The ministry has refused clearance on grounds that Singapore government-owned Temasek Holdings, Singtel's 56 per cent shareholder, has been fined by the Indonesian business watchdog for breaching competition laws in that country, where it has significant stakes in two telecom companies.
As a result, Singtel's application, which came up in the last meeting of the Foreign Investment Promotion Board (FIPB) on 8 July, has been deferred. Singtel had submitted the application at the end of last year.
Last year, Indonesian anti-trust agency KPPI fined Temasek $2.8 million for violating competition laws that restrict foreign companies or business groups from owning more than 50 per cent in an Indonesian business outfit or dominating the market.
SingTel has 35 per cent in PT Telkomsel. Singapore Technologies Telemedia, a fully-owned Temasek company, controls 75 per cent of Asia Mobile Holdings (AMH) which, in turn, owns 40 per cent of PT Indosat.
Singtel argued that its shareholding is below 50 per cent but the regulator has maintained that the company has violated cross-ownership regulations and, as a result, dominates 80 per cent of the market.
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According to the panel, Temasek and its units have control over appointments of key posts and access to sensitive information from the two companies that enable them to dominate the market.
KPPI ordered Temasek to sell its stake in either company in the next two years. Singapore Technologies Telemedia recently sold its shares to Qtel in PT Indosat.
In India, Temasek has stakes in two leading companies. One is in Bharti through Singtel and the other is a direct 10 per cent holding in Tata Teleservices.
Singtel has investments in various group companies of Sunil Mittal-owned Bharti group, which include Bharti Airtel, Bharti Aquanet and Bharti Telecom. It has also established a 100 per cent subsidiary called Singapore Telecom India Pvt Ltd to build brand awareness of the Singtel name in India.
For the long-distance services proposal, Singtel has roped in two Indian partners Bharti Enterprises and Leela Lace Software Solutions of the Leela hospitality group, which will together hold 26 per cent in the firm.
The proposal has gone through numerous meetings of the FIPB. In the initial meetings, the government asked Singtel to divulge its partners as well as its area of business. The company also had to obtain no-objection certificates for the venture from the Bharti group.