CHAPTER II THEORETICAL OF
FOUNDATION
2.1.
Merger
The merger is expected to benefit PT. Indosat as follows:
Economies
of
scale.
Reduction
in
the
average
cost
of
network
operation
will
benefit the cellular company as network is integrated and available to its
customers.
Synergy.
It results
from complimentary activities, e.g., one
firm
may
have
substantial
financial
resources
while
the other has profitable investment
opportunities
Fast
Growth.
This
merger
is expected
to earn a better
value of
growth at a
faster
rate
than
via
the
internal
expansion route through its own capital budgeting
proposals.
Tax
Benefits.
Saving
on
tax,
acquires
additional
manufacturing
capacities
and
strengths
Reduction
in
floatation
cost:
save
on
flotation
cost
of
future
equity,
preference
and debenture issues. In general, these costs (in % terms) decrease with the
increase in the size of the issue
Avoiding
cut-throat
competition:
enable
companies
to
avoid
competition
in
a
situation where there are too many players targeting a limited market.
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