Thanks To The Conglomerate Li Ka-shing, The Indosat Merger With Tri Has Made Them The Second Largest Telecommunications Provider In Indonesia

Hong Kong-born conglomerate, Li Ka-shing. (Photo: Doc. Forbes)

JAKARTA - The company owned by Hong Kong conglomerate Li Ka-shing, CK Hutchison, has successfully merged their telecommunications unit in Indonesia with the provider Indosat. This action is aimed at digital development in the largest market in Southeast Asia.

Reporting from Forbes, quoted on Tuesday, September 21, Hutchison 3 Indonesia (Tri Indonesia) joined with Indosat, which is an affiliate of the telecommunication operator Qatar Ooredoo Group, to create an entity called Indosat Ooredoo Hutchison. The total transaction value is around 6 billion US dollars or Rp. 85.8 trillion.

Indosat Ooredoo Hutchison will become the second largest cellular telecommunications company in Indonesia, with annual revenues of around US$3 billion or Rp42.9 trillion. The deal is expected to be finalized by the end of this year, subject to shareholder and regulatory approval.

"Indosat Ooredoo Hutchison will have an important role that will enable it to drive network expansion and upgrades that will support the [Indonesian] Government's digital agenda and benefit customers and Indonesia as a whole," said Co-Managing Director CK Hutchison Canning Fok.

"This merger will create a company with the power and scale to accelerate Indonesia's digital transformation and improve network performance and customer experience across the country," added Ooredoo Group Managing Director Aziz Aluthman Fakhroo.

The merger also highlights efforts to pursue the company's business scale in the Indonesian telecommunications sector. Fitch Ratings said in a report released in May, when CK Hutchison and Indosat were still discussing a merger, 5G investment would pose challenges for telcos.

"It will be a challenge for smaller telcos to absorb the costs of 5G investments without a return on direct investment," the report said.

The agreement is expected to realize the value of synergies before tax of up to 400 million US dollars in the next three to five years. After the transaction is closed, Indosat Ooredoo Hutchison will still be listed on the Indonesia Stock Exchange.

The ownership of 65.6 percent of Indosat Ooredoo Hutchison's shares will be owned by the parent company which is jointly owned by CK Hutchison and Ooredoo, while the Indonesian government will hold 9.6 percent of the company's shares.

This merger is the latest deal in telecommunications by CK Hutchison. In November, the company announced that it was in advanced talks to sell its wireless tower business in Europe to Spain's Cellnex Telecom for 10 billion euros.

In addition to telecommunications, CK Hutchison's businesses include finance, infrastructure, ports and retail. In 2018, Li Ka-shing retired as chairman of CK Hutchison and property developer CK Asset, but remained a senior advisor.

93-year-old Li Ka-shing is ranked first in the Hong Kong Rich List according to Forbes Real Time Billionaires, as of Tuesday 21 September 2021, with a net worth of US$31.3 billion or around Rp. 447 trillion (exchange rate of Rp. 14,300 per US dollar) .