Shares of Indonesia's two biggest telephone stocks tumbled at the start of trade on Tuesday following a ruling by the country's anti-monopoly agency, and dragging down the Jakarta stock index
KPPU, the anti-trust agency, said on Monday that it had found evidence that Singapore state investor Temasek Holdings and its telecoms units had breached the country's competition law, and ordered Singapore to divest its shares in one or other of the two Indonesian telecoms firms in which it owns stakes.
The KPPU's ruling coincides with a key meeting in Singapore for leaders of the Association of Southeast Asian Nations (ASEAN) as member countries -- including Singapore and Indonesia -- seek to improve economic and trade relations.
Some analysts warned that the KPPU's ruling against the Temasek and its units could scare off other foreign investors at a time when Indonesia is keen to attract more investment.
Temasek's wholly-owned unit ST Telemedia has 75 percent of Asia Mobile Holdings, which in turn owns 40 percent of PT Indosat, Indonesia's second-biggest mobile phone firm.
Temasek's Singapore Telecommunications owns 35 percent of PT Telekomunikasi Selular (Telkomsel), Indonesia's largest mobile phone operator.
The KPPU said on Monday that one or other of these stakes must be sold within two years, and also ordered an immediate reduction in Telkomsel's tariffs saying that the firm's pricing was "excessive".
Shares of Indonesia's biggest telecommunication firm, PT Telekomunikasi Indonesia Tbk (Telkom) -- which owns 65 percent of Telkomsel -- fell 4.31 percent to 10,000 rupiah, while Indosat shares fell 2.98 percent to 8,150 rupiah.
The Jakarta index plunged 3.04 percent to 2,566.26 points.
Temasek and its ST Telemedia telecoms unit have denied any wrongdoing, and have said they plan to appeal the decision.
Telkomsel's president director Kiskenda Suriahardja also said that the firm would appeal the ruling. "We will appeal all the decision. We are seeking clarity from this ruling," he told Reuters.
"Our tariffs did not violate the regulation. As it was mentioned by KPPU our tariffs are below the government cap. We never received any complaint from regulators," he added.