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Thursday, October 21, 2021

Qatar’s Ooredoo Group, CK Hutchison ink ‘landmark’ $6bn Indonesian merger


Under the new deal, the merged business will be named Indosat Ooredoo Hutchison.

Qatar’s Ooredoo and Hong Kong’s CK Hutchison Holdings Limited (CK Hutchison) signed an agreement to merge their Indonesian telecom units in a $6 billion deal, the two companies announced on Thursday. 

The merged businesses, PT Indosat Tbk (Indosat Ooredoo) and PT Hutchison 3 Indonesia (H3I), will be named PT Indosat Ooredoo Hutchison Tbk (Indosat Ooredoo Hutchison).

With the two companies combined, the total revenue is expected to increase by approximately $3 billion, making it Indonesia’s second largest telecoms company by revenue.

The Qatari and the Asian businesses also announced plans to reduce costs between $300 million to $400 million a year over the next three to five years.

“This agreement is a significant step towards our shared vision of creating outstanding value for our customers and shareholders by bringing together two of Indonesia’s leading telecoms brands to create a stronger number two player in Indonesia, backed by two highly committed partners in Ooredoo Group and CK Hutchison,” said Managing Director of Ooredoo Group Aziz Aluthman Fakhroo.

“Through economies of scale and the realisation of synergies between these highly complementary businesses, the merged company will be well placed to deliver a higher return on investment for all shareholders and build on the outstanding growth momentum already achieved by Indosat Ooredoo,” he added.

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Beside its commercial advantages, the merger is expected to create a more competitive world-class digital telecoms and internet company, with the aim to offer greater value for shareholders and customers.

“With this agreement in place, we can now turn our attention to closing the transaction and then working closely with CK Hutchison to leverage the combined expertise of our respective global telecoms groups to build a world-class digital telco for Indonesia. This merged company will deliver significant value and benefits for all stakeholders including Indosat Ooredoo and Ooredoo Group shareholders, for customers, employees and Indonesia,” Fakhroo noted. 

Ooredoo Group currently has a controlling 65% shareholding in Indosat Ooredoo through Ooredoo Asia, a wholly-owned holding company. 

CK Hutchison will receive newly issued shares in Indosat Ooredoo of 21.8% while PT Tiga Telekomunikasi Indonesia will receive 10.8% of the merged Indosat Ooredoo Hutchison business. 

In exchange for its 21.8% shareholdings in Indosat Ooredoo Hutchison, CK Hutchison will have a 50% shareholding in Ooredoo Asia.

The Asian giant will also take an additional 16.7% stake from Ooredoo Group for a cash consideration of $387 million. 

Following the transaction, each of the companies will own 50 percent of Ooredoo Asia, to be transformed into Ooredoo Hutchison Asia, which will retain a controlling 65.6% ownership stake in the merged company.  

Upon closing of the transactions, Indosat Ooredoo Hutchison will be jointly controlled by Ooredoo Group and CK Hutchison. 

‘Landmark deal’

The merged company will be listed on the Indonesian Stock Exchange, with the Government of Indonesia holding a 9.6% shareholding, PT Tiga Telekomunikasi Indonesia having 10.8% shareholding, and other public shareholders holding around 14.0%.  

“Importantly, the merger will create a company with the strength and scale to accelerate Indonesia’s digital transformation and improve network performance and customer experience across the country,” Managing Director of Ooredoo Group Aziz Aluthman Fakhroo said.

“Finally, I would like to express our most sincere gratitude to the Government of Indonesia for its progressive policies that are enabling this consolidation and the creation of a more sustainable telecoms industry, which will benefit customers, all operators, local shareholders and the people of Indonesia,” he added.

Meanwhile Group Co-Managing Director of CK Hutchison Holdings Limited Canning Fok said: “This is a great opportunity to create a stronger and more innovative telco player in Indonesia and will be an accretive transaction for shareholders and other stakeholders alike”.

“Indosat Ooredoo Hutchison will have a critical mass that will enable it to drive network expansion and improvements that will support the Government’s digital agenda and benefit customers and Indonesia as a whole. With greater scale, expanded spectrum, and a more efficient cost structure, Indosat Ooredoo Hutchison will also be better positioned to extend the rollout of its network and enhance service quality and speed,” he added. 

“CK Hutchison invests in and operates telecom businesses in 12 markets around the world, many of which have successfully rolled out 5G networks, and we look forward to expanding innovative 5G services in Indonesia when the time is right.”

While the two companies reportedly began discussing merging their units in December 2020, the completion of the transaction still requires approval of Ooredoo Group, CK Hutchison, Indosat Ooredoo shareholders, regulatory approvals and other customary terms and conditions. 

Once all approvals are received, the merging project is expected to be completed by the end of this year. 

“This merger is a landmark deal for Asia and for Ooredoo Group. It furthers our strategy to drive more value from our portfolio and accelerate digitalisation across our global footprint,” Chairman of the Board of Directors at Ooredoo Group Sheikh Faisal Bin Thani Al Thani said.

“I look forward to a long and successful partnership with CK Hutchison and to working together to build Indosat Ooredoo Hutchison into a digital champion for Indonesia,” he added.

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