Two telco tower giants, PT Sarana Menara Nusantara Tbk (IDX: TOWR) and PT Tower Bersama Infrastructure Tbk (IDX: TBIG) prepared a total capital expenditure Rp5.5 trillion (US$392.86 million) in this year - Photo: Special

JAKARTA (TheInsiderStories) – Two telco tower giants, PT Sarana Menara Nusantara Tbk (IDX: TOWR) and PT Tower Bersama Infrastructure Tbk (IDX: TBIG) prepared a total capital expenditure Rp5.5 trillion (US$392.86 million) in this year. In detail, the unit of Djarum Group to spend Rp3.5 trillion and the subsidiary of PT Saratoga Investama Sedaya Tbk (IDX: SRTG) amounted to Rp2 trillion.

Deputy managing director of TOWR, Adam Gifari, explained beside expanding the tower businesses, his company also aimed to develop fiber and connectivity businesses. The unit of Djarum Group is also preparing un-organic expansion by buying asset of other companies.

With these expansion, Sarana Menara sees the revenue could grow 8 percent compared to last year’ realization. While, Tower Bersama‘ finance director, Helmy Yusman, said the operator targeting to adds 3,000 leases in this year, consisting of new towers and collocations.

Recently, the issuer has purchased 3,000 towers belonging to PT Inti Bangun Sejahtera Tbk (IDX: IBST) with valued $280 million. The transaction is expected to be completed around the end of the first quarter of 2021. Now, the tower manager has 31,703 tenants and 16,215 telecommunication sites.

Last year, the provider has set the revenues growth around 14 – 15 percent compared to 2019 or around Rp7.4 trillion. During the first nine months of 2020, the net income of Tower Bersama jumped 19.3 percent in annual basis, from Rp4.65 trillion to Rp5.55 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 Ciptadana.

US$1: Rp14,000

Written by Editorial Staff, Email: theinsiderstories@gmail.com