Telkom to issue Rp 1.25t MTNs to cut dollar-denominated debts

Rendi A. Witular, The Jakarta Post/Jakarta

tate-owned telecommunications company PT Telkom plans to issue Rp 1.25 trillion (US$138 million) in medium-term notes (MTNs) later this month to cover its debts.

The debt resulted from the acquisition of Telkom's revenue- sharing partner, PT Aria West, last year for $390 million.

The notes are also expected to reduce Telkom's risk of over- exposure to massive dollar-denominated debts.

According to the company's prospectus released during an investor meeting on Tuesday, the notes will be divided into five series, with maturity periods between June 2005 and June 2007.

The note's indicative yield rates are based on the central bank's three-month Sertifikat Bank Indonesia (SBI) promissory notes, and government bonds series FR005 and FR004, with a margin of between 20 and 40 basis points.

The book-building process for the notes started on Dec. 1 and will be completed on Dec. 9, with the coupon rate announcement scheduled for Dec. 10, and emission of the notes on Dec. 15.

Publicly listed Telkom has appointed ABN Amro Asia Securities Indonesia, Bahana Securities, Mandiri Securities and BNI Securities as the arrangers for the issue.

According to the prospectus, Telkom has total debts worth around Rp 14.01 trillion, of which 53 percent is dollar denominated, 30.5 percent in rupiah, 10.2 percent in yen and 6 percent in euros.

After the issuance of the notes, Telkom's dollar-denominated debt portion is expected to decline to 46.3 percent, while its rupiah debts will increase to 37.8 percent, with the euro, as well as the yen, declining 10 percent and 5.9 percent respectively.

Given the composition of its huge dollar-denominated debts, the company fears that it may suffer foreign exchange losses and high interest burdens caused by a possible depreciation of the rupiah against the dollar sometime in the future.

Telkom suffered some Rp 869.81 billion in foreign exchange losses in the first semester of this year, causing its net profit to decline by 18.7 percent to Rp 2.87 trillion compared to Rp 3.53 trillion in the same period last year.

Telkom shares ended higher by Rp 100 to Rp 5,100 on the Jakarta Stock Exchange on Tuesday.