Indonesia's Indosat eyes $1.4 bln tower sale -sources

* May sell 14,000 towers by end yr or early next yr - sources
* Indosat says picked Citigroup as strategic advisor
* Telkom and Tower Bersama may bid for the assets - sources 

PT Indosat (ISAT), Indonesia's No. 2 mobile phone provider, may sell up to 14,000 telecom towers worth about $1.4 billion in coming months, three sources with direct knowledge of the matter said on Tuesday.

Indonesia needs about $7 to $8 billion of annual investment to build telecom towers across Southeast Asia's biggest economy to boost coverage and tap strong mobile phone growth, though foreign investors are banned from owning or operating towers.

Indonesian state telecom firm PT Telekomunikasi Indonesia (TLKM) and private telecom tower operator PT Tower Bersama Infrastructure are likely bidders, said two of the sources, who declined to be identified because the plan was not public.

Indosat, controlled by Qatar Telecom QTEL.QA, confirmed it was considering a sale.

"We're still evaluating the options, we could sell it or retain it. Nothing is definite yet on the sale plan. It may be decided this year or next year," said Fadzri Sentosa, an Indosat director.

Sentosa said the company has appointed Citigroup as a strategic advisor on its tower assets.

Indonesia is one of the world's most crowded telecommunications markets, with 11 operators fighting for custom in a population of 237 million.

Indosat has 37.8 million subscribers, well behind PT Telkomsel, a subsidiary of PT Telekomunikasi Indonesia, with 88 million subscribers, but ahead of PT XL Axiata's (EXCL) 35 million.

Indosat had 17,372 base transceiver station (BTS) towers as of the first half of 2010, and is likely to use the proceeds of any sale to pay down debt and for expansion of its core business.

"Telkom may likely be the bidder as the company is currently consolidating its tower business, but the situation is still fluid, any local telco players could come in to bid for the assets," said one of the sources.

Telkom has said it plans capital expenditure of about $2 billion next year to finance infrastructure projects, and is also looking to expand through acquisitions in the region as it sees the domestic market maturing.

Tower Bersama, controlled by Saratoga Capital, has raised about $220 million for an initial public offering in late October, as more firms seek to raise capital from investors in a Jakarta stock market at record highs this year. Source: