IndiHome services to be integrated into Indonesian network provider Telkomsel

Indonesian wireless network provider Telkomsel, Singtel's 35%-owned associate company in Indonesia, has entered into a conditional spin-off agreement (CSA) with its parent company Telkom to integrate broadband business IndiHome's services into Telkomsel.

The integration presents Telkomsel with the rare opportunity to enter the high growth fixed broadband market in Indonesia, with IndiHome holding a 75.2% market share. According to the release, Indonesia is one of the fastest growing fixed broadband markets globally with a penetration rate of 14% compared to 40% across Southeast Asia.

The integration will be a new growth horizon for Telkomsel and will enable it to expand its business portfolio against a backdrop of growing fixed mobile convergence and have cross-selling opportunities and cost synergies across sales and marketing channels, support functions and capital expenditure. This will strengthen Telkomsel’s position in the telecommunications and digital industry, as Indonesia’s integrated mobile and fixed broadband business.

The consideration for the integration is IDR58.3 trillion (SG$5.1 billion), which will be satisfied by the issuance of new shares by Telkomsel. The integration, if completed, will also result in Singtel’s effective equity interest in Telkomsel being reduced from 35.0%, to 29.6% of the enlarged integrated mobile and fixed broadband company.

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Singapore telecommunications company Singtel, through its wholly-owned subsidiary Singapore Telecom Mobile, has also entered into an agreement with Telkom and Telkomsel to subscribe to new shares of Telkomsel after the completion of the integration (STM Subscription), thereby increasing Singtel’s effective interest in Telkomsel by 0.5 percentage points to 30.1%. The consideration for the STM Subscription is IDR2.7 trillion (SG$236 million) and is to be paid out in cash on completion of the STM Subscription.

The consideration for the STM Subscription was determined on an arm’s length basis through a privately negotiated process based on inter alia, the same Telkomsel valuation used for the consideration shares and an assessment of the equity value of Telkomsel. The consideration will be funded via internal cash resources. As of 31 December 2022, the audited net asset value of Telkomsel was IDR30 trillion (SG$2.6 billion).

Barring unforeseen circumstances and before factoring in the significant synergies expected, the integration and STM Subscription taken as a whole, is expected to be earnings accretive for the Singtel group in the near term. The integration is subject to the fulfilment of the conditions precedent under the CSA, including the receipt of approvals from the relevant regulators and shareholders. The STM Subscription is subject to the completion of the integration.

MARKETING-INTERACTIVE has reached out for more information. 

Last year, Telkomsel (through its subsidiary Telkomsel Ekosistem Digital) and GoTo (through Aplikasi Multimedia Anak Bangsa),partnered up in a joint venture to strengthen the development of the gaming industry in Southeast Asia, under the brand name Majamojo. With an aim to become the leading gaming publisher in Indonesia, Majamojo will focus on mobile game development in Indonesia and Southeast Asia.

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