October 27, 2014 - 12:00am
SINGAPORE, October 16 (Fitch) Two deals announced in October by major Indonesian telcos to sell off tower assets to dedicated tower operators will have a varying credit impact for each of the deal participants, says Fitch Ratings. Market leader PT Telkom's plan to sell 49% of subsidiary Mitratel to Tower Bersama (TBI) will be credit neutral for Telkom and positive for TBI. XL Axiata's (Indonesia's third-largest telco) plan to sell 3,500 towers to PT Solusi Tunas Pratama (STP) will be credit positive for XL. The all-equity deal between Telkom and TBI will add about USD125m to TBI's annual revenue and USD70m to EBITDA. TBI's FFO-adjusted net leverage will improve to around 4.0x-4.5x from 5.0x as its annualised last-quarter run-rate EBITDA will rise to USD295m from USD225m, and it will consolidate additional net debt of USD225m to its existing net debt of USD1.2bn on completion of the transaction. TBI's tower portfolio will grow by 35% to 15,194, to emerge as Indonesia's largest independent telecoms tower company. Its operating EBITDAR margin will improve over the medium term as it adds more colocations (the renting/provision of space for other telcos' equipment) on the acquired towers - given their low tenancy ratio of 1.1x.