Indonesia ordered the Singapore government's investment arm on Monday to sell its stake in one of two major Indonesian mobile phone firms within two years, also fining it for a breach of competition law. KPPU, the country's antitrust agency, said in a hearing it would fine Temasek and its eight telecommunication units 25 billion rupiah ($2.7 million) each.
Temasek through the units has stakes in PT Telekomunikasi Selular (Telkomsel), Indonesia's biggest mobile operator, and in PT Indosat, the number two player. Some analysts had expressed concern that a ruling forcing Temasek to sell might scare off foreign investors, although rivals had been looking forward to the prospect of getting a foothold in Indonesia's mobile phone sector.
But the ruling also said that buyers of the stakes are not allowed to acquire more than 5 percent of total shares on sale and must not hold any affiliation with Temasek or other buyers.
The ruling appears to mean that potential investors, including Altimo, the telecoms investment arm of Russian billionaire Mikhail Fridman, and a number of Indonesian business groups, will not be able to acquire significant stakes in the companies.
KPPU said Temasek was guilty of anticompetitive behaviour and charging excessively high prices. Indonesia has some of the highest mobile tariffs in the world and the agency ordered Telkomsel to reduce its cellular tariffs by at least 15 percent immediately.
Prior to the ruling both Temasek and ST Telemedia had denied any wrongdoing and a lawyer for Temasek said after the decision that it would appeal. Tjandra Lienandjaja, an analyst at BNP Paribas Peregrine in Jakarta, said the decision would chill the investment climate.
"It is a negative thing in term of sentiment for our investment climate, because investors will think there is no certainty here, since it was the government itself which sold Indosat to Temasek," Lienandjaja said. But Revrisond Baswir, an economist at the University of Gajah Mada in Yogyakarta, said the ruling did not go far enough since it only applied to one of the stakes.