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T Dian Swastatika Tbk (DSSA) is to own a stake in PT Smartfren Telecom Tbk (FREN) — both are connected to Indonesia’s conglomerate Sinar Mas Group — after a Rp 1 trillion mandatory convertible bonds deal.

The company, which focuses on energy and infrastructure, has bought 10 of Smartfren’s bond series at Rp 100 billion each from PT Valensia Persada, Dian Swastatika announced. The bonds will be converted into equity within five years time after the Feb. 20 transaction.

Dian Swastatika will own a 15.4 percent stake in CDMA-based telecommunications provider Smartfren after the bond-to-equity conversion, according to public surveyor Doli Siregar & Rekan’s valuations. The transaction will also increase Dian Swastatika’s firm value to US$4.4 billion from $4.34 billion.

The bond purchase will be funded from Dian Swastatika’s share sale of its unit PT Golden Energy Mines Tbk (GEMS). Dian Swastatika announced last month a $1.5 billion share swap deal with Singapore’s forestry firm United Fiber System Ltd (UFS), which will facilitate a back door listing to the Singapore Stock Exchange.

Shares of Dian Swastatika soared 16.07 percent at the news on Thursday, to close trading at Rp 17,700 apiece, while Smartfren’s tumbled 15.62 percent to Rp 108 each.

Dian Swastatika said the value of the transaction with Smartfren and Valensia Persada was worth 21 percent of the company’s equity. Therefore, it did not have to seek shareholders’ approval as required by the Financial Institutions & Capital Markets Supervisory Agency (Bapepam-LK) for transactions valued at more than 50 percent of listed companies’ assets.

PT OSK Nusadana Securities has been appointed the selling agent for the transaction.

Smartfren is currently owned by three Sinar Mas-linked firms — PT Wahana Inti Nusantara, PT Global Nusa Data and PT Bali Media Telekomunikasi — which of each has about a 20 percent stake in the firm. The public-owned 31 percent stake in Smartfren and the remainder is owned by Dubai’s Jerash Investment Ltd.

Like other telecom firms, Smartfren has been under pressure from tight competition in the industry. It reported a net loss of Rp 1.56 trillion in the first nine months of 2011, a 48 percent increase from the same period in 2010.