Qatar Telecom set to raise stake in Indosat for $8o2m

Doha: Qatar Telecom QSC, seeking to control PT Indosat, agreed to pay its original offer price for more shares in Indonesia's second-largest telephone company, helping Indosat to its biggest gain in more than 10 years.

Qatar Telecom will offer 7,388 rupiah (Dh2.12) a share to boost its Indosat stake, Ahmad Fuad Rahmany, chairman of the Indonesian regulator, said in Jakarta yesterday. The government on October 27 allowed the Qatari company, which owns 40.8 per cent of Indosat, to raise its holding to 65 per cent. The following day, Qatar Telecom said it would pay 6,416 rupiah each for the additional shares after a rout in global stock markets.

Shares of Jakarta-based Indosat soared 20 per cent, its daily limit, after Rahmany's comments on the higher offer price, the biggest jump since October 1998. The offer price was 74 per cent more than the stock's midday close of 4,250 rupiah. The Qatari company will have to spend 9.71 trillion rupiah ($802 million) to raise its stake.

"The agreement shows that the buyer sees Indosat's real value at that price," said Danny Eugene, head of research at PT Sarijaya Permana Sekuritas. "Traders are expecting a gain from the tender offer, while long-term investors will see Indosat's intrinsic value at that price."

Law

Indonesian law allows overseas companies to own as much as 65 per cent of local mobile phone companies, while limiting foreign ownership to 49 per cent in fixed line operators.

The government allowed Qatar Telecom to raise its stake, provided Indosat separates its fixed line phone unit.

Qatar Telecom has asked the Indonesian government to drop the requirement to sell the fixed line business of Indosat, Bisnis Indonesia reported, citing an unidentified person. A competitor taking over the fixed line frequency may disrupt Indosat's business, the newspaper said. Indosat operates a fixed line wireless service called StarOne.

"Indosat is sharing some of its infrastructure with the fixed line business, so operation-wise, a spinoff would be difficult," said Sonny John, an analyst at PT Samuel Sekuritas Indonesia. "The business is too integrated."

Qatar may choose to limit its stake to just 49 per cent, John said.

Indosat has been given two years to spin off its fixed line operations, Communications Minister Mohammad Nuh said on October 27. "As soon as they have settled the issue with the ministry, they are allowed to make the offer," Rahmany said. "The price is not a problem."

Qatar Telecom in June paid $1.8 billion, or 7,388 rupiah a share, to buy a 40.8 per cent stake in Indosat from its venture with Singapore's Temasek Holdings Pte unit. The company said on June 26 it would pay 7,388 rupiah per share to increase its stake.