With the potential investment, the Chinese tech major is seen to be deepening its exposure in the Indonesian market by tapping one of the country’s biggest conglomerates and its vast ecosystem spanning communications and technology, paper, agribusiness, financial services and infrastructure.
Alibaba plans to partner with a deep-pocketed conglomerate in the Southeast Asian market at a time when the group is facing intense regulatory scrutiny in its home market, an industry expert said.
Alibaba already has a presence in Indonesia through PT Akulaku Silvrr Indonesia, part of the e-commerce and digital finance Akulaku Group. Akulaku controls 25.66% of Indonesian digital lender Bank Neo Commerce.
Alibaba’s proposed investment in the Sinar Mas ecosystem follows the latter’s recent entry as a shareholder into fintech player Dana – a joint venture between Indonesian conglomerate Emtek and Alibaba’s Ant Financial.
DealStreetAsia has learned that a deal between Alibaba and Smartfren is likely to be announced soon.
DealStreetAsia has reached out to Smartfren and Alibaba for comment. Amid the market buzz, Smartfren’s shares have been rallying on the Indonesia Stock Exchange and were up as much as 9.2% during the first trading session on Tuesday.
While the proposed investment by Alibaba may be new, Smartfren has previously inked deals with units associated with the Chinese tech major’s ecosystem. In December last year, Smartfren announced a joint venture between its subsidiary PT SF Digital Commerce and Fonixtree Digital Singapore Ltd. (FDSL).
FDSL is affiliated with Whale Cloud Technology, part of the Alibaba ecosystem and a crucial partner of the Alibaba Cloud software service, Smartfren director Antony Susilo said in an Indonesia Stock Exchange filing at that time.
Commenting on the potential investment, Institute for Development of Economics and Finance economist Nailul Huda said the deal signals a positive in the context of the overall 5G development in the country.
“For Smartfren, of course, this is a sufficient flow of funds to be able to compete with other telecom operators – Telkomsel and Indosat – who have already developed 5G. Alibaba itself is a large technology company in the global market. With (investment from) Alibaba, Smartfren should feel confident of the possibility of (securing) other investors going forward,” Huda said.
Indonesia’s telecom market includes three top players: Telkomsel (part of the state-owned Telkom), XL Axiata and Indosat Ooredoo. Telkom’s ecosystem spans tower company Mitratel, a telecom company under Telkomsel; digital wallet LinkAja; and data centre neuCentrIX.
Meanwhile, in 2022, Indosat Ooredoo expanded its ecosystem by merging with Hutchison 3 Indonesia in a US$6 billion deal. Separately, Axiata Group and XL Axiata acquired Lippo’s arm Link Net for around US$590 million.
Alibaba will need to make a substantial investment to enter such a capital-intensive industry in the archipelago, according to Heru Sutadi, an executive director at think tank Indonesia ICT Institute.
“Financially, Smartfren was making losses in the past decade. There will be much investment needed and money to burn to survive,” Sutadi said.
Smartfren swung to profit in the first three months of 2022 on the back of higher revenue. It recorded profits of 24.98 billion rupiahs (US$1.7 million) in the January-March period, compared to losses of 396.83 billion rupiahs in the same period a year earlier.