Econ has option to own 31% stake in Centralindo

Econ has option to own 31% stake in Centralindo

SINGAPORE (Reuters): Econ International Ltd said yesterday it had signed conditional agreements to subscribe for US$66.65 million exchangeable notes, which could be exchanged for shares in an Indonesian telecommunications firm.

The notes, to be issued by PT Putramitra Luhursejati and PT Mitramarga Senalestari, could be exchanged for a 31 percent stake or 12,090 shares in PT Centralindo Panca Sakti, construction- based Econ International said in a statement.

If exercised, the option could translate to a transaction value of US$215 million for the entire issued share capital of Centralindo, the statement said.

The notes will have a term of five years with an option to Econ to extend their maturity for a further two years and will carry a coupon rate of one percent a year on the principal.

Econ has also been granted an option to buy either a nine percent stake or 3,510 Centralindo shares held by the issuers for US$19.35 million or subscribe for additional notes totaling US$19.35 million, the statement said.

"The company believes that the opportunities in telecommunications in Indonesia are very attractive as a result of the increasing demand for telecommunications services," Econ said on its proposed diversification.

It said Indonesia's fixed lines and cellular penetration rates remain the lowest in the world at 2.1 percent and 0.3 percent respectively.

"The greatest growth potential lies in Centralindo's mobile cellular license," it said.

It said the International Telecommunications Unit estimated there would be up to five million cellular subscribers in Indonesia by 2000.

"This implies a forecast cellular subscriber annual compounded growth rate of approximately 73 percent," Econ said.

It said there was also "considerable potential" for Centralindo's 26 percent interest in PT Surya Citra Televisi (SCTV), one of the five private broadcast companies in Indonesia with 20 percent market share of viewers.

"With the acquisition, the company intends to establish telecommunications and media as a new area of business and to explore further opportunities in the Asia Pacific region," it said.

Econ added it intends to develop infrastructure activities, including telecommunications network services and media broadcasting systems, as one of its core areas.

It said the transaction would be financed by internal resources and bank borrowings.

NM Rothschild & Sons (Singapore) Ltd has been appointed financial advisors to Econ on the transaction.