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20/11 Reading Casestudy 1?

Indonesian watchdog probes SMS price-fixing allegations

Publication:The Straits Times 13/12/2007

It says it received a complaint that some mobile telcos were operating a cartel



In Jakarta

INDONESIA'S competition watchdog has launched a fresh probe of alleged
price-fixingby mobile telcos.

And the investigation could mean further trouble for Singapore's Temasek Holdings, after the Business Competition Supervisory Commission (KPPU) last month ruled that it had violated anti-monopoly laws with its stakes in the country's two biggest telcos.

The KPPU is now looking into allegations that the country's mobile phone operators got together to fix tariffs for short message services (SMS).

KPPU chairman Muhammad Iqbal said investigations began last week following a complaint that some mobile phone companies were operating a cartel and
fixing tariffs for SMS.

"We have been told that they signed an agreement to fix the
price of SMS. This is against business competition," he told The Straits Times.

He said the initial probe would take 30 days, and if there was evidence the companies breached anti-trust laws, further investigations would be conducted before a final ruling was made.

Last month, the KPPU ruled that Temasek – which has indirect but minority stakes in Indosat and Telkomsel – had contravened the law through cross-ownership,
price-fixingand abuse of market dominance.

Mr Iqbal said the latest investigation did not single out Indosat and Telkomsel, as it covered all the country's mobile phone companies.

But observers say the probe has raised concerns that it could again implicate Temasek Holdings over alleged violation of the anti-trust law.

Temasek has repeatedly said that it does not exercise any control over the running of its subsidiaries, ST Telemedia and SingTel, which are managed by separate boards of directors, and has no direct stakes in the Indonesian telcos.

ST Telemedia has stakes in Indosat through Asia Mobile Holdings – a joint venture with Qatar Telecom – which controls a 40 per cent share in the telco. SingTel has a 35 per cent stake in Telkomsel.

The KPPU maintains, however, that Temasek was guilty of violating anti-trust laws in the earlier case.

Analysts cautioned that it was too early to say whether Temasek would again end up in the firing line, but Mr Iqbal dismissed fears that the investment company is being deliberately targeted.

"This is a separate investigation," he said.

"It has nothing to do with Temasek. We received a complaint that some operators were
fixing the prices of SMS and we are investigating this.

"The case against Temasek is over. There is no attempt at trying to fix Temasek."

In its ruling last month, the KPPU found Telkomsel and Indosat guilty of
price fixing in the mobile phone business.

Telkomsel, which is majority owned by Telkom, a state-owned enterprise, was ordered to lower its tariffs by at least 15 per cent within two years.

The telco was also slapped with a 25 billion rupiah ($3.9 million) fine.

Temasek, apart from being fined 25 billion rupiah, has been ordered to give up its indirect stakes in one of the two telcos.

The company has said it will fight the ruling.