JAKARTA - AN INDONESIAN court on Friday ordered Singapore state investor Temasek Holdings and its affiliates to sell one of its two Indonesian telecoms units, upholding an earlier ruling by the country's anti-trust body.

Temasek has stakes in PT Telekomunikasi Selular (Telkomsel) and PT Indosat Tbk - Indonesia's two top mobile firms.

The court's decision against Temasek came as no surprise, but is likely to confirm concerns among some international investors that Indonesia remains a particularly tricky place to invest.

'It doesn't help Indonesia's image. They have enough problems already with inflation surging and the pressure that higher oil prices bring on the budget,' said David Cohen of Action Economics in Singapore.

'It's never been a very smooth ride for investors in Indonesia ... but investors in Singapore will continue to invest in Indonesia as it?s a natural outlet.'

Temasek said it was 'deeply disappointed by the verdict' and it planned to file an appeal with Indonesia's Supreme Court.

'The facts are Temasek has no shares in Indosat and Telkomsel, and plays no role in their business decisions and operations,' said Temasek managing director for strategic relations Goh Yong Siang in a statement.

Indosat is 41 per cent owned by Asia Mobile Holdings (AMH), which is a 75 per cent-held subsidiary of ST Telemedia.

ST Telemedia is fully owned by Temasek. Temasek indirectly holds 35 per cent of PT Telkomsel via its 56-per cent owned unit Singapore Telecommunications (SingTel).

'Both Telkomsel and Indosat are regulated businesses, operating within the guidelines of the Indonesian Telecommunications Regulatory Authority or Badan Regulasi Telekomunikasi Indonesia (BRTI),' said Mr Goh.

'It is therefore not possible for Temasek to engage in any monopolistic or anti-competitive practices in the Indonesia mobile telecommunications market.'

'The decision is going to have a negative impact on the investment climate here,' Temasek lawyer Todung Mulya Lubis said.

Temasek was established in 1974 by the Singaporean government and it has an investment portfolio worth more than 100 billion dollars with stakes in some of Asia's best-known companies including Singapore Airlines.

Last November's KPPU ruling was roundly denounced by analysts as nonsensical and a threat to already lacklustre investor interest in Indonesia. -- REUTERS, AFP