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span class="caption" style="width: 398px;">Forging an alliance: PT Bakrie Telecom (BTEL) workers conduct a regular check on the company’s base transceiver station at the Wisma Bakrie tower in Jakarta. BTEL agreed on Wednesday to acquire a 35 percent stake in cellular operator PT Sampoerna Telekomunikasi Indonesia as part of a share-swap agreement between the two companies. JP/P.J. Leo Publicly listed telecommunications company PT Bakrie Telecom (BTEL) is due to acquire a 35 percent stake in PT Sampoerna Telekomunikasi Indonesia (STI) as part of the two CDMA-based mobile phone providers’ share-swap agreement, BTEL’s top executive says.

BTEL’s president director, Anindya Bakrie, said in Jakarta on Wednesday that his company would, under the share-swap agreement, have an option to become STI’s majority shareholder within three years.

He did not, however, disclose the number of shares STI would hold in his company as part of the share-swap agreement.

Analysts said that STI might in return receive less than 10 percent of BTEL in the swap because of BTEL’s size, with its market capitalization of Rp 7.26 trillion (US$791 million) being far bigger than that of STI.

BTEL currently owns a CDMA (code division multiple access) provider, Esia, and dominates around 40 percent of the CDMA market in Jakarta, Banten and West Java areas. Meanwhile, STI, whose product is Ceria, penetrates rural areas in Java, Sumatra, the Nusa Tenggara islands and Bali.

BTEL operates on 800 MHz, while STI is on a 7.5 MHz frequency within the 450 MHz band.

“Both BTEL and STI’s shareholders have agreed to integrate the two business operations under one management in BTEL.

“The new BTEL aims to accelerate the penetration of true mobile convergence offerings for every customer in Indonesia, whether they are in cities, suburban or even rural areas,” Anindya said.

Michael Sampoerna, the president director of Sampoerna Strategic, which owns STI, said the collaboration would allow an opportunity for both companies to grow faster and meet demands for low-price telecommunications
services.

“There appears to be a disconnect in the growth of data communications due to heavy infrastructure investment, lower unit prices and slower expansion due to stiff competition. With this synergy, we can expand the business faster in order to better serve our customers and compete [in the market],” Michael said.

Anindya said that the share swap was not part of an exit strategy by his company to leave the more competitive telecommunications market in the country.

“We will never exit the telecommunications business. We both agree that telecommunications is a beneficial long-term business,” Anindya said.

According to a file submitted to the Indonesia Stock Exchange (IDX), the agreement also stipulates that STI will receive BTEL’s new shares to be issued in nonpreemptive rights.

BTEL is planning to hold an extraordinary general meeting of shareholders within a month to seek approval of nonpreemptive rights issuance of up to 10 percent with an estimated value of $90 million.

“Not all nonpreemptive rights of 10 percent will be swapped. We will use part of the proceeds from the new shares to pay mature debts of Rp 650 billion, and to further invest in data connectivity,” Anindya said.