Indosat to sell bonds to fund expansion

Indosat to sell bonds to fund expansion

PT Indonesian Satellite Corp., the nation's second-largest phone company, said it plans to sell bonds this year to raise funds for expansion. It will be the company's first bond offering since October 2003.

"We haven't decided on the amount or the timing," Hasnul Suhaimi, director of cellular marketing at Jakarta-based Indosat, said in an interview on Friday.

"We need to raise external funding because our cash is not enough to fund our expansion plan."

Indosat plans to spend as much as $1 billion this year, compared with $700 million last year to expand its network, including its cellular business, and meet higher mobile-phone demand, Deputy President Director Ng Eng Hoe said on Feb. 2.

Suhaimi declined to say whether the bonds will be sold in the domestic market or internationally.

The company competes with PT Telekomunikasi Indonesia, which owns PT Telekomunikasi Selular, the country's biggest cellular operator.

Indosat, which may sell the bonds by the end of June, is in talks with investment banks to help manage the sale, Suhaimi said, without elaborating.

The company, which is 42 percent owned by Singapore Technologies Telemedia Pte., sold $300 million of seven-year bonds on Oct. 28, 2003.

The 7.75 percent bonds were bid to yield 6.22 percent, 2.56 percentage points more than five-year U.S. Treasuries, according to Deutsche Bank prices as of Feb. 8. It received orders for three times the debt on offer at the sale.

Standard & Poor's rates Indosat's long-term foreign currency credit BB-, three levels below investment grade.

Moody's Investors Service has given the company a B2 rating, five levels below investment grade. Both are junk, or high-yield and high-risk, ratings. --Bloomberg