Mixed outlook for Indonesia’s tower firms - Mobile World Live

Mixed outlook for Indonesia’s tower firms

01 DEC 2016

Indonesia-based tower operators face mixed fortunes despite near double-digit growth forecast in mobile revenue over the next two years, as the largest player benefits from strong capex growth at Telkomsel.

Tower Bersama Infrastructure’s (TBI) revenue is expected to increase 7-10 per cent per year, driven by the aggressive rollout of 4G networks in Indonesia. TBI is likely to benefit from any accelerated capex expansion by its largest tower tenant Telkomsel, Fitch Rating said.

The agency expects rival Solusi Tunas Pratama (STP) to grow at a slower pace over the next two years, as its largest tenant XL Axiata will likely take steps to cut costs in the face of continued slow revenue growth. STP’s revenue is forecast to increase at mid-single-digit rates in 2017 and 2018.

STP is the country’s third largest tower firm, with fewer than 7,000 towers, and faces slower tower growth relative to Indonesia’s top-two tower companies, TBI and Profesional Telekomunikasi Indonesia (Protelindo).

The country’s mobile sector revenue is expected  to grow 8-9 per cent
per year over the next two years, on the back of 15-20 per cent growth in data revenue, because of the strong demand for 3G/4G services and the proliferation of affordable smartphones.

Fitch expects both firms’ operating EBITDA margins to be relatively stable this year and next at 82-84 per cent. It predicts that TBI will add about 1,000 towers and 2,000 tenants from 2016 to 2018, while STP will add 300 to 350 towers and about 600 tenancies a year.

Investment-grade telcos accounted for 83 per cent of TBI’s revenue in the first nine months of the year, compared with 65 per cent for STP and 49 per cent for Protelindo.

Fitch noted that TBI has a larger exposure to Telkomsel and Telekom Indonesia, at 45 per cent of its revenue, compared with Protelindo’s 20 per cent and STP’s 19 per cent.

Fitch does not expect STP to undertake large debt-funded acquisitions. Its strategy to monetise its fibre-optic backbone network (2,600km as at end-September) through long-term lease contracts could provide revenue growth and diversification. For the first three quarters, the tower business accounted for 90 per cent of revenue and the fibre business 10 per cent.

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Joseph Waring

Joseph Waring joins Mobile World Live as the Asia editor for its new Asia channel. Before joining the GSMA, Joseph was group editor for Telecom Asia for more than ten years. In addition to writing features, news and blogs, he...

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