JAKARTA (REUTERS) - Indonesian billionaire Chairul Tanjung has agreed to buy an 80 per cent stake in the country's second-biggest pay-TV operator, Telkomvision, heating up competition in the emerging pay television market currently controlled by another tycoon, Mr Harry Tanoesoedibjo.
Just 7 per cent of all Indonesia households have pay-TV, compared to India and China with 83 per cent and 54 per cent, respectively. The sector is expected to grow rapidly as Indonesia's middle class expands.
"The growth opportunity provided by the pay-TV market makes it very compelling for investors," said one of two sources with direct knowledge of the deal.
CT Corp, an investment holding company controlled by Mr Tanjung, is in talks with Indonesia's biggest telecom firm, PT Telekomunikasi Indonesia (Telkom), to buy the stake in PT Indonusa Telemedia or Telkomvision, Telkom said in a statement.
The deal is expected to be worth less than US$100 million (S$125 million), the two sources with knowledge of the deal said. Telkomvision's 2012 revenue was 405 billion rupiah (S$53 million), compared to pay-TV operator PT MNC Skyvision, controlled by Tanoesoedibjo, at 2.4 trillion rupiah.
Lippo Group and private equity firm CVC Capital Partners Ltd also have pay-TV ventures in Indonesia.
"This will unlock the value for Telkom and its shareholders and it can focus on its core business," said one of the two sources, both of whom declined to be named as the details were still confidential.
A Telkom spokesperson said that discussions were in the early stages and were expected to be completed over the next few months.
However, state-owned Telkom's divestment plans have run into problems in the past. The company pulled out of a merger deal in one of its telecom units, TelkomFlexi, with PT Bakrie Telecom worth US$1 billion in 2011 due to opposition from the workers union and parliament.
"This will likely cause a problem with the union," a company source said, noting the union had opposed the Bakrie deal because of concerns over cost-cutting once they were under the control of the private sector.
Mr Tanjung's business interests include Indonesia's biggest hypermarket-chain, PT Carrefour Indonesia, free-to-air TV stations and a mid-sized lender, PT Bank Mega.