Move comes as the telecom looks to expand in Indonesia’s fixed broadband market.
PT Telekomunikasi Selular (Telkomsel), the Indonesian associate of Singapore Telecommunications (Singtel), has agreed to merge with its parent’s IndiHome broadband arm to create an entity worth 58.3 trillion rupiahs ($3.9bn), the companies have said.
The move comes as Telkomsel looks to expand in Indonesia’s fixed broadband market, one of the fastest growing globally with a penetration rate of 14 percent compared with 40 percent across Southeast Asia.
“We believe this is a rare opportunity for Telkomsel to tap into the high-growth fixed broadband market in Indonesia 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 string of restructuring exercises in recent years among telecommunication companies in Asia to position themselves for the transition to a digital economy and 5G.
Australia’s Telstra last year formed a new holding company as a part of the final steps of its restructure. 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 percent of the enlarged integrated mobile and fixed broadband company, Singtel said.
Singtel plans to raise its stake in the enlarged entity by 0.5 percentage points to 30.1 percent by paying 2.7 trillion rupiahs ($180m), the companies said.
The deal is expected to be completed in the early third quarter of 2023, Singtel said.
IndiHome has a 75.2 percent market share in Indonesia, Singtel said.
Shares of Singtel have dropped by 1.9 percent year-to-date. They last traded at 2.52 Singapore dollars ($1.89) per share.