Ooredoo Group and CK Hutchison have unveiled plans to merge operations in Indonesia in a $6 billion deal designed to create a “commercially stronger” digital and telecommunications provider.
Under the new banner of Indosat Ooredoo Hutchison, the blockbuster transaction will see the official coming together of Indosat (Indosat Ooredoo) and Hutchison 3 Indonesia (H3I), with Vikram Sinha nominated as CEO and Nicky Lee as CFO of the combined company.
Ahmad Al-Neama will remain president director and CEO of Indosat Ooredoo and Cliff Woo will continue in his role as CEO of H3I until completion of the merger, with both set to join the Board of Commissioners of the merged company, subject to the necessary approvals.
With the deal expected to completed by the end of 2021, the merged organisation will aim to act as a “stronger second operator” in Indonesia with annual revenue of approximately US$3 billion and cost savings of roughly $300-400 million expected to be realised over 3-5 years.
“This agreement is a significant step towards our shared vision of creating outstanding value for our customers and shareholders by bringing together two of Indonesia’s leading telecoms brands to create a stronger number two player in Indonesia,” said Aziz Aluthman Fakhroo, managing director of Ooredoo Group.
“With this agreement in place, we can now turn our attention to closing the transaction and then working closely with CK Hutchison to leverage the combined expertise of our respective global telecoms groups to build a world-class digital telco for Indonesia.”
Ooredoo Group currently has a controlling 65 per cent shareholding in Indosat Ooredoo through Ooredoo Asia, a wholly-owned holding company. The merger will result in CK Hutchison receiving newly issued shares in Indosat Ooredoo amounting to 21.8 per cent and Tiga Telekomunikasi Indonesia amounting to 10.8 per cent of the combined entity.
Meanwhile, CK Hutchison will acquire a 50 per cent shareholding in Ooredoo Asia by exchanging its 21.8 per cent shareholdings in Indosat Ooredoo Hutchison for a 33.3 per cent stake in Ooredoo Asia, and will acquire an additional 16.7 per cent stake from Ooredoo Group for a cash consideration of US$387 million.
Following the above transactions, the parties will each own 50 per cent of Ooredoo Asia, to be renamed Ooredoo Hutchison Asia, which will retain a controlling 65.6 per cent ownership stake in the merged company.
Upon closing of the transactions, Indosat Ooredoo Hutchison will be jointly controlled by Ooredoo Group and CK Hutchison and will remain listed on the Indonesian Stock Exchange. Furthermore, the Government of Indonesia will retain a 9.6 per cent shareholding, alongside Tiga Telekomunikasi Indonesia at 10.8 per cent and other public shareholders holding approximately 14 per cent.
“This merged company will deliver significant value and benefits for all stakeholders including Indosat Ooredoo and Ooredoo Group shareholders, for customers, employees and Indonesia,” Fakhroo added.
“Through economies of scale and the realisation of synergies between these highly complementary businesses, the merged company will be well placed to deliver a higher return on investment for all shareholders and build on the outstanding growth momentum already achieved by Indosat Ooredoo.
"Importantly, the merger will create a company with the strength and scale to accelerate Indonesia’s digital transformation and improve network performance and customer experience across the country.”
Creating Indonesian market competition
At the heart of the deal, the merger is designed to bring together two “highly complementary businesses” to create a “larger, commercially stronger and more competitive” digital telecoms and internet provider in Indonesia.
In operating as the second largest mobile telecoms company in the country, the combined entity will attempt to drive innovation and network improvements capable of enhancing digital services delivery to customers nationwide, with a specific focus on leveraging multi-national capabilities spanning Europe, the Middle East, North Africa and Asia Pacific.
“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,” noted Canning Fok, group co-managing director of CK Hutchison. “Indosat Ooredoo Hutchison will have a critical mass that will enable it to drive network expansion and improvements that will support the Government’s digital agenda and benefit customers and Indonesia as a whole.”
According to Fok, the business will also be “better positioned” to extend the rollout of its network while enhancing service quality and speed with a specific focus on emerging technologies such as 5G.
“CK Hutchison invests in and operates telecom businesses in 12 markets around the world, many of which have successfully rolled out 5G networks, and we look forward to expanding innovative 5G services in Indonesia when the time is right,” Fok added.