CK Hutchison to merge Indonesian wireless business with Ooredoo’s PT Indosat in US$6.1 billion deal
- Combined mobile business will have US$3 billion in estimated annual revenue, generate up to US$400 million annual cost savings
- Deal will allow combined operations to better compete with Indonesia’s dominant carrier Telkomsel
The US$6.1 billion transaction will create Indonesia’s second-biggest mobile carrier with combined annual revenue of about US$3 billion in Southeast Asia’s most populous country. It also will create a more formidable rival to PT Telkomsel, the joint venture between state-owned Telkom and Singapore Telecommunications.
Telkomsel dominates the Indonesian wireless market, with more than 169 million customers and revenue of 87.1 trillion rupiah (US$6.1 billion). Indonesia has a total population of about 276 million people.
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By comparison, CK Hutchison’s Indonesian wireless business reported revenue of HK$9.1 billion (US$1.2 billion) in 2020. In the first half of this year, the Indonesian business generated HK$4.4 billion in revenue, a 4 per cent decrease from the first six months of 2020.
Hutchison and Ooredoo will eventually co-own Ooredoo Hutchison Asia, a holding company with 65 per cent control of the merged entity. The entity will continue to be traded on the Jakarta Stock Exchange. The Indonesian government will retain its 9.6 per cent stake in it.
The merger is expected to achieve about US$300 million to US$400 million in annual pre-tax cost savings over a three- to five-year period following the deal.
The merged company will be well placed to deliver a higher return on investment for all shareholders, Aziz Aluthman Fakhroo, Ooredoo’s managing director, said in a statement. It will create a company with the strength and scale to accelerate Indonesia’s digital transformation and improve network performance and customer experience, he added.
Vikram Sinha, PT Indosat’s chief operating officer, is expected to be named CEO of the combined company, with PT Indosat’s top executive Ahmad Al-Neama and PT Hutchison 3 Indonesia CEO Cliff Woo expected to join the combined company’s board.
The transaction is subject to shareholder and regulatory approval and is expected to close by the end of 2021.