Ooredoo Group and CK Hutchison to build a new digital telecom for Indonesia

Ooredoo Group and CK Hutchison have agreed to merge their Indonesian operations for US$6 billion in order to build a new world-class digital telecom for Indonesia. PT Indosat Ooredoo Hutchison Tbk (“Indosat Ooredoo Hutchison”) will be the name of the merged firm.

Indosat Ooredoo and H3I will unite to form a more commercially strong and competitive world-class digital telecommunications and internet company, ideally positioned to deliver more value to all shareholders, customers, and Indonesia.

Indosat Ooredoo Hutchison will be ideally positioned to help Indonesia accelerate its economic growth and digital transformation. With an expected annual turnover of around US$3 billion, it will be the country’s second largest mobile telecoms firm.

The united business will be able to compete more successfully due to its size, financial strength, and expertise. The combination of Indosat Ooredoo and H3I’s highly complementary assets and products will promote innovation and network enhancements, enabling the delivery of great digital services and a broader product offering to clients across Indonesia.

Indosat Ooredoo and H3I own infrastructure that is highly complementary, and the merged firm will benefit from cost and CAPEX synergies, as well as offer accretive returns to all stakeholders. Annual pre-tax synergies of around US$300-400 million are estimated to be realised over the next 3-5 years.

Indosat Ooredoo Hutchison will also be able to benefit from Ooredoo Group and CK Hutchison’s experience and expertise in networks, technologies, products, and services, as well as their global activities in Europe, the Middle East, North Africa, and Asia Pacific. In areas like procurement, the combined organisation will profit from their combined power and economies of scale.

Following the merger, the Indonesian mobile market is likely to maintain a high degree of competition, making the industry appealing to long-term investment.

Through Ooredoo Asia, a wholly-owned holding company, the Ooredoo Group currently owns a 65.0 percent stake in Indosat Ooredoo. CK Hutchison will receive 21.8 percent of the merged Indosat Ooredoo Hutchison business and PT Tiga Telekomunikasi Indonesia would receive 10.8 percent of the merged Indosat Ooredoo Hutchison business as a result of the Indosat and H3I merger.

CK Hutchison will acquire a 50 percent stake in Ooredoo Asia by swapping its 21.8 percent ownership in Indosat Ooredoo Hutchison for a 33.3 percent stake in Ooredoo Asia and a 16.7 percent stake from Ooredoo Group for a cash consideration of US$387 million, as part of the merger. Following the foregoing transactions, each of the Parties will own 50.0 percent of Ooredoo Asia, which will be renamed Ooredoo Hutchison Asia, with a controlling 65.6 percent share in the amalgamated firm.

Ooredoo Group and CK Hutchison will jointly control Indosat Ooredoo Hutchison once the agreements are completed. It will stay listed on the Indonesian Stock Exchange, with the Indonesian government owning 9.6% of the company, PT Tiga Telekomunikasi Indonesia owning 10.8%, and other public shareholders owning around 14.0 percent.

The Parties have agreed to name Vikram Sinha as CEO and Nicky Lee as CFO of Indosat Ooredo Hutchison, subject to requisite Indosat Ooredoo shareholder approvals. Until the merger is completed, Ahmad Al-Neama will remain President Director and CEO of Indosat Ooredoo, and Cliff Woo will stay CEO of H3I. Following the merger, Ahmad Al-Neama and Cliff Woo will join the amalgamated company’s Board of Commissioners, subject to Indosat Ooredoo approvals.

During the integration process, the Parties are dedicated to prioritising employee welfare in accordance with applicable regulations and in line with future company growth potential. As part of a larger, financially stronger, more competitive, and innovative technological firm, the combined company is projected to provide exciting growth prospects for workers.

Aziz Aluthman Fakhroo, Managing Director of Ooredoo Group, said: “This agreement is a significant step towards our shared vision of creating outstanding value for our customers and shareholders by bringing together two of Indonesia’s leading telecoms brands to create a stronger number two player in Indonesia, backed by two highly committed partners in Ooredoo Group and CK Hutchison. 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.

This merged company will deliver significant value and benefits for all stakeholders including Indosat Ooredoo and Ooredoo Group shareholders, for customers, employees and Indonesia. Through economies of scale and the realization 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.”

Canning Fok, Group Co-Managing Director of CK Hutchison Holdings Limited, said: “This is a great opportunity to create a stronger and more innovative telco player in Indonesia and will be an accretive transaction for shareholders and other stakeholders alike. Indosat Ooredoo Hutchison will have a critical mass that will enable it to drive network expansion and improvements that will support the Government’s digital agenda and benefit customers and Indonesia as a whole.

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.

I would like to thank Ooredoo Group for the commitment to this process. We have had fruitful discussions on how we can build a strong business together over the past few months, and I look forward to building a lasting and successful partnership together.

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.”

H.E. Sheikh Faisal Bin Thani Al Thani, Chairman of the Board of Directors at Ooredoo Group, concluded: “This merger is a landmark deal for Asia and for Ooredoo Group. It furthers our strategy to drive more value from our portfolio and accelerate digitalization across our global footprint. I look forward to a long and successful partnership with CK Hutchison and to working together to build Indosat Ooredoo Hutchison into a digital champion for Indonesia.” 

The deal is subject to Ooredoo Group, CK Hutchison, and Indosat Ooredoo shareholders’ approvals, as well as regulatory approvals and other standard terms and circumstances. The proposed merger is scheduled to be finalised by the end of 2021, assuming all clearances are secured.

JP Morgan serves as Ooredoo Group’s only financial advisor. CK Hutchison is working with Goldman Sachs & Co. and HSBC as joint financial advisors. Indosat Ooredoo has hired Barclays as its financial advisor.