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tate-owned telecommunications operator PT Telekomunikasi Indonesia (Telkom), through its subsidiary PT PINS Indonesia, is expected to finalize its acquisition of a stake in mobile-phone distributor PT Tiphone Mobile Indonesia in the third quarter of this year.

Telkom innovation and strategic portfolio director Indra Utoyo declined to disclose the value of the transaction, saying only that the valuation was based on Tiphone'€™s average share price this month. '€œI cannot you tell how much the exact value is as we are still negotiating [the price],'€ Indra said on Thursday.

Tiphone'€™s average share price in May has been in the range of Rp 843 [US$0.07] per share. Tiphone'€™s financial report in March revealed the company had a total of 5.54 billion outstanding shares, according to kontan.co.id.

It was reported previously that PINS Indonesia would acquire between 10 and 25 percent of Tiphone'€™s shares, equivalent to between 554.5 million up and 1.36 billion shares. Based on these calculations, therefore, the price would be between Rp 467.44 billion and Rp 1.14 trillion.

With the acquisition, Telkom is hoping to strengthen its distribution business which is run by PINS Indonesia. Tiphone, on the other hand, is currently Telkom'€™s biggest distributor. '€œTelkom needs Tiphone to expand PINS,'€ Indra said.

Aside from strengthening PINS, the acquisition was also expected to enlarge Telkom'€™s business, including its data services, he added.

Indra said Telkom also wanted to expand its device, network and application (DNA) ecosystem. '€œTiphone has strengths in device solutions. [Telkom] can enrich [Tiphone] applications and content,'€ he said.

PINS Indonesia'€™s president director Mustapa Wangsaatmadja recently said that PINS had taken the initiative to acquire the Tiphone stake last year. The acquisition funds are coming from PINS'€™ internal cash reserves and external sources.

'€œTiphone and its shareholders signed a conditional share purchase agreement on May 19,'€ he said, adding that PINS was still evaluating Tiphone'€™s potential to determine the appropriate price of the acquisition.

This year, PINS was focused on plans to expand its information technology (IT) distribution channel to smaller towns because currently it could only reach big cities, he said.

'€œTiphone is known for its mobile phone products. There is a possibility that we will cooperate in mobile phone bundling in the near future,'€ Mustapa said.

'€œPINS hopes that the acquisition can help the company to exceed its income target this year,'€ he added.

PINS Indonesia is targeting income of Rp 1.5 trillion this year, a 50 percent increase from last year, which amounted to Rp 1 trillion.

Tiphone, which was established in 2008, primarily operates in the mobile phone and pre-paid phone credit sector. The firm had net profits of Rp 61 billion in the first quarter of this year, an increase of 17 percent on the same period last year. While its cost of revenue increased by 52.6 percent to Rp 2.9 trillion in the first quarter of this year from Rp 1.9 trillion of the first three months of last year.

On Dec. 31, 2013, Tiphone had total liabilities amounting to Rp 2.069 trillion, consisting of short-term liabilities of Rp 2.021 trillion and long-term liabilities of Rp 48 billion. (ask)