Telkom plans to spend Rp 3t to buy back
Telkom plans to spend Rp 3t to buy back
Naila Firdausi and Soraya Permatasari, Bloomberg, Jakarta
PT Telekomunikasi Indonesia, the nation's biggest phone company, plans to spend as much as Rp 3 trillion (US$$294 million) to buy back American depositary receipts traded on the New York Stock Exchange.
The company is considering withdrawing all its shares from the exchange, President Arwin Rasyid said at a seminar in Jakarta. Telkom will seek shareholder approval for the buyback at a meeting in November, he said.
About 7 percent of Telkom's shares are traded on the New York Stock Exchange. The company will use cash to fund the buyback, Rasyid said.
The move may help Telkom cut its audit costs, said Prayoga Triyono, head of research at PT Henan Putihrai in Jakarta. Audit fees have risen "five-to-six times," Rasyid said in an interview on Aug. 3.
The company also has to pay legal fees and from next year start doing an audit on internal controls.
Telkom was delayed in producing two years of results because of difficulties in reporting according to both U.S. and Indonesian standards.
Administration costs rose 26 percent last year and 81 percent in 2003, while sales gained 25 percent and 30 percent respectively, the company said in August.
Telkom's ADRs, which consist of 40 shares, rose 0.9 percent, or 17 U.S. cents, to $20.18 on the New York Stock Exchange on Thursday.
On the Jakarta Stock Exchange, the shares added Rp 150, or 2.9 percent, to Rp 5,350.
The stock has gained 11 percent this year, outperforming the Jakarta Composite Index, which added 7.9 percent in the period.
The move, "which is an idea that the management is exploring right now, may benefit shareholders as it would increase the company's per share value" by reducing the number of outstanding shares, Husni Amani, an investor relations official at Telkom, said on Friday in a telephone interview.
The buy-back plan is not limited to the shares that trade on the New York Stock Exchange, he said.
Telkom may also buy back some shares from the Jakarta Stock Exchange, Husni said.
"The government, as the majority shareholder, will benefit from the move as it may receive a higher dividend per share," Triyono said.
The move to withdraw from New York "won't have a negative impact on our investment strategy," said Kennyarso Soejatman, who counts Telkom among the equivalent of $61 million he helps manage at First State Investments in Jakarta.
"Fund managers will keep the shares and will probably buy more because it's difficult to find a telecommunications stock with growth potential as high and as cheap as Telkom," Soejatman said.
"There's not much choice in the market."
Telkom, Indonesia's biggest company by market value, operates in a market where less than a quarter of the nation's 238 million people have mobile or fixed-line phones.