Fri, 22 Aug 2003

Indosat to issue bonds, cut down debt burden

The Jakarta Post, Jakarta

Indonesia's second largest telecommunications firm, PT Indonesia Satellite Corp. (Indosat), will issue bonds this year to help refinance its debt and to fund the merger of its cellular units.

President of Indosat Widya Purnama told reporters on Thursday that the company would issue rupiah and dollar-denominated bonds worth Rp 3 trillion (US$352 million) and US$300 million.

"We plan to issue the bonds to refinance Indosat's debts at a cheaper rate and to fund the merger plan. We plan to conclude the issuance this year," said Widya.

He said Indosat had shortlisted several financial companies including ING Groep NV, Goldman Sachs, JP Morgan, Barclay Capital, Andalan Artha Advisindo and Mandiri Sekuritas to be advisors for the bond issuance.

It is now in the process of selecting the winner and expects to make an announcement later this month.

The news on the bond issue, however, failed to lift Indosat shares at the local bourse on Thursday, as they ended lower by 0.6 percent, or Rp 50, at Rp 8,250 on profit taking.

Currently, Indosat has total debts of $900 million, including short-term debts totaling $360 million owed by its cellular unit PT Satelite Indonesia (Satelindo).

The debt burden has hampered Satelindo's investment program as under the agreement with the existing creditors, the company is restricted to a maximum yearly capital expenditure of $50 million.

The restriction has impeded Satelindo's efforts to catch up with its arch rival PT Telekomunikasi Selular Indonesia, a cellular unit of Indonesia's largest telecommunication company, PT Telekomunikasi Indonesia, or Telkom.

To solve Satelindo's problem, Indosat plans to integrate the unit with its other cell phone subsidiary PT Indosat Mobile Multi Media to become a division of Indosat, rather than a subsidiary.

Indosat has hired ING Groep to advise the merger plan, which is scheduled to be completed in October or November this year.

Indosat hopes that by "vertically" merging its cell phone units, it will be able to consolidate the companies' debts, making it easier for the company to refinance the debts and invest more to develop its cellular business.

The company's cellular subscribers are forecast to increase to around 5 million by the end of the year, compared with 3.1 million in 2002.

The company said that the increase in revenue from the cellular business was expected to compensate for an expected decrease in revenue from its international call business. The government plans to end Indosat's monopoly on international calls soon as part of the liberalization of the country's telecoms industry.

Indosat said that revenue from its international call business would drop by up to 10 percent to around Rp 1.92 trillion this year from Rp 2.137 trillion a year earlier.

A Singapore state-owned telecommunications company, Singapore Technologies Telemedia, bought a 41.94 percent controlling stake in Indosat last year from the Indonesian government, whose ownership in the company was trimmed to 15 percent.