Telkomsel bond offer gets strong offshore interest
Telkomsel bond offer gets strong offshore interest
Debbie A. Lubis The Jakarta Post Jakarta
The country's largest cellular operator PT Telekomunikasi Selular (Telkomsel) said on Tuesday that it had increased the size of its five-year bond issue to US$150 million from the initial plan of $100 million due to stronger demand than expected from overseas investors, the company said on Tuesday.
"We were quite surprised with the market's response because, previously perception about the Indonesian telecommunications (sector) was not very positive," Wim Timmermans, Telkomsel management accounting general manager, told The Jakarta Post.
He said that two-thirds of the demand for the bond issue came from overseas accounts particularly in Singapore, Hong Kong and London.
The bonds offer a yield of 9.825 percent, or 530 basis points over comparable U.S. Treasury bonds. It carries an annual coupon of 9.75 percent. Telkomsel has an option to call all or part of the bonds at the end of three years at a price of 102.5 percent.
UBS Warburg acted as the sole bookrunner and lead manager for this debut bond offering.
Telkomsel ended an international roadshow last week.
The Telkomsel issue is the largest since the country was hit by the 1997 financial crisis.
The strong overseas interest on the bonds, experts said, could provide a good opportunity for other companies to also start tapping funds from the international financial market as ailing domestic banks are still facing difficulties to channel significant lending.
Ray Anthony, an associate director of UBS Warburg told the Post that the upsizing of Telkomsel's bond issue showed that demand was high and foreign investors' appetite in bonds was strong.
"It looks like Indonesia is back on the map. If you were to suggest this, last year or even six months ago, people would say you were crazy," Anthony said.
He added that foreign investor's attitude was changing for the better due to the government's consistency with its reform programs, especially in the telecommunications sector.
Others, however, warn that overall investor sentiment toward Indonesia remains weak due to persisting political problems and legal uncertainty.
They also said that only quality companies like Telkomsel could attract foreign funds.
Telkomsel, the largest cellular operator in the country with 3.3 million subscribers as of the end of last year, is considered to be an attractive telecommunications play in Indonesia because of its huge potential for growth.
Telkomsel has said that the proceeds from the bond issue would be used to finance its expansion program.
Another positive factor was a recent agreement in which the state-owned telecommunications firm PT Telkom will sell a further 12.7 percent stake in Telkomsel to Singapore's SingTel, raising the latter's stake to 35 percent.
Telkom is the parent company of Telkomsel. Telkom itself plans to issue bonds worth between $100 million and $150 million in June.
Meanwhile, Standard & Poor's said that its decision on Tuesday to downgrade Indonesia's sovereign currency rating to "Selective Default" would not affect its B-plus rating on Telkomsel.