PT Telkom Indonesia (Persero) has announced a conditional agreement that will see its fixed broadband business, IndiHome, integrated into PT Telekomunikasi Selular (Telkomsel) for a sum of $3.91 billion. The deal is anticipated to be finalized in the early third quarter of 2023.
If completed as proposed, this merger would result in Singtel's stake in Telkomsel being reduced from 35% to 29.6%, creating an entity worth 58.3 trillion rupiahs ($3.9bn). This move comes as part of both companies' efforts to expand their presence within the rapidly growing Indonesian fixed broadband market which currently boasts a penetration rate of only 14 percent—significantly lower than the Southeast Asian average rate of around 40%.
"The integration between IndiHome and Telkomsel aims at establishing an enlarged integrated mobile and fixed broadband company that can better serve customers across various segments," said Ririek Adriansyah Sutikno, President Director & CEO at PT Telekomunikasi Selular.
This merger is among several restructuring exercises undertaken by telecommunications firms throughout Asia during recent years as they prepare for the transition towards digital economies driven by advanced technologies such as fifth-generation wireless networks (5G).
Upon completion of this strategic partnership with its parent company's subsidiary—Indonesia’s largest cellular operator—the Singapore-based multinational telecommunications corporation Singtel Group will own approximately one-third less equity interest in the new entity compared with their current proportional ownership level: specifically dropping down from holding roughly one out every three shares outstanding today (-1/2%) all way up until reaching just under thirty-percent total representation overall following consummation thereof (+/-0%).
Singaporean Telecom giant Singtel experienced a drop in share value over recent months, with year-to-date figures showing a decline of 1.9%. Despite this downturn, the company remains optimistic about its future prospects in Indonesia's burgeoning telecommunications market.
"The merger between IndiHome and Telkomsel is an important step toward capturing new growth opportunities within the Indonesian fixed broadband sector," said Chua Sock Koong, Group CEO at Singtel. "We believe that our combined expertise will enable us to better serve customers while capitalizing on emerging technologies such as 5G."
As both companies work towards completing this monumental agreement by Q3 of 2023, industry experts and investors alike will be keeping a close eye on how these evolving dynamics impact their respective businesses—as well as those throughout Southeast Asia more broadly—in terms of shaping regional competition amidst ongoing technological advancements taking place across global communication networks today.