Monday, June 09, 2008

Qatar Telecom Raises INDOSAT Share Holders

Qatar Telecom Raises INDOSAT Share Holder

Qtel in largest telecom deal in the Mideast

IN WHAT is described as the “largest telecom deal ever in the Middle East”, Qtel has picked up a 40.8% stake in PT Indosat, Indonesia’s second largest operator, for QR6.4bn. Qtel, which previously controlled 25% of Indosat, is now its largest stakeholder.

Qtel had acquired the stake from Asia Mobile Holding (AMH), a subsidiary it jointly holds with Singapore Technologies Telemedia. Qtel has a 25% stake in AMH. Qtel’s footprint now covers some 16 countries with a customer base of 44mn. Qtel is already set to enter the ‘elite club of the world’s top 20 telecom companies’ by 2020.

PT Indosat is Indonesia’s second largest telecom operator with some 27mn customers and a market share of 27% and its one-year EBITDA (earnings before interest tax depreciation & amortisation) up to March was about $950mn.

Indonesia, the fourth largest country worldwide, has a population of over 250mn. There are currently 97mn mobile customers in Indonesia with a penetration of 37%, making the country one of the top three growth markets in the world.

Qtel’s agreement to acquire a controlling stake in PT Indosat announced in Jakarta yesterday valued the company at QR15.4bn. PT Indosat is already a highly profitable company and in 2007 it had revenues worth QR6.5bn, EBITDA of QR3.4bn and a net profit of QR800mn.

Qtel Group chairman Sheikh Abdullah bin Mohamed bin Saud al-Thani said that Qtel was committed to investing in Indonesia.
“Qtel will give its full support to PT Indosat’s multi billion dollar investment programme in infrastructure,” he said. “We have received a very warm welcome from the Indonesian government and its people and we look forward to working together to ensure future success,” he said.

Sheikh Abdullah called it “an excellent deal” for Qtel shareholders. Qtel International chairman Sheikh Mohamed bin Suhaim al-Thani said that Qtel International had been the key to the success of the group’s expansion. “Without the right talent and focus we could not have achieved this. We have taken the approach to promote and hire the best talent we can find rather than to rely on external resources.”

Qtel Group chief executive officer Nasser Marafih said that PT Indosat, like Qtel, was an integrated operator offering all types of telecom services including mobile, the Internet, data and fixed line services. PT Indosat has 27mn customers.

“We believe there will be many synergies and benefits for the whole group including our operation in Qatar,” Marafih said.

Qtel sources said the company’s agreement to acquire a controlling stake in PT Indosat valued the company at QR15.4bn.
“Qtel shareholders should be smiling today as this price looks very good and should create at least QR3bn in value for Qtel shareholders,” a source told Gulf Times.
“Last time round many people questioned whether Qtel had paid too much on Wataniya deal in Kuwait. However, now that the details of the deal are better understood and Wataniya’s results continue to grow, this is no longer a question.

“Many independent analysts value the stock at Indonesian Rupiah 8,000 to 10,000. Based on these valuations the acquisition of PT Indosat will have created significant additional value for Qtel shareholders.”

Recent prices paid by Middle Eastern operators and others have been seen as very high. Zain paid over $6bn for the third licence in Saudi Arabia, a market that has reached 100% penetration. Saudi Telecom paid close to $900mn for a 26% stake in the third Kuwaiti licence. Vodafone has paid $2.1bn for the second licence in Qatar.

“In light of this pricing scale, the QR6.3bn paid by us for a controlling 40.8% stake in PT Indosat looks very attractive,” the Qtel source said. “Because PT Indosat operates in a market of over 250mn people with 27mn customers and already makes about $1bn in EBITDA, the deal positions as one of the best in emerging markets,” the source added.

Qtel yesterday said that as a result of the recently announced agreement to acquire a controlling stake in PT Indosat, the planned right’s issue for its shares looked even more attractive. Shareholders should be keen not to miss their opportunity to take up their rights and get more shares at attractive price.

Qtel has recently launched a rights issue to raise $1.6bn more capital from shareholders, part of the proceeds of which are expected to be used to fund this transaction. Stockholders who owned shares (as on May 28) have the right to acquire one additional share for every three owned at a discounted price of QR160 per share. Shareholders can subscribe until June 19. “We expect the rights offering to be oversubscribed,” Qtel said. “This should be no surprise given the fact that various analysts have reported that Qtel is undervalued by 40% to 60%, pre-PT Indosat deal. This deal makes us even more attractive.”

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