Indosat units merger plan approved<\/p>\n
Rendi A. Witular, The Jakarta Post, Jakarta<\/p>\n
The country's second largest telecommunications company, PT
\nIndonesian Satellite Corp. (Indosat), has secured approval from
\nits shareholders for a plan to vertically merge three of its
\ntelecoms subsidiaries this year.<\/p>\n
Indosat president Widya Purnama said that 98 percent of
\nIndosat's shareholders had approved the plan, which would pave
\nthe way for the company to start the merger process on November
\n20.<\/p>\n
\"This approval is an important step forward for us. The next
\nstep will be to sign the merger deed at the end of November,
\nafter the Investment Coordinating Board approves the plan,\" said
\nWidya during a press briefing on Tuesday.<\/p>\n
The three subsidiaries to be merged were two cellular
\nproviders, PT Satellite Palapa Indonesia (Satelindo) and PT
\nIndosat Mobile Multi Media (IM3), and telecommunications operator
\nPT Bimagraha Telekomindo.<\/p>\n
Indosat would integrate them as a division of the company
\ninstead of separate subsidiaries, with the integration process
\nitself scheduled to be concluded in 2005, Widya said.<\/p>\n
He explained that all business operations, assets and
\nliabilities would be transferred to Indosat as the parent
\ncompany, and that there would be no changes in capital or the
\ncomposition of the company's shareholders.<\/p>\n
According to Widya, the merger will allow Indosat to save 15
\npercent on its operational costs and 20 percent on capital
\nexpenditure over the next five years.<\/p>\n
The merger would also allow Indosat to consolidate the debts
\nof its three units, help the company develop its cellular
\nbusiness and integrate its marketing and sales strategy.<\/p>\n
Analysts said the merger was part of Indosat's efforts to
\ncatch up with its arch rival, PT Telekomunikasi Indonesia
\n(Telkom), in the cellular business.<\/p>\n
They said Indosat was lagging behind in developing its
\ncellular business because of its huge debt, which prevented the
\ncompany from allocating adequate investment for its
\ntelecommunication facilities.<\/p>\n
As of September, Indosat's consolidated debt amounted to a
\ntotal of Rp 8.81 trillion (US$1.03 billion).<\/p>\n
The merger was also part of Indosat's strategy for facing
\nincreased competitive pressure with the entry of Telkom into its
\ninternational direct dialing market, which is expected by the end
\nof 2003 or early 2004.<\/p>\n
International long distance is mostly controlled by Indosat,
\nwhile local and domestic long distance is controlled by Telkom.<\/p>\n
Elsewhere, Indosat's cellular marketing director Hasnul
\nSuhaimi said that by the end of this year, the company's cellular
\nsubscribers would reach around 5.5 million, up from 3.5 million
\nlast year, with market share to reach around 31 percent.<\/p>\n
Indosat was expecting its cellular subscribers to increase by
\naround 2 million next year, along with the company's plan to
\nallocate around $400 million for investment in its cellular
\nbusiness, said Hasnul.<\/p>\n
He explained that investment in the cellular business would
\naccount for 75 percent of the company's total capital expenditure
\nnext year. The remaining expenditure would be allocated to the
\nfixed line and multimedia business.<\/p>\n
Meanwhile, Indosat shares ended down Rp 500, or 4 percent, at
\nRp 11,950 on profit-taking by investors after the announcement of
\nthe merger's approval. Indosat shares had risen as much as 57
\npercent since the company announced its merger plan in August.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/indosat-units-merger-plan-approved-1447893297",
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"sponsor": "Okusi Associates",
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