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SingTel buys 22.3 per cent of Telkomsel

Optus parent extends regional business reach with the purchase of stake in Indonesia's leading mobile operator

Singapore Telecommunications Limited ("SingTel"), parent company of Australia's number two telco, Optus, today announced that it has signed a definitive agreement with KPN Mobile International BV ("KPN") to purchase KPN's 22.3 per cent stake in PT Telekomunikasi Selular ("Telkomsel"), for a cash consideration of US$602 million (about S$1.08 billion). This consideration was arrived at on a willing-buyer willing-seller basis. The purchase will be funded from borrowings.

This investment by SingTel's wholly-owned subsidiary, Singapore Telecom Mobile Pte Ltd ("SingTel Mobile"), is the largest to date by a Singapore company in Indonesia and is SingTel's third largest foreign investment after Optus and the Bharti Group, of India. PT Telekomunikasi Indonesia Tbk. ("PT Telkom") currently owns the remaining 77.7 per cent of Telkomsel.

With the purchase, SingTel replaces KPN as PT Telkom's strategic partner in Telkomsel, and assumes the rights and responsibilities under the shareholders' agreement previously held by KPN. SingTel will also be assuming the liability for commitments made by KPN, under a technical assistance agreement with Telkomsel, for an amount of US$25 million (S$45 million).

Telkomsel is Indonesia's largest mobile service provider with 2.2 million subscribers as at June 2001, giving it an estimated 47 per cent share of the Indonesian mobile service market. It operates the most comprehensive GSM 900 network in Indonesia and is the first mobile operator in the country to offer customers dual band service through its recently commissioned GSM 1800 network. Telkomsel's pre-paid (SimPATI) and postpaid (KartuHALO) services are leading brand names in Indonesia.

The investment in Telkomsel significantly enhances SingTel's presence in the Asia Pacific mobile market and further solidifies SingTel's position as a leading force in Asia's rapidly evolving telecommunications environment. Including Telkomsel, SingTel, together with its associated companies, will have a major presence in six cellular markets with a reach of more than 15 million customers.

SingTel President and CEO, Mr Lee Hsien Yang, said: "International investments are integral to SingTel's goal of becoming the leading communications service provider in the Asia Pacific region. Indonesia, with its vast market, is central to our plans for the region. Despite the weaker economic environment, the mobile market in Indonesia has displayed strong resilience, growing by 82 per cent per annum over the last two and a half years. With just over 4.6 million mobile users in Indonesia, we believe there is significant room for further growth."

"SingTel views Telkomsel as an attractive business with high growth prospects. The management of Telkomsel has built the company into a highly efficient, customer friendly and profitable operator. We are tremendously impressed with the vanguard role the company has played in the development of mobile communications in Indonesia."

Mr Lee added: "SingTel is also extremely honoured and excited to advance further our relationship with PT Telkom by becoming its partner in Telkomsel. SingTel has had a long and close relationship with PT Telkom. We look forward to working with PT Telkom and the management and staff of Telkomsel to extend its market leadership position in Indonesia."

Mr Mohammad Nazif, President Director of PT Telkom, said: "SingTel's decision to become our strategic partner in Telkomsel exemplifies the outstanding relationship that exists between the two companies. With SingTel's technological and commercial expertise and its prior experience in building and operating dual band networks and improving in-building coverage, we believe that through our partnership Telkomsel will be better positioned to construct the most advanced wireless networks in the country, thus furthering the development of Indonesia's mobile market."

In welcoming SingTel as a shareholder, Mr Mulia Tambunan, President Director of Telkomsel, said: "As a strategic partner with goals aligned with those of other stakeholders in Telkomsel, SingTel will be able to share with us its international experience and expertise in different aspects of operating a mobile telecommunications business. Through this sharing of knowledge and capabilities we hope to achieve synergies in the areas of procurement, marketing, international roaming, network planning and product development which will ultimately benefit our customers."

He added: "Given the fact that SingTel has shareholdings in many more mobile operators across the region, we could expect to see additional benefits from becoming part of this large regional group of mobile operators, both for our company and our customers. We look forward to working together with Telkom and SingTel as new shareholders to further build on Telkomsel's leading position in the Indonesian mobile industry."

Based on the audited consolidated accounts of SingTel and its subsidiaries (the "Group") as at 31 March 2001, the acquisition of Telkomsel will reduce the net tangible assets per share of the Group by approximately 12 per cent, from S$0.52 to S$0.46, at current exchange March 2001 is immaterial.

SingTel expects this transaction to be accretive to its earnings from the first full year of consolidation, FY2002/03, subject to Telkomsel's continued growth, strong operating and financial performance, and the Indonesian Rupiah/US Dollar exchange rate not weakening significantly.

No director or substantial shareholder of SingTel has any interest, direct or indirect, in Telkomsel or SingTel's proposed acquisition of KPN's 22.3 per cent stake in Telkomsel.

Completion of the purchase is conditional upon the fulfillment of certain conditions precedent including the approval of the relevant authorities.

Media contact:
Steve Wright
Director Public Affairs
Tel: (02) 9342 9312

About SingTel

SingTel acquired Optus on 30 August 2001 and listed on the Australian Stock Exchange on 10 September 2001. SingTel is one of the leading stocks on the ASX and is the number one stock on the Singapore Stock Exchange.

SingTel is one of Asia's leading communications companies with a comprehensive portfolio of services that includes voice and data services over fixed, wireless and Internet platforms. Serving both the corporate and residential markets, SingTel is committed to bringing the best of global communications to its customers in the Asia Pacific region and beyond.

SingTel has extensive interests in submarine cable and satellite systems, including its co-owned ST-1 satellite. Its infrastructure development strategy is to ensure that its networks remain modern and efficient, and continue to meet the needs of its customers. The SingTel Group is expanding rapidly into overseas markets, with investments in many Asia Pacific markets. Its major investments include Optus, Advanced Info Service of Thailand, New Century Infocomm of Taiwan, the Bharti Telecom Group of India and Globe Telecom of the Philippines. SingTel's turnover and net profit after tax (before extraordinary items) for the year ended 31 March 2001 were S$4.93 billion and S$2.32 billion respectively. More information can be found at www.singtel.com

About PT Telkom

Telkom is the dominant telecommunications operator in Indonesia, connecting its subscribers and users to all places in Indonesia through its facilities. Telkom has recently repositioned its business portfolio to become a full network and service provider, delivering international and domestic network services and telecommunications services. Telkom delivers, directly or indirectly through its affiliates and subsidiaries, fixed line, mobile, cable TV and internet based services to the business, residential and social customers. Telkom's backbone network covers the whole of Indonesia through utilization of fiber optic, satellite and digital microwave systems and technologies, and most of the users are Telkom's subscribers. As at June 30, 2001 Telkom has 7.8 million installed lines and 6.9 million fixed lines in service, giving Indonesia a telephone density of 3.16%. Telkom's operating revenues for the first half of 2001 was Rp7.4 trillion (S$1.3 billion) with an average growth of 17.38% over the year 1996 to 2000. Currently, the government of the Republic of Indonesia owns 66.19 per cent of Telkom shares, while domestic and international shareholders own the remaining 33.81 per cent of Telkom shares.

Fact Sheet on Telkomsel

PT Telekomunikasi Selular (Telkomsel) operates Indonesia's most comprehensive GSM 900 network, with coverage across all major population centers and provinces in Indonesia. As at 30 June 2001, its 2.2 million subscribers accounted for approximately 47 per cent of all mobile subscribers in Indonesia. The company has both the highest proportion of postpaid subscribers to pre-paid subscribers (35:65) as well as the highest monthly average revenue per user (ARPU) among its major competitors.

Despite the economic downturn of recent years, the mobile market in Indonesia has displayed strong resilience, growing by over 82 per cent per annum since 1998, from 1.0 million to over 4.6 million subscribers by 30 June 2001. While mobile market penetration over the same period has grown from 0.5 per cent to approximately 2.1 per cent, significant room for further growth remains. By regional standards, penetration in Indonesia remains low as supply constraints have held back subscriber growth. Telkomsel with its leading market share, strong and highly visible brand names, a net cash balance sheet, a high quality management team and committed experienced operators as shareholders is best positioned to derive maximum benefit from the expected growth in the Indonesian mobile market.

Telkomsel has gained its market leadership position in Indonesia through its focus on customer service and innovation. It was one of the first operators in Asia to launch pre-paid services in November 1997. This move significantly increased the affordability of mobile communications to the average customer and was a key catalyst for the rapid growth in the company's subscriber base. Despite the rapid increase in its pre-paid subscriber base, the company has consistently been able to grow ARPUs from its prepaid subscribers from an initial Rp.90,000 (S$15.80) per month in 1998 to Rp.105,000 (S$18.40) per month in the first half of 2001. This has primarily been as a result of Telkomsel's commitment to launching new and innovative services such as inter-operator SMS, pre-paid SMS and mobile banking.

While growth has been a consistent hallmark of Telkomsel's performance to date, the company has done so without compromising either its focus on its customers or its financial performance. The former is evidenced by its significant presence in the post-paid segment of the market, where subscribers on average tend to generate approximately Rp.285,000 (S$49.90) of revenues per month, while the latter is evidenced by its approximately 70 per cent EBITDA margin (of revenues net of interconnect outpayments, international roaming, dealer commissions, discounts and regulatory fees), its net cash position and its Rp.538 billion (S$94 million) dividend payment for the year 2000.

Telkomsel has over the last six months more than doubled its investment in the expansion of its network and capacity in order to meet the rapidly growing demand for its services. Additionally, the Ministry of Communications earlier this year allotted to Telkomsel an additional 7.5Mhz of frequency in the 1800Mhz band to enable it to launch a dual band service. With access to additional spectrum, and the roll-out of services on its recently commissioned GSM 1800 network, Telkomsel is the first mobile operator in Indonesia to provide dual band services to its customers.

The tables below set out the key operating and financial data for Telkomsel:

Key Operating Statistics 1999 2000 H1 2001
Post-paid Subscribers (000') 437 657 753
Pre-paid Subscribers (000') 588 1,030 1,427
Total Subscribers 1,025 1,687 2,181
Market Share 46.2% 46.0% 46.7%
ARPU (Rpk) KartuHALO (Post-paid) 272 277 285
SimPATI (Pre-paid 90 106 105
Churn Rate KartuHALO (Post-paid) 26.5% 17.2% 19.7%
SimPATI (Pre-paid) 23.8% 11.0% 6.7%

Source: Telkomsel & PT Telkom

Summary Financials (Rp bn) 1998 1999 2000 H1 2000 H1 2001 H1 20011 (US$)
Net Revenues 2 990 1,596 2,801 1,169 2,057 201
Growth   61.2% 75.5%   76.0%  
EBITDA 474 1,045 1,968 815 1,435 140
Margin 47.9% 65.5% 70.2% 69.7% 69.8%  
EBIT 169 782 1,637 663 1,215 119
Net Income 71 669 1,346 546 884 86
Capex 599 235 1,130 245 1,215 119
Total Assets 3,066 3,268 4,733 3,772 5,555 542
Net Cash/(Debt) 432 772 791 888 437 43
Net Book Value 1,613 2,261 3,490 2,678 3,848 375
Subs (000's) 492 1,025 1,687 1,226 2,181  
Growth   108.3% 64.6%   77.9%  

Source: Telkomsel
1 Assume Rp: US$ FX rate of 10,250.
2 Revenues net of interconnect outpayments, international roaming, dealer commissions, discounts, and regulatory fees.