Telkomsel bonds get high foreign interest

Telkomsel bonds get high foreign 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.

Others, however, warn that overall investor sentiment toward
Indonesia remains weak due to persisting political problems and
legal uncertainty.

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.

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.

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.