Indonesia’s Telkomsel agrees to $3.9bn merger with broadband arm

The move comes as telecommunications seek to expand into Indonesia’s fixed broadband market.

PT Telekomunikasi Selular (Telkomsel), the Indonesian partner of Singapore Telecommunications (Singtel), has agreed to merge with its parent’s broadband arm IndiHome to create an entity worth 58.3 trillion rupees ($3.9 billion). ), the companies said.

The move comes as Telkomsel looks to expand into Indonesia’s fixed broadband market, one of the fastest growing globally with a penetration rate of 14 percent compared to 40 percent in Southeast Asia.

“We believe this is a unique opportunity for Telkomsel to tap into the high-growth fixed broadband market in Indonesia by partnering with the country’s largest broadband operator, which is cost-effective and cash-generating,” said Yuen Kuan Moon, Singtel Group CEO. which owns 35 percent of Telkomsel.

PT Telkom Indonesia TLKM.JK owns the remaining 65 percent of Telkomsel and owns 100% of IndiHome.

The merger is the latest in a series of restructuring exercises in recent years among telcos in Asia to position themselves for the transition to a digital economy and 5G.

Australia’s Telstra formed a new holding company last year as part of the final steps of its restructuring. In 2020, Japan’s Nippon Telegraph and Telephone Corp (NTT) took its private wireless carrier business to cut costs.

If completed, the Indonesia deal will result in Singtel owning 29.6 percent of the enlarged integrated fixed and mobile broadband company, Singtel said.

Singtel plans to increase its stake in the expanded entity by 0.5 percentage points to 30.1 percent by paying 2.7 trillion rupees ($180 million), the companies said.

The deal is expected to be completed early in the third quarter of 2023, Singtel said.

IndiHome has a 75.2 percent market share in Indonesia, Singtel said.

Singtel’s shares have fallen 1.9 percent so far this year. They last traded at S$2.52 ($1.89) per share.