Daily Telegraph: Temasek faces $5bn fine in Jakarta clash

By Katherine Griffiths, City Correspondent
Last Updated: 12:10am GMT 19/11/2007

Sovereign wealth fund Temasek may today be fined $5bn (£2.4bn) following a showdown with the Indonesian government over telecoms investments.

Indonesia’s competition authority is understood to be preparing to levy a heavy penalty against Temasek after the fund refused to agree to the nationalisation of two multi-million pound shareholdings it holds in the country’s largest mobile telephone companies, Indosat and Telkomsel.

The dispute has been running since the beginning of the year and has culminated in a court case. Temasek, which manages $100bn of assets, faces allegations that it has built up a monopoly in Indonesia’s telecoms market and that it has abused its position to engage in anti-competitive practices.

The Indonesian Competition Commission will give its verdict today. The body could impose a fine of about $5bn, or force Temasek to hand over its shareholdings, or a combination of the two.

Critics of the Indonesian regime say it is bringing trumped up charges against Temasek in order to gain control of its two shareholdings, which have soared in value.

Temasek owns 18pc of Standard Chartered and recently bought 2pc of Barclays.

Temasek denies it has a monopoly position in Indonesia’s telecoms market. Its owns 30pc but controls a total of 40pc of Indosat. It controls 35pc of Telkomsel and owns 18pc of the company.

The Indonesian government has a golden share in Indosat and has a 51pc stake in Telkomsel.

There are suggestions that, if it gains control of Temasek’s investments, the Indonesian state may flip them to another private buyer for a quick profit. One potentially interested party is thought to be Altimo, the London-based company that is the number one player in Russia’s mobile and fixed line markets.

Some of those close to the process believe the case is reminiscent of the experiences of companies such as BP and Shell in Russia, where they have agreed to sell assets and renegotiate contracts under heavy pressure from the Kremlin. Temasek said it “at all times upholds the principles of fair competition”. It warned that if the competition authority came to a “flawed decision” it could “severely tarnish Indonesia’s reputation as an investment destination”.

The high-profile dispute may also increase suspicions about sovereign wealth funds. There have been tensions around some of Temasek’s investments, including its stake building in Standard Chartered.

Temasek maintains it operates completely outside of politics but some observers are sceptical because it is 100pc owned by the Singaporean government and is run by Ho Ching, wife of Singapore prime minister Lee Hsien Loong,

Analysts estimate sovereign funds will collectively grow from about $2,500bn today to $12,500bn by 2015.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/11/19/cntem119.xml

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