Debt Burden Threatens Lippo Group’s Internet Provider

Writer: Safrezi Fitra

Editor: Amal Ihsan Hadian

7/11/2018, 21.12 WIB

PKPU trial on 13 November will decide the future of Internux’s debt whether it will end peacefully or be declared bankrupt.

Telaah - Utang Lippo

PT Internux, an Internet service provider in the Lippo Group, is facing a debt problem of up to trillions of rupiah from hundreds of creditors. However, the manufacturer of Bolt brand modem is likely to survive bankruptcy, while the process of debt postponement petition (PKPU) is almost end peacefully or homologation.

Currently, Internux must face PKPU’s lawsuit with a total bill of Rp 4.69 trillion from 283 creditors: Rp 226 billion from two separatist creditors (guaranteed) and Rp 4.47 trillion from 281 concurrent creditors (not guaranteed). Meanwhile, First Media stated that Internux’s total debt is only Rp 4.26 trillion.

Regarding the debt problem, the Indonesia Stock Exchange (IDX) has requested an explanation from its holding company, PT First Media Tbk, on 30 October. The capital market authority wants to know whether the debt problem faced by Internux will have a big influence on First Media’s business.

“On 30 October, a voting on peace proposal was done and approved by a majority of creditors,” said First Media Corporate Secretary Shinta M Paruntu in a statement to the IDX, Monday (11/5).

However, there are still 20 percent of creditors who rejected it. Reportedly, about 61 percent of creditors are companies affiliated with Internux. The PKPU trial will be decided on 13 November.

The follow-up trial will determine the future of Internux and debt payment to its creditors. “The creditors can see for themselves whether the panel of judges will ratify peace or declare the debtor bankrupt,” Judge Marulak Purba said after reading the results of the vote at the Central Jakarta Commercial Court on Tuesday (10/30).

Keuangan Internux
Internux Finances (First Media)

Internux is a subsidiary of First Media, which is affiliated with Lippo Group. First Media, through its subsidiary PT Mitra Media Mantap, has recently increased its ownership in Internux to 75.88 percent from 74.58 percent at the beginning of last year. Meanwhile, the remaining shares were held by Prosper International Limited (4 percent) and Asia Pacific Mobile Pte Ltd (20 percent).

The company cannot pay its debts worth trillion of rupiah due to sluggish business and lost the competition. It was forced to restructure the debts through PKPU since 17 September 2018. This was registered in the Central Jakarta Commercial Court with the case number 126/Pdt.Sus-PKPU/2018/PN Jkt.Pst.

Internux faced the PKPU based on the request of its creditors, PT Equasel Selaras and PT Intiusaha Solusindo. Equasel seeks to collect debt worth Rp 3.21 billion from the transfer of Internux’s debt to PT Cursor Media. Meanwhile, the Intiusaha’s bill reached Rp 932 million from the transfer of PT Nusapro Telemedia Persada’s receivables. It was then followed by other companies, including the government through the Ministry of Communications and Information.

Based on First Media’s financial report, Internux is said to have debts from several creditors, including PT CIMB Niaga Tbk (BNGA) worth Rp 510.75 billion. However, this debt has been transferred to First Media to pay it by Rp 540 billion, which will mature in 2023. “The company will replace Internux’s position as a debtor,” Shinta wrote in an information disclosure to the IDX last August.

Another debt is to Raiffeisen Bank International AG, Malaysia. In May 2014, Internux received a credit facility worth US$ 50,000, which could be increased to US$ 100,000. This loan has collateral for receivables, assets and guarantees from Internux’s shareholders. As of September 2018, the debt position to Raiffeisen was Rp 667.05 billion. The total debt included in Internux’s PKPU actually reached Rp 5.65 trillion, but the value was reduced because the PKPU Management Team has released a debt bill from Raiffeisen worth Rp 954 billion.

Then, there was a long-term payment facility from PT Huawei Tech Investment for 36 months since July 2015. Internux has issued a Promissory Notes worth US$ 7,027 and paid US$ 5,870. For debts made in 2013, Internux also issued US$ 62 billion in Promissory Notes and has settled it.

During a meeting with creditors at the Central Jakarta Commercial Court on 29 October, Internux President Director Dicky Moechtar said the debt burden occurred due to the company’s stagnant business for four years. It received an allocation of Wireless Broadband in 2009, but it was only able to be operated commercially in 2013.

There were many obstacles during those four years. As a result, Internux did not get income, but it must continue to bear the operational costs. The shareholders have invested Rp 8 trillion and the company is forced to owe to many parties.

The story started with the fact that the frequency network won by Internux in 2009 was unsterile. Many government agencies were using this frequency. It took two years for Internux to clear the frequency.

The problem was not over. It was mentioned in the tender that the technology used for the frequency utilization is WiMAX, which had not been owned and its device was not available on the market. Internux decided to roll out the frequency network with a makeshift technology, even though it cannot be done commercially.

The company then proposed a permit to use neutral technology of 4G LTE in 2012, which was granted by the government. However, Internux must reinvest because it did not have the technology. The device was not available in Indonesia, so the company must buy it from abroad.

At the same time, the government issued a regulation regarding local content requirement (TKDN). About 50 percent of wireless broadband telecommunications equipment must be fulfilled from within the country in 2015. Internux managed to collaborate with domestic manufacturers to produce the equipment.

At the end of 2013, the company became a pioneer of 4G LTE technology because the facilities had been prepared previously. When it began the commercial operations, only Internux held the network services. Meanwhile, some operators who won other frequency tenders did not do so.

With this limitation, the Internux network was not connected outside the permitted areas. Customers of Bolt cannot use the services outside of Zone 4 (Jakarta, Bogor, Tangerang, Bekasi, and Banten), which was managed by Internux. In fact, the company also obtained frequency in Zone 1 (northern areas of Sumatra).

In 2014, the government provided frequency allocation to one of the telecommunication operators having service coverage in almost all regions of Indonesia. However, Bolt was unable to compete with the products of other telecommunications companies, so the sales were also down.

(Read: Meikarta Scandal Shaking Lippo Group’s Business Tree)

Currently, Internux plans to stop the pre-paid business for the sake of business continuity and paying off all of its debts. The company will reduce the number of Bolt Mobile customers by stopping the sale of modems and mobile devices in order to focus on adding post-paid customers (Bolt Home). Pre-paid customers can still be served by buying internet vouchers within the network of Internux’s partners.

Internux will also try to relocate telecommunications equipment to the tower location that matches the characteristics of Bolt Home customers. These steps are part of the company’s efforts to reduce operational costs. Tower costs can be reduced to Rp 300 billion.

Broadband Kominfo
Broadband (Ministry of Communications and Information)

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