SingTel said it had spoken to Royal KPN about buying the heavily indebted Dutch telecoms firm's stake in Telekomunikasi Selular (Telkomsel) from listed parent Telekomunikasi Indonesia (Telkom)

"SingTel has held discussions with Royal KPN with regard to purchasing KPN's stake in Telkomsel. However, no definitive agreements have been signed," a SingTel official said.

Analysts have estimated that the deal, which would help SingTel build up an Asian mobile network, could cost the lowly-geared Singapore company up to US$500 million.

SingTel, Asia's eighth largest telecoms company, said it would make appropriate announcements later.

Telkom's director of operations and marketing Komaruddin Sastrakoesoemah said the state-run domestic phone giant supported a partnership with SingTel.

Mr Sastrakoesoemah said he hoped the deal would be completed by the end of this year. Telkom holds 77.3 per cent of Telkomsel, which has about 45 per cent of Indonesia's booming cellular phone market.

"KPN is in talks to sell its stake in Telkomsel. The most serious discussions are with SingTel . . . The talks are almost completed," Mr Sastrakoesoemah said, adding other details would be announced when available.

While analysts were positive about the news, SingTel shares continued to sink. Stock prices were down five S cents to S$1.78 after hitting a low of S$1.76. The stock had slumped 13 per cent over the past five days.

"There is going to be a stock overhang. Australian investors who received SingTel stock for their Optus shares would be selling as they would want to cash in," said Kim Eng Securities analyst Stephanie Wong.

Based on Telkomsel's subscriber base of 2.2 million users, the price worked out to be US$1227 per subscriber - lower than the valuation of US$1500 per subscriber SingTel paid for Optus.