Janeman Latul & Yessar Rossendar

Telkom Keeping Line Open For Mergers and Acquisitions

PT Telekomunikasi Indonesia, the country’s largest telecommunications company, confirmed on Wednesday that it was considering merging one of its units with another firm or acquiring other operators next year with PT Bakrie Telecom a potential target.

“We’re still in the discussion stage, looking for opportunities,” said Sudiro Asno, Telkom’s chief financial officer, at the sideline of the annual Investor Summit in Jakarta.

“Just like when you’re searching for a pretty girl, we’re at the stage where we are looking at several of them.”

He said, however, that Telkom’s sights were not fixed on Bakrie Telecom alone. “We’re also looking at other smaller operators, but not the big players like PT Indosat and PT Excelcomindo Pratama,” Sudiro added.

Asked if Telkom would issue bonds to finance purchases, Sudir replied: “Something like that. If we’ve checked [the company] and it’s cheap, we’ll go for it. But we’re not setting any target date for an acquisition.”

Sector analysts, as well as government officials, have urged companies in the sector to merge, noting that extended price wars between the market’s 11 competitors was causing high levels of “unhealthy” competition, which resulted in lower-than-optimum earnings for the big players.

Indicating the continuation of the price war between operators next year, Sarwoto Atmosutarno, president director of Telkom subsidiary PT Telekomunikasi Selular, Indonesia’s largest mobile phone operator, said Telkomsel may reduce prices again in 2010 to stay competitive.

Analysts have said one possible option for Telkom was to merge its CDMA operator unit, Telkomflexi, with one of the country’s largest operators in the field.

CDMA, or code division multiple access, is a major mobile phone standard competing with the general system for mobile communications standards, the dominant system in Europe and Asia.

A cheaper technology to use, operators of CDMA are aiming at the high-volume, low-income market.

Bakrie Telecom, the second-largest CDMA operator by customer base, is confident that it will have 10.5 million subscribers signed up by the end of the year.

Telkomflexi currently has 13.7 million and is targeting 16 million to 17 million by end-2009.

Sudiro said that Telkom was still planning to spend at least $2 billion on capital expenditure next year and raise 50 percent to 60 percent of the capital from external sources.

The company was looking at its financing mix, weighing up bonds, loans and vendor financing, as it eyed acquisitions of telecommunications operators, as well as companies in the information, media and “edutainment” sectors, he said.

Asno was upbeat about the company’s performance next year due to growing consumer spending in Indonesia and an improving global economy.

“This year we may grow around 5 percent, but I’m sure next year, it will be around 8 percent to 9 percent,” Asno said.

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