Early this year, Protelindo officially announced the acquisition of 100 percent shares in PT Komet Infra Nusantara (KIN), adding 1,400 towers and more than 2,000 tenants to its portfolio. The company keeps expanding its dominance in Indonesia, a market that has experienced a lot of organic growth and dynamism over the last few months.
Protelindo’s CFO Steve Weiss comments on the drivers behind the acquisition and discusses the company’s strategy and future expansion plans, where fiber and new technologies are going to play a critical role.
TowerXchange: “First, congratulations on the KIN deal. We appreciate it is quite early but what details can you provide on the acquisition?”
Steve Weiss, CFO, Protelindo: “Providence and META, owners of KIN, had done a strategic review and decided to exit the tower business. In addition, Providence decided to refocus investments outside of Indonesia. KIN is the fourth largest independent towerco in the country and has an attractive mixture of tenancies as well as good tenancy ratios for a smaller towerco.”
“We are acquiring about 1,400 towers and more than 2,000 tenants including macro and micro towers as well as fiber infrastructure.”
“We are financing the operation through a combination of internal cash and debt, leveraging off PT Sarana Menara Nusantara’s strong balance and investment grade rating to raise competitively priced debt.
TowerXchange: “What were the drivers behind this decision and how do you foresee the integration of portfolios between Protelindo and KIN?”
Weiss: “We have a strategy of “Build, Buy, and Return,” meaning we will take advantage of organic growth when it happens, will pursue acquisition opportunities when they present themselves and will return money to shareholders in excess of the growth opportunities. We launched a dividend in 2017, increased it substantially this year and recently announced a share buyback program.
For the KIN deal in particular, their towers are complementary to our existing portfolio and we do not see much overlap. They also have almost 300km of fiber infrastructure on six islands that will improve our FTTT capabilities.”
TowerXchange: “Three years ago Protelindo also bought iForte. How has this acquisition affected your competitiveness and how it has contributed to Protelindo’s expansion?”
Weiss: “We believe there is a big explosion in data use that is just beginning and we have been pleasantly surprised by how aggressively operators are expanding their 4G footprints. Fibre is necessary to meet this increase in data usage. When we bought iForte the company had 750 km of fiber and a run-rate revenue of about IDR120bn. By the end of this year, we expect iForte to have nearly 8000 km of fiber and a run-rate revenue of nearly IDR600bn. It has ended up being a much bigger growth story than we envisaged when we bought it.
Thanks to the acquisition of iForte, and now of KIN, we believe we are able to offer a more comprehensive infrastructure solution, compared to other towercos in Indonesia.”
TowerXchange: “Protelindo is a leading consolidator in the Indonesian market. How do you foresee the shape of the towerco landscape to be in a few years from now? Is it going to be much different from the current one and what it was expected?”
Weiss: “We have bought two companies and an operator portfolio in the last three years. We expect continued consolidation in the sector and believe we have the financial wherewithal to participate. With interest rates rising and the IDR weakening, some of the smaller players may begin to feel pressure—this could lead to more discussions but not necessarily more deals if there is a mismatch on expectations between buyers and sellers.”
TowerXchange: “Indonesia has been one of the most active markets in the last couple of years, experiencing a significant organic growth across towercos. What is driving this dynamism and what expansion opportunities are you exploring?”
Weiss: “Organic growth in the tower sector was slow in 2015 and 2016, due to regulatory issues faced by the telecom operators. However, starting in 2017, growth has been very solid. We expect growth to continue as operators address the data explosion and increased smartphone penetration and XL, Hutch and Indosat start investing outside Java to challenge Telkomsel’s quasi-monopoly there.”
Protelindo will be speaking at this year’s fifth annual TowerXchange Meetup Asia 2018, on December 4-5 at Marina Bay Sands in Singapore. This year we are offering a GBP250 super early bird discount if you book by Friday, September 14. Please quote TXAS18INSTWRS when registering. For more information and to book please visit https://www.towerxchange.com/meetup/meetup-asia/.
August 21, 2018
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