Yeah. Good afternoon. I am Sachin Mittal. I lead the TMT, Telecom Media Technology Research at DBS Bank. Along with me is Nash, who actually covers our Indonesia telecom sector space and the internet space. And we have with us management of PT Sarana Menara Nusantara, Mr. Adam Gifari, and he will be sharing the results briefing with us in the next few seconds. Okay, over to you.
Hi, everyone. Thank you, Sachin. Thank you, Nash. I hope everybody is well. We are dialing in from Jakarta. Sachin is in Singapore. Hope everybody is well. We just released our second quarter result yesterday. The company is very busy at the moment, consolidating companies. I think we are showing very good results. The one that we acquired last year, IBST, now it is June has passed, so the company has been 12 months with us. The company is running 88% EBITDA margin now with about approaching 40% net profit margin. The synergies, efficiency of tower business and fiber that we have done in the past has been repeated, with IBST, which we feel good about. The company is running about IDR 400 billion, IDR 425 billion, as of June yesterday. I just saw the number. I sit in the commissioner board member.
Now let us walk through the Sarana one, and then we can take it from there for Q&A. Right now, we are with 35,800 towers, a total of steel amount of fiber optic, 117,000 km. We retain still much of our build out under build-to-suit model, meaning that somebody is undertaking to pay 10-year contracts if they use our fiber and towers. I think the model is slightly intact. We just did a Fitch Ratings review on this page, and S&P Global Ratings is about to go into rating committee. But we were briefed by the analyst that came over two weeks ago in Jakarta that there should be no change to our investment-grade ratings for Sarana through Protelindo, our largest and most important subsidiary. Our ROI, 8%, and return on equity, 17.5%. Just one highlight.
June, we are showing these numbers, and in matter of three weeks after June, we received the money from the rights issue, IDR 5.5 trillion. The dilution about 13.7%, which is not as high as what people thought it would be, because the standby buyer agreed to issue the new shares at higher than the market price. So a lot of investors are taking the benefit of that. When the announcement of IDR 680, the rights issue price was done, the market was about IDR 520 or IDR 510, and immediately after that, share price went up. But the undertaking agreement by the standby buyer was already signed and submitted to Otoritas Jasa Keuangan . Show must go on. And no issue on this one. But it shows the strength and commitment of the shareholders of the family behind this company.
Since the dilution is about 13%, we do not expect much of a hassle. A lot of people made money from buying up when it was IDR 400 or IDR 500 handle, and now it is IDR 600 handle in the share price. Sara na shares is included on all these bunch of indexes. We have also a very good ESG footprint. We can talk more about this later on, when we meet the company if you want to know more. The capital management, we have a very good capital management. I think the highlight of this quarter, second quarter, is about how excellent the operational performance is. We actually collected IDR 1.6 trillion, under which we can use the money to pay down debt.
If you look at the capital management part of the second quarter compared with the second quarter, you can see the gross debt of the company actually went down IDR 1.6 trillion, and borrowing cost went down f rom 6.21% to 6.15%. This is not taking into account the next expected BI Rate cut that should happen in second half this year. Hope everything goes well. Telecoms has reduced to three operators in 2025. I have been in the business for almost 20 years, so I think this is the moment that we are looking for the right kind of market structure. I think we will be working with Sinar Mas, XL, Smartfren after their merger on this consolidation of networks, making sure everything is smooth. This is not our first rodeo. We have done this before. We have done the heavyweight lifting with the largest merger in Indonesia, Indosat.
The next one XL and Smartfren should be much more manageable since we have gained so much scale in fiber and towers that operations should be stable going forward. I think right before this call, we were just talking with DBS analyst Mr. Sachin Mittal and Mr. Nash about what is the kind of aspiration that XL, Smartfren would want to have going forward. I think they realize the value of multiple players becoming free. Now it has materialized legally. It is just going through the motion of technical and legal cleanups between the companies, including us, Protelindo and XLS. It should be okay. I think we should be coming out okay. I think you have seen our ROE 17.5%, ROIC 8%, having seen a big merger as big as Indosat in 2022. Going forward, we should be with the skill and experience to manage such a merger.
Going into the future, I think this year another focus of the market will be to see what is happening with the spectrum auction, who is going to win that, and who is going to be rolling out 5G. The information that I got from this market is the same as what you guys are seeing or you guys are compiling, looking at the newspaper headlines. Let us see what happens. I think we focus not only what is happening on the outside, but we also focus into our internals. We have to be sure that when we roll out, we always utilize whatever we have already installed, increase the utilization, reduce the CapEx, reduce the OpEx. Whatever we can reuse for different types of purpose in the same area. It can be towers, it can be fiber, then we try as much as we can to reuse that.
We do not sit around all day waiting for colocation to come, which was the early, the first five or 10 years of the company. But now we are actually very active looking for other types of purpose of whatever asset that we have in the inventory of the company. That is what we have been doing every week of the day of the week in the company. I think fiber remains the model that we have. We can talk further, but there is a bit of an increase on fiber as well as tenancies first quarter coming from basically Indosat and XL executing what was already there, to some extent also Telkomsel. Just executing what was promised during first quarter and then executing that. But the tenancy ratio still a bit down, 1.62x just last quarter. This quarter 1.61x. But we do not see that to be much of a problem.
As long as we can get scale, we can manage our costs, we should be able to defend margins even though the non-tower segment is growing faster than the tower. Margins stays at about 83%. We focus a lot on getting contracts. I think the reason why people want to invest or commit to long-term contract is actually a healthier wireless and fiber market, fiber internet. So I think we want to be that counterparty. You will see this long-term contracts attempt to find long-term contracts will come out of us always because we like getting scale, getting contracted revenue, and then deliver the best value for that company. We do not mind seeing our capital being put into something that goes towards six to seven, eight years kind of payback from EBITDA as long as we know there will be value of this asset that we have going forward.
That is the thought process that we have today. And this is the towers that we have across the country. Jawa Bali, 21,000 towers. Sumatra, 8,100. Kalimantan, 3,300. Sulawesi, 2,700. And then Papua used to be closer to zero, like six to 12 months ago. Now it is 500 towers. So I think this is quite encouraging. And then this is the first two lines of Fiber to the Tower kilometer generating revenue in Sumatra, say it is 58,700. That is the amount of cable runs that we are charging, including the second core or third core. And then the FTTH kilometer pole in the second line is basically the physical cable that we have. So you can see that Sumatra has gained traction in utilization ratio. You can do the math yourself. Jawa approaching 2x. You can see from here. Bali, Nusa Tenggara, 1.5x, 1.6x thereabout.
Similarly with Kalimantan and Sulawesi. Kalimantan, Sulawesi is probably 1.2x, 1.3x. So, this is the kind of thing that we like to do. So we are probably the only company in Indonesia or let us get back one step. Indonesia is the only market from what I can gather, talking to international analysts, that has build-to-suit fiber model under long-term contracts. That is why the Wall Street banks do not typically can understand that we have build-to-suit fiber in Indonesia. And we go as far as 10 years. And in certain markets that we have, like Sumatra, Kalimantan, and et cetera, in this page that you are seeing, we market the second core to tenant number two, and then whatever excess capacity in cores, we try to use for other types of businesses, FTTH or connectivity.
Whenever we build a new fiber under FTTH, then we try to use it for FTTP as well. This is the kind of versatility and commitment to investment, being patient about it. As long as our customer is doing well and we are part of them being successful, I think we should be getting traction for more business into the future. We like to focus on arm's length contracts. We earn the business that we try to get rather than using non-sustainable measures of business dealings. This page is about fiber. The total rank is about 266,000. Comprised of fiber to the tower of almost 220 revenue-generating kilometer fiber with the physical cable 122. On top of that, we also have FTTH kilometer pole and then backbone and submarine about almost 25,000. Going through what we have done in the past 12 months.
We added about 4,300 towers. We added 27,000 km of revenue-generating fiber. We added 4,500 activations under connectivity, which means that we are still very much active. We can talk about revenue numbers later on. Then 271,000 home connect additional with additional 571,000 home passes. Then we are maintaining investment-grade ratings supported by the shareholders, including the standby buyer. The rights issue has been concluded. The dilution is about 13%. Then we are using today, actually, to pay down debt. The use of proceed has been listed in the prospectus. Then what do we do with the relaxed borrowing headroom? We will see in the next coming few weeks, coming months on what kind of organic or inorganic opportunities after we pay down debt from the rights issue money. Okay. Towers, total 35,800. I think this should translate if you do your Excel spreadsheet.
That means I think we added about 123 net tenancies during the quarter. That's coming from XL and Indosat. Fiber to the tower, you also see a smallish increase when it comes to fiber to the tower business. Similarly, I think that comes also from XL and Indosat. Basically cleaning up guys, whatever we have received in orders in previous quarters. We're just finalizing. That's why the increase is not that much. I think the most of increase is in connectivity. You'll be able to see that the number seems to be going down, but actually what has happened late last year, late 2025, is that one big government account was not renewing with us. But if you strip out that big government account, actually our organic and our non-government connectivity account increased by 15% to 20% year on year.
We just have to wait out this impact of a one time non-renewal of government account. Then as the assimilation of the non-government account growing faster than the decrease, then we should see a net increase. Then on FTTH, the 11.6% penetration rate, I think the previous quarter was about low 11%. So we see an increase in penetration rate. Mostly from Indosat and XL S. Then this is our diversifying business base. You see that our CapEx gone down. This is as a result of our being efficient on where we spend and the timing of it, of our CapEx spend. This year, 2025, as a general comment, we have committed to basically conclude with all the relocations that Indosat Business would require for their merger. So this year, 2025, would be the final year.
This year, at the same time, we also seeing XL Smartfren merger. We are still waiting to walk out through the details with XL S. I think we don't expect. We are hearing that they want to basically continue with a lot of the strategy before, which is focus on 4G, maybe we can do a win-win solution between us and them. We basically used the balance sheet already to acquire IBST, to build towers here and there. I think a lot of this asset that we own, including the fiber that we built for them, should be able to be useful for them with the merger. Tenancy and utilization ratio. For tenancy ratio went down 1.64x to 1.62x. For utilization ratio activity, it declined a bit because we added more fiber than we added additional core usage.
That's where we are. You see after IBST on towers, we increased a bit to above 200,000. What is this to the right? Number of tenancy is about 54,000 here, the dark blue. The lighter blue is about the number of towers to the left, which is 35,000, 36,000. This one, fiber to the tower generating revenue almost IDR 220,000. Number of towers flat. The number of tenancies increased a bit, 130 thereabout. The number of activation actually grew very quickly, I think 15%, 20% growth. This the part that I was talking to you about. Revenue towers is 7%, a bit less than 7%, revenue on tower is about 37%. EBITDA 11%, AFFO grow, which is EBITDA after net interest, is about 9.5%. Leverage profile. Net debt to EBITDA is 4.6x.
We should see this number closer to 4.1x, 4.2x after consolidation, after rights issue and the acquisition that we have done. You see here gross debt IDR 50 trillion. It used to be IDR 51.6 trillion this last quarter. We paid down debt quite aggressively. Average cost of fund is 6.15%. If you round it up, it's 6.2%. Actually there's a bit of a decrease and we're hopeful second quarter, second half should be another decrease in BI Rate. The policy rate from Bank Indonesia. This is the EBITDA, 2.2% in growth year-over-year. If you look at net income, 5.1%. If you look at revenues, 2.5%. Operating income, 1.2%. Stable performer given the busyness of the company and the headwind from various factors here. If you remember, April was the tariff announcement. Rupiah was weaker, but now it's back up again.
Indonesia is able now to announce that there should be another cut later this year. We're quite cautiously optimistic in managing our balance sheet. This is the cash flow statement 7 .8x. CapEx for OpEx. Interest, 1.5. At acquiring Remala and loan proceed. Paid dividend and cash balance IDR 782. On the profit and loss movement quarter-over-quarter and year-over-year, I think 2.5% year-over-year revenue, 0.7% decrease quarter-over-quarter. EBITDA 2.2% increase and 1.2% decrease quarter-over-quarter. Net profit 5.1% and 5.8% for each of year-over-year and quarter-over-quarter. Towers increase for its segment 2.9%. Fiber to the tower increased 9.9%. Connectivity 6.8% and this is due to the government accounts I was telling you about. Fiber to the home, 29.3% and total revenue growth is 3.9%.
This is what we were trying to say at the start of the year when we talk about the growth. It is actually from fiber and then connectivity should be trying to offset the negative here. But towers is there and then Fiber to the Tower is also there. Again, the use of Fiber to the Tower is actually very easy. When people want to increase capacity of their wireless network, they can use our fiber to fiber as towers to towers. So we have a good position in the industry. Operational data. Tower count increased by 4,300, 13.7%. Tenancy 3,800, 7.1%. Again, still towers growing faster than tenancy, so tenancy ratio goes down. Fiber to the Tower 14.4% when it comes to kilometer chargeable. Connectivity is 31% in terms of activations. FTTH home connect increased 52% from the 135,000 to 207,000.
This is a lot of questions when dollar went stronger. But I think we actually booked translation gain during second quarter. So this slide should not be an issue about, should be able to answer questions about foreign exchange exposure, ladies and gentlemen. I am not going to spend too much time on this slide. That is all I have today. Feel free to come back to me with questions to be led by Mr. Sachin. Please feel free.
Thank you, Pak Adam.
Thank you.
If you want to ask any questions, please press the raise hand button at the bottom of your window.
Okay.
We will accordingly schedule you for the questions.
Okay.
Maybe I can get the ball rolling
Yes
With the first two questions.
Feel free.
This is an often asked question, that this XL, Smartfren merger.
In terms of timeline and in terms of the complexity or the capacity, how do you see this is similar or different versus the Indosat-Hutchison merger? What is your thinking here? Secondly, now that your balance sheet is very healthy after the rights issue, where there are more number of segmentation, whether in the fiber market, or do you see still more in the tower market? Where do you see which is more segmentation and hence more opportunities for you to acquire? The two questions.
Yeah. Number one, I think it would be an understatement to say that a merger will be easier than the other merger to conclude. Because I think what I am hearing is that multiple vendors for equipment also creates additional complexity to the network consolidation. I think XL Axiata had an earlier start in talking, in discussing what is the new network going to be. I have not heard a single week where the new configuration for the merged entity is finalized. I have not heard that in meetings. So I expect to be changes. I think what is going to happen, there will be gradual implementation, and I think it is likely to be by area. So say Greater Jakarta, Jabodetabek. Maybe that is the first one, and then only after that, then people do Depok, maybe Bogor, as part of the Greater Jakarta, so the later part.
In terms of timelines, I am thinking two years. Given that Indosat Ooredoo Hutchison concluded in year three. I am talking about the relationship between the said merger entity with us and not just the taking down of equipment and then move elsewhere those equipment, but rather restructuring everything, the locations of the new leases, get everything countersigned by both parties, the newly merged entity and the said tower companies. I think I mentioned in the call that we are about to conclude 2025 with the last batch of relocations. So that means it took a full three years from 2022, January, when they first announced the merger. So I think that there is a potential for XL Axiata to be concluded in about two years. And then w hat will be the next target of acquisition you mentioned, Sachin?
Yeah.
Yeah, I think we are trying to digest already several acquisitions. This is not to say that we will not be participating. People ask us a lot about what is happening with Indosat Ooredoo fiber. No comments on that. I think I also observed that the media is a bit quiet on this front. Yeah. Which means nobody can say anything, even the potential bidders can't say anything. Typically, we have to wait around for the seller or the authorized adviser of the seller to say something. We are looking at opportunities, but this is not to say that we will jump board and then hop into buying something immediately from the time we get the money from right issue. In other words, my answer to you, Sachin, is that we don't know which one that we will try to get. We are working for several organic opportunities.
I think there could be a chance that after mergers that people are feeling good about. The talks about price repair, if it materializes, I think something could happen on that front as well, which means that it is just organic, which is very good for everybody. Obviously, I invite everybody on this call to monitor this together. We are in the business, and you guys in the markets, as well as your clients, your investors. So let us always check and then feel free to holler and invite me for coffee and talk about what is happening in the industry. But I think there is already talks about discussions, trying to do something about this. It is just I don't know the timing of this when it comes to price repair. Okay? Going back to you, Sachin.
Yeah. Just to follow up. One hand, we are saying it is more complex than the Indosat Hutch in terms of more decision-making required.
Actually, no. I am saying is that Indosat Ooredoo Hutchison also have similar problem. They have, I think Nokia, Huawei, and Ericsson as their vendors. With XL Smartfren, they have Huawei, ZTE. I forgot who is the third name. But they started a bit earlier with XL Axiata, given that a part of XL Axiata management is also part of XL Axiata, who has done merger before with Axis Telecom sometime back in 2016. Those are my assumptions, Sachin.
Okay. Not much different in terms of timeline. I mean, saying it could be, it took three years.
Yeah
This could be two to three years again. Similar. Very similar.
Yeah. I think that's possible.
Got it. Okay.
Yeah.
Okay. For the audience, I think you can raise your question. You can raise your hands.
Yeah.
Since I am not seeing a lot of raised hands, I think you can actually even unmute yourself to ask the question.
Who has just raised their hands?
While waiting for the question, I have just this question again on your latest new acquisition in the Remala Abadi, the DATA .
Yeah. Mm-hmm.
What do we expect from this? Because this is actually not, you have a 40% stake or so, right, in this company. So how should we think about the impact that we will see where and by what time frame we'll see the impact and which line-
Yeah
Of your income statement we'll see the impact of this.
Yes. Okay.
Merger.
Okay. The accounting method of consolidation is one thing. What we are looking at is actually the most strategic basic reason why we buy this company is to work together to increase utilization of our fiber. Whenever there is a new area of fiber that people need, we can build for them. Rather than working as separate companies, we will be working together basically, makes it an aggressive market penetrator, if you will, going to new markets, getting new accounts, corporates, small to medium enterprises, that kind of connectivity accounts. The impact on us is, I think we are still talking with our auditors on how to report this. We had questions about this as well previously. We are happy that the company's growing fairly fast. If you look at their prospectus, they're number one.
Typically in Indonesia, if you draft a prospectus, then the first one that you mention is the most important one, including if it's risk factors. But if it's what's their business profile, their number one is actually connectivity business, and then they serve a lot of government accounts, small to medium enterprises, and they're actually a smaller player for B2C. So I'm more keen towards saying that they are more of a big kind of customers provider. If you look at the growth rate, the company has small asset, but it feels like in comparison to their revenues, actually, they are very aggressive, not having too much asset, but they are able to deliver such a growth.
That's the kind of thing that the thought process, if we can help them use our assets or if they need more assets in the future, then we can work together. We have the capability to spend CapEx at the end of the day. Another point about CapEx is that if we are able to become the number one best in-class cost structure for CapEx and OpEx for one item that we have spent in the market, then we should be in the better position to compete. That's the thought process we have, Sachin.
Would we see the impact on your EBITDA when you integrate this company or no, it will below the EBITDA?
I think that should be a discussion to have with our auditors, and we'll come back to the market later on.
Understood.
Yeah.
Okay.
Okay. I invite question from the floor.
Yeah.
There is a question from Sabrina. You can unmute yourself, Sabrina. Okay. I think you can speak now.
Okay. Hello, am I audible now?
Yes.
Okay. Thanks for the opportunity, Sachin and Adam. I only have one question. Regarding your FTTH, I think it is the first time I am seeing like a quarter-over-quarter basis that, sorry, on FTTH. I think it is the first time that I have seen in the previous that actually the revenue has went down. Maybe can you share some colors on that?
FTTH or connectivity?
FTTH. This quarter is IDR 146 billion versus last quarter was at IDR 168 billion.
Okay. I am missing. Quarter over quarter is decreased. Are you sure?
Yep.
Because on this slide 20, I am seeing its connectivity was decreasing, not the FTTH.
Okay. Sorry, I might miss something. I will come back.
Yeah. It is okay. Because in my mind, connectivity is, sorry, FTTH is the part that we have already a lot of assets for. It is just a matter of getting it renewed, getting it marketed. The B2B partner of ours, they have the assets already. They just have to market it, and then we decided before we roll out. We decided which market that we want to go together. There is not much reason for them to basically, "Oh, this is the wrong market that we want to go." So, it is just a matter of monetization at the end of the day. I mentioned three times already earlier on that the decrease is on the connectivity because of certain government account. If we have several quarters going off already, then we should be able to see this decrease to taper off. Sorry, Sabrina. You are okay?
I think I am seeing the right number. I just checked the corporate presentation. I think your FTTH in first half was IDR 314 billion. Meanwhile, on the three months it is IDR 168 billion. So on a quarter-on-quarter basis, actually, the biggest decrease from IDR 168 billion to IDR 146 billion.
Okay. Give me one minute. Wait, please.
Wait. FTTH. What is your question?
Okay. In first half, I think FTTH is IDR 314 billion. Then the three months of 2025, it is IDR 168 billion for the FTTH. Our second-tier figures for FTTH is IDR 146 billion. On a quarter-on-quarter basis, I think it has come from the first nine years. I just want to check on what is causing this decline.
I am confused because Okay. I think it is just a matter of billing than anything else, Sabrina. It is just a matter of billing because, I am seeing here the net number, HomeConnect actually increased quarter-over-quarter. Hello?
Okay. But I think, I am referring to the revenue.
For you to claim a revenue going up or going down, then you need to have the drivers. I am looking at the drivers in front of me. HomeConnect generating revenue actually increased quarter-over-quarter. From first quarter of 182,000 and then second quarter, 207,000. I think there is a bit of a billing catch-up that is between us and the B2B partner. Something like that can happen. But I am seeing here the activity actually goes up.
Okay. From the third quarter and our second-
Yeah. I am giving you the numbers, yeah. The HomeConnect accounts as of first quarter is 182,000, and the second quarter is a 2Q numbers for 2025, 207,000 HomeConnect accounts. So an increase of quarter-over-quarter. Okay?
Okay. Understand. Thank you.
Yeah. Thank you.
Adam . May I ask you two questions? One question is in your home broadband.
How far near are we in terms of our EBITDA breakeven?
What do you mean?
How do we look at the EBITDA contribution from this home broadband? How to think about that?
Yeah. I think-
11%. Right now, we are 11% kind of, take up. Around 11.2%.
We do admit non-tower has just lower EBITDA margin. I think that has been true for the many, many quarters we have had this conversation. I think, the fact that now, consolidated EBITDA margin is 83%, I think that speaks to the fact that towers grows slower than the non-tower segment, and then non-tower segment has slower margins. So I think if you look at year-over-year, for instance, I think just last year, I remember the EBITDA margin consolidated for Sarana being 85%, and now it has come down to 83.2%. That is owing to fiber, basically. Yeah. Including FTTH connectivity, everything. We do not, unfortunately, break down between what is the connectivity EBITDA margins, what is FTTH, because everything is blended, and then everything is sharing headquarters, for instance, sharing overheads, sharing infrastructure, towers, and fiber. I have tons of pictures where we have DWDM.
Those in the TMT market long enough would know what DWDM is. That is the repeater for long-term fiber run that we put those kind of equipment in Protelindo tower premises. If another competitor wants to have DWDM asset for their fiber business, they have to pay somebody else. But in our case, we use our power premises. We do that as much as we can in the whole country.
Correct me if I am wrong. Please correct me if I am wrong, because my understanding is you need to be around at least 15% to 16% take-up of your home broadband network to actually be profitable. That is the typical number, and you seem to be inching closer to that number now, right?
Yeah, we are approaching that number. But I think the discussion about 15%, 16%, I have to check because I don't think we have made that discussion internally. But we do want to reach 20%. But I don't have the number in front of me to confirm you whether 15%, 16% is the breakeven point. Because different ways of financing this, et cetera. I have to get back to you, Sachin. It is a very complex question.
Sure. Maybe just to get it simple, maybe if I ask you for how should we think of your near term. Near term is probably less than 12 months and medium term of probably three, four years. How should we think of your revenue and EBITDA growth organically? How should we think of that?
Yeah. I have to get back to you for next year. Frankly speaking, I don't have the numbers in front of me. We're still-
Long term. Yeah.
Yeah.
How to model that long-term growth. Yeah.
I think we've known each other since what, Sachin? 2004?
More than a decade.
More than a decade, yeah. You know that I've never given a statement that I'm very sure that I'm correct when it comes to projections, because these are all driven by the markets itself. We just provide infrastructure for people to lease them. What I know is penetration seems low for equipment on towers. Towers per population also ratio seem not favorable for Indonesian wireless internet quality, and Indonesia wants to hop onto 5G. Those are the things that I know. If people are not able to charge the right price for that kind of investment, that's the difficulty would come to the said MNOs as well as us, the providers. Yeah, that's where we are today, Sachin.
Got it. There's a question from Henry. I will just unmute you, Henry.
Yeah.
I'm coming. Yeah.
Henry Teja.
Can you unmute yourself, Henry?
Hi. Hi, Sachin. Can you hear me?
Yes.
Okay. Thank you, Sachin, and thank you, Adam, for the call.
Yes.
Yeah, perhaps two questions from me.
Perhaps regarding the connectivity business. I think the segment will drive your overall revenue growth in the next one or two years, considering perhaps a muted tower and fiber orders from the telcos. Just curious, actually, what kind of customer profile that we are looking for the connectivity business here? I know that this is the catch-all account for the SMN. It might basically include the fiber satellite assets and the other stuff.
I am just curious, with all of your kind of fast fiber capacity that you have built in the last three to five years, what kind of customer profiles that basically can further optimize all these kind of capacities? What kind of customer sector or industry that basically can capture all these capacities? How about the contract itself? If we are talking about the fiber and tower, we always talk about 10 years kind of contract period.
Yeah.
I am just curious about the connectivity business here for the other enterprise segments.
Yeah. Very good. I hope that is the last one because I would typically forget the third one.
Okay, sure.
Okay, Henry. The first one, the profile of the customer that we look for. With Remala, we are more able to address more different kind of customers. More mass market kind of penetration. With Protelindo, iForte, we typically go for the largest hospitals, campuses, hotels. So those kind of thing when it comes to markets. More kind of a B2B. Then for the, what do you call it? The second one, the question that you had, I already forgot.
Like the contract itself.
Oh, the contract. Oh, yeah, it's short-term. Typically six to 12 months. You try to lock in for six to 12 months. That's why we believe in low-cost provider structure. Even before we buy Remala or something, we always try to be the low-cost provider. OpEx, CapEx, and financing cost. Because if we can be that one in the industry, then we should be better off to compete with other people. That's where we're coming from. Henry, that's my answer.
Sorry. Perhaps, if I can slip one more question in here, Adam.
Yeah. Mm-hmm.
All these backbone kind of networks and fiber assets in here, I think, to some extent, we are talking about the other sectors that might really need these kind of assets, like the financial institution and also the data centers. I am just curious, Pak Adam, what are your thoughts on these segments or these sectors for your assets?
Yeah, we do address. We do target banks, financial institutions, data centers. As a matter of fact, with several banks, we include the discussion about size that the said bank can lend to us if it is linked to an internet deal. Like for instance, Bank Permata, BCA, you can lend to us, you can increase your size to us if you give us internet business with your branches. I think we must have approached your bank, Mandiri, as well. That is the kind of approach that we have. Hotels, it is a discussion. Ascott, Aston, those kind of accounts. Yeah.
Got it. Pak Adam, sorry, perhaps last question. Pak Adam, just curious, what is actually the driver of this short-term contracts of six to 12 months, Pak? Just curious, Pak, looking at these shorter kind of contract terms, can you explain to me basically why does the margin basically lower, let us say, compared to other fibers and perhaps towers, considering that the contract terms itself is much shorter compared to when you engage with the telco- operators in here, Pak Adam?
Yeah. I think we just follow the industry whenever it was already formed by market forces. With towers, it remains a long-term contract, with fiber lease also. With bandwidth, it is typically months and year, but not more than one year to lock in. Yeah, we follow where the market is, basically. The key is to roll out in the most efficient in the marketplace, Henry.
Got it. Thank you so much, Pak Adam.
Okay. Thank you.
Okay. Any last question? We are approaching the end of the duration of the call. Any last question from the floor? Okay. Okay, Pak Adam. I think, any concluding remarks?
One question. I think we have Theodorus.
Oh, sorry about that. Do we have?
Theodorus Melvin.
Give me a second. I am trying to unmute. Are you able to unmute yourself?
Yes. Hello.
Hey.
How are you?
How are you, Melvin?
Good. Congrats on the result. Just one
Thank you.
Two questions. Just a hypothetical question.
If there are tower and fiber asset that is available in the market right now in organic, despite the size and the price, of course, which one do you prefer? Is it tower due to the better EBITDA margin, or are you also want to try to buy the fiber company?
Very good question. I think price has to be put into the consideration mix, right, Melvin?
Yep.
the contract itself. the location. It's kind of difficult to just give a blanket yes or no to towers or the other one, fiber. the needs of a company to expand is different from time to time, right? You may feel short in fiber in certain location and there's one available to sell, and makes it more attractive for you to buy, stuff like that. timing of it. A tower can come very quickly, like IBST that we did. I think we concluded the purchase on July 1st last year, when the transaction was only offered, I think March 2024. So it was very quick, about a IDR 3 trillion transaction. It just so happens that opportunity comes along. There's no way for us to say one against the other at this stage, unless we know more about what is at stake.
Strategic stake is also important for us to decide whether, is it involving better relationship with certain operators? That is also important for us to decide. We can weigh in on the options as well.
Okay. Thanks for the insight. I just want to make sure that-
Yeah
I believe a lot of people in this room are just guessing which one.
You have to check with me every week and then you buy me coffee, then maybe you get better answer.
Okay. Thank you so much for the insight.
No problem. Have a great weekend, everyone.
Yeah. Any last remarks, concluding remarks, Pak Adam?
I think Indonesia is among the last markets to have consolidated so far, from one end, a thousand players to now become three players. Even tower companies are consolidating, right, as we know, and if you read the newspaper. We think if the big three or big four players are merging with one another, it is a good outcome for consolidation. What we want to avoid is new players. We have experienced too many players already for the telcos, for the towers, and I think fiber could also use some consolidation. After this, I think people realize nobody is making money and people have to pay for consolidation, including us. We paid our part, our share. I think hopefully the mindset of people going forward will be about monetization. It does not matter if it is 4G or 5G. If it is about better monetization, I think everybody will be in the game, prospering.
I think those are my last words, Sachin.
Thank you, Pak Adam.
Okay, thank you everyone for your participation today. We can conclude the call now. Thank you. Have a happy weekend.
Thank you, everyone. Have a good weekend. Bye.