JAKARTA (TheInsiderStories) – Telco operator, PT Smartfren Telecom Tbk (IDX: FREN) announced to execute additional rights issue with a maximum targets R700 billion (US$48.95 million) to repay the debt, the management announced today. As planned, the company will releases a new Series C shares around 7 billion shares and 91.99 billion warrants or around 34.9 percent of issued and fully paid capital.
According to the finance director, Antony Susilo, the company had obtained shareholders approval on March 2 and will be submitted to the Financial Services Authority on Monday (03/08). He adds, the warrants give the investors to order new shares at a certain price in six months period after the issuance date.
If the shareholders not exercise their rights, their ownerships will be diluted by 37.6 percent. Currently, the shareholder of Smartfren are PT Global Nusa Data (30.30 percent, PT Wahana Inti Nusantara (18.49 percent), PT Bali Media Telekomunikasi (12.26 percent), PT Dian Swastatika Sentosa Tbk (IDX: DSSA) hold 12.15 percent, and public 26.7 percent.
This year, the unit of Sinar Mas Group has budgeted a capital expenditure around $300 million. Susilo explained, the provider aimed to improve the service quality, after received an additional 10 megahertz of spectrum from the government at the end of last year. To help the operator, its parent has exchanged the mandatory convertible bond with 26 billion new series C shares of Smartfren worth of Rp2.6 trillion. .
He stated that as many as three bondholders had converted their notes with 34 billion new shares of the company on Sept. 22, 2020. Boquete Group SA also participated in the MCB conversion with 2 billion shares of the provider.
After this action, Smartfren still has the remaining 46 billion series C shares which the holders of the MCB could exchange at any time. Other parties that hold the MCBs are PT Dian Ciptamas Agung, PT Nusantara Indah Cemerlang, PT Andalan Satria Permai, Hilmas Coal Pte. Ltd., and Cascade Gold Ltd. The notes was issued in 2014 and 2017 with total amount Rp3 trillion and Rp5 trillion, respectively.
Recently, Fitch Ratings says the shift toward larger data bundles and unlimited data offerings point to increased competition in Indonesia’ mobile market and the need for continued high investment. However, pricing should remain rational, with major telcos pursuing profitable growth despite tough market conditions.
The agency believes execution of strategy will be paramount amid a slowing economy, as operators strive to boost revenue. Smartfren (CCC+(idn)), the smallest rival and the first to launch unlimited data plans in 2H 2019, has made headway in its subscriber acquisition strategy, expanding revenue by 42 percent.
PT Indosat Ooreedoo Tbk (IDX: ISAT) (BBB/AAA(idn)/Stable) managed to increase its mobile revenue by 12 percent, followed by PT XL Axiata Tbk (IDX: EXCL) (BBB/AAA(idn)/Stable) at 10 percent and PT Hutchison 3 Indonesia’ at 8 percent.
“We expect competition to intensify, particularly in the more saturated Java region. However, the extent of competitive data bundles offered will depend on operators’ available capacity and subscribers’ ability to pay,” Fitch said on August 28.
The effects of the pandemic have been subdued for Indonesia’ mobile market, with industry revenue relatively flat in 2Q of 2020, compared with the 3 – 4 percent YoY contraction in the Philippines and Thailand. Base on the rater analysis, this is partly due to Indonesia’ fixed-broadband market being significantly under-served due to limited fixed-line infrastructure.
“We now forecast 2020 revenue growth in the low-single digits, from mid-single digits previously in 2019 at 6 percent, although a prolonged economic slowdown could temper prospects in 2H of 2020,” the report said.
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