2021 Indonesia Deal Roundup

Over 17,000 towers have changed hands this year already (and is there more to come?)

Indonesian Flag

Read this article to learn:

  • What motivated Protelindo to acquire STP Tower?
  • Mitratel’s plans for the rest of the year following their acquisition of Telkomsel’s sites
  • The history of Tower Bersama as a further equity sale could be on the cards
  • The disrupting influence of EdgePoint Infrastructure on the Indonesian market.
  • How tower ownership in the Indonesian market now looks

Indonesia has maintained its reputation for being one of the most active M&A markets in the world in 2021. A reset in valuations means companies have been far happier to sell than they have been for a few years previously, spurring a flurry of activity.

Even still, Indonesia was hardly quiet in 2020 and 2019 – with 16,521 towers changing hands in various operator-towerco sale and leaseback (SLB) deals, and towerco-towerco acquisitions.

EdgePoint Infrastructure (EdgePoint) got the ball rolling in 2021 with an SLB deal with Indosat Oordeoo and an acquisition of PT Centratama, a home grown towerco. Then in September, two deals were announced for over 10,000 towers between them.

On September 2nd, a second substantial sale and leaseback deal was announced between PT Dayamitra Telekomunikasi (Mitratel) and sister company Telkomsel in as many years. Then less than a week later the anticipated sale of STP Tower was confirmed when Protelindo became 90% shareholders.

As if that wasn’t enough, second and third largest operators, Indosat Ooredoo and 3 (CK Hutchinson Holdings) announced the signing of a deal regarding their long-awaited merger.

Hot on the heels of all this news, TowerXchange brings you everything you need to know about the Indonesian tower landscape and looks ahead to see what headlines might be yet to break in Indonesia.

Operator, tower and M&A landscape

Indonesia is home to five MNOs: market leaders, Telkomsel; Axiata Group owned XL Axiata, Indosat Ooredoo, 3 (CK Hutchinson Holdings) and Smartfen. Discussions focused around the potential merger of 3 and Indosat had been ongoing for some time, but were finally confirmed last Thursday (September 16) for a sum of $US6bn. The newly merged entity will still trail Telkomsel in terms of mobile market share, but will form a more sizeable competitor in the market.

MNO Market Share

There are an estimated 106,384 towers in the country, and 341,277,549 mobile subscriptions across a population of 273,523,621. This results in a SIM penetration of 124.8% and a SIM per Tower ratio of 3,207:1.

Whilst far from the worst in Asia, this figure points towards a pronounced opportunity to expand networks and improve connectivity. While most operators have a strong network in Java, expanding this to the other Indonesian islands remains a key priority for all the operators, though Telkomsel are further ahead in this regard. Fortunately, Indonesia is home to a wealth of towercos more than capable of building and maintaining the infrastructure to support these goals.

These ambitions could also be boosted by the relaxing of foreign investment rules, which came into effect on 4 March 2021. This could be good news for Asia’s largest Pan-Asian towerco – edotco, for whom the restrictions had been a barrier to entry to the most developed tower market in the ASEAN region. If they are to enter the market it would likely be through an acquisition of a smaller towerco to gain the necessary licence.

Prior to late 2020, there was an expectation that the highly competitive independent towerco market would slowly consolidate into a three-player market, with independent Protelindo, publicly listed Tower Bersama and Telkom Indonesia backed Mitratel expected to slowly acquire the smaller towercos across the country.

This expectation has come to be, but no one was expecting former edotco CEO Suresh Sidhu to start a new firm with backing from US powerhouse DigitalBridge. EdgePoint Infrastructure has entered the market and amassed a portfolio of over 8,000 towers in less than 6 months between February and July 2021.

Indonesia Deal Table

Protelindo set to acquire a majority stake in STP Tower

STP Tower’s owners, Carlyle Group and Southern Capital Group have been looking to sell their stake in the towerco of 6,700 sites for a number of years, but had been unable to find a willing buyer.

The latest rumours that STP was up for grabs again seemed to indicate that a deal was more likely than ever, with StonePeak Advisors, EdgePoint and IHS Towers in competition with Protelindo.

IHS Towers link to the deal is interesting – the towerco began operations in Africa, but has since expanded into South America to manage 4,026 in Brazil, 228 sites in Colombia and 51 sites in Peru. As well as being associated with the STP Tower sale they had also acquired a licence to begin building towers in the Philippines, but are yet to do so.

In the end though it was Protelindo who emerged victorious – with the deal closing on October 1st 2021. Upon close, Protelindo will make a mandatory tender offer for the remaining equity in the company. It was announced upon the closure of the deal that Protelindo paid IDR16.7 trillion for their stake in the business – equivalent to US$1.16 billion.

Speaking with TowerXchange, Protelindo CFO Steve Weiss commented that the STP portfolio was particularly attractive to the towerco given its scale, presence in the fiber sector, and strong pipeline. The portfolio offers significant organic growth opportunities with untapped potential in terms of increasing tenancy ratios across the 6,700 sites.

STP already has 12,000 tenancies and over 9,000km of fibre, and when combined with Protelindo’s existing assets takes the groups tenancies to 53,000 across 28,300 towers for a tenancy ratio of 1.87.

Protelindo have a history of company acquisitions, the most recent of which came in 2018 when towerco PT Komet Infra Nusantara (KIN) and its 1,400 tower portfolio was absorbed. They also entered into the fibre landscape in 2015 with the acquisition of iforte.

The acquisition of STP was advised exclusively by Singapore based Redpeak Advisers.

Steve Weiss, CFO Protelindo

Steve Weiss, CFO, Protelindo

Mitratel acquire 4,000 more towers ahead of IPO

On 2nd September 2021, Mitratel acquired 4,000 towers from sister company Telkomsel. Telkomsel and Mitratel both share an owner in state run Telkom Indonesia, and Mitratel receive 50% of Telkomsel’s build to suit orders.

The deal was valued at USD$436 million, and included Telkomsel signing a 10 year lease for tower space rental.

This latest transaction follows an acquisition of 6,050 towers for US$700m which was completed in 2020. It takes Mitratel’s tower count to around 28,000 – almost identical to that of Protelindo.

Preparations are also underway for an IPO of Mitratel, with HSBC, JP Morgan and Morgan Stanley amongst the banks appointed to run the process. The company is reportedly targeting a US$1bn listing on the Indonesia Stock Exchange before the end of the year. 

Telkom Indonesia had previously explored the transfer of Mitratel and its tower assets to Tower Bersama in a unique share swap deal, but this was ultimately blocked by the government back in 2015.

The recent deal between Telkomsel and Mitratel comes as Telkom Indonesia is restructuring and reprioritising its business, and are reportedly in talks with various undisclosed private equity firms to plan similar carve outs of its non-core business functions.

With the IPO imminent, TowerXchange anticipate that a further transfer of towers between Telkomsel and Mitratel may be on the cards in the near future.

Estimated Tower Ownership in Indonesia

Tower Bersama up for sale?

While maintaining a lower profile on the recent M&A front, third largest towerco Tower Bersama have amassed just shy of 20,000 sites. The publicly listed towerco was formed back in 2004, and have completed several other acquisitions since. 

That being said the majority of their 19,055 towers were built organically – with 60% coming from build to suit orders.

Tower Bersama is listed on the Indonesia stock exchange with two of its portfolio companies Gihon (in which Tower Bersama has a 50.43% stake) and PT Visi Telekomunikasi Infrastruktur (in which Tower Bersama has a 51.09% stake) separately listed. 

Provident Capital Indonesia and PT Wahana Anugerah Sejahtera, who between them own 54% of Bersama, are undergoing a strategic review of their various holdings, which includes Tower Bersama.

As per various sources, there are rumours that the owners are indeed looking to sell, and for a price of around USD$3bn.

It remains to be seen whether Tower Bersama will be up for grabs, and who will emerge as interested parties if a deal is scheduled to go ahead. At three times the size of STP, acquiring a stake in the towerco would be very attractive, but also extremely capital intensive, which could rule some of the players participating in the STP Tower out.

Enter EdgePoint Infrastructure

DigitalBridge backed EdgePoint Infrastructure, has ambitions to be a next-generation pan-Asian infraco. Those ambitions have been set into motion with two deals which between them acquired just over 8,000 towers. In February 2021 the company acquired a 38.3% stake in PT Centratama, which increased to a majority stake-holding of 76.79% in July. They also completed a 4,247 tower deal with Indosat Ooredoo, the Indonesian brand of Qatar based Ooredoo group.

Speaking in an interview with TowerXchange at the time EdgePoint CEO Suresh Sidhu (formerly CEO of edotco) commented that entering Indonesia was very important to EdgePoint’s strategic vision to become a leader in ASEAN passive infrastructure. “We settled on Centratama because it’s a nimble company that we felt punched above its weight. We needed something scalable and they aren’t just M&A focused, they are co-location and build-to-suit focused as well, so that organic growth was appealing” Sidhu explained in the interview.

EdgePoint Infrastructure Timeline

EdgePoint’s immediate future appears to be focused around taking Centratama private. They announced a mandatory tender offer to purchase the 2.57 billion shares that are owned by public shareholders. They have also agreed to purchase the remaining 14.9% of Centratama from Singapore based private equity firm Northstar Group.

What else might happen in Indonesia between now and the end of the year? If you are interested in learning more about the Indonesian tower markets and meeting key stakeholders from all the main companies the join us for TowerXchange Meetup Asia 2021 – taking place between 6-10th December 2021 as an online event. We will be discussing Indonesia in depth with a dedicated country spotlight and C-level leaders from Indonesian towercos will be speaking across a range of panels and roundtables across the event.

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