September 8, 2008
Malaysian cable TV firm, Lippo breaking ties
Malaysia's largest cable television operator Astro All Asia Networks Plc ended support and services to Indonesia’s Lippo Group's unit PT Direct Vision (DV) after allegations the latter failed to pay a $245 million bill, reported Indonesian daily the Jakarta Post.
DV, Astro's local operator in Indonesia, seems to have few ideas about what to do with its 100,000 subscribers once the permanent termination takes place October 1.
In a statement to the Malaysian stock exchange late Thursday, Astro announced it had given notice of the termination after refusing to renew the trademark license agreement with DV, set to expire August 31.
Astro has provided a thirty-day grace period - which ends September 30 - to allow DV to make alternative arrangements and mitigate the impact on its customers.
"These actions were undertaken after invoices for support and services amounting to approximately 805 million ringgit (some $245 million) - including interest on all
outstanding payments due since March 2005 - that were sent to DV had not been settled to date," the company said in the statement.
The termination notice requires DV to pay its bill in full within fourteen days, starting Sept. 1, failing which Astro will exercise its right to terminate all support and services immediately.
"There are almost no (financial) contributions from Lippo.
I can say that Astro supported 70 percent of the financing lifeline while 30 percent came from subscribers," said Alexander Lay, a local spokesman for Astro, adding the company had no stake in DV.
Both parties were in discussions to find the best solution to compensating subscribers, he said.
"Astro has pledged it will minimize the losses to subscribers if DV is unable to compensate them," he added.
DV senior vice president for corporate affairs Halim Mahfudz had little to say about how his company would deal with its subscribers after the termination takes effect, explaining
the company was still awaiting directives from shareholders.
"In the meantime, we continue providing quality services to our customers and running our programs," he said.
Halim refused to comment on the $245 million bill, saying it would be discussed during the shareholder meeting.
According to recent Malaysian media reports, the break up of Astro's joint venture is the latest in a series of business rows between Lippo Group - now under the helm of James Riady
and the Malaysian business group controlled by high-profile tycoon Ananda Krishnan.
Halim refused to comment on this issue.
In 2004, Astro was invited by Lippo to become a strategic partner in DV. The two companies entered into an agreement on March 11, 2005 for the establishment of a joint venture to
operate a cable TV business in Indonesia through DV.
Under the agreement, Astro owns a 51 percent stake in DV, with 49 percent belonging to Lippo.
In 2005, the government limited foreign ownership shares in media businesses by up to 20 percent, while the application for new broadcasting licenses was being processed.
As a result, the two parties were forced to revise their joint-venture agreement.
In 2006, Lippo indefinitely postponed finalisation of the revised agreement and the commercial services agreement, citing a matter completely unrelated to the venture, according to Astro.
Lippo Group is a major Indonesian conglomerate founded by Mochtar Riady.
The Group's one-time flagship, Bank Lippo, became a pillar of the group's regional property expansion.
The bank is now controlled by Malaysian CIMB Group, which will merge the bank with rival CIMB Niaga, dissolving Lippo's name entirely from the Indonesian banking sector.