Potential Merger between Smartfren and Axiata: Boosting Competition in Indonesia’s Telecommunications Industry

In a major development for the telecommunications industry in Indonesia, Smartfren Telecom, owned by the Widjaja family’s Sinar Mas, has announced a non-binding memorandum of understanding with Malaysia’s Axiata Group to explore a potential merger of their telecommunications business in Indonesia. This merger is currently being evaluated by both parties with due diligence underway. If the discussion results in a business combination, both Axiata and Sinar Mas intend to remain major shareholders in the merged entity.

The Indonesian market has four major mobile phone carriers, with XL Axiata and Smartfren being among the smallest. Combining these two companies would result in a larger entity with a combined subscriber base of about 94 million, significantly enhancing their ability to compete with larger rivals such as Indosat Ooredoo Hutchison and state-owned Telkomsel. The telecommunications industry in Indonesia has been consolidating due to intense competition, which is why CK Hutchison Holdings and Qatar’s Ooredoo merged their Indonesian units in a deal valued at $6 billion in 2022.

Smartfren has been facing losses and increasing debts despite recording its first profit in two decades in 2022. Last year, the company reported a net loss of 108 billion rupiah ($6.8 million) and plans to raise 8.5 trillion rupiah through a rights issue to pay off its debt. The Widjaja family owns Smartfren Telecom and controls the Sinar Mas group through it. Besides telecom, Sinar Mas has interests in various sectors including paper, financial services, real estate, agribusiness, and mining. The family is ranked No. 4 on Indonesia’s 50 Richest list with a net worth of $10.8 billion.