Qatar's Ooredoo, Hutchison in talks to merge Indonesian telco units

DUBAI/JAKARTA (Reuters) -Qatar’s telecoms company Ooredoo and Hong Kong conglomerate CK Hutchison Holdings are exploring a deal to merge their Indonesian units, the two companies said on Monday.

A deal between Indosat and PT Hutchison 3 Indonesia would help them to better compete against state-backed Telkomsel which controls around half of the cellular market in the world’s fourth most populous country.

Ooredoo, which owns a 65% stake in Indosat, said in a statement the two companies have signed a non-legally binding memorandum of understanding which is valid until April 30, 2021.

“Ooredoo is in the early stages of assessing the merits of such a potential transaction,” it said.

“”As part of our corporate strategy, we regularly review our strategic priorities and market position across all of our operations, and their contribution to the Ooredoo Group,” added Ooredoo, which operates across the Middle East, North Africa and Southeast Asia.

Indosat’s stock rose 7.6% after the announcement, giving it a market capitalisation of 30.70 trillion Indonesian rupiah ($2.2 billion).

CK Hutchison said in a separate statement the potential transaction is subject to due diligence, agreement on terms, signing of definitive agreements and obtaining all required corporate and regulatory approvals.

Indonesia recently passed a new law simplifying doing business and allowing spectrum-sharing between telcos, with officials telling reporters they hoped it would spur consolidation in the market.

“Consolidation is needed to support telco companies to prepare their investment for the initial deployment of 5G in Indonesia”, Indonesian communications minister Johnny Plate told Reuters ahead of Ooredoo’s announcement.

Analysts say that a merger between Ooredoo and Hutchison will, however, leave a question mark for Malaysian telco Axiata Group’s Indonesian unit.

PT XL Axiata Tbk is the second-biggest player by subscriber numbers in Southeast Asia’s largest economy, followed by Indosat, PT Smartfren Telecom Tbk and CK Hutchison Holdings Ltd’s local telco unit.

($1 = 14,140.0000 rupiah)

Reporting by Saeed Azhar, Fanny Potkin, and Maikel Jefriando in Jakarta; additional reporting by Donny Kwok in Hong Kong, editing by Louise Heavens and Emelia Sithole-Matarise