Telkom and Telkomsel have signed a Conditional Spin-off Agreement (CSA) to spin off and integrate IndiHome into Telkomsel. IndiHome is 100% owned by Telkom and the largest fixed broadband business in Indonesia.
The spin off and integration are in line with Telkom’s Fixed Mobile Convergence (FMC) initiative, and the signing of this preliminary agreement is a crucial step in implementing TelkomGroup’s strategy to bring about more choices and a better broadband experience, realize digital inclusion in Indonesia, and strengthen TelkomGroup’s business. The transaction will be value accretive for Telkomsel and has received the support of Telkomsel’s shareholders Telkom and Singtel. For Singtel, this integration aligns with its strategic reset principles of pivoting towards higher growth businesses, while reinforcing its commitment to Indonesia.
IndiHome has a 75.2% market share in Indonesia, one of the fastest growing fixed broadband markets globally with a penetration rate of some 14% compared to 40% across Southeast Asia. Fixed broadband ARPUs are some six times that of mobile in Indonesia and with rising affluence, fixed connections are poised for significant growth.
As the consideration for the IndiHome spin off is through the issuance of new primary shares in Telkomsel, there would be an increase of Telkom’s shares in Telkomsel, comprising Telkom 70.4% and Singtel 29.6% upon legal completion of the spin-off. The value of IndiHome amounts to IDR 58.3 trillion (equivalent to S$5.1 billion (50% higher than Telkom’s equity when combined with other commercial agreements between Telkom and Telkomsel), this transaction is categorized as a material transaction which requires approval from Telkom’s independent shareholders.
At the time of the integration, Singtel has agreed to exercise its pre-emptive right to purchase another 0.5 percentage point share in this enlarged entity by subscribing for new primary shares of Telkomsel post- integration, for IDR 2.7 trillion (equivalent to S$236 million) in cash. This brings its effective interest in Telkomsel to 30.1%, meanwhile Telkom goes to 69.9%.
With this strategy involving IndiHome and Telkomsel, Business to Consumers (B2C) in Telkom Group will be fully managed by Telkomsel, while Telkom’s operational focus will be on Business to Business (B2B). The FMC initiative is expected to strengthen TelkomGroup’s position as an integrated telco to address customers’ evolving needs and create synergies through their extensive customer network.
Telkom Group CEO Ririek Adriansyah
The integration process of broadband services for TelkomGroup’s retail customers is part of Telkom Group's 'Five Bold Moves' business transformation to strengthen the company's position as a market leader in digital telecommunications in Indonesia. This integration within one of Telkom’s flagship arm -Telkomsel- allows the public to access broader broadband services, provide seamless experience where customers can move freely without worrying about losing service, and to realize digital inclusion. TelkomGroup's business transformation also allows the company to operate more effectively and efficiently through focused business structures, including capital allocation and operational expenses.
Hendri Mulya Syam, President Director of Telkomsel
Telkomsel is enthusiastic about the achievement of the ongoing spin-off agreement process. Together with our shareholders, Telkom and Singtel, we believe that integrating IndiHome services will further strengthen Telkomsel's position in the telecommunications and digital industry in Indonesia while proving our commitment to advance and expand our business portfolio, especially in Fixed Mobile Convergence services.
