Analysis of good corporate governance at Indonesian telecom industry after privatization: case study at PT Telekom an PT Indosat

Abstract

The objective of this research is to examine whether there are differences of implementation of good corporate governance of company which privatized using different methods. This is relevant with the change of privatization pattern conducted by the government of Indonesia toward its state-owned companies, from Public Offering to Strategic Sale. One of important decisions taken by the government after the economic crisis is privatization of state-owned companies. It is done because the government finds difficulties to financing its national development programs and economic recovery. From company side, the change of ownership structure expected to be able to improve financial and operational performance. Furthermore, it is also expected to improve performance of transparency toward public, both obligatory disclosure and voluntary one. PT Telkom and PT Indosat are major telecommunication companies in Indonesia which, in fact, have been privatized using IPO in 1994/1995. Later, in 2002 PT Indosat was privatized by selling government`s shares to PT ICL as a Special Purpose Vehicle of STT Singapore. Privatization method used was Strategic Sale. This research concludes that privatization methods do not influence implementation of good corporate governance individually. Privatization influence the implementation if good corporate governance if the privatization results ownership structure change significantly, and increases risk which must be borne by new investors. Meanwhile, role of capital market authorities also influences the implementation of good corporate governance if law enforcement is carried out tightly.