* State-controlled firm’s biggest overseas acquisition
* Gearing up overseas expansion after Indonesia deals
* Telkom retains low debt-to-equity ratio (Adds Telkom M&A spending, debt gearing, names of advisors)
By Denny Thomas and Cindy Silviana
HONG KONG/JAKARTA, June 12 (Reuters) - State-controlled PT Telekomunikasi Indonesia Tbk has agreed to pay about $300 million to buy Pacific island Guam’s telecom and pay-television operator GTA, people familiar with the matter told Reuters, in what will be the biggest overseas acquisition by the Indonesian firm.
Earlier this month Indonesia’s biggest telecom operator, known as Telkom, with a market value of $21.7 billion, agreed to buy GTA from Japanese private equity firm Advantage Partners without disclosing the deal’s value. The people familiar with the matter declined to be identified as the deal value wasn’t public.
The acquisition comes as Telkom gears up efforts to expand overseas operations after a raft of mostly smaller deals in Indonesia in the past five years. Indonesian telecom firms face stiff competition and high operating costs at home, while the government is seeking consolidation in the sector.
Overall, the company has spent about $2.2 billion on mergers and acquisitions since 2005, excluding the latest deal, according to Thomson Reuters data. Telkom’s appetite for overseas deals comes as the Indonesian government also wants it to lead a planned $24 billion broadband expansion in the country over the next five years.
The deal will expand Telkom’s overseas footprint beyond existing business in Singapore, Hong Kong, Australia, the United States and Myanmar among others. In January a plan to buy New Zealand’s 2 Degrees was abandoned over a disagreement on price.
The Guam firm provides domestic wireless, fixed-line, broadband and pay-television services. The island’s geographic location also gives GTA a strategic role as a landing point in undersea cable traffic between Asia and the United States, meaning the purchase may help Telkom boost its global profile.
GTA and Telkom are part of a consortium working to build capacity to meet growing demand for bandwidth between Southeast Asia and North America.
Telkom director Honesti Basyir declined to confirm the deal’s value in a text message to Reuters. But he said the company will fund the acquisition through bonds and equity.
Telkom beat a host of private equity firms and telecom operators to win an auction for GTA managed by Citigroup, the people familiar with the matter said. Deloitte advise Telekom on the purchase, they said.
Citigroup declined to comment, and Deloitte officials weren’t immediately available to comment.
Advantage Partners acquired GTA in 2010 and is selling it, as part of a regular portfolio reshuffle, for a return that it “multiple” times its initial investment, one person said.
Telkom’s debt-to-equity ratio of 0.35 percent was below the industry average of 0.47 percent, according to Thomson Reuters data, leaving ample room for it to take on more debt to pursue more acquisitions. (Additional reporting by Eveline Danubrata in JAKARTA; Editing by Kenneth Maxwell)