Telkom Indonesia to merge broadband arm with Telkomsel to create $3.9 billion entity

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

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

"We believe this is a rare opportunity for Telkomsel to tap into the high-growth fixed broadband market in Indonesia by partnering the country's largest broadband operator which is profitable and cash generating," said Yuen Kuan Moon, group CEO of Singtel, which owns 35 per cent of Telkomsel.

PT Telkom Indonesia owns the remaining 65 per cent of Telkomsel and wholly owns IndiHome.

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

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

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

Singtel plans to raise its stake in the enlarged entity by 0.5 per centage point to 30.1 per cent by paying 2.7 trillion rupiah, the companies said.

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

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

Shares of Singtel have dropped 1.9 per cent year-to-date. They last traded at S$2.52 per share.

($1 = 14,955.0000 rupiah)