Hong Kong-based CK Hutchison and Qatari Ooredoo Group announced on Thursday they were merging operations in Indonesia to create a new number two mobile telco called PT Indosat Ooredoo Hutchison.
Estimated revenue of the entity made up of Indosat Ooredoo and Hutchison 3 Indonesia (H3I) is slated to be around $3 billion. Annual savings from the merger are expected to amount to $300 million to $400 million as they are realised over the next three to five years.
Ooredoo Group has a 65% interest in Indosat Ooredoo through its Ooredoo Asia holding company. CK Hutchison will get half of Ooredoo Asia by swapping its stake in the merged entity for 33% of shares, and ploughing $387 million into the Asia business for the remaining 16.7% stake. After this, the business will be known as Ooredoo Hutchison Asia.
Once the transaction is complete, Ooredoo Hutchison Asia will have 65.6% of shares in the listed Indosat Ooredoo Hutchison company, PT Tiga Telekomunikasi Indonesia will have a 10.8% stake, the Indonesian government will have 9.6%, and public shareholders will hold around 14% of shares.
The deal will need to be approved by Ooredoo Group, CK Hutchison, and Indosat Ooredoo shareholders, and is expected to be closed by the end of 2021. Current Indosat Ooredoo COO Vikram Sinha will become CEO, with the current CEOs of Indosat Ooredoo and H3I joining a board of commissioners for the merged company.
"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," CK Hutchison Holdings group co-managing director Canning Fok said.
"With greater scale, expanded spectrum, and a more efficient cost structure, Indosat Ooredoo Hutchison will also be better positioned to extend the rollout of its network and enhance service quality and speed.
"I would also like to express gratitude to the Government of Indonesia. Its foresight in creating an investment-friendly policy environment is helping to build a strong and sustainable mobile market in Indonesia."