PT Sarana Menara Nusantara Tbk ("SMN" or the "Company"), the parent company of Protelindo and iForte, continues to see potential for major telecom operators to continue expanding their networks in support of network densification and improved telecommunications coverage. SMN has orders on hand for more than 1,600 new colocations and build-to-suit ("BTS") tower orders to be completed in 2019. The Company ended the year 2018 with 17,437 towers and 28,319 installed leases. In addition, the Company is beginning to receive contracts for new tower lease orders in 2019 and has engaged in discussions for the renewal of tower lease contracts that will begin coming due in 2020.
"We expect 2019 will be a continuation of the capex cycle with telecom operators investing in their network coverage and capacity footprint. We will work closely with our partners in support of this expansion effort. We also expect to conclude discussions on tower lease renewals in the first quarter of the year", stated Aming Santoso, President Director of SMN.
Strong Demand For Fiber Optic Connections
Demand for fiber optic connections is growing rapidly led by the need to meet increasing demand for data services. Investment in fiber optics as of December 2018 reached approximately 9,400 km with 5,000 km of fiber optic cable for the telecommunications backbone and 4,400 km for tower fiberisation. Currently SMN Group has on hand orders for long term fiber lease for approximately 13,600 kilometers for tower fiberisation. The new fiber lease orders on hand will more than double the size of the existing fiber optic network.
SMN management believes the market for telecom infrastructure projects will continue to grow in line with the rapidly growing demand for data services by business and consumers. "Strong growth of internet data traffic is evident from the recent results of operators and is expected to continue expanding. With the increase of internet use under 4G wireless services, some of our telecom partners are beginning to reconfigure tower transmission lines using fiber optics to complement their tower network footprint", continued Aming Santoso. "We believe the trend toward tower fiberisation will continue as the ongoing 4G network rollout and demand for data requires faster and more reliable connections between tower end sites and hub sites”.
New Telecommunications Infrastructure Projects
SMN recently announced that a joint operation company ("JOC"), organized by iForte, has been awarded a contract to provide 1,939.2Mhz of High Throughput Satellite ("HTS") capacity to Badan Aksesibilitas Telekomunikasi dan Informasi (“Bakti”). Bakti is a unit under the Indonesian Ministry of Telecommunications and Information (“MOCI”). The contract is for a five-year period beginning 2019. Bakti will use the additional satellite capacity to comply with its universal service obligations under the government’s national telecommunications improvements projects.
"We are excited to be participating in the growing demand for data services infrastructure in Indonesia. This is an important step for MOCI to make high speed data and internet services available to throughout the Indonesian archipelago in support of the Government’s blue print for Indonesia’s telecommunication development”, stated Aming Santoso.
Gain Rp 5.8 Trillion in Incremental Contracted Revenue from New Businesses
SMN management estimates that new orders received to date for new tower leases, tower fiberisation and the HTS contract will add approximately Rp 5.8 Trillion in life of contract revenue to the SMN Group. The Group will begin earning incremental revenue from the incremental new orders in 2019 and will continue over the life of the new business. “We believe there is potential upside to the new revenue flows as telecom operators improve capacity and coverage to meet the demand for data", said Adam Gifari, Vice President Director of SMN.
SMN is a company listed in Indonesian Stock Exchange (“IDX”) under “TOWR” ticker with equity market capitalisation of approximately IDR 39 trillion. TOWR common stock has recently been included in the IDX80, a newly created index issued by IDX. The IDX 80 stocks are those stocks that are considered the most liquid on the IDX and have a free float which will support active trading of the stock.