consumers in Indonesia are able to choose
available operators
(iii) Hutchison in its investigation in KPPU (IOR of Hutchison on 21 June

2007) stated that its growth prediction in which in the first quarter of
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2007 was around 30-50 billion rupiah and new customers was around
300 thousands.
(iv) Based on the Notes of Meeting between KPPU and BRTI as well as
Directorate General Post and Telecommunication, it is presented by
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BRTI/Ditjen Postel that in developing technology, Telkomsel and Indosat
competes each other.
b. Telkomsel is fair in performing its business and always comply and complete
the valid rule of law.
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(i) The tariff charged by Telkomsel is prescribed by the rule of law in which
its formula is determined by government
(ii) Telkomsel does not treat discriminatively other operators concerning

interconnection. Interconnection bid document is prescribed by the rule of
law and approved by the competent authority.

2007) stated that Hutchison does not have problem concerning
interconnection, although there was also insignificant difficulty.
(iv) XL in its investigation in KPPU (IOR of XL on 9 August 2007) stated

(f) that XL has never found an abuse behavior of Telkomsel such as

blocking a call from XL number to Telkomsel etc.;
(g) that XL has never been restricted by Telkomsel in having permit;
(h) that XL is given a freedom by Telkomsel to choose its own

technology with its own capacity.
(v) Mr. Widya Purnama, the Managing Director of Indosat for the period of
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June 2002 to September 2004, in his statement on 9 August 2007,
declared that there is no collusion between Telkomsel and Indosat.
c. Telkomsel has created fair competition.
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(i) Telkomsel does not only concentrate to build a network in big cities but
also remote areas which provide new market shares for other operators
that have been initially developed by Telkomsel.
(ii) Telkomsel does not treat discriminatively to other operators concerning

interconnection. Interconnection bid document is prescribed by the rule of
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law and approved by the competent authority. It intends to have other
telecommunication operators same opportunities to develop/to compete
among them and Telkomsel alone with a result to maintain the level of
competition in the business of telecommunication.
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2007) stated that Hutchison does not have problem concerning
interconnection, although there was also insignificant difficulty. It proves
that Telkomsel, as a market leader, does not abuse its position to press
other operators in order to keep on competition running well.
(vi) XL in its investigation in KPPU (IOR of XL on 9 August 2007) stated

(a) that XL has never found an abuse behavior of Telkomsel such as

(b) that XL has never been restricted by Telkomsel in having permit;
(c) that XL is given a freedom by Telkomsel to choose ots own

It proves that Telkomsel, as a market leader, does not abuse its position to
press other operators in order to keep on competition running well.
(iv) Mr. Widya Purnama, the Managing Director of Indosat for the period of
declared that there is no collusion between Telkomsel and Indosat. It
proves that Telkomsel want to keep fair competition among
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telecommunication operators.
Restrain Public Interest

(i) the telecommunication service tariff of Telkomsel is prescribed by the
rule of law and approved by the competent authority, therefore it shall be
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considered that the tariff charged by Telkomsel does not restrain public
interests.
(ii) the tariff of Telkomsel interconnection is prescribed by the rule of law.

Interconnection bid document is prescribed by the rule of law and
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approved by the competent authority.
(iii) YLKI in its investigation in KPPU (IOR of YLKI on 24 September

2007) stated that no cellular consumers in Indonesia complain to the
service tariff.
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(iv) Telkomsel tries to build a network until remote areas and even clear out
the forest in order to give advantage to public especially those who live in
remote areas to provide them with telecommunication access and to
develop economy in that areas (prime mover), as it is stated in the
document and submitted to KPPU.
(v) With the availability of telecommunication business network of

Telkomsel, it is able to provide ew job (alleviate unemployment) due to
multiplier effect of Telkomsel’s business;
(vi) Telkomsel permits the usage of its infrastructure as a means of national

security of tsunami early warning system that is useful for public.
3. The Elucidation of Telkomsel :

We deny the suspected infringement of Article 25 paragraph (1).b of the Law No. 5
/ 1999 reported by KPPU, by the reason of: KPPU Investigation team does not have
evidence at all (even early evidence) indicates a suspected infringement of Article
25 paragraph (1) conducted by Telkomsel. We can prove them by the following
descriptions:
The allegation in the conclusion Preliminary Report is different with those of
the allegation in the Result of Further Investigation.
The allegation that become a basis of conducting Further Investigation is different
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with the conclusion of Preliminary Investigation, therefore the basic of conducting
Further Investigation is not clear , in which the differences are as follow:
The allegation in the Report of Preliminary Investigation (Especially on Suspected
infringement of Article 25 paragraph 1 . b of the Law No. 5 / 1999)
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“Telkomsel with its dominant position has restrained the development and growth
of PT Indosat, Plc, as a result PT Indosat Plc., cannot maximize its investment and
slowing down the profit growth of PT Indosat Plc., It causes to the worsening of
market in the whole cellular telecommunication service industry .”
While the allegation in the Report of Further Case Investigation Result No.
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07/KPPU-L/2007 (especially Article 25 paragraph 1 . b the Law No. 5 / 1999)
“Telkomsel abuses its dominant position to restrain market and the development of
technology that makes it infringes Article 25 paragraph (1).b of the Law No. 5 /
1999.”
“Certain Activities” (ic. Telkomsel restrains the development and growth of
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Indosat), that used previously as a basis of allegation that Telkomsel has infringed
Article 25 paragraph (1) of the Law No. 5/1999, is not included in the Report of
Follow-up Case Investigation Result No. 07/KPPU-L/2007 (especially Article 25
paragraph 1. b). Consequently, the suspected infringement used as a basis of
conducting Follow-up Investigation is biased/obscured .
The changing of “suspicion” to biased/obscured, as it is described above, proves
that actually KPPU Investigation team is not sure with its accusation addressed to
Telkomsel (restrain the development and growth of PT Indosat). Therefore, it is not
overstatement that we conclude KPPU Investigation team does not have evidence at
all (even early evidence) indicates a suspected infringement of Article 25 paragraph
(1) conducted by Telkomsel (restrain the development and growth of PT Indosat).
“Certain Activities” that consider to infringe Article 25 paragraph (1) of the Law
No. 5 / 1999, is very important because it will be LITIS CONTESTATIO
(limit/focus of an investigation) of KPPU Investigation team, all at once it becomes
a limit/focus of defense of the Reported (Telkomsel). Litis Constestatio is a
requirement in the due process of law in civilized countries.
Article 32, 33, 42 and 44 of the Regulation of the Commission for the Supervision
of Business Competition No. 1 / 2006 (“KPPU Regulation 2006”) regulate that the
Report of Preliminary Investigation is used in determining the needs of conducting
Follow-up Investigation and further in the Follow-up Investigation, the allegation in
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Preliminary Investigation is found and proved. Therefore, according to KPPU
Regulation 2006, it shall be narrowed focus of investigation as it reflected in
suspected infringement as the basis of conducting Follow-up Investigation. Its facts,
as it is mentioned above, the focus of investigation in the process of Follow-up
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Investigation is not narrowed but biased.
Telkomsel is not proven of abusing dominant position.
Telkomsel is not proven of abusing dominant position of market control and
technological development:
• From the viewpoint of legal aspect. Based on the expert’s statement of
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Hikmahanto Juwono page 7 to 10, there is no evidence legally that Telkomsel
abuse dominant position for controlling market.
• From the viewpoint of business. Telkomsel is always subject to valid regulation

in Indonesia, from tariff fixing process, submitting report of regulator, the
commitment of the development of telecommunication infrastructure in
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Indonesia as a license requirement had by Telkomsel.
• It can be concluded that the growth of Telkomsel business is resulted from fair
business practice and optimum performance as it is in line with Telkomsel
mission to actualize service leadership company (in coverage, quality, capacity
and service)
That before KPPU concludes whether Telkomsel has infringed Article 25 paragraph
(1) .b of the Law No. 5 / 1999, KPPU Investigation team shall prove that Telkomsel
as a Market Leader has restrained (i) market and (ii) technological development, in
which t it is not reflected in the Result Report of Follow-up Investigation of KPPU
Investigation team on 27 September 2007. Further, it can be described as follows:
(i) Telkomsel does not conduct market restriction even tries to develop market
cellular telecommunication.
a) XL in its investigation in KPPU (IOR of XL on 9 August 2007) states

i. that XL has never found an abuse behavior of Telkomsel such as

ii. that XL has never been restricted by Telkomsel in having permit
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iii. that XL is given a freedom that XL by Telkomsel to choose its own
iv. that Telkomsel establishes working group with other operators to
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give input so local government concerning tower sharing regulation
in the local area.
v. Telkomsel is not proven abusing dominant position to restrain

technological development (IOR of Hasnul Suhaimi, 9 August 2007,
item 22).
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vi. Telkomsel is not proven abusing dominant position to control market
(IOR of Hasnul Suhaimi, 9 August 2007) item 10.
The statement above is spontaneous acknowledgement of Telkomesl’s

competitors in supporting market cellular telecommunication
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development.
b) Mr. Widya Purnama, the Managing Director of Indosat for the period of
It reflects that Telkomsel does not try to restrain market.

c) Telkomsel does not only concentrate to build a network in big cities but
also remote areas which is admitted by other operators that it needs high
cost. The statement above is spontaneous acknowledgement of
Telkomsel’s competitors in supporting market cellular telecommunication
development.
(ii) Telkomsel does not restrain technological development even try to develop
cellular telecommunication technology.
a) XL in its investigation in KPPU (IOR of XL on 9 August 2007) stated

the following matters
i. that XL has never been restricted by Telkomsel in having permit;
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ii. that XL is given a freedom by Telkomsel to choose its own
The statement above is spontaneous acknowledgement of Telkomesl’s
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competitors for the effort of Telkomsel in supporting development of
technology in cellular telecommunication by not restraining the
technology that will be used by XL.
b) It needs to express that Telkomsel is the first cellular telecommunication
operator that introduce:
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i) Prepaid business in Indonesia that used IN technology;
ii) Services with GPRS and EDGE technology based;
iii) Certain value added services such as ring back tone;
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iv) Electronic voucher;
v) 3G services that provides video call, video streaming;
The matters in which the technology used by Telkomsel an applied then

by other Telkomsel competitors those give positive contribution to the
development of market cellular telecommunication.
4. The Elucidation of Telkomsel :
It is in line with the definition of the intended Article namely Article 1 (10)
The definition of KPPU states that geographical market is a market related to
coverage or certain marketing area in the competition law; it means market analysis
related to product that has to be based on per region approach because the
competition among regions are different one to another compare to analyze
geographical market within a national coverage.
Goods is not only mentioned by its similar substitution but also its complementary.
Comment is not available.
8.
Y
The Elucidation of Telkomsel:
It is in line with the references in the rule of laws, and in line with KM 35/2004 in
which FWA is part of fixed local accessed.
Agree with the statement that PSTN, FWA, and cellular telecommunications are
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classified as substitution products due to no significant differences in service.
From the viewpoint of customer, the characteristic of FWA and cellular is
complementary. Customer uses the advantages of FWA from the viewpoint of tariff
for local communication and use the wide coverage for intensive communication.
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Therefore, the characteristic of FWA and Cellular are complementary.
KM (Ministerial Decree) 35/2004 determines the price of FWA service following
tariff pattern of PSTN; while other KM. Thereby regulates tariff pattern of cellular,
the price of FWA service and cellular will always be different. Nevertheless, the
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difference can be complementary. FWA and cellular for consumer is
complementary.
Similar to the statement above, is consumer not finding a cheaper one if the
facilities offered is the same. Can be the result shown? Data sampling of the survey
with 300 sampling cannot reflect the population in telecommunication market in
Indonesia.

In our opinion, the information given by Mastel (Telecommunication Community)
in its IOR, cannot be used a reference, as it is known that Mastel
(Telecommunication Community) has never conducted research concerning cellular
tariff, therefore the information of Mastel (Telecommunication Community) in
irrelevant as a reference in item 13.
It is opposed to the qualification of witness as it is regulated in Article 1 (22) of
KPPU Regulation, 2006.
Besides, advertisement and promotion performed by operators in the last period is
mere in discount rather than coverage. It can be concluded that the market
developed currently is sensitive to price.
Y
As a witness, Mastel (Telecommunication Community) is improper as we has
already mentioned in item 13.
It is needed to be noted that technological development nowadays has enabled FWA
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operator offer services with the mobility of more than one coverage area.
The product of Telkomsel are HALO card , simPATI and Kartu As. There are also
GSM, dual band and 3G.
Note: Wi-Fi is not a product of Telkomsel services.
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The cellular competition is not only Telkomsel and Indosat. All operators use their
own license power (including the license of Telkomsel that only limited in cellular
service) to capture available market shares.
17.
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Indonesian market, as it is seen by KPPU, cannot be classified as single market
because every region has their own characteristic, challenge and potency that are
different one to another. The decision to serve in one region requires strategic and
various decision from the operators.
The decision of operator to serve a certain area is mentioned by the purpose of long-
term business consideration rather than restriction on regulation and technology.
Telkomsel decides to have network or national coverage as its license it had.
It is untrue to say that there is no restraint in marketing products. It can be seen in
the GDP of the area and total population per region. The following is some
economic indicators and cellular service in the regions.
19.
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To serve a region is a risky business decision. The things to ponder are:
• Geographical challenge: Indonesia is a large archipelago country with a hard
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topographical challenge.
• Insufficient infrastructures such as electricity or diesel fuel and highway to

ensure that coverage (BTS) coverage is able to work 24 hours a day within 7
days a week.
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• Value chain challenge, it is an unavailability of distribution network to market
Telkomsel’s products directly.
• Transmission supply challenge
• Economic challenge: the potency of society, buying power, industrial maturity

etc.
Such challenges had made any operator with national license not ready to develop
in remote areas. The principle of Telkomsel is to put forward its superiority of
service quality (capacity, coverage quality) rather than narrow minded and short-
term business calculation. After operating for 12 years, such principles have put
Telkomsel be a prominent cellular service operator in Indonesia, in capacity, quality
coverage and financial performance.
Up to present day, the tariff of Telkomsel is national tariff. The absence of other
operators in which Telkomsel operated has brought to certain consequences such as
building distribution network, educating society. In a region with high competition,
Telkomsel structurally implement policies such as discount and the changing of
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POC that show the reaction of Telkomsel to competition.
Homogenous price is a general strategy implemented bay all operators. The same
goes for Satelindo as a first operator and a first mover in a region.
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Telkomsel thinks that Indonesian market is heterogeneous, very competitive, in a
big cities and developing market like small town or remote area. Therefore, it is
dangerous to analyze geographical market without considering local heterogeneous
market.
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There is no direct relation with the suspected infringement of Article 17 (1) and 25
(1)(b) to Telkomsel
(1)(b) to Telkomsel
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(1)(b) to Telkomsel
Telkomsel as a service leader and subsidiary of PT Telkom intends to develop
telecommunication in Indonesia.
With the presence of XL, in October 1996, currently cellular operators compete
tightly (Indosat, Telkomsel & XL) in the same period.
The different performance is determined by strategy of the operator and not history
of the operator.
(1)(b) to Telkomsel
(1)(b) to Telkomsel
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(1)(b) to Telkomsel
(1)(b) to Telkomsel
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(1)(b) to Telkomsel
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(1)(b) to Telkomsel
(1) (b) to Telkomsel.
34.
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(1) (b) to Telkomsel.
The accumulation of Telkomsel gained form regions in which there is no competitor
operates in the relevant market or no competitors enter the market after Telkonsel
operate for a long time in those regions. The market ownership of more than 50%
does not reflect the domination of Telkomsel and the competition level in those
regions.
Comparing the CAGR between FWA and Cellular, that CAGR FWA is bigger than
Cellular. It indicates that public interest prefer FWA to cellular.
Apart form the definition of pertinent market, the six operators is the densest in this
industry.
According to Benny Pasaribu, a number of players in Europe are determining only
to maximum 4 operators.
A number of players indicate level of competition.
Market share per area in which Telkomsel enjoys rapid growth in any market is
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based on the strategy of network development over IKC.
Based on consumer the order of operators do not change from 2004-2006.
This statement does not indicate that market is not competing perfectly. Many
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reason to consider concerning this condition such as marketing cost (grew 44% in
2005 to more than IDR 700 billion) and capex cost to Rp 13 trillion spent to keep
the position. Telkomsel keeps market shares through network and service quality
and proved by awards received by Telkomsel.
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The description above is untrue, especially in the sentence: ”Temasek through
SingTel performed an acquisition of 22.3% Telkomsel shares from KPN
Netherlands in 2001. …”
The acquisition of shares in 2001 was not conducted by Singtel but Temasek.
Concerning acquisition, all decision is in the management of Singtel. It is affirmed
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by:
m. the information of Reported I (Temasek) as it is in the IOR on 13
August 2007 by KPPU Investigation team to Temasek that was
represented by Mr. Goh Yong Siang, in item 13:
“STT and Singtel. The company invests globally. Temasek does not
involve in the decision in STT and SingTel to acquired Indosat and
Telkomsel.”
n. the information of Reported VIII (Singtel) as it is in the IOR of
Further Investigation on 23 July 2007 by KPPU Investigation team
to Singtel that is represented by Quah Kung Yang. In item 85 and
86 are written:
The question of KPPU Investigation Team::

“Who did decide to buy Telkomsel’s shares?
Singtel’s Answer:
“Board of Singtel Mobile Director ”
The question of KPPU Investigation Team::
“Is the decision taken in RUPS or Extra ordinary RUPS?”
Singtel’s Answer:
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“I think not in Annual Meeting.”
In line with the license of foreign investment Telkomsel had, one of Telkomsel’s
shareholders is Singtel Mobile. There is no reference at all that Singtel Mobile is
Temasek Business Group. We can inform you further that the law of investment, jo.
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The law of Limited Corporation admits only foreign party in the form of foreign
corporate body or foreign individual. Therefore, the expression of “Business group”
is not acknowledgable.
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(1)(b) to Telkomsel
(1)(b) to Telkomsel
43.
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(1)(b) to Telkomsel
(1)(b) to Telkomsel
In line with the licence of foreign investment Telkomsel had, one of Telkomsel’s
shareholders is Singtel Mobile. There is no reference at all that Singtel Mobile is
Temasek Business Group. We can inform you further that the law of investment, jo.
The law of Limited Corporation admits only foreign party in the form of foreign
corporate body or foreign individual. Therefore, the expression of “Business group”
is not acknowledgeable.
46. 46 The Elucidation of Telkomsel:
Agree. It needs important to be added that the regulation of government on tariff is
KM No. 20/2001. KM No. 20/2001 has been amended twice, the first amendment
through KM No. 29/2004, and second amendment through KM No. 40/2006) on the
Telecommunication Network Operation.
And then for KM No. 21/2001, it is amended into KM No. 30/2004
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We agree with the description, but until 2006, there was not a further implementing
regulation yet on the formula of calculating tariff. PM (Government Decree) No.
12/2006, as a reference of KPPU Investigation team in item 46, was effectively
valid in early of 2007. During that period, the whole operators use KM No. 27/1998
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and KM No. 79/1998 as references.
It was supported by the explanation of Ditjen Postel as it is stated in the Notes of
Meeting on 30 August 2007.
Telkomsel implement existing regulation to fix price service.
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51.
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As it is elucidated by KPPU in item 53, the item 54 cannot be implemented.
KM No. 27/1998 and KM No. 79/1998 was arranged and applied by the
Government in 1998, in which the Law No. 3 / 1989 (the previous
telecommunication law) has a “monopolistic/duopolistic spirit”, differs from the
spirit” of the”Anti-trust” law No. 36/1999.
Both KM’s do not regulate further the limitation, the prohibition and permission of
Telecommunication service operators to charged tariff to the users of
Telecommunication service. The tariff regulation is only limited in “ceiling price”
that may not infringe the Ceiling Price stated in KM 27/ 1998 and KM 79/1998. It
also regulates the limit of competition area among operators and it has
accommodated the interests of consumer and operator (business actor) of
Telecommunication service. It is affirmed by Government through Ministry of
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Communication and Information through Ditjen Postel (based on the rule of Article
1 number 1 and 2 KM 31/2003; Directorate General Post and Telecommunication
is part of BRTI assigned to monitor competition in Telecommunication industry) as
it was written in the Notes of Meeting between Directorate General Post and
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Telecommunication with KPPU on 30 August 2007, in the third sheet, the last
paragraph is written as follows:
“The maximum tariff rate stipulated in KM No. 27 / 1998 and KM No. 79 /
1998 is a limit competition area among operators in which the rates are
tolerance between the interest of public and as consumers and operators to
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keep their abilities to develop and to extend network including to outside
Jakarta. Therefore, if at field, the operators become followers of the
maximum tariff rates, the government cannot do anything.”
The monitoring function of Government is enforced by BRTI, especially in the
competition of telecommunication service operation, has a definite limit that no
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operators may apply tariff more than competition area limit as it is determined in
KM 27 / 1998 and KM 79 / 1999;
The tariff applied by operator/business actors of telecommunication services
(including Telkomsel) – not more than competition area limit determined in KM 27
/ 1998 and KM 79 in 1998- is a kind of conduct that complies or implements
prevailing rule of laws. Therefore, the tariff implementation within a corridor of
a competition area is a conduct admitted of exception by the Law No. 5 / 1999
(refer to Article 50.a);
Under the law, BRTI cannot be blamed for doing nothing such as reprimanding,
warning or sanctioning to operators/business actors of telecommunication service
applying maximum tariff beyond competition area limit determined in KM 27 /
1998 and KM 79 / 1998. It is due to the position of both KM as part of previous
telecommunication law regime (the Law No. 3/1989) that sets price by
government rather than market mechanism. When tariff is set up and it has
considered: (i) a competition area limit, and (ii) the interest of consumer or
operators/business actors (refer to description of g above), a fairness is measured by
whether “the the tariff limit is passed or not”;
If operator/business actors implement a tariff, it shall be adjusted with the regulation
of its basis. The Km 27 / 1998 and KM 79 / 1998 is considered by KPPU
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Investigation have caused unfair competition–quod non-, then the mistakes cannot
be blamed at all to operators/business actors, including Telkomsel.
For the elucidation of postpaid tariff is on page 15:
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The tariff of HALO card is presented based on the available data.
10% of Pre added value tax tariff
Local time unit = 20 second
For the elucidation of HALO card tariff is on page 20:
The tariff of HALO card is presented based on the available data
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10% of Pre added value tax tariff
Local time unit = 20 second
Domestic Call1 and Domestic Call2 time unit = 15 second
Airtime Rp 325 (economy)
Airtime Rp 406 (business)
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For the elucidation of prepaid tariff on page 22:
The tariff table of HALO card SMS presented for the period of period of 2002 to
2006 accord with the available data.
For the elucidation of prepaid tariff is on page 23:
The call tariff of Simpati prepaid Card in 2001 to 2002
to PSTN is accord with the available data
intra operator accord with the available data
to other operator Rp 1,300 (off peak), Rp 1,600 (peak)
Receiving call Rp 2,500, Rp 3,000 (neighboring zone)
The call tariff of Simpati prepaid Card in 2002 to 2003
to PSTN is accord with the available data
intra operator is accord with the available data
to other operator Rp 1,300 (off peak), Rp 1,600 (peak)
Receiving call Rp 2,500, Rp 3,000 (neighboring zone)
The call tariff of Simpati prepaid Card and AS card in 2004 are accords with the
available data.
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The call tariff of Simpati prepaid Card and AS card in 2004 - 2005 are accords to
the available data.
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The call tariff of Simpati prepaid Card and AS card in 2005 - 2006 are accords to
the available data.
For the elucidation of prepaid SMS tariff on page 25:
The tariff of prepaid SMS was valid in 2002 Simpati prepaid national Card is
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accord with the available data.
The tariff of prepaid SMS was valid in 2004, Simpati prepaid Card Rp 350 and AS
card Rp 325 (AS), Rp 350 (Telkomsel), Rp 375 (OLO) domestic, Rp 1000
(international).
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The tariff of prepaid SMS was valid in 2005 Simpati prepaid Card Rp 350 and AS
card Rp 300 (AS,Telkomsel, OLO) domestic, Rp 1,000 (international)
The tariff of prepaid SMS was valid in 2005 Simpati prepaid Card Rp 350 and AS
card Rp 150 (AS), Rp 300 (Telkomsel, OLO) domestic, Rp 1,000 (international)
For the growth revenue of Telkomsel, in line with the business policy of the
company and not caused by monopoly practice. That Telkomsel in this matter
cannot avoid the decrease of share revenue, in 2004 decreased to 59% from 60% in
2003.
While in 2006, Telkomsel and XL successfully increased revenue share caused by
the weakening of Indosat’s operation.
Agree, but there is a tariff change for termination from Mobile to Fixed either local
(268 →152) or SLJJ (659 →850) and local termination from Fixed to Fixed (157
→73) accord with the Notes of Finalization Meeting on Interconnection Tariff and
Collection Tariff on 24 July 2006 in which in the meeting it was agreed by General
Directorate of Post and Telecommunication as a Chairperson of BRTI and all
Telecommunication Operators .
Y
From the table of revenue and expenditure of interconnection, it is seen that the
expenditure mostly spent for BTS investment and marketing.
P
From the available data of BTS growth, Telkomsel is always consistent to boost
BTS along with the directives of company policy “Invest Ahead of Growth”. The
financial data concerning revenue of cellular operator interconnection, comment is
not available.
O
From the table of EBITDA, it is seen that in 2006 the growth of EBITDA is not big
as XL. The following data is from Morgan Stanley, 7 August 2007, shows that even
in 2006, Telkomsel gets into dynamic in EBITDA margin, showing that the market
is competitive.
C
The following table is from Deutch Bank, used to show that opex Telkomsel since
2004 is higher than the opex average of cellular, therefore it was getting better due
to Telkomsel’s business strategy in 2006.
65.
P Y
(1)(b) to Telkomsel
O
(1)(b) to Telkomsel
C
(1)(b) to Telkomsel
(1)(b) to Telkomsel
(1)(b) to Telkomsel
(1)(b) to Telkomsel
(1)(b) to Telkomsel
(1)(b) to Telkomsel
(1)(b) to Telkomsel
Y
(1)(b) to Telkomsel
P
(1)(b) to Telkomsel
(1)(b) to Telkomsel
O
(1)(b) to Telkomsel
Therefore, there is something to be underlined in this item that (i) Telkom also
appoints 3 directors (managing director, director of finance, and one director for
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other division) and appoints 4 commissioners with one of them is chief
commissioner.
(1)(b) to Telkomsel, but then in 78 (d) (xxii) that Sheikh Muhammad is not a chief
commissioner of Telkomsel.
Untrue. Wi-fi is not a Telkomsel service.
Accord with company document.
Accord with company document.
Correction, that number of Telkomsel customers of Halo card is only 1.47 million.
The market segment decision is only in the launching, but then in the
implementation there is no restriction for customer to choose.
The correction for the data 100% in entire Regency, it should be Regency capital.
84.
Y
It should be presented some revision to some stipulation in Telkomsel’s Statutes as
follow:
a. Item b.5, it should be: “to fix service fee (excluded salary, the decision is the
authority of RUPS) to and dismiss of (including severance pay) Director”
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b. Item d: reference Article in Statutes should be Article 10. 2
c. Item i: reference Article in Statutes should Article 15. 7
d. Item n: incorrect, the description is correct as it is in the item l and m
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e. Item o: reference of present quorum percentage and decision making shall be
80%
Apart from the stipulation of Statutes described in item 84, in Telkomsel there is
also an agreement among shareholders that control, among others are Business Plan
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and Budget, that has to be submitted to Board of Director and board of
commissioner to be approved at the latest of the end of November.
From item 84 and the stipulation of shareholders’ agreement, it can be concluded
that PT Telkom as a majority shareholder in Telkomsel owns majority control to
Telkomsel. It can be seen from the authority to make decision in RUPS for a
general matters as it is mentioned in item 84, and the decision of board of
commissioner over Business Plan and budget. Nevertheless, it does not reduce the
protection to minority shareholders, as it is seen from the decision to the specific
material as it is mentioned in 84.
Accord with the condition in 2006. See note in 86.
In the very beginning of the joint ventures with SingTel, under the Statutes Telkom
has fixed right to appoint Managing Director, director of Finance and other
directors out of 5 available member of directors. The position of Director Marketing
and Director of Operation hold by SingTel Mobile is not a fixed position but a
result of the decision of general meeting of shareholders. It is needed to inform that
until the early 2003 the position of Director of Marketing is nominated by PT
Telkom.
It is needed to inform that Department of Procurement and Logistics under
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Directorate of Planning & Development is nominated by PT Telkom since the
beginning of 2003.
It is important to inform that Capex Proposal (for Capex above Rp.50 billion) is a
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per-project detailed proposal arranged by Board of Director based on the approved
budget. In other words Capex Proposal is an implementation of Budget
Plan/Business Plan.
Routinely (monthly; along with the arrangement of quarter implementation
allocation), Board of Director submits Capex Proposal to Capex Committee to be
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approved further by Board of Commissioner. Capex Committee is an organ that
assists Board of Commissioner to implement its monitoring asignment especially
Capex. Capex Committee will give recommendation to Board of Commissioner on
the decision to taken concerning the submitted proposal. Therefore, the final
decision of Capex proposal implementation is not in the hand of Capex Committee
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but Board of Commissioner.
Currently, Capex Committee consists of 3 members: Chairperson Committee (In the
very beginning is hold by Commissioner nominated by PT Telkom), one other
members is from Board of Commissioner nominated by SingTel Mobile and a VP
or GM who are responsible to the plan of Capex Telkomsel (currently, the position
is hold by Mrs. Herfini Haryono).
It is needed to inform that Capex Committee Members are assisted by several staffs
of either PT Telkom or SingTel Mobile. Mr. Widjaja Suki is one of the staff from
SingTel Mobile. There is no different authority had by Mr. Widjaja Suki wih other
staffs from PT Telkom. Capex Committee has also an authority to appoint and ask
for assistances from external independent adviser to complete its assignments.
Each of Capex Committee Member has equal rights to give suggestion or input. The
involvement of the staffs from PT Telkom and SingTel Mobile (Widjaja Suki) are
limited only to give suggestion not to take decision or actively to influence Capex
Committee Members. Within the internal structure of PT Telkom and SingTel
Mobile, the staffs are subordinated to Capex Committee Members. In this matter,
Mr. Leong Shin Loong is a member of Capex Committee of SingTel Mobile as well
as Director of SingTel Mobile, while Mr. Widjaja Suki is only a Deputy Director of
SingTel Mobile.
Y
The Capex Proposal submitted in the corridor of approved Budget Plan. The Capex
Proposal may not over the corridor of Budget Plan, unless there is a revision to the
Budget Plan (in which it is the right of Board of Commissioner).
P
The inputs and correction of Mr. Widjaja Suki are technical rather than strategy
concerning the Budget Plan. Other staffs of Capex Committee posted by PT Telkom
also possess the same authority. Mr. Widjaja Suki’s notes, inputs and corrections
are possible to be accepted with the approval and permit of Capex Committee since
Widjaja Suki as a personal or by its position does not have right to suggest or to
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give correction directly on behalf of Capex Committee of SingTel or of Capex
Committee by himself.
As it is mentioned previously that Capex Committee approval is a detailed
implementation of approved Budget Plan.
C
The Capex Proposal is submitted and responded monthly by Capex Committee and
Board of Commissioner but the plot of implementation plans are arranged quarterly
based on annual Budget Plan.
As it is mentioned in item 87, Capex Committee Members are assisted by several
staffs of either PT Telkom or SingTel Mobile. Mr. Widjaja Suki is one of the staff
from SingTel Mobile. There is no different authority had by Mr. Widjaja Suki wih
other staffs from PT Telkom who assist Capex Committee, including to
communicate directly with the management staff of Telkomsel Business Control
such as Mr. Jaka Susanta.
In performing the tasks, including taking decision on Business Plan and Budget
Plan, the Board of Commissioner members, either from SingTel or PT Telkom are
assisted not only by a number of committees such as Capex Committee and
Auditing Committee but also staffs from SingTel and PT Telkom assigned to assist
Board of Commissioner or Committee. In other word, SingTel does not have
special or bigger rights and authority than PT Telkom to perform the tasks
mentioned above. Each member of Board of Commissioner has equal rights to give
suggestion or input in line with the fiduciary duty as it is required by the law of
Y
Limited Corporation.
Agree; there is no joint procurement with Singtel
P
Cited from Financial Highlight Telkomsel, No comment available.
(1)(b) to Telkomsel
O
(1)(b) to Telkomsel
(1)(b) to Telkomsel
C
(1)(b) to Telkomsel
(1)(b) to Telkomsel
(1)(b) to Telkomsel
(1)(b) to Telkomsel
(1)(b) to Telkomsel
(1)(b) to Telkomsel
Y
(1)(b) to Telkomsel
P
(1)(b) to Telkomsel
(1)(b) to Telkomsel
O
(1)(b) to Telkomsel
(1)(b) to Telkomsel
C
(1)(b) to Telkomsel
(1)(b) to Telkomsel
(1)(b) to Telkomsel
(1)(b) to Telkomsel
(1)(b) to Telkomsel
(1)(b) to Telkomsel
Y
(1)(b) to Telkomsel
P
(1)(b) to Telkomsel
(1)(b) to Telkomsel
O
(1)(b) to Telkomsel
(1)(b) to Telkomsel
C
(1)(b) to Telkomsel
(1)(b) to Telkomsel
irrelevant as a reference. It is opposed to the qualification of witness as it is
regulated in Article 1 (22) of KPPU Regulation, 2006.
The interconnection has been controlled and regulated by government through
BRTI. In this case, Telkomsel and other incumbent operators had implemented non-
discriminative policy in the implementation of interconnection.
Y
P
Besides, the changes of interconnection regime, from interconnection regime to cost
based regime, is performed gradually because there are many technical matters
needed to be adjusted since it cannot be performed all at once to have new DPI
permit in August 2007. The most significant thing is the change of interconnection
tariff under Memorandum of Understanding or amending previous PKS in which
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the completeness of new PKS is also included in it. BRTI also knows about that and
approves it during the meeting of BRTI with the operator’s representatives on 19
December 2006 (the notes of meeting is enclosed).
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Telkomsel in implementing interconnection policy bases on the Telecommunication
law, in which obligate network operator open interconnection access to other
network operators. Telkomsel accesses to numbering block of partner operators
(software) and connect interconnection link physically (Hardware).
Concerning the testimony of Hutchinson, we inform that the connection of
interconnection link can be performed directly or transiting through other networks
based on the economic calculation agreed by many parties. If the traffic of the
parties is < 48 Erlang, it will be economical transiting through other network
because it only pay transit fee subject to the traffic. It is cheaper than operating its
own interconnection. The decision of 48 Erlang as a limit to develop link
interconnection intends to reduce the cost. The rule is contained in DPI Telkomsel
approved and defined by BRTI (by the Decree of Directorate General Post and
Telecommunication No. 279/DIRJEN/2006 on 4 August 2006).
Y
There is a justification behind the policy, agreed as well by two parties that perform
an agreement. Justification: For SMS interconnection SMS, due to technical
limitation the billing statement is through SKA (sender keeps all) in which no
payment given to partner operators for intra SMS operator by assuming that sms
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traffic is balance because usually the receiver of SMS will reply the SMS. Such
situation can cause a fraud by spamming SMS from sender operator to receiver
operator without any interconnection fee, while the receiver operator is overloaded.
A high increase of traffic is possibly to occur, if a retail price of SMS intra operator
is cheap. Therefore, the parties agree to avoid such situation because it is able to
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restrain other parties. The price change of SMS to the same operator is possible to
be done. In fact, there a still a bad operator that assaults informal work ethic.
Incorrect. Justification: In the DPI Telkomsel, approved and legalized by BRTI, it is
stated that concerning link interconnection partner operator can share transmission
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of Telkomsel or other parties available in the Telkomsel’s premises with market
price or in line with KM. It has to be done because there is no other space for new
equipment if partner operator is about to develop its own transmission. The policy
will be revised if there is a space for the purpose. In the low capacity, cost for rent
is cheaper self-developing. Thereby, we inform that Telkomsel does not
implements restraint or forcefulness concerning interconnection policy.
Besides, the GDP of Indonesia in 2006 had reached US$ 1,280 per capita. It
assumes that the average of cellular cost is US$ 7 per customer then the cellular
consuming service is maximum around 7% and not 10%-20% as described by
Mastel.
Y
P
Besides, in our opinion tariff is also a function of quality. Decreasing tariff is able
to decrease quality that finally lead to consumer loss, as it is stated in Analysis.
O
C
Besides, SMS has a principle of senders keep all. Consequently, the decrease of
tariff initiated by one operator can cause network trouble to other operator (see
elucidation in item 124). Telkomsel principally enjoys SMS tariff discount to 50%
for on net. We add that there is no regulation on SMS tariff.
Besides, as we have already mentioned that tariff is not mere a function of cost but
also quality.
Y
Besides, the cost charge is a matter of business choice whether it is a cost charge to
vendor or customer. Every business has its own advantage and disadvantage.
P
Charging to vendor means high dependency of technology, decreasing of network
extension-- especially in the infeasible economic regions—and difficulties in
keeping standard quality. Telkomsel combines investment cost into business
strategy business on the basis of network and customer satisfaction.
131.
C O
The data of EBITDA result. The data is not “apple-to-apple” in which Telkomsel as
a pure cellular operator compare to other telecommunication operator. Therefore,
the result of Telkomsel is higher due to the absence of legacy for
telecommunication service. The EBITDA to be presented shall be consolidation
EBITDA with Telkom in which its EBITDA only 62%, so that the highest EBITDA
is Smart, a Philippine operator. Besides, EBITDA is a function of efficiency. Based
on the following item, Telkomsel operates efficiently.
The data description of Merril Lynch per June 2007 is for Asian countries. The data
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clearly show that Indonesian market is not in an extreme condition shown by the
absence of significant rate but churn market indicator is the highest. The churn
indicates the freedom of consumer to immigrate from one operator to another. From
the viewpoint of HHI, the competition degree is the second best after India. The
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respond to the Preparation council of commission session based on the result of
Follow-up Investigation Case No. 07/KPPU-L/2007.
Analysis
A. 1. Comments. Not available.
1
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2. Comments. Not available.
3. There is no direct relation with the suspected infringement of Article 17 (1)

and 25 (1)(b) to Telkomsel .
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5. The analysis in item 5 of the Report of Investigation result. There is no direct
relation with the suspected infringement of Article 17 (1) and 25 (1)(b) to
Telkomsel. The shareholder of Telkomsel is Singtel and Telkom, in which
among them the agreement on investment are made as it is presented in item
84 in the presentation of the Report of Follow-up Investigation Result KPPU
(response to number 7 in number 5). In line with the license of foreign
investment Telkomsel had, one of Telkomsel’s shareholders is Singtel
Mobile. There is no reference at all that Singtel Mobile is Temasek Business
Group. We can inform you further that the law of investment , jo. the law of
Limited Corporation admits only foreign party in the form of foreign
corporate body or foreign individual. Therefore, the expression of “Business
group” is not acknowledgeable. (respond to number 9 in number 5).
2 6. There is no direct relation with the suspected infringement of Article 17 (1)
and 25 (1)(b) to Telkomsel.
Y
and 25 (1)(b) to Telkomsel. Therefore, it needs to inform that the law of
Foreign Investment, the investment in Telkomsel is SingTel Mobile.
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12. That the interpretation of majority share even based on Black Law is
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indicating that Telkom is also majority shareholder because referring to
Telkomsel’s Statutes one share one vote is valid.
13. There is no other interpretation needed to know the meaning of majority
share.
The Telkomsel’s Board of Commissioner consists of 6 members, 4 members
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14.
are nominated by Telkom and 2 members by Singtel Mobile. The Board of
Director Telkomsel consists 5 members, 3 members are nominated by
Telkom and 2 members by Singtel Mobile.
15. Article 22. 9 of Telkomsel’s Statutes regulates that the whole decision of
RUPS are taken based on deliberation to come to general consensus but if
the meeting meets no agreement, the decisions are determined by voting with
at least 51% (fifty one percent) of the qualified votes.
16. The structure of Telkomsel shareholders is 65% for Telkom and 35% for
Singtel Mobile, therefore de facto, Telkom has stronger bargaining position
than Singtel Mobile.
17. Referring to 65% of Telkom’s shares in Telkomsel, then the majority
shareholder in Telkomsel is Telkom and not Singtel Mobile.
18. The regulation on bigger quorum concerning amendment of a Statutes,
merger, taking over, dismissal and bankruptcy is a form of protection to
minority shareholders by law in order to prevent it from the unfair conduct of
majority shareholders.
19. That the argument of KPPU Investigation team in item 19 on veto rights of
shareholders that possessed more than 25% as it is stipulated by the law of
Limited Corporation. Basing on this statement, KPPU then qualifies SingTel
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Mobile as company controller is groundless. Under the law of Limited
Corporation, the veto rights of shareholders are given in relation to the
upholding of fair principles to any shareholders, besides KPPU Investigation
team has kept aside another important element that veto rights are only
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concerning with the decision making on merger, taking over, dismissal and
bankruptcy (as it is stated in item 18 above), in which none of them has ever
occurred in Telkomsel. That based on the description above, it is incorrect
for KPPU to implement Article 76 of the law on Limited Corporation to
determine shareholder of company controller.
O
20. That in Telkomsel’s Statutes and agreement with shareholders, the rights of
each shareholders, including protection to minority shareholder, are
regulated in line with the law on Limited Corporation.
21. Based on the derivative interpretation, the lawmaker of Law No. 5/1999
examines that the meaning of majority share has already been understood
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clearly, in which majority share refers to the highest number of shareholders.
The understanding of “Majority Share” in Article 27 of the Law No. 5/1999
is simple in fact, in line with the grammatical interpretation. It is concerning
“quantity” and/or “certain quantities” of shares owned by a shareholder.
Based on the composition of shareholders, Singtel owns 35% of shares in
Telkomsel and Telkom 65%. It is clearly understood that Telkom is a
majority shareholder in Telkomsel. Each shareholder owns one shares one
vote.
22. The teleological interpretation of majority share is not needed due to the
clearance and simplicity of majority share meaning that is to refer to the
highest number of shareholder.
and 25 (1)(b) to Telkomsel. It is needed to inform that the rule in Article 27
of the Law No. 5/1999 is categorized as a prohibition based on ”rule of
reason”, and not ”per se illegal”.
24. Considering that Telkom owns 65% of Telkomsel’s share then the real
control of Telkomsel is Telkom.
25. The understanding of majority share is clear and understandable in which it
refers to the highest number of shareholder.
Y
26. The interpretation of majority share is related to the Law No.19/1997 on the
Imposing Bill for Tax Collection is irrelevant, therefore it is ignored.
27. The understanding of majority share is clear and understandable, other laws
needed to interpret majority share are ignored because the understanding of
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majority share is to refer to the highest number of shareholder.
28. The interpretation of majority share related to the regulation of BAPEPAM
on the Taking Over of public limited company is ignored due to the status of
Telkomsel as closed company.
29. The interpretation of majority share related the regulation of Central Bank of
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Indonesia on Single Ownership in Indonesian Banking is ignored due to the
status of Telkomsel as non-bank corporation.
30. The description of KPPU on the understanding of majority related to the
practices in other countries is irrelevant with the condition of Telkomsel.
Based on the rule of Article 20 AB KPPU, it is stated that the case
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investigation deserves to the rule of positive prevailing laws in Indonesia and
not to the rules of foreign laws.
31. The comments are the same as the elucidation in number 30 and up.
37. Considering that Telkom owns 65% of Telkomsel’s share then Telkom is a
majority share in Telkomsel. The special quorum in the RUPS intends to
protect minority shareholders as it is ordered by the law of Limited
Corporation.
Y
P
44. Based on our description above, majority share as it is in Article 27 of the

Law No. 5/1999 cannot be understood as a control of a business actor to
other business actors. A control to a company is simply determined by a
number of shares owned by a majority shareholder.
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45. In the context of Telkomsel, Singtel Mobile cannot make strategic policy by
ignoring Telkom as a shareholder of 65% shares. Therefore, the description
of KPPU in item 45 in Analysis is unreasonable.
46. Based on Telkomsel’s Statutes and the practice in Telkomsel, Singtel cannot
force its wills by ignoring Telkom as a majority shareholder. It is a common
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feature in a joint venture company.
47. The description of KPPU on in this item is related to the data of Indosat. No
comment is available. It is irrelevant with the suspected infringement of
Article 17 (1) and 25 (1) (b) conducted by Telkomsel.
48. Singtel Mobile is the owner of 35% of Telkomsel’s shares.
B 49. Cross-ownership is not the only cause of high concentration. Generally, the
cause of high concentration is vertical and horizontal integration rather than
cross-ownership. The industry in which Telkomsel resided does not admit
cross-ownership, as long as it concerned with Telkomsel.
50. The measurement of market power is (P-MC)/P, if this value reaches 1 then
market power possession is big and no market power for the value reaches to
0. Telecommunication industry in Indonesia, the tariff fixing is determined
by government regulation. It is noted further that in line with the existing
regulation, a tariff adjustment by dominant communication operator shall
get previously an approval from government authority (BRTI). The price
paid by customer is formed by a tariff minus discount (if any) in which
discount is influenced by a dynamic competition in the market.
51. According to the theory, market power is calculated by Price-Cost margin.
Y
Currently, market power in price rate is equal and regulated by government
regulation. In the cellular industry of Indonesia, the products available is
complementary products that make the ability of determining market is not
high. The production is possible to be a factor of unfair competition because
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the company with low production cost, generally has better market shares.
Competition occurs in obtaining production efficiency that give profit to
consumer as a return. The high value of profit margin is determined by the
different price and its margin cost that creates a price pressure competition
because price is determined by regulation.
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52. Consumer loss does not automatically decrease social welfare. If it is
focused on the economic growth, the social welfare is a combination of
surpluses of consumer and producer. The description of this problem can be
seen in ‘Telkomsel Analysis as a cellular service leader in Indonesia (an
economic study relating to the infringement of Article 17.1 and 25.1. b of the
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Law No. 5/1999), hereinafter referred to as whitepaper, that has been
submitted by Telkomsel to KPPU in July 2007.
53. In telecommunication industry of Indonesia, cross-ownership does not exist
and the leadership of Telkomsel in the market is caused by the acceptability
of public to service and tariff offered by Telkomsel.
54. As a service leader, Telkomsel tries to develop new market network, in
which other players are not interested. Tariff is fixed by regulation so that
output in the new market is not influenced by other players. The behavior of
Telkomsel does not cause anti-competition, protection and incentives to its
competitors.
55. Generally, the advantageous competition of the company is formed by three
elements namely price leadership, service leadership, and product
diversification Price leadership is the price offered by company is so low that
make other company get difficulty to enter market. Service leadership is the
service offered is superior. Product diversification is the various products
offered to public. The competition in Indonesian telecommunication industry
is focused on service leadership. Therefore, the existing operator offer very
low price, especially the Telkomsel’s variant tariff that can be seen in the
enclosure.
Y
56. Cross-Ownership schema is not valid in Indonesian telecommunication
industry due to its absence. According to the rates of HHI in Indonesia is the
lowest after India, it makes the high concentration is absent. Unbalanced
concentration occurred is caused by generalizing the analysis of market not
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specified or through geographical factors. It will lead to bias conclusion. As
it is seen in the form of tight competition in JABOTABEK (Jakarta, Bogor,
Tangerang, Bekasi) Java and Bali, in which market shares of Telkomsel is
not more than 50%. From the data collected by LPEM, the market elasticity
value is elastic and getting higher annually unless in 2004. With the high
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elasticity and the existing HHI, then the market power in this industry
(HHI/Elasticity) tends to decrease. Entry barrier in this industry is not caused
by the players but it depends much on the regulation performed by
government (BRTI) and the investment procedure facilities. In the case of
Oligopoly “Price Leadership” in which company leader determines the first
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price, then other company fixes little bit lower than company leader. With
the Sequential Price Competition, in the end of equilibrium, other companies
is more benefitted than a leading company because there many opportunities
to capture much more customers. In the end, the position of the leader
changes and come back to the initial process to increase consumer surplus.
57. Such a measurement is used in measuring market concentration in an
industry. The measurement using HHI is better than CR but practically, CR
measurement is easier. The limitation of measuring market is market
definition (it shall be clear and specific), geography (it shall be accurately
observed to avoid of making mistake in comparing the players), the presence
of international trade, and the maturity of company (it shall be equal).
Therefore, calculating HHI in cellular telecommunication industry in
Indonesia shall define exactly the definition of market namely market that
gives similar service, coverage area (not nationwide) and equal maturity of
companies (in this case Telkomsel, Indosat and XL).
58. CR needs not to see the whole players in the market but only identify a
player that has big market shares. CR4 means four companies with big
market shares. In the case in which there are only 5 companies with the
market shares that relatively equal, then its CR5 reaches 1. In this
measurement, carefulness in needed to interpret it.
Y
59. The measurement of HHI requires to note the whole players in the specific
market as it is stated in response number 57.
60. The assumption in this case it there are 4 companies in the market. The
measurement is able to define market correctly as it is stated in number 57.
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61. 10,000 is obtained only in one company in the market, then the market share
is 100%, and its HHI is 1002.
62. This method introduced by Farrel and Shapiro (1990). The analysis is
emphasized in merger horizontal or integration.
63. 1000 to 1800 of HHI cannot be commonly used, it depends on the number of
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companies and their market shares. If there are 5 companies in the market
and each company has the same market shares, then the value of HHI is
2000; does it has high concentration? The answer is no because each
company has similar market shares so there is no concentration only in one
or two companies. In the case of telecommunication industry in Indonesia in
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which 3 players has the same market definition, then the value of 1000 to
1800 is not valid anymore.
64. In their writing on horizontal merger, Farrel and Shapiro (1990) said that the
problem of HHI measurement is fundamental to see concentration rates. The
objective of the research is how big is the impact of merger to social welfare.
65. In the case of telecommunication industry in Indonesia the GHHI
measurement is ignored due to the absence of cross-ownership.
66. The formula of GHHI is not effective in market measurement of
telecommunication industry of Indonesia due to the absence of cross-
ownership.
67. Citing Campos and Vega (2003) in “Our version of the GHHI critically
depends on the exact definition of degree of “ownership” and “control”
attributed to the stakeholders. ... at least three alternative definitions: control
can be defined by the degree of ownership, by the capacity to form winning
coalitions in the company’s voting game or by the relative number of
directors appointed by each group of investors in the Board of Director.”
Currently, there are 2 directors represented Singtel Mobile and the rest of 3
represented PT TELKOM.
68. In their original article, Gilberto Vega and Javier Campos (2003) do not
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mention the limitation of high concentration from 1000 to 1800. The focal
pont is GHHI gives higher value than HHI as an impact of merger with the
same ownership.
69. To understand a better consumer surplus (CS), the utility function of cellular
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public users and their demands shall be made. The price change will
influence CS. Theoretically and practically, CS shall be measured after
calculating Compensation Variation (CV) and Equivalent Variation (EV), in
which EV < ∆CS < CV. So, it is not easy to calculate CS accurately.
Consumer loss is a decrease CS due to the price change and not a
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comparison of CS among countries because willingness to pay product is
different from one country to another, depending on the public taste, per
capita income or buying power, and the need rate of the service.
70. The Industry of telecommunication in Indonesia has its own oligopolistic
market structure because the limit of bandwidth frequency can be offered to
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operator. Telkomsel has submitted the detail analysis in white paper to
KPPU.
71. Sweezy model has been broken by Bertrand model. Bertrand model is able to
show that in the end of price competition a balance exists in time of the price
is equal to its marginal cost. The analysis of Kinked Demand curve has not
been used for so long as a basis of analyzing industrial organization.
72. Based on model of Cournot, Bertrand and Stackelberg, there are three kind
of behaviors in non-cooperative oligopoly. Telecommunication industry in
Indonesia is more suitable to be approached by Stackelberg model in
competition quantity as an analysis basis as it is in the white paper that has
been submitted in July 2007.
73. With the equal price rate, Bertrand model is not suitable to be used as an
analysis basis in telecommunication industry in Indonesia as it is in the white
paper that has been submitted in July 2007.
74. Stackelberg model is not mere for output but also for price but the strategy of
player determines price as leader give no profit to the leader itself.
Therefore, there are many leading companies play with their own output
strategy as it is in the white paper that has been submitted in July 2007.
75. In Cournot, the small and big change depends on the marginal cost (MC).
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Each company has equal reaction function if its margin cost is equal.
Nevertheless, with the different MC, company that has lower MC will have
many quantities in the market. The price is determined after the quantity is
supplied to the market and it become parallel price for all players in the
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market as it is in the white paper that has been submitted in July 2007.
76. Collusive Oligopoly in game theory is confronted with the difficulties to
coordinate and to prevent incentive to fraud. Cartel is possible only if there is
a regulation and fine among player that conducting Cartel. The deeper
analysis can be seen in the white paper that has been submitted in July 2007.
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77. Price Leadership will not occur in Oligopolistic market but to the market that
tends to be Monopolistic in which there is only a dominant company fixing
price while others become “Residual Demand Curve” of other dominant
companies. Usually, the price fixed is low or close to the marginal cost of the
competitor’s company with the assumption that the MC of dominant
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company is smaller than the competitor’s.
78. Comparing Cournot Model shall be with Stackelberg Model for quantity. In
quantity, Stackelberg Model gives Consumer Surplus bigger than Cournot
Model. While if we want to compare Price Leadership, it is better to use
Bertrand Model so that it will be the same due to a competition price. In
competition price condition, price is close to MC of each company in the
market. The same conclusion is that the lowest will have bigger market
shares. The deeper analysis can be seen in the white paper that has been
submitted in July 2007.
79. The agreement of interconnection is obliged, monitored and verified by
government through BRTI, and not a beginning of collusive agreement. In
an agreement of interconnection, the principle of non-discriminative is
applied to close the opportunity of collusion. Another problem to get out
form collusion is coordination and incentive. The deeper analysis can be
seen in the white paper that has been submitted in July 2007.
and 25 (1)(b) to Telkomsel
81. Comment is not available. It has no relationship with Telkomsel’s business
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82. There is no cross-ownership, so that 2003 cannot be used as a basic analysis.
83. There is no cross-ownership. The good performance of Telkomsel is mere a

result of business of Telkomsel that is performed with the accurate business
decisions.
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84. The revenue of Telkomsel reflects the growth and role of Telkomsel in
developing national economy through multiplier effect in many sectors, in
line with the writing of “Telkomsel leads through service” in the white paper
that has been submitted in July 2007.
85. The market leadership of Telkomsel since 2001 has indicted the acceptability
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of public to service and tariff offered by Telkomsel. Even customer has
many choices with services and various prices offered by many operators.
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88. Generalizing the measurement of market shares will be misleading. The
measurement shall be based on the geographical coverage. The market
shares in the following table reflects dynamic competition among operators.
Jabotabek Central Java
Telkomsel 43.5% 46.8%
Indosat 34.8% 35.9%
XL 21.7% 17.3%
Total 100.0% 100.0%
89. 10,000 is obtained only in one company in the market, then the market share
is 100%, and its HHI is 1002.
90. If it is assumed that the marginal cost of Telkomsel, Indosat and XL are
equal and Telkomsel is a market leader, then the measurement of HHI will
reach to 4400 with model of Stackelberg. With the lower EBITDA margin of
Telkomsel, the MC of Telkomsel is lower than its competitor that make its
HHI value is more than 4400. Therefore, government and/or regulator shall
try to get efficiency from other company.
91. The limitation of HHI measurement as it is stated in number 57 shall be an
attention in analyzing telecommunication industry in Indonesia. Based on the
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calculation in the table of item 90, the rate of HHI that reflect a dynamic
competition among operators. The condition in 2007 would be different
because a number of players increased and the two prominent competitors
increase their promo and reducing price to make them more efficient. The
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value of HHI is possible to be small with the assumption that it is calculated
by using certain geographical factors.
92. In line with the vision and mission of Telkomsel to give as wide as possible a
telecommunication access to Indonesian people.
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94. For analyzing cellular competition, other factor than network and price as it
is mentioned by KPPU, shall be considered. Coverage is very important in
analyzing cellular competition in Indonesia because of geographical factor
and the low of PTSN penetration.
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95. The growth of BTS is not the only analysis to win the competition in cellular
industry. Concerning the development of BTS, Telkomsel has to face many
external constraints such as the availability of power/electricity,
transmission, and the geographical factor, the huge area of Indonesia. Being
a volunteer in the regions, have obliged Telkomsel to build all value chain of
telecommunication business such as distribution network, dissemination of
cellular business to local people. The number of new BTSs will mean
covering market share, increasing market coverage, and developing network
effect. Each operator has their own decision to the development of BTS.
Developing BTS in volunteering time is a risky business decision related to
the challenges of geography, transmission, availability of power/electricity,
and business strategy, in this case Telkomsel always uses Invest ahead of
growth, a business strategy that has been implemented by Telkomsel in the
very beginning of its establishment. Other operators usually apply market
approach to boost BTS growth.
96. The statement stating that the decreasing of Indosat (the closest competitor),
give a freedom to dominant player optimizing its market. The decreasing of
Indosat cannot be avoided and beyond the control of Telkomsel because
Telkomsel does not have control to Indosat. Furthermore, a certain condition
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cannot be compared directly and come to conclusion as it is in 95 because
such a deed will lead to misinterpretation. The decreasing of performance of
Indosat has been distributed better to the whole players that make XL lowers
its gap for chasing to be No.2 and it is possible referring to a number of BTS
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of XL. The growth of BTS is part of business plan that is arranged
consistently and not of the decrease of Indosat’s BTS growth.
97. The average price cannot be used as a reference in analyzing tariff. From
period to period, Telkomsel (and also other operator) often offering discount
or promo for giving lower price. Besides, Telkomsel is also adjustment Point
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of Charging that give customer wider a local call zone.
98. The picture is full of simplification needed for coming to accurate
conclusion. See also the elucidation in item 97, in which Telkomsel price is
dynamic from time to time.
99. In the case of Oligopoly “Price Leadership” in which company leader
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determines the first price, then other company fixes little bit lower than
company leader. With the Sequential Price Competition, in the end of
equilibrium, other companies is more benefitted than a leading company is
because there many opportunities to capture much more customers. In the
end, the position of the leader changes and come back to the initial process to
increase consumer surplus.
100. The Analysis shall be seen as trend and not based on growth average to see
competition change better in price.
101. The growth data of presented retail selling price cannot be compared due to
the references used by KPPU in processing data.
102. The statement concerning the significant increase of postpaid customer is
incorrect. The postpaid Telkomsel contributes only less than 5% (total
customers in 2006 was around 1.6 million) out of the whole customers. Even
the total customers of entire operators are 2.9 million. It is not true to say that
the increase of operator‘s high margin is caused by postpaid customers. It
can be said that in general the users of postpaid are those who are not
sensitive with price because they are corporation customers not retail and
VVIP customers (being customers since the initial establishment of
operator).
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103. Conceptually, Price Leadership model with the tacit collusion is hard to last
long due tot the problems of coordination and incentive, as it elucidated by
Nash Equilibrium in the case of Prisoner Dilemma. Generally, Price
leadership is conducted in the low price or tariff so that other players receive
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residual demand curve.
104. There is no high non-cooperative or competitive concentrations in the
markets of cellular industry in Indonesia. The measurement of HHI shall
consider the limitation as it is stated in number 57. The explanation of GHHI
has been stated in number 65 and 66.
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105. The expression of “single entity doctrine” is not acknowledgeable in
Indonesian legal system so there is no cross-ownership involving Telkomsel.
106. Although market control by Telkomsel and Indosat are up to 89.64% in
2006, it indicated no cross-ownership.
107. Although market shares average of Indosat-Telkomsel are 89.61%, it
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indicates no cross-ownership
108. The increase of common market shares of Telkomsel and Indosat in the
whole years does not prove/relate to the existence of cross-ownership.
109. It has been stated in item 57. The general or national measurement cannot be
used as an exact measurement of HHI.
113. It is needed to note that with the same number of players, HHI value in
Stackelberg-Quantity model is bigger than in Cournot model. Nevertheless,
the high value of HHI does not make lower consumer surplus in Stackelberg
model than in Cournot. Even in Stackelberg-quantity model the consumer
surplus and social welfare is higher than in Cournot model, as it is in the
white paper that has been submitted in July 2007.
114. The method of GHHI cannot be implemented to explain cellular market
concentration in Indonesia. The elucidation of GHHI has been stated in
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number 65 and 66.
number 65 and 66. The exact calculation is available as it is in number 57.
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123. The basic calculation of market power is Lerner Index (LI); the price is
reduced by weighted average of the marginal cost divided by the price itself.
In LI measurement, the interpretation shall be taken carefully because there
is a cost influence, especially sunk cost, and innovation. The innovation
automatically reduces marginal cost. The statement is true saying that the
measurement of competition degree is a demand function. It is incorrect to
say that the result of measurement indicates that the behavior of companies
in Indonesian cellular industry Indonesia is non competitive. In order to
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create non competitive condition, it has to face the problems of coordination
and incentive of the players to gain higher profits.
124. The competition in the market is to have market shares as high as possible.
However, whatever products offered by producer can be received by
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customers. The competition can be conducted in many ways such as
competition price, quality product, and channel distribution. The stages
presented is correct but it cannot be seen as geographical market
aggressiveness because there is a region in a competition price such as
JABOTABEK and Java. While in other regions, there is still in the stage of
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network development. Such a production process shall be attended in
implementing HHI as it is stated in number 57 and 94.
125. First mover advantage is only possible if the cost average or the marginal
cost of first mover is always lower than other competitors. For example
Telkomsel, Telkomsel is not a first player in JABOTABEK but Telkomsel
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currently leads the market in this region caused by precise strategy
implemented by Telkomsel in penetrating market. The statement saying that
in the first step that market power will be possessed is not true. It can be seen
from the new entrants who enter in the high competition regions. By
creating price war they immediately grab market shares. It means that Price-
Cost margin of new entrants are low so that their market power is not big.
126. The statement saying that first mover is benefitted in the Stackelberg-
quantity is incorrect. It should be market leader that previously determine
quantity and then followed by its followers. The pervious determination is
understood as first mover in Game Theory of the sequential game.
127. The calculation of maximizing profit of company 1 as a leader with the
function of follower’s reactions, as it is stated by KPPU.
128. The maximum profit of each company in the market is when margin
revenues (MR) is equal with its margin cost (MC). In the example here MC
= 0, then MR = 0, Q1 as leader is 1/2a. By entering Q1 value to the function
of follower’s reaction, Q2 becomes 1/4a. The conclusion stating that the
quantity produced by company 2 is smaller than company 1 as the first
mover is; the condition is valid if there are only two companies in the market
and the first mover is a market leader. In the case that there are three
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companies with the demand function is similar to the example, then Q1 as a
leader will have quantity comparison 3:1:1 with its followers. In other words,
the market shares leader will be 3/5 and marginal cost 60%.
129. In the Stackelberg model, the follower only reacts after Leader determines its
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products quantity. In other words, the follower tries to find a gap that cannot
be fulfilled by leader. The increase of product quantity by follower will
cause supply increase in the market; under market mechanism, if supply
increases price will decrease. The decrease of price results the profit
decrease of the whole players in this industry.
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130. Telkomsel is not a first mover in Indonesian cellular industry. Nevertheless,
in 1996 the three existing cellular players, Telkomsel, Satelindo and XL,
have an equal opportunity to become Leader in the market. Concerning the
number of Telkomsel’s BTS, the Telkomsel’s business strategy bases on
coverage, capacity and quality, it is not mere a short-term financial business
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calculation. The restraint of BTS’s development applied to Telkomsel is
able to establish distortion in the market. Each new entrant needs market
penetration to enable it becomes a competitor in the potential region such as
JABOTABEK and Java.
131. BTS is an important investment for the players in cellular industry but it is
not the only decisive factor in the competition, especially in the new area as
it is elucidated in 95.
132. In the low market penetration region, the chance of each player to boost the
capacity is widely open, along with the business plan that has been stated
and it is not mere a reaction function of the first mover in that region. To the
present time, market penetration for Indonesia is around 30%.
133. The statement saying that Telkomsel is a first mover is untrue. The restraints
of Telkomsel development is able to distort market development because
there is no guarantee that market mechanism and fair competition can be
established under such a situation. Besides, the implication of changing
behavior from Stackelberg model to Cournot model is not a good idea to the
development of Indonesian economy because social welfare and consumer
surplus is bigger than in the Stackelberg model.
134. In the Stackelberg model there is no dominant company but only market
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leader. In the Stackelber-Quantity competition, market leader does not fixes
price but previously determines quantity and afterward the followers adjust
it. BTS is only concerning capacity and not giving power to become a first
mover. The right placement of BTS in a region is able to create a potency of
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increased market share. The BTS placement strategy is very potential to
make a company market leader.
and 25 (1)(b) conducted by Telkomsel. Besides, the Telkomsel analysis
considers not only competitor’s behavior but also market needs anticipation
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and an adjustment of needed based services.
136. The market shares data of Telkomsel, Indosat, XL over the income of
customer, # Telkomsel BTS performs cellular business is based on three
pillars, widening coverage, improving capacity and quality, consequently
Telkomsel builds BTS significantly. The revenue and customer are outputs
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of coverage, capacity and quality .
137. The consistency of Telkomsel in 50-55% is an accurate strategy of
Telkomsel in performing business while XL as an aggressive operator enjoy
the increase of its market share in 2006. Such a condition is a fair dynamic
market.
138. As a first mover, Telkomsel takes a higher risk than its followers do. It is
proved from the aggressiveness of Xl that begins to harvest significant crops
in which Telkomsel exists in that region.
139. The boost of capacity and the strategy of BTS’ placement are the
fundamental things to keep and to increase market shares. The rapid of
market penetration by other players does not depend on the budgeted
CAPEX but it depends on the precise of BTS placement itself.
140. Telkomsel is not a first mover in cellular industry in Indonesia, as it is
elucidated in item 130.
141. Currently, the Indonesian cellular industry is non-cooperative Oligopoly
market, and there is a leader in the market so that Stackelberg model is
suitable to be implemented in analyzing this industry and the analysis shall
be based on the specific geographical market and it cannot be analyzed
nationally. Thus, there is no accumulation of monopolistic profits in
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Indonesian cellular industry since competition occurs in the oligopolistic
market. The three prominent operators are relatively in the equal position.
The dominant position is obtained because of service and discount given as a
wish of market, as it is elucidated in item 140.
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142. In other words, Nunn and Savari (2002) give an indication that the existing
cellular industry cannot be approached by Cournot model that state a number
of competitors in the market do no influence the market power of company.
Thus, in the world market cellular industry there are leader and follower, so
that the exact approach is Stackelberg model.
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143. Telkomsel is not a first mover in cellular industry in Indonesia, as it is
elucidated in item 130 and the players in cellular industry in Indonesia keep
on competing one to another.
144. The performance decreases of competitors have nothing to do with
Telkomsel. In Indonesian telecommunication industry, cross-ownership is
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absence and no high concentration in non-cooperative or competitive
markets of cellular industry. It indicates that competition occurs in this
industry
145. The indication of aggressiveness decrease of Indosat as the closest rival to
Telkomsel has nothing to do with Telkomsel because Telkomsel does not
have control over Indosat.
146. In Indonesian telecommunication industry, cross-ownership is absence and
the performance decrease of Indosat has nothing to do with Telkomsel.
147. In Indonesian telecommunication industry, cross-ownership is absence and
the performance decrease of Indosat has nothing to do with Telkomsel. The
high competition occurs in cellular industry and it can be seen from the value
of HHI as it is stated in 56, and the increase of new player.
148. In the case of Oligopoly “Price Leadership” in which company leader
determines the first price, then other company fixes little bit lower than
company leader. With the Sequential Price Competition, in the end of
equilibrium, other companies is more benefitted than a leading company
because there many opportunities to capture much more customers. In the
end, the position of the leader changes and come back to the initial process to
increase consumer surplus.
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149. Methodologically, it needs to be analyzed whether the tariff change variables
is appropriate to test the existence of price leadership and fixed pricing.
By using tariff change variables, it will provide significant conclusion as it is
elucidated by sequential price competition in item 148.
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150. The test of equal postpaid average tariff of Telkomsel and Indosat indicates
that there is a Sequential Price Competition for postpaid tariff. In the end of
151.
equilibrium, other companies are benefitted more than a leader. As it is
elucidated in item 148
152. The test of equal prepaid average tariff of Telkomsel and Indosat indicates
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that there is a Sequential Price Competition for prepaid tariff. In the end of
153.
equilibrium, other companies are benefitted more than a leader. As it is
elucidated in item 148
154. According to the theory, market power is calculated by Price-Cost margin.
Currently, market power in price rate is equal and regulated by government
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regulation. Business efficiency is an important factor in the high of EBITDA.
The telecommunication tariff in other countries presented by Morgan Stanley
and LPEM shall be proved whether the data have been passed through a
certain method. The presentation method will be an important issue because
the differences in taking retail tariff, regulatory, and the blended FWA total
operator & cellular will influence the result. Production cost can be a factor
of fair competition because company with a low cost production generally
has better market shares. Thus, the competition exists in finding production
efficiency in order to give consumer profits. The high value of profit margin
is determined by the different price and its margin cost that creates a price
pressures competition because price is determined by regulation.
155. Business efficiency is an important factor in the high of EBITDA. In table 11
it is seen the high of EBITDA and nominal growth of each operator in which
Telkomsel is more efficient than the existing competitors. See elucidation in
64 on presentation.
156. The EBITDA margin indicates a company that provides telecommunication
service is productive and very efficient. As a startup company with no
burden of legacy system along with the wide open market opportunity has
caused the average EBITDA of newly cellular industry grows above the
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average EBITDA of industry in the saturated market. It is in line with the
survey conducted by UBS and Barkawi (date enclosed). Concerning to the
tariff, so far there is no such a statement from the regulator so that it can be
concluded that the statement saying, with the high EBITDA operators apply
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tariff as high as possible following the tariff mentioned by regulator is
untrue. It needs to be noted that in the accounting record-keeping system,
the calculation of EBITDA margin in Indonesia uses the record-keeping of
EBITDA based on net revenue and not gross revenue (net revenue is added
discount and interconnection expenses), in which the calculation of EBITDA
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margin in other countries is a comparison between EBITDA and gross
revenue. (Barkawi’s data). It is calculated based on gross EBITDA, the
EBITDA of Telkomsel is around 60%.
157. The EBITDA more than 50% is answered as in number 156. It does not
mean that a high EBITDA more than 50% will obtain 100% cash inflow
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higher than the expenditure because there is a bad debt relating to record
keeping cash flow of a company. Historically, by implementing intensive
efforts and not mere getting from market, Telkomsel is able to optimize the
risk of uncollectible cash bill from the customers by improving billing
system in order to increase cash flow to the company. Thus, by installing a
newest billing system technology and attempting of a company to boost
productivity, an efficiency of company cash inflow can be improved.
158. Prior to cross-ownership, it was a company developing in which company
needed significant costs to develop its business. It was also a time when the
government has not stabilized price relating to O&M, Marketing and cost of
card. Learning from the instability of price after crisis and the increase of
productivity as a penetration responded by market has escalated the traffic
utility to the network of each operator which then increases productivity,
decreases high cost and in other side boosts network efficiency. It makes the
EBITDA after cross-ownership in average is over the EBITDA before cross-
ownership (See network utilization before and after cross-ownership).
159. Telkomsel is the first operator that is able to increase productivity by
escalating network utilization and optimizing company efficiency through
outsourcing, managed services and partnership with the third party (vendor,
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dealer, and other partners). It is not surprising that Telkomsel is able to
reach 72% EBITDA or the net revenue.
160. Prior to cross-ownership, XL faced many internal problem relating to
positioning product company as premium services, financial capability,
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internal share selling to strategic partner in order to optimize its resources for
getting optimum productivity and boosting efficiency. With such condition,
it cannot be denied that the EBITDA of XL is slightly under Telkomsel.
161. The EBITDA of Indosat is slightly under Telkomsel due to internal
consolidation resulting from internal merger of Indosat, IM3 and Satelindo.
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After cross-ownership, Indosat cannot optimize immediately the opportunity
in the market, therefore the market acceleration is not fast as Telkomsel.
162. Market power is not calculated from EBITDA margin but a function of P-
MC/P. Therefore, the conclusion stating that high EBITDA margin means
creating high market power. EBITDA is a function of productivity (customer
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base, minutes of usage, utilization) and function of efficiency (capex, and
opex efficiency). See the analysis of Deutch Bank by Raymond Kosasih.
163. Currently, tariff is regulated by regulator. An assumption concerning
excessive tariff shall be addressed o regulator not to operators, all this time
there is no indication that Telkomsel infringes regulation in Indonesia.
164. The comparison of cellular tariff and cost component in other countries is
irrelevant referring to the basic differences such as geography, public buying
power, the availability of infrastructure and regulation.
165. The assumption used to predict tariff growth causes bias analysis.
166. There is an impreciseness of time and data as well as the excluding of

discount element. The price paid by customer is formed by a tariff minus
discount (if any) in which discount is influenced by a dynamic competition
in the market. Besides, the comparison of cellular tariff and cost component
in other countries is irrelevant referring to the basic differences such as
geography, public buying power, the availability of infrastructure and
regulation
167. There is an impreciseness of time and data as well as the excluding of
discount element, as it is elucidated in 166.
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169. Incorrect. If the discussion is on interconnection tariff, then the table 17 shall
be:
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Comparison of interconnection tariff and recommendation (local)
Tariff % Tariff %
Telkomsel 361 100 449 100
Indosat 361 100 449 100
XL 361 100 449 100
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Recommendation in agreement July 24, 2006
361 449
Comparison of interconnection tariff and recommendation (long distance)

Tariff % Tariff %
Telkomsel 471 100 622 100
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Indosat 471 100 622 100
XL 471 100 622 100
Recommendation in agreement July 24, 2006

471 622
172. The answer is the same as Number 162, market power is not calculated from
EBITDA margin but by P-MC/P, because EBITDA margin is more a
function of productivity and efficiency.
173. The comparison is not valid because the calculation of EBITDA margin of
Telkomsel is a comparison of EBITDA and net revenue, while other
operators uses comparison between EBITDA and gross revenue. See the
valid result of Barkawi survey.
174. The decrease of tariff cannot be correlated with ROE, because there are other
factors relating to policies dividend of each company in which the higher
policies dividend of a company, the lower equity recorded and the higher its
ROE.
175. In line with Duppont formula that ROE is a function of profitability
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(NI/Sales), function of productivity (Sales/Asset) and function of leverage
(asset/equity), so that ROE reached by Telkomsel is a function of company
efforts to provide effect multifier services that enabling to make productivity
and to leverage business. Historically, it can be seen that the ROE average
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of Telkomsel is always to maintain productivity and leverage that always
being stable with fixed ROE. Besides, ROE is also a comparison due to the
differences of operator’s policies dividend.
176. Defining tariff function of ROE cannot be conducted directly because with
the lowering price the traffic increase is compensated so that there is an
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elasticity between tariff and different traffic. The traffic remains to be
different depend on the competition intensity. By decreasing tariff to, let say,
32% does not guarantee that the obtained ROE will be lower than the present
value since traffic increases and tariff decreases. Naturally, the higher
penetration the lower tariff for service barrier caused by increasing
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competition and the more various choice for the customers. (Read article
UBS).
177. The statement is untrue, because there is an elasticity between price and
traffic that impacting no the return. Therefore, with the tariff decrease of 32
%, the ROE of Telkomsel is able to depend on the elasticity of traffic and
price. Is there something wrong with Telkomsel in such a condition?
178. The approach in seeing operating revenue growth with function of quadratic
and exponential indicates only existing trend pattern. Nevertheless, the
validity of the coefficient cannot be detected its testing statistical result.
179. GSM has a long road map. It is not true if GSM is out of date because GSM
is able to adapt 3G. Telkomsel does not implement harvesting strategy due
to the increase of CAPEX from year to year. In other words, Telkomsel also
develops technology by building overlay network and not only utilizing the
existing technology. Thus, it cannot be analyzed between a relationship
pattern of quadratic marginal cost exponential and harvesting policy as well
as the out of date of technology.
180. The ROE is calculated as it is elucidated in item 175. The high ROE depends
much on the asset development conducted by Telkomsel in performing
investment that is able to create high selling revenue. From the viewpoint of
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profit margin, Telkomsel is challenged to boost efficiency so that total cost
production is low.
181. The approach in seeing total asset with function of quadratic and exponential
indicates only existing trend pattern. Nevertheless, the validity of the
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coefficient cannot be detected its testing statistical result.
182. The third party trusts Telkomsel because Telkomsel’s ability to pay its debts
is indubitable supported by the trend of revenue growth of Telkomsel. Thus,
the readiness of third party is caused by Telkomsel performances.
183. Generally, company tends to keep its leadership in the market. The ability of
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follower to chase a leader will depend on the follower’s efficiency.
184. The approach in seeing equity shareholder growth with function of quadratic
and exponential indicates only existing trend pattern. Nevertheless, the
validity of the coefficient cannot be detected its testing statistical result.
185. Generally, investors expect high return rate. The increase of dividend
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payment attracts investor to invest in Telkomsel.
186. The statement is groundless. Telkomsel does not have capacity to restrain
other operators by threatening through interconnection link to the operators
that decrease tariff referring to interconnection as something that cannot be
ignored by all telecommunication operator in Indonesia (in line with the Law
36/99). Besides, BRTI als oblige all operator to reaches DPI as an official
business bid document that have to be approved and monitored by BRTI in
its implementation. We note that based on IOR of XL, it is stated that XL has
never been restricted by Telkomsel and XL considers that the cellular
condition in Indonesia is over competitive. We also note facts that, as it is
expressed by Benny Pasaribu (one of members of Investigation team of
KPPU) in his dissenting opinion that tariff rate is decreasing year by year,
increasing customer in number and increasing telecommunication operators
in Indonesia (until 2006 there were 10 Operators in INA and the biggest in
Asia)
Concerning the interconnection threat to the party that decrease tariff, it is
needed to know that retail tariff is not a subject to be included in the
agreement with interconnected party. Therefore, the policy of retail tariff and
interconnection is irrelevant. So far, Telkomsel does not have a complaint
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from the telecommunication operators relating to the threat of disconnecting
interconnection to the operators that decrease tariff. Based on page 2 above,
it is untrue to say that Telkomsel has abuse its market leader position to
barrier market and to develop technology or practicing monopoly and/or
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unfair competition. It is reflected from the increase of operators with their
positive performance growth.
187. In line with the valid regulation, Telkomsel is obliged to provide and ask
interconnection service to and from other operators. Concerning to this
matter, it is a compulsory of Telkomsel to submit and to have an approval
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from the government authority (BRTI) over its DPI. Besides, the
interconnection agreement is vice versa, in which both parties have equal
bargaining position because the operators have duties to their customer to
the availability of interconnection service.
188. The justification of the clause of the availability is related to the usage of
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SKA method in SMS interconnection so that each operator shall keep the
network performance and prevent SMS spamming. The parties involved in
the agreement have to agree with the clause in the PKS. The amendment of
the agreement has shown that Telkomsel as a market leader does not force its
wills or to discriminate other cellular operator although there is a possibility
of the menacing of spamming negative effect.
189. The demand of Telkomsel to have the traffic in 48 El is to optimize network
capacity and to avoid high cost idle capacity. It is also affirmed by XL in the
IOR of XL Witness on 9 August 2007 in which it is stated that if the
network is open and there is an El condition with the installed capacity but
the usage is only part of the capacity, it causes cost inefficiency.
190. The comparison of cellular tariff and cost component in other countries is
irrelevant referring to the basic differences between Indonesia and other
countries. The price paid by customer is formed by a tariff minus discount (if
any) in which discount is influenced by a dynamic competition in the market.
The EBITDA depends much on the efficiency of a company. Therefore,
related to the consumer loss in cellular industry in Indonesia the statement is
irrelevant. Besides, the opinions of Mr. Benny Pasaribu as a judge of council
of commission in this case, LM FE UNPAD and Sri Adiningsih, PhD from
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UGM state that the high tariff does not cause consumer loss. The fact is the
opposite.
191. The process of consumer loss calculation can be seen in item 69.
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193. From the data proceeded by LPEM, the elasticity value of market is very
elastic. It means that if a bit of price change it causes public demand change
in a huge number to the opposite direction. It has made operators compete
one to another to decrease price for increasing revenue.
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194. The elasticity rate presented is not a rate of own-price elasticity of demand
because it is possible that there is an influence of decisive variable of other
Quantity demanded so that it cannot be used as a basis of analysis by using
own-price elasticity of demand.
195. It cannot be analyzed because its elasticity number cannot be mentioned its
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volume. Beside the comparison of cellular tariff and cost components in
other countries are not relevant, as it is described in item 164.
198. For the interconnection tariff, the whole operator reenact interconnection
tariff of the recommendation of OVUM and for retail tariff government
only regulates on the floor price and there is no clause obliges that retail
tariff shall be the same as floor price. The usage of price in other countries as
a calculation basis of consumer loss is irrelevant, as it it stated in item 164
199. Average is one of central calculation such as modus and median while
central limit theorem is an explanation that a normal distribution dispersion
will follow this theory and become a forming of distribution Z and student-t.
Therefore, it cannot be seen that there is a relationship between central limit
theorems with consumer loss.
200. Excessive pricing in Indonesia does not occur because Government regulates
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price. Generally, operators in Indonesia reenact price under the government
regulation. The calculation of consumer loss by comparing with the price of
other countries is irrelevant referring to the basic differences such as public
buying power , willing to pay utility over cellular service and geography.
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201. The similar economic condition cannot be automatically equalized because
of the function of marginal cost preferences utility of consumer influence
much consumer loss. The calculation of consumer surplus change shall be
seen on how Compensation (CV) and Equivalent Variation (EV) calculated.
Calculating CV and EV needs utility function/consumer preference. The
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utility function/consumer preference among countries is different, so that it
cannot compare to other countries although the macroeconomic condition is
relatively the same. It cannot be analyzed because its elasticity number
cannot be mentioned its volume. Beside the comparison of cellular tariff and
cost components in other countries are not relevant, as it is described in item
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164.
202. Consumer loss is a decrease CS due to the price change and not a
comparison of CS among countries because willingness to pay product is
different from one country to another, as it is described in item 69.
203. If a company leader decreases price until certain point in which it creates
residual demand under the average cost of the follower company. It causes
follower company keep out from the market, because there is no more
incentive for follower to produce because of the is under its production cost.
The complete elucidation is in white paper of Telkomsel.
204. The calculation of ROE can be seen in item 175. It clearly impossible to see
how is the relationship between consumer loss and ROE. The existing price-
cost margin is caused by Telkomsel’s ability to boost efficiently because
price is regulated by government .
205. In telecommunication industry in Indonesia, the cross-ownership is absence
and there is fair competition in this industry that can be seen from the high of
HHI competition in service, and discount war.
206. Telkomsel is operating in line with the business plan, and not influenced by
other competitors. Besides, by considering market in Indonesia—developing
in some regions, even exponentially—it will be risky for not take the chance
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to boost company’s growth.
207. Market concentration is not caused by closest rival. Each competitor can
grab market shares of the dominant player which make the decrease of
market concentration.
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208. The enormous market shares does not directly cause lowering market price.
The company of non-dominant player decrease price to attract public with its
products.
209. Comments. Not available. The pattern of Cournot-Nash does not influence
price rate but quantity.
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210. In telecommunication industry in Indonesia, the cross-ownership is absence,
GHHI can be ignored.
211. It happens only if the cost structure of each company is similar.
212. The decrease of competition rate does not mean that consumer surplus and
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social welfare is getting better. In the Stackelberg model, even if its HHI is
higher than Cournot model, the consumer surplus and social welfare is
better than Cournot model.
213. Stackelberg-Quantity model gives more on lower price than Cournot model.
With the lower price and the better consumer surplus, the consumer loss will
decrease significantly. Thus, Cournot model is not correct to be a basic
analysis of cellular industry in Indonesia.
Conclusion
1 We do agree with the conclusion of KPPU Investigation team in number 1. The
conclusion in number 1 principally states “the structure of cross-ownership
between Telkom and Indosat in cellular telecommunication industry in Indonesia
has been cancelled by government as a follow-up of Ministerial Decree
No.72/199 in the form of ownership swap between Telkom and Indosat to
Telkomsel and Satelindo”. Such a conclusion proves that actually the meaning of
cross-ownership (in the expression of Article 27 the Law No. 5 / 1999 mentioned
as ”own majority share in some similar companies that perform business in
the common field in the relevant market ”) shall be in the form of direct
ownership or share by business actor (in some similar companies that perform
business in the common field in the relevant market ). If it is implemented in the
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inconcreto case under the investigation of KPPU, that has to be prove then is:
whether SingTel Mobile as shareholder of Telkomsel (marginal cost ICL and
ICPL as shareholder of Indosat) also have shares in other similar companies that
carrying out business in the common field with Telkomsel (marginal cost
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Indosat) in the common relevant market with Telkomsel (marginal cost Indosat).
The reason why the swap between Telkom and Indosat to Telkomsel and
Satelindo shall be a benchmark to interpret cross-ownership” as it regulated in
Article 27 of the Law No. 5 / 1999, are as follows:
a. KPPU in its conclusion stated that the example of existing cross-ownership
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in telecommunication business practice in Indonesia is the ownership of
Telkom and Indosat inTelkomsel and in Satelindo;
b. The share ownership of Telkom in Satelindo and in Telkomsel, as well as

the share ownership of Indosat in Telkomsel and in Satelindo (hereinafter
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used as object of swap to enforce KM 72 / 1999) is ”direct” in the sense of
listed as share ownership of Telkomsel and Satelindo, it can be proved by
referring to Annex II on Profile of Operator Section II, principally states that
owner/shareholders of (i) Satelindo are Telkom with 22.5% and Indosat with
7.5%, and (ii) Telkomsel is Telkom with 42.72% and Indosat with 35%.
c. KM 72/1999 – that becomes a basis of the implementation of swap between

Telkom and Indosat to their share ownerships in Telkomsel and Satelindo-
is stipulated or issued in order to harmonize the Law No.5/1999, as it is
stated in Annex I (of KM 72/1999) on the Restructuring of BUMN of
Telecommunication Operator, section A on Objective number 1 to 3 that we
cite as follows:
”The comprehensive telecommunication reformation in Indonesia is

enforceable under the new Law on telecommunication, and in accordance
with the Law No.5/1999 on the Prohibition of Monopolistic Practice and
Unfair Business”
Furthermore, it is implemented with he policy as it is stated in section B
number 2 of the same Annex, it is said:
”in line with the policy to re-position and restructure PT Telkom and PT
Indosat as two competitive full fixed providers of telecommunication, then it
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has need of internal restructuring in PT Telkom and PT Indosat in order to:
a. eliminate joint ownership of PT Telkom and PT Indosat in one affiliated
telecommunication corporation.
b. ...
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c. ...”
d. Based on the description of item a, b, and c above, it affirms and clears that
the expression of “own share in the formulation of Article 27 of the Law
No.5/1999 shall be understood as “direct ownership”.
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Based on the entire documents in KPPU related to the investigation process
in this legal case, in which we have examined in detail during the process of
examination (inzaghe), there is no single evidence that show (i) Singtel
Mobile as a shareholder of Telkomsel owns shares in other similar
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companies or in the common relevant market with Telkomsel, and (ii) ICL
and ICPL as shareholder of Indosat owns shares in other similar companies
or in the common relevant market with Indosat. Thereby, the conclusion that
has been issued by KPPU regarding to ”Cross-ownership” is: NOT PROVEN
OF THE PRESENCE OF CROSS-OWNERSHIP.
e. Besides, we also add that the formulation of Article 27 of the Law No.5/1999
itself states ”Business actor is prohibited to have majority share in some
similar companies that performing business in the similar fields and in the
common relevant market ...”.The expression used is “own (ic. not ”to
dominate “or ”to control”) that legally means as a state of ”bezitter eigenaar”
or ”legal owner” so that it can treat directly anything over the goods that is
controlled (i.e. such as “to sell”, if it is related to share is “to have use of
votes in shareholder general meeting /RUPS”);
f. The expression of ”own share” in Article 27 of the Law No.5/1999 if it is

related to the Law of Limited Corporation, then ”ownership of the share” in a
limited corporation shall be proved by examining shareholder list issued by
the corporation, referring to the Article 48 (1) of the Law on Limited
Corporation (for instance. the Law No. 40/2007) it is stated that “the
corporation share is issued by the name of the holder” and in Article 50 (3) it
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is stated that ”in the lists of shareholder is also noted any changes of share
ownership”.
g. The description of item e and f above, it affirms and clears that the
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expression of ”own share” in the formulation of Article 27 of the Law
No.5/1999 it shall be understood as “direct ownership” that can be proved
by discerning to the List of Corporation Shareholders.
Based on the entire documents in KPPU related to the investigation process

in this legal case, in which we have examined in detail during the process of
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examination (inzaghe), there is no single evidence that show (i) Singtel
Mobile as a shareholder of Telkomsel owns shares in other similar
companies or in the common relevant market with. Telkomsel, and (ii) ICL
and ICPL as shareholder of Indosat owns shares in other similar companies
or in the common relevant market with Indosat. Thereby, the conclusion that
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has been issued by KPPU regarding to “Cross-ownership” is: NOT PROVEN
OF THE PRESENCE OF CROSS-OWNERSHIP.
2 That shareholder of Telkomsel is Telkom with 65% of shares and Singtel Mobile
with 35% of shares. Telkomsel. In line with the license of foreign investment
Telkomsel had, one of Telkomsel’s shareholders is Singtel Mobile. There is no
reference at all that Singtel Mobile is Temasek Business Group. We can inform
you further that the law of investment , jo. the law of Limited Corporation admits
only foreign party in the form of foreign corporate body or foreign individual.
Therefore, the expression of “Business group” is not acknowledgeable.
3 There is no cross-ownership involving Telkomsel
4 We do not agree with the conclusion of KPPU Investigation team in number ke-4,
by the reasons of the following:
Jurisdictionally, the implementation of recent collection of cellular
telecommunication service fixed by Telkomsel or other cellular operators cannot
be impugned legally. It caused by the following condition and juridical fact:
a. Currently, all cellular operators is awaiting for the new regulation that
regulate of recent collection of cellular telecommunication service as it is
stated by the Law No. 36/1999 Jo. Government Decree No. 52/2000 Jo.
Ministerial Decree No. 21/2002. While awaiting for the new regulation, the
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existing technical regulation used as legal basis in determining cellular tariff
– since 2002 up to the Follow-up Investigation of the case--- used by KPPU
Investigation team are (i) KM 27/1998 and (ii) KM 79/1998.;
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b. The jurisdiction conditions are understood and admitted by KPPU
Investigation team as it is stated in the Report of Follow-up Investigation
Result on page 15 item 55 that also a conclusion of the description of part
5.3 on Tariff Regulation.
c. During our examination (inzaghe) to the documents related to Preliminary
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Investigation, the understanding and admittance of KPPU Investigation team
is are based on:
(i) The Notes of Meeting with the General Director of Posts and
Telecommunication on 30 August 2007, in the third sheet, last
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paragraph and ke-4 paragraph;
(ii) Investigation Official Report Indosat (represented by Johnny Swandi

Sjam) on 27 August 2007 on page 10 item 95;
(iii)Investigation Official Report to Excelomindo (represented by Hasnul

Suhaimi) on 09 August 2007 page 4 item 13;
(iv) Investigation Official Report Dewie Pelitawati R, on 14 September 2007

page 7 item 38;
d. KM No. 27/1998 and KM No. 79/1998 was arranged and applied by the
Government in 1998, in which the Law No. 3 / 1989 (the previous
telecommunication law) has a “monopolistic/duopolistic spirit”, it is very
different with the spirit” of the ”Anti-trust” law No. 36/1999. The technical
regulation is part of previous telecommunication law regime (the Law No.
3/1989) that sets price by government rather than market mechanism. The
operator of telecommunication service (cellular in particular ) is only subject
to and implement the regulation.
e. KM 27/ 1998 and KM 79/1998. It regulates the limit of competition area

among operators and it has accommodated the interests of consumer and
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operator (business actor) of Telecommunication service. It is affirmed by
Government through Ministry of Communication and Information through
Directorate General of Post and Telecommuniation (based on the rule of
Article 1 number 1 and 2 KM 31/2003; Directorate General Post and
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Telecommunication is part of BRTI assigned to monitor competition in
Telecommunication industry) as it was written in the Notes of Meeting
between Directorate General Post and Telecommunication with KPPU on 30
August 2007, in the third sheet, the last paragraph is written as follows:
“The maximum tariff rate stipulated in KM No. 27 / 1998 and KM No.
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79 / 1998 is a limit competition area among operators in which the rates
are tolerance between the interest of public and as consumers and
operators to keep their abilities to develop and to extend network
including to outside Jakarta…”
f. Concerning the description of item c and d above, when the new technical
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regulation is valid –to regulate tariff by cellular operators--- is KM 27/1998
and KM 79/1999 that:
(i) part of previous telecommunication law regime
(ii) issued/applied after considering the interest of consumer and

operator/business actor and;
(iii) considered to be a limit competition area
then, fairness is measured by whether “the the tariff limit is passed or not” .
As long as the ceiling tariff is not passed by cellular operator (especially
Telkomsel), there will be no single reason to legally impugn cellular operator,
including the tariff applied by Telkomsel is excessive.
g. Based on the telecommunication technical rules as it is stated in :
(i) KM 31/2003 on the Stipulation of BRTI Article 1 number 1 and 2, and

Article 6 .b ke-2, juncto:;
(ii) Annex KM 67/2006 on Work Relation Arrangement between Dephub

(Department of Transportation) and BRTI in section A, III, letter c item 2,
junctis ;
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(iii)KM 33/2004 on the Monitoring of Fair Competition in the operation of
fixed network and the operation of basic telephone service.
Directorate General Post and Telecommunication as the supervisor of
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Directorate General of Post and Telecommunication and part of BRTI
assigned to monitor the fair competition in Telecommunication industry
considers that there is nothing wrong with the implementation of collective
tariff of telecommunication service by cellular operators (including
Telkomsel) that so far based it on KM 27 / 1999 and KM 79 /1999, as it
reflected in the Notes of Meeting between Directorate General Post and
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Telecommunication with KPPU on 30 August 2007, in the third sheet, the
last paragraph is written as follows:
“The maximum tariff rate stipulated in KM No. 27 / 1998 and KM No. 79 /
1998 is a limit competition area among operators in which the rates are
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tolerance between the interest of public and as consumers and operators to
keep their abilities to develop and to extend network including to outside
Jakarta. Therefore, if at field, the operators become followers of the
maximum tariff rates, the government cannot do anything.”
”Cannot do anything” means there is nothing wrong with it because the

jurisdiction condition concerning collective tariff of telecommunication
service is as it is described in item f above.
h. Such a reality show that the profile and the condition of legal institution in
Indonesia is not ideal and perfect yet to support fair competition climate.
The profile of ideal telecommunication industry (i.e. in the sense of the
creation of ideal fair business competition) is predicted by the Government of
Indonesia to pass ”evolutional” stages (i.e. form the viewpoint of time) and
to be reached after 2011. Such a description refers to the Blueprint of
Government Policy on Telecommunication Industry as it is stated in the
Ministerial Decree of Transportation No. KM 72 / 1999 (stipulated on 17
September 1999 or 9 days after the Law No. 36/1999 on Telecommunication
being legalized [”the new Telecommunication Law” enacted on 8 September
1999] with the spirit of ”anti-trust”), in Chapter III on the Profile of the
Future Indonesian Telecommunication section III.1:
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”The future telecommunication profile that want to be reached it shall be
ideally interpreted as a phase of time dimension, if there will be :
a. a fair, efficient, and sustainable competition in the operation of
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telecommunication service and network;
b. a regulator that effectively enforce regulation and license requirement;
b) the distribution of the advantages of competition to customer in

accessing telecommunication service without any different in access
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location, payment and the status as residential customer or business ;
and
c) consumer of telecommunication service that is protected in the sense of

service quality, price to paid and various choices.
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Such depicted situation above, ideally, has been or able to be reached by a
few countries only and such condition can be reached after 2011...
Further, in the same Chapter, in section III.4 on the Evolution of

Telecommunication, it is stated as follows:
”2.1. The development of telecommunication keeps on going. As it is the
telecommunication regulation that will always change along with the
development of technology and the dynamic of economy. Competition in any
telecommunication operation is deemed important but not enough to be liberate
in whole. The quality of its competition remains to be a sustainable issue of
economic liberalization....”
Based on the description above, if the competition has not been perfect from the
viewpoint of law, it shall not impugn telecommunication service operators. The
telecommunication service operators (Telkomsel in particular) has tried as useful
as possible to implement and to comply with the valid government regulation
such as KM 27 / 1999 and KM 79/1999. The Republic of Indonesia is a
constitutional state (Rechtstaat), as it is stated in the Constitution of 1945. The
regulation of laws is the principles to create ideal condition, therefore law shall be
enforced and complied. If the effort of enforcing and complying with the
regulation is considered to violates against the law (anti-competition), it will
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destroy the principles of law in the constitutional state.
Furthermore, as it is described above, the Telkomsel tariff fixing intends to
implements rule of law and in line with Article 50.a of the Law No. 5/1999, it is
a conduct admitted of exception by the Law No. 5 / 1999. If the tariff applied by
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Telkomsel is considered too high, the government regulation on pricing shall be
revised and based on the revised law all operators shall adjust it, including
Telkomsel.
5 That the conclusion of KPPU Investigation team in number 5 stating that “The
use of market power by Telkomsel, decreasing competition and creating
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excessive pricing in cellular telecommunication service in Indonesia violates
Article 17 paragraph (1) and Article 25 paragraph (1) of the Law No.5/1999” is a
conclusion that has no legal basis, by the reasons of:
1. The analysis on Market Power shall be used to analyze whether or not
Telkomsel has abused dominant position as it is regulated in Article 25 the
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Law No.5/1999, and not used at all to prove: (i) decreasing competition, and
(ii) excessive tariff. In other word, the use of Market power Telkomsel does
not relate to the tariff fixing and decreasing of competition but to analyze the
allegation of abuse of power impacted in the market restriction and
technological development as it is regulated in Article 25 of the Law
No.5/1999 .
2. As it is presented by KPPU Investigation team on page 103 -104 on the

analysis of the use of market power by Telkomsel to restrain competitors,
KPPU Investigation team tries assertively to prove that there is a market
restriction conducted by Telkomsel to other operators. It indicates that the
analysis on the use of market power does not relate to the tariff fixing and
decreasing of competition. Thereby, the postulate of KPPU Investigation
team is not based on the relevant analysis.
3. We have described in number 4 above that the tariff fixing of Telkomsel is

in line with the regulation of Government in KM No. 27/1998 and KM No.
79/1998. Thereby, the postulate of KPPU Investigation team that the use of
Market Power Telkomsel causes decreasing of competition and excessive
tariff of cellular telecommunication.
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4. That the suspected infringement of Article 17 paragraph (1) of the Law
No.5/1999 conducted by Telkomsel, is in the process of verification of
KPPU’s Investigation team, had used the principle of “Per-Se Illegal” that
can be seen in the sentence “by implementing/keeping high tariff, Telkomsel
then has infringed Article 17 paragraph (1)”;
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5. The usage of such principle of verification “Per-Se Illegal” is incorrect,
because in conducting an evidence to the suspected infringement of Article
17 paragraph (1) the Law No. 5/1999 shall implement the principle of “Rule
of Reason” in which KPPU does not only prove, - quad non -, the existence
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of market control by Telkomsel but also monopolistic practice or unfair
competition caused by market control by Telkomsel.
6 Therefore, KPPU should, before concluding whether Telkomsel infringes the rule
of Article 17 paragraph (1), prove whether Telkomsel:
- Conducts unfair competition and restrains public interests (refer to Article 1
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number 2 of the Law No. 5 /1999); or
- Conducts unfair or violates law or restrains competition (refer to Article 1

number 6 of the Law No. 5 / 1999).
Telkomsel have not conducted unfair competition/ violated law / restrained

competition.
7 From the Report of Follow-up Case Investigation Result of KPPU No.07/KPPU-

L/2007 on 27 September 2007, KPPU cannot prove that Telkomsel has
conducted the intended activities. In fact, the Report of Follow-up Case
Investigation Result and investigation official reports used as one of reference to
arrange a report, Telkomsel concludes the following matters:
a. The competition of cellular telecommunication is fair and over competitive
(i) that many operator-cellular telecommunication operators newly emerge

in Indonesia such as Indosat, XL, Sampoerna, Hutchison, NTS, Mobile 8.
(ii) Analysis Report on growth competitor
(iii)XL in its investigation in KPPU (IOR of XL on 9 August 2007) states

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(a) that market in Indonesia is relatively more competitive than
market abroad, even over competition;
(b) that the competition to capture new customer is more aggressive
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(c) that the competition in developing network performed by XL is
good,
(iv) YLKI in its investigation in KPPU (IOR of YLKI on 24 September

2007) stated that cellular consumers in Indonesia are able to choose
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available operators
(v) Based on the Notes of Meeting between KPPU and BRTI as well as
Directorate General of Post and telecommunication it is presented by
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(vi) Based on the Notes of Meeting between KPPU and BRTI as well as
Directorate General of Post and telecommunication it is presented by
b. Telkomsel is fair in performing its business and always comply and complete
the valid rule of law.
(i) The tariff charged by Telkomsel is prescribed by the rule of law in which
its formula is determined by government

interconnection. Interconnection bid document is prescribed by the rule
of law and approved by the competent authority.
(iii)Hutchison in investigation in KPPU (IOR of Hutchison on 21 June

2007) state that Hutchison has not got problems dealing with
interconnection although there is a problem but it is not significant

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(b) that XL is given a freedom by Telkomsel to choose ots own

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(c) .that XL is given a freedom by Telkomsel to choose its own
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declared that there is no collusion between Telkomsel and Indosat.
c. Telkomsel has created fair competition.
(i) Telkomsel does not only concentrate to build a network in big cities but
also remote areas which provide new market shares for other operators
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that have been initially developed by Telkomsel.

interconnection. Interconnection bid document is prescribed by the rule
of law and approved by the competent authority. It intends to have other
telecommunication operators same opportunities to develop/to compete
among them and Telkomsel alone with a result to maintain the level of
competition in the business of telecommunication.
(iii)Hutchison in its investigation in KPPU (IOR of Hutchison on 21 June

2007) stated that Hutchison has not got problem concerning
interconnection, although there was also insignificant difficulty. It proves
that Telkomsel, as a market leader, does not abuse its position to press
other operators in order to keep on competition running well.


(b) that XL has never been restricted by Telkomsel in having permit;
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(c) that XL is given a freedom by Telkomsel to choose its own
It proves that Telkomsel, as a market leader, does not abuse its position
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to press other operators in order to keep on competition running well.
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Telkomsel does not Restrain Public Interest

(i) the telecommunication service tariff of Telkomsel is prescribed by the rule of
law and approved by the competent authority, therefore it shall be considered
that the tariff charged by Telkomsel does not restrain public interests.
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(ii) the tariff of Telkomsel interconnection is prescribed by the rule of law.
Interconnection bid document is prescribed by the rule of law and approved
by the competent authority.
(iii) YLKI in its investigation in KPPU (IOR of YLKI on 24 September 2007)

stated that no cellular consumers in Indonesia complain to the service tariff.
(iv) Telkomsel tries to build a network until remote areas and even clear out the
forest in order to give advantage to public especially those who live in
remote areas to provide them with telecommunication access and to develop
economy in those areas (prime mover), as it is stated in the document and
submitted to KPPU.
(v) With the availability of telecommunication business network of Telkomsel,

it is able to provide new job (alleviate unemployment) as a multiplier effect
of Telkomsel’s business;
(vi) Telkomsel permits the usage of its infrastructure as a means of national

security of tsunami early warning system useful for public.
8 We deny the suspected infringement of Article 25 paragraph (1).b of the Law
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No. 5 / 1999 reported by KPPU, by the reason of: KPPU Investigation team does
not have evidence at all (even early evidence) indicates a suspected infringement
of Article 25 paragraph (1) conducted by Telkomsel. We can prove them by the
following descriptions:
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The allegation in the conclusion Preliminary Report is different with those of
the allegation in the Result of Follow-up Invetigation.
9 The allegation that become a basis of conducting Follow-up Investigation is
different with the conclusion of Preliminary Investigation, therefore the basic of
conducting Follow-up Investigation is not clear , in which the dirrences are as
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follow:
The allegation in the Report of Preliminary Investigation (Especially on
Suspected infringement of Article 25 paragraph 1.b of Law No. 5/1999).
“Telkomsel with its dominant position has restrained the development and growth
of PT Indosat, Plc, as a result PT Indosat Plc., cannot maximize its investment
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and slowing down the profit growth of PT Indosat Plc., It causes to the worsening
of market in the whole cellular telecommunication service industry.” While the
allegation in the Report of Follow-up Case Investigation Result No. 07/KPPU-
L/2007 (especially Article 25 paragraph 1 . b the Law No. 5 / 1999) “Telkomsel
abuses its dominant position to restrain market and the development of
technology that make it infringes Article 25 paragraph (1).b of the Law No. 5 /
1999.”“Certain Activities” (ic. Telkomsel restrains the development and growth
of Indosat), that used previously as a basis of allegation that Telkomsel has
infringed Article 25 paragraph (1) of the Law No. 5/1999, is not included in the
Report of Follow-up Case Investigation Result No. 07/KPPU-L/2007 (especially
Article 25 paragraph 1. b). Consequently, the suspected infringement used as a
basis of conducting Follow-up Investigation is biased/obscured. The changing of
“suspicion” to biased/obscured, as it is described above, proves that actually
KPPU Investigation team is not sure with its accusation adressed to Telkomsel
(ic.restrain the development and growth of PT Indosat). Therefore, it is not
overstatement that we conclude KPPU Investigation team does not have evidence
at all (even early evidence) indicates a suspected infringement of Article 25
paragraph (1) conducted by Telkomsel (ic.restrain the development and growth
of PT Indosat). “Certain Activities” that consider to infringe Article 25 paragraph
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(1) of the Law No. 5 / 1999, is very important because it will be LITIS
CONTESTATIO (limit/focus of an investigation) of KPPU Investigation team,
all at once it becomes a limit/focus of defense of the Reported (Telkomsel). Litis
Constestatio is a requirement in the due process of law in civilized
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countries.Article 32, 33, 42 and 44 of the Regulation of the Commission for the
Supervision of Business Competition No. 1 / 2006 (“KPPU Regulation 2006”)
regulate that the Report of Preliminary Investigation is used in determining the
needs of conducting Follow-up Investigation and further in the Follow-up
Investigation, the allegation in Preliminary Investigation is found and proved.
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Therefore, according to KPPU Regulation 2006, it shall be narrowed focus of
investigation as it reflected in suspected infringement as the basis of conducting
Follow-up Investigation. Its facts, as it is mentioned above, the focus of
investigation in the process of Follow-up Investigation is not narrowed but
biased.
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Telkomsel does not abuse dominant position
1 That before KPPU concludes wether Telkomsel has infringed Article 25
paragraph (1) .b of the Law No. 5 / 1999, KPPU Investigation team shall prove
that Telkomsel as a Market Leader has limit (i) market and (ii) technological
development, in which t it is not reflected in the Result Report of Follow-up
Investigation of KPPU Investigation team on 27 September 2007. Further, it can
be described as follows:
(i) Telkomsel does not conduct market restriction even tries to develop market
cellular telecommunication.
a) XL in its investigation in KPPU (IOR of XL on 9 August 2007)

states the following matters:
i. that XL has never found an abuse behavior of Telkomsel such as

blocking a call from XL number to Telkomsel etc. ;that XL has
never been restricted by Telkomsel in having permit
ii. that XL is given a freedom XL by Telkomsel to choose its own

iii. that Telkomsel establishes working group with other operators to
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give input so local government concerning tower sharing
regulation in the local area.
The statement above is spontaneous aknowledgement of Telkomesl’s
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competitors in supporting market cellular telecommunication
development.
b) Mr. Widya Purnama, the Managing Director of Indosat for the period
of June 2002 to September 2004, in his statement on 9 August 2007,
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c) Telkomsel does not only concentrate to build a network in big cities

but also remote areas which is admitted by other operators that it
needs high cost. The statement above is spontaneous
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acknowledgement of Telkomesl’s competitors in supporting market
cellular telecommunication development.
(ii) Telkomsel does not restrain technological development even try to develop
cellular telecommunication technology.
a) XL in its investigation in KPPU (IOR of XL on 9 August 2007)

stated the following matters:
i. that XL has never been restricted by Telkomsel in having permit;
ii. that XL is given a freedom by Telkomsel to choose ots own

The statement above is spontaneous aknowledgement of Telkomesl’s

competitors for the effort of Telkomsel in supporting development of
technology in cellular telecommunication by not restraining the
technology that will be used by XL .
c) It needs to express that Telkomsel is the first cellular
telecommunication operator that introduce:
i) Prepaid business in Indonesia that used IN technology;
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ii) Services with GPRS and EDGE technology based;
iii) Certain value added services such as ring back tone;
i) Electronic voucher;
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ii) 3G services that provides video call, video streaming; The matters
in which the technology used by Telkomsel an applied then by
other Telkomsel competitors that give positive contribution to the
development of market cellular telecommunication
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19. Considering further that Council of Commission has sufficient evidence and evaluation
to take Decision; -------------------------------------------------------------------------------------
STATE OF LAW
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Based on the Report of Follow-up Investigation Result (hereinafter referred to as “LHPL”),
Opinion and Defense Reported, letters, documents and other written proofs Council of Commission
examine and conclude whether or not an infringement conducted by the Reported in a quo case. In
performing the examination, Council of Commission describes several part namely, first, LHPL on
infringement; second, identities of Reported; third, relevant market; fourth, formal aspect; fifth,
material aspect; sixth, conclusion; seventh, other things to be considered; and eight, decision dictum
and closing. ------------------------------------------------------------------------------------------------------
1. LHPL State of Infringement----------------------------------------------------------------------------
1.1 To the infringement conducted by Reported, Investigation team in LHPL principally state
that Temasek Business Group has performed cross-ownership to Telkomsel and PT.
Indosat, Tbk., that make Telkomsel conduct monopolistic practice and abuse of dominant
position in relevant market in a form of excessive tariff fixing and hindering
interconnection so that causes consumer loss. By such things above, the Investigation
team conclude that Temasek Business Group has infringed Article 27 letter a and
Telkomsel has infringed Article 17 paragraph (1) and Article 25 paragraph (1) b of the
Law Number 5/1999 -------------------------------------------------------------------------------
2. The Identities of Reported Parties: -------------------------------------------------------------------
2.1 Reported Parties in this case are as follows: ----------------------------------------------------
2.1.1 Reported Party I is Temasek Holdings Pte. Ltd. (“Temasek”) a corporation that
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was founded under the Law of Singapore and domiciled in Singapore by
addressed of 60B Orchard Road #06-18 Tower 2 The Atrium@Orchard,
Singapore 238891; (vide Evidence C15, C16) ----------------------------------------
2.1.2 Reported Party II is Singapore Technologies Telemedia Pte Ltd. (“STT”) a
corporation that was founded under the Law of Singapore and domiciled in
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Singapore by addressed of 51 Cuppage Road #10-11/17, StarHub Centre,
Singapore 229469; (vide Evidence C77)-----------------------------------------------
2.1.3 Reported Party III is STT Communications Ltd, (“STTC”) a corporation that
addressed of 51 Cuppage Road #10-11/17, StarHub Centre, Singapore 229469;
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(vide Evidence C78) ----------------------------------------------------------------------
2.1.4 Reported Party IV is Asia Mobile Holding Company Pte. Ltd. (“AMHC”) a
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2.1.5 Reported Party V is Asia Mobile Holdings Pte. Ltd. (“AMH”) a corporation that
addressed of 51 Cuppage Road #10-11/17, StarHub Centre, Singapore 229469;
(vide Evidence C82) ----------------------------------------------------------------------
2.1.6 Reported Party VI is Indonesia Communications Limited (“ICL”) a corporation
that was founded under the Law of Mauritius and domiciled in Mauritius by
addressed of Deutsche International Trust Corporation (Mauritius) Limited 4th
floor, Barkly Warhf East, Le Caudian Waterfront, Port Louis Mauritius; (vide
Evidence C83) -----------------------------------------------------------------------------
2.1.7 Reported Party VII is Indonesia Communications Pte. Ltd. (“ICPL”) sebuah
2.1.8 Reported Party VIII is Singapore Telecommunications Ltd. (“SingTel”) a
Singapore by addressed of 31 Exeter Road Comcentre #28-00, Singapore
239732; (vide Evidence C148) ----------------------------------------------------------
2.1.9 Reported Party IX is Singapore Telecom Mobile Pte. Ltd. (“SingTel Mobile”) a
Singapore by addressed of 31 Exeter Road Comcentre #28-00, Singapore
239732; (vide Evidence C154) ----------------------------------------------------------
2.1.10 Reported Party X is PT. Telekomunikasi Selular (“Telkomsel”) by addressed of
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Wisma Mulia lt. 15, Jl. Jend. Gatot Subroto Number 42, Jakarta 12710 is a
corporate body established under the Notary Act of Poerbaningsih Adi Warsito,
S.H. Number. 181 dated 26 May 1995 with the latest revision under the Notary
Act of Nelly Sylviana S.H. Number 3 dated 5 May 2003 that perform business in
the area of procuring and providing mobile telecommunication service including
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mobile cellular network Global System For Mobile Communication (STBS-
GSM) in the legal territory of Republic Indonesia; (vide EvidenceC165) -------
3. Relevant market ------------------------------------------------------------------------------------------
3.1 Prior to the perform examination on whether or not an infringement conducted, Council
of Commission has to describe the definition of relevant market in this case as follow:
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3.1.1 That in Investigation team of LHPL principally states that relevant market in this
case is a cellular telecommunication service all over Indonesia. The
determination is based on the product analysis, usage and price as well as
geographical coverage area; (vide Article 7 to Article 9 of the Law Number.
36/1999 on Telecommunication, Article 9 paragraph (2) of PP Number. 52/2000
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on Telecommunication Operating, KM. 35/2004 on the Operation of Fixed
Wireless Access with limited mobility. Evidence B55) -----------------------------
3.1.2 To the definition of the relevant market above, in the opinion and defense of
Temasek, STT, STTC, AMHC, AMH, ICL, ICPL, principally disagree and state
that the Fixed Wireless Access (FWA) have to be entered to the definition of
relevant market by considering that mobility factor does not consider to be
important by most of Indonesian consumers as well as high cross elasticity
between FWA and Public Switched Telephone Network (PSTN) to the cellular
service; (vide Evidence C120, C58, C32, ) --------------------------------------------
3.1.3 To the definition of product market, Council of Commission has a notion as
follow: --------------------------------------------------------------------------------------
3.1.3.1 Although the usage of SLJJ is relatively smaller than a total cellular
call as cited by AMH, ICL, ICPL from the report of economic
consultant Case Associate (CA) year 2007 (vide Evidence C120), the
user of cellular examine that the cellular service is not only based on
the usage to call but to receive a call too, Council of Commission has
a notion that mobility factor is the important distinguishing factor for
the cellular user that is not obtained from the service of FWA. The
character of the product is in line with the report of economic
consultant of Nera Consulting (Nera) year 2007 that its document
enclosed in the Annex of the defense and response of SingTel and
Singtel Mobile (vide Evidence C312). In the report of Nera, it is
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assertively stated that consumers do not have mobility service of FWA
as the consumers gained from the cellular service, so that NERA does
not put FWA in the product market of cellular service; -----------------
3.1.3.2 Besides, Telkomsel states in its written defense in paragraph (10) that
FWA is a complement of cellular service ---------------------------------
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“From the point of view of consumer, the characteristic of FWA and
cellular is complementary. Consumer can get the advantages of FWA
excellence from the tariff side for local call and utilize the wide
coverage for cellular for intensive call area. Therefore, the
characteristic of FWA and Cellular is complementary”. (par. 10)” ---
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3.1.3.3 The consumer survey conducted by Follow up investigation team
stated in the Anne of LHPL shows that the increase of hypothesis price
5% and 10% do not cause respondent stop using GSM and immigrate
to PSTN and only 2.23% respondents who are willing to stop using
GSM and migrate to FWA. The rate shows that the understanding of
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the migration of GSM to FWA and/or PTSN is inelastic or not
substitution; (vide Evidence B55) ------------------------------------------
3.1.4 Council of Commission does not find the mistake made by Investigation team in
defining product market in this case, namely cellular service that in it excluded
FWA and PSTN; --------------------------------------------------------------------------
3.1.5 In its report, the Investigation team determine that geographical market in this
case is nationwide, on the basis that there is a competition influencing price in
the territory of Indonesia; ----------------------------------------------------------------
3.1.6 That Temasek, STT, STTC, AMHC, AMH, ICL, ICPL, SingTel, and SingTel
Mobile does not disagree with the definition of geographical market proposed by
LHPL; --------------------------------------------------------------------------------------
3.1.7 That in the response and defense, Telkomsel basically state that geographical
market is not nationwide, but covering smaller area by the reason of any region
has different potency, character and challenge;---------------------------------------
3.1.8 Furthermore, Council of Commission has a notion that in defining geographical
market, it is based on competitive pressure and price in one place influenced by
the price of other regions. Such an influence brings two regions into one united
geographical market. The influence can be seen from the price change pattern in
the two regions. It is in line with the view of Nera in her report on page 20 (vide
Evidence C312) as cited from Carlton, Perloff in the book Modern Industrial
Organization third edition page 40; ----------------------------------------------------
“The geographic limit of the market is determined by answering the question of
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whether an increase in price in one location substantially affects the price in
another. If So, Then both locations are in same market” ---------------------------
Concerning to this, Council of Commission finds that cellular service standard
and price are similar nationally, (vide price list in LHPL par. 56-59) therefore the
rationale suggested by Investigation team in LHPL paragraph (20) is adequate to
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ground that the geographical market in this case is nationwide; -------------------
3.2 Council of Commission conclude the definition of relevant market in this case is
cellular telecommunication service all over Indonesia . -----------------------------------
4. Formal Aspect ---------------------------------------------------------------------------------------------
4.1 Hereinafter, prior to conclude material aspect, Council of Commission examines in
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advance formal aspects responded by the Reported on Jurisdiction, Case Handling
Implementation, Indosat Divestment Consultation, and an authority to interpret the Law
No. 5/1999 ------------------------------------------------------------------------------------------
4.2 On the Commission’s Jurisdiction----------------------------------------------------------------
4.2.1 That in LHPL Investigation team principally suggests that Commission is entitled
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to investigate Temasek, STT, STTC, AMHC, AMH, ICL, ICPL, SingTel and
SingTel Mobile, due to the rule stated in the Law No. 5/1999 , although it is not
founded and domiciled in the territory of the Republic of Indonesia. Investigation
team has a notion that Temasek, STT, STTC, AMHC, AMH, ICL, ICPL, SingTel
and SingTel Mobile, jointly perform business activity in Indonesia under the
imposing of single economic entity doctrine which complete rules to be
considered as business actor as it is Article 1 paragraph (5) the Law No. 5/1999
concerned. The doctrine of single economic entity is a doctrine which perceive
holding company and its subsidiaries as a single economic entity. The Law No.
5/1999 recognizes an expression a group of business actor and on the ground of
that, the Investigation team has a notion to have Commission with its authority to
conduct an investigation to the Reported of the case;--------------------------------
4.2.2 To the opinion of the Investigation team, Temasek, STT, STTC, AMHC, AMH,
ICL, ICPL, SingTel and SingTel Mobile in their defenses disagree and state
principally that Commission does not have Jurisdiction to the Reported. The
Reported postulate that they were founded under the law of Singapore and
domiciled in Singapore, as well as performs no business activities in Indonesia.
While ICL is a body founded under the Law of Mauritius and domiciled in
Mauritius as well, perform no business activities in Indonesia. On the ground of
that, the Reported postulate that the Reported are not business actors as it is
Article 1 paragraph (5) of the Law Number 5/1999 concerned consequently
Commission do not have authority to investigate and to decide the Reported;---
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4.2.3 To examine whether Commission do have jurisdiction to Reported or not,
Council of Commission ascertains, First, the rule in the Law No. 5/1999, Second,
from the perspective of judicature practice of Indonesia, Third, the judicature
practice in other countries that have ever enforced competition law;--------------
4.2.4 First, Council of Commission has a notion that under the rule of the Law No.
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5/1999, Commission has jurisdiction although the Reported are not domiciled in
Indonesia, with the following description:--------------------------------------------
4.2.4.1 As it recognized that the Law No. 5/1999 intends to keep the market
mechanism running by forestalling from monopoly practices and unfair
competition. Market in this matter is Indonesian domestic market that
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is openly to any party to participate, domestic or overseas. Yet, as a
sovereign state, Indonesia is equipped by law and institution to enforce
it to guarantee market mechanism proceed effectively, efficiently, and
fairly, the Law No. 5/1999 is one of the rule of law to create it. The
consideration (c) of the Law No. 5/1999 states: -------------------------
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“anyone who performs business activity in Indonesia has to be in the
fair competition in order that it will create economic power
concentration to certain business actor”----------------------------------
4.2.4.2 The consideration is obviously a phrase “anyone who perform business
activity in Indonesia” elucidating that the Law No. 5/1999 can be
applied to “anyone” without noticing the origin either domestic or
overseas as long as they “perform business activity in Indonesia” ----
4.2.4.3 The spirit in the consideration is formulated further in Article 1
paragraph (5) of the Law No. 5/1999 the Law on the definition of
business actor:-----------------------------------------------------------------
“individual or corporate body, that is founded and is domiciled or to
conduct activity in the territorial jurisdiction of the Republic of
Indonesia, either by itself or jointly under agreement, carrying out
various business activities in the field of economy.”” -------------------
4.2.4.4 The phrase “founded and domiciled or performed business activity”
infers that business actor “founded and domiciled or performed
business activity” fours indicates that business actor that are not
founded or domiciled in Indonesia can be applied for the Law
Number.5/1999, during they conduct business activity in the territory
of the Republic of Indonesia.------------------------------------------------
4.2.4.5 Second, from the practice or principal implementation those business
actors domiciled outside the territory of Indonesia are applied to the
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rule of the Law No. 5/1999, the law that has been confirmed by
Supreme Court of the Republic of Indonesia. One of the case that
imposed this law is the Case Number 07/KPPU-L/2004 on tender
conspiracy of the sales of 2 (two) Very Large Crude Carrier (VLCC),
the property of Pertamina that which the case won by Frontline Ltd.
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(hereinafter referred to as case of “VLCC Pertamina”). In the case of
VLCC Pertamina, the Commission sentence Frontline Ltd. A
corporation founded under the Law of Bermuda, based in di Norway,
and its central finance management in New York, the United States of
America. In its objection in the District Court, Frontline Ltd. Postulate
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that Frontline is not a business actor as it is Article 1 paragraph (5) of
the Law No. 5/1999 concerned, because it was not founded and
domiciled or perform business activity in the legal territory of
Indonesia. The participation of Frontline Ltd. in VLCC tender
conducted by Pertamina represented by PT Liner Equinox, and all
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activities during the tender process conducted by PT Liner Equinox.
There is no business activity of Frontline Ltd. performed within the
territory jurisdiction of Republic of Indonesia. ---------------------------
4.2.4.6 In case of VLCC Pertamina, Commission thought that all activities
conducted by PT Liner Equinox in the process of tender is for the
interest of Frontline Ltd. It is clear that business activity conducted by
PT Liner Equinox is also indirectly conducted by Frontline Ltd. It can
not be denied then that Frontline Ltd. has also conducted business
activity in Indonesia. It is meant by business actor within the meaning
of Article 1 paragraph 5 of the Law No. 5/1999;-------------------------
4.2.4.7 The decision of Commission to VLCC Pertamina revoked by District
Court but it reconfirmed by Supreme Court under the decision No. 04
K/KPPU/2005 dated 29 November 2005. At this rate, Supreme court
has same position with the Commission in implementing the
understanding of business actor to corporation that founded and
domiciled abroad as well as the understanding of performing business
activity in Indonesia, namely the intended activities is not understood
as it is directly performed by cooperation but it could be performed by
other party in Indonesia; ----------------------------------------------------- .
4.2.4.8 Hereinafter, considering that Indonesia is a part of global community
and Commission is actively participated in international forum related
to the development of competition law, then Council of Commission
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also concerned on the jurisdiction applying extraterritorial competition
law in various countries that have in advance imposed in competition
law.
4.2.4.9 Council of Commission suggests that examining competition law
practices in other countries need to be conducted as an effort of
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comparing or using as a reference to knumberw whether the validity of
the Law No. 5/1999 to business actors outside Republic of Indonesia
territory of jurisdiction is unique or in accordance with international
commonly standard and not at all to subdue or confess the
implementation of foreign law in the territory of jurisdiction of the
Republic of Indonesia like what is postulated by the Reported. Council
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of Commission finds that such principles had been previously adopted
in some countries; ------------------------------------------------------------
4.2.4.10 The first case is on the implementation of extraterritorial in United
States in 1909 in American Banana Co. v. United Fruit Co., 213 U.S.
347 (1909) that was responded pretty minded initially. In the decision,
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Supreme Court of the United States said: ”… the general and almost
universal rule is that the character of an act as lawful or unlawful must
be determined wholly by the law of the country where the act was
done” (See: Andrew I Gavil, William E. Kovacic, and Jonathan B.
Baker, Antitrust Law in Perspective: Cases, Concepts, and Problems in
Competition Policy, Thompson West, Washington DC, 2002, page
934). ----------------------------------------------------------------------------
4.2.4.11 The Supreme Court Doctrine of the United States was then expanded
as the same manner as seen in the next decision in the case of United
States v. Aluminum Co. of Am., 148 F.2d 416 (2d Cir. 1945) those who
refused the doctrine of American Banana, states that foreign party act
that affect to the United States' imports is included in the regulation of
Sherman Act. In its consideration, Judge stated: “… any state may
impose liabilities, even upon persons not within its allegiance, for
conduct outside its borders that has consequences within its borders
which the state reprehends” (See Andrew I Gavil, William E. Kovacic,
and Jonathan B. Baker, 2002, page 934). The decision was known as
“effect doctrine” in the implementation of extraterritorialities
competition law in the US. --------------------------------------------------
4.2.4.12 Commission Council finds that in 1982, the United States Congress
codified the principles of jurisdiction of competition law in the United
States in Foreign Trade Antitrust Improvement Act of 1982 (FTAIA)
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and stated that the United States have jurisdiction to the act of anti-
competition conducted by foreign party if: “such conduct has a direct,
substantial, and reasonably foreseeable effect (A) on [domestic or
import commerce] or (B) on export trade or export commerce…” (See
Andrew I Gavil, William E. Kovacic, and Jonathan B. Baker, 2002,
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page 935)-----------------------------------------------------------------------
4.2.4.13 In case of Hartford Fire Ins. Co v. California, 509 US 764 S.Ct 2891
(1993), The United States Supreme Court used “effect doctrine” and
principle of comity concurrently. In case of Hartford Fire, a company
reinsurence in UK had been assumed to conduct conspiracy with the
insurance company in the United States by limiting a form of insurance
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protection. In this case, the principle of comity remained to be applied
tightly; although the Government of United Kingdom permitted the
US to take action to the company but gave no instruction to do that,
therefore the United States Supreme Court does not assume that it
would trigger a serious conflict between the interests of two
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governments by keeping on respect the principles of comity for not
breaking it;---------------------------------------------------------------------
4.2.4.14 To explain more about the role of comity principles on
extraterritoriality jurisdiction of competition law in the United States,
in 1985 United States Department of Justice (US DOJ) and Federal
Trade Commission (FTC) issued Antitrust Enforcement Guidelines for
International Operation. The Guidance stated that the both bodies
would consider principles of comity when examining whether or not a
violation to the competition law (See: Alison Jones and Brenda Sufrin,
2004 page 1239); -------------------------------------------------------------
4.2.4.15 Hereinafter, Council of Commission found that effect doctrine is
always implemented in case concerning foreign party, as the same
manner as seen in case United States v. Nippon Paper Industries Co.
109 F.3d (1st Cir. 1997). In this case, the Japanese companies domicile
in Japan conducted all cartel activities in Japan was pricing a selling
price of fax paper to the United States. The companies were accused
by the Government of America under the United States jurisdiction
that then strengthened by Appeal Court of the United States (See::
Alison Jones and Brenda Sufrin, 2004 page 1239-1240).---------------
4.2.4.16 In European Union, the case of extraterritoriality decided for the first
time in 1974 in the case of Béguelin (Case 22/71, Béguelin Import Co.
v. GL Import Export [1971] ECR 949, [1972] CMLR 81).
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Nevertheless, the case was not merely discussed on the implementation
of extraterritoriality of competition law because of one of the parties in
the agreement domiciling in the European Union country, no sanction
imposed to other parties domiciling in Japan -----------------------------
4.2.4.17 Hereinafter, presumably that Council of Commission enhances
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European Union principle of extraterritoriality under effect doctrine
that started to be discussed in 1972 in case of Dyestuff (Case 48/69, ICI
v. Commission (Dyestuff) [1972] ECR 619, [1972] CMLR 557. ICI
founded and had head office in UK (at that time it was not member of
European Union yet) was alleged for conduct concerted practices
(cartel) and infringed Article 81 EC Treaties by instructing its
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subsidiary in Belgium. At European Court of Justice (ECJ), General
Counsel impose effect doctrine in his opinion toward the case: “… the
condition necessary for taking extraterritorial jurisdiction of
competition were that the agreement or concerted practice must create
a direct and immediate restriction of competition, that the effect of the
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conduct must be reasonably foreseeable, and that the effect produced
on the territory must be substantial” (See: Alison Jones and Brenda
Sufrin, 2004 page 1249). In it decision, ECJ did not adopt effect
doctrine yang stated by General Counsel, ECJ based its jurisdiction to
the argument known as “single economic entity doctrine”. In the
argument ECJ stated that European Union law has developed doctrine
that thought holding company and its subsidiaries as a business actor
the context of competition law; then European Commission has
jurisdiction to the UK's company (See: Alison Jones and Brenda
Sufrin, 2004, page 1240);----------------------------------------------------
4.2.4.18 The next case was in European Union that adopted effect doctrine was
Wood Pulp I (Wood Pulp [1985] OJ L85/1, [1985] 3 CMLR 474). In
this case, European Commission performed a series of investigation to
the suspected price fixing conducted by 41 producers and 2 producer
associations that infringed Article 81 EC Treaty. All 43 parties in the
case domiciled outside European Union but almost all them owned
subsidiaries, agent or representatives within the region of European
Union. 36 parties were fined by European Commission and most of
them submitted objection toward the decision of the European
Commission, on the basis of: first, on the jurisdiction and the second,
on their concerted practices. ECJ decided to conduct a session on the
jurisdiction problem (“Wood Pulp I”) by bringing the parties to trial
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prior to have a second session to the second objection submitted by the
parties (“Wood Pulp II”). ----------------------------------------------------
4.2.4.19 In Wood Pulp I, General Counsel in his opinion readopt effect doctrine
to affirm European Commission jurisdiction to the conduct of cartel,
therefore ECJ came to the different conclusion by ignoring the
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discussion on effect doctrine but turn it to its “implementation”. ECJ
stated that the place to which the agreement signed was not relevant,
but the most decisive one is the place where the agreement was
implemented; ------------------------------------------------------------------
4.2.4.20 The Singaporean competition law explicitly states extraterritoriality of
competition law in its body. Article 33 paragraph (1) of The
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Competition Act 2004 explicitly state the prohibition of Competition
Act be effect on the agreement made or activities done outside
Singapore or by parties outside Singapore (See: Burtong Ong, The
Origins, Objectives and Structure of Competition Law in Singapore,
World Competition 29(2): 269-284 Kluwer Law International, the
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Netherlands, 2006, page 283); ----------------------------------------------
4.2.4.21 Based on the whole description, Council of Commission has a notion
that whether in national or international system of law, competition law
can be valid extraterritorially as long as the condition in effect doctrine,
doctrine of implementation or single economic entity doctrine are
completed; ---------------------------------------------------------------------
4.2.5 Hereinafter, Council of Commission examine, whether extraterritoriality
principles can be imposed in this case, Council of Commission consider the
followings: ---------------------------------------------------------------------------------
4.2.5.1 Based on the fact that Temasek, STT, STTC, AMHC, AMH, ICL,
ICPL, SingTel, and SingTel Mobile (hereinafter referred to as
“Temasek Business Group”) were not founded under the law of
Indonesia and not domiciled in Indonesia as it elucidated in point 1.1
On the Identity of Reported; (vide Evidence C15, C16, C77-C79, C82-
C84, C148, C154) ------------------------------------------------------------
4.2.5.2 The jurisdiction of Commission to the Reported shall be tested on the
basis of several matters, namely: (i) whether the activities of Temasek
Business Group impact in the legal territory of Indonesia that make it
in line with effect doctrine, or (ii) whether Temasek Business Group
perform certain activities that its implementation is in legal territory of
Indonesia that make it in line with the doctrine of implementation, or
(iii) whether Temasek Business Group established single economic
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entity with Indonesian business actor that make it in line with single
economic entity doctrine; ----------------------------------------------------
4.2.5.3 Either Investigation team of LHPL or Reported in their defenses has
describe the schema of Temasek ownership from Temasek to
Telkomsel and Indosat, Plc., as it can be seen in the following
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diagrams:-----------------------------------------------------------------------
Temasek Holdings
(Private) Limited
100%
100%
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Singapore
Technologies
54,15%
Telemedia Pte. Ltd
45,85% Singapore Indonesia
100% Public Telecommunications Government
STT Pte. Ltd
Qatar Government Communications
Ltd
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55% 100% 100% 51,19%
Qatar Telecom Asia Mobile

Holding Company Singapore
(Q tel) Q.S.C PT Telekomunikasi
Pte. Ltd Telecom Mobile
Pte. Ltd Indonesia Lts
100% 75%
35% 65%
Q tel Investment 25% Asia Mobile
Holdings BSC Holdings Pte, Ltd
100% 100%
Indonesia Indonesia Government of

Public Communications Communications Indonesia
Limited Pte. Ltd
40,77%
44,05% 14,5 % PT Telekomunikasi

PT Indosat Lts Selular
4.2.5.3.1 Temasek Holdings is an owner of 100% of STT’s shares
and 54.15% of SingTel. ---------------------------------------
4.2.5.3.2 SingTel is an owner of 100% shares of SingTel Mobile;
4.2.5.3.3 SingTel Mobile is an owner of 35% shares of Telkomsel.
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4.2.5.3.4 STT is an owner of 100% shares STT Communication.--
4.2.5.3.5 STT Communication is an owner of 100% shares Asia
Mobile Holdings Company -----------------------------------
4.2.5.3.6 Asia Mobile Holdings Company is an owner of 75%
shares Asia Mobile Holdings---------------------------------
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4.2.5.3.7 Asia Mobile Holdings is an owner of 100% shares
Indonesia Communication Limited and 100% shares
Indonesia Commnication Pte. Ltd. --------------------------
4.2.5.3.8 Indonesia Communication Limited has 39.96% shares PT.
Indosat, Plc, and Indonesia Communication Pte. Ltd
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memiliki 0.86% shares PT. Indosat, Plc. -------------------
4.2.5.4 A clear ownership shares of Temasek to Telkomsel and PT. Indosat,
Plc., that both are performing business activity in the legal territory of
the Republic of Indonesia ; --------------------------------------------------
4.2.5.5 Council of Commission has a notion that a company with 100% of
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share ownership over other company’s shares shows automatically a
single economic entity between the holding and an investee company
(100% shares), without any other information to prove; ----------------
4.2.5.6 Council of Commission has a notion that a company with 50% of share
ownership over other company’s shares shows automatically a single
economic entity between the holding and an investee company, unless
if it can be proved that: (i) holding company has no management
representative in the subsidiary, (ii) holding company has no ability to
influence a directive policy of subsidiary, (iii) holding company has no
confidential and sensitive information access to subsidiary. Council of
Commission found that there things above are negative. ---------------
4.2.5.7 Based on the share ownership in 4.2.5.3 above and considering the
authority owned by holding company to its subsidiary as it is
elucidated by in LHPL by Investigation Team, Council of Commission
has a notion that Temasek Business Group is single economic entity.
4.2.5.8 Council of Commission has a notion that, it is true that a company with
less than 50% of other company’s shares cannot be automatically
called a single economic entity or it is not, but de facto the two
companies is a single economic entity if in realty they meet 3
condition: (i) holding company has no management representative in
the subsidiary, (ii) holding company has no ability to influence a
directive policy of subsidiary, (iii) holding company has no
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confidential and sensitive information access to subsidiary. If the three
criteria are negative, the share ownership of less than 50% can be
considered as passive investor.
4.2.5.9 As it usually found in of share ownership through capital market. Yet,
if the three criteria are fulfilled, holding company obviously has
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controlling influence to subsidiary and the aim of share ownership is
becoming an active investor. Therefore, a company that has subsidiary
shares is seen as single economic entity; ----------------------------------
4.2.5.10 That Temasek Business Group has 35% of Telkomsel’s shares and
41.16% of PT. Indosat, Plc. With the share ownership less than 50%,
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the three criteria needs to be concerned whether Temasek Business
Group has control to Telkomsel and PT. Indosat, Plc;------------------
4.2.5.11 Council of Commission examines it from: (i) management
representation aspect, (ii) an ability to influence company’s decision,
and (iii) confidential information access----------------------------------
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4.2.5.11.1 Management representation ----------------------------------
4.2.5.11.1.1. Concerning of management, Investigation
team in LHPL had elaborated management
representation owned by Temasek Business
Group to Telkomsel and PT Indosat, Plc,
and the fact that SingTel Mobile has rights
to post directors and commissioner in
Telkomsel. LHPL also shows that since
2002 two positions for directors are always
available for SingTel Mobile, Director of
Commerce and Operation (vide Evidence
C165, C168-C171, B1);----------------------
4.2.5.11.1.2. That LHPL also found that ICL is entitled to
post 8 (eight) of 9 (nine) position for
director and commissioner in PT Indosat,
Plc, while the Government of Indonesia as
the holder of A series shares only has 1
position has 1 for director and commissioner
of PT Indosat, Plc, currently the 9 (nine)
directors, although in reality the
Government of Indonesia is given a chance
to nominate more than 1 director and
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commissioner. LHPL also found that since
ICL become shareholder, Vice Managing
Director and Director of Finance are always
taken by ICL ; (vide Evidence C46, C54,
C80, C117, C238-C243) ---------------------
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4.2.5.11.2 Decisive Influence to company policy ----------------------
4.2.5.11.2.1. Concerning the ability of Temasek Business
Group in influencing the company policy,
Council of Commission found that strategic
company’s policies must be approved by at
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least ¾ shareholders, so that the
implementation of Limited Corporation law,
that the shareholder of more than 25% is
able co veto such decisions; -----------------
4.2.5.11.2.2. That LHPL deeply explain the authority of
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SingTel Mobile as a shareholder of
Telkomsel and the authority of of ICL as a
shareholder of PT Indosat, Plc, shows that
the shareholder with votes as they have is
able to determine the approval to reach the
¾ of the whole company shares vide
Evidence C54, C117, C165, C208, C209);
4.2.5.11.2.3. Hereinafter, Council of Commission also
found that LHPL, Investigation team had
disclose the influence of SingTel Mobile to
Telkomsel in determining Capital
Expenditure (Capex). The Capex of
Telkomsel shall be approved by Capex
Committee that consists of 3 (three) people
and one of them is commissioner nominated
by SingTel Mobile. Besides, Council of
Commission found facts as it is elucidated
in LHPL, that SingTel, holding company
SingTel Mobile, also actively help Capex
Committee through Commissioner
nominated by SingTel Mobile, by providing
extra ordinary staff yang has direct access to
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Telkomsel management; (vide Evidence
B22-23, B37)
4.2.5.11.2.4. Council of Commission has a notion tha the
determination of capex is one of the
important policy in developing Telkomsel
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concerning service quality and coverage
provider;----------------------------------------
4.2.5.11.2.5. That in LHPL, Investigation team also show
the influence of ICL to PT Indosat, Plc, in
term of network procurement that is
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controlled by the Vice Managing Director
nominated by ICL and as it made the delay
of network building of PT Indosat, Plc.;
(vide Evidence B44, B46 B51) -------------
4.2.5.11.2.6. Council of Commission has a notion that a
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control to the network procurement method
and implementation is Indosat’s policy
relating to cost efficiency and business
development of Indosat in quality and
coverage service; (vide Evidence B44, B51)
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4.2.5.11.3 Confidential Information Access ----------------------------
4.2.5.11.3.1. Concerning confidential information access,
Council of Commission has a notion that the
determination of Capex to Telkomsel and
the network procurement method of PT
Indosat, Plc, is a company confidential
information due to its vitality to each
company. Such an information cannot be
accessed by public; ---------------------------
4.2.5.11.3.2. Council of Commission found that in
LHPL, SingTel has an access to the
information concerning the plan of Capex
Telkomsel and ICL they also has
information on the delay of network
building of Indosat PT. Indosat Plc., due to
the fault of mentioning procurement method
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that has been informed to one of Indosat
Commissioner, that also has position in the
management o ICL; --------------------------
4.2.6 That by fulfilling the three criteria, Council of Commission examine that
Temasek Business Group, besides owning number of significant shares, also has
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decisive influence to control Telkomsel and PT Indosat, Plc., so it can be
considered as single economic entity.--------------------------------------------------
4.2.7 Council of Commission perceive that considering effect doctrine or
implementation doctrine to evaluate the jurisdiction of Commission to Temasek,
STT, STTC, AMHC, AMH, ICL, ICPL, SingTel, and SingTel Mobile is not
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needed; -------------------------------------------------------------------------------------
4.2.8 That through the implementation of single economic entity, Council of
Commission examine that Temasek Business Group has performed business
activity in the legal territory of the Republic of Indonesia indirectly through the
activities of Telkomsel and PT. Indosat, Plc., thereby Commission has
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jurisdiction to Temasek, STT, STTC, AMHC, AMH, ICL, ICPL, SingTel, and
SingTel Mobile for this case.. -----------------------------------------------------------
4.3 State of Case Handling -----------------------------------------------------------------------------

4.3.1 Hereinafter, it is still on formal aspect, Council of Commission examine whether
in this case handling, Commission infringe the principle of due process of law. In
their defense the Reported fundamentally states the followings:-------------------
4.3.1.1 Temasek states that the withdrawal of a report shall terminate
investigation process; --------------------------------------------------------
4.3.1.2 STT, STTC, AMHC, ICL, ICPL state that LHPL is issued in the long
period of time after the report is withdrawn;------------------------------
4.3.1.3 Commission gives no fair right to defense, in the form of --------------
4.3.1.3.1 Temasek, STT, STTC, AMHC, ICL, ICPL state that
Investigation team has ignored documents submitted by
the Reported; ---------------------------------------------------
4.3.1.3.2 Temasek, STT, STTC, AMHC, ICL, ICPL, SingTel, and
SingTel Mobile state only be given limited time to arrange
its written defense; ---------------------------------------------
4.3.1.3.3 4.3.1.3.3 Temasek, STT, STTC, AMHC, ICL, ICPL,
SingTel, and SingTel Mobile state for not being given
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access to investigation document; ---------------------------
4.3.1.3.4 Temasek and Telkomsel state the allegations are unclear;
4.3.1.3.5 STT, STTC, AMHC, ICL, ICPL, SingTel, and SingTel
Mobile state for not being investigated in the Preliminary
Investigation; ---------------------------------------------------
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4.3.1.4 Temasek, STT, STTC, AMHC, ICL, ICPL, SingTel, and SingTel
Mobile state the statements in mass media bay the Commission has
influence the independency of the investigation process and Council of
Commission ;------------------------------------------------------------------
4.3.1.5 Temasek, SingTel and SingTel Mobile state Council of Commission
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in this case is not fair because it does not involve Commission member
of the Preliminary Investigation that has dissenting opinion in the
LHPL; --------------------------------------------------------------------------
4.3.2 To the point of opinion or defense of the Reported concerning due process of
law, Council of Commission suggest the following consideration: ---------------
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4.3.3 Concerning Report Withdrawal ---------------------------------------------------------
4.3.3.1 Concerning the withdrawal of report, Council of Commission notice
that the withdrawal of report by Reporting Party does not make the
process to the case being terminated for the sake of justice concerning
the characteristic of the Commission case is not a pure civil case
namely a dispute between an individual and othe individuals.
Competition case consists of public dimension, means any case
handling in Commission is aimed for the interest of public and state.
Therefore, there is no crime by complaint in the case handling process
of the commission because no expression of withdrawing case in either
in the Law No. 5/1999 or Commission Regulation No. 1/2006 2006..
4.3.3.2 It is true that Commission in registration procedures or note case uses.
L and I. Letter L mean the case from report. Meanwhile . I mean the
case is the initiative case of Commission. The usage of. L and I as a
mean to know early process of case and only express early information
early owned by and for the sake of administrative case handling in
Commission; ------------------------------------------------------------------
4.3.4 The Time Period of Issuing LHPL -----------------------------------------------------
4.3.4.1 Concerning the period of time in issuing LHPL, Council of
Commission examine that Commission successively accept report
related to suspected infringement of the Law No. 5/1999 that
conducted by PT. Indosat, Plc., date 18 Octobers 2006 and date 17
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November 2006. Based on investigation process and clarification
conducted by Commission, the reports is incomplete and the handling
was terminated; ---------------------------------------------------------------
4.3.4.2 Hereinafter, Council of Commission found that on 22 December 2006,
the Commission accept again the report concerning suspected
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infringement of the Law No. 5/1999 conducted by PT Indosat, Plc.,;
4.3.4.3 That after receiving the report, under Article 16 of KPPU Regulation
No. 1/2006, Commission is able to clarify and to examine report
within 60 (sixty) days and can be extended for the furthest of 30
(thirty) days. Thereby, as from the report entered, Commission can
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conduct investigation process and report clarification until 3 May
2007;----------------------------------------------------------------------------
4.3.4.4 That within the process, Commission further concludes that the report
state to be completed and clear to go to filing step for 30 (thirty) days
and followed by presenting report at the furthest of 14 (fourteen) days
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after filling to be determined then whether it proper or not to go to
Preliminary investigation process. Thereby, as from the end of
investigation and clarification, on 3 May 2007, the filling process and
the presenting report have to end at the furthest on 6 July 2007; ------
4.3.4.5 That after the presenting of report and Commission decides to continue
to the process of Preliminary investigation, under Article 39 paragraph
of the Law No. 5/1999, at the furthest of 30 (thirty) days after the
report available. Thereby, since the end of presenting report,
Preliminary investigation shall be end at the furthest of 20 August
2007;----------------------------------------------------------------------------
4.3.4.6 That accomplishing Article 39 paragraph (1). jo Article 43 paragraph
(1) and paragraph (2) of the Law No. 5/1999, after Preliminary
investigation process, Follow up investigation conducted for the
longest 60 (sixty) days and can be extended for the longest of 30
(thirty) days. Thereby, as from the end of Preliminary investigation,
Follow up investigation end at 26 December 2007; ---------------------
4.3.4.7 That the time mentioned above is the maximum time needed for the
investigation. In the implementation the process is shorter than the time
provided. The following is the description of the time: ----------------
4.3.4.7.1 That the presentation of case report on date 5 April 2007
resulted, Commission decide to continue the case to the
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process of Preliminary investigation; (vide Evidence A8)
4.3.4.7.2 That based on the decision of Commission No.:
13/PEN/KPPU/IV/2007, Preliminary investigation was
conducted from 9 April 2007 to 22 May 2007; (vide
Evidence A9) ---------------------------------------------------
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4.3.4.7.3 That based on the decision of Commission No.:
23/PEN/KPPU/V/2007, Follow up investigation was
conducted from date 23 May 2007 to 15 August 2007;
(vide Evidence A30) -------------------------------------------
4.3.4.7.4 4.3.4.7.3 That based on the decision of Commission No.:
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152/KEP/KPPU/VIII/2007, the Extended Follow up
investigation was conducted from 16 August 2007 to 27
September 2007; (vide Evidence A161) -------------------
4.3.4.7.5 That the Regulation Commission No. 1/2006 does not
specifically oblige Commission to submit LHPL to the
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Reported and when it shall be submitted; ------------------
4.3.4.7.6 That after Follow up investigation completed on 27
September 2007, Investigation team submitted LHPL and
the whole files to the Commission, the Commission then
establishes Council of Commission and submitted LHPL
and all the files of the case (vide Evidence A216). Council
of Commission then prepared the council session and
deliver LHPL to the Reported. The process takes a couple
days so that LHPL will be received by the Reported later;
4.3.4.8 The timed needed for the investigation process has followed the rule
and completed the principle of due process of law in which they have
been strengthened by the some Supreme Court Decree (MA):---------
4.3.4.8.1 The decree of MA No. 01 K/KPPU/2004 in the case of
Commission against PT Perusahaan Penerbangan Garuda
Indonesia; -------------------------------------------------------
4.3.4.8.2 The decree of MA No. 02 K/KPPU/PDT/2004 in the case
of Commission against PT Jakarta International Container
Terminal;
Commission against PT Telekomunikasi Indonesia Plc.;
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Commission against PT Perusahaan Umum Percetakan
Uang Republik Indonesia (Perum Peruri)/The Indonesian
National Mint; --------------------------------------------------
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Commission against PT Carrefour Indonesia; -------------
4.3.5 Concerning Defense ----------------------------------------------------------------------
4.3.5.1 Concerning defense, Council of Commission examine that in
accordance with the task and authority regulated in the Law No.
5/1999 on the Prohibition of Monopoly practices and unfair business
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competition, and Commission Regulation No. 1/2006 on the
Procedures of Case handling in Commission, gives the chance to
Reported to submit defense and consider all the case files including the
documents submitted by the Reported either in the step of investigation
or in the Council of Commission Session; --------------------------------
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4.3.5.2 That the time conducted to defend, accomplishing to due process of
law, has been mentioned in the Law No. 5/1999 and Commission
Regulation No. 1/2006 Procedures of Case handling in Commission.
The limited time had by the Reported is also had by Investigation team
and Council of Commission in the period of time of each step of case
handling in Commission, and it has to be abided as a form of due
process of law and legal certainty;-----------------------------------------
4.3.5.3 Furthermore, it is dealing with the access to the whole documents.
Council of Commission examine that in this case, such an access has
been given in the phase of enzage. The Reported have time to get an
enzage with the following time table:--------------------------------------
4.3.5.3.1 Temasek conducted an enzage on 4 October 2007; (vide
Evidence B59)--------------------------------------------------
4.3.5.3.2 STT, STTC, AMHC conducted an enzage on date 5
October 2007; (vide Evidence B59) -------------------------
4.3.5.3.3 AMH, ICL, ICPL conducted an enzage on date 8 October
2007; (vide Evidence B59) -----------------------------------
4.3.5.3.4 SingTel and SingTel Mobile conducted an enzage on 9
October 2007; (vide Evidence B59) -------------------------
4.3.5.3.5 Telkomsel conducted an enzage on 10 October 2007;
(vide Evidence B59) -------------------------------------------
4.3.5.4 Concerning to the references to be referred by the Investigation team as
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it asked by the Reported, Council of Commission thinks that the
references are public property;----------------------------------------------
4.3.5.5 Concerning the clearance of allegation that is postulated by Temasek
and Telkomsel, Council of Commission thinks that the suspected
infringement has been clear and consistent namely the infringement of
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Article 27.a that has been conducted by Temasek Business Group and
suspected infringement of Article 17 paragraph (1) and Article 25
paragraph (1) b conducted by Telkomsel, with the following
description: --------------------------------------------------------------------
4.3.5.6 That the essence of suspected infringement conducted by
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Temasek Business Group relating to cross ownership of
Temasek Business Group in Telkomsel and Indosat.; ---
4.3.5.7 That the essence of suspected infringement conducted by
Telkomsel either in the Report of Preliminary investigation
result or LHPL is the same, that it is emphasized on the
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abuse of its dominant position. (vide Evidence A28, A215)
4.3.5.8 That accomplishing the regulation in Article 44
Commission Regulation No.1/2006, Follow up
investigation is conducted to find whether or not an
evidence of infringement based on the preliminary
evidence accumulated by Investigation team in the
Preliminary investigation and then stated in the report of
the result ----------------------------------------
4.3.5.9 Concerning the investigation of STT, STTC, AMH, AMHC, ICL,
ICPL, SingTel, and SingTel Mobile in the Preliminary investigation,
Council of Commission examines that it is justifiable because of the
status of STT, STTC, AMH, AMHC, ICL, ICPL, SingTel, and
SingTel Mobile as Reported are decided in the Preliminary
investigation. It needs to be added that in the phase of Preliminary
investigation, Investigation team performs an investigation to
Termasek as a group that cover STT, STTC, ICL, SingTel, and
SingTel Mobile; (vide Evidence A28) -------------------------------------
4.3.5.10 That the Commission Regulation No.1/2006 in Article 33 states that:
(2) If the Follow-up Investigation is needed to perform, the
Commission decide the status of Reported, agreement and/or activities
that is suspected to infringe or the rule of law that is suspected to be
infringed by the Reported, through the decision of Follow-up
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Investigation. ------------------------------------------------------------------
4.3.5.11 That based on the descriptions related to the consideration documents
of the Reported, the period of time arranging defense, clearance of the
allegation, Investigation Team, and the status of the Reported of STT,
STTC, AMHC, AMH, ICL, ICPL, SingTel, and SingTel Mobile that
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newly stated in the Follow-up Investigation, then the chance to arrange
defense from the Reported has been given properly and prescribed
by the regulations; ----------------------------------------------------------
4.3.6 Concerning the Independency of Council of Commission --------------------------
4.3.6.1 Concerning the independency Council of Commission, Council of
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Commission examine that the statement of the Chairperson of Council
of Commission to the mass media relating to this case does not
influence the independency of Council of Commission in deciding this
case. The Council of Commission in deciding the decision is not based
on the structural of Commission so that anyone in the Commission
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cannot be instructed and be responsible to no one. The council of
commission bases its decision simply on the document that are
scrutinized and legal consideration pronounced in the decision;-------
4.3.7 Concerning Member of the Council of Commission---------------------------------
4.3.7.1 Concerning the structure or composition of the Council of
Commission, Council of Commission thinks that the decision is the
authority of the Chairperson of Commission and it has accomplished
Article 2 paragraph (2) g jo Article 51 paragraph (4) Commission
Regulation No. 1/2006 on the Procedures of Case handling in
Commission -------------------------------------------------------------------
Article 2 -----------------------------------------------------------------------
(2) In performing the duty, as it mentioned in paragraph (1) the
Chairperson of Commission has authority to:----------------------------
g. appoint a Chairperson and members of Investigation team and
council of Commission. -----------------------------------------------
Article 51-----------------------------------------------------------------------
(2) The membership of Council of Commission as it meant by
paragraph (3) at least 1 (one) member of Commission handle a case in
Follow-up Investigation.
4.4 Concerning Divestment Consultation and Government ---------------------------------------
4.4.1 Concerning the government divestment shares in Indosat, Temasek, STT, STTC,
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AMHC, ICL, ICPL, SingTel, and SingTel Mobile in its opinion and defense
principally states that the divestment of PT. Indosat, Plc., has been consulted with
Commission, and Commission observe that it does not infringe the Law No.
5/1999;--------------------------------------------------------------------------------------
4.4.2 That to the statement of the Reported as it meant above, Council of Commission
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do not find evidence that the Commission has agreed to the divestment of
government shares of PT Indosat, Plc., and STT as an awarded. In the document
of Government’s elucidation in the hearing with House of Representative (DRY)
Republic of Indonesia, page 11 (vide Evidence C1) stated that: “Ministry of
BUMN on 23 January 2003, have completed an invitation of KPPU for
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consulting meeting and theretofore KPPU does not need further information
from Government/Indosat relating to Indosat’s divestment. Council of
Commission thinks that such a statement cannot be interpreted as an agreement
of Commission to the divestment process of Indosat that then was divested to
STT. It is consistent with the opinion of Commission that has never agreed
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with the divestment of Indosat which then divested to STT. -------------------
4.5 Concerning the authority of Commission to interpret -----------------------------------------
4.5.1 That AMH, ICL, and ICPL in their opinion or defense, principally state that
Commission does not have right to interpret the Article in the Law No.5 /1999,
in this matter Article 27 considering the Commission is not judicative or
legislative institutions; -------------------------------------------------------------------
4.5.2 Concerning the opinion or defense of the Reported, Council of Commission
thinks that the authority to interpret the Law No. 5/1999. The interpretation can
be conducted through the decision of the case of through the guidelines and other
written publications. It is in line with the Article 35.f of the Law No. 5/1999, that
Commission has tight to: ”arrange a guideline and/or other publications relating
to this law;” apart from the reality whether the commission is in an area of
executive, judicative or legislative;-----------------------------------------------------
4.5.3 Council of Commission perceives that the implementation of authority to
interpret the law can be observed in the Decision Commission No. 07/KPPU-
L/2004 on the case of VLCC Pertamina that has been reconfirmed by Supreme
Court in its decision No.04 K/KPPU/2005, dated 29 November 2005. In that
case, Commission interpret the understanding of ”tender” by basing on the
Guideline Article 22 on the prohibition of conspiracy in the tender; --------------
4.5.4 That in the Decision of Commission No. 07/KPPU-L/2004 is stated that price
bidding “covers a bid of purchasing or of procuring goods or services” in other
words in the Decision, Commission has interpreted the meaning of tender in the
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Article 22 of the Law No. 5/1999 as not only “contract of work for procuring
goods or services” but also “selling goods or services” in which it was
reconfirmed by” the decision of Supreme of Court; ---------------------------------
4.5.5 That the understanding of ”bid of selling a goods or services” has been included
in the Guideline of Commission regarding Article 22 on the Prohibition of
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Conspiracy in a Tender. It shows that Commission has authority to interpret
Articles in the Law No. 5/1999; -------------------------------------------------------
4.6 Considering that based on the elucidations that have been described above, Council of
Commission observe that there is no formal infringement in the process of this case.-
5. Concerning Material Aspect----------------------------------------------------------------------------
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5.1 Prior to examine whether or not an infringement conducted by the Reported, Council of
Commission has to explain standard analysis of an infringement the rule of the Law No.
5/1999 in general, and then explain the standard or elements of Article 27, Article 17,
and Article 25 respectively;----------------------------------------------------------------------
5.2 Council of Commission has a notion that in general the Law No. 5/1999 does not affirm
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analysis approaches used for any Article or its stipulation, using rule of reason or per se
rule. Basically, rule of reason approach states that determining whether or not an
infringement is not sufficient to base on formal evidence of a business practice (conduct)
but it needs other evidence that such a business practice is able to cause
negative impact to competition and public interest. For this reason, in this approach an
impact analysis of the business actor’s behavior to competition. On the contrary, the per
se rule basically sates that whether or not an infringement can be based only to the
sufficient evidence that shows a conduct of a business actor. The approach requires the
absence of evidence that the conduct causes negative impact to competition due to a
legal presumption that the conduct of a business actor causes negative impact to business
competition; -----------------------------------------------------------------------------------------
5.3 Although it is not strictly regulated about the valid approach, in the perspective of its
formulation, the prohibition in the Law No. 5/1999 is classified at least into two group,
there are prohibition of rule of reason based analysis and per se rule based analysis. The
article with the sentences, “causes monopoly practice” and/or “unfair business
competition” is classified to be analyzed by rule of reason and it need an analysis of an
impact of competition or an activity is performed or an analysis that the business activity
is not fair. While for the rule with have no such sentences are classified into the rules that
is analyzed by rule per se rule; --------------------------------------------------------------------
5.4 The Infringement to Article 27.a of the Law No. 5/1999 ------------------------------------
5.4.1 The rule of Article 27.a of the Law No. 5/1999 is said in a whole as follows:: -
“Business actor is prohibited to have majority shares at some similar companies
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that conduct business activity in the common field at the common relevant
market, or establish some companies that have business activities at common
relevant market, if the ownership resulted: -------------------------------------------
(a) one business actor or one group of business actor control more than 50%
(five percents) market share of one goods or certain service.”---------------------
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5.4.2 Concerning to Article 27, Council of Commission has a notion that at least there
are two perspective to determine the infringement to Article 27 namely
minimalist and maximalist. According to minimalist perspective, it is an
infringement to Article 27 if at least two important evidences are completed
namely, firstly, there is a business actor who controls or establishes some
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companies in a relevant market, and second, the control or the establishment
causes market control more than 50%. Thus, the prohibited behavior (conduct) is
to have control or to establish some companies, and the prohibited cause is
market control of more than 50%. The minimalist perspective also perceives that
there is an infringement to Article 27, it a business actor has majority shares in
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two or more competed companies, and the ownership result to more than 50% of
market control. The approach applied is per se rule because Article 27, from its
formulation, excluded two sentences of “able to cause monopoly practices”
and/or “unfair business competition.” ------------------------------------------------
5.4.3 Differ from minimalist perspective, maximalist perspective sees that there is an
infringement to Article 27, besides completing 2 (two) elements (as it is in the
minimalist perspective), other elements have to be completed namely business
practice (conduct) that cause negative impact to competition. In this perspective,
the prohibited business practice (conduct) is the market control abuse that cause
negative impact to competition. The approach applied is rule of reason because in
general the tasks of Commission are to examine whether the negative impact of
business practice to competition exists or not. ----------------------------------------
5.4.4 Concerning the perspective to Article 27, Council of Commission in this case
applied maximalist perspective, that make the important elements in Article 27
are, first, business actor; second, to have shares in some companies; third; market
control; fourth, the behavior of dominant position abuse; and fifth, negative
impact to competition;--------------------------------------------------------------------
5.4.5 In the Investigation team of LHPL, it is stated that Temasek, STT, STTC,
AMHC, AMH, ICL, ICPL, SingTel and SingTel Mobile have infringed Article
27.a of the Law No. 5/1999. The Reported in their defenses disagree to the
opinion and conclusion of Follow up Investigation team; --------------------------
5.5 Further, Council of Commission examines whether elements in Article 27.a completed
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by the following analysis: -------------------------------------------------------------------------
5.5.1 Business Actor-----------------------------------------------------------------------------
5.5.1.1 According to the previous limitation of jurisdiction of Commission to
Temasek, STT, STTC, AMHC, AMH, ICL, ICPL, SingTel, and
SingTel Mobile, Council of Commission has a notion that the
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Reported are business actors as it completes the rule of Article 1. 5
No. 5/ 1999 with the following consideration as follows:--------------
5.5.1.1.1 That Investigation team of LHPL principally states
Temasek, STT, STTC, AMHC, AMH, ICL, ICPL,
SingTel, and SingTel Mobile establish a business group as
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it is a doctrine of single economic entity. The doctrine of
single economic entity in this case is proved with the
existence of control conducted by Temasek Holdings to its
subsidiaries;-----------------------------------------------------
5.5.1.1.2 That the schema of the Temasek ownership to its
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subsidiaries has been illustrated by Investigation team in
paragraph (40) to (45) LHPL; -------------------------------
5.5.1.1.3 That a share ownership grading from Temasek to its
subsidiaries is followed by the authority to appoint director
in any level as it is shown by Investigation team in
paragraph (77) LHPL; ----------------------------------------
5.5.1.1.4 That instead of shareholder, Investigation team also find
many double positions for the purpose of easing to
implement holding companies policies. The double
position is shown by Investigation team in paragraph (78)
LHPL;
5.5.1.1.5 That STT, STTC, AMHC, AMH, ICL, ICPL in their the
opinions or defenses state that the diagram of made by
Investigation team does not reflect an integrated ownership
schema. In the stage share ownership made by
Investigation team, it shall be added around 25% of
AMHC shares owned by Qatar Telecom through Qatar
Investment Holding and 65% of Telkomsel’s shares
owned by PT. Telkom, Plc.; ----------------------------------
5.5.1.2 That to this matter, Council of Commission agrees with the opinions
and defenses of STT, STTC, AMHC, AMH, ICL, ICPL, that the
scheme displayed by Investigation team does not reflect an integrated
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ownership schema, therefore Council of Commission is about to
consider the position of Qatar Telecom and PT Telkom, Plc., in the
analysis to the existence of Temasek Business Group in this part; ----
5.5.1.3 That in their opinions and defenses, Temasek, STT, STTC, AMHC,
AMH, ICL, ICPL, and Telkomsel state that the double positions in
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some company shown by Investigation team in LHPL is not true in a
whole; --------------------------------------------------------------------------
5.5.1.4 That concerning to this matter, Council of Commission examines that
the information in the opinions and defenses of the Reported is true,
therefore Council of Commission revise the report of LHPL
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Investigation team as follows: ----------------------------------------------
5.5.1.4.1 Ho Ching is not Executive Vice president STT and
Executive Vice President STTC; ----------------------------
5.5.1.4.2 George Chow Yew Tong is not Senior Vice President
STT;
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5.5.1.4.3 Vincente Perez, Peter Seah, Sam Soon Lin, Yap Boh Pin,
and Edward Lee is not Director AMHC;-------------------
5.5.1.4.4 Steven Geoffrey Miller is not Chief Financial Officer
AMHC and ICPL;---------------------------------------------
5.5.1.4.5 Syeikh Mohammed is not Telkomsel Commissioner but
PT. Indosat Commissioner, Plc.;----------------------------- .
5.5.1.5 That in their opinions and defenses, Temasek, STT, STTC, AMHC,
AMH, ICL, ICPL, SingTel, and SingTel Mobile state that Temasek,
STT, STTC, AMHC, AMH, ICL, ICPL, SingTel, and SingTel Mobile
are separated corporate bodies that have their own and separated
management and asset;-------------------------------------------------------
5.5.1.6 That in its opinion and defense, Telkomsel particularly denies a control
conducted by shareholders to its company; -------------------------------
5.5.1.7 That in their opinions and defenses, STT, STTC, AMHC, AMH, ICL,
ICPL inform a legal action in Singaporean law between SingTel and
Starhub, both are subsidiaries of STT, and show that that SingTel and
STT do not include in the a group of business actor; --------------------
5.5.1.8 That in their opinions and defenses, AMH, ICL, ICPL state that AMH
in May 2007 obtained external loans for amount US$ 1.16 billion
without any involvement of shareholders, it shows that there is no
business group;----------------------------------------------------------------
5.5.1.9 That concerning to the points above, Council of Commission suggest
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the following consideration:-------------------------------------------------
5.5.1.9.1 That Council of Commission thinks different concerning
an expression “business actor”, an expression of “a group
of business actor” is acknowledgeable although it is not
elucidated by the Law No. 5/1999. The expression of “a
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group of business actor” in Article 1.1, Article 4
paragraph (2), Article 13 paragraph (2), Article 17
paragraph (2) . c, Article 25 paragraph (2), and Article
27 of the Law No. 5/1999; ------------------------------------
5.5.1.9.2 That Council of Commission thinks the expression of
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“business actor” stated in the Law No. 5/1999 implies
different legal approach to legal subject as it is in other
law, especially corporate. The corporate law recognizes
two legal subject namely “natural person” and “corporate
body” of “legal body”. The last is usually to mention
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limited company as an independent legal subject with a
legal personality under the legalization of Ministry of Law
and Human Right. In the business competition law, such
an approach is not always valid to be implemented. In
business competition, the most used approach is functional
approach to the subject. Such kind of approach is seen as
well in accounting field. Finance Accounting Guideline
Standard (PSAK) and Generally Accepted Accounting
Principle (GAAP) suggest that a subsidiary with more than
50% of its shares owned by holding company has to
consolidate its finance statement to the holding company
because the two companies are single economic entities
from the point of view of economy. -------------------------
5.5.1.9.3 That in the competition law, such a view is known as
single economic entity that is acceptable in other
jurisdictions. Council of Commission observes that such a
view has a strong foundation and argument to be
implemented in Indonesian competition of law. Council of
Commission examines that such a doctrine can be
implemented to elucidate what is in the Law No. 5/1999
called as “a group of business actor” ------------------------
5.5.1.10 That based on such an opinion, then the fact that a group of business
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has separated corporate body and assets is not relevant to conclude
the existence of business group. Under the same view, a business group
need not to have corporate body, such as the deed of establishment or
company statutes because as it mentioned above, a group can consists
of several independent corporate bodies. The share ownership is one
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indicator indicating the existence of a group of business actor. Another
relevant factor that has to be considered is the existence of control of
holding company to its subsidiary. The biggest control had by holding
company to its subsidiary is an appointment of director and member of
company management in addition to the right as shareholder. The
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absence of 100% share ownership enables it to have active control or
more than 50% of share ownership, and passive control to veto
strategic decision on General Meeting of Shareholders. The opinion of
Council of Commission to deny all at once the opinion and defense of
Telkomsel stating that Temasek through its subsidiaries has no control
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to to Telkomsel. The fact shows that Temasek through SingTel Mobile
has 35% shares in Telkomsel enable to veto some shareholders’
strategic decision beside other facts as it revealed by Investigation
team in LHPL on the active intervention of shre holders in Capex
Committee Telkomsel; (vide Evidence C165, B23, B25, B34, B36)--
5.5.1.11 That fact concerning separated management as it is postulated by
Temasek, STT, STTC, AMHC, AMH, ICL, ICPL, SingTel, and
SingTel Mobile does not guarantee that they can communicate one to
another in deciding important decision. The data in LHPL shows that
there are many double positions in the organizational structures of
Temasek and its subsidiaries; -----------------------------------------------
5.5.1.12 That related to the legal dispute in Singapore between SingTel and
Starhub, Council of Commission thinks that the default legal dispute is
not an evidence of the absence of a group of business actor. The
default suit can even occurs between shareholders and directors or
between director and director in a similar company. The information
concerning legal dispute between SingTel and Starhub in Singapore
that is submitted by STT, STTC, AMHC, AMH, ICL, ICPL, therefore,
is irrelevant with the examination on the existence of Temasek
Business Group;-------------------------------------------------
5.5.1.13 That the same opinion is valid to the whole facts submitted by AMH,
ICL, ICPL regarding the ability of AMH in obtaining external loans
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without any involvement of shareholders. The fact is irrelevant to
examine the existence of a group of business actor since it cannot show
or deny either share ownership of control of holding company to ties
subsidiaries; -------------------------------------------------------------------
5.5.1.14 The relevant fact to observe the existence of Temasek, STT, STTC,
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AMHC, AMH, ICL, ICPL, SingTel, and SingTel Mobile are (i) share
ownership grading from Temasek, STT, STTC, AMHC, AMH, ICL,
ICPL, SingTel, and SingTel Mobile and PT. Indosat, Plc, (ii) control
in any level or subsidiaries in the form of selection director and
managment member, (iii) veto rights owned by SingTel Mobile
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to the decision of general meeting of sharesholders of Telkomsel,
(iv) share ownership of PT. Indosat, Plc., by ICL, (v) active
involvement of in assisting Capex Committee Telkomsel, (vi) the
inifluenceof STT to the policy of Indosat’s director in the method
of procurement;-------------------------------------------------------- ;
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5.5.1.15 That based on the entire opinion of Council of Commission above, ,
Council of Commission examines that Temasek, STT, STTC, AMHC,
AMH, ICL, ICPL, SingTel, and SingTel Mobile is a group of business
actor that in this case is called Temasek Business Group ; -------------
5.5.2 Cross Ownership --------------------------------------------------------------------------
5.5.2.1 That Investigation team in LHPL states principally that the
understanding of “majority shares” need to be interpreted further and
in interpreting it Investigation team come to a conclusion that
“majority shares” in Article 27 of the Law No. 5/1999 shall be
understood as control. Further, Investigation team states that Temasek
Business Group owns “majority shares” of Telkomsel and PT. Indosat,
Plc..,;----------------------------------------------------------------------------
5.5.2.2 That in their opinions and defenses, the Reported principally state that
there is no majority shares in either in Telkomsel or in PT. Indosat,
Plc., because majority share ownership shall be understood as the share
ownership of more than 50% while Temasek Business Group owns
less than 50% either in Telkomsel or in PT. Indosat, Plc.;--------------
5.5.2.3 That Council of Commission has a notion that majority shares in
Article 27 of the Law No. 5/1999 cannot be understood by other laws
due to the characteristic of Article 27 of the Law No. 5/1999 that
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intends to prevent the existence of economic market concentration.
Besides, the rules of laws referred by either Investigation team or
Reported is not correct. Investigation team uses the Law No.19/1997
on the Imposing Bill for Tax Collection, the regulation of BAPEPAM
No. IX.H.1 on the Taking Over of public limited company, the
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Regulation of Central Bank of Indonesia No.8/16/PBI/2006 on Single
Ownership in Indonesian Banking. The rules of laws above are not
implemented in the context of elucidated the aims of the Law No.
5/1999 which make the definition refer to the rules cannot support the
aim and final objective to be achieved by the Law No. 5/1999. The
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same thing also applies to the Law No.19 /2003 on State-owned
Enterprise (“the Law of BUMN ”) and the Law No. 8 /1995 on Capital
market (“the Law on Capital market”) referred by STT, STTC, AMHC
in their opinion and defense based stated by Prof. Hikmahanto Juwana
(vide Evidence C62);---------------------------------------------------------
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5.5.2.4 Council of Commission thinks that interpreting literally ‘majority
shares’ as it is done by STT, STTC, AMHC will negate or eliminate
the meaning of Article 27, because business actor will always to
ignore from the article. Therefore, in order to effect the rules in Article
27, the word ‘majority shares’ in the article shall be understood
essentially. The fundamental meaning of Article 27 is to prohibit
business actor controls some competing companies in the market. The
control exists through majority shareholder in both companies. If it
happens, de jure, it is a control. The significant share ownership in both
companies is de facto able to control management decisions’ of the
company. If Article 27 is not interpreted fundamentally, business actor
is able to ignore through the simple way. Business actor, for example,
owns majority shareholder in a company but keep on the number of
share ownership in other companies remain to be little bit lower than
the majority, although it de facto is still able to control an influence the
decision of a company A business actor implements a strategy to
control a degree of competition of both companies although its
ownership is not absolute. ---------------------------------------------------
5.5.2.5 Further, Council of Commission examines whether there is a control of
Temasek Business Group in both competing companies, Telkomsel
and PT Indosat, Plc.;---------------------------------------------------------
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5.5.2.6 That in the discussion on the Commission jurisdiction, Council of
Commission found that ICL as the shareholder of PT Indosat, Plc., has
a representative in the management of PT Indosat, Plc. Besides,
Council of Commission found an ability of ICL to influence. Indosat’s
policies such as the decision in procurement method and the rights to
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have an access to confidential information of PT. Indosat. The three
things above shows an ability of ICL to control PT.Indosat, Plc., thus,
based on the Rule of Reason approach to Article 27 of the Law No.
5/1999, Indonesian Communication Limited is considered to have
majority shares of PT. Indosat, Plc..,. --------------------------------------
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5.5.2.7 Regarding to control in Telkomsel, Council of Commission found that
SingTel Mobile as a shareholder that assigns its representatives in
Telkomsel management. Besides, SingTel Mobile has an ability to
control Telkomsel management by vetoing the decision of shareholder
general meeting that need an approval of ¾ shareholders of Telkomsel.
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Council of Commission also found the privilege of SingTel Mobile to
access confidential concerning its active participation in Telkomsel
Capex Committee and it is shown that SingTel Mobile has an ability
to control Telkomsel;---------------------------------------------------------
5.5.2.8 That to clarify the concepts of company control, Council of
Commission need to elucidate that a company enables to have more
than one business actor with their ability control. The ability to control
a company owned by a business actor, in the different degree does not
eliminate an ability to control other business actors. It explains that
PT. Telkom, Plc., as an owner of 65% of Telkomsel’ shares has a
control to Telkomsel but it does not mean that it eliminates an ability
of SingTel Mobile to control Telkomsel as it has been previously
described namely in the form of management representation, influence
influential ability to the company policies and an access to confidential
information; -------------------------------------------------------------------
5.5.2.9 That in their opinion and defenses, Temasek, STT, STTC, AMHC,
AMH, ICL, ICPL state a similar legal construction to the definition of
majority shares, then the Government of Indonesia The Government
of Republic of Indonesia also has majority shares in Telkomsel and
PT. Indosat, Plc., with the result that the Government of Indonesia
shall be investigated for infringing Article 27 of the Law No. 5/1999;
5.5.2.10 That responding to the statement, Council of Commission thinks that
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the prohibition in Article 27 of the Law No. 5/1999 is valid only to
business actor. Council of Commission does not deny a fact that the
Government of the Republic of Indonesia has a control to Telkomsel
through PT. Telkom, Plc., and to PT. Indosat, Plc., because the
Government of Republic Indonesia is also an owner of A series shares
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of PT. Indosat (vide Evidence C,54, C117), Plc., Nevertheless,
considering that the prohibition in Article 27 of the Law No. 5/1999 is
valid only to business actor, the Government’s cross ownership differ
from those of Temasek Business Group. The ownership of the
Government of Republic of Indonesia is not an prohibited cross
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ownership as it is prohibited by Article 27 of the Law No. 5/1999.
Council of Commission thinks that the Government of Indonesia in
this case is not a business actor as it is elucidated in Article 1.5 of the
Law No. 5/1999; --------------------------------------------------------------
5.5.2.11 Council of Commission thinks that in this case the Government of
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Republic of Indonesia does not “perform any activities in economic
field”. In general, the assignment of government is a regulator by
determining a frame of regulation for business actors during
performing their business activity. Council of Commission examines
that government share ownership to PT. Indosat, Plc., does not intend
to gain profits. PT. Indosat, Plc., is a business actor in the strategic
field and control strategic sector, controlling satellite. The presence of
the Government of Republic of Indonesia with its shares 14.58% and
shareholders of A series of PT. Indosat, Plc., intends to secure the
strategic sector and to ensure the availability of telecommunication
infrastructure for public for the sake of national interest and not profit
oriented;------------------------------------------------------------------------
5.5.2.12 In the Law model of Competition arranged by the United Nations
Conference on Trade and Development (UNCTAD) in 2007, it
principally state the rules of competition laws that cannot be applied to
government or government official. In Chapter II Part II (Scope of
Implementation) Part C, it is mentioned that: “...does not apply to
sovereign acts of the State itself, or to those of local governments, or to
acts of enterprises or natural persons which are compelled or
supervised by the State or by local governments or branches of
government acting within their delegated power” -----------------------
5.5.2.13 Based on such consideration, Council of Commission thinks that the
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Government of Republic of Indonesia is not a business actor as it is
mentioned in Article 1. 5 of the Law No. 5/1999 with a result it does
not a subject in this case; ----------------------------------------------------
5.5.3 Market Shares -----------------------------------------------------------------------------
5.5.3.1 That in LHPL, Investigation team has described cellular market share
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from 2001 to 2006; -----------------------------------------------------------
5.5.3.2 That in LHPL, the Investigation team uses only data of 3 biggest
operators in cellular industry namely Telkomsel, PT Indosat, Plc.,
(Indosat) and PT Excelcomindo Pratama, Plc., (XL) as an economic
analysis basis and measure competition condition in the relevant
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market ; (vide Evidence C166-C171, C236-C243, C289-C294) -------
5.5.3.3 That based on LHPL, as it is seen in the following market share table
of Telkomsel, Indosat and XL below: ------------------------------------
Telkomsel Indosat XL
Total
Business Market Business Market Business Market
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Year selling
income share income share income share
value
2001 4,918.22 56.14% 1,770 20.20% 2,073.03 23.66% 8,761.15
2002 7,572.95 58.37% 3,272 25.22% 2,130.41 16.42% 12,975.01
2003 11,146.12 60.37% 5,118 27.72% 2,198.06 11.91% 18,461.76
2004 14,765.08 59.93% 7,342 29.80% 2,528.48 10.26% 24,635.63
2005 21,132.91 64.56% 8,645 26.41% 2,956.38 9.03% 32,734.25
2006 29,145.19 68.08% 9,228 21.55% 4,437.17 10.36% 42,809.89
Average 14,780.08 61.24% 5,895.61 25.15% 2,720.59 13.61% 23,396.28
5.5.3.4 That Telkomsel has a biggest market share in the relevant market
straight year since 2001, by the average income of Rp
14,780,080,000,000.00 (fourteen trillion seven hundred billion eighty
million rupiah) and annual market share average was 61.24% for the
period of 2001-2006; ---------------------------------------------------------
5.5.3.5 Market share of Indosat fluctuated market control with tend to decrease
after 2004. The average of Indosat’s annual cellular income is Rp
5,895,610,000,000.00 (five trillion eight hundred ninety five billion six
hundred ten million rupiahs) and annual market share average was
25.15% for the period of 2001-2006; --------------------------------------
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5.5.3.6 Market share of XL decreased after 2001 and fluctuated between 9-
11% for the period of 2003-2006, the average market share for the
period of 2001-2006 was 13.61%. The annual average revenue of XL
was Rp 2,720,590,000,000.00 (two trillion seven hundred twenty
billion five hundred ninety million rupiahs); -----------------------------
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5.5.3.7 That in their defense, STT, STTC, AMHC, AMH, ICL, ICPL
principally state that Investigation team should include the data of
other operators rather than Telkomsel, Indosat and XL in analyzing
relevant market ; --------------------------------------------------------------
5.5.3.8 Council of Commission understand that based not eh definition of
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relevant market mentioned in LHPL, the business actor in the market is
not only Telkomsel, Indosat and XL. Based on the calculation of
consumer shares it is known that Telkomsel, Indosat, and XL 97%
consumer in the relevant market (vide Evidence A174). Based on
revenues (vide Evidence C301,C302), market share of Mobile-8
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operator in 2006 was only 1.72% if the relevant market consisted of 4
biggest operators (vide Evidence C166-C171, C236-C243, C289-
C294). The small market share and coverage operation of other
operators rather than Telkomsel, Indosat, and XL will not give
material influence in the analysis of competition condition in relevant
market ;-------------------------------------------------------------------------
5.5.3.9 That in its analysis, NERA Consulting (vide Evidence C312) also uses
the data of Telkomsel, Indosat, and XL; ----------------------------------
5.5.3.10 Based on the descriptions, Council of Commission examines that using
the data of 3 biggest operators in analyzing economy and competition
condition in pertinent by Investigation team is sufficient; --------------
5.5.3.11 That based on the data of such market shares, it is seen that Telkomsel
and Indosat jointly control as it is depicted in the table below:: -------
Telkomsel Business XL
XL
Market share income Business
Year Market
and Indosat Consolidated income
share
collectively (in billion) (in billion)
2001 76.34% 6,688 2,073.03
23.66%
2002 83.58% 10,845 2,130.41
16.42%
Periode 2003 88.09% 16,264 2,198.06
11.91%
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Cross- 2004 89.74% 22,107 2,528.48
10.26%
Ownership: 2005 90.97% 29,778 2,956.38
9.03%
2003-2006
2006 89.64% 38,373 4,437.17
10.36%
Average 89.61%
2003-2006
5.5.3.12 That based on the table it is seen that since the presence of cross
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ownership, “the market share of Telkomsel and Indosat jointly
increased significantly by the average of 89.61%. It was always less
than 50%,; --------------------------------------------------------------------
5.5.4 Behavior------------------------------------------------------------------------------------
5.5.4.1 To the Network Procurement of Indosat ----------------------------------
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5.5.4.1.1 That in LHPL, the Investigation team found facts that
cannot be argued by the Reported that the Vice Managing
Director of Indosat (Kaizad B. Heerjee) in his capacity as
an important person in a management, did not take
maximal action in deciding a method of network
development that caused nine-month delay of the Indosat
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network development in 2006. (vide Evidence B44, B51)
5.5.4.1.2 The Investigation team found facts that cannot be argued
by the Reported that 4 (four) director of Indosat had
reported the delay of network development to STT asking
for action to the Vice Managing Director of Indosat, a
STT’s nomination. Nevertheless, there is no action taken
by STT as a shareholder that nominate Vice Managing
Director of Indosat. (vide Evidence B51)-------------------
5.5.4.1.3 That Investigation team found an important fact that the
development of BTS is very significant in networking
business. The directors of Indosat are aware of the delay,
unfortunately without the any decision taken by STT as a
shareholders that dealing with this matter, the development
of Indosat network has to be delayed; (vide Evidence B44,
B51)
5.5.4.1.4 The delay of the development can see from the graphic of
BTS market share. The market share of Indosat in this
field tended to decrease otherwise its competitor’s tended
to increase. In the end of 2006 the decrease of BTS
markets share of Indosat caused it reached by XL. As it is
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depicted in the table and graphic below; (vide Evidence
C166-C171, C236-C243, C289-C294)----------------------
NUMBER OF BTS PERIOD 2003-2006

Business 2003 2004 2005 2006
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Telkomsel 4,820 6,205 9,895 16,507
INDOSAT 3,007 4,026 5,702 7,221
Excelcomindo 1,491 2,357 4,324 7,260
Total 9,318 12,588 19,921 30,988
Source: LHPL
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Cellular Operator BTS Segments
60.00%
50.00%
40.00%
30.00%
20.00%
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10.00%
0.00%
2003 2004 2005 2006
Telkomsel INDOSAT Excelcomindo
Source: LHPL, proceeded
5.5.4.1.5 Based on the growth of BTS in each operators, it seems that

the aggressiveness of Indosat is lower its two competitors.
Although the growth is positive annually, its growth is
slower than other competitors are. Comparing to the year of
2005, the BTS growth lowering is seen in 2006;
BTS growth rate Telkomsel
INDOSAT
100.00% Excelcomindo
80.00%
60.00%
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40.00%
20.00%
0.00%
2003 2004 2005 2006
P
Year
Source: LHPL proceeded
5.5.4.1.6 Council of Commission concludes that either STT’s

representative in Indosat or STT do not want to take
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strategic action to the development of Indosat although the
steps are needed to compete in cellular market ; ----------
5.5.5 Impact --------------------------------------------------------------------------------------

5.5.5.1 Further, in order to examine whether the control of Temasek Business
Group and policy lowering of Indosat caused negative competition,
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Council of Commission observes five matters namely: (i) competition
in cellular industry, (ii) price leadership, (iii) price level, (iv) profit
rate, and (v) consumer loss. -------------------------------------------------
5.5.5.2 Competition in the Cellular Industry in Indonesia -----------------------
5.5.5.2.1 That in LHPL, the Investigation team principally state that
the decelerated growth of BTS Indosat compare to its
competitors give a freedom to dominant player to optimize
its market power because Indosat is the closet competitor
to the dominant player. The decelerating of aggressiveness
of its dominant player in the relevant market in this case
caused market is not competitive depicted by high
concentration, excessive price, price leadership, and
excessive profit; ------------------------------------------------
5.5.5.2.2 That in their opinion and defenses, STT, STTC, AMHC,
AMH, ICL, and ICPL principally state that investment of
BTS is not an indicator of competition level. In their
opinions and defenses, STT, STTC, AMHC and Telkomsel
principally state that cellular market is competitive by
basing on the evidence of a number of big mobile phone
with market shares more than 1%. In their opinion and
defenses, further, AMH, ICL, ICPL, SingTel, and SingTel
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Mobile principally state that the evidences of competition
are based on (i) the decrease of Average Revenue Per User
of telephone operator in 2002 – 2006, (ii) The high
monthly churn rate of company of cellular network
provider in Indonesia on the basis of international standard
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( it indicates a number of significant changing carrier) ---
5.5.5.2.3 To the opinion above, Council of Commission thinks that
cellular business is a network business in which consumers
concern about the availability of service or coverage and it
is directly proportional with a number of service BTS. As
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a network effect industry, cellular industry will compete in
network effect for its consumers. Thereby, a growth of
BTS is an instrument to win competition among cellular
operators in increasing network effect. As one of evidence,
Telkomsel implements a strategy called “Invest Ahead of
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Growth” (vide opinion or defense of Telkomsel),
Telkomsel implicitly considers that investment of BTS is
important for the company’s growth. BTS investment is
an important indicator of competition in the relevant
market.----------------------------------------------------------
5.5.5.2.4 That in stating large number of operator, STT, STTC,
AMHC, and Telkomsel includes operators in the outside of
relevant market of this case. Council of Commission
comprehends that quantitatively, business actor in many
markets often used as a low of entry barrier in an industry.
Therefore, a large number of operators in certain condition
cannot be used as an indicator of competitive market
without giving attention to decrease market power or
increase competitive pressure. It is proven by the market
share control of Mobile 8 which only 1.72% in 3 (three)
years
5.5.5.2.5 Responding to the postulate of Temasek, STT, STTC,
AMHC, AMH, ICL, ICPL concerning ARPU, Council of
Commission has a notion that the more decrease of ARPU
rate does not indicate the higher competition cellular
telephone industry, the decrease of ARPU rate could be
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caused by a high number of consumers with small average
consumption due to high cellular phone tariff. ARPU or
Average Revenue Per User shows an income rate of
cellular operators per consumer; ---------------------------
5.5.5.2.6 Responding to the postulate of Temasek, STT, STTC,
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AMHC, AMH, ICL, ICPL, Singtel, Singtel Mobile,
Telkomsel concerning ARPU, Council of Commission
thinks churn rate, expired card based on number of
consumer data. Currently, the definition of active and
passive consumer in Indonesia are different form one
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operator to another. Besides, a high churn rate caused by
the low price of starter pack that added with high pulse has
make starter pack turned to be a calling card. Another
possibility is consumer may migrate from one number to
another number within the same operator. Considering to
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such reasons, using churn rate as an indicator of
competition rate is inconsistent. As it has been reported by
NERA on page 52 paragraph (173) (vide Evidence C312):
“From Economic viewpoint, the correlation between churn
rates and competition is not very clear. For instance, high
average churn rate might be the result of one carrier’s
inferior quality of service and have nothing at all to do
with the level of competition.” -------------------------------
5.5.5.2.7 Council of Commission concludes cellular industry in
Indonesia is not competitive. -------------------------------
5.5.5.3 Price Leadership --------------------------------------------------------------
5.5.5.3.1 That in LHPL, the Investigation team principally state that
there is a movement of cellular service selling price that
indicates the behavior of anti-competition. The indication
is strengthened by the behavior of price fixing with the
minimum fluctuation. LHPL concludes the pattern of
price movement of Telkomsel, Indosat, and XL in
paragraph (97) to (103) of LHPL and analysis of price
pattern movement between Telkomsel and Indosat in
paragraph (148) to (153) of LHPL. --------------------
5.5.5.3.2 That in its opinion and defense, Temasek states that table 5
in LHPL should be used as an evidence that there is no
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price leadership. ------------------------------------------------
5.5.5.3.3 That SingTel and SingTel Mobile principally state that
price parallelism shows there is a competition. ------------
5.5.5.3.4 That STT, STTC, AMHC, AMH, ICL, and ICPL
principally state price parallelism cannot be indicated as
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price fixing------------------------------------------------------
5.5.5.3.5 That Telkomsel principally state that the conclusion
depends much on the usage and processing tariff data.
Thereby, Telkomsel does not present different result
analysis with LHPL. -------------------------------------------
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5.5.5.3.6 Responding to the postulate of STT, STTC, AMHC,
AMH, ICL and ICPL, Council of Commission agreed that
tariff pattern does not always indicate price-fixing. In
LHPL, the tariff parallelism shown by the result of
measurement is not interpreted as price-fixing but a price-
leadership phenomenon as one indicator of the absence of
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competition that shall be conducted by competitor.
Whether or not the presence of anti competition is not
simply shown as tariff parallelism. The conclusion stating
that price leadership is stated from the behavior of anti
competition is considered together with other indicator that
together come to conclusion consistently. ------------------
5.5.5.3.7 Responding to postulate of STT and STTC that price
parallelism indicates a competition, Council of
Commission thinks that by considering the condition of
price movement as it is reported in LHPL and Reported,
can be stated that there are different tariff for cellular
service offered by each operator. The different tariffs is
various and try to gain maximal profit in many market
shares. The movement of minimum selling price of
cellular service, especially price movement of Telkomsel
and Indosat that based on statistic process in LHPL can be
an initial indication of the presence of competition in
relevant market. By understanding that price can fluctuate
in the same direction of production cost, then in time of
tariff movement is less fluctuated, it can be stated that
there is no significant price fluctuation that should be in
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the same direction of the fluctuation of component cost.
The rapid growth of consumer in the network effect
positive industry shall increase economic scale of each
operator and decrease average cost which lead to decrease
of cellular service significantly. If the price fixing is
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nothing to do at all with the related cellular service cost
provided by operators, it indicates market power of certain
operator that boost to the absence of competitive price
strategy from its competitors. --------------------------------
5.5.5.3.8 Based on LHPL and the opinion and defenses of the
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Reported, it is proven that Telkomsel in 2002 and 2006
had reached significant economic scale growth that should
be -if the owner want to be the best in this industry and to
place in a solid place to expect long term profits- arranging
aggressively competitive price strategy to minimize a
threat from the competitor. Coinciding with the financial
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problems of Indosat, Telkomsel shall boost its
aggressiveness in price competition. Yet, it is not done by
Telkomsel. Therefore, it is proven that Telkomsel is only
decrease competitive pressure and does not try to create
competition in the market------------
5.5.5.3.9 That based on the description elucidated previously, it
indicates that Telkomsel does not see Indosat as a
competitor as a way to gain long term profits. -------------
5.5.5.3.10 Responding to the postulates of Temasek, Council of
Commission examines that price leadership is one of price
movement pattern parallel among business actor in the
relevant market. The parallel movement in the form of
price leadership will occurs if the follower responds to the
same direction with the price change done by the leader.
The understanding of table 5 in LHPL cannot be separated
from the graphic of price movement among operator in
paragraph (78) to (81) of LHPL. Table 5 is a tabulation of
the average of price rate in 2002-2006. Concluding data in
Table 5 alone without considering the graphics in the same
part, will lead to the wrong direction. Council of
Commission thinks that the annual average values does not
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describe the whole pattern of price movement in each price
change done by the leader. The calculation showing that
averagely Telkomsel price for certain services increase but
Indosat and XL decrease. It strengthened an allegation
that Telkomsel as a leader has real market power that is
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able to have strong price leadership. It is shown by the fact
that the price lowering done by follower is not followed
by Telkomsel. Besides, the absence of Telkomsel in price
lowering as it is done by other operators shows that there
is no price parallelism which come to conclusion that there
is a competition. ------------------------------------------------
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The growth of Selling Price of Cellular Service (peak time) 2002-2006
Telkoms Indos Telkoms Indos Telkoms Indos
XL XL XL
el at el at el at
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Postpai
5.36% 5.41% 8.38% 0.00% 0.06% -0.25% 3.08% 3.08% 4.47%
d
Prepaid - - -
4.40% -11.15% 0.00% 0.07% 0.00% -12.43%
* 21.78% 22.00% 17.81%
Source: LHPL
5.5.5.3.11 It is clearly seen that if Telkomsel increase the price,
operators will react by following the increased pattern. The
price lowering done by Indosat and XL is only conducted
by Telkomsel in the long period or fixing stable price. It is
see in the graphic of Prepaid Intra- operator (LHPL) -----
Prepaid intra-operator
1.700
1.600
Telkomsel
1.500
Indosat
1.400
XL
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1.300
1.200
01/10/2005
01/10/2006
01/04/2006
01/04/2004
01/04/2003
01/04/2005
01/10/2003
01/10/2002
01/04/2002
01/10/2004
Source: Picture of LHPL
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In which Telkomsel as a leader does not follow price
lowering as it is done by XL, but when Telkomsel
increases price (Picture 7, LHPL Page. 80), it is seen that
Indosat and XL then follow the price increase done by
Telkomsel. -----------------------------------------------------
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Postpaid inter-operator
950
940
930 Telkomsel
920 Indosat
910 XL
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900
890
01/07/2004
01/07/2002
01/01/2003
01/07/2003
01/01/2004
01/01/2005
01/07/2005
01/01/2006
01/07/2006
01/01/2002
Source: Picture LHPL

Such a phenomenon is seen in picture 5 of LHPL Page 78
on postpaid tariff of PSTN the increase of Telkomsel tariff
is followed then by XL. --------------------------------------
Postpaid - PSTN
535
525
Indosat Telkomsel
515
Telkomsel Indosat
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505 XL XL
495
485
01/01/2002
01/01/2003
01/07/2003
01/07/2002
01/01/2004
01/07/2004
01/01/2005
01/07/2005
01/01/2006
01/07/2006
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In the tariff movement pattern of Prepaid of PSTN, it is
seen in the period of 4/1/2004 that the stable of Telkomsel
tariff is used Indosat and to decrease tariff ----------------
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Prepaid - PSTN
1100
1000
Telkomsel
900 Indosat
XL
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800
700
01/10/2002
01/04/2003
01/10/2003
01/04/2004
01/10/2004
01/04/2005
01/10/2005
01/04/2006
01/10/2006
01/04/2002

However, the price lowering of both operator does not
influence to the lowering price of Telkomsel. In 4/1/2004
when Telkomsel increased price, the conduct was followed
by the increase of Indosat on 4/1/2005 and XL on
10/1/2004.-------------------------------------------------------
5.5.5.3.12 In the movement pattern of tariff in postpaid intra operator,
it is clearly seen that Telkomsel is not influenced to
decrease price. Telkomel price stability is used by Indosat
to increase its price in the same level as Telkomsel. The
price lowering done by XL is not followed by Telkomsel
and Indosat. In which it is alsi seen in prepaid inter-
operator above and below. ------------------------------------
Postpaid intra-operator
814
Y
813
Telkomsel
812
Indosat
811
XL
810
P
809
01/01/2002
01/07/2002
01/01/2003
01/07/2003
01/01/2004
01/07/2004
01/01/2005
01/07/2005
01/01/2006
01/07/2006
5.5.5.3.13 There is a reaction of XL and Indosat to the increase to
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price done by Telkomsel, but no reaction of Telkomsel to
the price lowering by XL and Indosat clearly indicates
that there is a price leadership in relevant market, in which
Telkomsel is a leader in price fixing.------------------------
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5.5.5.3.14 Thereby, there is price leadership in relevant market
5.5.5.4 Concerning Excessive Price-------------------------------------------------
5.5.5.4.1 Than in LHPL, the Investigation team principally state the
cellular price in Indonesia is excessive based on: ---------
5.5.5.4.1.1. cellular price comparison in other countries.
---------------------------------------------------
5.5.5.4.1.2. interconnection fee comparison-------------
5.5.5.4.1.3. Telkomsel financial simulation. ------------
5.5.5.4.1.4. profitability rate measured by EBITDA in
which operator’s EBITDA are getting
increase but the price does not decrease. --
5.5.5.4.2 That based on the data of Ditjen Postel (vide Evidence
A174), the price cellular in Indonesia is higher than
Singapore, Thailand, Brunei, India, Malaysia, and
Vietnam.---------------------------------------------------------
The Comparison of prepaid cellular– inter operator
(Rp/minute)
Country Operator Peak Off Peak
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Brunei B-Mobile 577
Thailand DTAC 524
India BSN 518
Singapore Singtel 924 462
Source: Ditjen Postel.
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5.5.5.4.3 That in peak-time, the Indonesian cellular price,
Telkomsel, Indosat, and XL are Rp 1,600, Rp 1,500, and
Rp 1,537 respectively. Differ from Indonesia, cellular
price of Celcom (Malaysia) only Rp 1493/minute,
cellular price of B-Mobile (Brunei) only Rp 577/minute,
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cellular price of DTAC (Thailand) only Rp 524/minute,
cellular price of BSN (India) only Rp 518/minute,
cellular price of SingTel (Singapura) only Rp 924/minute,
and cellular price of Mobifone (Vietnam) only Rp
819/minute. -----------------------------------------------------
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5.5.5.4.4 That Investigation team in LHPL indicates the high
cellular price and interconnection recommendation of
OVUM, that can be observed in the table below.(vide
Evidence C303 and in the tariff lit in LHPL paragraph 56-
59). --------------------------------------------------------------
The Comparison of Tariff and Tariff

Interconnection Recommendation
PSTN Other Cellular
Operator
Price % to
Price recommendation
recommendation
Telkomsel 950 151.03% 1600 178.17%
Indosat 900 143.08% 1500 167.04%
XL 837 133.07% 1537 171.16%
OVUM 629 898
Source: OVUM, data proceeded
Details: The value of OVUM recommendation is an addition of
origination and termination cost. In other words, the value of
recommendation has covered whole cost.
5.5.5.4.5 That the value of OVUM recommendation is total of

origination and termination cost and interconnection cost,
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then the value of recommendation has covered a whole
prediction of cellular cost per minute. ----------------------
5.5.5.4.6 That based on the table above, the cellular price is above
the cost.----------------------------------------------------------
5.5.5.4.7 That based on LHPL, the lowering price potency of
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Telkomsel cellular service is as follow:---------------------
Telkomsel Financial Simulations with ROE 20%, 25%, 30%, and 35%
Detail Actual Potency

ROE=20 ROE=25 ROE=30 ROE=35
% % % %
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equity 23073 23073 23073 23073 23073
ROE 55% 20% 25% 30% 35%
Net Income 11182 4614.6 5768.25 6921.9 8075.55
Tax 0.31436 0.3143663 0.3143663 0.3143663 0.314366
6
EBIT 16309 6730.416 8413.02 10095.624 11778.228
Operating cost 12836 12836 12836 12837 12838
Gross revenue 29145 19566.416 21249.02 22932.624 24616.228
C
Lowering Price 32.87% 27.09% 21.32% 15.54%
Details:
The Actual data was in 2006
The italic variable is assumed fixedly
5.5.5.4.8 As it can be observed in the table, with the assumption that

total equity is fixed, if ROE of Telkomsel is only 20%, the
net income will decrease from Rp 11,182,000,000,000.00
(eleven trillion one hundred eighty two billion rupiahs) to
Rp 4,614,600,000,000.00 (fourteen trillion six hundred
fourteen billion and six million rupiahs). Then, with the
assumption tax percentage to EBIT is fixed, the value of
EBIT will decrease from Rp 16,309,000,000,000.00
(sixteen trillion three hundred and nine billion rupiahs) to
Rp 6,730,416,000,000.00 (six trillion seven hundred and
thirty billion four hundred and sixteen million rupiahs).
Consistently, with the assumption of operating cost value
is fixed, then the gross revenue will decrease from Rp
29,145,000,000,000.00 (twenty nine trillion one hundred
and forty five billion rupiahs) to Rp
19,566,420,000,000.00 (nineteen trillion and five hundred
sixty six billion four hundred and twenty million rupiahs).
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With the assumption that cellular structure usage is fixed,
the value of gross revenue is 67.13% of actual gross
revenue, so that the potential tariff value is calculated for
amount of 67.13% of actual price, then the lowering price
rate potency is 32.87%. ---------------------------------------
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5.5.5.4.9 With the same methodology above, if the minimum of
Telkomsel ROE rate that satisfied shareholders is 25%,
30%, and 35%, the lowering price will be 27.09%,
21.32%, and 15.54% respectively from the actual price.
5.5.5.4.10 That LHPL indicates excessive price based on the high
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profit rate of cellular operators. The high profit rates is
shown by the value of huge Ebitda Margin and remain to
be in the long time. The value of Ebitda is shown in the
following table: (vide Evidence C166-C171, C236-C243,
C289-C294)-----------------------------------------------------
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Ebitda Margin
Value Value Value
2001 71.14% 55.32% 67.40%
2002 67.48% 54.11% 67.44%
2003 72.01% 53.29% 65.34% The
2004 72.28% 57.69% 62.71% Period of
2005 72.91% 58.09% 56.67% Cross-
2006 71.15% 57.62% 54.17% Ownership
The 72.09% 56.67% 59.72%
Average in
the period
of Cross-
Ownership
5.5.5.4.11 The high Ebitda indicates that cellular operators still have
space to decrease price rate -----------------------------------
5.5.5.4.12 Responding to the finding of Investigation Team, Temasek
principally disagree with Investigation team and state that
Investigation team shall consider inflation factor.---------
5.5.5.4.13 That in their responses and defenses Temasek, STT,
STTC, AMHC, AMH, ICL, and ICPL principally stte that
cellular service price in Indonesia is not higher than other
countries---------------------------------------------------------
5.5.5.4.14 That in their response and defenses, Telkomsel principally
state that the cellular price in Indonesia is still below
ceiling price as it is fixed in the Ministerial Decree, so that
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it cannot be considered to be excessive. --------------------
5.5.5.4.15 Council of Commission has a notion that the excessive
price is a price higher than its predicted competitive price,
or higher significantly than its cost. Based on such
principles, Council of Commission examines that cellular
P
service price in the relevant market is excessive.----------
5.5.5.4.16 That the research of OVUM has indicated a lowering price
of interconnection fee nominally, therefore although the
cellular price decrease because of inflation, the price that
does not decrease nominally shows that the price is more
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excessive than its interconnection cost. The elucidation is
a response of Council of Commission to the postulates
stated by Temasek concerning the importance of including
inflation value in the calculation. ----------------------------
5.5.5.4.17 That huge EBITDA is a logical consequence of higher
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price than its cost, with a result then excessive margin. --
5.5.5.4.18 Responding to the postulate presented by Telkomel that
the price fixed by operator is within the ceiling price fixed
by the government on the basis of Ministerial Decree of
Tourism, Posts and Telecommunication No.
27/PR.301/MPPT-98 (KM 27/1998) and Ministerial
Decree of Transportation No.79/1998 (KM 79/1998),
Council of Commission examines that ceiling price fixed
by the government is maximum price. Such a price
limitation just restrain the increase of price over the ceiling
price but not to prevent lowering price through market
mechanism. Council of Commission has a notion that it is
an authority of Commission to examines whether the price
and the conduct in the market is in line with of opposes to
the Law No. 5 /1999. It is affirmed by the Law
No.36/1999 on Telecommunication that has determined
tariff through competition mechanism and let the
mechanism of monitoring of competition to the rule of the
Law No. 5 /1999.-----------------------------------------------
5.5.5.4.19 Although it is not over ceiling price fixed by KM 27/1998
and KM 79/1998, the price above competitive predicted
price remain to be categorized as excessive price ---------
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5.5.5.4.20 Responding to the response on Temasek, STT, STTC,
AMHC, AMH, ICL, and ICPL stating that the tariff in
Indonesia is relatively lower than other countries, which
make the different conclusion with Investigation team in
LHPL, Council of Commission examines that cellular
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price comparison with other countries is influenced by the
choice of the comparative countries and cellular price
evaluation technique resulted on different conclusion.
Therefore, Council of Commission examines the price is
not based on other countries. ---------------------------------
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5.5.5.4.21 Council of Commission concludes that cellular service
price in Indonesia is excessive------------------------------
5.5.5.5 Concerning Excessive Profit ------------------------------------------------
5.5.5.5.1 That in LHPL, Investigation team state that “the high
market power alleged to be caused by concentrated
structure due to the presence of cross ownership can be
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shown by some indicators. Among others are high margin
profit measured by EBITDA, high selling price compare to
other countries, and the different of between selling price
and cost spent. --------------------------------------------------
5.5.5.5.2 That in its opinion and defense, Telkomsel principally
states that market power is not calculated from EBITDA
margin but a function of P-MC/P, a formula of Lerner
Index, in which P is price rate and MC is marginal costs
marginal----------------------------------------------------------
5.5.5.5.3 Council of Commission thinks that it is true for market
power to be calculated based on (P-MC)/P of known as
Lerner Index formula, in which it philosophically
describes the ability of business actor to fix price far from
cost. Nevertheless, telecommunication industry with
network based will cause fixed cost value total cost value
which make Lerner index is hard to be used as an indicator
of competition in telecommunication sector. It is admitted
by Nera on page 23 paragraph (74) (vide Evidence
C312):.
”thus, we would not expect the Lerner to be a good
predictor of competitive conditions in
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telecommunications”. -----------------------------------------
5.5.5.5.4 Council of Commission concludes that calculating by
using Lerner index cannot be implemented accurately to
measure market power in telecommunication industry, so
that other method shall be used as a reference to measure
P
market power, that is to use a method of profit rate value
that basically an ability of company to keep the price away
from its costs.. --------------------------------------------------
5.5.5.5.5 That it their opinions and defenses, STT, STTC, AMHC,
AMH, ICL, ICPL principally state that EBITDA is not a
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good measuring instrument to measure profit rate value.
EBITDA is Earning Before Interest, Tax, Depreciation,
and Amortization. Profits represent what a company has
gained after all costs are calculated while EBITDA does
not calculate costs at all. -------------------------------------
C
5.5.5.5.6 That in their opinions of defenses, Temasek, Singtel,
Singtel Mobile, and Telkomsel principally state that high
EBITDA and ROE do not indicate market power or
excessive tariff.-------------------------------------------------
5.5.5.5.7 Council of Commission has a notion that the profit fates is
usually measured by EBITDA and Return on Capital
Employed (ROCE) that remains high and tends to grow for
mid and long term. Regulator and the monitoring
competition agency see the difference company profit rate
when conduct investment anti-competitive behavior or see
the level of competition as it is elucidated in the report of
NERA page 44 (vide Evidence 312).------------------------
5.5.5.5.8 Council of Commission found that LHPL has shomn
comparison of EBITDA margin of Indonesian cellular
operator compare to other countries that cite the report of
Morgan Stanley (vide Evidence C305) on EBITDA Margin
in 2005 in which Telkomsel has the highest EBITDA
Margin compares to other operators in other Asian
countries and Indosat is the cellular operator with more
than 505 EBITDA Margin. -----------------------------------
P Y Source: LHPL, Paragraph 132
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5.5.5.5.9 That in describing the picture above, Morgan Stanley
states that EBITDA margin is 55% - 60% categorized as
the highest value. “Partly due to high prices and also due
to limited competitive intensity, Indonesian mobile
operators have enjoyed high EBITDA margin industry of
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55% - 60%”. (vide Evidence C305). -----------------------
The high of EBITDA margin along with the high cellular

price compare to emerging market in other Asian countries
gives a space for business actors in Indonesia to lower
price. The space for decreasing such price describes that
profit margin of cellular industry remain high so that it
needs to be decreased;-----------------------------------------
5.5.5.5.10 Council of Commission also finds that NERA (vide
Evidence C312) compares EBITDA margin by using the
same measurement used by companies abroad. Nera gives
a picture that EBITDA margin of Indonesian cellular
industry is the highest in the world compare to other 52
countries in the world and the second after Philippines, as
is it shown by the following pictures. -----------------------
P Y
Source: Report Nera for Singtel Page 48, 2007 (vide Evidence C312)
5.5.5.5.11 Council of Commission agrees with Nera stating that the
high profit also shown in the value of ROCE. ------------
The value of ROCE Cellular Industry Indonesia Year 2002 - 2006
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2002 2003 2004 2005 2006 Average
Telkomsel 45 % 59 % 56 % 70 % 71 % 60 %
Indosat 6% 13 % 14 % 13 % 10 % 11 %
Exelcomindo 22 % 14 % 13 % 9% 12 % 14 %
Industri 23 % 29 % 30 % 35 % 36 % 30 %
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Source: Report of Nera Page 45
Graphic of ROCE Cellular Industry Year 2002-2006
Return On Capital Employed in Relevant market
40%
35%
30%
25%
20% IIndustry
15%
10%
5%
0%
2002 2003 2004 2005 2006
Year
Source: Nera Data, proceeded

Based on the value of ROCE cellular industry in the report
of Nera (vide Evidence 312) on page 45, it found that from
year by year ROCE industry shows the consistency of
value to grow from 23% in 2002 to 36% in 2006. It
indicates that the investment in cellular industry, year by
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year, give bigger profits. The growth consistency of ROC
shows an increase of profit. ---------------------------------
5.5.5.5.12 Council of Commission concludes that from the rate of
profitability, shown by the value of high margin EBITDA
and the year-by-year growing consistency of ROCE,
P
proves that there is an excessive profit in the relevant
market.
5.5.5.6 Consumer Loss----------------------------------------------------------------
5.5.5.6.1 That in LHPL, the Investigation team principally states
that there is a consumer loss based on the analysis of price
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comparison with other countries for amount of Rp
79,900,000,000,000.00 (seventy nine trillion and nine
hundred billion rupiahs) to Rp 195,800,000,000,000 (one
hundred and ninety five trillions eight hundred billion
rupiahs) per year. Based on the analysis of comparison
C
with the interconnection cost for amount of Rp
79,900,000,000,000 (seventy nine trillion and nine
hundred billion rupiahs) to Rp 195,800,000,000,000 (one
hundred and ninety five trillions eight hundred billion
rupiahs) per year. Based on the calculation conducted by
LPEM UI, Rp 504,000,000,000.00 (five hundred and four
billion rupiahs) to Rp 1,200,000,000,000.00 (one trillion
and two hundred billion rupiahs) in 2005 Mastel (vide
Evidence C13). And based on the financial analysis, the
consumer loss caused by Telkomsel is Rp
9,800,000,000,000.00 (nine trillions and eight hundred
fifty-nine billion rupiahs) to Rp 24,000,000,000,000.00
(twenty-four trillions and seventy-eight billion rupiahs) in
2003-2006. ------------------------------------------------------
5.5.5.6.2 That to such calculation, in its opinion and defense the
Reported do not agree and state that principally the
calculation of consumer loss mentioned in LHPL and
Report LPEM UI are in accurate. Therefore the Reported
do not give the result of calculation by using alternative
method in calculating consumer loss ----------------------
5.5.5.6.3 According to Council of Commission the calculation of
consumer loss determined by the difference between the
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price paid by consumer and producer’s evaluation (cost
plus profit) received by consumer that is reflected in
competitive market of business actor to achieve fair ROE.
--------------------------------------------------------------------
5.5.5.6.4 That based on the approach above, Council of Commission
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has a notion that the value of consumer loss is Rp
14,760,000,000,000 (fourteen trillion and seven hundred
sixty four billion nine hundred eighty billion rupiahs) to
Rp 30,800,000,000,000 (thirty trillion and eight hundred
eight billion seven hundred twenty million rupiahs) within
the four years (2003 to 2006). The calculation has
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considered the balance interest of business actor and
consumer. -------------------------------------------------------
5.5.5.6.5 Further, Council of Commission describes the calculation
of such consumer loss as follows:---------------------------
5.5.5.6.5.1. That the consumer loss calculated based on
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the financial analysis in LHPL is based on
the assumption of profit achievement rate to
the satisfied value of owners’ capital (ROE).
Consumer loss is calculated by the
difference of existing ROE with the
assumption of ROE minimum satisfaction
rate of shareholders. The existing Telkomsel
ROE from 2003 to 2006 is (vide Evidence
C166-C171):-----------------------------------
Year ROE
2003 48%
2004 45%
2005 55%
2006 55%
The assumption of rate of minimum
satisfactory ROE is 20%, 25%, 30%, and
35%. In line with the calculation of
Investigation Team, the consumer loss of
Telkomsel customers from 2003 to 2006
was around Rp
9,859,000,000,000 (nine trillions and eight
hundred fifty-nine billion rupiahs) to Rp
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24,078,000,000,000 (twenty-four trillions
and seventy- eight billion rupiahs); --------
---------------------------------------------------
---------------------------------------------------
5.5.5.6.5.2. That the calculation of consumer loss using
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ROE above does not consider price decrease
potency of Telkomsel to the price decrease
of Indosat and XL. The consumer loss is a
price correction potency multiplied by the
revenue of PT Indosat. The consumer loss is
a price correction potency multiplied by the
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revenue of XL. According to the assumption
calculation conducted by the Investigation
team, then the ROE 20%, ROE 25%, ROE
30%, and ROE 35% show that price
decrease potency is 15.54% (for ROE 35%),
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21.32% (for ROE 30%), 27.09% (for ROE
25%), and 32.87% (for ROE 20%). -------
5.5.5.6.5.3. If the price decrease for Indosat consumer is
valid with the decrease of 15.54% and
21.32% then the consumer loss yang for
Indosat customer in 2005 and in 2006 is:-
Year Revenue Price Consumer

(billion down loss
Rp) (ROE (billion
30%) Rp)
2005 11,589.80 21.32% 2,470.94
2006 12,239.40 21.32% 2,609.44
total 5,080.38

(billion down loss
Rp) (ROE (billion
35%) Rp)
2005 11,589.80 15.54% 1,801.06
2006 12,239.40 15.54% 1,902.00
total 3,703.06
5.5.5.6.5.4. Based on similar calculation, consumer loss
of XL, on the basis of price decrease
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potency, is 15.54% and 21.32% and it can
be calculated as follows: ---------------------
(billion down loss
Rp) (ROE (billion
P
30%) Rp)
2005 3,059.13 21.32% 652.21
2006 4,681.67 21.32% 998.13
total 1,650.34
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(billion down loss
Rp) (ROE (billion
35%) Rp)
2005 3,059.13 15.54% 475.39
2006 4,681.67 15.54% 727.53
Total 1,202.92
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5.5.5.6.5.5. Based on finance statement of Telkomsel,
Indosat and Excelcomindo, Council of
Commission found consumer loss for at
least Rp 14,764,980,000,000.00 (fourteen
trillion and seven hundred sixty four billion
nine hundred eighty billion rupiahs) to Rp
30,808,720,000,000.00 (thirty trillion and
eight hundred eight billion seven hundred
twenty million rupiahs) with the following
description: ------------------------------------
Company Loss
(billion Rp)
minimum maximum
Telkomsel 9.859,00 24.078,00
Indosat 3.703,06 5.080,38
XL 1.202,92 1.650,34
Total 14.764,98 30.808,72
5.5.5.6.6 That Council of Commission has a notion that the
Investigation team has pointed causality of between the
cross ownership of Temasek with the consumer loss as it I
elucidated in the Schema of Cross-Ownership in LHPL.
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Temasek Business Group has restrained Indosat to
compete with Telkomsel, so it causes Telkomsel’s market
shares increase and the market share of Indosat decrease
in 2002-2006. Being more concentrated of the market the
market power of Telkomsel increase so that Telkomsel has
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power to become a price determiner to keep the price high
and causes consumer loss. ------------------------------------
5.5.5.6.7 Council of Commission has a notion that cross ownership
Temasek Business Group has caused high consumer
loss in cellular industry in Indonesia from 14.7 trillion
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to 30.8 trillion rupiah .---------------------------------------
5.6 Infringement to Article 17 paragraph (1) of the Law No. 5/1999 ---------------------------
5.6.1 The Follow-up Investigation team in its conclusion states that the usage of
market power Telkomsel decrease competition level and excessive pricing to the
cellular telecommunication service so it infringe Article 17 paragraph (1) of the
Law No. 5/1999. --------------------------------------------------------------------------
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5.6.2 Article 17 of the Law No. 5/1999 is said completely as follows:------------------
(1) “Business actor is prohibited to have control to the production and /or goods and
/or services marketing that is able to cause monopoly practice and/or unfair
competition.”--------------------------------------------------------------------------------------
(2) “Business actor is deserving of alleged of considered to have control to the
production and /or goods and /or service marketing as it is intended by paragraph (1)
if: ---------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
(a) there is no substitution for the related goods and/services; or ------------------------
(b) causes other business actor barrier cannot enter to the competition of common
related goods and/services; or------------------------------------------------------------------
(c) a business actor and/or a group of business actor control more than 50% market
share of certain goods or services.-------------------------------------------------------------
5.6.3 Council of Commission has a notion that to be said infringing Article 17, there
must be fulfilled the standards of some important elements namely, first, business
actor; second, controlling market; third the business actor implementing a
business policy (practice and conduct) that causes negative impact to
competition.--------------------------------------------------------------------------------
5.6.4 Further Council of Commission examines whether the elements of Article 17
paragraph (1) of the Law No. 5/1999 has been completed by the following
analysis; ------------------------------------------------------------------------------------
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5.6.5 Business Player----------------------------------------------------------------------------
5.6.5.1 That Telkomsel is a corporate body founded and domiciled in
Indonesia and perform business in economic field as it is eludicated in
the part of Reported Identity.; (vide Evidence C165) --------------------
5.6.6 Market Share-------------------------------------------------------------------------------
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5.6.6.1 That in LHPL, the Investigation team has elucidated cellular market
share from 2001 to 2006. ----------------------------------------------------
5.6.6.2 Based on the data, Council of Commission examines that Telkomsel
has more than 50 % of market shares with the average of 61.24%;
(vide Evidence C166-C171, C236-C243, C289-C294) ------------------
5.6.7 Behavior------------------------------------------------------------------------------------
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5.6.7.1 That Investigation team of LHPL principally states that there is
interconnection restraint conducted by Telkomsel in line with the
testimony of Mastel (vide Evidence B52), Hutchinson (vide Evidence
B14), and document cooperation document of Telkomsel and one of
operators -----------------------------------------------------------------------
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5.6.7.2 That in the opinion of defense related to the verification of
infringement of Article 17 paragraph (1) and Article 25 paragraph
(1).b of the Law No. 5/1999, principally states: --------------------------
5.6.7.2.1 That the testimony of Hutchinson does not have strength
as written proof because Hutchinson is not a business
player in the telecommunication industry in Indonesia in
the period of 2002-2006. --------------------------------------
--------------------------------------------------------------------
5.6.7.2.2 That the testimony of is invaluable testimony -------------
5.6.7.2.3 That the Investigation team does not complete 2 (two)
principles written proof ---------------------------------------
5.6.7.2.4 That the Investigation team has engineered IOR ----------
5.6.7.3 Considering to the opinion and defense of Telkomse, Council of
Commission gives the following consideration:--------------------------
5.6.7.3.1 Concerning the Testimony of Hutchinson ------------------
5.6.7.3.1.1. That in the period 2002-2006 in LHPL is a
period of analyzing economy conducted by
Investigation team and not a period of the
infringement happened in this case.
Therefore, the testimony of Hutchinson
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include in LHPL is a relevant testimony that
has a strength as a valid written proof
although Hutchinson entered
telecommunication industry in Indonesia
only 2007. The testimony of Hutchinson is
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valuable clue to the behavior in the period of
2002-2006.-------------------------------------
---------------------------------------------------
5.6.7.3.2 Concerning the Testimony of Mastel------------------------
5.6.7.3.2.1. That the testimony of Mastel is used by
Investigation team in LHPL as a party that
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understand an occurrence. It is in line with
the criteria of witness as it is regulated in
Article 1 (22) of the Commission
Regulation No. 1/2006 on the Case
Handling Procedure in KPPU that states: -
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”Witness is anyone of any party that that
sees infringement and gives information for
the interest of investigation” ----------------
5.6.7.3.3 Concerning Minimum 2 (two) Written Proof --------------
5.6.7.3.3.1. Council of Commission found that in the
verification of Telkomsel behavior in LHPL,
it bases on more than two valid and
supportive written proofs between one
written proof to another, namely the
testimony of Mastel (vide Evidence B52),
the testimony of Hutchinson (vide Evidence
B14), economic analysis as a clue, and
Cooperation Agreement between Telkomsel
with Hutchinson (vide Evidence C207).
Thereby, the verification conducted by
Investigation team has been based on
sufficient written proof. ----------------------
5.6.7.3.4 Concerning the engineering of IOR -------------------------
5.6.7.3.4.1. Concerning the postulate of engineering of
IOR, Council of Commission found as
follows: paragraph (126) of LHPL states:
“That the rate of cellular tariff in Indonesia
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is considered higher related to the
Indonesian public purchasing power with
the income per capita is USD 700, in which
the expenditure for cellular service is 10-
20% of the income,” is a conclusion of
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Investigation team to the investigation of
Mastel on 21 June 2007. IOR (vide Evidence
B52) as it is intended by point 4 states: --
“It is considered high compared by average
public purchasing power. I have ever seen a
research from Harvard on cellular tariff in
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Bangladesh, the understanding of low and
high price are based on her average of
public majority in Indonesia. In Indonesia
the income per capita is USD”--------------
In addition, in point 7 states: ----------------
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“There are groups of low class economic
income such as costermonger, pedicap
driver that has taken home pay a day is Rp
20,000.00 – Rp 30,000.00 After using
cellular phone, their income decrease in
average for Rp 5,000.00 around 10%-15%
of disposable income, but it spent
improperly.” -----------------------------------
5.6.7.3.4.2. Council of Commission examines that there
is a mistake in citing IOR on the portion of
usage that must 10%-15% but it is included
in LHPL 10%-20%. Yet, Council of
Commission examines that the mistake does
not eliminate the material validity of the
whole written proof. --------------------------
5.6.7.4 That based on the description above, Council of Commission examines
that the verification conducted by Investigation team has completed
two principles of written proof. ---------------------------------------------
5.6.7.5 That it is proved Telkomsel has conducted interconnection restraint,-
5.6.7.6 Price Leadership--------------------------------------------------------------
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5.6.7.6.1 Based on the description as it is elucidated in 5.5.5.3 a
mutatis mutandis is valid in this part, then Council of
Commission concludes that price leadership has existed
and conducted by Telkomsel. ------------------------------
5.6.7.7 Concerning Excessive Price-------------------------------------------------
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5.6.7.7.1 5.6.8.1.1 Based on the description as it is elucidated in
5.5.5.4 a mutatis mutandis is valid in this part, then
Council of Commission concludes that the price of
Telkomsel cellular service is excessive.-------------------
5.6.8 Impacts ----------------------------------------------------------------------------------
5.6.8.1 Competition in Indonesian Cellular Industry -----------------------------
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5.6.8.1.1 Based on the description as it is elucidated in 5.5.5.2 that
mutatis mutandis is valid in this part, then Council of
Commission concludes that cellular industry in
Indonesia is not competitive. -------------------------------
5.6.8.2 Concerning Excessive--------------------------------------------------------
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5.6.8.2.1 The consideration and explanation as it has elucidated in
5.5.5.5 mutatis mutandis valid to this part with the growth
as follows:-------------------------------------------------------
5.6.8.2.1.1. EBITDA margin of Telkomsel is always

around average rate of 72.09% in the period
of 2003 to 2006. (vide Evidence C166-
C171) -------------------------------------------
5.6.8.2.1.2. EBITDA margin of Telkomsel is the highest
compare to other cellular operator in Asian
countries, as it is elucidated in Report
Morgan Stanley dated 21 February 2006.
(vide Evidence C305) ------------------------
---------------------------------------------------
5.6.8.2.1.3. The value of ROCE increased from 45% in
2001 to 71% in 2006 as it is shown by the
graphic: (vide Evidence C312) --------------
Telkomsel
Nilai ROCEROCE Value
Telkomsel
75%
70%
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65%
60%
55%
P
50%
45%
40%
2002 2003 2004 2005 2006
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Source: Nera, proceeded
5.6.8.2.1.4. The growth of operational income per year
in the period of time 2001 to 2006 growth
follow multiple the pattern of quadratic and
exponential as it is shown by the following
graphic : ----------------------------------------
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---------------------------------------------------
OPREV
40000
30000
20000
10000
Observed
Quadratic
0 Exponential
0 1 2 3 4 5 6 7
Sequence
Source: LHPL
5.6.8.2.1.5. The diagram above shows the relationship
between revenue achievement and the
double growth, following the pattern of
quadratic and exponential. Telkomsel
Operating revenue in 2001 was Rp
4,918,000,000,000 (four trillion and nine
hundred and eighteen billion rupiahs), in
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2002 was Rp 7,573,000,000,000 (seven
trillion and five hundred seventy three
billion rupiahs), in 2003 was Rp
11,146,000,000,000 (Eleven trillion and one
hundred forty six billion rupiahs), in 2004
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was Rp 14,765,000,000,000 (fourteen
trillion and seven hundred sixty five billion
rupiahs), in 2005 was Rp
21,133,000,000,000,00 (twenty one trillion
and one hundred thirty three billion
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rupiahs), and year 2006 amount to Rp
29,145,000,000,000,00 (twenty nine trillion
and one hundred forty five billion rupiahs),
the growth of operating revenue is following
the pattern of quadratic with is equation
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Y=a+bX+cX2, when Y is operating revenue,
X is year, and the value of a=4564.10, b=-
18.939, and c=677.946. The growth of
operating revenue is following the pattern of
exponential when with the equation Y=aebx,
when Y is operating revenue, X is year, and
the value of a=3663.10, b=0.3502. --------
5.6.8.2.1.6. The growth of EBIT, EBITDA, and Net
Income of Telkomsel in the period of 2001
to 2006, if it is translated in a graphic, will
say that the growth following expontial or
quadratic is no simply a linier growth.-----
5.6.8.2.2 Based on the description above, Council of Commission
concludes that Telkomsel obviously gains excessive
profit in the relevant market. ------------------------------
5.6.8.3 Consumer Loss
5.6.8.3.1 According to Council of Commission the calculation of
consumer loss determined by the difference between the
price paid by consumer and producer’s evaluation (cost
plus profit) received by consumer that is reflected in
competitive market of business actor to achieve fair ROE.
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--------------------------------------------------------------------
5.6.8.3.2 That based on the approach above, Council of Commission
predicts that Telkomsel’s consumer loss is Rp
9,859,000,000,000 (nine trillions and eight hundred fifty-
nine billion rupiahs) to Rp 24,078,000,000,000 (twenty-
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four trillions and seventy- eight billion rupiahs) for the
period of four years (2003 to 2006). must prioritize the
interests effort perpetrator and consumer importance ----
5.6.8.3.3 Further, Council of Commission describes consumer loss
rate as follows:---- ---------------------------------------------
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5.6.8.3.3.1. That consumer loss measured by financial
analysis in LHPL is assumed profit
achievement rate to satisfied ROE
Consumer loss is measured from the
different of existing ROE with the
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assumption of rate of ROE that at less
satisfy shareholders. The Telkomsel ROE
from 2003 to 2006 is: (vide Evidence C166-
C171 --------------------------------------------
Year ROE
2003 48%
2004 45%
2005 55%
2006 55%
5.6.8.3.4 The assumption of minimal ROE is 20%, 25%, 30%, and

35%. In line with a calculation LHPL, consumer loss of
Telkomsel from 2003 to 2006 was Rp 9,859,000,000,000
(nine trillions and eight hundred fifty-nine billion rupiahs)
to Rp 24,078,000,000,0000 (twenty-four trillions and
seventy- eight billion rupiahs);
5.6.8.3.5 That the high price of Telkomsel cellular service has
caused consumer loss from Rp 9,859,000,000,000 (nine
trillions and eight hundred fifty-nine billion rupiahs) to
Rp 24,078,000,000,000 (twenty-four trillions and
seventy- eight billion rupiahs). -----------------------------
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5.7 The infringement of Article 25 paragraph (1) of the Law No. 5/1999 ----------------------
5.7.1 In its conclusion, Investigation team states that the usages of market power by
Telkomsel causes lack of competition level and excessive pricing in service
telecommunication so it infringes Article 25 paragraph (1). ------------------------
5.7.2 Article 25 paragraph (1).b is said as follows: ----------------------------------------
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“business actor is prohibited directly or indirectly abuses dominant position --
b. limit market and technology development; ---------------------------------------
5.7.3 Prior to the completeness analysis of element of Article 25 paragraph (1).b,
Council of Commission has to describe previously an analysis approach to
Article 25 namely, according to Council of Commission, an analysis of Article
25 can be conducted by per se rule or rule of reason. The implementation of per
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se rule approach is a minimalist approach because the formulation of Article 25
excludes one out of two sentences, “can cause monopoly practice” and/or “unfair
competition”. The implementation of rule of reason approach is maximalist. This
perspective bases its assumption on the policy of business actor as it is in
paragraph (1) letter a, b, or c that the policy is not surely caused negative impact
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to competition, it could be potential only to cause, therefore, a test is needed. In
this case, Council of Commission implements maximalist perspektif, rule of
reason. --------------------------------------------------------------------------------------
5.7.4 Council of Commission has a notion that the important elements of Article 25
paragraph (1) letter b are (1), Business actor; (2), market ownership; (3), market
barrier and technology development restraint; and (4), negative impact to
competition. -------------------------------------------------------------------------------
5.7.5 Further, Council of Commission examine whether the element in Article 25
paragraph (1) letter b are completed by the following analysis;--------------------
5.7.6 Business Actor ----------------------------------------------------------------------------
5.7.6.1 That Telkomsel is a corporate body incorporated and domiciled in
Indonesia, performed business in an economic field as it is elucidated
in Identity of Reported; (vide Evidence C65) -----------------------------
5.7.7 Market Share-------------------------------------------------------------------------------
5.7.7.1 That in LHPL, the Investigation team has elucidated cellular market
share from 2001 to 2006. ----------------------------------------------------
5.7.7.2 Based on the data, Council of Commission examines that market share
of Reported X has been more than 50%, with the market share average
for 61,24% (vide Evidence C166-C171, C236-C243, C289-C294)----
5.7.8 Market Barrier and Development of Technology Restraint ------------------------
5.7.8.1 The Investigation team of LHPL states that there is an interconnection
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restraint conducted by Telkomsel as an answer to the testimony of
Mastel (vide Evidence B52), Hutchinson (vide Evidence B14), and an
agreement document between Telkomsel and one of operator. --------
5.7.8.2 That in the opinion and defense, Telkomsel principally states not to
have restricted the development of technology, Telkomsel is a first
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cellular telecommunication operator that introduce:---------------------
5.7.8.2.1 Pre-paid business in Indonesia using IN technology; -----
5.7.8.2.2 Service on the basis of GPRS and EDGE technology;---
5.7.8.2.3 Certain value added services such as ring back tone; -----
5.7.8.2.4 Electronic voucher; --------------------------------------------
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5.7.8.2.5 3G service that provides video call, video streaming;-----
to which they are technological development implemented by
Telkomsel and applied further by Telkomsel’s competitors to
contribute positively market development of cellular
telecommunication.-----------------------------------------------------------
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5.7.8.3 Council of Commission examines the insufficient evidence to state
that Telkomsel restricts technological development. The facts show
that Telkomsel develops new technology and followed further by other
cellular operators.-------------------------------------------------------------
5.7.8.4 Council of Commission examines that there is market barrier through
the restraint of interconnection but there is no restraint to the
development of technology. -------------------------------------------------
5.7.8.5 Due to the incompleteness of the elements above, Council of
Commission needs not to examine the impact causes by market barrier
and by development of technology restraint. -----------------------------
6. Conclusion--------------------------------------------------------------------------------------------------
6.1 Considering that based on the consideration and description above, the Council of
Commission come to conclusion as follows: ---------------------------------------------------
6.1.1 That Temasek Business Group has cross ownership in Telkomsel and Indosat
which causes anti-competition in the market of cellular telecommunication
service in Indonesia, with the result that Temasek Business Group infringes
Article 27 a, of the Law No. 5/1999. --------------------------------------------------
6.1.2 That Telkomsel has conducted interconnection restraint and kept a high price
which causes anti-competition in the market of cellular telecommunication
service in Indonesia, with the result that Telkomsel infringes Article 17
paragraph (1) of the Law No. 5/1999 --------------------------------------------------
6.1.3 That Telkomsel is not proven to restrict the development of technology in
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cellular telecommunication service in Indonesia, with the result that Telkomsel
does not Article 25 paragraph (1) b of the Law No.5/1999 ------------------------
7. Considering that before deciding it, Council of Commission considers the followings ---------
7.1 That economic activity in Indonesia must be performed based on the principle of
democracy on economy accomplishing with Article 2 of the Law No. 5/1999, economic
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activity that considers the balance of business actor's interests and public interest.-------
7.2 That any business activity in Indonesia intend to guarantee public interest and to boost
national-economy efficiency as one of efforts in improving people prosperity. -----------
---------------------------------------------------------------------------------------------------------
7.3 That government in conducting privatization in so many forms has to concerned the Law
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No. 5/1999 -------------------------------------------------------------------------------------------
7.4 That any party in Indonesia has to perform hard to prevent economic power concentration
by certain business actor, including cross ownership. -----------------------------------------
7.5 That telecommunication sector is a strategic sector covering satellite, undersea fiber cable
network, and microwave links that control many people, so that government is entitled to
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regulate in order not to violate Indonesian sovereignty rights in having international
telecommunication access. ------------------------------------------------------------------------
7.6 That telecommunication is important sector and gives substantial contribution to national
economic development although there are already a lot of operators but it has not shown
optimum competition performance; --------------------------------------------------------------
7.7 That the enforcement of the Law No. 5/1999 is an effort to guarantee rule of law for
business actor; ---------------------------------------------------------------------------------------
8. Considering that crossed ownership conducted by Temasek together with STT, STTC, AMHC,
AMH, ICL, ICPL, SingTel, and SingTel Since 2003 to 2006 caused costumer loss Rp
14,764,980,000,000 (fourteen trillions and seven hundred sixty-four (fourteen trillions and
seven hundrer sixty-four billion nine hundred eighteen billion rupiahs) and max Rp
30,808,720,000,000 (threaten trillions and eigh hundred eigh billion seven hundred twenty
billion rupiahs) of the Law Number 5 / 1999, Commission Committee ---------------------------
9. Consider that base on the fax and conclusion, to infringe considered 43 paragraph (3) of the
Law Number 5 / 1999, Commission Committee; ------------------------------------------------------
DECIDED
1. To state that Temasek Holdings, Pte. Ltd., Singapore Technologies Telemedia Pte. Ltd.,
STT Communications Ltd., Asia Mobile Holding Company Pte. Ltd, Asia Mobile
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Holdings Pte. Ltd., Indonesia Communication Limited, Indonesia Communication Pte.
Ltd., Singapore Telecommunications Ltd., and Singapore Telecom Mobile Pte. Ltd were
legally and convincingly violated Article 27 of Law No. 5/1999;
2. To state that PT. Telekomunikasi Cellular were legally and convincingly violated Article
17 (1) Law No. 5/1999; -----------------------------------------------------------------------------------
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3. To state that PT. Telekomunikasi Cellular were legally and convincingly violated Article
25 (1) letter b Law No. 5 / 1999;------------------------------------------------------------------------
4. To instruct Temasek Holdings, Pte. Ltd., Singapore Technology 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
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Telecommunications Ltd., and Singapore Telecom Mobile Pte. Ltd to stop their share
ownership in PT. Telekomunikasi Selular and PT. Indosat, Tbk. by divesting the whole
share ownership to one of the company, PT. Telekomunikasi Selular or PT.Indosat, Tbk.,
as from 2 (two) years since the decision final and binding; --------------------------------------
5. To instruct Temasek Holdings, Pte. Ltd., together with Singapore Technologies Telemedia
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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 want to divest its ownership and release voting right and rights to
nominate directors and commissioner in one of the company, PT. Telekomunikasi Selular
or PT. Indosat, Tbk., until the shares divest in a whole as it is instructed in dictum 4
above; -------------------------------------------------------------------------------------------------------
6. The divestment of share ownership as it meant in dictum 4 above shall be performed
under the following condition: -------------------------------------------------------------------------
a. to each buyer is limited to maximum 5% of the total divested shares;-----------------
b. the buyer may not associate with Temasek Holdings, Pte. Ltd. and or other buyers
in whatever form;----------------------------------------------------------------------------------
7. To punish 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 each for
amount of Rp 25,000,000,000 (twenty-five bilion rupiahs) which have to be transferred
that must be transferred to State Treasury as the Deposit Income of Violation Fine in
Business Competition Department of Trade, General Secretariat of Work Unit of
Commission for the Supervision of Business Competition, by government bank with the
acceptance code 423491 (Income of Violation Fine in Business Competition Field).
8. To instruct PT. Telekomunikasi Selular to stop practicing high tariff and decrease
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cellular service tariff at least 15% (fifteen percent) from valid tariff at the date this
decision announce;----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
9. To punish PT Telekomunikasi Selular to pay fine for amount of Rp 25,000,000,000
(twenty-five billion rupias) which have to be transferred that must be transferred to State
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Treasury as the Deposit Income of Violation Fine in Business Competition Department of
Trade, General Secretariat of Work Unit of Commission for the Supervision of Business
Competition, by government bank with the acceptance code 423491 (Income of Violation
Fine in Business Competition Field).
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IN WITNESS THEREOF, it was decided in the consultative meeting of Council of Commission,
on Monday, dated 19 November 2007 and announced in open council for public at the same day
and date, with Commission Council consist of Dr. Syamsul Maarif, S.H., LL.M as the Chairperson,
Prof. Dr. Tresna P. Soemardi, Didik Akhmadi, Ak, M.Comm, Erwin Syahril, S.H. and Dr.
Sukarmi, S.H., M.H respectively as Members, with Arnold Sihombing, S.H., M.H. and M. Hadi
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Susanto, S.H. as Registrars.
The Chairperson of Council,
Duly Signed
Dr. Syamsul Maarif, S.H., LL.M.
Member of Council, Member of Council,
Duly Signed Duly Signed
Prof. Dr. Tresna P. Soemardi Didik Akhmadi, A.k., M. Comm

Member of Council, Member of Assembly,
Erwin Syahril, S.H. Dr. Sukarmi, S.H., M.H.
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Registrars,
Arnold Sihombing, S.H., MH M. Hadi Susanto, S.H.
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SEKRETARIAT OF COMMISSION FOR SUPERVISING BUSINESS COMPETIION
(Ad interim) Law Enforcement Director,
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Ismed Fadillah, SH, M.Si

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THE CONDITION OF THE CASE

2. Considering that the Commission issues Confirmation Number

3. Considering that after performing Preliminary Investigation, the Examiner Team

1. The Confirmation of the Commission for the Supervision of Business

2. The Decision of Commission for the Supervision of Business Competition

1. Ir. M. Nawir Messi, M.Sc. (Chairperson); ---------------------------------------------------

3. Prof. Dr. Tresna P. Soemardi (Member);----------------------------------------------------

4. Didik Akhmadi, A.k., M. Comm (Member); -----------------------------------------------

1. Farid F. Nasution, S.IP., S.H., LL.M; ---------------------------------------------

1. Arnold Sihombing, S.H. M.H; -----------------------------------------------------

III.The Suspected Infringements; ---------------------------------------------------------------

1. Temasek Holdings Pte. Ltd (hereinafter referred to as Temasek) owns

2. PT. Telekomunikasi Selular (hereinafter referred to as Telkomsel) remains

3. Telkomsel abuses its dominant posisition to restrain market and the

IV. The Relevant market ;------------------------------------------------------------------------

4. Under Article 1 (10) of the Law No.5/1999, relevant market is a market

5. Under the commission law, a market concerning specific coverage or area

6. Principally, product market analysis is to mention kind of goods and/or services,

7. In general, the market of telecommunication industries can be classified into

8. The operating of fixed network or Public Switch Telephone Network (PSTN)

10. Characteristic. The significant characteristic differences of “cellular

13. Although subscribers in specific segment concern on tariff, mostly concern on

16. As products of PT. Telkomsel telecommunication services, Kartu Halo, Simpati,

4.2 Geographical Market; -------------------------------------------------------------------

18. In relation to the coverage or marketing area, there are no constraints on

5.1 The Development of Telecommunication Industry in Indonesia; ----------------

i. PT Bimagraha Telekomindo (“Bimagraha”), 45%; -----------------------

ii. Detemobil Deustche Telecom Mobilfunk GmbH, 25%; -----------------

iii. Telkom, 22.5%, and -----------------------------------------------------------

iv. Indosat, 7.5%; ------------------------------------------------------------------

i. Telkom, 42.5%; ----------------------------------------------------------------

ii. Indosat, 35%;-------------------------------------------------------------------

25. As a volunteer of prepaid cellular telecommunications service provider, Telkomsel

ii. ICL, 41.9%;-------------------------------------------------------------------

iii. Public, 45.19%; --------------------------------------------------------------

Number of Subscribers Subscriber Segment

Number of Subscribers Subscriber Segment

Number of Subscribers Subscriber Segments

Indosat 9,754,607 14,512,453 16,704,729 32.15% 30.88% 26.18%

Excelkomindo 3,791,000 6,978,519 9,527,970 12.50% 14.85% 14.93%

Mobile-8 (Fren) 500,000 1,200,000 1,825,888 1.65% 2.55% 2.86%

36. In Indonesia, cellular telecommunication industry is an industrial sector which

Number of Subscribers Subscriber Segments

The Comparation of Subscribers based on the

Source: Directorate of Telecommunication, Director General of Posts and

38. A numbers of customers or subscribers. By 2006, a number of subscribers of the

40. Temasek through SingTel performed an acquisition of 22.3% Telkomsel shares

Indonesia Singapore Telecom

PT. Indosat, Tbk. Telkomsel

Indonesia Singapore Telecom

PT. Indosat, Tbk. Telkomsel

5.3 Tariff Regulation;--------------------------------------------------------------------------

a. The Law No. 36/1999 On Telecommunication; Article 27 and Article

b. Government Regulation No. 52/2000 On Telecommunication Operating; --

c. Ministrial Decree No.21/2001 On Telecommunication Operating;-----------

d. Ministrial Regulation No. 8/2006 On Interconnection Tariff;-----------------

e. Ministrial Regulation No. 12/2006 On Cell Phone Tariff Station;------------

50. The list of maximum postpaid tariff regulation that is regulated by

Waktu Bisnis: Pukul 08.00-22.00

Direct Using Cost

Business Hour: At 08.00-22.00

53. In fact, the regulation of the Minister of Communication and Information