Good afternoon, everyone. Thank you so much for joining PT Sarana Menara Nusantara Tbk first quarter 2025 earnings call with Mr. Adam Gifari as Advisor, Group IR as the key speaker today. This call is going to be started with presentation, then follow up with the Q&A session held by our analyst coverages. Please go ahead, Adam.
Hi. Thank you, Adeline. Thank you, Erindra. Thank you, BRI Danareksa for hosting this call. Hi, everyone. Hopefully, you are all well. It's a rather hot day today in Jakarta. Very hot. The reason why the call was postponed by two weeks, because I was initially wanted to go to Hajj, but then the travel got canceled. We're sticking to the schedule. I feel sorry for this one. Hopefully next quarter will be on time as per usual, two days after release of certain results, then we can have calls like this. Let me walk you through the first quarter, its presentation, then we can kick off with more questions after that. Let me share screen. Okay. First slide.
We closed the last quarter, which is first quarter 2025, with 35,506 towers and a total of approximately 170,000 km of fiber optic network. This is referring to physical cable that we have all across the country. These are approximate number that we have accumulated all these years. I think the good news about 35,5006 towers and the 170,000 km of fiber optic, majority of them, around 95% of all this fiber are based on long-term contracts. Erindra, since when you're joining in this call, trying to explain that when we started towers in the past, we called the term built to suit. Built to suit the need of the anchor tenant. We coined the same transformation for the fiber optic that we have, built to suit fiber.
170,000 km of fiber optic network. I think a high 90% of those fiber were built under built to suit contract. There's somebody agreeing to pay 10-year contracts to basically help us recoup the investment. We have excess capacity. As you know, we have excess capacity on the towers, and we look for higher utilization on those towers with co-location . With fiber optic, it's similar. We built under built to suit long-term contracts, long-term contract cash flow to pay for the lease of the fiber, help us to recoup the investment. We have excess capacity, then we're going to be using the excess capacity on the fiber to basically either serve as a backhaul, transmission between towers or FTTH or connectivity business as much as we can.
So, we call it increased utilization on those fiber. We can talk more about details, how different the fiber optic utilization ratio than that of towers co-location ratios. We still keep this part, which is built to suit model for towers and fiber with long-term predictable cash flow. The reason why we like this, because we have somebody needing infrastructure, and we identify together with them where is the location that they need the coverage, the reach out of the towers and fiber. We would spend the CapEx. We own the asset, and we look for higher utilization going forward. As of this reporting, we still retain investment-grade ratings with S&P and Fitch with stable outlook. Investment grades with S&P is triple B minus, with Fitch international scale is triple B flat, and we have national scale triple A.
Maintain stable returns, ROI, about 8.3%, and this is based off net profit. Return on equity is 16.6%. These are where the stocks are included, various indices. We got moved into small cap index, I think just last year. Now we also have ESG rating of single A. Still included in the KEHATI ESG leaders and IGX local small cap companies. Now this is our strategy, how we go about this business. The first one is capital management. I think we can come to more detail about this one, but we always strive for low-cost funding. We are happy to report that we're seeing that SRBI is now yielding below 6.5, I think closer to 6.25 now, 6.27, I think last time I checked.
We have ample liquidity from the banking market, including facilities being offered to us of $100 million. That's like IDR 12 trillion liquidity that's been offered to us for financing. Helped by investment-grade ratings from cooperating agencies in line with global best practices. We have a low-risk business because high demand, difficult to replace. We have spent all this CapEx to basically get all cash flows going into the company as lease revenues in the terms of fiber and towers. I think we have consolidating company effectively by the time we release this first quarter. Telcos will have reduced to three operators, and this is already done. We can talk more about deposit impact on us with XLS . We have opportunities for acquisitions.
We have contracted revenue of IDR 74.1 trillion, which is the largest in the market. This is based on existing contracts only right before our growth year or renewals. We have the attractively valued business with high annual recurring free cash flow that funds CapEx, dividend, and share buybacks. We have been a successful consolidator. I think we are one of those in this market, and we have a stable EBITDA and FFO profile. We invest in strong free cash flow and low cost of capital into the business. We do acquisitions, whatever savings that we can in interest expense, in CapEx, in OpEx. We reinvest into the business, and we still see today Indonesia in the middle of 4G cycle still. We have also opportunities for telco companies to acquire a telco business to include more scope of work here in Indonesia, like batteries.
Previously, it was gensets or shelters, but now we are seeing batteries as a very nice addition to our existing scope of work because it is cheaper, it is more efficient. We want to continue to do that, providing for everyone in the telco space. Let me try to remove this. We are prepared for new opportunities, expanding product offering. We have successfully proven that we can do site versus managed services, power as a service. We have about 700 locations where we provide batteries for. We are going into green energy generation as well, even though not directly connected to the telcos. At least we are seeing that we see a good demand for green energies, which is more efficient, and to replace some of that fossil fuel power consumption that people are using in the space. This is coming from us.
Fixed mobile convergence is also ongoing. Number three here, C3. 5G represent another set of opportunities. We are hearing that there could be additional spectrum to be auctioned sometime this second half. So we have predictable revenue, we have dependent tenants. We have upside from additional revenue, high barrier to entry because we like to do things like arm's length. So we own the assets, we pay the landlords. We still believe this that is the most sustainable model, i.e., we retain arm's length transaction with various people, the landlords, the owner of assets, right, can be corporations.
As long as we keep our costs efficient, we are proving to the market that we are a very good partner, good payment terms, never defaulted in any of our premises, with very low risk, independent companies as well, coming from the private sector, not affiliated with any political parties. I think those are the values that we see as one of the things that keeps us sustainable for the long term. Fast-growing industry, we see very strong growth in the traffic. We see continued demand on traffic, on internet, can be through their wireless phones, can be through their wired solution using fiber. Just to recap, it has been I think 18 months since the first time we heard about Starlink satellite solution for wireless mobile. We have not seen Starlink being mentioned again by various parties, by all parties.
I think this proves that whatever we have, we are serving the sector that we are serving is actually are here to stay, at least for quite a very long time. I think 5G is only starting. 5G will further prove that satellite solution is somewhat more inferior than the terrestrial services that we are providing using wireless phones. This is our portfolio of towers in the whole country. So we closed the quarter with 35,500 towers. Majority of them located in Jawa, Bali, Nusa Tenggara, 21,000 towers. Sumatera is 8,000. Kalimantan, 3,200. Sulawesi, 2,700. Maluku Papua, 519. I think it is interesting to note this is 500 towers in Maluku Papua. It is a very hard place.
A new tower over there will need also, if there is a new build, typically need fiber solutions, subsea cables to provide connectivity or connections with other parts of their network in other islands. It is challenging, but we want to play a part in that as long as the economic is making sense and we want to be playing an important role in this expansion towards the east in Indonesia. We have done a very good job in Sulawesi, with the mode of entrance with FTTH. We expect something similar to be felt also in the eastern part of Indonesia as well, depending on the pace that the telcos are expanding to that part of Indonesia. This is our portfolio of fiber. Total length 265,507 km. Revenue generating, meaning if you see that we have 170,000 km in the first page of the presentation.
Those are the physical cable that we have on poles, most of them. If the total length is 275 that we are charging to customers, so we have a nice utilization ratio of more than 1x, obviously. I think one thing to note in this discussion about fiber utilization ratio is that we do not count whenever a product or fiber is being used by other entities within the group for their other fiber endeavor. The reason why it is difficult, because it is inter-company using, and whenever we attain new revenue in other subsidiaries, what we see is, of course, consolidated revenue will go up, but the CapEx becomes smaller in comparison to the similar competitor doing similar offering that we have.
We expect that kind of the fiber assets that we have built for FTTH or FTTP, if it is used by other companies within the group, including Remala, for instance, going to the future, then we see increased revenue and CapEx not necessarily going to have that high increase in CapEx. So we should be able to see increased ROE, ROIC because of such, the way we are increasing utilization in the fiber that we already have in the beginning built by the official contracts. But we are going into the higher utilization mode by allowing other entities within the group to basically expand the usage of those fiber and penetrating new markets, getting new customers. So first quarter discussion about build, buy, and return. We invest typically in built-to-suit towers and co-locations. We see healthy demand for co-locations coming from the number one and number two.
But we are seeing headwinds from the number three, which was a business combination of XLS and Smartfren that took place, I think, two months ago. Legally, formally, they successfully merged, and we are now in discussion to basically what kind of restructuring, what kind of help that we can give as a Towerco or fiber company, for that matter, to XLS. XLS and Smartfren is now called XLS. We are still in detailed discussion as to because without the agreement from our side to allow for relocation of two contracts in one tower that was established before the merger. They could be paying twice on the same tower. So we want to help them legally move the second contract to another location. So effectively, they are not making double payment, but rather effective payment, useful payment for them.
So two payments on one tower because of the merger. If the second contract, if the second liability to pay into the future is being moved to another location, that is beneficial for them. So that is where we are, I think, major theme of the impact of merger XLS that took place two months ago. We have done successfully with Indosat.
The merger with Indosat and Hutchison took place in the first month of 2021, and then we started with relocation, restructuring the agreement starting like 24 months, 18 months later, post that legal merger. And we are about to conclude the last batch of relocations in this year, 2025. I think just to remind people, we have not concluded in full of relocating those IOH Indosat Hutchison contracts into new locations, and then we are starting to see the impact of XLS merger. So that is probably what concerns many people.
But at the moment, at this time of call, last time discussing with management, we have not finalized this with XLS. So nothing to report at this stage. But we believe what we are trying to offer will be like a solution that is win-win. So they need our help. We need their help as well. So we kind of need each other to become even more successful than where we are today as two large companies in the telcos and infrastructure companies respectively. Now going to point number two is the expansion of fiber optic network, FTTH. We started this back in 2022. So if you look at we have about 170,000 km of physical cable. Probably about 10%, 15% of that 170,000 km was generated because we were aggressive with FTTH contracts.
Initially with XLS pre-merger, and then we were also aggressive with Indosat in helping them getting access to like 600,000 home passes. So now we are in the phase of identifying together with them for more markets, but nothing to report at this stage. I think for Indosat, they are also quite busy with certain transactions. And then XLS just merged. So I think we are working together closely with them, but no further detail at this stage that we can share for FTTH. Similarly, with FTTP, we see the wireless network, the wireless mobile business is, I think the bigger companies have their very big market share. I think what market has expected at the start of 2024 for certain price repair to take place, and we have not heard from sell side analysts or buy side investors what kind of improvement in that part.
So we do not expect FTTP and tower addition to be that great this year. We expect them to be flat, especially for towers, because we have XLS that is just merged two months back. So we expect rather flat for towers and FTTO, FTTH this year. Then the one that we expect to grow is actually the core connectivity part of this. Then we can go to the next part, which is connectivities activations that we have added during the 12 months ended first quarter. We added 4,457 towers, including about 1,500 towers of this 4,457 as relocations, and then 32,265 km of revenue-generating fiber. And we added 58,003 home connect assets, and then we added 721,829 home passes. And then we are successful in protecting investment-grade ratings, which is our return policy when it comes to giving capital back to shareholders.
I think they believe us that we are a conservative company or borrower. They can see in our collections, they can see in our margins. We can talk about detailed numbers later on, but I think we are taking pride in the fact that we are successful in maintaining these investment-grade ratings. We still pay dividends through 2025 already of IDR 307 billion. Portfolios. Towers, 35,506 towers and 58,045 tenants. Tenant ratio 1.63. I think it is a slight dip from previous quarter of 1.64. Towers located in Java being 54%. I do not expect 54% in Java to be this much different. Maybe it can come down to 52%, 53% in Java. The split has been like that for the longest I can remember, because ex-Java is an important market.
Even though people say ex-Java is growing faster, Java is still the market that people are important. We still see demand for new towers to be built in Java also to basically create better capacity on the sites that they have already. Fiber to the tower. We closed the quarter with 218,800 km revenue generating, and those are the kilometers that we are charging. Network focus to support data traffic surge. Like tower model, the non-cancellable long-term contract and opportunity for higher utilization is the most important factor why we go into this type of business, providing fiber to the tower. Americans or Europeans call this backhaul, but we coined the term fiber to the tower, FTTO.
FTTH is the one that people have heard before, and we have almost 1.8 million home passes by end of March, and we have about approximately 10% penetration rate. We actively seeking opportunities to provide connectivity, and this is the basket of different types of communication or infrastructure solutions. Various types, VSAT, wireless, wireline, B2B and B2G arrangements, different types. We have 17,649 activations by end of March. This is how the business of the company has evolved so far. Accumulative CapEx first quarter is IDR 685 billion under towers, the blue one here, and IDR 423 billion for non-towers.
We are revisiting how much that we spend for CapEx because we want to be sure that the impact of everything take into account the mergers, two mergers we are talking about, Indosat and IOH and XLS getting the most benefit after those are basically deployed or built ready for them to use. Utilization ratio for fiber stood at 1.84 here.
Again, I repeat, the 1.84 does not include the utilization of our existing fiber in the case that connectivity uses some of it. Or FTTH fiber that was initially built for FTTH. If some of the fiber under FTTH is being used for backhaul or fiber to the tower solution, then we cannot basically calculate what is the new ratio taking into account after those situations. Indeed, the 1.84 can be higher. It is just that we are not going to bill our sister companies. We do not calculate.
It's a very complex math, meticulous discussion to come up with such a number. We maintain with whatever we think is easier, which is utilization ratio based on third party, outside party using the fiber that we have. And utilization ratio or co-location ratio for towers, 1.63 here. It used to be 1.64 just last quarter. This is the impact fully. I think 90% of the impact is coming from IOH merger. But then again, don't forget, since we are very keen on maintaining costs, CapEx and in borrowing costs to the benefit of the company, including shareholders, you can see that our return on equity maintained up at about 16%.
This is the track record that towers for the past since 2021 tends to be stable here. Whatever we add in tenants doesn't give us additional revenue yet because we were focusing a lot on relocations. But the growth came from the light blue here, which is the FTTO, and the number of activations that has been growing nicely. But then again, I think for this year, 2025, we expect the bright spot is on the connectivity. We expect the activations to basically help us prop up the overall growth of Sarana TOWR or reserve for the year 2025. Take into account that, number one, we are still finalizing the impact of IOH for 2025, and we're only starting to see probably the impact of XLS merger starting second half this year, 2025.
All those factors take into account, we expect 2025 to have a low single-digit revenue growth this year. Moving on to the next slide. Revenue tower growth grew at 7% CAGR. You see here, if you annualize first quarter, revenue tends to be flat on the towers. On the non-tower, the revenue is slightly higher in growth. This is basically impact of the merger, IOH. The XLS, the individual companies pre-merger have already started to scale their expansion because they were focusing on the merger. We expect, again, all these factors take into account stable growth of this year to be like a low single- digit for 2025. FFO grew IDR 100 billion here because we save on interest expense. We did our contribution on the financing part. This helps FFO grows a little bit.
The gap between FFO growth and that of EBITDA becomes smaller. If you look at this presentation, same presentation for the previous quarter, you see that the gap in growth for EBITDA and FFO is actually bigger. This is the contracted revenue that we have, stable around IDR 74 trillion-IDR 75 trillion. The committed one is the additional business that we just received during the time that we prepared these presentations. The IDR 68 trillion are basically characterized by contract that is already ongoing. But the orange one is the one that is already committed to give to us. Something signed, like a sign-up sheet or something. We added to this contracted revenue slide on this page. Leverage profile, 4.6 net debt to EBITDA after we buy IBST. I think that's quite a bit of achievement. Gross debt stands at about IDR 51.6 trillion.
Interest coverage ratio, 3.5. Average interest cost, 6.2%. Again, another achievement that we think is good about the company is that if you check this same slide to just last quarter, then you will see that this number is 6.3, and this is where we are looking at 6.2. So yielding a bit slower than that of SRBI or maybe a 10-year bond yield coming from the government. I think last time I checked was 6.8% for the 10-year paper Indonesian FR. Corporate credit rating is BBB minus, BBB, and BBB flat. This is abridged P&L. I am going to focus on operating income, on profit before tax, and EBITDA, 5.3%. The margin, even though the company is hit with headwinds, margin stays at about 83.5%. We expect for the full year 2025, this 83.5% to come down a bit to 83%.
Net profit margin, if you see here, 26%, 25%. I think we are in defensive mode. It is quite a resilient business model, but we want to help our Telco partners successful in the merger. So you can see us very busy for the next couple of quarters working together with merge parties to help achieve their targets. This is cash flows. Beginning cash, IDR 940 billion. Collection, IDR 4.2. CapEx and OpEx, IDR 1.8. Interest expense, IDR 800. Then IDR 2.4 in cash surplus. Then loan proceed, IDR 168. Dividend, IDR 307 billion so far this year. Cash ending, IDR 201. Revenue, - 2.4% quarter-over-quarter. Grew the company revenue 5.3% year-over-year. EBITDA, - 2.8%. Year-on-year, so 5.3%. Net income, - 9.6%. Stable net profit year-on-year compared to same quarter 2024, grew by about 0.7%. Revenue analysis, towers, 2.9%. FTTO, 15.2%.
Connectivity, - 5.6%. FTTH grew 42.7%. So total is 5.3% consolidated revenue. Summary operational data. It is 14.4% towers increase. Tenancy 7.2. This is as a result of we are not adding tenancies while we are adding towers because of relocations, as you can imagine. So tenancy ratio edged out a bit, edged down a bit from 1.64 last December to 1.63 this closing March. FTTP, 17.3% grew in revenue generating fiber. Connectivity 30.4%, FTTH 46%. This is the profile of the company debt. You see these red boxes, U.S. dollar, and U.S. dollar. Those are originally U.S. dollar debt, but we have hedged them at 15,000 and 15,000 hedge rates, financial hedging rates. So if we assume we got to pay down the debt today at 16,300, we are in the money.
Japanese yen, we have a little bit of borrowing in Japanese yen, but not that much. So we have a very good maturity profile, 2026, 2027, and beyond that it is going to be lower. 66.2% floating, 33% fixed. This is actually the result of us starting from 2024 when we paid down the bonds in fixed rates, including that of November 2024 expiration. The view is that 2025 will be with lower interest rate, including that of the U.S. Treasury yield.
We are still waiting for that, obviously, because we want to fix some rates and increase the fixed rate borrowing portion of this whole balance sheet of the company from previously 66%, maybe reduce it to 50%. We started to see interesting yields coming from AAA-rated corporates. So those will be our benchmarks, obviously. I think Adeline and Mr. Erindra, those are the slides I have for you today. Handing back over to you for more discussions.
Thank you. Kafi will let the Q&A start.
Okay. Thank you, Adam, for the insightful presentation. Now we will move on the Q&A session. Please feel free for the participant to raise your hand or type your question in the chat box.
Yeah.
Okay, let's start the question, please, for the participant.
I think while we are waiting for questions, let me share you what the market has been asking me for the past two weeks here. Number one is, what is the assumptions about the impact of XLS, right? What I told them, because during IOH merger of three years period we dealt with them, we saw one year, 2024, being the weakest, being the largest. The worst impact on us was about 700 leases churned in 2024. Since we do not know much about what's the outcome of XLS merger, we just assume the same -700 churn, non-renewals, that would impact us this 2025. This is for the sake of budgeting, since we are still in long hours discussion with XLS. I think it's better we just assume that.
That means if we add gross tenancy healthily from the big operators, but since we are assuming - 700, we see a flattish tower revenue. Similarly, if the telcos, the wireless business is not that strong, we expect FTTP to be not strong. FTTH, since the most party who gave us order last time was XL, and XL is now busy merging and consolidating everything with Smartfren under this newly formed XLS entity. We are not going to assume anything yet. The last part, the brightest spot as I mentioned, is actually the connectivity, because that would be non-telcos that we are trying to serve here. Universities, hotels, hospitals, government entities. Assuming spending resumes back to normal, then we should be able to basically get some orders from those, since we have the fiber anyway.
The way we look at this is that if we have the strong balance sheet, the strong rating, the sheer amount of fiber, and a very efficient cost structure, then we should be at least at par or better off, if not better off than the next competitor who doesn't have any of those factors I mentioned to you. That's what's happening with XLS now. The question that usually people ask me is that what's happening with the RUP issue? I think we can comment that we are waiting for OJK to come back to us. I think everything has been filed. We are just waiting for the last response to be heard from XL and from OJK to allow us to get approval for our RUP issue.
We expect to get this approval by end of June, then we should be able to get the money in next month in July. By the time we get the effective statement, then we will diverge what is the finance structure for this rights issue to the market, to everybody, right? Another question that usually comes my way is: When will we consolidate Remala, the newly acquired company with stock ticker data?
We expect to be able to consolidate at the latest per 3Q this year of 2025. 3Q. That will be the latest time that we can consolidate, because we are still in discussion with auditor, whether we wait until we conclude with MTO or shall we, can consolidate right away. We are still in that discussion with relevant parties, yeah. Those are the four main items that people usually ask me, especially after first quarter release. Kafi and everybody else, handing back over to you.
Yes. Okay. Thank you, Adam. Interesting, that you tell the bright spot for this year will be in the connectivity.
Right.
Yeah. But in the first Q25 result, the connectivity revenue declined by 14% Q-o-Q.
There is one or several government accounts that did not get renewed, and that is because of that. Yeah.
Oh, okay.
Yeah. One question that came my way was, as a result of such churn, the average revenue per application also went down. Because, if you deal with a big customer, one account, and then big revenue. So that brings up the averages of everybody in the application. If you look at revenue per unit per applications in previous quarter, then you see it got distorted. Yeah. So I would advise people to use the first quarter number going forward if you want to project something. Is that clear, Kafi?
Okay. Thank you, Adam, for your answer. Is there anybody, any question?
Yeah.
Hi, Adam. While still waiting for the questions from the audience, maybe just one question on your FTTO, Adam. I'm just trying to understand your view on the potential fiber that can still be monetized through FTTO. From a long-term perspective, what kind of upside do you see from increasing utilization or expanding to the underserved towers?
Yeah. Today I am hearing operators say about 60%, 60, of towers that they use in Indonesia being fiberized. I think, obviously for that ratio to go higher is for higher utilization by higher usage by people in all places, right, for it to go up. I think, I am sensing, as a personal user, single bar on my phone is actually increasingly common more recently during the past six months, even in the dense area like downtown Jakarta. I think actually operators are waiting to see if they can monetize at higher price points, or people call it higher ARPU. That would mean if they can manage to do that means there will be more allowance for better OpEx going out to the future, which means some of that can go into leasing infrastructure, including fiber, Erindra. Yeah.
When I mentioned just now about 2024 being among the weakest year for churn, especially from the big guys like Indosat, that struck me as, I think people are wanting to see more proof that this market can be repaired when it comes to ARPU, better price point per customer on the wireless side before they become more aggressive about anything else. Did you get that, Erindra?
Yes, Adam. I think that makes sense. Thank you.
Yeah. I think the price of wireless, and that should translate to better price for fiber solution as well. Because, I think the idea is 4G has been rolled out since 2017. Some buy-side investors said to me that they were expecting something better because merger has taken place several times already. Hopefully, if this is the last one, from five players becoming three, more rational, less player given that increasing revenue pie for everybody. So that should translate to better allowances for OpEx, including lease of infrastructure. So that is the hope, I think, Erindra.
Yep. I think that's what we are-
Yeah. I think from-
Looking forward to
our point of view as an infra company, I think you can see in our numbers, right? We have seen headwinds, many headwinds. I think we've done a good job to borrow Mr. Trump's word, when he's tough to say something. We've done a good job in preserving margins, borrowing at low cost, best-in-class operations, best-in-class CapEx structure per unit, whatever we spend per kilometer of fiber, per kilometer per towers of all types. I think- We're just waiting for the right momentum in the industry to basically wait for that inflection point.
Got it. Thank you.
Yeah. Thank you.
I think we have a few questions here from the participants. Start with [inaudible], please unmute yourself.
Yeah. Thank you, Erindra and Adam. Am I audible? Hello.
Hi.
Yes. Thanks . Maybe, if you don't mind, I have two questions . I think it should be quite a quick one . The first one, can you elaborate a bit about your plan and what to do with Remala , with Remala Abadi? Do you see that, basically iForte or SMN as a sponsored company will go to, let's say, end user, ISP provider and that makes you a direct competition to XLSmart , which is currently now is your client, and how do we look at the long-term strategic business in the fiber proposition for iForte ? That's one. Sorry, go on, Adam. Please go on.
Let me answer that one first. I think Remala is larger in connectivity than FTTH. If you look at the prospectus, for instance. They're larger with their connectivity, with their enterprise marketing than anything else. I think what we look for is a partner who can help us increase utilization of our fiber. If there's anything in fiber that they need, it's better that we work together with us. The reason why we buy the majority of the stock is, rather than becoming competitors, maybe it's easier we work together. You use our fiber. If you need fiber, tell us, and we can spend some for you. They're the one spearheading the effort to market, penetrating new markets. They are more likely, if you look at their split, it's actually more connectivity than anything else.
Okay. That's very clear, Adam. Thank you.
Okay. Number two? Your number two?
Yeah, sorry. Now that I think you're seeing some headwind from consolidation, probably they should transit to lower CapEx and probably lower growth as well. Do you see any possibility of higher dividend, Adam? Maybe if not this year, then next year, Adam. Just wondering if there is a significant shift in your dividend policy, given the statement.
I think that has a lot to do with our business case this year, whether we enter into the CapEx cycle or if some cases that the CapEx cycle is smaller, then we have more cash to pay down debt, for instance, and free up more free cash flows for more dividends. But I think for discussing dividend for this year and next year, I'm more inclined to say that it's going to be for growth CapEx, or if not growth CapEx, then to pay down debt. So maybe to your question about higher dividend, not the next one or two years, from my point of view.
Okay. Thank you, Adam. Very clear.
Thank you.
Thanks. Next question from Sabrina. Please unmute yourself.
Thanks, Adam, for the presentation.
Hi.
I only have one question regarding the connectivity business. Earlier, we expect that for towers revenue, FTTH, FTTB, we expect it to have a lower growth for this year.
Yeah.
Which for your overall revenue should be driven by connectivity. Besides from the numbers from Remala Abadi later on, have you secured any contracts besides the one from [inaudible]? How should we see on the overall connectivity revenue contributions there?
I spoke with iForte CFO, and then I think we agreed that the company Sarana would want to see a more refined approach for the new added company before it is represented what is the business plan. I think we expect next month that we will be able to talk more about Remala business plan after acquisition, Sabrina.
Okay. For the connectivity,
This is like talking what kind of companies, what kind of customers, and which locations because previously they were working as separate companies, but now we become one to be sure that we are integrated. I think that is the strategy, too, that we look for to refine the expansion strategy of Remala as the newly added entity within Sarana.
But, besides from Remala, is there any opportunities there as a driver for your connectivity business? Or it is only from Remala that we are expecting for this year?
Oh, no. I think iForte itself is also very aggressively going after connectivity business. Hotel chains, industrial complexes. We have a dedicated team to go after those types of accounts, Sabrina.
On the-
To be sure that we are not overlapping, for instance, we need to basically redo the business plan altogether.
Okay. And for the revenue contributions, I believe that it is roughly around 10% to 11%, so are we still expecting the same figures for this year?
The contribution from what? Connectivity?
Yes.
Yeah. I think that should be higher because the other side of the company are not growing as much, so that contribution should be higher.
Okay, got it. Thanks, Adam.
Thank you.
Adam, I think there is a question in the chat box from Andy. If you don't mind refreshing your statement or comments about progress about
Okay.
The relocation agreement with XLS.
Yeah. I think this relocation this time is a bit different. Meaning, in the past, we dealt with XL with its merger with Axis. I think that was 2016. The previous merger was IOH, Indosat Hutchison. Which means we have done many discussions with XL before Indosat and Hutchison before, right? This time, the XLS merger, the driver's seat is taken by a gentleman from Smartfren. So we cannot reiterate our approaches that we have taken before in previous mergers, and that means it's taking more time, rather than if it's just another XL management that we can talk about.
So I think that's what's been taking place for the past two months when it comes to initiating, making sure we are on the same page, same understanding about relocations. Now we are still in discussion. When it comes to the question where we are today, I think, we are discussing terms with them, and nothing to report, unfortunately, at this stage. So that's where we were. No, that's what I said before, and that's where we are.
Yep. Okay. Thank you, Adam.
Is there more questions from participants? Adam , while waiting for more questions, I think, just curious here, Adam, with the upcoming spectrum auction especially for the 1.4 GHz for the wireless access, Adam.
Yeah.
We understand that operators may deploy the small cell or micro base stations.
Yes.
[inaudible] in supporting this rollout?
Oh, yeah. I think, I mentioned this several times, and maybe I can say this again. For me as Adam Gifari, I think, for me, you can call it 5G, you can call it 4G, but I think it's more importantly, it's about monetization than anything else. If you monetize successfully your 4G, I think it's great. If you have to upgrade it to 5G, I think, okay, we can deal with that as well.
With 5G, if they use it for office wireless or maybe for wireless mobile, I think there should be more demand for infrastructure. We want to keep our mode of operations that going arm's length with tower owners, with landlords, with whatever structure that if we need to pay somebody to allow us to use their infrastructure for us to expand and help our customers. That would be the way to go. Again, the key is successful monetization, Erindra.
Okay, back to the point, Adam.
Yeah, of course. That is number one. Number two, depends on also what kind of payment term that operators have to pay when it comes to additional spectrum. Is it pay as people go? I have heard that concept some two years ago. Or if the Komdigi would require something like a fixed payment
Yeah.
A year or two years, which means CapEx. I am not sure if everybody is happy with that kind of arrangement. So that also depends on a lot of things, Erindra.
Okay. Got it, Adam. We have a question from Rishabh. Please go ahead.
Hey. Hi, Adam. Thanks for the presentation. Adam, you had mentioned in your remarks that we will spend a keen eye on the CapEx spend and the margins. Any guidance on those two accounts as to what are we budgeting for this year?
You mean CapEx?
CapEx and the margins.
Okay.
EBITDA margins.
Yeah. I only have EBITDA margin, because below EBITDA, it is very difficult to predict. Too many moving parts, including tax, for instance, and interest expense. For EBITDA margin, I think, 83.5% in first quarter. I think we expect to see lower to 83% this year.
Okay.
Yeah. CapEx, initially, we were thinking about IDR 5 trillion-IDR 6 trillion, just organic. Those are the initial ranges that we have in mind at the moment.
What are the key areas of such CapEx? Because you had briefed, there is slightly lower growth expected in FTTH also. So what are the key areas of investment in FTTH?
The key area would be the final round of relocations with IOH this year, 2025, and we assume some also relocation for XLS . Several scenarios, frankly speaking, Rishabh, when it comes to CapEx, is that how much that we should be spending on FTTH. If there should be more on relocations, but I think a lot of that will be relocations, frankly speaking, this year. Not to mention also ground leases. That needs to continue to be paid.
Got it. Thank you, Adam. Thank you. That is clear.
Mm-hmm. Yeah.
Okay. Are there any more, one last question for Adam? Okay, no more questions, I guess.
Yeah. Thank you, Erindra. And thank you, everyone. Let me make my final remarks here. I think this year will be the year of overlapping two impacts of mergers in one year. We have done some scenarios, including to reach out comments about what would be the area that we spend CapEx on. Assuming just flat revenue, low single-digit revenue, we still have to spend CapEx. But the idea is to support these merging entities, IOH and XLS, to become healthier in their wireless and fiber solution ventures. Relocate those redundant payments after the merger, make it that their numbers, assuming their merger plan is successful, reach those numbers under new management board, new entities that they form from the mergers, and then take it from there, basically. We strongly believe if we see better monetization, there should be more OpEx to be spent on infrastructure.
And we have plenty of that. And then can be in many forms, as I mentioned in our capabilities. We are obviously waiting for that inflection point. I think everybody in this call, including me from the company as well as the buy side, the sell side, we can also monitor together this development while we continue to execute whatever needed from the industry. We want to contribute our part. I think we've been doing so, and I think we've delivered very efficient lease of infrastructure to various parties. It's just a matter of making sure the whole circle works from end to end, including starting from monetization. Hopefully the call today is helpful to you all.
Okay. Thanks a lot, Adam, for your-
Thank you, everyone. Thank you, Adeline and BRI Danareksa .
Thank you so much, Adam. See you next time.
Bye, everyone.
Bye.
Bye.