Telkom, Indosat finalize $1.5-billion telecoms deal

JAKARTA (JP): State telecommunication firms PT Telkom Indonesia and PT Indonesia Satellite Corporation (Indosat) said they had signed the final agreement to end their cross ownerships in three of their subsidiaries.

"Today we announce that we have signed conditional definitive Sale and Purchase Agreements," a joint statement of the two companies said on Wednesday.

The announcement shrugged off market worries that both companies would delay signing the US$1.5 billion deal, due to the sharp depreciation of the rupiah.

Under the deal, Telkom would pay $945 million, and Indosat $599 million to exchange ownerships in their subsidiaries.

However, since they signed the memorandum of understanding on the deal in February, the rupiah took a steady downward course.

The local unit came down to breach the Rp 10,000 level against the U.S dollar from its February position at over 9,000.

On Monday, stock investors dumped Telkom and Indosat shares over fears both companies would postpone signing the deal, because it might be considered too expensive.

The agreement itself is seen as vital to the two companies' restructuring efforts, and for opening the industry to foreign investors.

Under the deal, Telkom would acquire Indosat's 35 percent interest in the country's biggest cellular phone operator, PT Telekomunikasi Selular (Telkomsel), for a value of $945 million.

The move would boost Telkom as the majority shareholder in Telkomsel with a stake of 70 percent.

Indosat for its part, would spent $186 million for acquiring Telkom's 22.5 percent stake in the second largest cellular operator, PT Satelit Palapa Indonesia (Satelindo).

For the $375 million, Indosat also agreed to buy Telkom's fixed line assets at its joint operation scheme IV, covering the region of Central Java and Yogyakarta.

The remaining $38 million would be used by Indosat to purchase 37.66 percent stake in PT Aplikanusa Lintasarta from Telkom.

Shortly after the MOU, Indosat further announced plans to raise its stake in Satelindo to 75 percent.

This is done through Indosat acquiring a 100 percent stake in PT Bimagraha Telekomindo, which controls 45 percent of Satelindo.

Analysts noted that Indosat's move to control Satelindo underlined its bid to compete against Telkom in the cellular phone market.(bkm)