Okay. Good afternoon, everyone.
This meeting is being recorded.
Welcome to TOWR third quarter 2024 earnings call. My name is Bob Setiadi . I am the telecom tower analyst for the CGS International Sekuritas. We are pleased today to have management from TOWR, [Non-English content] Adam with us, to present the quarter as well as the outlook. I think let us start this call with the presentation from [Non-English content] Adam, before we continue with the Q&A.
Thank you, Bob. Thank you, Ruth. Thank you CGS for hosting the call. Hi, everyone. Good afternoon. Hope you are all well. I think this afternoon we see a bit of a volatility in the Indonesian market, yeah. Rupiah a bit weaker. But I think these too shall pass in our minds that there should be a silver lining at the end of the day, how we can go about this volatility in the fixed income bond market, yeah, as well as the currency. Let me start with our most recent release, to be sure we are on the same page. This is our press release. At the same time, we released the third quarter results. This is the first quarter that we consolidate IBST, the company that we bought on July 1st. Revenue grew by about 8.4%, EBITDA 7.1%. EBITDA margin is around 84%.
IBST is carrying a bit lower margin during the first quarter of its consolidation. We all know also that the growth from non-tower is still quite strong with lower margins. We managed to basically control this, maintain this about 84%. Net income sums to about a slight increase to IDR 2.478 trillion from last year, IDR 2.474 trillion. Net income margins stands at about 26.2%. Tower count, on the following line, reached 35,371 towers, grew by about 18%. Total tenants 58,165, grew by about 7.2%. Tenancy ratio as a result decreased from 1.8x last year to 1.64x this quarter. Notably because IBST carries a lower tenancy ratio, but as you can see, we have worked very hard to basically maintain the margins even though tenancy ratio has come down.
Total fiber, physical cable that we have, including that we have FTTP, FTTH, and backbone, subsea, everything lumped into one, sums to about 160,000 km of fiber run, grew by about 33% year-over-year. Fiber tower, the physical cable, part of this total fiber, grew by about 22.3%. FTTP revenue generating grew by about 20.9%, including IBST. The utilization ratio, which is divided by overall, comes to about 182%, which came to about almost 1.5 million home passes. It is 167% growth. The home connect grew by about 100% to almost 156,000. Connectivity activations remain robust to 26%, comes to about 50,761 activations under the connectivity segment. We are highlighting that this quarter, the leverage comes to about 4.35x, even though we have paid almost all of the debt that we are incurring to buy IBST, because we have strong cash flow management as well as compensation.
We have leverage slightly manageable to 4.35x as of September. Again, this quarter marks the first quarter where we consolidated IBST results. I think we have mentioned in the last quarter that we should not see IBST's first quarter, second quarter of 2024 to be reflected in Sarana, the TOWR results, because we have done a lot of synchronizing of the accounting policies as the new owner of IBST, as well as the assumptions that we used during the acquisition evaluation. We have our own assumptions like what would be the towers, what would be the revenue that we expect from the fiber that the company carries, and then basically, not take into account anything else that we don't see as with very little value or even no value. Total towers increased to 35,000, 18% year-on-year growth.
The tenancy ratio reached 1.64x due to two factors, which is IBST consolidation, with lower tenancy ratios, as well as from IOH tower lease contracts points to new locations. The contribution of revenue from the tower segment to the consolidated revenue recorded as stable at around 67%, slightly increased from previous quarter because inclusion of our result from IBST towers. Business growth from non-tower segment continues to grow impressively. The contribution is about 33%, slightly down from 34% because IBST consolidation again. The growth of revenue from FTTP, connectivity, and FTTH, comes to about 18%, 13%, and 14%. A very low base FTTH at 69% year-on-year. The largest contributor to non-tower segment is fiber leasing. The total asset itself growing 33% to around 150,000 km.
The fiber to the tower segment utilization without IBST, we are trying to show to separate the existing fiber without IBST, is about 190%. If we include the fiber utilization because of the IBST, then 152% utilization because IBST itself, it was carrying 132%. The previous quarter IBST utilization ratio was about 122%.
So IBST itself is also growing organically the utilization ratio of its fiber to the tower. In the third quarter, our CEO mentioned that the first quarter that we consolidated result from IBST , we are pleased to report that IBST has contributed a net profit of IDR 41 billion during the three months to TOWR result. We are very optimistic that operational synergies will continue to improve so that IBST net profit contribution can increase. I think IBST net EBITDA margin was below 80% during the three months ended September 2024.
As an update of our process to do a rights issue, we just got approval from SM shareholders at the EGMS on October 25th. The use of proceeds will be to pay down debt as well as possibly working capital needs. Strategically, we expect this rights issue to basically provide new capacity to continue organic or inorganic expansion, help maintain company's investment grade of BBB from Fitch Ratings as well as BBB- from S&P . Now move on to the presentation slides, which is more of a 3Q compared to the 3Q of the previous quarters that we can look at. I think we've looked at this before. I'm going to skip. Just to highlight the access to low cost of funding, I think is quite strong.
We have not seen much of an impact on this quarter from the cut of interest rate by the Fed as well as BI, even though now we are seeing concern from the market whether there will be any cut from the Fed side. If there's no cut there from the Fed side, then BI may follow by not doing any cuts. But, I think the dust from the U.S. election should be momentarily quite concerning, but I think there will be, at the end of the day, certain cuts will happen.
We don't know which quarter, but, I think we have set ourselves to basically, get benefit from the cut in interest rates, as about IDR 15 trillion- IDR 17 trillion of our debt that we have today, is linked to BI rate. Yeah. So if there's a cut in Fed, and BI follows, then we should be benefiting.
Liquidity amounts to the company sums to about $695 million equivalent. We borrow, I think almost all, if not all of this $965 million is in rupiah. We're just stating in dollars for sake of presentation or communication, and investment grade ratings still in place. I think one thing that I would like to highlight is that contracted revenues stands at about IDR 78.8 trillion, we were the largest, and we continue to be the largest. We expect that, whatever new funding or existing cash flow that we have generating from operations can continue to fund CapEx, dividend, and share buybacks. We have been consolidating. We are in the works of doing some acquisition as well as we speak, even though I cannot name them.
We continue to look for opportunities for us to continue consolidate the market in the towers as well as the fiber segment. Moving on the towers that we have. This is the split of towers that we have as of September. Total towers 35,300, 52% in Java, Bali, the most dense areas. Sumatra is almost 8,000 towers. Kalimantan, 3,200 towers. Sulawesi 2,700 towers. Papua and Maluku continue to be not so dense in its tower penetration, even though it's growing quite nicely, especially from the likes of Indosat. They want to have a good penetration though on the eastern side of Indonesia. On the fiber, we have reached about 258,000 km. Fiber to the tower, 215,000 km revenue generating with 1.8x utilization ratio. FTTH, 20,300 km of fiber including IBST. Backbone and submarine 22,000 km.
Quite substantial that we expect to continue to basically utilize into multi types of customers and solutions with our fiber. The build versus return slide about the growth of towers. We added 5,400 towers during the past 12 months. We added 37,000 revenue-generating fiber during the past 12 months, which I think in line what we have said to market before 30,000, 40,000 kind of a revenue generating fiber adds during the past 12 months. Towards the end of the year, we added 33,250 activations. Home Connect reached almost 81,000. 939,000 home passes addition. Return, we're prioritizing protecting investment-grade ratings, which I think we have delivered. We have maintained investment-grade ratings. I think both S&P and Fitch have said so. Return dividend policy, there has not been any change.
We expect also an interim dividend in coming months as per usual practice of the company. Diverse product portfolio. Towers tenancy ratio 1.64. 54% towers located in Java. Sorry, I was mentioning 52%, it should be 54%. IBST is skewed towards Java, the tower presence, and then 46% ex-Java. So there's a bit of an increase in towers located in Java. This is not to say ex-Java is not growing. I think we see a continued demand for really quite remote areas in the eastern part of Indonesia for the likes of Indosat to basically penetrate. We're working with them to basically provide towers and fiber in those locations. The growing need for additional scope. I think we are working towards increasing efficiency for backup powers with batteries and stuff like that. We are working with several of the operators.
I think XL and Smartfren, they are still in the quite serious discussion for the merger, so not so much of a movement on the XL part. I think the idea is that they know that the shift for more efficient energy, not just about backup power using genset, but there needs to be an increased usage with batteries as well. Fiber to the tower reached 215,000 revenue generating by end of September. I think there continues to be opportunities for us to increase utilization on our fiber to the tower. I would like to remind everybody that when we say the fiber that we own, and if there is a utilization done by another segment using fiber under Sarana Group, unfortunately, we will not be able to report it, I think.
People can look at the spend of CapEx efficiency actually increased in the form of ROE or ROI. We do not have to necessarily spend the same CapEx for FTTH, for instance, in the same location. We can use some of the FTTP fiber that we have to support the FTTH expansion as well as connectivity segment and fibers. As we continue to grow the fibers expansion, we expect this kind of synergies to continue. The home penetration is about 11%. The home FTTH assets reaches about 1.5 million home passes by September. So in line with what we said to market that by end of year, we should be reaching 1.6 million-1 .8 million home passes. We are on track to achieve that by year-end. This is the CapEx spend.
The blue one on this September is inclusive of IBST, so there are a bit of an increase. Organically, the spend of fiber is decreasing in significance. Since there was a one-off of IBST on this chart, it seems that the tower CapEx is higher than the fiber itself. Even though that is not the case, we continue to be aggressive on the CapEx side. On the tenancy ratio, we mentioned the 1.78x. By December 2023, tenancy ratio 1.64x. Utilization ratio 1.86x, decreased a bit to 1.82x. This is December compared to September. Tenancy ratio on the towers and fiber utilization ratio does not include asset and synergies operationally between towers, FTTP and FTTH, as well as connectivity business.
We should be able to basically protect our return on equity just on existing assets that we have whenever we expand on other types of fiber solutions, helped by the fact that we have sheer amount of towers in various locations as well as fiber utilization that we expect to continue to happen between different types of fiber solutions that we can offer to markets. On the fiber to the tower generating revenue, which reached 125,000, which is a marked increase from 182,000 by December. Next page. Activations 15,700, and the number of pre-payments as of December, 12,600. The increase continues to be quite showing how busy we are. The tenancies on this one increased a little bit from the IBST consolidation on this chart. On the AFFO. On the revenue, 7.7% CAGR. Revenue on tower, 50.1%. EBITDA grew by about 12.4%.
AFFO grew slightly lower, even though the gap, I noticed, seems to be closing between EBITDA and AFFO growth because we managed to basically suppress our interest expense as a percentage of gross debt that we have, which I think we can show it in later slides. The amount of future revenue contracted is IDR 78.8 trillion. I think the highest that we have reached so far. This is including that we consolidated IBST, and under IBST, we have renewed a good 10 years under Smartfren contracts. That helps with this metric, IDR 78.8 trillion.
So actually, an increase from last quarter of IDR 74.2 trillion of contracted revenue. Now almost IDR 79 trillion contracted revenue. Even though we have consolidated, paid for a block of the price that we acquire for IBST, net debt to EBITDA remained at about 4.3x.
Average interest rate 6.3%, which is, I think, JIBOR stands about seven percentage. The yield of 10-year rupiah bond sits at about 6.7% as of we speak now. The fact that we are able to get interest rate of 6.3% blended, I think is quite an achievement that we have continued to exhibit since the start of the year. I think in December, I remember because of the spike of BI rate taking place September last year by 25 basis points, we were as high as 6.5,% but now it's come down to 6.3%. We maintain the ratings from the three rating agencies, S&P, Fitch National Indonesia Scale, as well as Fitch Global, BBB-, AA A, and BBB, respectively. On the year-on-year for the quarter, the three months ended September, revenues grew by about 12%.
EBITDA grew by 12.4%, including IBST, net income 2.8%. I mean, this is a result of finance charges. But I think on the operational level, we continue to show resilience by adding towers, more fiber. We are realizing better economies of scale on basically doing the same thing, running operating towers, maintaining them, as well as marketing the fiber will be done by capacity that we already have for Protelindo Towers. That is basically duplicated all the way to STP, all the way to IBST. So that helps with fiber, the same way that we are running the fiber operations, the non-towers. So margins basically remain intact. On the IBST itself, we mentioned that IDR 41 billion contributed during the three months ended September. We expect improvement, obviously, in coming quarters.
I think the peak should be able to be demonstrated sometime in 2025 full year. I think we mentioned that we should be about IDR 700 billion in EBITDA for 2025, in the most recent facilities as well. Cash flow collection, I think, quite okay for the nine months, IDR 11.2 trillion. If we had IDR 12 trillion in revenue, IDR 12.7 trillion, IDR 12.6 trillion. So we have collected a lot of the revenue that we have accrued so far. CapEx+ OpEx sums to about IDR 7.7 trillion. Interest expense IDR 2.2 trillion. Cash ending IDR 2.5 trillion, after acquisitions. So we borrowed IDR 4.8 trillion, including to pay for the mandatory tender offer, which is not included in this set because we only paid for the MTO October 4th.
So we prepared for the cash, which is MTO payment took place, like, three days after the cut-off date of this financial statement.
There was a dividend during the nine months of IDR 935 billion. Cash ending is about a strong IDR 2.5 trillion consolidated. On the profit and loss revenue, we grew the quarter compared to the quarters before as well as the quarter last year, 12%, 6% respectively. On EBITDA to 12.4%. EBITDA 7%. Again, showing strong trends, upon IBST. Net income this quarter compared to last year, decreased by 2.8%, but there was an increase just last quarter, by 4.3% quarter-on-quarter, reaching IDR 842 billion during the quarter, for three months, ended September 2024. Revenue analysis. Tower grew us 0.8%, including IBST. Fiber to the tower 18%. The connectivity grew 13%, FTTH, from a low base, grew by about 370%, 369%. So total top line growth compared to nine months a year before, 8.4%. Summary operational data. Towers 18%, tenancy 7.2%.
Tenancy ratio decreased because tenancy grew slower than we grew towers. Fiber to the tower grew 20%, connectivity 26%. This is the three months this year compared to last year. FTTH 100%, yeah. Because again, this is a build-to-suit process that FTTH takes a lot of time and a lot of sweat to basically execute the orders. FTTH takes quite a bit of time to basically execute, and we are showing the numbers on this page. IDR sits at about almost 15,800. Again, just to show people that we have hedged the debt maturing 2028, 2029, that we borrowed in originally U.S. dollars. The red boxes hedged at about 15,000 upon maturities. The $138 million should be paid in the next quarter. This quarter, 4Q. We have prepared for the cash, so it should be no issue.
Whatever U.S. dollar debt we have remaining are the red boxes on this page when we see again each other in the next discussion for the company's results, that you should not be seeing the bond again. It should be paid down, the 10-year bond that we issued 2014. I think that's it. Ruth and Bob, handing back over to you for questions and discussions.
Okay. Thank you, Adam.
Thank you.
I think we can start with the Q&A. Our audience, if you have any question to Adam, please use the raise hand function or alternatively, you can type in the chat box. Oh, we already got one.
Yeah.
Please go ahead, Sabrina.
You can.
Hello, good afternoon.
Hi.
Yeah. Hi, Adam. Thanks for the presentation and thanks, Bob, for the opportunity.
Yeah.
I have three questions from my side. I know that you just consolidated your IBST figures.
Which from the latest available data that I can find for IBST, is actually the tenancy ratio is about 1.74x, correct me if I'm wrong. That's roughly about 5,800 tenants for IBST.
Yeah.
I saw that your net tenant additions in 3Q 2024 only reached about 3,800 additional tenants. I would like to understand where this discrepancy comes from. That's my first question.
So, second question is, considering there are chances of a rate cut, right?
Are you looking to change your debt mix as in increasing the floating portion or it will remain as is? And my last question is, seems like your goodwill on your balance sheet keeps on increasing as well. But we note that this is due to the past acquisitions, right? So how should we assess its sustainability? Is there any potential risk of impairment going forward? Only three questions.
Yeah. So, the number two. So on the borrowing. So I think the rate that we borrow, that is a floating rate. I think, we play by approximately 50% fixed rate and about 50% floating. The reason why the floating is a bit higher, because we think there's an opportunity for us to borrow floating rates, when the banks are offering a very good rate, including the biggest banks in Indonesia. The unfortunate thing about bonds is that we have to wait until it's been paid down before we can basically enjoy borrowing fixed rate. There's an opportunity for us to do so, in the following quarter when we see the $138 million bonds, long dated bonds, that was issued 10 years ago. When it comes due, we should be able to replace it with a floating rate borrowing.
On the goodwill, I think we are working to basically utilize the asset that we have, including the past acquisitions. Especially the biggest ones are the towers. STP, IBST, KIN, all those names. We try to utilize as much as we can. The thing about the tower business is that we have to reallocate, make sure that all the segments are growing on the tower side, including the past acquisition we have. I think we're doing that. STP and IBST , the listed ones at least, we should be able to show growth on each of these two portfolios. Because if we are focusing on the audited numbers here, the listed ones, we should be able to basically protect the bottom line from further negative goodwill, as you mentioned. And then what's the first one?
Tenancy ratio increase around?
Yes. The towers under Protelindo was about low 1.8x just last quarter. I think IBST was showing 1.2x- 1.3x last quarter. That resulted in a lower tenancy ratio blended this quarter. The decrease is due to the decrease in the number of tenants. If you strip out IBST, I notice is that, basically, we mentioned this last quarter. We experienced more than expected churn from Indosat, from XL Axiata as well. From previously budgeted numbers because, during consolidation and during more intense competition on the operator side, they would rather slow down their renewals, even though the numbers are still within the 1%-2% churn that we have mentioned before to markets here. I think globally, 1%-2% annual churn is something that is not unusual.
I think we mentioned, it used to be the number about 300, but this year, because of slower growth on the tower side, weaker selling price because of competition, the churn was about 500-700 for the full year, including the one that you just mentioned, Sabrina. Hope that's helpful for you.
Okay. The 500-700 is a net churn or?
It's a net churn for the full year.
Okay.
Yeah.
Okay.
I think we mentioned this in previous quarters already.
Okay. Thank you.
That's why, I think we are looking towards better years, better quarters from the tower side. I think during the start of the year, we saw quite exuberant dynamic tower market, but turns out second Q and third Q was more challenging it turns out. We are experiencing that on our performance on the tower side as well. We have shared this with markets before in previous quarters.
Okay. Thank you. Let's move on to the next question, [Non-English content], from chat box.
Yeah.
This is from Melvin from Stockbit.
Yeah.
Congratulations on the relatively smooth acquisition process. I have a few questions.
Yeah.
Number one, a minor question. Could you provide some insight as to why PT Dwimuria Investama Andalan becomes, but then PT Sapta Adhikari Investama. Number two, could you outline your strategy for increasing the tenancy ratio of IBST tower given the current trend of industry consolidation?
Number one, I think we have not mentioned that, who is the standby buyer. I do not think it has been announced yet. Melvin, I do not know where you got that information. It is already? Prospectus, yeah. I think it is a family entity, if it has been announced yet. It is basically, one is of the parent, one is the children. It is the intention from the family to basically continue to invest in this business, given that we have shown resilient results during various times, including difficult times of weak rupiah, higher interest rates. That is the intention from the family as far as I can know. Then for increasing the tenancy ratio, I think we are treating all the portfolio as one now, not just that of IBST. Everything is consolidated. Whenever we market towers, it is always including IBST.
We are utilizing whatever towers we own, and we add from organic growth. We are doing that as we speak. We see lower tenancy ratios from previous acquisition as well. We are increasing that by marketing that under Protelindo marketing effort that we use digital tools, information that we gather from markets, how signals are compared between one operator to another in certain locations, and then how to improve their revenues by showing the trends of social media users, for instance, to be sure that their respective customers know that there is a need for improvement in the network quality. Just to analyze one area, we can achieve that by, to market that, showing, say, for Facebook, what kind of WhatsApp speed that is happening in certain areas from one operator to another.
I think I can share that this kind of slower environment, I think there is a clear awareness on the part of the operators that the need for improvement is there. It is just that they are managing their top line as well, while there is a bit of competition, as we all know, on the wireless side. Before they embark into further expansion translating to potential increase in tenancy ratios, they are working with us basically. We are seeing intention from, say, Indosat at the moment to basically for the next couple of years, thousands and thousands of new sites that they want to penetrate in the form of both co-locations as well as build-to-suit. Whenever you hear from Indosat that they want to basically increase top line on the wireless side, it is basically translating into new tenancies add on our side as well.
This kind of weakness, we do not expect that to happen continuously. Hopefully under the lower interest rate environment, the better pricing environment, the improvement is happening as in future quarters. We have seen the plan from the said operators that to improve that, to achieve whatever revenue that they need, they need to improve their quality of networks. I think I personally experiencing drop calls, using GSM. I cannot accept SMSs in the places that I live, just behind stock exchange. I think this kind of improvement are yet to be fixed in coming quarters here. Just a matter of time. Hopefully that is helpful for you, Melvin.
Thank you. Just would like to remind the audience again, if you have any question, please type in the chat box or use the Raise Hand.
Yeah.
If not, let me continue back with my question.
Yeah.
Just some housekeeping. Have you completed the refinance of IBST debt? That is number one.
Yeah.
Number two is, you mentioned about you are still open for M&A. So what are the characteristics of your potential target? Is it more towards tower, fiber or any characteristic there?
Yeah.
Okay, sure.
Great. I think we have done quite a bit of refinancing, which aligns IBST pricing on the loans to be the same pricing policy as Protelindo already. I think we mentioned, it used to be 8.5%-9%. Then I think sometime in August, the company was already refinanced, or at least, aligned the pricing with that of Protelindo to 6.5% at least. If there is a different dynamics in the macro environment because of U.S. election is done, for instance. Then the Federal cut is happening more, realizing than just, and not just about expectations. So we should be, and looking again, all these possibilities of decreasing costs. We see a one-year bond done by Astra, for instance, it used to be 6.3%, 6.4%. That was before U.S.
10-year, was about 3.6%-3.8%, but now the same number has increased to 4.2%, 4.3%. A bit of a reversal, we admit, but at least we are ready with the possibility to issue more bonds or borrowing more from banks, whichever that is beneficial for the company. What is the second question?
Second question is, about the M&A characteristics.
M&A characteristics. I think we are seeing more fiber than towers, admittedly, even though we are seeing smaller tower companies are trying to basically divesting themselves. I cannot name names because we have NDA with everyone, including the non-listed ones. I think fiber continues to be quite interesting. It can complement whatever we have in existing fiber locations. There continue to be demand for internet in location where we operate. FTTH is the mode of growth as well for Indosat, so that is quite encouraging. I think we are looking more towards fiber now, participating, even though towers is not to say that there is not much left to be acquired for towers, because we see opportunity to buy more towers. But admittedly, fiber is increasingly the names that have been mentioned in our meetings.
Thank you.
Yeah.
I would like to remind the audience again, if you have any question.
Yeah.
While we wait for.
We have from Kevin.
Oh, yeah, sorry. Yeah. Chat box.
Just read through. Could you share more about demand for FTTH? I think FTTH is the strategy that was announced just 2023. 2024, 2025 will continue to be the years FTTH is growing. I think with XL, for instance, who started this from the non-Telkom side, they only started in 2022. Indosat replaced the slower growth on FTTH because XL is merging. We continue to basically, I think 1.6million- 1.8 million home passes to be achieved by year-end. We are building a new budget for 2025, including FTTH, obviously. I think it is a market that for the likes of mobile operators who have just started FTTH, continues to be the venue of growth for these guys. We are quite optimistic for FTTH opportunities. Number two areas Indonesia experiencing highest demand growth for FTTH. Actually, ex-Java is quite interesting for us.
The first batch of FTTH was actually in Sulawesi for us. Sumatra is also a market that we are penetrating. We continue to be providing FTTH by owning fiber, which is slightly different than most other FTTH players here. The way we mention the number of home passes, I think is quite conservative because when we build FTTH, it is under a build-to-suit contract, meaning that the definition of homes being passed by the fibers are determined by the handover minutes of meetings between us and the said operators. Even though in reality, the fiber to the home when it is designed initially, for instance, to serve housing complex is worth of the cable. We know there is already another housing complex in the west side of those cables, which we can obviously try to market later on our own or working together with operators.
We think we are quite conservative in defining home passes in this sense, because again, the definition of home passes being passed by the fiber that we built is under the build-to-suit contract. Obviously we can use and be more aggressive on utilizing the FTTH cable for more home passes in the future, creating into more home connections.
Question number three from Kevin Bahana is that, do you think TOWR will focus more on acquiring fiber companies rather than tower companies? I think number three, just to share a bit on towers opportunity. When we were discussing IBST opportunities, we were try to create a transaction that is workable for us, accretive to the shareholders on operational and then on the EBITDA revenue growth, and then can create for platform for consolidations or for organic growth going forward.
The process can take quite fast, including IBST. I think we heard the process was last announced just last year, less than 12 months ago. We concluded like nine months after that, the said process was basically beginning. The process letter was sent to us by their sell-side advisors. The process of an acquisition can be quite quick, and we are fortunate that we can do a quick turnaround responding, getting the financing for it, and then acquiring it after lengthy due diligence. Whichever opportunity comes our way, we try to digest and then execution can be quite quick on our side. That is one of the things that sell side likes doing this M&A with us because we are ready with the capacity to absorb the additional assets and then immediately do a turnaround on the profitability on the said asset.
Should be relevant also for the Sabrina questions later on about the goodwill itself. When we do this, it is going to be whether we can extract value, complement our existing fiber, existing towers, and then whether we can basically benefit from whatever industry dynamics that we are experiencing, including the fiber itself. The opportunities are presenting itself continuously on both towers and fiber. Although admittedly, now fiber is the one that is being mentioned more during our internal meetings. Just to share what is happening in the board and management meetings of the Sarana, including subsidiaries.
From Andy.
Andy Kurniawan question: How could you share the progress of Indosat and Hutch power relocation until now? For 2025, I think we should be less than 2,000 locations to be relocated. I thought this is talking about end of year 2024 until end of year 2025. That should be in the mid-teens of hundreds. Less than 2,000 that remain to be relocated under Indosat Hutchison relationship between us and IOH. Hopefully, that can be concluded in the next 12 months during 2025. If not, some carryover may take place during 2026. We are very hopeful that this is concluded sooner than later, obviously for the benefit of Indosat that after this, they can focus more on organic addition and just about fixing their financial abilities to deliver under the context of tower leases.
Number two from Andy is that FTTH business has a good growth from connect. In line with that, could you share the rental rate trend of FTTH? It will be more than current level or low. I think, for FTTH, including all fibers, we are pricing it at market. The good thing about our fiber presence is that FTTH has demonstrated our ability to grow FTTH, piggybacking on our FTTH as well. We are protecting returns. Typically, we have an eight-year payback on the CapEx that we spend for fiber, including FTTH. Whatever efficiency that we can basically get from FTTH connectivity fiber to the tower segment altogether, we are delivering to the whole of Sarana's results. Whatever the market price. Sometimes, if it's a bit difficult, then we are charging better economics.
Sometimes if we can basically get more benefit by basically piggybacking on FTTH, we can use that to our advantage by getting more volumes. Because we are demonstrating with more volumes on the same business using fiber, for instance, we should be increasing our economies of scale, Andy. Hopefully that's helpful for you.
Yeah.
Yeah.
Would like to remind the audience again, if you have any questions to[Non-English content] Adam, please feel free to raise hand or type in the chat box. Still one minute left.
Yeah. The process of the rights issue, we are working with the regulators now, I think by way of update. We will update markets with more details about the exact timing for it. But I think we are working not long after the EGMS that we have obtained shareholder's approval on October 25th. We are working with regulators to basically getting an effective statement for such issuance. Yeah.
Yeah, sorry.
Yeah.
One more question from Sabrina.
Yeah.
Go ahead, Sabrina.
Hi, [Non-English content]. Just two more follow-up questions. I saw that the revenue contribution from XL, Telkomsel, and Indosat is lower currently. I would like to know how much is the proportion of Smartfren's revenue contribution to your overall revenue contribution right now. Previously, it was about 5%, right, [Non-English content]? If I'm not mistaken.
Yeah. If you don't see it in our revenue breakdown, it's got to be still.
About 5%.
Yeah.
Okay.
Because the non-towers, there was a bit of a decrease in revenue contribution on the non-tower from 34% last quarter. Now it comes down to 33%. But I think overall, Smartfren is still not that substantial compared to Telkomsel, XL, and Indosat.
Okay. From your lease rates, I think there is a slight uptick in your lease rate in 3Q 2024. Is this due to more favorable lease terms with Smartfren following the acquisition?
Admittedly, we recognize some of the tower revenues on a cash basis because there are certain customers who wanted to do reconciliation every time we do the annual billing. Based on those, rather than we invoice them or accrue revenue earlier, which translates to us having to pay the VAT, we decided to do a portion of that revenue to be only by the time we are about to receive the cash, i.e., after such audit or reconciliation between us and the said customer, then we only basically accrue the revenue or recognize the revenue on the top line. Yes, the process sometimes can be quite lengthy for certain customers.
Okay. The current market lease rate is hovering about IDR 12 million. Would you say it is about that amount?
I think quite stable in that area. The lease rate, including everything under Smartfren, under IBST.
Okay. Thank you.
Thank you.
Yeah. Thank you. I think we have no more questions, so probably if you have anything further to mark.
I think IBST margin was, during the last quarter, yeah, three quarter, I think below 80%. Which is obviously below the normal rate of our EBITDA margin. So, we are working towards consolidating more, synergizing more between IBST assets into our existing standard operating procedures, headcount as well, to be sure that everything is aligned, synergistic. So we expect the 2024, 2025 full year will be the better year for IBST. It is quite a complex asset, admittedly, IBST, compared to STP that we acquired 2021. So, it is taking a bit more time. But, we have realized whatever we can within the capacity of the management, to basically, like cost of financing, we have done. A lot of the operations are already done. 4Q should be better. 2025 should be better for IBST. And of course, Sarana result as well from IBST.
Thank you. If there's no more question, I think we can close this call. Once again, thank you, [Non-English content] Adam, for.
Thank you, Bob. Thank you, Ruth.
I think we can close it. I hope we can see you again.
Thank you, everyone. Have a good evening.
Thank you.
Bye.