T

elecommunications giant PT Telekomunikasi Indonesia (Telkom) says the progress of its share buyback is on track to sustain a plan for a share swap deal with Singapore’s SingTel to reclaim full ownership in Indonesia’s biggest cellular operator, PT Telekomunikasi Selular (Telkomsel).

Telkom finance director Honesti Basyir said that the company’s share buyback has reached 66.8 percent, or equal to around 430.97 million shares out of a total planned 645.16 million.

“In line with the progress, Rp 3.3 trillion (US$356.40 million) has been disbursed from a total allocated budget of Rp 5 trillion,” Honesti said last week.

Honesti said that the average price during the buyback was Rp 7,700 a share. Shares in Telkom (TLKM) closed at Rp 7,250 a piece last Friday, a 250-point drop, or 3.33 percent compared to a day earlier.

Telkom is performing the fourth stage of a share buyback, which was started after the company obtained approval in a meeting of shareholders in May last year to conduct the operation within 18 months, or until the end of this year. In previous stages of share buybacks, which were carried out from 2005 to 2009, Telkom collected 491 million shares saved as treasury stock. Funds for the buyback came from the company’s retained earnings.

When the fourth stage of the share buyback is completed, Telkom will have 1.14 billon shares, or about 5.63 percent of its total shares. Telkom is currently 53 percent owned by the government while the public holds the remaining shares.

Telkom once offered to swap its own shares with a stake in its subsidiary Telkomsel held by Singapore Telecommunication (SingTel). Telkom currently holds a 65 percent stake in Telkomsel and SingTel, whose majority shareholder is the Singaporean government, owns the remaining 35 percent.

Telkom sold part of its shares in Telkomsel several years ago as part of the government’s privatization program, which was condemned by the public as the cellular unit was seen as a valuable asset. Telkomsel currently has 110 registered subscriptions in a country of almost 240 million people. The company led the cellular market by holding a 43 percent market share.

Telkom president director Arief Yahya said that the share swap remained an option.

“We continue to buy back our own shares. There is indeed a discourse for a share swap. It remains an alternative,” Arief said.

Arief, however, was pessimistic that the share swap could be conducted this year.

Honesti said that Telkom has not held any formal meetings with SingTel to talk about the company’s desire to control the ownership of the mobile phone operator.

“Certainly, SingTel has its own strategic plans for Telkomsel because it is one of their valuable portfolios. We want to obtain all shares in Telkomsel from SingTel at once. However, if we see SingTel’s position, we may need a long time to do that,” Honesti said.

He added that Telkom has not appointed any financial advisors for the plan to take back Telkomsel. The company was reportedly staging a “beauty contest” to select local and foreign financial companies to be financial appraisers to help the company asses the share buyback from SingTel.

Telkomsel reported Rp 12.3 trillion in revenues during the first quarter of the year, up 9 percent compared to last year’s first quarter. The cellular company’s net profits reached Rp 3.5 trillion.

Parent company Telkom, reaped Rp 17.79 trillion in revenues in the first quarter of the year, a 6 percent increase compared to Rp 16.71 trillion from the same period last year. Telkom’s net profits stood at Rp 3.3 trillion in the first three months of the year, increasing by 17 percent from Rp 2.83 trillion over the same period last year.