Telkom, the largest telecommunications company in Indonesia, has signed a Conditional Spin-off Agreement (CSA) with Telkomsel to integrate IndiHome, Telkom's fixed broadband business, into Telkomsel, its mobile unit subsidiary. IndiHome is 100% owned by Telkom and is Indonesia's largest fixed broadband business. Telkom (65%) and Singtel (35%) have already given support for the transaction.
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Integration part of Fixed Mobile Convergence Strategy
The integration of IndiHome is expected to strengthen Telkom's position in the market and support its Fixed Mobile Convergence (FMC) strategy. The CSA, which is subject to approval from Telkom's independent shareholders, is valued at IDR 58.3 trillion and involves the issuance of new primary shares in Telkomsel to Telkom in exchange for IndiHome. As a result, upon legal completion of the spin-off, Telkom will hold a 70.4% share in Telkomsel, while Singtel will hold 29.6%.
Singtel and Telekom's Stake
According to the statement, At the time of the integration, Singtel has agreed to exercise its pre-emptive right to purchase another 0.5 percentage point share in this enlarged entity by subscribing to new primary shares of Telkomsel post-integration for IDR 2.7 trillion in cash. This brings Singtel's effective interest in Telkomsel to 30.1%, with Telkom's stake at 69.9%.
IndiHome, Broadband Market Share
IndiHome has a 75.2% market share in Indonesia, which has a fixed broadband penetration rate of just 14%, compared to 40% across Southeast Asia. The integration of IndiHome is expected to boost Telkomsel's high-growth fixed broadband market in Indonesia, as Fixed broadband ARPUs are around six times that of mobile connections in Indonesia. Telkomsel will manage Telkom Group's Business to Consumers (B2C), while Telkom's operational focus will be on Business to Business (B2B).
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According to TelkomGroup CEO Ririek Adriansyah, the integration of broadband services is part of Telkom Group's "Five Bold Moves" business transformation to strengthen its position as a market leader in digital telecommunications in Indonesia. Telkomsel President Director Hendri Mulya Syam expressed enthusiasm for the integration and said it would strengthen Telkomsel's position in the telecommunications and digital industry in Indonesia.
The CSA is expected to be completed in the early third quarter of 2023, subject to the fulfilment of certain conditions, including the receipt of approvals from Telkom's shareholders.
