Ring, ring, ring… For Indonesian telecommunications giants PT Indonesian Satellite Corporation (PT Indosat) and PT Telekomunikasi Indonesia (PT Telekom) this is not an unusual sound. However, when investors are on the line asking questions about the company’s ADR programs, timely and open communications are necessary for success. Both telecom entities have taken to IR as the means to promote trading in the global market.
Unaccustomed to the level of information required by overseas investors, many Asian companies face difficulties in presenting corporate stories. Those establishing ADR programs are finding out that communicating with foreign investors in today’s global environment is a matter of liquidity or illiquidity. The effect of open and full disclosure translates into increased foreign interest in the stock which often, in turn, leads to greater domestic interest.
The Indonesian telecom industry has proved its mettle in communicating abroad. Both PT Telekom and PT Indosat went the IPO route, issuing the largest ADRs in the country’s history. Just after the IPOs both companies scrambled to put together effective IR departments to cope with the wave of foreign investor interest. For its part, the Indosat offering was considered award winning by some finance magazines.
What was key for investors to understand when considering both Indonesian DRs was the fact that the government has maintained a monopoly over telecom services. Only government entities, through management agreements, joint operations or joint venture schemes can provide services in Indonesia. Indosat’s status as the company responsible for international telecommunications will be maintained for 75 years untill 2042, while PT Telekom remains the provider of domestic telecom services.
Country File
‘We established our IR program on January 1, 1995, after we came out with our IPO,’ says Budi Prasetyo, general manager of IR at PT Indosat. ‘We realized it was crucial for the continued success of the ADR to pass on information about the company to investors. Since Indonesia was a relatively new market for foreign investors, we had to provide a sufficient level of information on the country. In that way, they could put Indosat into the background context of an emerging economy.’
In fact, members of Indosat’s communications department were at work even before the IR program was established. ‘We knew we had to provide detailed information so investors had a complete picture,’ says Prasetyo. ‘These communications could only lead to increased liquidity of the ADR. Without it we would not have reached the level of investor interest we needed to succeed.’
Indeed, PT Indosat’s October 1994 launch of its DR did well. Substantially oversubscribed, the company issued one ADR for every ten ordinary shares. Listed on the NYSE, the company issued 24.96 mn DRs at the offering price of $32.05. As the largest of all Indonesian companies to issue ADRs, Indosat raised $800 mn.
PT Indosat is the primary provider of international telecom services in Indonesia, linking the country to 252 countries and holding a market share of 91.2 percent of international paid minutes.
One of the company’s primary messages to ADR investors is its rapid introduction of telecom technologies and its expanded scope of services. The business has grown rapidly in recent years, reflecting the overall economic growth of Indonesia. The result is an attractive investment opportunity, which the IR team is quick to point out during this year’s 33 city roadshow.
‘We have our annual roadshows geared towards informing investors about the continued development of the company,’ says Prasetyo. ‘We travel throughout Asia, Europe, and North America. We hold quarterly conference calls to explain our financial results and answer questions. Our staff of eight supplements this with regular meetings with investors, either in our offices or abroad, as well as the usual IR tools of shareholder targeting, brochures and advertisements where appropriate.’
Movement Monitor
PT Telekom’s DR was eventually well received by the market that had some inkling of what Indonesian telecom giants could do. Launched in November 1995, the offering, which consisted of one ADR for 20 series B-shares, was for 31.207 mn DRs at $18 per share. Listed on the NYSE, PT Telekom raised over $560 mn.
‘Our IR unit (IRU) was established a month after our DR listing,’ comments Setiawan Sulistyono, manager of investor relations at PT Telekom. ‘Our intention was to provide seamless communication between investors and the company. It is our department that monitors the movement of international trading in ADRs and responds to market trends.’
PT Telekom provides local and domestic long distance services through 2.76 mn lines in service. It is one of the largest companies in Indonesia, and either directly provides – or has investments in companies that provide – a wide range of telecom services, including cellular and leased line services. Historically, Telekom has derived over 90 percent of its revenues through its public-switched telephone network.
‘The IR program for our ADR is not much different from what we practice for our common shares,’ says Sulistyono. ‘We promote the company through Telekom publications, quarterly reports, and annual reports in the form of the 20-F. Our goal is to explain the strengths of the company in the local market while explaining the fundamental differences between Telekom and Indosat as an investment play.’
