Indosat to buy Satelindo stake for $340 million

The Jakarta Post, Jakarta

State-owned telecommunications firm PT Indosat is close to reaching a deal with Germany's Deutsche Telekom to buy the latter's 25 percent stake in local cellular operator PT Satelindo for about US$340 million, according to a minister.

"The price is around $340 million, but it can still change. Nothing is finalized," State Minister of State Enterprises Laksamana Sukardi told reporters following a Cabinet meeting.

"(The final deal) is expected soon," he added.

He did not provide details.

The government initially offered around $200 million for the 25 percent stake, but Deutsche Telkom, which is under pressure to sell assets in the region due to plunging profits, wanted $400 million, reports said.

The government wants Indosat to acquire the Satelindo stake to increase its value before the government sell its shares as part of this year's privatization program.

Indosat already owns a controlling 75 percent stake in Satelindo, the country's second largest cellular operator.

The publicly listed Indosat is mulling various options for financing the acquisition, including a rights issue, bond issue or bank borrowing.

A rights issue means issuing more shares to allow Indosat to raise funds from the stock market. There is no clear timetable for the rights issue, but the government hopes to finalize it before June, when the first stage of Indosat's share sale takes place.

The government owns a 65 percent stake in Indosat, with a 45 percent stake to be sold this year through a two-step process.

The first divestment is scheduled for June, when the government will release a 15 percent stake through the stock market.

The remaining 30 percent will be sold in October to strategic investors.

The country's cellular phone industry has been rapidly growing. Thus raising its stake in Satelindo would help boost Indosat's earnings, which would in turn make it a more attractive investment.

Satelindo had some 1.9 million customers as of the end of last year, and is targeting to raise its customer base to three million.

Analysts, however, said the downside was the huge debt burden of Satelindo.