SingTel – CIMB

Court rules in favour of KPPU

The Jakarta District Court upheld the ruling by Indonesia’s competition watchdog (KPPU) that Temasek and its affiliates, i.e. SingTel and ST Telemedia had breached Indonesia’s anti-monopoly laws. Key highlights of the ruling are:

• Temasek was ordered to sell its stake in either Telkomsel or Indosat (as per KPPU’s ruling). However, the Jakarta District Court also gave Temasek the option of cutting stakes in both Indosat and Telkomsel by 50% (instead of selling off one telco).

• The deadline for divestment was shortened to 12 months vs the 2-year deadline set by KPPU.

• The divested stakes can be sold for up to 10% to each buyer, higher than the maximum of 5% mandated by the KPPU. The KPPU also earlier ruled that the buyers cannot be affiliated to Temasek.

• Temasek’s fine was reduced to Rp15bn vs. the Rp25bn imposed by KPPU.

• Overruling of KPPU’s decision to ask Telkomsel to cut prices by 15%.

Temasek said it will appeal the ruling. SingTel is studying the ruling before deciding on its appeal to the Supreme Court.


Temasek has not exhausted its options. We understand Temasek has 14 days to file an appeal with the Supreme Court. The Supreme Court has up to 9 months to hear the appeal, barring unforeseen circumstances. Should the Supreme Court rule in favour of KPPU again, we believe Temasek is likely to seek international arbitration. Hence, we expect this saga to be protracted. We gather that Temasek could concurrently seek international arbitration before the Supreme Court makes a judgement.

Temasek likely to keep Telkomsel, sell Indosat in worst case. In the worst case scenario if Temasek is forced to sell, we believe it will likely dispose Indosat which is the smaller of its two telcos in Indonesia. Hence, there should be no impact on SingTel. We note that the value of Temasek’s Indosat stake will be impaired by the maximum 10% stake as strategic shareholders are unlikely to be interested, and therefore will cast an uncertainty over the longer term direction of the telco.

Valuation and recommendation

Keeping Outperform with unchanged target price of S$4.45. Telkomsel’s fundamental value is unlikely to be impacted by the on-going case as we believe Temasek will sell Indosat in the worst case scenario.

However, we are reviewing our call on SingTel following our recent downgrade on Telkomsel (Underweight) due to intense price competition.

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