Smartfren Telecom, controlled by the Widjaja family’s Sinar Mas, has signed a non-binding memorandum of understanding with Malaysia’s Axiata Group to explore a potential merger of their telecommunications businesses in Indonesia. This move is aimed at creating a larger company with a combined subscriber base of about 94 million, which will enable the merged entity to compete more effectively in the Indonesian telecommunications market. Both parties are conducting due diligence, and if the discussion results in a merger, Axiata and Sinar Mas aim to remain major shareholders in the new entity.
Indonesia, as Southeast Asia’s largest economy, has four major mobile phone carriers, with XL Axiata and Smartfren among the smallest. The consolidation of these two companies would aim to create a stronger player in the market to take on bigger rivals such as Indosat Ooredoo Hutchison and state-owned Telkomsel, which have larger subscriber bases. The telecommunications industry in Indonesia has been witnessing consolidation in recent years, with CK Hutchison Holdings and Qatar’s Ooredoo merging their Indonesian units in a $6 billion deal in 2022.
Smartfren has been facing challenges with losses and increasing debts, despite recording its first profit in two decades in 2022. The company reported a net loss of 108 billion rupiah ($6.8 million) last year and recently announced plans to raise 8.5 trillion rupiah through a rights issue, with the majority of the proceeds intended to address the company’s debt obligations. The merger with Axiata Group could potentially help Smartfren strengthen its financial position and competitive standing in the market.
The Widjaja family, with a net worth of $10.8 billion, is one of Indonesia’s wealthiest families and controls the Sinar Mas group. In addition to the telecommunications sector, the family’s business interests span across various industries such as paper, financial services, real estate, agribusiness, and mining. By exploring a merger with Axiata Group, the family aims to further expand its presence in the telecommunications sector and potentially solidify its position as a major player in the Indonesian market.
The proposed merger between Smartfren and Axiata Group is still in the early stages of evaluation, and both parties are expected to continue discussions to finalize the terms of the deal. If the merger proceeds, it could reshape the telecommunications landscape in Indonesia by creating a larger and more competitive player in the market. This move comes at a time when the industry is witnessing increased consolidation to navigate the challenges of fierce competition and changing consumer preferences in the digital age.
Overall, the potential merger between Smartfren and Axiata Group signifies a strategic move by both companies to strengthen their market position and enhance their competitive edge in Indonesia’s telecommunications sector. As the discussions progress, stakeholders will be closely watching to see how the deal unfolds and what impact it will have on the industry as a whole. With the backing of the wealthy Widjaja family’s Sinar Mas group, the merged entity could potentially emerge as a key player in the Indonesian telecommunications market, signaling a significant development in the industry’s landscape.
