Qatar-based Ooredoo QPSC and Hong Kong’s multinational conglomerate CK Hutchison Holdings have agreed to merge their telecommunications businesses in Indonesia, PT Indosat (Indosat Ooredoo) and PT Hutchison 3 Indonesia (H3I), in a US$6 billion deal, the two companies announced on September 16.
The merged company, PT Indosat Ooredoo Hutchison, will be the second largest mobile telecoms group in the country, with an estimated annual revenue of approximately US$3 billion.
The combination will bring together two highly complementary businesses to create a digital telecoms and internet company with the scale, financial strength and expertise to compete more effectively, the companies say. Indosat Ooredoo Hutchison will be well-positioned to accelerate Indonesia’s economic growth and transformation into a digital society, they add.
Indosat Ooredoo and H3I own highly complementary infrastructure and the combination of these assets will enable the merged company to benefit from cost and capital expenditure synergies and provide accretive returns to all stakeholders. Annual run rate pre-tax synergies of approximately US$300 million to US$400 million are expected to be realized over three to five years. Ooredoo Group currently has a controlling 65% shareholding in Indosat Ooredoo through Ooredoo Asia, a wholly-owned holding company.
The merger of Indosat and H3I will result in CK Hutchison receiving newly-issued shares in Indosat Ooredoo amounting to 21.8% and PT Tiga Telekomunikasi Indonesia amounting to 10.8% of the merged Indosat Ooredoo Hutchison business. Concurrent with the merger, CK Hutchison will acquire a 50% shareholding in Ooredoo Asia by exchanging its 21.8% shareholdings in Indosat Ooredoo Hutchison for a 33.3% stake in Ooredoo Asia, and will acquire an additional 16.7% stake from Ooredoo Group for a cash consideration of US$387 million.
Following the transactions, the parties will each own 50% of Ooredoo Asia, to be renamed 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. It will remain listed on the Indonesian stock exchange, with the Indonesian government retaining a 9.6% shareholding, PT Tiga Telekomunikasi Indonesia holding a 10.8% shareholding, and other public shareholders holding approximately 14%.
Subject to necessary Indosat Ooredoo shareholder approvals, the parties have agreed to nominate Vikram Sinha as chief executive officer and Nicky Lee as chief financial officer of Indosat Ooredoo Hutchison. Ahmad Al-Neama will remain president-director and CEO of Indosat Ooredoo and Cliff Woo will remain as CEO of H3I until the completion of the merger. Upon completion, Ahmad Al-Neama and Cliff Woo will join the board of commissioners of the merged company, subject to the necessary Indosat Ooredoo approvals.
Completion of the transaction will be subject to the approval of Ooredoo Group, CK Hutchison, Indosat Ooredoo shareholders, regulatory approvals and other customary terms and conditions. Assuming all approvals are received, the proposed combination is expected to be completed by the end of 2021. J.P. Morgan is acting as exclusive financial adviser to Ooredoo Group, while Goldman Sachs and HSBC are the joint financial advisers to CK Hutchison. Barclays is the financial adviser to Indosat Ooredoo.
Ooredoo is an international communications company operating across the Middle East, North Africa and Southeast Asia. Serving consumers and businesses in 10 countries, Ooredoo delivers data through a broad range of content and services via its advanced, data-centric mobile and fixed networks. Ooredoo generated revenues of 29 billion Qatari riyal (US$7.97 billion) as of December 31 2020. Its shares are listed on the Qatar Stock Exchange and the Abu Dhabi Securities Exchange.
