Indosat's New CEO Appointment Triggers Question
PT Indosat Ooredo Tbk (IDX: ISAT), plans to raise as much as US$300 million by selling 3,000 towers - Photo by Indosat Ooredoo

JAKARTA (TheInsiderStories) – Indonesia’ third-largest mobile operator, PT Indosat Ooredo Tbk (IDX: ISAT), plans to raise as much as US$300 million to fund a sharp increase in capital expenditure (capex) by selling 3,000 towers, local media reported in Jakarta on Wednesday (07/10).

Turina Farouk, Indosat Ooredoo’ head of corporate communications, admitted that the company is currently seeking funding to conduct business. One of the funding options being studied is tower sales. However, he said, currently the option is being reviewed internally, and officially announced to the public if it has become a decision.

The company sets the average price for one tower unit in the range of $100 to $200 thousand. This price varies depending on the tower location and the rental period, as well as other aspects.

The operator significantly increased its capex for 2019 to 2021 to $2.2 billion, as it moves to expand fourth generation (4G) coverage and catch-up to rivals after years of under-investment. The company plans to invest in the densification of its 4G networks across the country, adding an additional 18,000 4G base stations by the end of the year.

Indosat Oeredoo is working with New York, United States-based JP Morgan Chase & Co as an adviser for the sale and has already been contacted by potential local and overseas buyers, the report said. If a potential buyer can be found, Indosat could eventually end up leasing back some of those towers at a future date.

Indosat has over 97 million subscribers across Indonesia and Southeast Asia, making it the country’s third-biggest mobile network operator by subscribers. The company also offers fixed-line broadband services to its customers.

In February 2012, the operator sold 2,500 towers to Tower Bersama Infrastructure for $519 million and then leased back capacity from the company, which is one of two major independent tower operators in Indonesia.

The sales value of this tower is known to reach $ 519 million. The company is currently renting back 2,500 towers for a 10-year period with a monthly rental price of $1,300 per tower slot.

Indosat Ooredoo was hit hard by a government SIM registration push started in May 2018, with its mobile connections dropping from nearly 110 million in Q4 2017 to 57.5 million in the last quarter of 2018, data from GSMA Intelligence showed. It’s market share dropped from 23 percent to 18 percent over that period.

Its revenue in 2018 fell 23 percent year-on-year to Rp23.1 trillion ($1,64 million), due mainly to a 26 percent decline in its mobile business. While, in the first quarter of 2019, Indosat Ooredoo posted operating revenues of Rp6.05 trillion and EBITDA of Rp2.07 trillion. The company recorded market capitalization currently reaching Rp14.4 trillion.

On March, the international rating agency, Moody’s Investors Service has revised the outlook on company’ ratings to negative from stable. At the same time, Moody’s has affirmed the company’s Baa3 issuer rating.

The negative outlook reflects a weakening in Indosat’s financial metrics driven by the company’s plans for accelerated 4G capex amid an intensely competitive operating environment for the Indonesian mobile sector, says Nidhi Dhruv, a Moody’s Vice President, and Senior Analyst.

US$1=Rp14.200

Written by Lexy Nantu, Email: lexy@theinsiderstories.com