SINGTEL announced on Thursday (Apr 6) that its Indonesian associate Telekomunikasi Selular (Telkomsel) has entered into a conditional spin-off agreement with Telkom Indonesia (Telkom), the parent company of Indonesian telco IndiHome, to integrate IndiHome’s services into Telkomsel.

Telkomsel is Singtel’s 35 per cent-owned associate in Indonesia.

Singtel said the integration provided a “rare opportunity” for Telkomsel to enter the fixed broadband market in Indonesia, with IndiHome holding a 75.2 per cent market share.

“This will strengthen Telkomsel’s position in the telecommunications and digital industry, as Indonesia’s leading integrated mobile and fixed broadband business,” said Singtel on Thursday.

The consideration for the integration stands at 58.3 trillion rupiah (S$5.1 billion) and will be satisfied through the issuance of new shares by Telkomsel.

When completed, Singtel’s effective equity interest in Telkomsel will be reduced from 35 per cent to 29.6 per cent of the enlarged integrated mobile and fixed broadband company.

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Furthermore, Singtel, through its wholly-owned subsidiary Singapore Telecom Mobile, will subscribe to new shares of Telkomsel after the integration is complete.

The move will raise Singtel’s effective interest in Telkomsel by 0.5 percentage point to 30.1 per cent. The consideration for the share subscription is 2.7 trillion rupiah and will be paid out in cash, Singtel said.

This will be funded via internal cash sources, it added.

The integration and share subscription are expected to be earnings accretive for the group in the near term.

However, the integration’s success is contingent on the fulfilment of certain conditions set out under the conditional spin-off agreement, which includes getting approval from relevant regulators and shareholders. The subscription agreement thus depends on a successful integration.

Singtel : Z74 0% called for a trading halt at 8.59 am on Thursday, before the announcement. The trading halt lifted at 9.15 am on the same day.

The counter was trading flat at S$2.51 as at 9.48 am on Thursday.