What’s new: Mitratel saw a slower start to the year than expected as Tower trends softened on lower ARP/Tenant. While Fiber remained the key driver, it was partially offset by the natural decline of its Reseller business. EBITDA growth was also slower while earnings managed a 1% growth.
Although the merger of XL-Smartfren poses as a challenge to Indonesia’s Tower industry, Mitratel is relatively less exposed (<20% revenue exposed) compared to TOWR (more than 30% of revenue exposed). Similar to Protelindo, Mitratel’s expansion to adjacencies such as Fiber and Power to the Tower is starting to bear fruit; Fiber was the key contributor in Q4. We see Mitratel as the beneficiary of challengers’ expansion into ex-Java in the medium term and stay Buyers with a IDR 1,135 price target.
Key takeaways:
- Revenue was up 1.4% YoY as Tower leasing slowed. Fiber remained the key contributor, partially helped by the IDR 650bn (US$ 41m) acquisition of PT UMT in early December 2024.
- Tower leasing: The Tower Owned business (82% of sales) slowed to 0.7% YoY from 2.5% on lower ARP/Tenant.
- Fiber: Fiber business (6% of sales) rose by 27% YoY versus 40% prior, in part due to its acquisition of PT UMT in early December. While still nascent, rising demand for network speed is expected to drive continued demand for fiber to the tower services. Currently, 50% of its fiber assets are in ex-Java.
- Tower-related: The Tower related business (7% of sales) which tends be volatile, grew 9.7% YoY from -4.6%.
- Reseller: Reseller (5% of sales) fell 16% YoY, which is in-line with Mitratel’s gradual shift away from the lower margin business.
- EBITDA growth slowed to 1.1% YoY from 5.2% prior as EBITDA margins fell by 30bps YoY to 83%, in part due to higher contribution from slightly lower margin operations like Fiber (>70% margin).
- Net profit was roughly stable YoY (+1%); net profit margin down 10bps YoY to 23.3%.
- Reported Net debt/EBITDA improved to 1.9x from 2.1x last quarter. Given its relatively lower leverage amongst peers, there is potential for further M&A opportunities, and in fact we have seen rumours that the merger between Mitratel and Tower Bersama has started to be discussed again.
- KPIs:
- Towers net addition rose by 189 to reach 39,593 which represents the largest TowerCo in Indonesia.
- Tenants continued to grow ahead of Towers growth, up by 391 to 60,259 with tenancy ratio at 1.52x. As a reminder, the company had guided tenants to grow by 2.5k in 2025.
- Out of the three Towers under our coverage, Mitratel remains the most exposed to ex-Java where demand is currently, with proportion of towers at 41% Java/59% ex-Java; Protelindo is at 51% Java/49% ex-Java. We think there is further room for expansion in ex-Java, where tenant growth has been outpacing that of Java given the telcos’ expansion in ex-Java.
- Fiber network length grew by 2.5k km to reach 53.5k km, on track to rise by 10k KM this year as guided.
Conclusion:
Despite being the largest TowerCo in Indonesia, Mitratel is less exposed to the XL Axiata-Smartfren merger compared to Protelindo where more than 30% of its total revenue are exposed. That said, the latter has diversified to adjacent businesses. We expect Indonesia’s tower industry to be challenged by the network consolidation of XL and Smartfren. Longer term however, Mitratel stands to be benefit from the challengers’ expansion into ex-Java. Additionally, Mitratel is the least levered amongst peers which offers potential M&A headroom while its low tenancy ratio is ripe for further growth. We retain our Buy recommendation and IDR1,135 target price.
Full 12-month historical recommendation changes are available on request
Reports produced by New Street Research LLP, 18th Floor, 100 Bishopsgate, London, EC2N 4AG. Tel: +44 20 7375 9111.
New Street Research LLP is authorised and regulated in the UK by the Financial Conduct Authority and is registered in the United States with the Securities and Exchange Commission as a foreign investment adviser.
Regulatory Disclosures: This research is directed only at persons classified as Professional Clients under the rules of the Financial Conduct Authority (‘FCA’), and must not be re-distributed to Retail Clients as defined in the rules of the FCA.
This research is for our clients only. It is based on current public information which we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. We seek to update our research as appropriate, but various regulations may prevent us from doing so. Most of our reports are published at irregular intervals as appropriate in the analyst's judgment. This research is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients.
All our research reports are disseminated and available to all clients simultaneously through electronic publication to our website.
New Street Research LLC is neither a registered investment advisor nor a broker/dealer. Subscribers and/or readers are advised that the information contained in this report is not to be construed or relied upon as investment, tax planning, accounting and/or legal advice, nor is it to be construed in any way as a recommendation to buy or sell any security or any other form of investment. All opinions, analyses and information contained herein is based upon sources believed to be reliable and is written in good faith, but no representation or warranty of any kind, express or implied, is made herein concerning any investment, tax, accounting and/or legal matter or the accuracy, completeness, correctness, timeliness and/or appropriateness of any of the information contained herein. Subscribers and/or readers are further advised that the Company does not necessarily update the information and/or opinions set forth in this and/or any subsequent version of this report. Readers are urged to consult with their own independent professional advisors with respect to any matter herein. All information contained herein and/or this website should be independently verified.
All research is issued under the regulatory oversight of New Street Research LLP.
Copyright © New Street Research LLP
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of New Street Research LLP.