Telkom Indonesia's Conditional Spin-off of its Wholesale Fibre Business: Strategic Reallocation and Shareholder Value Implications

Telkom Indonesia's decision to spin off its wholesale fibre connectivity business to its subsidiary, PT Telkom Infrastruktur Indonesia (TIF), marks a pivotal step in its corporate strategy to reallocate assets and enhance long-term value creation. Valued at Rp35.78–35.79 trillion ($2.16 billion), the transaction is structured in two phases: the first, transferring over 50% of Telkom's fibre infrastructure assets by year-end 2025, and the second, completing the transfer by mid-2026 a Reuters report. This move aligns with broader efforts to streamline operations, optimize underutilized fibre network assets (currently at ~40% capacity), and position TIF as a standalone infrastructure provider, according to a Bisnis report.

Strategic Rationale: Refocusing on Core Operations

The spin-off reflects Telkom's strategic pivot from a diversified telecom operator to a focused infrastructure and digital services leader. By isolating the wholesale fibre business, Telkom aims to unlock operational efficiencies and create a platform for external partnerships. The transaction is designed to "strengthen Telkom's position as a leading infrastructure connectivity provider in Indonesia" while supporting national digitalization goals, Reuters reported. This reallocation also addresses the challenge of declining average revenue per user (ARPU) in the mobile segment, which has stabilized at Rp41.2 thousand after peaking in 2024, according to the TLKM 2Q25 earnings call.

The decision to retain a 99.99% stake in TIF ensures Telkom maintains control while enabling potential capital injections or strategic collaborations to scale the fibre business. Analysts note that TIF's current revenue is 99% internally sourced, but the goal is to increase third-party contributions to 15% by leveraging the spin-off's structural flexibility, as discussed in a Bisnis article.

Shareholder Value and Financial Implications

While telecom sector spin-offs have historically shown mixed short-term market reactions, Telkom's approach emphasizes long-term value creation. One 2025 analysis highlights that Telkom trades at an undemanding valuation of 3.7x forward EV/EBITDA and 12x P/E, both below -2SD of its five-year historical averages, suggesting potential for re-rating. The company's Q1 2025 financials reinforce this: consolidated revenue reached Rp36.6 trillion, with EBITDA at Rp18.2 trillion (49.8% margin), demonstrating resilience despite a revised 2025 revenue target of flat growth.

The spin-off is expected to stabilize EBITDA margins, which were trimmed to 50% for 2025 from an initial 50–52% range. By reducing operational complexity and focusing on high-growth areas like 5G and enterprise services, Telkom aims to offset pressures from saturated mobile markets. Analysts project EBITDA growth of 6–7% annually from 2025–2026, supported by Fixed Mobile Convergence (FMC) initiatives and digital infrastructure expansion, as noted in a BCG report.

Investment Attractiveness: Catalysts and Risks

Telkom's strategic restructuring, including reducing subsidiaries from 55 to 22 by 2027–2028, underscores its commitment to operational clarity. The company has also approved a $1.3 billion dividend and $188 million share buyback program, signaling confidence in capital allocation, according to a Panabee report. These measures, combined with the spin-off, position Telkom as a compelling value play in a sector where median total shareholder returns lag behind cross-industry benchmarks, as examined in a ResearchGate study.

However, risks persist. Intense competition in Indonesia's telecom sector and the need for sustained capital expenditure (14–15% of revenue) to maintain infrastructure could pressure margins. Additionally, the success of the spin-off hinges on TIF's ability to attract external clients and partners-a goal that requires execution discipline.

Conclusion: A Calculated Bet on Digital Infrastructure

Telkom Indonesia's wholesale fibre spin-off is a calculated move to reallocate assets toward high-growth infrastructure and digital services. While short-term market reactions to telecom spin-offs remain uncertain, the company's undemanding valuation, strategic clarity, and focus on operational efficiency position it as an attractive long-term investment. For shareholders, the spin-off represents a step toward unlocking latent value in underutilized assets and fostering a more agile corporate structure. As Indonesia's digital economy expands, Telkom's ability to execute its restructuring plans will be critical to sustaining its leadership in the sector.