Smartfren Telecom, controlled by the Widjaja family’s Sinar Mas, has announced a potential merger with Malaysia’s Axiata Group to combine their telecommunications businesses in Indonesia. The non-binding memorandum of understanding is still in the early stages of evaluation, with both parties conducting due diligence to explore the feasibility of the merger. If successful, both Axiata and Sinar Mas aim to retain significant ownership in the combined entity, which would create a larger company with a combined subscriber base of about 94 million.
Indonesia, the largest economy in Southeast Asia, currently has four major mobile phone carriers, with XL Axiata and Smartfren being the smallest. By merging, the two companies hope to strengthen their position in the market and compete more effectively against larger rivals such as Indosat Ooredoo Hutchison and state-owned Telkomsel. The move comes as the telecommunications industry in Indonesia faces intense competition and consolidation, with recent mergers like the one between CK Hutchison Holdings and Ooredoo in a $6 billion deal in 2022.
Smartfren has been struggling with losses and high debt levels, 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, prompting a decision to raise 8.5 trillion rupiah through a rights issue to address its debt obligations. The proposed merger with Axiata could provide Smartfren with the resources and strategic advantage needed to turn around its financial performance in a highly competitive market.
The Widjaja family, with a net worth of $10.8 billion, controls the Sinar Mas group which has diverse interests beyond telecommunications, including paper, financial services, real estate, agribusiness, and mining. Ranked as the fourth richest family in Indonesia, the Widjajas’ involvement in the potential merger between Smartfren and Axiata highlights their commitment to exploring growth opportunities and consolidating their position in the telecommunications sector.
As the merger discussions progress, investors and industry observers will be closely monitoring the developments to assess the potential impact on the Indonesian telecommunications market. The combined entity of Smartfren and Axiata would not only create a stronger player in terms of subscriber base but also pave the way for enhanced competition and innovation in the industry. With the telecommunications landscape evolving rapidly, strategic partnerships and mergers are becoming increasingly common as companies seek to secure their market positions and drive growth in an increasingly digital world.
Overall, the proposed merger between Smartfren and Axiata represents a significant move in the Indonesian telecommunications sector, with the potential to reshape the competitive landscape and drive consolidation in the industry. With both companies aiming to leverage their strengths and resources through the merger, the deal could have far-reaching implications for market dynamics, customer experience, and innovation in the sector. As the evaluation process continues, stakeholders will be keenly awaiting further updates on the progress and outcomes of the merger discussions between the two telecommunications giants.
