JAKARTA (TheInsiderStories) – Three telco operators, PT Telekomunikasi Indonesia Tbk (IDX: TLKM), PT Sarana Menara Nusantara Tbk (IDX: TOWR), and PT Tower Bersama Infrastructure Tbk (IDX: TBIG) interested in buying 4,000 towers belonging to PT Indosat Ooredoo Tbk (IDX: ISAT). As reported, the unit of Qatar Ooredoo Q.S.P.C., plans to releases its tower again for debt refinancing and other purposes.
The deputy managing director of Sarana Menara, Adam Gifari, told local media, the company’s business strategy is to grow organically and inorganically and always try to evaluate every opportunities. Then, Telkom’ official Pujo Pramono, the provider and its subsidiaries als are constantly exploring inorganic business development.
Then, CFO of Tower Bersama, Helmy Yusman Santoso, admitted that the company is interested in participating in the bidding process by the cellular provider. The director & COO of the seller, Vikram Sinha, said the divestment process still in the initial assessment stages and not yet have not decided the valuation of the tower.
For an illustration, the company has sold 3,100 of its towers to PT Dayamitra Telekomunikasi (Mitratel) and PT Protelindo, a subsidiary of Sarana Menara for Rp 6.39 trillion (US$453.19 million). After the transaction, Moody’s Investors Service has affirmed the Baa3 issuer rating of lndosat and has changed the outlook to stable from negative.
“The change in outlook to stable from negative reflects the improvement in Indosat Ooredoo’ operational metrics, as well as our expectation that the company will maintain its market position while keeping its financial metrics broadly stable over the next 12 – 18 months,” says Stephanie Cheong, the analyst from Moody’s in her latest report.
Indosat‘ rating continues to incorporate a one-notch uplift based on Moody’s expectation of high likelihood of support from its parent, in times of need. Despite intense competition in Indonesia’s mobile sector, the provider’ operating and financial profile has improved materially over past several quarters owing to increasing data revenues and its enhanced network.
Its recovering average revenue per user (ARPU) and stable subscriber base have supported revenue growth of 9.2 percent in the first nine months of 2020, outpacing the industry growth which was flat for the same period. The ARPU increased 14 percent to Rp31,700 compared to a year ago, while its subscriber base up 3 percent to 60.4 million over the same period.
Indosat also successfully monetized its non-core tower assets, which has sustained its ability to fund its ongoing large capex programme. As a result, the operator deleveraged faster than Moody’s expectations, with its debt to EBITDA improving to 2.5x at Sept. 30, 2020 from a peak of 3.7x at the end of 2018.
Moody’s expects the pace of the issuer revenue growth to slow over the next 12-18 months given increased competition and a weak economic backdrop. Still, strong demand for data and the company’ improved network quality and reach following its accelerated investments in 4G will support modest revenue growth of around 5 percent until next year.
In addition, she expects Indosat to maintain high capital expenditure intensity, keeping an adjusted spending (including leases) elevated at 42 – 46 percent of revenues over the next 12-18 months, as the company continues to invest in enhancing its 4G networks and expansion outside of Java.
Its large spending plan will continue to drive negative free cash flow over the next 12 – 18 months, Moody’s expects a portion of that will be funded from its current high cash balance, helping to keep leverage manageable around 2.6 – 2.8 over the next 12 – 18 months, which is within the Baa3 rating thresholds, although at the weaker end.
Indosat‘ liquidity position is good. Its cash and cash equivalents of Rp4.0 trillion as of September and availability under its committed revolver facilities of Rp5.1 billion, combined with its projected operating cash flow of around Rp6.1 trillion over the next 12 months, will be sufficient to cover its debt maturities of Rp3.4 trillion and projected capital spending of Rp10.0 trillion.
Furthermore, the agency expect the company will refinance its maturing debt with longer-dated rupiah bonds and bank loans. Its demonstrated strong access to the domestic bank and bond markets, its refinancing risk is manageable.
Indosat is an integrated telecommunications network and services provider in Indonesia. The company is the second-largest cellular operator in the country in terms of revenue and active subscribers. It also provides multi-media, data communications, and internet services. The company is 65% owned by Ooredoo.
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