Indosat expects to raise Rp 1.3 T from TBIG sales

JAKARTA. Mobile phone operator PT Indosat (ISAT) will be using Rp 1.39 trillion (US$122.40 million) of funds gained from a planned sale of shares in a tower company to partially pay debts that are due this year.

In an announcement posted via the Indonesia Stock Exchange (IDX) on Friday, Indosat disclosed that it would be selling its entire 239,826,310 shares in telecommunication tower company PT Tower Bersama Infrastructure (TBIG).

The shares, equivalent to 5 percent of Tower Bersama’s capital, were collected by Indosat in 2012, when the operator sold 2,500 of its towers to Tower Bersama. The latter paid Indosat an upfront fee of $406 million as well as the newly issued shares.

The operator has appointed Merrill Lynch (Singapore) Pte. Ltd. as its sole placement agent and CSLA Singapore Pte. Ltd. as the colead manager. The transaction is scheduled to close next Wednesday.

“We formally announced our plans to the Financial Services Authority [OJK] today [Friday],” Indosat finance director Stefan Carlsson said. He added that the operator had been considering selling the shares for the past six to nine months, as the firm never intended to act as a long-term shareholder or financial investor.

“We took a stake in Tower Bersama during the tower deal to ensure a good partnership with them, and enjoy upside value from the shares,” he said.

Indosat, as the anchor tenant of the 2,500 towers, had signed new lease agreements, carrying a minimum period of 10 years, with Tower Bersama during the deal.

Meanwhile, Tower Bersama’s share price hovered around the 3,000 range in 2012. In this sale, however, shares will be offered at 5,800 apiece.

Carlsson said the disposal of the shares was so as to meet this year’s funding needs, especially network expansions. “We have debt maturing and capital expansions as part of our financial plans, and the sale proceeds will be used to cover a combination of both,” he said, adding that sourcing funds from the sale would reduce the firm’s borrowing figures.

He pointed out that this year, Indosat estimated capital expenses of Rp 8 trillion to Rp 9 trillion in capital, close to the amount spent last year. He further added that the operator faced approximately Rp 6 trillion in maturing debts this year.

“We are considering refinancing between Rp 5 trillion and Rp 6 trillion, depending on our cash flow,” he said, adding that Indosat expected no “big debt reductions” given the hefty capital costs.

He pointed out that as of 2013, gross debt stood at Rp 27.7 trillion, which would have been 8 percent lower if not for the “accounting” losses due to higher foreign exchange rates.

At the end of 2013, Indosat reported net losses of Rp 2.782 trillion, despite a 6.4 percent year-on-year increase in revenue to Rp 23.8 trillion, due to foreign exchange losses of Rp 2.786 trillion.

“However, around Rp 3.9 trillion of our gross debt was not real debt, but financial leasing on the towers. Roughly half of the balance after the reduction was US-denominated debt,” he said. (Mariel Grazella)