The investment required to serve Asia’s third-biggest population spread across 6,000 inhabited islands – out of a total of at least 17,000 isles and atolls – is already large
“It’s time for us to work from home, learn from home, worship at home,” Indonesia’s president announced in the early days of the pandemic in March. What Joko Widodo couldn’t have known back then was how social distancing would bring rivals in the country’s competitive telecommunications industry closer together. Credit for consolidation must go where it’s due: to the sprawling geography of the world’s largest archipelago.
The investment required to serve Asia’s third-biggest population spread across 6,000 inhabited islands — out of a total of at least 17,000 isles and atolls — is already large. But with 197 million Internet users spending more time at home guzzling data, it’s pointless and wasteful for five mobile operators to seek to duplicate expensive infrastructure in a nation stretching from the Pacific Ocean to the Indian Ocean. And sure enough, Hong Kong’s CK Hutchison Holdings Ltd. is nearing a deal with Qatar’s Ooredoo QPSC to combine their Indonesian mobile operations in a cash-plus-stock deal, Bloomberg News reported this week.
A merger will be welcome news. A smaller industry will be less likely to become a casualty of what’s likely to be a slow post-Covid-19 economic recovery next year. Fitch Ratings expects the Indonesian telecom sector’s leverage to increase toward 2 times funds from operations in 2021, from 1.7 this year, “amid rising network investment to meet demand in mobile data and fiber broadband services.”..
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