CK Hutchison, a conglomerate controlled by Hong Kong's richest man Li Ka-shing, has agreed to merge its Indonesian wireless telecommunications business with the local operations of Qatar's Ooredoo to sharpen their competition against the market leader.
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.
"This is a great opportunity to create a stronger and more innovative telco player in Indonesia and will be an accretive transaction for shareholders and other stakeholders alike," Canning Fok Kin-ning, CK Hutchison's group co-managing director, said in a statement.
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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.
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.
The merger comes nearly nine months after both parties entered into exclusive talks to combine their operations. Under the terms of the deal, the Hong Kong group will merge its unit known as PT Hutchison 3 Indonesia with PT Indosat to form an entity called PT Indosat Ooredoo Hutchison.
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.
The deal is the latest this year for CK Hutchison, the conglomerate with businesses ranging from the world's ninth-largest container port to the Watsons pharmacy chain. In August, CK Hutchison agreed to buy out its joint venture partner Swire Pacific in Hongkong United Dockyards, which provides marine and engineering services.
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