April 18, 2017 9:17 pm JST

Indonesia media tycoons in legal drama over soap opera deal

Hary Tanoesoedibjo's TV network accuses Sinemart of breach of contract

WATARU SUZUKI, Nikkei staff writer

JAKARTA -- The heated battle for dominance in Indonesia's television market has grown even hotter, with two tycoons locked in a legal wrangle that could have consequences that reach beyond their core media businesses.

Rajawali Citra Televisi Indonesia, a TV network operator and a unit of Hary Tanoesoedibjo's media company Media Nusantara Citra, has accused production house Sinemart Indonesia and its co-founder, Leo Sutanto, of breaching their contract by selling itself to a unit of rival TV operator Surya Citra Media.

The South Jakarta District Court ruled in favor of RCTI, declaring the sale as null and ordering the defendants to pay 2.64 trillion rupiah ($198 million) in damages and publish an apology on the front page of nine newspapers, according to a ruling published on April 13 in a newspaper owned by Media Nusantara.

But Surya Citra, controlled by tycoon Eddy Sariaatmadja's Emtek Group, is fighting back, saying the ruling was issued without the attendance or knowledge of the defendants. Sinemart is considering appealing the ruling and "shall take steps and legal measures that are provided by laws," Surya Citra said in a stock exchange filing on Tuesday.

In January, Surya Citra spent 500 billion rupiah to buy an 80% stake in Sinemart through a subsidiary. Sinemart has been producing hit Indonesian soap operas, known as "sinetron," for RCTI, and the acquisition was seen as a way to boost ratings at Surya Citra's flagship free-to-air channel SCTV - and bring RCTI down from the top spot. SCTV premiered its first batch of Sinemart-produced sinetron series in February.

Shares in Surya Citra and Media Nusantara have declined 4% and 9%, respectively, from their April 12 closing prices. Indonesia's judicial system is known for its lack of consistency, and analysts say the case has dampened investor appetite in the two companies.

"This will likely go all the way to the Supreme Court ... . But even then, rulings are very hard to enforce," said Henry Wibowo, an analyst at local brokerage Bahana Securities.

The stakes are high for both companies. Surya Citra's efforts to boost its audience share comes at a time when its parent company, Emtek Group, is investing heavily in internet technology. It recently inked a deal with Chinese payment giant Ant Financial Services to develop a payment service in Indonesia.

Meanwhile, Tanoesoedibjo's MNC Group is seeking to diversify into the property and financial services sectors, including plans to develop resorts with the family business of U.S. President Donald Trump.

Cash flow from their TV business is seen as key to realizing the objectives of both players.

Nikkei staff writer Erwida Maulia contributed to this report.

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