Li Ka-Shing’s Flagship Bets On Indonesia’s Digital Future With $6 Billion Merger
CK Hutchison, the flagship company of Hong Kong billionaire Li Ka-shing, announced that it is merging its Indonesian telecommunications unit with Indonesia’s Indosat in a $6 billion deal to accelerate digital efforts in Southeast Asia’s biggest market.
Hutchison 3 Indonesia will merge with Jakarta-listed Indosat, an affiliate of Qatari telecom operator Ooredoo Group, to create an entity called Indosat Ooredoo Hutchison with a total transaction value of around $6 billion, the two companies said in a joint statement on Thursday.
Indosat Ooredoo Hutchison will be the second-largest mobile telecoms company in Indonesia, with an annual revenue of about $3 billion, the statement added. The deal is expected to be completed by the end of this year, subject to shareholders’ and regulatory approvals.
“Indosat Ooredoo Hutchison will have a critical mass that will enable it to drive network expansion and improvements that will support the [Indonesian] Government’s digital agenda and benefit customers and Indonesia as a whole,” said Canning Fok, co-managing director of CK Hutchison.
“The merger will create a company with the strength and scale to accelerate Indonesia’s digital transformation and improve network performance and customer experience across the country,” added Aziz Aluthman Fakhroo, managing director of Ooredoo Group.
The combination highlights the pursuit of scale by Indonesian telecom companies in a crowded field, Fitch Ratings said in a report released in May, when CK Hutchison and Indosat were still discussing a merger. “It will be challenging for smaller telcos to absorb 5G investment costs without an immediate return on investment,” the report noted.
The deal is expected to realize an annual run rate pre-tax synergies of up to $400 million in the coming three to five years.
Upon closing of the transaction, Indosat Ooredoo Hutchison will remain listed on the Indonesia Stock Exchange. The controlling 65.6% stake of Indosat Ooredoo Hutchison will belong to a holding company equally owned by CK Hutchison and Ooredoo, while the Indonesian government will hold 9.6% of the company.
The merger is the latest deal in the telecoms space by CK Hutchison. In November, the company announced that it was in advanced talks to sell its wireless towers business in Europe to Spain’s Cellnex Telecom for €10 billion.
Besides telecoms, CK Hutchison’s businesses include finance, infrastructure, ports and retail. In 2018, Li retired as chairman of CK Hutchison and property developer CK Asset, but remains as a senior advisor. Li, 93, is No. 1 on the Hong Kong Rich List this year with a net worth of $35.4 billion.