UPDATE 3-Indonesia's Telkom eyes $1.2 bln telecom tower deal

* Telkom picks Macquarie to advise on $1.2 bn tower deal

* Wants to buy SingTel's interest in 9,000 towers

* Tower unit Mitratel to be listed after deal

(Adds analyst comment, SingTel comment, market background)

By Janeman Latul

JAKARTA, April 14 (Reuters) - PT Telekomunikasi Indonesia (TLKM.JK), Indonesia's biggest telecoms firm, said it had picked Macquarie Group Ltd (MQG.AX) to advise on a telecoms tower deal worth up to $1.2 billion, adding it plans to list the tower unit.

Telkom wants to buy Singapore Telecommunications' (SingTel) (STEL.SI) interests in about 9,000 telecoms towers this year, said the Indonesian firm's president director, in a deal which he estimated was valued at between $800 million and $1.2 billion.

The towers are owned by PT Telekomunikasi Selular (Telkomsel), Indonesia's biggest mobile phone operator. Telkom owns 65 percent and SingTel owns 35 percent of Telkomsel.

While analysts say the telecoms tower business requires billions of dollars of investment given the relatively low penetration of Indonesia's mobile market, whoever controls those towers stands to reap considerable benefits from leasing them out to other cellular operators.

"The negotiation with SingTel is currently ongoing and we have appointed Macquarie to advise us as it has extensive experience in infrastructure," said Rinaldi Firmansyah, Telkom's president director.

"You can value each tower at about 800 million rupiah to 1.2 billion rupiah ($88,690-$133,000) based on the calculation of the construction cost," he added.

Firmansyah said once the deal was finalised the company would consolidate the towers under its unit, PT Dayamitra Telekomunikasi, or Mitratel, which will focus on the telecoms infrastructure business.

"Once it is consolidated we will list Mitratel on the stock exchange," he said.

"We have about 20,000 towers but only about 9,000 are economically feasible, meaning that we could lease those to other operators," Firmansyah said.

FOREIGN INTEREST

SingTel responded in an email to Reuters saying that "as shareholders of Telkomsel, both Telkom and SingTel conduct regular reviews of Telkomsel's business operations and its future directions. One of the ongoing discussions focuses on Telkomsel's tower assets. It is too premature to comment on the subject."

Poltak Hotradero, head of research at PT Recapital Securities in Jakarta, said that penetration of Indonesia's mobile market is still less than 50 percent, reflecting the lack of infrastructure in many parts of the sprawling archipelago of 17,000 or so islands.

"Mitratel will earn a huge income from leasing its towers to other smaller operators," he said.

For such smaller players "it's economically cheaper to lease rather than build and maintain their own towers," he added.

Telkomsel will benefit longer term as by leasing out the towers it will reduce its overall costs.

The tower business is also of strategic importance.

Earlier this year, Indonesia's government said it would open up the sector to foreign investment, because it would require as much as $8 billion a year in investment to build up the infrastructure.

At the time, Singtel had expressed its interest in becoming a strategic partner in Mitratel, a government source told Reuters.

However, strong opposition from the communication and information ministry scuttled the plan to open up the sector to foreign investors. ($1=9020 Rupiah) (Additional reporting by Harry Suhartono in Singapore; Editing by Sara Webb and Jon Loades-Carter)