Ooredoo and CK Hutchison ink $6bn Indonesian merger

Ooredoo and CK Hutchison ink $6bn Indonesian merger

17 September 2021 | Natalie Bannerman

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Ooredoo QSC (Ooredoo) and CK Hutchison Holdings Limited (CK Hutchison) have signed a $6 billion definitive agreement for the merger of their telecoms businesses in Indonesia.

PT Indosat Tbk (Indosat Ooredoo) belonging to Ooredoo and PT Hutchison 3 Indonesia (H3I) belonging to CK Hutchinson will be merged into a new company to be called PT Indosat Ooredoo Hutchison Tbk (Indosat Ooredoo Hutchison).

Once completed, the merger will bring together two complementary businesses to create a larger, commercially stronger and more competitive digital telecoms and internet company. Also, as the second largest mobile telecoms company in the country, Indosat Ooredoo Hutchison is expected to make annual revenue of approximately $3 billion.

At the same time, Indosat Ooredoo and H3I both own complementary infrastructure, the combination of which will also 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 $300-400 million, are expected over 3-5 years.

“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," said Aziz Aluthman Fakhroo (pictured left), managing director of Ooredoo Group.

"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. 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."

"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,” added Fakhroo.

Ooredoo Group currently holds a 65% stake in Indosat Ooredoo through Ooredoo Asia, its wholly owned holding company. Through the merger CK Hutchison will gain a 21.8% stake in Indosat Ooredoo and PT Tiga Telekomunikasi Indonesia, amounting to 10.8% of the merged Indosat Ooredoo Hutchison business.

In addition, 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 $387 million in cash. Once these transactions have completed both parties will each own 50.0% of Ooredoo Asia, to be renamed Ooredoo Hutchison Asia, which will hold a controlling 65.6% ownership stake in the merged company.

Upon closing, Indosat Ooredoo Hutchison will be jointly controlled by Ooredoo Group and CK Hutchison. It will remain listed on the Indonesian Stock Exchange, with the Government of Indonesia retaining its 9.6% shareholding, PT Tiga Telekomunikasi Indonesia holding a 10.8% stake, while other public shareholders hold approximately 14%.

"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. 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," said Canning Fok (pictured right), group co-managing director of CK Hutchison Holdings.

Finally, I would also like to express gratitude to the Government of Indonesia. Its foresight in creating an investment friendly policy environment is helping to build a strong and sustainable mobile market in Indonesia.”

Subject to Indosat Ooredoo shareholder approvals, both companies have nominated Vikram Sinha as CEO and Nicky Lee as CFO of the newly merged business. Until then, Ahmad Al-Neama will remain president director and CEO of Indosat Ooredoo and Cliff Woo will as CEO of H3I. Once completed and subject to approvals, Al-Neama and Woo will join the board of commissioners of the merged company.

Subject to regulatory approvals and conditions, the deal is due to close by the end of 2021.