Thu, Apr 12, 2018 - Page 10 News List

Indonesian billionaire brothers chase tower assets as Internet users surge

Bloomberg

Indonesian billionaire brothers Michael and Budi Hartono, who built their fortunes by selling cigarettes and providing banking services, are now turning their focus to telecommunications.

PT Sarana Menara Nusantara, backed by the Hartonos’ Djarum Group, is open to acquisitions to consolidate its leadership position in the cellular tower business, company vice president director Adam Gifari said.

Sarana has cash or cash equivalents of about 2.3 trillion rupiah (US$161 million) for any purchase, he said.

Indonesia’s growing number of smartphone users and the emergence of e-commerce unicorns, such as PT Tokopedia and PT Go-Jek Indonesia, are driving demand for high-speed data in the world’s fourth-most populous country. The archipelago lags countries such as China and India in tower density, offering growth opportunities for local companies.

Sarana last month bought smaller rival PT Komet Infra Nusantara, its second purchase in two years.

“We’re open to do more deals like that, as we are supported by a strong base of shareholders, the Hartono family,” Gifari said in an interview on Monday. “You will likely hear our name if there’s an opportunity to buy tower companies or tower portfolio in Indonesia.”

Djarum Group owns more than 50 percent of Sarana and the Kudus, Indonesia-based company also counts T. Rowe Price Group Inc and Lone Pine Capital LLC as shareholders.

The Hartono brothers, through their holdings in PT Bank Central Asia Tbk and the tobacco business, are together worth almost US$25 billion, according to the Bloomberg Billionaires Index.

Sarana is to pay 1.4 trillion rupiah to Komet Infra, which would add about 1,400 towers and 2,000 tenants, the company said on March 26.

The company acquired the tower business of PT XL Axiata two years ago.

Tower businesses in Indonesia offer earnings margins of more than 85 percent before interest, taxes, depreciation and amortization, the result of a ban on foreign direct investment in the sector and typically long-term tenancy contracts with mobile phone service providers, PT Ciptadana Sekuritas Asia said.

The outlook for tower companies remains positive, as demand for mobile Internet services will continue to grow, Ciptadana analyist Niko Margaronis said.

Internet users in Southeast Asia’s largest economy are to swell to as much as 70 percent of the population by next year, from almost 55 percent, or 143 million users, last year, data from an association of Internet service providers showed.

The country has about 100,000 towers for its more than 250 million people, while China has 1.95 million units for its 1.4 billion people, said Indra Gunawan, chief sales and marketing officer at PT Profesional Telekomunikasi Indonesia, a unit of Sarana.

“Mathematically, the ratio should reach that level, but we need to take into account the geographic feature of Indonesia. In some mountainous areas and with the number of islands, we might need more towers to cover our population,” Gunawan said. “The demand for mobile data will drive requirement for capacity, and therefore our growth into the future.”

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