ASIA NEWS NETWORK
WE KNOW ASIA BETTER
SingTel associate declared broke despite $6b assets
Publication Date : 21-09-2012
Singtel's Indonesian mobile associate has been declared bankrupt with debts of S$680,000 (US$555,000), despite having more than US$6 billion in assets.
The Jakarta Commercial Court made the ruling against PT Telekomunikasi Selular (Telkomsel) last week after former vendor PT Prima Jaya Informatika filed a bankruptcy order against it.
Indonesian law states that firms that are late in paying their debts to more than two companies are considered bankrupt.
Prima Jaya showed that in addition to owing it 5.3 billion rupiah (US$554,000), Telkomsel also owed content provider Extent Media about 40 billion rupiah.
Telkomsel said it is filing an appeal against the decision today.
Its lawyer said receivers at Telkomsel would "not affect daily operations and services to clients".
"A receiver's job is to identify and list all the assets of the company and ensure the value of those assets are not deteriorated. A receiver cannot cause a company to lose value," he said.
A SingTel spokesman said that it supports Telkomsel's decision to appeal, adding: "Telkomsel is a financially strong company, with net assets of 35 trillion rupiah or US$3.8 billion" as of June 30.
SingTel owns 35 per cent of Telkomsel, while state-owned Indonesian firm PT Telkom holds the other 65 per cent.
Analysts criticised the decision to bankrupt Telkomsel - Indonesia's largest mobile services firm, with a base of 100 million mobile users and a strong financial position - and blamed outdated bankruptcy laws.
This is not the first time a large company has been in this position over relatively small debts.
In 2004, Prudential Life Insurance was declared bankrupt because of an alleged debt to one of its agents, reported The Jakarta Post. The Supreme Court later reversed the decision.
Said Didu, former secretary of Indonesia's state-owned enterprises ministry, said the Telkomsel ruling "defies logic".
"How could some five billion rupiah debt claim make Telkomsel bankrupt? The company books five trillion rupiah monthly revenue," he told The Straits Times.
"The bankruptcy law is flawed. The law was not carefully drafted and has loopholes open to parties with bad faith to manipulate."
Securities Investors Association of Singapore lead analyst Ng Kian Teck said SingTel would be affected if the court stops Telkomsel's operations over the bankruptcy. But he added that this is unlikely to happen.
SingTel shares fell three cents to S$3.31 yesterday.