Indonesia’s state-controlled PT Telekomunikasi Indonesia (Telkom) (TLKM.JK) said on Friday it expects a tower deal with Singapore Telecommunications (SingTel) (STEL.SI) worth up US$1.2 billion ($1.68 billion) to be completed this year.

Telkom, which said it sees single-digit percentage growth in second-quarter net profit, is shifting its focus to data services to earn higher profits as subscriber growth in Southeast Asia’s biggest economy slows. It also needs to invest heavily in telecoms infrastructure including towers.

Telkom’s president director Rinaldi Firmansyah said the firm was still in talks with SingTel. Earlier this year, Telkom said it would borrow nearly US$400 million to buy out SingTel’s interests in about 9,000 telecoms towers. 

 

“We’ll still have to see how aggressive they will be about finding tenants for the towers once the deal is done. The deal itself still has be to negotiated in terms of pricing and how it’s structured,” said Sebastian Tobing, equity analyst in Jakarta for UBS, which rates Telkom as a buy. 

 

The towers are owned by PT Telekomunikasi Selular (Telkomsel), Indonesia's biggest mobile phone operator. Telkom owns% of Telkomsel and SingTel owns the remaining 35%. 

 

Telkomsel is expected to add 10 million new subscribers this year, bringing the total to 91 million, Telkom's finance director Sudiro Asno said. 

 

“The market is already mature but we expect to still retain 50% of market share,” Asno told reporters. 

 

Telkomsel will get a 3-4 trillion rupiah ($458.6-$611.5 million) loan from foreign and local banks, replacing plans to raise 3 trillion rupiah from bond issues this year. 

   

Firmansyah said the company is also in talks with mobile phone operator Bakrie Telecom (BTEL.JK) on consolidation of operators of the CDMA, or code division multiple access, mobile standard. 

 

“We have talked and are making an assessment with Bakrie Telecom, but are also doing similar things with other local firms,” Firmansyah said. “Whether it’s a merger or acquisition will depend on how the talks progress,” he said. 

 

“We will spin off the CDMA unit before we proceed with consolidation... The spin-off will give between 10 to 20% efficiency in cost.” 

 

A senior official in the state enterprises ministry said on Thursday Indonesia may appoint a new president director for Telkom to replace Firmansyah, who was promoted to president director of Telkom in 2007 after three years as the firm’s finance director.

 

Telkom, which has a stock market value of US$17.5 billion, has been struggling to record significant profit growth over the last two years as it faces fierce competition from other mobile phone operators, including PT Indosat (ISAT.JK) and PT XL Axiata (EXCL.JK), the number two and three players respectively. 

 

Shares of Telkom traded steady by Jakarta’s midsession close, but have fallen 15% so far this year, underperforming the broader market <.JKSE> which is up 10.5%.