SingTel – Phillip

Indonesian court ruling

Outcome. The Indonesian district court upheld the ruling by the Indonesian competition watchdog KPPU that Temasek and its affiliates had breached Indonesia’s anti-monopoly laws. Therefore, Temasek had to divest its stake in PT Telkomsel or PT Indosat. The timeframe had also been reduced from two years to one year. Moreover, Temasek was given the option to halve both stakes within one year. Temasek mentioned that it would appeal the ruling while SingTel would study the ruling before deciding to appeal.

SingTel is likely to keep its stake in PT Telkomsel. We believe that in the worstcase scenario where Temasek loses its appeal, it will sell PT Indosat instead of PT Telkomsel. This is because PT Indosat is the smaller telecommunications player in Indonesia. In other words, SingTel will most probably maintain its stake in PT Telkomsel.

Maintain BUY recommendation, target price at S$4.22. We are maintaining our BUY recommendation and target price as its operations in Indonesia are unlikely to be affected by the final outcome of the ruling after the appeal.

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