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Analysis: Mitratel solidifies top market share position by crossing competitor lines
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Two officers perform maintenance of telecommunications towers at PT Tower Bersama Infrastructure, Tbk (TBIG) in the Cikampek area - West Java, Friday (02/08). Specifically in the TBIG homecoming route, TBIG operates 368 sites, while in the southern homecoming route TBIG operates 457 sites. TBIG prepares a team that is ready 24 hours 7 days for possible risks. (JP/Nurhayati)
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T Dayamitra Telekomunikasi or Mitratel (MTEL) further cements its position as the biggest tower solutions provider in Indonesia as it finalizes a deal with Indosat Ooredoo Hutshison (ISAT) to purchase 997 of their towers to add to the 34,800 towers they owned as per September 2022. Prior to this deal, most of their towers were acquired from Telkomsel, a sister company to Mitratel and competitor to ISAT.
Much like their agreements last year with Telkomsel, the deal between Mitratel and Indosat uses a “sales and lease back” scheme. Mitratel will pay ISAT Rp 1.64 trillion (US$109 million) for the 997 towers and lease 983 of them back to ISAT for the upcoming 10 years at a price of Rp 138.6 billion a year.
One of the main benefits of transferring ownership of a tower to a solutions provider like Mitratel, is that a single tower can be leased to multiple different operators, even if they were competitors. However, the tenancy ratios of Mitratel’s towers are still behind their tower solutions peers. While the average tenancy ratio of other tower owners is around 1.87x, the tenancy ratio for Mitratel towers is still around 1.44x.
On the other hand, to differentiate itself from its peers, Mitratel has been expanding its business to include infrastructure assets other than towers. Just November last year, Mitratel signed a cooperation agreement with PT Telkom Satelit Indonesia (Telkomsat) to provide satellite backhaul services. This cooperation adds satellite connections to their network portfolio, allowing them to provide solutions to operators struggling with geographical constraints where tower connections and cable coverage is limited.
Another part of Mitratel’s asset portfolio also includes fiber optic cables, which have a total of over 15,000 kilometers in length connected to towers by the end of 2022. Fiber optics and edge computing, another part of Mitratel’s asset portfolio, will become important infrastructure when the market shifts towards 5G in the future. However, the coverage of 5G in Indonesia is still limited to urbanized regions and projects to increase their coverage are still underway.
For now, Mitratel President Director Theodorus “Teddy” Ardi Hartoko will be focusing on boosting tenancy ratios. The company’s performance last year showed that tower leasing produces desirable results, where the earnings before interest, taxes, depreciation and amortization (EBITDA) margin for the tower leasing segment was at a high 85.2 percent. Should their asset monetization strategies perform well, Teddy believes that Mitratel could potentially become one of the top 10 market capitalized companies in Indonesia this year.
The stock market has also been reacting to Mitratel’s deal with Indosat. On Feb. 14 and 15, the day before and during the signing of the deal between Mitratel and Indosat, the trading volume of Mitratel’s MTEL shares spiked. The corporate action is seen by some investors as a signal that foreshadows growth in MTEL’s performance.
