JAKARTA (TheInsiderStories) – Telecommunication provider, PT Tower Bersama Infrastructure Tbk (IDX: TBIG) allocated Rp4 trillion (US$277.78 million) to acquire other telecommunication towers in this year, said the management yesterday. The funds part of this year’ capital expenditure Rp6 trillion (US$416.67 million).
This year, the tower managers plans to adds 7,400 towers, consisting of new towers and collocations and to adds 3,000 leases. Recently, the issuer has purchased 3,000 towers belonging to PT Inti Bangun Sejahtera Tbk (IDX: IBST) with valued of Rp3.97 trillion.
The deal is expected to be completed around the end of the second quarter of 2021. Now, the tower manager has 31,703 tenants and 16,215 telecommunication sites. Last year, Tower Bersama through its Singapore’ unit, TBG Global Pte. Ltd., has issuer global bond worth of $300 million will mature in 2026 and interest rate 2.75 percent.
The notes get BBB- rating from Fitch. At the same day, the subsidiaries also received a loan facility worth of $275 million from a consortium of banks. This loan bears an interest margin of Libor+ 1.75 percent per annum for foreign currency and Libor+ 1.85 percent per year for the domestic loans also due in June 2026.
Now, Tower Bersama in the process to offer local bond up to Rp2.91 trillion to pay debt. Fitch Ratings has assigned an AA+ for the notes. The bond issuances will add to the list of fundraising run by the company since last year for debt refinancing.
Finance director, Helmy Yusman Santoso, has said the plan to accelerate the repayment has been carried out on Feb. 22, 2021. After the debt repayment, total gross loans of the company and its units will become $505.4 million, include lease liabilities, usage right assets, 2017 loans, 2018 loans, and 2019 loans.
Fitch assessed that Tower Bersama has sufficient funding space to complete the acquisition planned of 3,000 towers belonging to Inti Bangun Sejahtera. The agency also estimated that the ratio of funds from operations to the net debt will remain five times in 2020 and 2021. The company’ acquisition strategy is estimated to increase revenue of $41 million and EBITDA of $34 million per year.
The tower portfolios will also increases to 19,215 towers.Going forward, the agency estimated that the telecommunications tower industry will mutually consolidate and be led by several big players, one of which is the unit of PT Saratoga Investama Sedaya Tbk (IDX: SRTG). Santoso optimistic that it can print double-digit growth in revenues, EBITDA and net profit in this year.
In the first nine month 2020, Tower Bersama posted a net profit of Rp747.47 billion, up 22.14 percent from the same period last year amounting to Rp611.96 billion. The revenues also rose 13.54 percent to Rp3.94 trillion compared to last year of Rp3.47 trillion.
Based on Ciptadana Sekuritas reports, Indonesia is still in early stage of data adoption. With low data usage per subscriber, low smartphone penetration and relatively young population, the consumption still has long runways. They estimate 40 percent data traffic in 2019 – 2022.
Large tower companies set to benefit from the aforementioned telcos’ network expansion, with top three TOWR, TBIG, and PT Dayamitra Telekomunikasi (Mitratel) owned 55 percent of tower population. Compare to Mitratel, Sarana Menara and Tower Bersama have the advantage as they operate as independent tower operators.
“We believe TBIG and TOWR have achieved the required scale to operate efficiently and consistently grabbing orders from telcos. They are the only tower companies who are consistently making profit,” wrote the report.
In addition, tower managers under over coverage have pocketed size-able contracted revenues which are sufficient to cover revenue for the next five to six years. For Tower Bersama, the amount rose from 2019 position of Rp51.0 trillion to Rp53.1 trillion in first half of 2020.
The company has entered a master agreement with H3I to automatically renew expiring lease contracts until 2022 to mitigate consolidation risks in the industry, an issue that has been prevalent for a long time. As in the case of PT XL Axiata Tbk (IDX: EXCL) and Axis merger, despite any combination, tower-lease contracts are irrevocable and will run until maturity.
Consequently, Tower Bersama’ rental rate will face some pressures until 2022 although its tenancy growth and strong non-tower business revenue growth could cover for lower rental rate risks. On the other hand, the operator sits on Rp26.3 trillion revenue, equivalent to five years of projected revenue. Both tower providers are now consistently returning cash to shareholders.
“We believe tower companies are in the most critical growth phase for the next 1 – 2 years. As such we are projecting 9.5/10.2 percent of revenue/EBITDA CAGR for the industry in 2019 – 2022,” concluded by research company.
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