CK Hutchison, Ooredoo in Talks to Merge Indonesia Telecom Units

CK Hutchison Holdings Ltd. and Qatar’s Ooredoo QPSC are in talks to combine their Indonesian wireless phone businesses as part of a consolidation to fend off competition in Southeast Asia’s biggest market by subscribers.

The discussions concern the potential merger of Jakarta-listed PT Indosat, in which Ooredoo owns about 65%, and CK Hutchison’s PT Hutchison 3 Indonesia unit, the companies said in a statement on Monday. The negotiations will be exclusive until April 30, though no final decisions have been made about the terms of a deal or whether to go forward with a combination. Bloomberg News reported the deal talks on Dec. 21.

The potential merger of the two units could better position the new partners to take on bigger rivals -- state-owned PT Telkom Indonesia, the nation’s largest operator, and Axiata Group Bhd.’s local arm PT XL Axiata. CK Hutchison, a conglomerate founded by Hong Kong’s richest man Li Ka-shing, had last year made a preliminary approach to combine the unit with XL, people familiar with the matter said at the time.

Telkom, XL and Indosat collectively captured 86% of mobile revenue in Indonesia in the first-half of 2020, according to a report by Fitch Ratings in November. Telkom had about 171 million users as of 2019.

Hutchison Asia Telecommunications, which houses CK Hutchison’s telecom business in Indonesia, Vietnam and Sri Lanka, had about 48.8 million active customer accounts across the three countries, according to its latest interim financial report. Indosat counted about 60.4 million by end-September.

Indonesia accounted for HK$3.95 billion ($510 million), or 87% of Hutch Asia’s total revenue in the first six months of 2020. It’s Hutchison Asia’s only telecom market that posted a positive Ebitda and largely drove the company’s 7% user growth in the first half of this year.

Faced with multiple challenges, CK Hutchison -- now led by Victor Li, the senior Li’s older son -- has been seeking ways to conserve cash and get more value from the group’s assets. Last month, it agreed to sell its Europe tower assets to Spain’s Cellnex Telecom SA for 10 billion euros ($12.2 billion).

Hong Kong-based CK Hutchison’s businesses, spanning ports, telecom and retail, have been hit by political unrest at home, the U.S.-China trade spat and lately the coronavirus pandemic. After reporting a 29% slump in first-half net income, CK Hutchison in August warned of further profit declines at its core operations in the second half.

©2020 Bloomberg L.P.

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