SingTel (S$2.53, up 5 cents) disclosed that PT Telkom Indonesia (Persero) Tbk (Telkom) and PT Telekomunikasi Selular (Telkomsel) have signed a deed of spin-off to integrate IndiHome into Telkomsel. This was marked by the signing between Telkom CEO Ririek Adriansyah and Telkomsel CEO Hendri Mulya Syam on Tuesday.
After Telkomsel’s increase in capital associated with this transaction is notified to the Minister of Law and Human Rights of the Republic of Indonesia, scheduled to be carried out on July 1, 2023, IndiHome will legally be under Telkomsel’s management starting July 1, 2023.
This agreement is an important milestone for the implementation of TelkomGroup’s Fixed Mobile Convergence (FMC) initiative as part of the company’s Five Bold Moves main strategy, in order to create
a sustainable impact on society such as providing broader coverage, more equitable and reliable broadband services, supporting the acceleration of digital inclusion and the digital economy, increasing the level playing field of the Indonesian telecommunications industry, and strengthening the company’s business in the future.
Following the completion of the IndiHome integration process, Telkom’s effective ownership in Telkomsel to 69.9%, while Singtel’s in Telkomsel to 30.1%. The transfer of IndiHome to Telkomsel also marks the shifting of TelkomGroup business focus, whereas the Business to Customer (B2C) segment is fully managed by Telkomsel, while Telkom will focus on becoming the market leader in the Business to Business (B2B) segment which is a potential new source of revenue for Telkom’s higher growth in the future.
“Today is an important milestone for the transformation of TelkomGroup that focuses on advancing Indonesian B2B. We would like to express our gratitude for the support of all stakeholders for Telkom’s ongoing transformation to create optimal value for the company, customers, society, shareholders and government,” said Telkom CEO Ririek Adriansyah.
Ririek added based on an in-depth study on FMC, 23 of the world’s 25 largest telco operators have implemented FMC. This shows that the FMC initiative is the most appropriate practice considered its proven results. Telkom’s strategic move is also supported by the Ministry of SOEs.
“After this, IndiHome will synergize with Telkomsel to bring innovations that provide maximum results for the company and all stakeholders. Moving forward, TelkomGroup will continue Five Bold Moves initiatives such as InfraCo, Data Center Co, B2B Digital IT Service Co, and DigiCos,” explained Ririek.
The integration of IndiHome into Telkomsel also covers the management of business and customers for several services such as internet (fixed broadband), landline (fixed line), Internet Protocol Television (IPTV), a variety of bundling of other digital consumer services. Regarding the integration, Telkomsel is committed to ensuring that there is no quality reduction in IndiHome broadband services during the transition period.
Telkomsel believes that the FMC initiative will strengthen Telkomsel’s positioning as the leading digital telecommunications company in Indonesia, which will consistently present innovative convergence
of products and services, by accelerating the equality of people’s experience in utilizing digital lifestyle services that are more inclusiveand sustainable.
At $2.53, market cap of SingTel is S$41.7bln, FY24F P/E is 16.2x, current P/B is 1.6x, FY24F dividend yield is 4.9% and its present net debt position of S$8.3bln equates to net gearing of 33.2%. Telkomsel is SingTel’s 30%-owned associate and given that we continue to like the latter due to its defensive attributes in times of market uncertainty while dividend yield also appears attractive, we are thus maintaining our BUY recommendation on SingTel.