Tuesday, 11 May 2021

Ooredoo wants to take on Telkomsel with Hutchison merger

by Harry Baldock, Total Telecom
Thursday 18 March 21

The merger would see the two companies able to better compete in the Indonesian market, becoming the second largest player after Telkomsel

Back in December 2020 it was first announced that Qatari telecoms company Ooredoo was exploring the possibility of merging its Indonesian unit with CK Hutchison’s PT Hutchison 3, a move which would see them poised to challenge Telkomsel’s market dominance in Indonesia.    Now, reports suggest that the combined entity may be looking to grab a market share as large as 30% following the merger…

Back in December 2020 it was first announced that Qatari telecoms company Ooredoo was exploring the possibility of merging its Indonesian unit with CK Hutchison’s PT Hutchison 3, a move which would see them poised to challenge Telkomsel’s market dominance in Indonesia. 
 
Now, reports suggest that the combined entity may be looking to grab a market share as large as 30% following the merger. 
 
“The combination with Hutch will put us as a clear number two, taking us to 27–30% revenue market share in Indonesia,” Ooredoo’s managing director Aziz Aluthman Fakhroo told Bloomberg, noting Indosat’s market share in 2020 was around 17%. 
 
Currently, Indonesia has five domestic telecoms operators – Telkomsel, Axiata, Indosat, Smartfren Telecom, and Hutchison’s 3 Indonesia. While highly competitive, the market is nonetheless dominated by Telkomsel, which controls around 60% of the mobile market.
 
For a long time now, the Indonesian government has said that the market is ripe for consolidation, with fears that the current level of competition will hinder the effective rollout of 5G. The government drafted legislation late last year that would make spectrum-sharing between telcos easier, potentially pushing the market towards mergers.
 
“Consolidation is needed to support telco companies to prepare their investment for the initial deployment of 5G in Indonesia,” said Indonesian communications minister Johnny Plate back in December.
 
To what extent such a merger will allow the new joint business to challenge Telkomsat remains to be seen. With an extensive fibre network, Telkomsat is well positioned for Indonesia’s eventual 5G rollout, something which the new business will struggle to overcome. The merger in fact is more dangerous for the existing second-place player, Axiata’s Indonesian unit, whose market share could well be at risk.
 
As always, the merger is subject to regulatory approval, with Fakhroo saying that he was hopeful that they companies will “get there by the end of the year”.
 
Meanwhile, Indosat is currently exploring the sale of around 4,000 towers, continuing a trend of offloading passive infrastructure which has been taking place for around two years now. Back in 2019, Indosat sold around 3,100 mobile towers to Mitratel and Profesional Telekomunikasi Indonesia in a deal worth around $450 million, which it used to raise capex expansion.
 
The operator reportedly has around 20,000 towers remaining and is likely to further leverage these for short-term cash for further network expansion.
 
 
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