Business

Telkom says valuation is
on track to acquire Pacnet

Arief Yahya. JP/R. Berto Wedhatama

Indonesia’s largest telecommunication provider, PT Telekomunikasi Indonesia (Telkom), says due diligence for its plan to buy a controlling stake in Hong Kong and Singapore-based undersea cable operator Pacnet Ltd. will be completed next month.

Newly appointed president director Arief Yahya said the company planned to use both internal and external cash to finance the acquisition, whose value has yet to be determined, pending due diligence.

“We have time for ‘go or no go’ until this June [...] Once we submit [the bid], we have to keep silent about it,” Arief told reporters on Monday. Arief confirmed that Telkom submitted its bid earlier this month, when the company was under previous management.

Pacnet reportedly has a value of US$1 billion. According to a report by rating agency Moody’s Investor Service, Pacnet reaped $528.6 million in revenue in 2011, up 4.4 percent from a year earlier. The company’s earnings before interest, tax, depreciation and amortization (EBITDA) stood at $82 million last year, up 2.2 percent from 2010.

According to Moody’s, Pacnet was incorporated in Bermuda in 2006. The company wholly owns and operates the EAC-2C2 network, Asia’s largest privately owned submarine cable infrastructure of 36,800 kilometers.

The company also owns the EAC Pacific network spanning 9,620 kilometers from Japan to the US. Pacnet provides data connectivity solutions to major telecommunications carriers, large multinational enterprises and small and medium enterprises in the Asia-Pacific region.

Telecommunication expert Danrivanto Budhijanto said that the Pacnet acquisition would help Telkom develop its undersea cable network, which was important in an archipelagic country such as Indonesia.

“Telkom is trying to develop a fiber-optic network on land, operate a satellite network in space and build an undersea cable network so that the company can play on the global stage, through Pacnet, which already has a global network. This is as rare an opportunity that a telecommunication company can get,” he said.

Danrivanto said that Telkom needed to be a player on both the regional and global stages.

“Telkom is already too big to play only in Indonesia. Not all development must be performed by Telkom. It’s time for other operators to build their networks in Indonesia,” Danrivanto, a former member of the Indonesian Telecommunication Regulatory Authority (BRTI), said.

Telkom, which is 51.19 percent owned by the government, is strengthening its position atop Indonesia’s telecommunication service sector with massive development and investment to boost income from its internet data business.

The company has set aside Rp 21.19 trillion until 2012 to build a national broadband network that will connect customers to content providers for data connection of 20 to 100 megabits per second (Mbps).

The network is designed to cover 497 cities and 13 million homes by the end of 2015.

Telkom is also replacing its copper cable fixed wireline network into fiber optic network to deliver faster internet connections.

The transformation from copper cable to fiber-optic was officially launched at the end of April. The company aims to install fiber-optic cable for one million users by the year’s end.

Telkom is expecting 8 percent growth in the competitive telecommunications market, which has reached a saturated point, particularly as the number of SIM card holders in Indonesia has exceed the nation’s population of about 240 million.

Shares in Telkom (TLKM) were unchanged at Rp 7,850 a piece on Tuesday, while the company’s market capitalization was previously reported at Rp 158.3 trillion.

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