The telecoms tower industry In Indonesia is undergoing significant changes, which in turn have implications for investment groups that are contemplating an entry into the market.
In volume terms, the market will see a doubling of the nationwide tower base over the course of the next 4 to 5 years (from c. 100,000 tower locations today growing to c. 200,000 locations by 2026).
The demand for this extra tower capacity will be largely driven by the needs of the mobile network operators (MNOs) in Indonesia, with the primary growth drivers being as follows:
The continuing escalation of mobile data payloads (currently increasing at 60% per year in Indonesia), arising from video streaming demand and new working practices - WFH/LFH
The accelerating rollout of 5G networks and the associated cell densification in urban environments (Telkomsel and Indosat Ooredoo have each launched 5G service in 2021)
The implementation of IoT services for the enterprise sector across a variety of industries (manufacturing, logistics and mining are seen as the likely early adopters of IoT capabilities)
The imperative for MNOs to sustain an asset-light and operationally-efficient business model will also mean - over time - that ‘TowerCos’ will become ‘InfraCos’ by extending the portfolio of services they offer to their traditional tenant base.
Among the new offerings emerging are:
Primary/back-up 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 utilizing fiber links (FTTx) and Distributed Antennae Systems (DAS). Note: Protelindo is the exemplar, evidenced by the acquisition of iForte Solusi Infotek (iForte).
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
From an investor perspective Wellington expects that new opportunities in Indonesia will arise - comprising exits, mergers, acquisitions and partnerships - as a consequence of these market dynamics, and in line with the coming maturation of the industry over the next 3 to 5 years.
Moreover, we anticipate that Specialist Infrastructure Funds will focus increasingly on the Indonesian tower market - particularly in view of the streamlining of the regulations governing foreign investment currently being instituted by the Omnibus Law.
In this Wellington Perspective, we explore these profound and rapidly-evolving industry trends, as well as providing a ‘deep-dive’ profile of six of the incumbent tower providers in Indonesia - both domestic and international.
If you would like to know more, please contact us