Fitch Affirms Indonesia's Telkomsel Following Bankruptcy Verdict
Published on: 21st Sep 2012
Note -- this news article is more than a year old.
By: Ian Mansfield
Fitch Ratings has affirmed Indonesia based Telekomunikasi Selular s Telkomsel Long Term Foreign and Local Currency Issuer Default Ratings at BBB and BBB respectively Its National Long Term Rating has been affirmed at AAA idn and foreign currency senior unsecured rating at BBB The Outlook is Stable
The affirmation follows a recent verdict by Central Jakarta District Court to accept a bankruptcy petition against Telkomsel filed by Prima Jaya. Fitch has affirmed the ratings as the amounts in dispute are insignificant compared with Telkomsel's financial resources and the agency does not expect the company's funding banks to take any action. Telkomsel will appeal the court's verdict.
Fitch notes that the bankruptcy verdict may hinder the company's operational flexibility. Nevertheless, the agency expects the dispute to be resolved in a manner which does not significantly impair the company's operating and financial profile.
The court held that Telkomsel had failed to pay IDR5.3bn (USD558,000) to Prima Jaya. In June 2011 Prima Jaya signed a deal with Telkomsel to distribute prepaid credit and SIM cards for two years. However, according to Prima Jaya, Telkomsel unilaterally terminated the agreement in June 2012, halting delivery of its cards and causing losses.
Telkomsel is the leading mobile operator in Indonesia with 117 million subscribers and remains one of the strongest telecom companies in Asia with a conservative credit profile. The company's 2011 revenue and EBITDA were IDR48.7trn (USD5.6bn) and IDR27.5trn (USD3.1bn) respectively. As of end-December 2011, Telkomsel had IDR4.2trn (USD470m) in cash and equivalents.
Telkomsel is 65%-owned by the Indonesian government-controlled fixed-line operator Telekomunikasi Indonesia. Singapore Telecommunications, itself ultimately majority-owned by the government of Singapore, owns the 35% minority.