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ublicly listed telecommunications operator PT Bakrie Telecom (BTEL) will own a minority stake in PT Smartfren Telecom (FREN) after the first agreed to share its network with the latter.

Bakrie Telecom will allocate bandwidth to Smartfren on the 800 MHz frequency and will also rent the network being operated by Smartfren in exchange for the stake, according to Smarfren finance director Antony Susilo.

'€œWe can'€™t disclose yet how much of our stake will be owned by Bakrie Telecom. We will announce it later, once we finalize everything,'€ Antony said Wednesday.

As of September, Smartfren was 32.81 percent owned by PT Wahana Inti Nusantara, 24.81 percent by PT Global Nusa Data, 24.1 percent by PT Bali Media Telekomunikasi, 16.46 percent by the public and 1.82 percent by Jerash Investment Ltd.

The three major owners of Smartfren '€” Wahana Inti Nusantara, Global Nusa Data and Bali Media Telekomunikasi '€” are all subsidiaries of conglomerate Sinar Mas Group.

No details were immediately available about how much the network sharing deal affects Smartfren'€™s shareholders and by how much their shares will be diluted, but Antony said further information would be announced next week.

Smartfren network director Merza Fachys said that the deal between his firm and Bakrie Telecom would help better the two'€™s financial performances. '€œThe agreement will provide greater efficiency for both parties because we will have a joint network,'€ he added.

Merza explained further that Smartfren would act as a netco, which would be responsible for the network, technology and operations, while Bakrie Telecom would act as a servco '€” the customer-facing arm. Both, however, would still operate as separate entities, he added.

Smartfren is aiming to seek loans of between US$400 and $500 million to finance its network migration to roll out long-term evolution (LTE) technology, better known as 4G.

Smartfren will roll out next year time division duplex-LTE (TDD LTE) in 2.3 GHz frequency and frequency division duplexing-LTE (FDD-LTE) in 800 MHz.

The firm successfully slashed its losses by 39.5 percent to Rp 939.9 billion (US$77.24 million) in the first nine months of this year, from Rp 1.54 trillion year-on-year due to surging revenues.

Meanwhile, Bakrie Telecom has been sued by three bondholders in New York as the company allegedly failed to make two interest payments on a $380 million bond.

The New York-based bondholders, which hold more than 25 percent of the outstanding bond maturing in May 2015, claimed the Bakrie Group'€™s company failed to pay interest due in November last year and May this year, Reuters reported.

Ratings agency Fitch Ratings has downgraded Bakrie Telecom'€™s long-term foreign and local currency issuer default rating to Restricted Default (RD) from C (highly vulnerable).

Bakrie Telecom'€™s Indonesian supplier, PT Netwave Multi Media, has recently filed a debt restructuring process with the country'€™s commercial court over a concern that Bakrie Telecom could not pay its debt totaling Rp 4.73 billion.

Bakrie Telecom corporate communications manager Hen Roliya Helana declined to comment on the legal case when contacted by The Jakarta Post.