QATAR Telecom (Qtel) has defied some political resistance to complete a controversial acquisition of a Singapore firm's stake in No.2 Indonesian telco Indosat.

The US$1.8 billion (S$2.5 billion) stake was transferred to Qtel by Singapore Technologies Telemedia (ST Telemedia), which held the shares in two holding companies. ST Telemedia is a unit of Temasek Holdings.

The Indosat stake that ST Telemedia held has been at the centre of a legal dispute since last year, when Indonesia's Business Competition Supervisory Commission, or KPPU, ruled that the Singapore firm had breached antitrust laws.

The KPPU claimed that Temasek had engaged in monopolistic practices in Indonesia's mobile-phone market, and had breached anti-competitive laws by holding majority stakes in more than one company in the same industry.

Temasek has a deemed stake of about 20 per cent in Indonesia's No.1 telco Telekomunikasi Selular (Telkomsel) held via SingTel. It also had a 31 per cent deemed stake in Indosat, held via its wholly owned unit ST Telemedia.

The KPPU fined the companies and also ordered Temasek to sell its deemed stake in either Telkomsel or Indosat. It also ruled that buyers could purchase the shares only in 5 per cent chunks at most.

Temasek, SingTel and ST Telemedia claimed that there was no breach of antitrust laws and appealed against the ruling in the Central Jakarta District Court.

But last month, the Indonesian court upheld the KPPU's ruling. The three firms then said they would appeal against this decision to the Indonesian Supreme Court.

But on June 7, ST Telemedia announced that it was selling its Indosat stake to Qtel.

ST Telemedia, Qtel and Indosat claim that the deal is legal and gets around the 5 per cent rule as no Indosat shares were actually sold to Qtel.

What ST Telemedia sold was its stake in two holding companies, Indonesia Communications Limited and Indonesia Communications Pte Ltd, which held the actual Indosat shares.

ST Telemedia said that because none of the two companies is registered in Indonesia, they are not subject to the country's laws or the KPPU's 5 per cent cap, which is under appeal anyway.

Last week, Indonesian Vice-President Jusuf Kalla confirmed that the deal was 'just business as usual for overseas buyers. As the owners of the shares are in Singapore, the transaction is legitimate'.

But news of the sale provoked contrasting reactions from different senior lawmakers in Indonesia.

While State Enterprises Minister Sofyan Djalil said the sale was good for Indonesia and that the government would not halt it,

KPPU chairman Syamsul Maarif said the agency was looking at legal action to scupper the deal.

Qtel chairman Abdullah Al-Thani acknowledged the controversial nature of the purchase, and said that it would abide by the Supreme Court's final ruling when it came.

chuahh@sph.com.sg

About the case

INDONESIA'S Business Competition Supervisory Commission, or KPPU, had ruled last year that Temasek had violated the country's antitrust law through cross-ownership in two Indonesian telcos, Telkomsel and Indosat.

Temasek has a deemed stake of about 20 per cent in Telkomsel held via SingTel. It also had a 31 per cent deemed stake in Indosat, held via its wholly owned unit ST Telemedia.

The KPPU fined the companies and also ordered Temasek to sell its deemed stake in either Telkomsel or Indosat. It also ruled that buyers could purchase the shares only in 5 per cent chunks at most.

Temasek, SingTel and ST Telemedia appealed against the ruling in the Central Jakarta District Court. But the Indonesian court last month upheld the KPPU's ruling.

Temasek and its affiliates have appealed against this decision to the Indonesian Supreme Court.