Indonesia’s Telkomsel, a subsidiary of Singapore Telecommunications (Singtel), has agreed to merge with its parent company’s IndiHome broadband arm to create a new entity worth 58.3 trillion rupiahs ($3.9bn). The move is aimed at expanding Telkomsel’s presence in Indonesia’s fixed broadband market, which is one of the fastest-growing globally, with a penetration rate of just 14% compared to 40% across Southeast Asia. Singtel owns a 35% stake in Telkomsel, while PT Telkom Indonesia owns the remaining 65% and wholly owns IndiHome.
Yuen Kuan Moon, the group CEO of Singtel, said that the merger presents a rare opportunity for Telkomsel to tap into Indonesia’s high-growth fixed broadband market by partnering with the country’s largest broadband operator, which is profitable and cash-generating. The merger is the latest in a series of restructuring exercises among telecommunications companies in Asia as they position themselves for the transition to a digital economy and 5G.
Last year, Australia’s Telstra formed a new holding company as part of its restructuring efforts, while in 2020, Japan’s Nippon Telegraph and Telephone Corp (NTT) took its wireless carrier business private to cut costs. If completed, the Indonesian deal will result in Singtel owning 29.6% of the enlarged integrated mobile and fixed broadband company. Singtel plans to raise its stake in the new entity by 0.5 percentage points to 30.1% by paying 2.7 trillion rupiahs ($180m).
The deal is expected to be completed in the early third quarter of 2023, according to Singtel. IndiHome currently holds a 75.2% market share in Indonesia. Shares of Singtel have dropped by 1.9% year-to-date and last traded at 2.52 Singapore dollars ($1.89) per share.