Indosat Ooredoo Hutchison (IOH)'s latest transactions with Mitratel and Dhost may be the last major deals in the space.

On Wednesday, publicly listed IOH announced that it had signed an agreement to sell 997 towers to PT Dayamitra Telekomunikasi (Mitratel), a subsidiary of Telkom Group. The deal worth Rp 1.65 trillion (US$108.8 million) puts the average price per tower at Rp 1.65 billion.

According to the agreement, IOH will lease back 983 towers from Mitratel for a 10-year period at Rp 138.6 billion per year.

IOH also sold 633 indoor infrastructure facilities to Dhost in a deal worth Rp 480 billion. The telco will then rent 544 of those back for 10 years, paying Rp 125.4 billion in fees per year.

Both deals are expected to be concluded in the first quarter of this year.

Mohammad Fakhrul Arifin, an equity research analyst at BCA Sekuritas, said the tower deal may be the last one conducted by IOH. "They now have a very [small] number of towers, if [they have] not completely run out," Fakhrul told The Jakarta Post on Friday.

Mitratel director of investment Hendra Purnama said the communication infrastructure that was acquired by his firm in the deal accounted for IOH's last towers to be sold. That is why Mitratel would like to expand its network by buying towers from other telco companies, on top of the 1,000 new towers it has built itself.

"It all depends on the opportunity. If there is potential for a deal, we definitely will join," Hendra told Investor Daily on Thursday.

However, Mandar Donde, head of Asia Pacific technology, media and telecom investment banking at Bank of America (BofA), said the number of tower sale and leaseback transactions by Indonesian telcos was expected to slow down as many of them had now largely sold their towers.

Since 2014, other major telcos, such as Telkomsel and XL, have also sold thousands of towers to physical infrastructure companies with experience and expertise in managing such facilities.

Focus on meeting customer demand

Telecommunication companies could invest the money received from the sale of their mobile phone towers in their core businesses, BofA’s Mandar noted. Thus, they could increase their overall marketing activity to win customers or invest in related sectors.

Mandar added that Indonesians were “on a journey” to access digital services, such as video streaming, social media, payments, e-commerce and gaming.

"Thus, it's important for telcos to provide seamless connectivity, including 4G and 5G, for digital enablement across the country for everyday needs," he told the Post on Monday.

On top of that, Fakhrul from BCA Sekuritas said that tower sales could raise telcos’ bottom line. In IOH's case, for example, the firm would no longer need to account for depreciation of the towers once they are sold.

"With potential proceeds of around Rp 2.13 trillion, this is eventually more than sufficient to partly deleverage near-due debts," Fakhrul explained.

In its last earnings report, IOH reported Rp 4.7 trillion in net profits for last year, down from Rp 6.7 trillion in the previous year. However, its revenue increased 49 percent to Rp 46.75 trillion after the merger of Indosat Ooredoo and Hutchison (Tri) in early 2022.

In a statement, IOH CEO Vikram Sinha said the business integration between Indosat Ooredoo and Tri had reached 81 percent of completion and was expected to be finished in March.

The financial report also shows that the majority of the firm's revenue came from cellular services, especially data packages. Meanwhile, tower leasing and 2G services, such as voice calls and short message services (SMS), are all on a downward trend.

According to Fakhrul, with the phase of tower sales largely over, telco firms will focus on the organic growth of their user numbers in the future.