Telkom Indonesia eyes M&A in Asian markets, to spend $1.7b on digital business

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Indonesia’s largest telecommunication operator Telekomunikasi Indonesia, also known as Telkom, is exploring options to acquire overseas and local digital businesses.

The state-owned operator is scouring key markets in southeast Asia, Japan, South Korea and the US for potential acquisitions, a top official of Telkom said.

The inorganic strategy is to further strengthen the digital business, which accounts for 50 per cent of the telecom operator’s revenues.

Cellular provider Telekomunikasi Selular (Telkomsel), end-to-end ICT Solutions provider Telkom Sigma and online market place will become the group’s arm to expand its business. is a joint venture company between US eBay Inc. and Telkom, focusing on the online marketplace business. Currently has more than 2.5 million products from more than 2000 sellers.

The acquisitions will enable the firm to have a complete inventory of services to serve across the industry, Alex Sinaga, Telkom president director said.

In order to give a push to the digital portion of the business, the state operator is also setting aside a lion’s share, 80 per cent, of its capital expenditure for 2016 for investing in this segment.

This year, Telkom intends to spend Rp28 trillion ($2.1 billion).

“For capex, we have prepared budget which utilises up to 25 per cent of the expected 2016’s revenues and this (Capex)  will be used mostly for digital business development in the areas of mobile, 3G, broadband and fiber optics,” Sinaga said.

Based on first quarter results, the digital and legacy businesses now contribute equally to the overall revenues. Sinaga expects the digital portion to the company’s revenues to remain stable at this level.

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Telkom booked a first-quarter profit of Rp4.59 trillion ($347.72 million), an increase of 20.4 per cent compared to Rp3.81 trillion in the same period last year. With a 16.6 per cent revenue increase to Rp27.54 trillion and Earnings before interest, tax, depreciation and amortization (EBITDA) rising 18.8 per cent to 14.66 trillion.

“This growth is supported by a high growth in broadband service customers, both fixed broadband and mobile broadband Telkomsel Flash. Our Telkomsel Flash customer base increased 42.2 per cent to 43.84 million,” he said.

For fixed broadband, led by the IndiHome program, customer numbers have grown 20.7 per cent to 4.2 million customers.

This year, Telkom will shared dividend final of Rp78.86 and special dividend Rp15.77 a share or 60 per cent of 2015 net profit with worth Rp9.29 trillion. The dividend will be paid on May 26. Currently, the company has 98.18 billion outstanding shares.

Last year, net profit of Telkom rose 7 per cent in 2015 to Rp15.49 trillion from a previous Rp14.47 trillion (in 2014). Revenues increased by 14.2 per cent on an annualized basis to Rp102.47 trillion, while operating profit stood at Rp32.42 trillion (+11 per cent) and EBITDA Rp51.42 trillion, up 12.6 per cent compared to IDR45.67 trillion in 2014.

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