Indonesia’s Telkomsel agrees to $3.9bn merger with broadband arm

The move comes as the telecom seeks to expand into Indonesia’s fixed broadband market.

PT Telekomunikasi Selular (Telkomsel), the Indonesian partner of Singapore Telecommunications (Singtel), has agreed to merge with the parent company’s IndiHome broadband arm to create an entity worth Rs 58.3 trillion ($3. 9 billion), the companies said.

The move comes as Telkomsel looks set to expand into Indonesia’s fixed broadband market, one of the fastest growing in the world with a 14 percent penetration rate compared to Southeast Asia’s 40 percent.

“We believe this is a rare opportunity for Telkomsel to tap into Indonesia’s fast-growing fixed broadband market by partnering with the country’s largest broadband operator, which is profitable and cash-generating,” said Yuen Kuan Moon, Group CEO of Singtel, which owns 35 percent of Telkomsel.

PT Telkom Indonesia TLKM.JK owns the remaining 65 percent of Telkomsel and wholly owns IndiHome.

The merger is the latest in a series of restructurings over the past few years at telecommunications companies in Asia to position themselves for the transition to a digital economy and 5G.

Australia’s Telstra formed a new holding company last year as part of the final steps of its restructuring. In 2020, Japan’s Nippon Telegraph and Telephone Corp (NTT) took its wireless carrier business private to cut costs.

If completed, the Indonesia deal will result in Singtel owning 29.6 percent of the expanded integrated mobile and fixed broadband business, Singtel said.

Singtel plans to increase its stake in the expanded entity by 0.5 percentage points to 30.1 percent by paying 2.7 trillion rupiah ($180 million), the companies said.

The deal is expected to close in early Q3 2023, Singtel said.

IndiHome has a market share of 75.2 percent in Indonesia, Singtel said.

Shares of Singtel are down 1.9 percent year-to-date. They were last trading at 2.52 Singapore dollars ($1.89) per share.