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.