JAKARTA -- Two internet provider subsidiaries of Lippo Group are locked in a legal battle with Indonesia’s communications ministry over 708 billion rupiah ($48 million) of unpaid bills -- further fueling speculation about the conglomerate’s cash-strapped situation.
First Media and its subsidiary Internux, which had aggressively marketed the Bolt! portable wifi routers in Indonesia over the past several years, failed to pay their bills for using a radio frequency band regulated by the ministry in 2016-17.
The two companies were originally given a Nov. 17 deadline to complete the payment, with the ministry threatening to revoke their license if the deadline was not met. A commercial court in Jakarta granted the companies' proposal to pay the bills in instalments that could extend to 30 years. The ministry objected to this decision and is currently appealing the verdict in the Supreme Court.
“The court decided on homologation; this is not a settlement,” Communications Minister Rudiantara told reporters last week. “Homologation allows payment in instalments for decades. Of course we’re objecting to that; we are processing the appeal.”
The Lippo subsidiaries have had the spectrum license since 2009 and it is due to expire next year. Another ministry official said that agreeing to their instalment proposal would mean automatically extending their license for at least another decade -- to which the ministry objects given the companies’ history of not paying bills on time.
Rudiantara said the two companies had been told not to sell any new Bolt! devices.
Local media reports suggest that Internux is indebted to a large number of other entities, and that the friction with the ministry began when a lawsuit was filed in September by a company demanding payment. It was later revealed that Internux has outstanding bills to pay to some 280 entities -- including the communications ministry -- amounting to more than 4 trillion rupiah.
The companies have fought back. In a filing to the Indonesia Stock Exchange, First Media said it had filed a lawsuit against a communications ministry director on Nov. 2. However, the ministry revealed later the same month that the lawsuit was withdrawn when the ministry put on hold its threat to revoke the license. First Media and Internux have also revised their proposal to pay the bills in instalments only until 2020. Despite this, the ministry would still proceed with its appeal to the Supreme Court, Rudiantara said.
First Media and Internux's legal struggles add to a string of problems for Lippo Group, which is run by the Riadys family. Concerns have also been raised over the Chinese-Indonesian conglomerate’s finances after credit rating agencies downgraded its main property subsidiary Lippo Karawaci a number of times over the past year and a half, citing cash flow problems. Lippo Karawaci has been selling off assets to Singapore-based affiliates to meet operating cash flow and interest payments for the coming years.
Additionally, bribery allegations surrounding its flagship Meikarta township project outside Jakarta drew fresh scrutiny over the group’s ability to finance the ambitious development, which has been marred by reports of unpaid advertising bills and salespeople’s salaries. A Bloomberg report in November suggested that scrutiny into the Meikarta project had caused Singapore dollar-denominated notes issued by two Singapore-based Lippo companies to drop over concern the group is using other entities to help shore up its finances.
First Media and Lippo could not be reached for comment at the time of writing.