Government wants Indosat to increase stake in Satelindo
The Jakarta Post, Jakarta
The government plans to have state-owned international call operator PT Indosat raise its stake in its cellular operator unit, as part of an effort to make Indosat more attractive ahead of its divestment later this year.
State Minister of State Enterprises Laksamana Sukardi said that acquiring the Satelindo stake would wet the appetite of potential Indosat investors.
"One option for raising Indosat's value is to buy Deutsche Telekom's stake in Satelindo through a rights issue," Laksamana told a late Wednesday hearing with House of Representatives' Commission IX for financial affairs.
Germany-based Deutsche Telekom owns a 25 percent stake in Satelindo, the country's second largest cellular operator, while the state-owned Indosat owns the other 75 percent.
Laksamana said he planned a rights issue for Indosat to finance the purchase of Deutsche's 25 percent stake.
"The rights issue is still at the preliminary planning stage, but it's an idea," he said.
Issuing more shares would allow Indosat to tap the capital markets for funds to finance its investment in Satelindo.
The plan would hinge on the market's appetite for Indosat's new shares, and whether the company could secure an underwriter willing to take up the remainder.
Given the fast growth in the cellular phone market, raising its stake in Satelindo would help boost Indosat's earnings, which should help make it a more attractive investment.
Indosat acquired a majority stake in Satelindo last year in exchange for surrendering its stake in rival cellular operator PT Telkomsel.
Laksamana gave no schedule for the rights issue, but if the plan were to be realized it would have to be effected before next June when the first stage of Indosat's divestment process is slated for completion.
The government owns a 65 percent stake in Indosat, with a 45 percent stake to be released this year through a two-step sell- off process.
In June, the government plans to divest a 15 percent stake through the stock market, and in October another 30 percent to a strategic investor.
From the sale, the government hopes to raise between Rp 4 trillion (about US$400 million) and Rp 5.1 trillion to help it fill out the yawning state budget deficit this year.
Indosat is one of the 24 state-owned enterprises on this year's privatization list. Its sale is expected to yield the lion's share of the Rp 6.5 trillion targeted from privatization.
Wednesday's hearing with Commission IX ended without the legislators endorsing or approving the divestment list.
Although their approval is not mandatory, securing political support before selling state companies could prove crucial to making sure that deals proceed smoothly.
Earlier privatization deals or state asset sales came under pressure from legislators, jeopardizing signed sales contracts at the expense of the country's investment climate.
House Commission IX has asked the government to hold further meetings with it in the future.
At this stage, Indosat's sale is already hanging in the balance. The company's workers oppose the privatization on the grounds that Indosat is too vital to be surrendered to foreign control.
Joining ranks with other workers in the telecommunications and postal services sector represented by the ISP Postal labor union, Indosat workers warned they would go on strike unless the government dropped the plan.
ISP Postel said it insisted on meeting Laksamana this week to demand his resignation, while at the same time also demanding that the government give assurances that it would drop the planned sale.
Laksamana earlier said he would hold talks with the labor union, but as of Thursday no meeting had taken place according to his Deputy for Privatization Mahmuddin Yasin.