The telecoms tower industry in Indonesia continues to evolve at pace, evidenced by these recent game-changing events:
The acquisition of PT Solusi Tunas Pratama (STP) by rival group PT Professional Telekomunikasi Indonesia (Protelindo) in a ‘sale and leaseback’ transaction valued at IDR 16.7 trillion (USD 1.17 Bn.)
The announcement of a planned IPO for PT Dayamitra Telekomunikasi (Mitratel), facilitated by the parent company Telkom Group and scheduled for 4Q 2021. It is anticipated to be the second largest such offering in Indonesia history, and is expected to raise up to IDR 20.4 trillion (USD 1.3 Bn.)
In this latest Wellington Perspective, we examine the impact of this latest activity on the structure and trajectory of the Indonesian tower sector going forward with an emphasis on the ‘Top 3’ forces for change:
1. Competitive intensity is increasing, as a streamlined 3-player market structure emerges.
The battle or the #1 spot in the sector is underway, with the contenders being independently-held Protelindo, PT Telkom-backed Mitratel and publicly-listed Tower Bersama.
EdgePoint Infrastructure - a newcomer backed by the US-based DigitalBridge Group - is also pursuing an aggressive tower acquisition strategy in Indonesia.
This industry structure mirrors the consolidation occurring within the mobile network operator (MNO) category in Indonesia, whereby a 3-player market is also the likely end game.
For more information on the competitive dynamics between the MNOs in Indonesia please see this prior Wellington Perspective.
2. Tower asset prices are escalating over time, as the race for market domination plays out in Indonesia.
A total of ten large scale transactions have been executed in the period from 2019 to 3Q 2021, with the average acquisition cost per tower reaching IDR 1.93 Bn. (USD 135,000).
The outcome from the recent acquisition of PT Solusi Tunas Pratama (STP) by Protelindo set a new all-time high of IDR 2.62 Bn (USD 183,000) per tower, representing an uplift of 36% in valuation over the average three-year yield.
These rising asset values - coupled with the sustainability of EBITDA margin performance across the sector (currently averaging 79%) - are attracting increasing interest from both regional and international investors alike.
3. TowerCos are migrating to the Digital Infrastructure Provider (‘InfraCo’) model, by extending the portfolio of ‘turnkey’ services offered to their traditional MNO tenant base.
Among the new client propositions being developed are:
Energy generation and supply to existing mobile networks - delivered via Energy Services Company (ESCO) partnerships and Power-as-a-Service (PaaS) platforms
Managed network services - the integration of existing tower assets and ‘last mile’ connectivity utilising fiber links (FTTx) and Distributed Antennae Systems (DAS)
Support for tailored ‘Edge Computing’ solutions in the enterprise sector - on behalf of local MNOs and global cloud ‘hyperscalers’, such as Amazon, Google and Microsoft
Provisioning of high-precision, ‘Internet of Things’ (IoT/IoE) applications across vertical sectors such as agriculture, forestry, mining, environmental services and wide-area surveying
It is clear that the telecoms tower sector in Indonesia is poised for the next phase of maturation, as the trio of ‘powerhouse’ operators - Protelindo, Mitratel and Tower Bersama - each seek to create new, value-creating roles for themselves and vie for an outright leadership position in the market.
For a deeper-dive into the sector - featuring both the current state of the market and the likely dynamics going forward - please refer to this prior Wellington Perspective
Meanwhile if you would like to open a dialogue on any aspect of the tower industry in Indonesia, please contact us.