Indonesian telcos BTel and Smartfren confirm plan to merge networks

4 Nov 2014

Indonesian CDMA operator Bakrie Telecom (BTel) and fellow CDMA wireless service provider Telekom PT SmartFren (Smartfren) have confirmed plans to merge their respective network operations in a tie-up that will make the former one of Smartfren’s shareholders. Reuters reports that whilst neither side has divulged the value of the deal, nor indeed the size of the equity stake BTel will own, upon completion it intends to lease part of Smartfren’s network to serve its own customers. The move comes in the wake of BTel’s escalating financial woes: the carrier is being sued by three bondholders in New York for its alleged failure to make two interest payments on a USD380 million bond.

According to TeleGeography’s GlobalComms Database, BTel booked gross revenue of IDR928 billion (USD79.53 million) in the first six months of this year, down sharply by 28.9% from IDR1.31 trillion in H1 2013, as net revenue also slumped 30.5% year-on-year to IDR773 billion. Net income (loss) for the six months under review was IDR316.8 billion, on the back of a sizeable IDR292.7 billion loss in the corresponding year-earlier period. The plummeting net income came despite the operator booking a profit of IDR210.7 billion in Q1 2014; BTel’s second trimester saw it record a massive loss of IDR527.6 billion to wipe out the earlier gains. In June this year, the provider set out its stall to sign up a net one million new customers in 2014, despite its rising level of debt and the indifferent consumer appeal of its CDMA business. It reported a total of 12.5 million subscribers at mid-2014.

For its part, Smartfren announced plans in August 2014 to invest up to IDR10 trillion to prepare the ground for its 4G network launch and to migrate its 1900MHz band network to 2300MHz, as requested by the country’s government. The operator’s deputy CEO Djoko Tata Ibrahim says that the capital expenditure project will be financed through a combination of vendor financing and syndicated loans from China Development Bank (CDB), adding: ‘We will probably also find other sources of funding’. Smartfren, which is controlled by the Sinar Mas Group, counted a total of 11.7 million subscribers as 30 June 2014 and is looking to boost this to 15 million by the end of the year.

Indonesia, Bakrie Telecom (BTel), PT Smart Telecom (Smartfren)