JAKARTA: Malaysian conglomerate Axiata Group and Indonesian group PT Sinar Mas have sought permission from the Indonesian government to merge their telco units, the communications minister told Reuters on Wednesday.
Their planned merging of Indonesian units, PT XL Axiata and PT Smartfren Telecom would further consolidate companies in the telecoms sector into just three big players, Budi Arie Setiadi said in an interview.
Bloomberg had previously reported the planned merger to create a $3.5 billion entity, citing people familiar with the matter. Budi said he had no knowledge of the expected value of the prospective new entity.
XL Axiata and Smartfren did not immediately respond to requests for comments.
Executives from both XL Axiata and Smartfren had multiple meetings with Budi during which they mentioned the merger plan, including at a meeting in Spain at the end of February, the minister said.
"The two companies are still in talks to do the merger," Budi said. "I, as the regulator, support this plan so that Indonesia's telecommunication ecosystem becomes healthier," he added.
A deal could be reached this year, he said.
The combined unit would compete for customers with market leader PT Telekomunikasi Selular (Telkomsel), an affiliate of Singapore Telecommunications (Singtel), and Indosat Ooredoo Hutchison, a unit of Qatar's Ooredoo and Hong Kong's CK Hutchison.
"It's better to have only three operators in Indonesia, more manageable. After that, we can improve quality of the services," Budi said.
XL Axiata is currently Indonesia's third largest telecom operator, serving 58 million customers, followed by Smartfren, which has 32 million users. (Reporting by Ananda Teresia; Editing by Gayatri Suroyo and Martin Petty)