Monday, November 19, 2007

Temasek not guilty

As expected, Singapore government investment arm Temasek Holdings has been found guilty of unfairly dominating and manipulating Indonesia's telco market.

Temasek issued a terse but strong statement to say it is not guilty of the charges and will appeal the sentence.

Simon Israel, Temasek’s executive director, stated: “We are not guilty. The decision makes no sense. It ignores the facts. The charge against Temasek is groundless – Temasek has no shares in Indosat and Telkomsel, and we play no role in their business decisions and operations.

Telkomsel is controlled by the Indonesian Government which also has a golden share in Indosat. The telecommunications industry in Indonesia is regulated. It is inconceivable that the Indonesian government and the telecommunications regulator would allow the prices to be fixed or cause a loss to the consumer. Temasek will fight this decision.”

Sophie's World agrees that the Indonesian ruling doesn't quite make sense as the Indonesian government has a bigger say than Temasek in the two Indonesian telcos. The ruling will no doubt dent Indonesia's image among foreign investors. Will leave it to Indonesian experts to talk about this.

Temasek is technically correct though to say it doesn't own shares in the two telcos. The shares are held through two Temasek subsidiaries. Temasek owns 56 per cent of Singapore Telecommunications which in turn owns 35 per cent of Telkomsel, Indonesia's largest mobile phone carrier. Temasek owns all of Singapore Technologies Telemedia which, along with Qatar Telecom, owns a 41.9 per cent stake in Indosat, the second-largest telecommunications company in the country.

Although Temasek is probably sound on the technical and legal fronts, the ruling has wider implications on Temasek as a sovereign wealth fund. This is not the first time that Temasek has had missteps in the region.

Last year, Temasek caused an uproar in Thailand when it acquired Shin Corporation from the family of former PM Thaksin Shinawatra. The Thai court ruled against a unit of Temasek-controlled Shin following the takeover by Temasek.

Thailand is still involved in the protracted review of its foreign ownership rules to ascertain whether Temasek did indeed breach the rule in the deal, which subsequently triggered a military coup that ousted Thaksin.

It seems that some quarters are determined to whack Temasek at all cost as it is seen as the vehicle of the Singapore government.

There is definitely no shortage of volcanic problems within the Asean family.

3 comments:

Anonymous said...

I will call it as "Getting a taste of of your own medicine". Who asks Temasek to be so greedy in the first place!

And why is it that nobody at Temasek did any homework. Of all the places, why did Temasek chose to do business in a country where "greasing the palms" is the order of the day.

Another expensive lesson to learn. So is that possibly one of the reasons why thay had to push out the Longetivity Insurance Scheme within the next 6 months?

george said...

Is it mere coincidence that wherever Temasek went, its woes is sure to go?

Why do countries that should ostensibly be benefiting from investments by Temasek be knocking it? Is it a viable strategy to think that you can play it straight when the operating environment is as crooked as they come? In a largely male dominated arena, having a woman in charge is a big liability. If you think westerners are more equitable, think again. You only need to look at the sort of impediment and challenge faced by SIA with the Aussies and the Brits. In business, there is no such thing as nobless oblige. Don't dream.

Anonymous said...

It is a pity that Singapore is too small for such an efficient and wealthy government. That causes 'got money but no where to spend' dilemma to Singapore.

Being in the centre of countries with different mentality, what Singapore government should do is to encourage her people (not of corporation related to the authority) to invest in these countries. Just look at OCBC and UOB, they did not face major problem with the authority of these countries.