Bakrie may launch August rights issue, sources say

17 Jun 2010

Indonesian wireless operator Bakrie Telecom may look to raise new funds from a rights issue in August 2010, as part of a wider deal to merge its CDMA operations with those of PT Telekomunikasi Indonesia (Telkom). Reuters cites four different, but unnamed, sources as saying that the firm is readying the issue, with two going further to suggest a merger deal with Telkom could be finalised as early as July. If realised, the enlarged entity would control more than 90% of the domestic CDMA market. Telkom’s TelkomFLEXI service currently has around 15 million subscribers and Bakrie Telecom has eleven million.

The combined operation would rank as the fourth-largest cellular operator after Telkom, PT Indosat (ISAT.JK: Quote) and PT XL Axiata (EXCL.JK: Quote). Bakrie is understood to be considering pricing the rights issue at IDR250 per share, equivalent to a 47% premium to the current share price of IDR170. The telco, which is 39.9%-owned by Indonesian group PT Bakrie & Brothers, has a stock market value of USD535 million. One of Reuters’ unnamed sources said that following completion of the rights issue, Telkom could look to spin off TelkomFLEXI, which would then be purchased by Bakrie.

In March this year CommsUpdate reported that Telkom was considering a merger between its CDMA unit and another domestic provider – possibly Bakrie. At the end of May matters moved forward when it was confirmed that Telkom was in talks with its fellow operator on the possible consolidation of their CDMA operations in the country. And at the start of this month the Indonesian government threw its weight behind the plan, with the Enterprises Minister Mustafa Abubakar quoted as saying that the government would support any plan ‘as long as it benefits’ the state-backed (i.e. Telkom) company.

Indonesia, Bakrie Telecom (BTel), Telkom Indonesia