Telstra Corporation Ltd teams up with Telkom in Indonesian expansion

Telstra has formed a joint venture with Indonesia’s number one telecommunications provider.

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After a number of successful investments in Asia, Telstra Corporation Ltd (ASX: TLS) yesterday announced it will join forces with Indonesia’s largest telco in a 50-50 joint venture. Telstra will join forces with Telkom in a bid to steal market share away from established players like Singapore Telecommunications Ltd (ASX: SGT) and BT, by supplying cloud computing and technology services.

Both partners believe the Indonesian technology market will be worth up to $2 billion per year by 2020 and, from Telstra’s perspective, it’s the perfect platform to continue growing its Network Application and Services (NAS) division internationally.

Since selling out of its Hong Kong mobiles business and divesting its Sensis business, the giant Aussie telco had been expected to announce an acquisition or investment as part of its Asian expansion.

The investment in the Indonesian market will reaffirm the direction of the telco, which many analysts had been expecting would become more of an IT company than telecommunications giant. Recently, the company’s Chinese online car sales business Autohome (NYSE: ATHM) was listed on the New York Stock exchange and has been a major hit with technology investors in the US, who wanted exposure to booming Asian economies and Asia’s growing middle class.

This deal will allow Telstra to tap into Telkom’s huge number of fixed-line, mobile and enterprise customers. Brenden Riley, Telstra Global Enterprise and Services group executive, said the deal allows them to move into the market at a relatively low cost and, by partnering with an established business, greatly reduces the risk. It is a strategy they will likely pursue moving forward: “It is one of the first big geographical expansion plays for Telstra and NAS … and I think [partnering geography by geography] is where we’re headed at the moment,” Mr Riley said.

Foolish takeaway

As part of the NAS division, this deal follows the recent acquisitions of both Melbourne’s O2 Networks and Sydney’s NSC Group and proves Telstra is looking to grow its technology offerings both domestically and abroad. It’s dominance in local markets and increasing presence overseas should make Telstra more appealing to long-term growth and income investors alike.

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