Bankers and political analysts say the suspension of a proposed US$800 million (S$1.1 billion) sale of the tower business owned by PT Excelcomindo Pratama - one of the country's largest mobile telecommunications concerns - is stoking questions over President Susilo Bambang Yudhoyono's grip on power.

Excelcomindo's proposed sale was scuttled because of a new regulation introduced by the Communication and Information Ministry. This regulation was enforced despite it being in contradiction with a still-in-force presidential economic decree that opens the sector to foreign participation, telco industry executives and bankers say.

Mr Peter Chu of Goldman Sachs, the international bankers appointed by Excelcomindo to manage the proposed sale of its tower business, declined comment when contacted by telephone in Hong Kong earlier this week.

A senior Excelcomindo executive in Jakarta said the company was monitoring the situation and was not in a position to comment on the new regulations.

He did, however, point out that if the company received the roughly US$800 million for its tower business from an Indonesian concern, it would proceed with the sale.

Several foreign bankers and political analysts say the flip-flop by the government underscores a far bigger problem that continues to cloud the Indonesian economy.

'The fact that the President has yet to step in and clarify this matter seems to suggest that a power vacuum is building here,' said a foreign banker and long-time resident of Jakarta who is involved in the proposed Excelcomindo plan.

Analysts also say that Indonesia's refusal to open its tower business to foreign companies could stunt the growth of its telecommunications sector.

As the market for mobile phones and other related services widens, the country will require an estimated US$10 billion to build new telecommunications towers. This is capital which local companies are likely to find difficulty in raising, bankers say.

In recent years, the leasing or sale of the telecommunications tower business has emerged as a profitable spin-off for telcos.

Buyers of these businesses generally derive higher revenue by sharing the tower infrastructure with multiple users. Proponents of the business say this helps reduce tariff charges imposed on customers and lowers the cost of capital that telecommunication companies must invest in infrastructure.

Goldman Sachs, which was assigned to oversee the sale of Excelcomindo's tower business, invited potential international buyers sometime in mid-March.

According to bankers and Indonesian telco industry executives, the proposed disposal of Excelcomindo's tower business had attracted a diverse cast of potential bidders, including Blackstone Group, Carlyle Group, Kohlberg Kravis Roberts & Co and TPG Capital.

The proposed sale fell through shortly after the Communication and Information Ministry announced new rules that it was closing the country's tower business to foreign investors.

ljlopez@sph.com.sg