Mitratel: IPO & Telco Tower Expansions

State-Owned Enterprise (SOE) Minister Erick Thohir gave a leak regarding the plan to offer shares to the public or initial public offering (IPO) of several SOEs and their subsidiaries. Without elaborating on the company's name, he said that SOEs and their subsidiaries in some sectors were encouraged to IPO, including telecommunications, hospitals, energy, and logistics. He gave an IPO signal from a subsidiary of PT Telkom Indonesia (Persero) Tbk from the telecommunications sector, which is engaged in the data center and telecommunications tower business. The consideration is that Telkom Indonesia can no longer depend on the telephone business. "Telkom's valuation is still good, I think, but it has to be better, especially with the improvement of the existing business model," he said on Friday (7/30). On the other hand, he also encouraged the sub-holding PT Pertamina (Persero), engaged in the marine logistics transportation business (marine logistics), for the IPO. Meanwhile, from the energy sector, he encourages the holding of geothermal or geothermal SOEs formed later on the floor in the capital market. As is known, this geothermal BUMN holding is planned to consist of a subsidiary of PLN, PT PLN Gas & Geothermal, and PT Indonesia Power (IP) which will be managed under PT Pertamina Geothermal Energi (Persero), which is a subsidiary of Pertamina. Erick said that the holding plan had already received the green light from Finance Minister Sri Mulyani.

PT Dayamitra Telekomunikasi (Mitratel) which operated in the telecommunications tower rental business, is the company with the largest number of telecommunications towers in Indonesia. The subsidiary of PT Telkom Indonesia Tbk (TLKM) is certain to be listed on the stock exchange this November. The Ministry of State-Owned Enterprises (SOE) said that Mitratel's IPO plan is targeted to raise funds of US$1 billion to US$1.4 billion or equivalent to Rp14.3 trillion to Rp20 trillion (assuming an exchange rate of Rp14,300/US$) by releasing 25% of Mitratel's shares to the public. Heretofore, there were already several telecommunication tower companies that had IPOs on the Indonesia Stock Exchange, including PT Tower Bersama Infrastructure Tbk (TBIG) and PT Sarana Menara Nusantara Tbk (TOWR). From a technical standpoint, the shares in the telecoms tower sector are in a downturn phase. This can be seen from the share prices of TBIG and TOWR. Based on RTI data, in the last month until Tuesday (10/19), TBIG's share price fell 5.28% and TOWR fell 10.61%. However, with the inclusion of Mitratel, this will be a euphoric momentum for tower sector shares to experience an increase short term. As for now, Mitratel's tenancy ratio is still the lowest, at 1.57 times compared to TBIG and TOWR which has a tenancy ratio of 1.89 times as of the second quarter of 2021. Even so, Mitratel's IPO is expected to be a success, given that the Investment Management Agency (LPI), namely the Indonesia Investment Authority (INA), will be involved in the IPO process to market Mitratel's IPO shares to foreign investors, including several sovereign wealth funds (SWF) from around the world.

After eight years of absence, the government's dream of bringing State-Owned Enterprises to the stock exchange has finally come true. A PT Telkom Indonesia Tbk subsidiary in the tower business sector, PT Dayamitra Telekomunikasi (Mitratel), is rumored to be going public at the end of November or early December. Mitratel's initial share offering process will likely start in November, while the initial public offering (IPO) is planned for late November or early December this year. Some time ago, Mitratel added assets in the form of 10,050 tower units from another Telkom subsidiary, PT Telekomunikasi Selular (Telkomsel). The first transfer was carried out on October 14, 2020, as many as 6,050 units. Then, on August 31, 2021, as many as 4,000 units. Based on experience in various countries, the valuation of this tower can increase tens of times. The multiple high valuations are due to the sale and leaseback scheme in the telecommunications tower business. This means that towers are purchased, then apart from being used alone, they are also leased back, so there is a potential for an increase. In Indonesia, the telecommunication tower valuation business is relatively low compared to other countries. The reason, the tower is used exclusively for internal use. Based on the latest statements from telecommunication companies and tower leasing companies and analyzing recent tower transactions in Indonesia, Citi estimates the tower rental rate to be around Rp11 billion. Despite the decrease in rental rates, Citi assesses that the rental rate for Mitratel towers will be high because previously, it was only used for Telkomsel's needs, while in the future, it will be used by other operators. All in all, With the opening of Telkomsel tower rentals, Citi assesses that more and more towers are competing for collocation. Note that with the combined transfer of 10,500 towers from Telkomsel to Mitratel, shareable tower supply has increased by 13% in the past year.

Sources

CNBC Indonesia

CNN Indonesia

Kompas