Protelindo (Sarana Menara Nusantara), the second-largest tower company in Indonesia, announced that it has completed the acquisition of a 94% stake in Solusi Tunas Pratama (STP), the fifth-largest tower company in Indonesia for $1.17bn USD (16.7 trillion Indonesian Rupiah). Specifically, Protelindo has purchased STP’s 6.8k towers and 5.0k miles (8.1k kilometers) of terrestrial fiber and subsea cables.

Notably, key shareholders of Solusi Tunas Pratama (STP), including private equity firms the Carlyle Group and Southern Capital Group, sold their shares to Protelindo.

Transaction Overview – Protelindo Buys STP Towers in Indonesia

Solusi Tunas Pratama (STP) has 6.8k towers in Indonesia with a tenancy ratio of 1.84x. Indeed, this equates to 12.5k tenants with equipment on the company’s towers. Overall, 85%+ of STP’s towers are located in Java and Sumatra, two islands with the highest population densities in Indonesia.

Fiber

STP operates 5.0k miles (8.1k kilometers) of terrestrial fiber and subsea cables, which includes fiber networks that the company operates in-partnership with third parties.

Solusi Tunas Pratama STP Fiber Map

Of STP’s overall fiber network, 2.9k miles (4.6k kilometers) are deployed for mobile backhaul.

Valuation

Protelindo’s acquisition of STP implies an enterprise value for 100% of the company of $1.68bn USD (24 trillion Indonesian Rupiah). Additionally, the company expects the acquisition of STP to be earnings accretive in 2022.

For 2022, STP expects to generate ~$150m USD (2.1 trillion Indonesian Rupiah) of revenue and ~$130m USD (1.9 trillion Indonesian Rupiah) of EBITDA. Therefore, Protelindo’s valuation of STP represents a ~13x EV/EBITDA multiple.

Financing

To fund the acquisition of STP, Protelindo raised $980m USD (14.0 trillion Indonesian Rupiah) of new debt, with the remaining $189m USD (2.7 trillion Indonesian Rupiah) coming from its existing facilities. In turn, Protelindo’s pro forma leverage increased to ~4.5x net debt-to-EBITDA.

Protelindo (Sarana Menara Nusantara) – Pro Forma for STP

As of Q3 2021, Protelindo had 21.6k towers in Indonesia and 40.5k tenants, equating to a 1.87x tenancy ratio. Additionally, Protelindo had 37.0k miles (59.6k kilometers) of revenue generating fiber.

Pro forma for Protelindo’s acquisition of STP, the combined company has 28.3k towers and 53.0k tenants, implying a 1.87x tenancy ratio. As such, Protelindo will be Indonesia’s largest tower company, ahead of Mitratel, which recently completed its initial public offering (IPO) and has a portfolio of 28.0k towers in Indonesia.

Finally, in combination with STP, Protelindo (Sarana Menara Nusantara) grows its network to 41.5k miles (66.8k kilometers) of terrestrial fiber and subsea cables.

Strategy

As one of the largest remaining independent tower companies of scale in Indonesia, STP was a strategically significant acquisition for Protelindo. While Tower Bersama (IDX: TBIG) remains a possible take-out candidate as well, the company is much larger than STP, with its portfolio comprising 19.6k towers.

Adam Simmons covers Towers for Dgtl Infra, including American Tower (NYSE: AMT), Crown Castle (NYSE: CCI), SBA Communications (NASDAQ: SBAC), Cellnex Telecom (BME: CLNX), Vantage Towers (ETR: VTWR), IHS Holding (NYSE: IHS), and many more. Within Towers, Adam focuses on the sub-sectors of ground-based cell towers, rooftop sites, broadcast / radio towers, and 5G.

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