Indosat seeks Satelindo control

Indosat seeks Satelindo control

Dow Jones, Jakarta

PT Indonesian Satellite Corp. plans to raise up to $400 million through the issue of dollar-denominated bonds and a rights share issue to buy the 25 percent stake it doesn't own in its cell phone unit from Deutsche Telekom AG.

A source close to the deal told Dow Jones Newswires Thursday that Deutsche Telekom has asked for $400 million for its stake in PT Satelit Palapa Indonesia, or Satelindo.

"We are still negotiating with Deutsche Telekom to finalize the purchase," the source said, adding the German company has already signaled it's ready to sell the shares.

Indosat will own 100 percent of Satelindo if it buys Deutsche Telekom's stake. The state-owned Indonesian telecoms company is trying to build up its cell phone business to make itself more attractive to foreign investors.

The government plans to sell 45 percent of Indosat this year to reduce the state's huge budget deficit.

Indosat's planned rights issue will increase its current shareholders equity by about 5 percent, the source said. The size of the bond will depend on the final valuation of the 25 percent stake and market conditions.

The plan to issue bonds comes only days after PT Telekomunikasi Selular Indonesia, or Telkomsel, the country's largest cellphone company, successfully issued $150 million worth of dollar-denominated bonds. The Telkomsel bonds, which are due in 2007 and callable in three years, have a coupon rate of 9.75 percent and were priced to yield 9.825 percent.

Indonesia's more stable political climate, following chaos in recent years, has given local companies a window to issue international bonds. With a dearth of high-yield bonds in Asia, investors are slowly returning to Indonesia.

Still, Indosat's planned bond issue may not attract the same interest as Telkomsel, whose parent is PT Telekomunikasi Indonesia, another state-owned telecom company.

Singapore Telecommunications Ltd.'s plans to raise its stake in Telkomsel to 35 percent pending shareholder approval helped win foreign interest in the Indonesian company's bonds.

Indosat, however, faces a number of financial problems, including Satelindo's huge debt, which means the cellphone company isn't able to expand its business. The state-owned company said last week it plans to inject $75 million into Satelindo to help improve its unit's financial position.