Corporate News in Brief - November 2010

SMART AND FREN PLAN MERGER IN 2012. Mobile telephone operators PT Smart Telecom and PT Mobile-8 Telecon Tbk merger in the next two years after cooperation in the marketing of their product Smart and Fren starting this year. The merger is similar to one between Flexi unit of PT Telekomunikasi Indonesia Tbk and Esia unit of PT Bakrie Telecom Tbk. The merger plan between the two publicly listed companies has been approved by the minister for state enterprises. Gandi Sulistiyanto, the chief commissioner of PT Smart Telecom said Smart Telecom which operates at frequency of 1.900 MHz is very much interested in creating merger with Mobile-8 which operates in the 800 MHz band as the customer premises equipment in the band of Smart is not no longer easily fund in the market. Gandi said the merger with Mobile-8 is very feasible specially from the point of view of cellular market as it will prevent monopoly such as by the Esia and Flexi combined that could dominate more than 50% of the market.

TAM TO INVEST $111 MILLION IN 2011. PT Toyota Astra Motor (TAM) plans to invest Rp1 trillion (US$111 million) in 2011 to expand networks of sales agents and to finance research for development of new products. The company plans to have 385 dealers, up from 205 at present, said Johnny Darmawan, a director of Astra International the parent company of TAM. Astra, the country's largest automotive company, has set aside US$900 million for capital expenditures next year to be distributed among its subsidiaries. Johnny said additional dealers are needed with growing car market with annual sales predicted to reach 1 million units in the next few years. This year car sales on the domestic market are predicted to reach around 700,000 units, up from around 450,000 units last year. TAM is expected to chalk up Rp 35 trillion in income from the sales of cars and spare parts, up 25% from last year. In the first 11 months of the year Toyota car sales on the domestic market rose 53% to 257,000 year-on-year with a market share of 37%. Astra International, which had a 56% share of the domestic car market also has units producing Daihatsu, Isuzu and Peugeot cars and Honda motorcycle, which also has the largest market share in the country.

PUPUK KALTIM AND PUSRI TO TEAM UP WITH JORDAN PHOSPATE. Two state fertilizer companies - PT Pupuk Sriwijaya (Pusri) and PT Pupuk Kaltim (PKT) - and Jordan Phosphate Mine Company (JPMC) have agreed to jointly build three fertilizer factories in the country. Under an agreement signed in Jakarta, the sulfuric acid, phosphoric acid and NPK (nitrogen, phosphate and kalium) factories will be built in East Kalimantan and South Sumatra, where two state fertilizer companies are located. Minister for state enterprise Mustafa Abubakara said construction of the three factories will cost up to US$900 million to be share equally by the three partners. Mustafa said most of the production will be for domestic consumption with surplus to be exported to other Asean countries including Malaysia, the Philippines and Thailand. He said two of the three factories are to be operational in 30 months and the other one of Gresik, East Java each with a production capacity of 1 million tons. Pusri in South Sumatra and PKT in East Kalimantan are both producers of urea fertilizer.The Jordanian company already has an agreement with state fertilizer company Petrokimia Gresik on the procurement of basic material phosphoric rock. Pupuk Kaltim also signed a memorandum of understanding with Jordan Phospate on procurement of phosphoric rock, kalium chloride (KCL), and monoammonium Phosphate (MAP).

EXXONMOBIL FAVORED TO BECOME PERTAMINA'S PARTNER IN NATUNA gas project. ExxonMobil is favored to become partner of state oil and gas company PT Pertamina to develop the Natuna D-Alpha gas block in South China Sea, Riau Islands. ExxonMobil is placed at top of the list of prospective partners based on technical consideration in addition to being cooperative, Pertamina spokesman Mochammad Harun said. "The selection of ExxonMobil among the top favorites has nothing to do with the visit here of President Barack Obama," Harun said. ExxonMobil was awarded the contract earlier to develop the gas block but it failed in implementation of the contract even after being extended. The government then terminated the contract and gave it to Pertamina. Harun said there are four other short listed bidders yet to be selected as possible partner in the Natuna project. Originally, there are 8 bidders among multinational oil companies including ExxonMobil, Total, Shell, ENI, CNPC, StatOil Hydro, Chevron and Petronas. Vice President Boediono has reminded Pertamina to immediately announce its partner and sign a production sharing contract with the government before the end of this year. Pertamina needs financially powerful partners with high technology to develop the reserve, believed to be one of him largest in the world, as the gas has high carbon dioxide content.

KRAKATAU STEEL'S STELLAR DEBUT IN STOCK MARKET. State owned steel maker Krakatau Steel made a stellar debut on the Indonesia Stock Exchange, soaring 49.4 percent on the back of strong local buying before trading of the shares was temporarily suspended. The stock closed at Rp 1,270, compared with its opening price of Rp 850. Total transaction value was Rp 2 trillion ($226 million). The market proved the price set by the government was too low fuelling graft talks . market analysts said. There has been speculation that the stock's price was intentionally set low for its initial public offering last week, despite strong demand at home and abroad. Juniman, an analyst from Bank Internasional Indonesia, said the stock's soaring price following its debut was proof that the IPO share price was too low, especially considering the strong prospects projected for the steel industry. "Local investors saw that the price was cheap considering the company's potential, that's why there was heavy buying today," he said, State Enterprises Minister Mustafa Abubakar earlier indicated that the shares would be sold at Rp 1,000 each, but later he said the ministry had decided to lower the price to allow investors more profit. The country's top steel maker raised Rp 2.7 trillion from the sale of 20 percent of its equity, or about 3.2 billion shares, in its IPO last week.

LIPPO KARAWACI HOPES TO EARN $500 MILLION FROM HOSPITAL BUSINESS A YEAR. PT Lippo Karawaci with core business in property sector, said it hopes to earn US$500 million from its hospital business a year in the next five years. Lippo Karawaci will acquire more hospitals if opportunity is open, Ketut Budi Wijaya, the president of the publicly listed company said when officially commissioning the seventh and newest unit of Siloam Hospital in Jambi , the largest in the city. Budi predicted a 5% increase in the company's income from the hospital every year. Earlier the company acquired a hospital in Balikpapan , East Kalimantan, and renamed Siloam Hospital. PT Lippo Karawaci acquired 79.61% of the hospital originally known with the name of Husada Hospital at a price of Rp 231 billion. Budi said the hospital will be modernized to meet international standards so that the local people do not have to go to Singapore for good medical treatment. The Balipapan unit is the sixth of the chain of Siloam Hospital. In the next five years, Lippo Karawaci plans to build 25 new hospitals.

RIM TO ESTABLISH SUBSIDIARY IN INDONESIA. Research In Motion (RIM) said it was establishing a subsidiary in Indonesia to facilitate the marketing of its BlackBerry smart phones and to comply with the country's law. The government has stressed the Canadian firm should establish a database center and server in Indonesia to meet legal requirements. The center would allow authorities to conduct lawful interceptions of e-mail and other messages, and the leasing of bandwidth for the servers would contribute revenue, Communication and Information Minister Tifatul Sembiring said earlier. Canadian Finance Minister Jim Flaherty said in Jakarta RIM is a very important Canadian-based company, and has now become a significant player in Indonesia "I'm here because Indonesia matters a lot to Canada as a trading partner in the G-20,'' Flaherty said at a ceremony to unveil Research In Motion Indonesia. Gregory Wade, RIM's managing director for Southeast Asia, said the establishment of the local unit was a milestone in RIM's long-term commitment and investment in Indonesia. RIM already has subsidiary in Singapore established four year earlier.

GAPURAPRIMA TO ACQUIRE SHOPPING MALLS WORTH US$55.6 MILLION. Publicly traded property company PT Perdana Gapuraprima said it will acquire five shopping malls at a total price of Rp500 billion (US$ 55.6 million). The locations of the five malls in Bekasi Trade Center, Bandung Trade Center, Jatinangor Town Square , Solo Grand Mal and Solo Wholesale Center are strategic, Gapuraprima director Arief Aryanto said. The company will launch rights issue to raise Rp 700 billion to finance the acquisition in the second quarter of next year, Arief said. The company said it has set income target at Rp650 billion next years with a net profit of Rp 125 billion. Corporate secretary Rosihan Saad said the company also plans to invest Rp 2 trillion in property projects in Jakarta next year. The company will build apartment and office buildings, shopping mall and convention building, he added.