Indonesia’s Mitratel takes bold approach in acquiring towers divested by telcos

[JAKARTA] Indonesia’s largest telecom tower operator Mitratel has been on an aggressive push in acquiring towers of late, as more cellular carriers shed their assets to focus on their core business.

The Telkom Indonesia subsidiary recently bought 803 towers worth 1.75 trillion rupiah (S$151 million) from local telco Gametraco Tunggal, with the acquisition including 1,327 tenants. About 70 per cent of these towers are located outside Java island.

Mitratel – which raised 18.7 trillion rupiah at its November 2021 initial public offering on the Indonesian Stock Exchange – had said at the time that it would use half of the proceeds to acquire new towers and businesses. Earlier this year in February, the GIC-backed company entered into a sale-and-leaseback agreement with Indonesia’s Indosat Ooredoo Hutchison for 1,630 telecom sites. The deal, which included 997 towers, was worth 1.79 trillion rupiah. In September, Mitratel purchased 54 towers from XL Axiata for 37 billion rupiah.

In all, Mitratel currently owns about 38,000 towers across Indonesia, solidifying its position as the largest tower company in South-east Asia.

Mitratel’s president-director and group CEO Theodorus Ardi Hartoko said that the latest acquisition of 803 towers is in line with the company’s mission to provide more Internet connectivity outside the country’s most populated island, Java.

Other than towers, Mitratel has also been actively expanding its fibre network, having acquired 967 km of optical fibre from Power Telecom for 85 billion rupiah, in a deal announced on Dec 1.

This takes Mitratel’s total billable length of optical fibre to more than 30,000 km, spanning from Jakarta to Central Java.

“We believe that, in the future, telecom operators will require more optical fibre to meet the demand for high-speed Internet. We predict that over the next 10 years, this business will be able to support Mitratel’s operations,” said Hartoko.

Mitratel said in a statement that the tower and fibre deals were paid for with internal funds. The company had budgeted a capital expenditure of 7 trillion rupiah for 2023, about 58 per cent of which had been absorbed by the end of September.

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All the towers acquired in 2023 will contribute up to 190 billion rupiah a year to Mitratel’s total revenue. In all, the company expects to see revenue increase by 11 per cent year on year, said chief investment officer Hendra Purnama.

As at September, Mitratel booked 6.3 trillion rupiah in revenue, 11.9 per cent higher compared with the same nine-month period last year. Its net income is up by 16 per cent to 1.43 trillion rupiah.

The earnings before interest, taxes, depreciation and amortisation (Ebitda) margin grew to 80.6 per cent, driven by an increase in the tenant ratio to 1.5 times.

Hendra added that Mitratel has allocated 6.5 trillion rupiah for capital expenditure in 2024 to support its further expansion through more acquisitions and the build-and-lease tower strategy.

Indonesia has been one of the most prolific tower markets in terms of growth and mergers-and-acquisition activity in Asia. Analysts predict that more telecom operators in Indonesia and elsewhere will continue to divest their towers and fibre network to reduce their construction and maintenance costs.

Christofer Kojongian, an equity research analyst at Sucor Sekuritas, noted that many telecoms players in Indonesia are looking to expand their market share outside of Java as demand for Internet connectivity grows elsewhere in the archipelago.

He said that rising public demand for Internet and mobile phone services in Indonesia, coupled with the government’s liberalisation of its foreign direct investment rules, have opened up many opportunities for phone tower construction in the country.

“Among its competitors, Mitratel is the most well-prepared to acquire towers and fibre optics from telecom operators. It has a robust cash flow and the capacity to attract external funding,” he added. Mitratel’s debt-to-equity ratio and net debt to Ebitda ratio has remained relatively low at 42 per cent and 1.4 times respectively.