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AirAsia to Buy Control of Batavia Air

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I supposed none of Indonesian carrier would make big leap into Malaysian market. Their domestic market is more lucrative.

But Lionair did say that they will set up a local in here that will enable them to fly domestic routes here.

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But Lionair did say that they will set up a local in here that will enable them to fly domestic routes here.

 

Doubt the gomen will permit.

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JAKARTA, Indonesia—Asia's largest budget airline, AirAsia Bhd, plans to buy a sizable stake in one of its Indonesian rivals, Batavia Air, in a move aimed at accelerating the Malaysian carrier's rapid rollout in Southeast Asia's largest economy.

 

AirAsia will buy a 49% stake in closely held Batavia Air, while AirAsia's local partner, PT Fersindo Nusaperkasa, will purchase the remaining 51%, with both deals totaling about $80 million. Foreign companies are only allowed to own as much as 49% of an Indonesian airline. Batavia Air is one of the largest airlines in Indonesia, with an 11% market share for domestic flights.

 

"The Batavia Air acquisition is a fantastic opportunity for AirAsia to accelerate our growth plans in one of the most exciting aviation markets in Asia and further underlines our belief in the growth potential of Indonesia's aviation sector," said AirAsia Group Chief Executive Tony Fernandes, who recently announced plans to move to Indonesia to spearhead the company's plans here.

 

Indonesia is seen by many analysts as one of the world's last, big growth markets for air travel. While its population of about 240 million people makes Indonesia the world's fourth most populous country after China, India and the U.S., only a small portion of its citizens have ever flown.

 

A lack of good bridges, trains and ferries sometimes makes air travel the only means to travel in the 17,000-island archipelago. Meanwhile, business travel has taken off as companies fly to far corners of the country in search of its rich natural resources, including coal, tin and palm oil.

 

The number of domestic and international passengers in the air in Indonesia has shot up more than 65% in the past two years to about 68 million last year, according to Indonesia's Directorate General of Civil Aviation.

 

Indonesian carriers have been bulking up their fleets to transport more of the country's growing middle class to new destinations at home and abroad. The national carrier PT Garuda Indonesia and its low-cost arm Citilink have been ordering billions of dollars' worth of new planes. Budget carrier Lion Air this year finalized an order for 230 aircraft from Boeing Co. BA +1.19% in a $22 billion deal that was the biggest order to date for the Chicago-based plane maker.

 

AirAsia, for its part, has operated in Indonesia for years, serving major cities such as Jakarta and Yogyakarta. But it has faced particularly stiff competition there, because Indonesia already has a far greater number of carriers than many other countries in the region, which has helped keep fares low.

 

The acquisition of Batavia Air will add more than 30 planes to AirAsia's current fleet of about 100 aircraft and give the Malaysia-based carrier new landing rights across Indonesia and internationally, as well as a new hub in Surabaya. It also provides AirAsia access to Batavia Air's network of travel agents in Indonesia, an important asset in a country where most budget fliers don't have the computers needed to book directly online, said Ahmad Maghfur Usman, analyst at OSK Research in Kuala Lumpur.

 

"An acquisition is a fast way to expand market share," for AirAsia, he said.

 

While growing through acquisition—with the extra costs of debt and integration it brings—isn't the norm for most low-cost carriers, AirAsia might be willing to take on the added costs to get ahead of the increasing competition in Indonesia, analysts said.

 

A recent attempt by AirAsia to tie up with Malaysian Airline System Bhd. in Malaysia, by contrast, didn't work out. The two companies, one state-owned and the other run by an entrepreneur, struggled to work out the details and in May decided to unwind a share-swap agreement planned last year after resistance from unions at the state-owned airline.

 

AirAsia should have less trouble integrating with Batavia Air, which is a private company that started flying in 2002 and doesn't have the political baggage that often comes with state-owned enterprises.

 

"This is their first airline acquisition," said Mr. Usman, the OSK Research analyst, of AirAsia's move. "Let's see whether Tony can work his magic."

 

Mr. Fernandes added that a planned stake sale of an AirAsia Bhd. subsidiary, AirAsia Indonesia, via an initial public offering will be postponed until the completion of the acquisition of Batavia Air. The IPO was initially planned for the fourth quarter of this year.

 

Source: http://online.wsj.co...3137424384.html

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Doubt the gomen will permit.

 

No prize for guessing who's the possible party that might block the deal eh? Anyway, worst case, Batavia wont work out for Tony just like Astro Indo (JV with Lippo) didn't work for Ananda Krishnan. Indonesia, though not new to Tony, are so vast, and their local billionaires are sure to play hard against him. We'll just wait and see.

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what is the point of maintaining the batavia brand? i hope it doesnt turn into some freak hybrid mandala tiger. ugliest permanent livery in the world.

 

the whole point of airasia doing acquisition is to fast expand the airasia image. thats why the vietnam jv didnt work out, cause vietnam gomen didnt allow airasia name, and tony would not compromise. so i dont see why tony will compromise on this either.

 

for now he will say, yeah yeah batavia remain. then slowly after one year or so, he will change it.

 

just like how he say AA hq never truly move to jakarta. and then now Air Asia Asean is there.

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Batavia Air a good fit for AirAsia: analysts

 

 

PETALING JAYA (July 27, 2012): Analysts see Indonesia's Batavia Air as a good fit for AirAsia Bhd, allowing the budget carrier to tap into the Indonesian travel market and collaborate with Indonesia AirAsia through the latter's existing international market penetration.

 

OSK Research Sdn Bhd aviation analyst Ahmad Maghfur Usman deemed the acquisition of Batavia Air for US$81 million, valued at 16 times historical price-earnings, as fair and in line with the average global low-cost carrier (LCC) valuation.

 

He also expects the net effect on AirAsia’s total net gearing would be marginal, from 1.33 times to 1.35 times.

 

"The acquisition of Batavia Air, which ranks third in market share in the archipelago behind Lion Air and Garuda, will see AirAsia’s combined share in the Indonesian market surge up from the current 2% to 14%. This will positively benefit AirAsia’s overall traffic network and gives it access to a strong sales distribution and agency network, which is crucial in expanding in the domestic Indonesian market," he wrote in his report today.

 

"Although profitable, the family-operated Batavia Air is operationally not well managed, registering net margins of only 0.8% last year. With AirAsia professionally running the show, we see a lot of room for potential cost cuts in line with the AirAsia culture," said Ahmad, maintaining a "buy" call with a RM4.57 fair value.

 

Kenanga Research said AirAsia will have to gear up by RM87.1 million for the acquisition of Batavia Air, assuming a 70:30 debt-to-equity ratio.

 

It said AirAsia is likely to revamp Batavia Air's fleet within the next three years after it streamlined Batavia's new routes and business direction or even change its entire business model to LCC.

 

Batavia is a full-service carrier that services two main markets -- Asia and the Middle East. It currently operates 35 aircraft, with an average fleet age of 12 years. Most of the aircraft are Boeing 737s, with two Airbus A330s.

 

"We do not see any unfavourable competition between Indonesia AirAsia and Batavia Air in Indonesia as both are catering to different market segments in Indonesia," said Kenanga.

 

"With the acquisition of Batavia, AirAsia will be able to leverage on Batavia's existing domestic customers to penetrate the local market faster while feeding Batavia with its international passengers via Indonesia AirAsia," it added.

 

The research firm is not changing its earnings forecasts for AirAsia for financial years 2012 and 2013 at this juncture, as it does not expect the carrier to equity account for its 49% stake in Batavia Air immediately.

 

It is maintaining an "outperform" call on AirAsia, with a RM4.06 target price.

 

As of 3.37pm, AirAsia shares were trading at RM3.73, unchanged from yesterday's close.

 

Source: http://www.thesundaily.my/news/448500

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Gotcha! Think of Valuair-JetstarAsia merger. I believe they (AirAsia & Batavia) will operate similarly like their Singapore rival.

 

Everything are same from merchandises to staffs, except on some Batavia flights, the aircraft will retain its livery or at least Y6 sticker on QZ standard livery. (like 9V-VLE)

 

And maybe Batavia will focus more on domestic or not-so-grandeur routes.

 

 

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Just got this from our spy at the AK Gossip Division. Thanks a bunch, you know who you are.

 

Welcome Batavia Air

Tony Fernandes

Sent: Friday, July 27, 2012 8:41 AM

To: JAA_ALL; IAA_All; MAA_ALL; TAA_ALL; PAA_ALL; AAX_ALL

 

Dear AllStars,

 

I am very proud to announce today that AirAsia has acquired Batavia Air, a jewel in the crown of Indonesian aviation.

 

The carrier, based in Jakarta and Surabaya, adds another 30 planes to the 20 we already have in Indonesia, making us first in international and third in domestic.

 

It's a rough diamond and there's lots of work to be done. But Batavia complements our business very well and will increase our footprint in Indonesia and the region.

 

This is the result of the Asean office, which helped make this deal a reality. Their hard work brings us one step closer to achieving our goal of being No. 1 in Indonesia.

 

Yet we must not become complacent. We've come so very far since those first two planes in 2001 but we have not even begun to realise our full, amazing potential.

 

So let us continue to strive for the best, to be the best. Move fast and break things.

 

Kind regards,

Tony

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Press Release:

 

Jakarta, Indonesia: AirAsia Berhad (“AAB”) today announced that it has through its fully

owned subsidiary AirAsia Investment Ltd entered into a Conditional Share Sale

Agreement ("CSSA") together with its partner PT Fersindo Nusaperkasa (“Fersindo”) to

acquire PT Metro Batavia (“Metro Batavia”), which operates the Indonesian airline,

Batavia Air, and Aero Flyer Institute (“AFI”), an aviation training school (together “Metro

Batavia Group”). The agreement was signed today between AAB, Fersindo and Metro

Batavia at a signing ceremony in Jakarta.

 

In accordance with Indonesian civil aviation ownership regulations, AAB will hold a 49%

stake in Metro Batavia Group with the 51% majority held by its Indonesian partner,

Fersindo. Fersindo is also the 51% majority shareholder of PT Indonesia AirAsia (“IAA”).

The total purchasing consideration for Metro Batavia Group is USD80 million (equivalent

to approximately RM253 million) and will be settled in cash. The acquisition of 100%

interest in Metro Batavia by AAB and Fersindo will be carried out in two stages, through

acquisition of a majority 76.95% stake and subsequently followed by the remaining

23.05% held by its existing shareholders. Correspondingly, the total purchasing

consideration for 100% interest in AFI is USD1 million (approximately RM3.2 million).

The acquisition is expected to complete by 2nd quarter 2013 and is subject to regulatory

approvals in Indonesia.

 

This new acquisition will complement AirAsia’s existing Indonesian operations, IAA ,

which has successfully captured strong market share in Indonesia’s international airline

traffic, with an extensive and well-established domestic route network throughout the

Indonesian archipelago. The Batavia Air acquisition provides greater domestic

connectivity and an extensive feeder network into IAA’s existing hubs in Jakarta,

Bandung, Denpasar, Medan and Surabaya. Upon the successful acquisition, Batavia Air

and IAA will fly more than 14 million customers serving 42 Indonesian and 12

international destinations. The addition of Batavia Air will provide AirAsia immediate

access to an enlarged fleet of aircraft, experienced pilots and flight crew and increasingly

competitive slots at major Indonesian airports at a time when Indonesia’s travel sector is

experiencing double-digit growth on the back of rapidly growing consumer demand for

air travel.

 

Following the acquisition the number of distribution channels in Indonesia will increase

ten-fold to over 5000 authorised agents and more than 70 sales outlets. With this

enlarged agency footprint AirAsia will be able to reach even more customers while

complementing our internet based sales.

 

“The Batavia Air acquisition is a fantastic opportunity for AirAsia to accelerate our growth

plans in one of the most exciting aviation markets in Asia and further underlines our

belief in the growth potential of Indonesia’s aviation sector,” said Tan Sri Dr Tony

Fernandes, Group CEO and Director of AAB.

 

Founded in 2002, Batavia Air has earned its reputation as a leading domestic airline with

a strong safety track record throughout its operating history. Operating a fleet of 33

aircraft, Batavia has consistently held significant domestic market share through serving

41 domestic routes and has recently expanded its route network to international

destinations such as Singapore, Jeddah, Riyadh, Kuching, Dili and Guangzhou. A

certified flight school, simulator training centre and aircraft maintenance facilities also

support Batavia Air’s operations.

 

“I am proud to have built Batavia Air into a leading Indonesian airline from its humble

beginnings. Recent developments in the airline industry have made me recognise that

Batavia Air requires greater scale in order to compete and grow further, and I am so

pleased that AirAsia will now take Batavia Air to even greater heights,” said Bapak

Yudiawan Tansari, Batavia Air’s founder.

 

“We are impressed with Batavia Air’s achievements over the past 10 years and will

continue to build on Bapak Yudiawan’s legacy. We are excited with the potential

synergies this acquisition will bring to AirAsia Group and see this as a natural extension

of the success we have achieved with IAA . Indonesian air travelers can all look forward

to even more affordable fares soon,” remarked Tan’ Sri Dr Tony Fernandes.

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Just like in any Indonesian sinetron, hopefully it is just a false alarm.

 

Transportation Ministry air transportation director general Herry Bhakti Gumay said on Friday that the government might cancel the Batavia Air acquisition if it found that the majority share holders of the company were foreigners.

 

Indonesia AirAsia (IAA) announced Tuesday that it would soon acquire mid-service airline Batavia Air. PT Fersindo Nusaperkasa, owner of a 51 percent stake in IAA, signed in an agreement on Thursday to buy PT Metro Batavia, the owner of Batavia Air, for US$80 million.

 

Herry, however, said that those companies had yet to report their plan to the ministry.

 

“We will give Batavia, AirAsia Berhad, and Fersindo Nusaperkasa a month to report their plans to us. We are going to cancel the acquisition process if Indonesia is not the majority share holder,” Herry told reporters.

 

http://www.thejakartapost.com/news/2012/07/27/govt-may-cancel-batavia-acquisition.html

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Welcome to the real world, TF. Here in Malaysia u used your connections and power to terminate FY jets. Now in Indonesia i'm not surprised at all if incumbent Garuda and Lion are lobbying hard to the authority to cancel the deal. Bet you gotta fatten the cash envelope.

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I think that this was already expected.

 

That is why they announced that the deal was a Conditional Share Sale Agreement and is subject to regulatory approvals in Indonesia. So the agreement must meet with all Indonesian legal and civil aviation rules.

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Haha, TF, do u think this is Europe? Do u think it will be a level playing field?

Do u think the Indonesians will like a foreigner (especially a malaysian) coming in to buy their companies?

As mentioned above, you used your political power in Malaysia. In Indonesia, more palm greasing will be needed as you are not a local.

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I think that this was already expected.

 

That is why they announced that the deal was a Conditional Share Sale Agreement and is subject to regulatory approvals in Indonesia. So the agreement must meet with all Indonesian legal and civil aviation rules.

 

Those are standard terms in any M&A exercise anywhere.

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Gentleman. (And Ladies?)

 

Why so worked up on the possible complications of the AA/Batavia deal?

As you know, I am not a follower of fashion, all things the Red Ones do, we have flee for that, but,

one thing is for sure. TanSri TF is not stupid. TF has played the various governments and PM's of Malaysia

as a violin in the past and present and he has got and will have his way.

 

So, do not think for a second that he does not know the cost of doing business in Indonesia. He Knows.

Noise as we have seen from the Indonesian authorities was as expected and it would raise my eyebrows only if it was not publiced as such. So far for being excited by press releases.

 

Level playing field? TF does not need such a thing. The more bend or sloped as possible, that's what gives the edge in his opinion. At the poker tabel, you don't blink if you have been dealt with the wrong cards. There is no such thing. Everey card can be used to your advandage, Especially if the other players think they are winning. The dice has rolled and the outcome is casd.

 

@ flee, "nothing pesonal"

 

Regards

A.v.S.

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Arthur,

 

No probs - this is a forum and everyone has their opinions.

 

I am not so bothered whether the deal is "cancelled" by the authroities.

 

I am more interested to see how Batavia Air and AirAsia Indonesia work this out. To me, the challenges of doing that is rather more interesting than the politics behind it.

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On the fair value, QZ and Y6 are now 51% owned by a same Indonesian entity - Fersindo. If there is a dispute about Fersindo's Indonesian majority ownership status, which is now possibly jeopardising the Y6's buyout transaction, would the Indonesian government refutes QZ's licence to operate as well? That would be highly unlikely, wouldn't it?

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AirAsia acquisition of Batavia under investigation

 

 

The Business Competition Supervisory Commission (KPPU) is demanding full disclosure from Malaysia-based AirAsia Berhad and PT Fersindo Nusaperkasa on their plan to acquire a controlling stake in Metro Batavia, the owner of Batavia Air, in a transaction worth US$80 million.

 

The antimonopoly agency fears that the acquisition by the owners of Indonesia AirAsia (IAA) would create a business entity that would control more than 50 percent of the domestic market, which is in violation of the 1999 Law on unlawful business practices.

 

“We will annul the acquisition if it has the potential to stop other carriers from growing in the aviation industry,” KPPU head Tadjuddin Noer Said on Monday.

 

There is no official record on IAA’s number of passengers for domestic flights as the airline predominantly serves international routes with domestic interconnections. Batavia Air domestic route passengers reached 6.75 million, or equals to 11.25 percent of the domestic share.

 

Tadjuddin said the agency would look into the composition of ownership in the parent companies of IAA, in which 49 percent is controlled by AirAsia and 51 percent by Jakarta-based Fersindo.

 

He urged AirAsia and Fersindo to disclose the details of ownership within the companies in 30 days so as to allowing the agency to precisely calculate their control over the domestic market. “If they fail to notify the KPPU, they will be fined Rp 1 billion [$106,000] a day,” Tadjuddin said.

 

In an agreement signed last week, AirAsia and Fersindo would purchase 76 percent of Batavia some time this year while the remainder would be acquired in the second quarter of next year.

 

He further said that the KPPU wanted to determine whether the acquisition of Batavia was prompted by the possibility of the company going bankrupt or driven by AirAsia’s intention to expand its Indonesian presence ahead of ASEAN’s open sky policy in 2015.

 

“We are afraid that AirAsia Berhad is using Batavia Air as a vehicle to control our market ahead of the open sky policy. We can say the acquisition process is just camouflage, which would not be right,” Tadjuddin told reporters on Monday.

 

Tadjuddin said that such a practice would endanger business competition in the country’s aviation industry, which would kill off other domestic carriers.

 

“It would create an unhealthy environment in the business, such as in pricing or creating what is called a cartel,” he said.

 

Contacted separately, the Transportation Ministry’s air transportation director, Djoko Murjatmodjo, said the ministry had recently received a report from Batavia Air on its plan to sell their shares to the two companies.

 

However, he said the company had yet to further elaborate on how many of its shares would be sold to the Malaysian-based company and how many to its Indonesia unit, giving an unclear message to the government.

 

Similar to the KPPU, he said the ministry would look at the composition of shareholders of Fersindo as well as the acquisition process of Batavia Air.

 

“The KPPU has the right to annul the acquisition if Indonesia is not the majority shareholder,” Djoko said.

 

Previously, the ministry’s air transportation director general, Herry Bhakti Gumay, said the ministry would not hesitate to “revoke Batavia Air’s SIUAU [flight permit]” if the acquisition did not comply with Indonesian ownership rules.

 

The Batavia acquisition comes hot on the heels of Tiger Airway’s takeover of Mandala Air earlier this year.

 

Fersindo Nusaperkasa president director Dharmadi was not available for comment when contacted by The Jakarta Post.

 

Source: http://www.thejakartapost.com/news/2012/07/31/airasia-acquisition-batavia-under-investigation.html

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He further said that the KPPU wanted to determine whether the acquisition of Batavia was .... or driven by AirAsia’s intention to expand its Indonesian presence ahead of ASEAN’s open sky policy in 2015

You can just envisage already how wildly successful (or not :)) this upcoming ASEAN open sky thing is going to play out :p

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Yes, not very good news for consumers as govts are still so nationalistic!

 

Its just like how the Malaysian govt managed to protect Proton despite the implementation of AFTA.

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Yes, not very good news for consumers as govts are still so nationalistic!

 

Its just like how the Malaysian govt managed to protect Proton despite the implementation of AFTA.

Agreed. Just like the MAS-Air Asia share swap saga too. That was not a good news to consumers. Am just glad the share swap thingy is canceled :D

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Batavia acquisition to follow Indonesian rules: Fersindo

 

 

PT Fersindo Nusaperkasa, owner of a 51 percent stake in the low-cost carrier Indonesia AirAsia (IAA), was committed to complying with the rules when acquiring the domestic airline Batavia Air, a senior company official said on Wednesday.

 

“I have been working in this industry for 35 years. My team and I know the rules exactly and how to do business here and I guarantee that we will follow Indonesian rules,” Fersindo president director Dharmadi told The Jakarta Post.

 

According to Indonesian rules, foreign ownership of airlines is capped at 49 percent, leaving the remaining 51 percent of shares in the hands of Indonesians.

 

On Monday, the Business Competition Supervisory Commission (KPPU) said they would look into the composition of ownership in the parent companies of IAA, of which 49 percent is controlled by Malaysian-based AirAsia Berhad, to make sure that the Malaysian company did not control too much domestic market share.

 

“Fersindo is purely a domestic investor company. We would be disappointed if people doubted our domestic status,” Dharmadi said.

 

He said he had recently talked to the Transportation Ministry’s air transportation director general Herry Bhakti Gumay, explaining that the composition of Batavia Air would be similar to IAA, with 51 percent domestic shares and the remaining 49 percent foreign-owned.

 

“We do not have hundreds of aircraft like Lion Air or Garuda Indonesia,” he said.

 

The KPPU fears that the acquisition by the owners of IAA would create a business entity that would control more than 50 percent of the domestic market in violation of the 1999 law on unlawful business practices.

 

KPPU head Tadjuddin Noer Said said they would annul the acquisition if it had the potential to stop other carriers from growing in the aviation industry.

 

By operating 45 aircraft: 21 aircraft belonging to IAA and 24 to Batavia, they expect to carry 14 million passengers this year, accounting for 20 percent of the market.

 

According to Transportation Ministry data, the number of airline passengers in Indonesia reached 68.19 million last year; 60.04 million domestic passengers and 8.15 million international passengers.

 

IAA became the strongest international player in 2011 by carrying 3.38 million passengers, or 41.58 percent of the international market, while it carried only 181,200 domestic passengers, 3 percent of the domestic share. Ministry data showed that Batavia Air flew almost 7 million passengers last year; 6.75 million domestic and 292,280 international passengers, or 11.25 percent and 3.59 percent respectively of the 2011 market shares.

 

Source: http://www.thejakartapost.com/news/2012/08/02/batavia-acquisition-follow-indonesian-rules-fersindo.html

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