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The Surge in Towerco Transactions Continues Unchecked

The race for increased market share within telecoms tower industry in Indonesia is continuing in 2022.

In this latest Wellington Snapshot, we provide an update to our prior reports on this dynamic sector, as the pace of change accelerates.

Indonesia has seen an increasing flow of tower deals over the past eighteen months, and more may follow as international investor groups – ranging from private equity firms to pension funds - continue to scrutinize the market for attractive investment opportunities.

This trend was illustrated in May 2022 with the move by Macquarie Asset Management (MAM) - in partnership with the Public Sector Pension Investment Board (PSP Investments) - to pay USD 610 m. in order to acquire a significant minority stake in Bersama Digital Infrastructure Asia Pte. Ltd., an entity holding also a 62.4% interest in Tower Bersama (PT Tower Bersama Infrastructure Tbk), an independent tower company in Indonesia with over 20,00 towers.

The sheer size of Indonesia – based both on population and landmass – is a major attraction for these investors, particularly in view of the ‘demographic dividend’ that is anticipated for 2030. And Indonesia offers the largest – and fastest growing - digital economy in the ASEAN region.

In addition the tower deals undertaken during the period spanning the COVID-19 pandemic indicate that asset valuations in Indonesia are lower than those in the peer economies such as Vietnam, Thailand and Malaysia.

In the quest for domestic market dominance, TowerCo PT Dayamitra Telekomunikasi Tbk. (aka Mitratel – a subsidiary of PT Telkom Indonesia, the nation's leading full service Telco), plans to use c. 50% of the funds from the USD 1.3 billion IPO in November 2021 for new acquisitions.

This mirrors the acquisition by Sarana Menara Nusantara (Protelindo) of 6,800 towers from Solusi Tunas Pratama for an industry-high cost of USD 1.17 billion in the same month.

At a strategic level, the TowerCos are looking to expand their sphere of operations into adjacent market categories - in order to protect and enhance their existing profitability performance as well as acquiring new service delivery capabilities.

Increasing local network densification – a feature of the imminent rollout of 5G technology – will require TowerCos to invest in dedicated optical fiber links to critical locations. In turn this will support the emerging demand for edge computing applications and the provision of private network platforms arising from both public and private sector accounts.

In addition, the explosive growth of mobile data demand (which is increasing at c. 40% per annum) will also prompt the TowerCos to form partnerships with in-country data center providers in order to deliver enterprise-grade data privacy and security solutions.

The TowerCo sector in Indonesia is clearly poised to enter the next phase of market evolution. So if you would like to open a dialogue on any aspect of the industry, please contact us.

WP - Tower Sector Snapshot
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