Insights Back To Growth Mode

Industry Focus
Indonesia Industry Focus

Telecommunication tower
Refer to important disclosures at the end of this report
DBS Group Research . Equity 13 Feb 2017

Back to growth mode JCI : 5,360.80
Inflexion point in BTS rollout in 2017 a growth Analyst
catalyst for Indonesia tower-cos William SIMADIPUTRA +62 2130034939
william.simadiputra@id.dbsvickers.com
More attractive growth outlook vs. regional peers
Sachin MITTAL +65 6682 3699
Market has not priced the growth inflexion point sachinmittal@dbs.com
TOWR is our top pick given its valuation discount

vs. TBIG
2017 is the inflexion year for organic sites and tenants

addition a catalyst for tower-cos. We believe Indonesias
STOCKS
largest tower-cos TOWR and TBIG will post stronger organic
revenue growth and profitability performance going ahead.
12-mth Performance
Price Mkt Cap
TBIG and TOWRs growth also will continue outperforming the Target Price (%)
Rp US$m Rp 3 mth 12 mth Rating
smaller tower-cos given their 1) stable Indonesia tower lease
rate, and 2) sustained tenancy ratio of above 1.5x, which Tower Bersama 5,125 1,742 5,500 (11.6) (13.1) HOLD
enables a lucrative EBITDA margin of 80%. PT Sarana Menara 3,410 2,610 4,900 (10.3) (24.1) BUY
Source: DBS Vickes, DBS Bank, Bloomberg Finance L.P.
Operators still underinvested in their networks another Closing price as of 3 Feb 2017
growth catalyst for tower-cos. The expansion of telco
Tower Bersama Infrastructure : Bersama provides telecommunication
operators base transceiver station (BTS) has bottomed out last infrastructure services to Indonesian wireless carriers.
year post the consolidation phase, and we should witness a PT Sarana Menara Nusantara : PT Sarana Menara Nusantara Tbk,
normalised BTS rollout which also benefit tower-co revenue through a subsidiary, builds telecommunications towers. The company
growth. Indonesian operators in Indonesia are potentially constructs and operates the towers as well as rents them to mobile
underinvesting in network infrastructure amid the growing telecommunications services providers
data usage and subscriber base. A higher smartphone

penetration will lead to growing subscribers and data traffic, a
sign that operators need to accelerate their network New sites & tenants' addition are tower-co share price
infrastructure expansion, including towers and BTS rollout. catalyst
2,000 5,00
High growth era,
4,50
Market has not priced growth inflexion point. Indonesian rising share price
1,500
4,00
tower-cos share price underperformed in 2016 on the back of 1,000
3,50
the slower organic revenue growth, given the operators 3,00
network consolidation phase in 2015-2016 though 500 2,50

2,00
Indonesian telco operators still posted relatively lucrative 0
1,50
topline growth until 9M16. Currently, both TOWR and TBIG (500)
1,00
are trading at 9.3x and 11.2x FY17 EV/EBITDA, respectively, or 500

(1,000) 0
at -1SD of their 5-year average, and still at the discount relative
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
1Q15
to their US peers average EV/EBITDA of 15x-16x.

TowerLHS Tenants LHS Shareprice RHS
Reiterate TOWR as our top pick. Though both tower-cos are Source: Companies, DBS Vickers
expected to deliver similar revenue and EBITDA CAGR of 13%-
14% in FY16-18F, we prefer TOWR to TBIG given the formers
1) valuation is at the discount to TBIG's, and 2) relatively
unleveraged balance sheet, which means that TOWR enjoys
better flexibility to pursue both organic and inorganic growth
opportunities.
ed-CK / sa- MA, PY

Industry Focus
Stock pick: We prefer TOWR market lease rate post acquisition of XL towers also allows TOWR
We prefer TOWR for its better revenue per tenant and unlevered to expand its revenue per tenant. Note that when TOWR
balance sheet. These are the critical success factors that have acquired XL's towers, XL offered a Rp10m per month lease rate
enabled TOWR to maintain its largest market share in the for its existing tenants.
Indonesian towers market. TOWR has successfully grown its
EBITDA faster than TBIG organically and inorganically in the past Revenue per tower sites (Rpmn/ sites)
three years, and we believe this trend will continue, as TBIG 60.0
needs to keep an eye on its leverage level on top of generating 55.0

returns to its shareholders.
50.0
TOWR will grow its revenue and EBITDA at a CAGR of 14% over 45.0
FY16-18F vs. TBIG's 13%, even after acquiring a large chunk of 40.0
2,500 towers from XL Axiata (EXCL) in a one-off transaction.
TOWR is set to grow at a faster pace, thanks mainly to its 35.0
unlevered balance sheet that allows TOWR to absorb more 30.0
towers and sites from its competitors without taking on

1Q12
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3Q12
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2Q16
3Q16
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significant new debt and raising equity.
TBIG TOWR
TBIG and TOWRs quarterly EBITDA trend Source: Companies, DBS Vickers
1,400
1,200 Unlevered balance sheet

1,000
TBIG and TOWR have different leverage ratios, with TBIG having
a higher debt to rolling EBITDA of 5.0 in 9M16, vs. TOWR's 2.6.
800
A lower gearing level means that TOWR has higher expansion
600
flexibility, to pursue both organic growth and M&A opportunities
400
in the market. For its latest XL towers acquisition, TOWR was
200 able to pay for the Rp3.6tr transaction with cash, without any
new equity issuance, which provides a sweetener for cellular
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1Q14
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1Q15
operators to sell their towers to TOWR.

TOWR TBIG
Maintaining a healthy leverage is important for sustaining tower-
Source: Companies, DBS Vickers
cos growth, as they finance almost 80% of the tower
infrastructure capital expenditure via credit. The latest rating
Besides valuation aspects, our different ratings for TBIG and
downgrade by Fitch to BB-/Stable for TBIG on the back of its
TOWR also reflect the divergence in their revenue growth
slower-than-expected deleveraging process reflects the credit
potential both organic and inorganic. Other than revenue
agencys concern over its leverage ratio, despite the fact that
growth outlook and gearing level, both TBIG and TOWR actually
TBIG has a secure cashflow stream for the next several years.
have pretty similar operational metrics such as tower lease rate of
Rp10-12m per month and EBITDA margin of 80%. Moreover,
Third-party financing, mainly bank loans and bonds, is a key
both companies are exposed to Indonesias big 4 cellular
component of the tower leasing business. The tower-cos need
operators such as Telkomsel, Indosat, XL and Hutch 3, with both
leverage to enhance returns to shareholders, and they can also
tower-cos receiver quality and client base being pretty much
raise external financing given their cashflow visibility in view of
similar.
their long-term site lease schemes with tenants (10 years). The
covenant metrics that is applied to tower-cos is net debt/rolling
Revenue per tenant
EBITDA; for every dollar of EBITDA generated, a tower-co can
TOWR performed better in generating revenue per tower, given
borrow another US$1 of debt.
its higher tower tenancy ratio of 1.7x vs. TBIG's 1.6x. Even before
the XL tower acquisition, TOWR was able to maintain a high
On the other hand, we think that TBIG needs to keep an eye on
tenancy ratio of 1.9x. TOWRs ability to add tenants at the
its gearing level before embarking on further significant growth
Page 2
Industry Focus
plans, Thus, if any upcoming large orders for tower site past three years attest to the superior growth in emerging
construction or any M&A opportunities appear, TBIG will not be market vs. the USs.
able to finalise the transaction immediately as it needs to devise
a financing structure that minimises the equity or cash portion as Indonesian tower-cos average tenancy ratio is 1.7x, vs. around
much as possible, which was seen in the terminated Mitratel 2.0x for regional peers. The lower tenancy ratio relative to
transaction back in 2015. regional peers is a sign that Indonesias network density has
room to improve. The ongoing uptrend for Indonesias
Net debt / annualised EBITDA (9M16 ) smartphone penetration rate and data usage means that its telco
6 sector and tower-cos has brighter revenue growth outlooks,
5
5 coupled with the fact the countrys network intensification
initiative means additional BTS in existing locations are required
4
to maintain decent network service quality.
3 2.7
Tenancy ratio comparison (X)
2
2.5
2.3
2.2 2.2
1
2
0 1.7
1.6
TBIG TOWR 1.5
NetdebttoEBITDA
1
0.5
Discount to its regional peers, despite more lucrative

growth outlook 0
AMT CrownCastle TBIGIJ TOWRIJ BhartiInfratel
Our target EV/EBITDA for TOWR and TBIG stand at FY17F 11.9x
Averagetenancyratio(X)
and 13.0x, respectively, or at around their 5-year average
EV/EBITDA multiple. We believe both tower-cos should re-rate Source: Companies, DBS Vickers
from the current levels, since they are widely expected to
maintain their dominance in the Indonesian tower business given Despite the lower tenancy ratio per tower, Indonesian tower-cos
their positive EBITDA growth outlook and as their smaller peers have the highest EBITDA margins, thanks to the countrys
struggle to grow. competitive rental rates and lower operational costs i.e. land
lease expenses and electricity tariffs. Indonesias lease scheme
Moreover, both tower-cos target multiples are also still at a allows tower-cost pass on electricity tariffs to the operators.
discount relative to their US peers who are trading at EV/EBITDA
multiples of 15.0x (see the relative valuation table on the next Indonesias rental rate overall is more affordable compared to
page). We believe Indonesia tower-cos should offer better that faced by US tower-cos. Indonesia tower-cos revenue per
investment opportunities given Indonesias superior telco sector tenant is only half that of their US peers, but higher vs. that of
growth on the back of a low smartphone penetration rate and Indias Bharti Infratel. Bharti Infratel has a lower lease per tenant
Indonesian tower-cos better performance, such as higher as it is not a fully independent tower company since it is 72%
EBITDA margins, and potential for tenancy ratio improvement. owned by Bharti Airtel, the lease rate is not comparable with that
of a fully independent tower-co or a tower-co that has no
How Indonesian tower-cos compare to regional peers? affiliate relationship with its tenants.
We believe Indonesian tower-cos are poised to offer more
attractive growth opportunities vs. their regional peers given
Indonesias superior telco industry outlook. Beside industry-wide
prospects, the valuation metrics for Indonesian tower-cos are
overall more attractive, coupled with their brighter growth
outlook vs. their regional peers. American Towerss international
investments outside the US going into emerging countries in the
Page 3
Industry Focus
Revenue per tenant (US$ per tenant) EBITDA margin comparison

40 90% 83.2%
36 37 82.2%
35 80%
68.8%
70% 64.3%
30
60%
25
50% 43.9%
20
15 40%
15 13
30%
9
10 20%
5 10%
0%
TBIG TOWR Bharti(IN) AMT(US) CC(US) AMT CrownCastle TBIGIJ TOWRIJ BhartiInfratel
Revenuepertenants(US$pertenant) EBITDAmargin(%)
Source: Companies, DBS Vickers Source: Companies, DBS Vickers
Relative valuation table

EV/EBITDA (X) PE (X) Revenue EBITDA
Mkt Cap Div yield FY16-18
Ticker (USD) 2016F 2017F 2016F 2017F (%) FY16-18 CAGR CAGR
Indonesian tower companies
TBIG IJ Equity 1,700 13.8 12.5 36.5 29.6 2.4 13.2% 13.1%
TOWR IJ Equity 2,671 11.2 9.3 21.2 17.2 2.6 13.8% 13.9%
SUPR IJ Equity 555 9.9 8.8 15.3 13.3 n.a
American tower companies

AMT US Equity 43,856 18.6 16.9 52.0 47.5 2.1 8.6% 8.7%
CCI US Equity 31,286 18.3 17.4 72.6 92.2 4.2 9.5% 5.3%
India tower company

BHARTI INFRATEL LTD 8,976 10.0 9.1 21.5 20.2 0.9 8.6% 9.7%
Source : DBS Vickers, Bloomberg Finance L.P, as of 3rd February 2017
ed-CK / sa- MA, PY

Industry Focus
What is priced in? Operator's slow tower and sites rollout TOWRs 5-year forward EV/EBITDA (X)
in 2015-2016 (x)
Indonesian tower-cos share price has underperformed the
15.0
broader Jakarta Composit Index (JCI) index last year given +2 std
concerns over how the tower-cos will sustain their revenue and 13.0 +1 std
EBITDA growth momentum going forward. Generally, as
Avera
investors view tower-co stocks as 'growth stocks', a slower 11.0
revenue growth performance can lead to major selloffs. In 2015- -1 std
9.0
2016, tower-cos were facing low revenue growth of 10%-12% -2 std
with Telkomsel being the only player involved in BTS and site
7.0
infrastructure growth, as ISAT, EXCL and Hutch 3 embarked on
Jan-12
Jan-13
Jan-14
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Jan-16
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
consolidation efforts.
TBIG and TOWRs 1-year share price performance
TBIG JCI TOWR Underperformance on TBIGs 5-year forward EV/EBITDA (X)
1.3 the absence tower sites
addition (x)
1.2
21.0
1.1
1.0
17.0
0.9
A
0.8
13.0
0.7
Dec16
Dec16
Oct16
Oct16
Aug16
Aug16
Aug16
Apr16
Apr16
Feb16
Feb16
May16
May16
Sep16
Sep16
Nov16
Nov16
Jan17
Jan17
Mar16
Mar16
Mar16
Jun16
Jun16
Jul16
Jul16
-2
9.0
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16
Both TOWR and TBIG are trading at -1SD of their 5-year
EV/EBITDA multiples, or c.2012 valuations. We believe this signals
that the market has priced in the slower sites and tenants
addition prospects in 2017 relative to the 2013-2015 period. On
the other hand, everything else for both tower-cos are still pretty
much the same, such as their EBITDA margin of 80%. In 2012,
the average sites and tenants for tower-cos only reached 7,500-
8,000 tower sites and tenants on the back of EBITDA of Rp2tr,
which are roughly half the current levels.
We believe the current share prices of tower companies provide

an attractive entry point. The revenue and EBITDA enjoy a
backlog contract of ten years on average that is secured under
long-term lease schemes and also provides stable profitability.
Particularly for TOWR, we believe that at the current share price
levels, the potential downside risk is minimal please refer to our
scenario analysis table.
Page 5
Industry Focus
Tower and sites addition can catalyse tower cos share price TOWR's share price vs. sites and tenants net addition
being a key determinant of revenue and EBITDA growth outlook 2,000
High growth era,
5,00
The key catalyst for the tower-cos share price is their revenue 1,500
rising share price 4,50
4,00
and EBITDA growth outlook, which is driven by new sites and 3,50
1,000
tenant's addition. Tower-cos share price has underperformed 3,00
last year, even as they posted positive revenue and EBITDA 500 2,50
growth on the back of stable and visible revenue and earnings 0

2,00
1,50
thanks to long-term lease contracts that come with a high 1,00
(500)
profitability guarantee and cost-pass through schemes. 500
(1,000) 0
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1Q16
2Q16
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1Q12 marked the start of the high-growth cycle, with BTS and
sites addition reaching 500-1,000 sites per quarter, thus resulting TowerLHS Tenants LHS Shareprice RHS
in high double-digit y-o-y revenue and EBITDA growth of 20%-

25%. On the other hand, the sites and tenants addition was
*normalised sites and tenants addition ex. M&A towers
relatively soft in the past two years (1Q15-3Q16), given the
operators consolidation phase that led to slow new BTS and
M&As are catalysts that can boost the share price, as evidenced
tower sites orders for independent tower-cos. Such a trend was
by one-time towers addition which can help lift revenue and
followed by the downtrend in tower-cos share price despite their
EBITDA simultaneously. TBIGs successful ISAT acquisition almost
steady y-o-y EBITDA growth. Our chart for TBIG below excludes
doubled the formers share price, as the new 2,500 towers
the one- off tower additions from M&As, such as the TBIG-ISAT
addition provided an instant boost for both revenue and EBITDA.
2,500 towers M&A in 2Q12 and TOWR-EXCL 2,500 tower M&A
Another case in point was when TBIG almost completed the
in 2Q16.
Mitratel tower acquisition, which could have provided a very
large footprint for TBIG given its capability to leverage its
TBIG's share price vs. sites and tenants net addition
relationship with Telkomsel which is the largest and the fastest
2,000 12,00
growing operator in Indonesia.
High growth era, 10,00
1,500
rising share price
8,000
1,000
6,000
500
4,000
0
2,000
(500) 0
1Q12
2Q12
3Q12
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TowerLHS Tenants LHS Shareprice RHS
Page 6
Industry Focus
TBIG and TOWRs footprint will sustain as smaller Smaller players are struggling to grow
operators fail to grow Their attempts to encroach into TBIG and TOWRs territory seem
We believe the smaller competitors may become attractive to be unsuccessful so far, as 1) larger companies has a proven
takeover candidates given their continuous struggle to grow, but execution track record and they can meet operators stringent
they do have lucrative underlying assets the tower tower and sites orders on time, and 2) the big players access to
infrastructure and more importantly, long-term lease contracts competitive financing allow them to deliver solid profitability and
with various operators. better ROIC per tower.
Consolidation among tower-cos is possible, as currently TOWR On paper, the tower business only revolves around building the
and TBIG are the only large players in Indonesia and the gap tower infrastructure such as finding a piece of land, purchasing
between both players and the lower-tier tower-cos is pretty wide. some steel bars, and then welding them altogether and planting
Indonesia has witnessed the mushrooming of new tower them in the ground. However, the ability to execute is a key
companies, thus fuelling concerns over how long TOWR and competitive advantage of the largest players. Beyond
TBIG can maintain their dominance in the Indonesian tower understanding operators expansion plans and technology, the
business. CENT was set up in 2013, while SUPR has successfully tower-cos also need to overcome network expansion challenges,
acquired EXCL towers, and they were seen at that time poised to such as finding the right land location, leasing the land and
disrupt TBIG and TOWRs dominance in the industry. delivering the tower structure punctually.
We also believe only TOWR and TBIG can absorb the operators TBIG and TOWRs tower sites vs. competitors (9M16)
deployed towers given their track record in competing such 16000
transactions and accessibility to financing. One of the strategies 14000
to grow in this business is to keep pursuing M&A s via the 12000
acquisition of the smaller players or cellular operators in-house 10000 Smaller peers are relatively
tower infrastructure. fragmented vs. the larger
8000
tower co
6000
Moreover, the valuation of current transactions has also become 4000
richer, given that the larger operators see the value of the towers 2000
beyond the tower infrastructure itself. They see the potential to
0
boost the towers tenancy. On the other hand, this causes the TBIGIJ TOWRIJ SUPRIJ METAIJ CENTIJ Other
smaller operators to struggle in growing or attracting the interest Towersitesownership
of the cellular operators, no thanks to their inability to absorb

towers of meaningful size and at attractive valuation.
Tower transaction (US$ per tower)

250000
200000
150000
100000
50000
0
ISATTBIG(2,500 EXCL SUPR(3,500 Mitratel TBIG EXCLTOWR(2,500 Towerreplacemen
towers 2012) towers 2014) (terminated2015) towers 2016) cost
Numbersoftowers

*Mitratel-TBIG deal was terminated in 2015
Page 7
Industry Focus
Smaller operators tend to struggle to operate efficiently, as TBIG and TOWRs EBITDA margin vs. smaller peers (FY15)
reflected by their lower EBITDA margins no thanks to their 100%
strategy of disrupting the existing rental rates adopted by the 90%
larger tower-cos. However, the smaller operators face a number 80%
of issues, such as the lack of scale to meet large tower orders 70%
from operators and financing difficulties. Lower rental rates vs. 60%
the market rate and failure to achieve economies of scale (with 50%
40%
tenancy ratios lower than their larger peers) translate into lower
30%
EBITDA margins for small players. A lower EBITDA margin means
20%
that there will be lower cash inflow to service interest payments
10%
and debt facilities.
0%
TBIGIJ TOWRIJ SUPRIJ CENTIJ IBSTIJ BALIIJ
Page 8
Industry Focus
Is operators network investment sufficient to cope with

the rising data usage in Indonesia?
Data usage is trending up network capex should also The increasing data usage (mainly for Java areas) is being
move in the same direction driven by higher smart phone penetration and emerging
A positive outlook for cellular operator's business and financial mobile app-based services in Indonesia. Indonesias
performance will bode well for the independent tower-cos, as smartphone penetration rate is still relatively low compared to
the formers network expansion will translate into new towers other countries a sign that the data usage uptrend will
and sites rollout. Currently, the cellular operators allocate sustain for the next several years on the back of brighter
about 50%-60% of their site expansion budget to third-party smartphone penetration prospects.
tower-cos.
The higher data usage will convince the operators to continue
We believe that Indonesias cellular operators are poised to investing in network infrastructure to maintain their service
record stable earnings growth of 6%-7% in 2017. Besides quality and market share. Data usage among the listed
enjoying steady subscriber growth, the industrys average operators grew rapidly in the past two years. In 2016, we
revenue per user (ARPU) is also trending up on the back of witnessed data usage growth of 30%-40% y-o-y in each
stabilising data pricing competition among operators. Data quarter. We believe such a trend will continue going forward
revenue will remain the key growth driver on top of legacy given the steady growth in subscribers, coupled with the
voice and SMS services, and data revenue growth will also ongoing rise in smartphone penetration rate. Currently,
drive the uptrend in data traffic growth. Indonesias smartphone penetration rate is still low compared
As we also do not expect any potential disruption arising from to other ASEAN countries.
a new entrant into the Indonesian telco space this year, the
competitive landscape among the operators will remain Data usage trend (TB)
benign this year. ISAT has signalled its intention to reduce its 600,000
data bonus quota during its 3Q16 results announcement, 500,000

which attests to ISAT's confidence that the competitive
landscape will remain benign. Such a benign competitive 400,000
landscape will lead to a brighter earnings growth outlook, as 300,000
the telcos profitability will not compress due to irrational

200,000
pricing strategies.
100,000
Operators 2017 y-o-y revenue growth outlook 0

12.0% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
10.5%
Telkomsel XL Indosat
10.0%
8.0%
6.9%
6.0%
Indonesias smartphone penetration rate is still lower than a
5.0%
lot of countries a sign that data revenue could still trend up
4.0% amid the rise in smartphone affordability and accessibility.
2.0%
Smartphone adoption in Indonesia will continue to increase
on the back of rising smartphone affordability and availability.
0.0%
TLKM ISAT EXCL
Page 9
Industry Focus
Smartphone penetration rate (%) BTS net add inflexion point in 3Q16
100 92.3 14,000
90
79.3 80.1 12,000
80
70 10,000
60 55.5
48.2 8,000
50
40.1
40 36.6
31.2 6,000
30
4,000
20
10 2,000
0

Indonesia Malaysia Phillipines Thailand Vietnam Singapore Japan United
States 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
Penetrationrate ISAT Telkomsel XL
Source: Companies, DBS Vickers Source: Companies, DBS Vickers
Can tower-cos monetise tenants positive growth Network sharing implication for tower companies
outlook? We think the network sharing development is positive for the
Indonesian tower-cos faced relatively slow revenue growth in tower-cos, as the operators intend to widen their network
2015-2016, even as the operators maintained their BTS roll-out. coverage to outside Java areas in view of the low cost factor.
The operators network consolidation efforts such as the XL-Axis The move by telcos to expand their network will translate into
merger and Indosats network modernisation mean that they more demand for tower and BTS, mainly for outside Java areas.
will maximise their spare network capacity before starting to
outsource again. The quarterly trends show that the new BTS The ability to expand at relatively low cost should enable smaller
net add has started to pick up since 1Q16, led by Telkomsel. operators like XL and ISAT to venture further into ex. Java
territory, whose subscribers offers higher yields vs. those in Java
We believe the trend should continue with the abatement of the areas. Currently, the outside Java areas are dominated by
1,800MHz re-farming issue and the increasing data traffic amid Telkomsel, thanks to its heavy upfront network infrastructure
4G LTE rollout. The increasing traffic means that the operators investment there.
will intensify their network expansion efforts and expand their
network coverage, rather than only upgrading their existing The proposed network sharing will focus on active network
network infrastructure. sharing, including BTS and backhaul network components a
network sharing plan that goes beyond the existing passive
sharing scheme for tower infrastructure. According to our
checks, the network sharing regulation also accommodates the
establishment of joint-venture entities between the cellular
operators. Thus, the related capital expenditure and leverage
can be 'outsourced' to non-consolidated entities.
Moreover, this sharing scheme can maximise the effectiveness

of cellular operators capital expenditure, mainly for backbone-
related network infrastructure. Note that the current tower
infrastructure is shared via outsourcing to the independent
tower companies.
Page 10
Industry Focus
But more time may be needed Operators quarterly revenue trend (Rpbn)
There is now less buzz on the network sharing front compared 40,000
to last year. It may take some time before the plan is finalised, 35,000
as evidenced by the interconnection fee regulation. Our checks 30,000
with some cellular operators reveal that the new regulation on 25,000
network sharing may take some time to be rolled out this year, 20,000
as certain technical and non-technical aspects of the regulation 15,000
need to be addressed. 10,000
5,000
Lease rate stable on tenant's stellar financial performance
0
The tower lease rate outlook will remain stable given the current 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
lease rate of Rp10-12m per month relatively unchanged since Telkomsel XL Indosat
three years ago is a bargain for the telco operators, especially

given the tower-cos proven track record in fulfilling site
construction orders. The chart on revenue per total tower site
The operators have successfully expanded their profitability and
below also shows that the tower-cos are able to maximise their
this did not come at the expense of the tower-cos. The telco
revenue per tower via maximising their tower sites tenancy.
operators prefer to maximise their networks economies of scale
Revenue per tower site (Rpm per site) by offering attractive data quotas to attract subscribers and
grow revenue. It is worth noting that tower lease expenses
110.0
account for less than 10% of operators COGS.
90.0
Operators EBITDA margin trend
65%
70.0
60%
50.0 55%
50%
30.0
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
1Q15
45%
40%
TBIG TOWR
35%
30%
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
The operators stellar performance in the past two years will also
Telkomsel XL Indosat
reduce the pressure on lease rates going forward. The operators
enjoyed positive revenue growth momentum, with their EBITDA Source: Companies, DBS Vickers
expanding and the positive quarterly trend becoming more
obvious.
Page 11
Industry Focus
Key risks
Slower-than-expected cellular operators BTS rollout to

independent tower companies. A larger-than-expected network
infrastructure spare capacity for both ISAT and EXCL means that
they need not deploy much of their BTS to the third-party tower
companies, thus resulting in a lower-than-expected revenue
growth outlook vs. our forecast given the more muted sites and
tenants BTS addition.
Competition. If we underestimate the competition from the

smaller tower companies, TBIG and TOWRs competitive edge as
the sole partners for Indonesias largest operators could be
eroded. In this case, the operators will deploy their towers to the
smaller tower companies. Hence, the operators rising network
investment would not directly benefit TOWR and TBIG.
Rental rate pressure. If the tower-cos fail to renew their lease

rates at the current levels, they would be unable to grow their
revenues at our expected pace we are assuming a stable rental
rate outlook going forward.
Regulatory risk. This could arise if we had somehow misread the

network sharing scheme and the implications for the tower
companies. If the official network sharing regulations scope
goes beyond our expectations, it could trigger a longer-than-
expected network consolidation among operators. This could
impact the tower-cos new sites and tenants rollout, which is a
key re-rating catalyst for tower-cos share price.
Page 12
Industry Focus
Scenario analysis double-digit revenue and EBITDA growth outlook, or at 14%

We have conducted an analysis of bull- and bear-case scenarios premium to TOWR.
for both TOWR and TBIG. Our analysis looks at potential risks in
the future, on top of our base-case assumptions and target price Bear-case scenario
implications. Our scenario analysis excludes any M&A Our bear-case scenario is based on the view that the
opportunities which can skew the performance in any one consolidation among the operators will take a longer time than
financial year via one-off tower and tenant additions. expected. This would lead to slower-than-expected tower sites
and BTS rollout from the operators to the third-party operators.
Base-case scenario With the spare network on hand, operators can implement the
Our base-case scenario is based on a stable industry outlook, on network sharing scheme without giving any direct benefits to
the back of expectations that cellular operators will roll out their the third-party tower companies.
BTS more aggressively than 2015-2016, driven by growing data
traffic and subscribers. The inflexion point of sites and tenants 1) TOWR
growth provides the revenue growth catalyst for both TOWR TOWRs revenue and EBITDA CAGR can only reach 8% in FY16-
and TBIG. 18F due to the dimmer sites and tenant's addition outlook as
well as disappointing lease rates mainly on new contract
1) TOWR renewals; or in this case, we think that TOWR should lower the
TOWRs revenue and EBITDA growth of 13.9% CAGR in FY16- lease rate to win more orders from operators. This scenario also
18F is mainly driven by the 13.2% CAGR for sites and tenants gives a lower EBITDA margin of 70%.
over the same period thus implying a stable tenancy ratio of
1.6x. We assume stable rental rates going forward, given Our bear-case target price is Rp3,000, which implies an FY17
Indonesias rental rates are competitive vs. regional rates, and EV/EBITDA of 10.0x or at -1SD of TOWRs 5-year average
we also see the recent contract renewal rate still tracking the EV/EBITDA. We believe TOWRs share price will not re-rate in
average lease rate in the past three years. This implies that the our bear-case scenario given the absence of revenue and sites
future backlog will see a flat rental rate. Our stable lease rate tenants' growth, which is a major re-rating catalyst for this
and maintenance cost assumptions lead to a stable EBITDA stock.
margin outlook of 83%.
2) TBIG
Our base-case target price is Rp4,900, which implies an FY17 TBIGs revenue and EBITDA CAGR can only reach 8.0% in FY16-
EV/EBITDA of 11.9X or at TOWR's 5-year historical average 18F due to the dimmer sites and tenant's addition outlook as
EV/EBITDA . Our valuation is still at the discount to its regional well as disappointing lease rates mainly on new contract
peers of above 15.0x-16.0x despite its double-digit revenue and renewals; or in this case, we think that TOWR should lower the
EBITDA growth. lease rate to win more orders from operators. This scenario also
gives a lower EBITDA margin of 70%.
2) TBIG
TBIGs revenue and EBITDA growth of 13.2% CAGR in FY16- Our bear-case target price is Rp2,300, which implies an FY17
18F is mainly driven by the 12.9% CAGR sites and tenants over EV/EBITDA of 10.0x or at -1SD of TBIG's 5-year average
the same period thus implying a stable tenancy ratio of 1.6x. EV/EBITDA. We believe TBIGs share price will not re-rate in our
We assume stable rental rates going forward, given Indonesias bear-case scenario given the absence of revenue and sites
rental rates are competitive vs. regional rates, and we also see tenants' growth, which is a major re-rating catalyst for this
the recent contract renewal rate still tracking the average lease stock.
rate in the past three years. This implies that the future backlog
will see a flat rental rate. Our stable lease rate and maintenance Bull-case scenario
cost assumptions lead to a stable EBITDA margin outlook of Our bull-case scenario is based on the view that the tower and
83%. sites tenants growth will return to the 2012-2015 levels, thus
providing a y-o-y revenue growth rate of 20%. We take into
Our base case target price is Rp5,500, which implies an FY17 account a partial network sharing scheme, where the operators
EV/EBITDA of 13.0X, or at TBIG's 5-year historical average could share their networks beyond just tower sharing, which
EV/EBITDA. Our TBIG's target price implied EV/EBITDA multiple is enables operators other than Telkomsel to expand to ex. Java
still below to its regional peers at 15.0x-16.0x, back by its areas and accelerate their tower sites rollout and tenant
Page 13
Industry Focus
addition. Both TOWR and TBIG are well positioned to absorb the
orders given their strong footprint in outside Java areas and easy
access to financing.
1) TOWR
Our bull-case scenario implies revenue and EBITDA growth of
20% for TOWR, which is growth rate prior to the operators
consolidation phase in 2015-2016. On the back of operators
network intensification efforts, TOWR's tenancy ratio could
jump back to 1.9x, or the level prior to the XL towers acquisition
in 2016.
Our bull-case scenario target price is Rp5,800, which implies an

FY17 EV/EBITDA of 13.5x, or in line with TBIG's base-case
scenario target multiple. We believe TOWR deserves to trade at
TBIG's target valuation given its better performance in both
revenue and EBITDA growth.
2) TBIG
Our bull-case scenario implies a revenue growth rate of 22.6%
for TBIG (slightly faster than TOWRs), given its larger exposure
to Telkomsel and Indosat, but with a slightly lower tenancy ratio
of 1.8x. Our bull-case scenario EBITDA margin stands at a stable
83%, as we do not expect any rental rate hikes at this point
this rental rate offers a win-win solution for both operators and
tower companies.
Our bull-case target price for TBIG is Rp7,900, which implies an

FY17 EV/EBITDA of 15.0x, or +1SD of its 5-year historical
average EV/EBITDA of 13.5x. As the fastest growing tower-co
(relative to TOWR), TBIG deserves to be re-rated. On the other
hand, its improving EBITDA performance implies that TBIG can
gradually normalise its gearing level.
Page 14
Industry Focus
TOWR scenario summary

Bear Base Bull
Terminal growth rate 0.0% 1.0% 1.0%
Revenue & EBITDA growth - CAGR FY16-18F 8.0% 13.9% 20.0%
FY16-18F tower sites growth 0% 13.7% 19.6%
Tenancy ratio (X) 1.30 1.60 1.90
LT EBITDA margin 70.0% 83.0% 83.0%
EBITD (Rpbn) 3,600 4,602 5,000
Target price (Rp) 3,000 4900 5,800

FY17 EV/EBITDA 10.0 11.9 13.5
Source : DBS Vickers
TBIG scenario summary

Bear Base Bull
Terminal growth rate 0.0% 1.0% 1.0%
Revenue & EBITDA growth - CAGR FY16-18F 8.0% 13.1% 22.6%
FY16-18F tower sites growth 0% 12.9% 21.2%
Tenancy ratio (X) 1.30 1.60 1.70
LT EBITDA margin 70.0% 83.0% 83.0%
FY17F EBITDA (Rpbn) 2,762 3,514 4,000
Target price (Rp) 2,300 5,500 7,900

FY17 EV/EBITDA 10.0 13.0 15.0
Source : DBS Vickers
Page 15
Indonesia Company Guide
Tower Bersama Infrastructure
Version 3 | Bloomberg: TBIG IJ | Reuters: TBIG.JK Refer to important disclosures at the end of this report
DBS Group Research. Equity 13 Feb 2017
HOLD Current valuation unjustified by mild

Last Traded Price ( 10 Feb 2017): Rp5,375 (JCI : 5,371.70) growth outlook
Price Target 12-mth: Rp5,500 (2% upside) (Prev Rp6,400)
Potential Catalyst: Quarterly earnings performance Maintain HOLD and reduce TP to Rp5,500. Our lower TP reflects
Where we differ: We believe TBIG's stretched balance sheet could pose the slower earnings growth outlook on the back of TBIG's softer
risk to its sites and tenants addition outlook sites and tenants growth outlook. We also assume a lower sites
Analyst
William Simadiputra +62 2130034939 and tenant's addition of 2,000 sites and 3,200 tenants,
william.simadiputra@id.dbsvickers.com respectively, for this year which still reflect a tower site
Sachin MITTAL +62 66823699 sachinmittal@dbs.com tenancy ratio of 1.6x. This is due to the still slow new tower
rollout from TBIG's major tenants, i.e. Indosat and XL with both
Whats New telcos still in network consolidation mode.
Maintain HOLD rating with lower TP of Rp5,500
Stretched balance sheet could hinder its expansion. Its gross
Valuation is still 20% premium to TOWRs debt annualised EBITDA reached 5.0x in 3Q16, close to its debt
covenant of 6.25x. In our view, this could limit TBIGs ability to
Our TP drops on lower earnings forecast clinch one-off M&A transaction opportunities or even a big
Lower sites and tenants addition assumptions order from its clients, as TBIG needs to keep an eye on its capital
structure to stick to its commitment to reward shareholders via
dividends.
Price Relative Valuation is still premium at TOWR despite the share price drop.
We think the share price drop has priced in TBIG's softer site
and tenant addition going forward. However, TBIGs valuation is
still steeper than TOWRs, though the premium has narrowed to
10% vs. the 3-year historical average of 20%.
Valuation:
Our target price of Rp5,500 is based on DCF valuation (WACC
9.2%, terminal growth 4%) and implies an FY16F EBITDA of
Forecasts and Valuation 13.0x.
FY Dec (Rp m) 2015A 2016F 2017F 2018F
Revenue 3,421 3,655 4,125 4,688 Key Risks to Our View:
EBITDA 2,911 3,114 3,514 3,993 TBIG's deleveraging process. If its deleveraging initiatives or its
Pre-tax Profit 1,089 573 1,219 1,617
existing sites and tower additions fail to generate meaningful
Net Profit 1,430 280 814 1,127
Net Pft (Pre Ex.) 1,402 280 814 1,127 cash flow to repay its debt, TBIG's growth could come in
Net Pft Gth (Pre-ex) (%) 277.3 (80.0) 190.7 38.4 below our and consensus expectations.
EPS (Rp) 298 58.4 180 249
EPS Pre Ex. (Rp) 292 58.4 180 249 Rental rate pressure and tenancy risk. A change in the
EPS Gth Pre Ex (%) 277 (80) 208 38 industrys competitive landscape and shift in bargaining power
Diluted EPS (Rp) 298 58.4 180 249
Net DPS (Rp) 59.6 11.7 35.9 49.7
towards telecommunication operators could pressure rental
BV Per Share (Rp) 319 366 531 730 rates.
PE (X) 18.0 92.1 29.9 21.6
PE Pre Ex. (X) 18.4 92.1 29.9 21.6 At A Glance
P/Cash Flow (X) 15.2 44.7 19.7 15.7 Issued Capital (m shrs) 4,531
EV/EBITDA (X) 15.1 14.4 12.7 11.4 Mkt. Cap (Rpbn/US$m) 24,356 / 1,830
Net Div Yield (%) 1.1 0.2 0.7 0.9 Major Shareholders (%)
P/Book Value (X) 16.9 14.7 10.1 7.4
Wahana Anugrah Sejahtera 22.4
Net Debt/Equity (X) 11.3 10.3 7.8 5.8
ROAE (%) 79.3 17.1 39.2 39.5 Provident Capital Indonesia 22.2
Tower Bersama Infrastructure TB 6.1
Earnings Rev (%): (42) (12) (10)
Consensus EPS (Rp): 236 291 339 Free Float (%) 49.3
Other Broker Recs: B: 7 S: 4 H: 10 3m Avg. Daily Val (US$m) 1.1
ICB Industry : Technology / Technology Hardware & Equipment
Source of all data on this page: Company, DBS Vickers, DBS Bank,
Bloomberg Finance L.P
ASIAN INSIGHTS VICKERS SECURITIES

ed: CK / sa: MA, PY
Company Guide
WHATS NEW
TBIG needs to trade at lower multiple for a rating upgrade
Maintain HOLD and reduce TP to Rp5,500. Our lower TP

reflects the slower earnings growth outlook on the back of We assume TBIG's rental rate will remain stable at Rp11-12m
TBIG's softer sites and tenants growth outlook. Moreover, per month, as TBIG's rental rate is based on the long-term
TBIGs valuation is still steeper than TOWRs, though the lease scheme of 10 years with the operators. Coupled with
premium has narrowed to 10% vs. the 3-year historical stable operational cost like site maintenance, we believe TBIG's
average of 20%, even after the recent share price correction. profitability outlook will be stable going forward and its
Given both players have a pretty similar growth outlook; we EBITDA margin of 80% will sustain as well.
believe that TOWR is a more attractive investment proposition
vs. TBIG at this point. Stretched balance sheet could hinder its expansion. Its gross
debt annualized EBITDA reached 5.0x in 3Q16, close to its
We also assume a lower sites and tenant's addition of 2,000 debt covenant of 6.25x. In our view, this could limit TBIGs
sites and 3,200 tenants, respectively, for this year which still ability to clinch one-off M&A transaction opportunities or even
reflect a tower site tenancy ratio of 1.6x. This is due to the still a big order from its clients, as TBIG needs to keep an eye on its
slow new tower rollout from TBIG's major tenants, i.e. Indosat capital structure to stick to its commitment to reward
and XL with both telcos still in network consolidation mode. shareholders via dividends.
Our lower earnings forecast reflect the soft sites and tenants TBIGs high gearing ratio also will limit its tower and sites
addition going forward, at 1,500-2,000 sites and tenants tenant's growth going forward. With its current leverage level,
addition on average, vs. TBIG's historical addition level of we believe that TBIG is unable to take on a tower addition
2,000-3,000 sites per annum. Our softer operational transaction of 2,500 as evidenced by TOWR and XLs tower
performance outlook reflect the softer BTS rollout from TBIGs transaction last year, where TOWR sweetened the deal by
second- and third-largest tenants XL and Indosat amid network paying cash to XL.
consolidation.
Earnings revision summary
2016F 2017F 2018F
Old New Changes Old New Changes Old New Changes
Revenue (US$mn) 3,955 3,655 -8% 4,615 4,125 -11% 5,078 4,688 -8%
Gross profit
(US$mn) 3,173 2,893 -9% 3,840 3,422 -11% 4,293 3,954 -8%
EBITDA (US$mn) 3,370 3,114 -8% 3,931 3,514 -11% 4,325 3,993 -8%
Net profit (US$mn) 486 280 -42% 930 814 -12% 1,253 1,127 -10%
Sites 14,825 13,000 -12% 16,325 15,000 -8% 17,750 16,900 -5%
Tenants 24,165 20,800 -14% 26,120 24,000 -8% 29,288 27,040 -8%
Tenancy ratio (x) 1.63 1.60 -2% 1.6 1.60 0% 1.7 1.6 -3%
Source : Company, DBS Vickers, DBS Bank

Page 2
Company Guide
Tower sites
CRITICAL DATA POINTS TO WATCH
Earnings Drivers:
Double-digit EBITDA growth. We forecast EBITDA to grow by a
13.2% CAGR over FY16-18, driven by solid profitability and site
expansion. Our assumption only accounts for organic growth
(built-to-suit).
EBITDA margin will remain above 80%. Stable rental rate and
tenancy ratio also means TBIG's EBITDA margin will be
sustainable at the c.80% level, the highest among regional DAS & shelter only sites
peers. Almost all operational costs are passed through to the
operators and the tower-co will only bear the tower
maintenance costs.
Double-digit tower site and tenant growth. TBIG plans to grow

its tower sites and tenant base by 13.1% and 14.0% CAGR
respectively over FY16F-18F, by leveraging on the tower
outsourcing trend. Telkomsel, which accounts for 39% of
TBIGs total revenue, will remain the key tenant growth driver
and keep TBIG's tenancy ratio stable at 1.6x despite the double-
digit growth in tower sites over the next three years. Tower tenants
Stable rental rate outlook. We expect tower-co's monthly rental

rate, including TBIGs, to be stable at Rp12m per tower. We
believe the current rental rate is a win-win situation for both
tower-cos and operators, and hence, there will not be rental
pressure ahead.
Long-term lease contracts provide visible earnings and cash

flows. Operators are locked in under 10-years lease contracts
with fixed terms until expiry. The long-term contract benefit
creates visible earnings and cash flows, and the nature of the Tower tenancy ratio
business also allows tower-cos to leverage up with competitive
external financing to gain business scale.
Tower acquisition. Given operators' stretched cash flows amid

tight competition and the urgency to deleverage balance sheets,
they will continue to divest non-core assets, mainly tower
assets. This will benefit tower-co as it would boost tower
ownership and EBITDA simultaneously, and in turn, drive up the
share price. This was what happened after Indosat acquired
2,500 towers back to 2012, and after the announcement of the
ongoing Mitratel transaction. The next tower tender will Capex (Rp tn)
probably come from Indosat (ISAT IJ, BUY).
Source: Company, DBS Vickers, DBS Bank

Page 3
Company Guide
Leverage & Asset Turnover (x)

Balance Sheet:
Leveraged balance sheet. Given its stable and visible cash flow
business model, TBIG is able to leverage its balance sheet to
gain business scale. Net debt-to-EBITDA ratio is 6.25x as the
debt covenants are based on rolling EBITDA every time TBIG
generates US$1 EBITDA, it is allowed to raise another US$1
from the creditors.
Steady capital expenditure outlook. TBIGs capex will reach

around Rp2tr per year in FY16-17, in line with average annual
addition of 2,000 towers. We assume each tower infrastructure
Capital Expenditure
requires Rp1bn of investment.
Share Price Drivers:

Share trading at 12.3x EV/EBITDA. Tower Bersama is trading at
double-digit EV/EBITDA multiple, but that is justified by its stable
business and cash flows, and strong earnings visibility. TBIG is
trading at around 20% premium to TOWR, thanks to its higher
stock trading volume liquidity.
Key Risks:
Tenancy risk. If tower-co fails to find additional tenants for the ROE (%)
newly acquired/built towers, this would result in a drop in
tenancy and profitability.
Rental rate pressure. Change in industry's competitive

landscape and bargaining power with telcos, potentially
leading to rental rate pressure.
Weak rupiah vs USD. High USD-denominated debt may hit

earnings if the Indonesian currency depreciates.
Operators' network expansion slowdown. Slower network Forward PE Band (x)

expansion means slower BTS roll-outs, which would hurt
tower-cos' site expansion outlook.
Company Background
PT Tower Bersama Infrastructure Tbk provides
telecommunication infrastructure services to Indonesian
wireless carriers. The company develops and operates
telecommunication-supporting infrastructure including towers
and in-building systems across Indonesia.
PB Band (x)

Page 4
Company Guide
Key Assumptions
FY Dec 2014A 2015A 2016F 2017F 2018F
Tower sites 10,825 11,389 13,000 15,000 16,900
DAS & shelter only sites 993 1,040 1,090 1,141 1,196
Tower tenants 18,081 18,796 20,800 24,000 27,040
Tower tenancy ratio 1.70 1.70 1.60 1.60 1.60
Capex (Rp tn) 2.30 2.00 1.60 2.20 2.10
Segmental Breakdown
FY Dec 2014A 2015A 2016F 2017F 2018F
Revenues (Rpbn)
Tower revenue 3,267 3,399 3,540 4,005 4,563
Shelter-only & DAS 39.9 22.4 115 120 125
Total 3,307 3,421 3,655 4,125 4,688
(Rpbn)
Income Statement (Rpbn)

FY Dec 2014A 2015A 2016F 2017F 2018F
Revenue 3,307 3,421 3,655 4,125 4,688
Cost of Goods Sold (510) (449) (762) (702) (734)
Gross Profit 2,797 2,972 2,893 3,423 3,954
Other Opng (Exp)/Inc (292) (311) (292) (330) (375)
Operating Profit 2,505 2,661 2,601 3,093 3,579
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0
Associates & JV Inc 0.0 0.0 0.0 0.0 0.0
Net Interest (Exp)/Inc (1,404) (1,600) (2,028) (1,873) (1,962)
Exceptional Gain/(Loss) 329 27.8 0.0 0.0 0.0
Pre-tax Profit 1,431 1,089 573 1,219 1,617
Tax (689) 356 (260) (309) (358)
Minority Interest (40.8) (15.1) (32.9) (95.5) (132)
Preference Dividend 0.0 0.0 0.0 0.0 0.0
Net Profit 701 1,430 280 814 1,127
Net Profit before Except. 372 1,402 280 814 1,127
EBITDA 2,718 2,911 3,114 3,514 3,993
Growth
Revenue Gth (%) 22.9 3.5 6.8 12.9 13.6
EBITDA Gth (%) 23.2 7.1 7.0 12.8 13.6
Opg Profit Gth (%) 22.1 6.2 (2.3) 18.9 15.7
Net Profit Gth (Pre-ex) (%) (70.6) 277.3 (80.0) 190.7 38.4
Margins & Ratio
Gross Margins (%) 84.6 86.9 79.2 83.0 84.3
Opg Profit Margin (%) 75.8 77.8 71.2 75.0 76.3
Net Profit Margin (%) 21.2 41.8 7.7 19.7 24.0
ROAE (%) 23.1 79.3 17.1 39.2 39.5
ROA (%) 3.5 6.4 1.1 2.9 4.2
ROCE (%) 7.0 13.0 5.8 8.8 11.0
Div Payout Ratio (%) 41.1 20.0 20.0 20.0 20.0
Net Interest Cover (x) 1.8 1.7 1.3 1.7 1.8

Page 5
Company Guide
Quarterly / Interim Income Statement (Rpbn)

FY Dec 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016
Revenue 869 880 902 917 942

Gross Profit 739 772 800 815 836
Other Oper. (Exp)/Inc (83.7) (73.6) (73.9) (78.0) (79.8)
Operating Profit 655 698 726 737 756
Other Non Opg (Exp)/Inc 147 (19.9) 63.5 29.9 (267)
Net Interest (Exp)/Inc (466) (476) (410) (463) (385)
Exceptional Gain/(Loss) 0.0 (54.5) (101) 14.7 227
Pre-tax Profit 336 147 279 318 331
Tax (90.7) 454 470 (215) (235)
Minority Interest (19.4) 31.7 (2.4) (7.3) 0.70
Net Profit 226 634 747 95.3 96.2
Net profit bef Except. 226 688 847 80.6 (131)
EBITDA 735 759 784 795 818
Growth
Revenue Gth (%) 2.9 1.3 2.4 1.7 2.8
EBITDA Gth (%) 2.8 3.2 3.3 1.4 2.9
Opg Profit Gth (%) (1.3) 6.6 4.0 1.4 2.6
Net Profit Gth (Pre-ex) (%) (24.9) 204.6 23.2 (90.5) nm
Margins
Gross Margins (%) 85.0 87.7 88.7 88.9 88.7
Opg Profit Margins (%) 75.4 79.3 80.5 80.4 80.2
Net Profit Margins (%) 26.0 72.0 82.8 10.4 10.2
Balance Sheet (Rpbn)

FY Dec 2014A 2015A 2016F 2017F 2018F
Net Fixed Assets 474 534 1,664 3,424 5,119

Invts in Associates & JVs 0.0 0.0 0.0 0.0 0.0
Other LT Assets 17,847 19,660 19,660 19,660 19,660
Cash & ST Invts 902 297 5,604 405 87.7
Inventory 404 307 446 503 572
Debtors 491 693 820 925 1,051
Other Current Assets 1,511 1,309 1,309 1,309 1,309
Total Assets 21,629 22,800 29,501 26,224 27,798
ST Debt 7,311 250 3,131 9,389 9,604

Creditor 178 193 128 145 165
Other Current Liab 1,635 1,472 1,550 1,599 1,648
LT Debt 8,748 18,033 21,583 11,234 11,491
Other LT Liabilities 1,653 1,262 1,262 1,262 1,262
Shareholders Equity 2,076 1,530 1,754 2,406 3,307
Minority Interests 28.2 60.8 93.6 189 321
Total Cap. & Liab. 21,629 22,800 29,501 26,224 27,798
Non-Cash Wkg. Capital 594 644 896 993 1,119

Net Cash/(Debt) (15,157) (17,986) (19,110) (20,219) (21,007)
Debtors Turn (avg days) 60.4 63.2 75.5 77.2 76.9
Creditors Turn (avg days) 186.1 340.6 236.2 177.7 177.2
Inventory Turn (avg days) 449.3 653.6 554.1 617.5 614.0
Asset Turnover (x) 0.2 0.2 0.1 0.1 0.2
Current Ratio (x) 0.4 1.4 1.7 0.3 0.3
Quick Ratio (x) 0.2 0.5 1.3 0.1 0.1
Net Debt/Equity (X) 7.2 11.3 10.3 7.8 5.8
Net Debt/Equity ex MI (X) 7.3 11.8 10.9 8.4 6.4
Capex to Debt (%) 14.5 11.0 6.7 10.6 10.0
Z-Score (X) 1.2 1.5 1.3 1.1 1.1

Page 6
Company Guide
Cash Flow Statement (Rpbn)

FY Dec 2014A 2015A 2016F 2017F 2018F
Pre-Tax Profit 1,431 1,089 573 1,219 1,617

Dep. & Amort. 212 251 516 422 415
Tax Paid (122) (187) (182) (260) (309)
Assoc. & JV Inc/(loss) 0.0 0.0 0.0 0.0 0.0
Chg in Wkg.Cap. (515) (45.1) (330) (146) (175)
Other Operating CF 0.0 592 0.0 0.0 0.0
Net Operating CF 1,006 1,701 577 1,235 1,548
Capital Exp.(net) (2,335) (2,003) (1,644) (2,181) (2,110)
Other Invts.(net) (1,415) 0.70 0.0 0.0 0.0
Invts in Assoc. & JV 0.0 (1.0) 0.0 0.0 0.0
Div from Assoc & JV 0.0 0.0 0.0 0.0 0.0
Other Investing CF 0.0 0.0 0.0 0.0 0.0
Net Investing CF (3,750) (2,003) (1,644) (2,181) (2,110)
Div Paid (288) (286) (56.0) (163) (225)
Chg in Gross Debt 3,078 (477) 6,431 (4,090) 471
Capital Issues 0.0 461 0.0 0.0 0.0
Other Financing CF 0.0 0.0 0.0 0.0 0.0
Net Financing CF 2,791 (302) 6,375 (4,253) 246
Currency Adjustments 0.0 0.0 0.0 0.0 0.0
Chg in Cash 46.6 (604) 5,308 (5,199) (317)
Opg CFPS (Rp) 317 364 189 305 380
Free CFPS (Rp) (277) (63.0) (223) (209) (124)
Target Price & Ratings History
Source: DBS Vickers, DBS Bank
Analyst: William Simadiputra

Sachin MITTAL

Page 7
Indonesia Company Guide
PT Sarana Menara Nusantara
Version 3 | Bloomberg: TOWR IJ | Reuters: TOWR.JK Refer to important disclosures at the end of this report
DBS Group Research. Equity 13 Feb 2017
BUY Reasonably priced vs its peers

Last Traded Price ( 10 Feb 2017): Rp3,450 (JCI : 5,371.70)
Price Target 12-mth: Rp4,900 (42% upside) Maintain BUY rating and target price of Rp4,900. We like TOWR
Potential Catalyst: Quarterly earnings results, M&A for its unlevered balance sheet, which allows it to maintain
Where we differ: We like TOWR for its undemanding valuation relative superior revenue and EBITDA growth vs its peer TBIG. TOWRs
to its peers valuation is also at around 20% discount relative to TBIGs
Analyst despite its better revenue and EBITDA growth outlook. TOWR
William Simadiputra +62 2130034939 will continue to pursue tower addition growth both organically
william.simadiputra@id.dbsvickers.com (build-to-suit) and inorganically (via pursuing M&A
Sachin MITTAL +65 6682 3699 sachinmittal@dbs.com
opportunities, as seen in the XL tower acquisition in 2016).
Whats New Steady revenue and EBITDA growth outlook. It is expected to
Steady revenue and EBITDA growth outlook post a steady revenue CAGR of 13.9% over FY16F-18F on the
back of stable rental lease rates and its ability to sustain its
Strong profitability also will sustain ahead
tower sites tenancy ratio at 1.6x-1.7x. Its EBITDA margin will
Benefiting from operators network expansion sustain at 80%, given that its rental lease scheme allows higher
operational costs, mainly electricity expenses, to be passed on.
Maintain BUY rating and target price of Rp4,900
Benefiting from growing data usage, operator network
expansion. After the consolidation phase in 2015-2016, the
Price Relative Indonesian big 4 operators capex spending remains high given
the continuous investments to expand their network coverage
and service quality to maintain their market share, amid the
uptrend in data consumption among subscribers. Such a trend
will benefit the independent tower companies in terms of steady
sites and tenants addition going forward. The upcoming 2,100-
2,300MHz spectrum auction and network sharing regulation
can present further upside risks, given the faster-than-expected
operator network expansion mainly from the ex. Java region.
Forecasts and Valuation
FY Dec (Rp m) 2015A 2016F 2017F 2018F Valuation:
Revenue 4,470 4,769 5,547 6,185 Reasonably priced relative to its peer. The stock offers
EBITDA 3,776 3,957 4,602 5,131
Pre-tax Profit 3,958 2,160 2,776 3,241 reasonable EBITDA growth and is trading at a 20% valuation
Net Profit 2,958 1,620 2,082 2,431 discount to its peer Tower Bersama (TBIG, HOLD, TP Rp6,400).
Net Pft (Pre Ex.) 2,958 1,620 2,082 2,431 We maintain our DCF-based TP of Rp4,900 (9.2% WACC, 4%
Net Pft Gth (Pre-ex) (%) 169.0 (45.2) 28.5 16.8 terminal growth rate). Our target price implies 11.9x FY17
EPS (Rp) 290 159 204 238 EV/EBITDA (average 5-year multiple) vs. the current EV/EBITDA
EPS Pre Ex. (Rp) 290 159 204 238
valuation of 9.2x (-1SD of its 5-year mean).
EPS Gth Pre Ex (%) 169 (45) 29 17
Diluted EPS (Rp) 290 159 204 238
Net DPS (Rp) 0.0 0.0 122 59.8 Key Risks to Our View:
BV Per Share (Rp) 752 911 993 1,171 Tenancy risk and rental rate pressure. If a tower-co fails to find
PE (X) 11.9 21.7 16.9 14.5 tenants for newly acquired/built towers, its tenancy ratio and
PE Pre Ex. (X) 11.9 21.7 16.9 14.5 profitability are likely to drop. Lower-than-expected rental rates
P/Cash Flow (X) 17.9 9.7 9.3 8.3
EV/EBITDA (X) 11.2 10.9 9.1 7.8
also will squeeze profitability.
Net Div Yield (%) 0.0 0.0 3.6 1.7
P/Book Value (X) 4.6 3.8 3.5 2.9 At A Glance
Net Debt/Equity (X) 0.9 0.8 0.7 0.4 Issued Capital (m shrs) 10,203
ROAE (%) 47.8 19.1 21.4 22.0 Mkt. Cap (Rpbn/US$m) 35,200 / 2,644
Earnings Rev (%): 0 0 0 Major Shareholders (%)
Consensus EPS (Rp): 227 262 305 PT. Sapta Adhikari Investama (%) 32.7
Other Broker Recs: B: 12 S: 0 H: 3 T Rowe Price Group Inc (%) 7.6
Source of all data on this page: Company, DBS Vickers, DBS Bank, Free Float (%) 68.3
Bloomberg Finance L.P 3m Avg. Daily Val (US$m) 0.17
ICB Industry : Telecommunications / Mobile Telecommunications

ed: CK / sa:MA, PY
Company Guide
Towers
CRITICAL DATA POINTS TO WATCH
Earnings Drivers:
Stable earnings growth, driven by organic tower addition. We
forecast TOWR's EBITDA to grow by 13.9% CAGR over FY16-
19F, on the back of solid site additions, and stable rents and
tenancy ratios. For the same reasons, we expect EBITDA margins
to remain strong ahead at ~80%.
Steady site and tenant growth. We forecast TOWRs sites to

Total tenants
grow by 6.4% CAGR over FY16-18F after the EXCL tower
acquisition, thanks to its unlevered balance sheet. This will be
driven by the big four telco operators in Indonesia, as all of
them will continue to expand revenues and market share amid
the competitive telecommunication market in Indonesia.
Tenancy ratio will accelerate post XL towers acquisition. We

believe TOWR's tenancy ratio will drop to 1.6x in FY16 after the
EXCL tower acquisition and remain stable at 1.7x-1.8x going
forward on steady tenants addition. Indonesias tower
companies also still has room to increase the tenancy ratio up to
Tenancy ratio
2.5x and gain better economies of scale.
Stable rental outlook, provide a stable EBITDA margin.

Indonesias monthly rental lease rate will be sustainable at
Rp12m per month, as the current rents offer a win-win situation
for both the tower-cos and operators. Our channel checks also
suggest that overall rental rates have remained stable despite
minor changes to contract terms, like passing through electricity
costs to the operators. This will have little impact on revenues
and profitability.
Capex (Rp tn)
Tower outsourcing trend to continue ahead. Telcos will
continue to outsource their requirements by leasing tower
infrastructure from third parties instead of building their own,
as telcos want to reserve capex to improve/expand network and
maintain market share.
Non-organic growth opportunity, as thanks to TOWR financial

flexibility. Indonesias operators (ex. Telkom) balance sheets are
highly leveraged, which is why they have been divesting non-
core assets, mainly tower assets. These divestments provide
non-organic growth opportunities for tower-cos, especially EBITDA margin (%)
TOWR given its high financial flexibility. A higher number of
towers will be followed by higher revenues, EBITDA and share
price.

Page 2
Company Guide
Leverage & Asset Turnover (x)

Balance Sheet:
Unlevered balance sheet. TOWR has better tower sites and
EBITDA growth potential relative to TBIG given its unlevered
balance sheet. TOWR has a lower net debt-to-EBITDA of around
2.0x after the EXCL tower acquisition vs. TBIG's 2.7x in 4Q15.
This means TOWR is more better positioned for site and tenant
growth, whether organically or inorganically this year. Given its
strong balance sheet, we also believe TOWR can start to pay
dividend this year with appealing yield of 3%-4%, assuming
60% dividend payout ratio.
Capital Expenditure
Share Price Drivers:
Share price trading at 9.3x FY17F EV/EBITDA. TOWR is trading
close to 10.0x EV/EBITDA multiple but this is justified by its
stable business and cash flows. TOWRs EV/EBITDA multiple is at
20%-30% discount to TBIG's, despite both companies
registering good performances. But TOWR has low trading
liquidity because of its low free float.
EBITDA growth is the key share price driver. It does not matter
whether growth is derived organically or through tower
acquisitions, the market appreciates its EBITDA growth outlook ROE (%)
which is determined by sites and tenants addition.
Key Risks:
Tenancy risk. If a tower-co fails to find additional tenants for
newly acquired/built towers, its tenancy and profitability are
likely to drop.
Rental rate pressure. Tower rental rates could drop if the

competition among tower-cos intensifies. The resulting shift in
bargaining power towards operators also means that tower-
cos will not be able to pass on higher costs, and hence margins Forward PE Band (x)
will contract.
Operators rein in network expansion, weak rupiah vs USD. A

slower network expansion would entail a slower BTS rollout,
which could derail a tower-co's site expansion plans.
Company Background
PT Sarana Menara Nusantara Tbk, through a subsidiary, builds
telecommunication towers. The company constructs, operates
and rents the towers to mobile telecommunications service PB Band (x)
providers.

Page 3
Company Guide
Key Assumptions
FY Dec 2014A 2015A 2016F 2017F 2018F
Towers 11,346 12,237 15,237 16,084 17,272
Total tenants 20,138 21,472 25,572 28,072 30,572
Tenancy ratio 1.80 1.80 1.70 1.70 1.80
Capex (Rp tn) 1.20 4.30 1.40 1.90 1.90
EBITDA margin (%) 83.3 84.5 83.0 83.0 83.0
Income Statement (Rpbn)

FY Dec 2014A 2015A 2016F 2017F 2018F
Revenue 4,106 4,470 4,769 5,547 6,185
Cost of Goods Sold (577) (572) (1,609) (1,740) (1,891)
Gross Profit 3,530 3,898 3,160 3,807 4,294
Other Opng (Exp)/Inc (1,124) 610 (504) (586) (653)
Operating Profit 2,406 4,508 2,657 3,222 3,641
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0
Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0
Pre-tax Profit 1,557 3,958 2,160 2,776 3,241
Tax (459) (993) (540) (694) (810)
Minority Interest 1.20 (6.3) 0.0 0.0 0.0
Preference Dividend 0.0 0.0 0.0 0.0 0.0
Net Profit 1,100 2,958 1,620 2,082 2,431
Net Profit before Except. 1,100 2,958 1,620 2,082 2,431
EBITDA 3,418 3,776 3,957 4,602 5,131
Growth
Revenue Gth (%) 28.4 8.9 6.7 16.3 11.5
EBITDA Gth (%) 28.9 10.5 4.8 16.3 11.5
Opg Profit Gth (%) 39.6 87.4 (41.1) 21.3 13.0
Net Profit Gth (Pre-ex) (%) (1.5) 169.0 (45.2) 28.5 16.8
Margins & Ratio
Gross Margins (%) 86.0 87.2 66.3 68.6 69.4
Opg Profit Margin (%) 58.6 100.9 55.7 58.1 58.9
Net Profit Margin (%) 26.8 66.2 34.0 37.5 39.3
ROAE (%) 26.3 47.8 19.1 21.4 22.0
ROA (%) 6.7 15.3 6.9 7.9 8.3
ROCE (%) 11.5 19.1 9.3 10.2 10.4
Div Payout Ratio (%) 0.0 0.0 0.0 60.0 25.1
Net Interest Cover (x) 2.8 8.2 5.4 7.2 9.1

Page 4
Company Guide
Quarterly / Interim Income Statement (Rpbn)

FY Dec 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016
Revenue 1,133 1,196 1,170 1,253 1,309

Gross Profit 770 643 1,015 1,091 1,135
Other Oper. (Exp)/Inc (137) 99.6 (123) (93.0) (109)
Operating Profit 634 743 892 998 1,026
Other Non Opg (Exp)/Inc 0.0 286 0.0 0.0 0.0
Exceptional Gain/(Loss) (471) 2,416 (66.4) 216 99.3
Pre-tax Profit 24.0 3,007 697 1,089 941
Tax (11.0) (816) (178) (281) (343)
Minority Interest (1.1) (3.7) (1.5) (1.8) 3.30
Net Profit 11.9 2,187 518 807 601
Net profit bef Except. 483 (229) 584 591 502
EBITDA 952 828 1,001 1,108 1,146
Growth
Revenue Gth (%) 5.6 5.6 (2.1) 7.1 4.5
EBITDA Gth (%) 5.4 (13.0) 20.8 10.8 3.4
Opg Profit Gth (%) 54.7 17.3 20.0 11.9 2.8
Net Profit Gth (Pre-ex) (%) 40.0 nm nm 1.1 (15.0)
Margins
Gross Margins (%) 68.0 53.8 86.7 87.1 86.8
Opg Profit Margins (%) 55.9 62.1 76.2 79.7 78.4
Net Profit Margins (%) 1.0 182.9 44.3 64.4 45.9
Balance Sheet (Rpbn)

FY Dec 2014A 2015A 2016F 2017F 2018F
Net Fixed Assets 12,368 14,683 17,657 17,720 18,129

Invts in Associates & JVs 0.0 0.0 0.0 0.0 0.0
Other LT Assets 2,272 3,200 3,148 3,096 3,044
Cash & ST Invts 2,010 2,987 3,347 5,447 8,194
Inventory 0.70 11.1 0.80 0.90 1.00
Debtors 574 471 1,005 1,169 1,304
Other Current Assets 58.2 64.2 64.2 64.2 64.2
Total Assets 17,282 21,417 25,222 27,497 30,735
ST Debt 203 446 446 446 446

Creditor 472 217 684 733 795
Other Current Liab 1,365 1,315 1,793 1,947 2,064
LT Debt 9,151 9,684 10,684 11,684 12,684
Other LT Liabilities 1,376 2,076 2,315 2,554 2,793
Shareholders Equity 4,724 7,680 9,300 10,133 11,955
Minority Interests (7.9) (1.6) (1.6) (1.6) (1.6)
Total Cap. & Liab. 17,282 21,417 25,222 27,497 30,735
Non-Cash Wkg. Capital (1,204) (985) (1,407) (1,447) (1,490)

Net Cash/(Debt) (7,344) (7,144) (7,783) (6,684) (4,937)
Debtors Turn (avg days) 55.5 42.7 56.5 71.5 72.9
Creditors Turn (avg days) (400.2) 96.4 531.7 719.5 695.8
Inventory Turn (avg days) (0.5) 1.6 7.0 0.8 0.8
Asset Turnover (x) 0.3 0.2 0.2 0.2 0.2
Current Ratio (x) 1.3 1.8 1.5 2.1 2.9
Quick Ratio (x) 1.3 1.7 1.5 2.1 2.9
Net Debt/Equity (X) 1.6 0.9 0.8 0.7 0.4
Net Debt/Equity ex MI (X) 1.6 0.9 0.8 0.7 0.4
Capex to Debt (%) 22.8 17.4 38.4 11.9 14.5
Z-Score (X) 2.6 2.9 2.3 2.4 2.4

Page 5
Company Guide
Cash Flow Statement (Rpbn)

FY Dec 2014A 2015A 2016F 2017F 2018F
Pre-Tax Profit 1,557 3,958 2,160 2,776 3,241

Dep. & Amort. 1,013 (732) 1,300 1,380 1,490
Tax Paid (26.4) (335) (61.6) (540) (694)
Assoc. & JV Inc/(loss) 0.0 0.0 0.0 0.0 0.0
Chg in Wkg.Cap. 270 (876) (56.3) (115) (73.2)
Other Operating CF 1.00 (51.5) 291 291 291
Net Operating CF 2,814 1,962 3,634 3,793 4,255
Capital Exp.(net) (2,135) (1,760) (4,273) (1,444) (1,899)
Other Invts.(net) (269) 0.0 0.0 0.0 0.0
Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0
Div from Assoc & JV 0.0 0.0 0.0 0.0 0.0
Other Investing CF 0.0 0.0 0.0 0.0 0.0
Net Investing CF (2,404) (1,760) (4,273) (1,444) (1,899)
Div Paid 0.0 0.0 0.0 (1,249) (610)
Chg in Gross Debt 46.4 777 1,000 1,000 1,000
Capital Issues 0.0 0.0 0.0 0.0 0.0
Other Financing CF 47.7 (1.9) 0.0 0.0 0.0
Net Financing CF 94.1 775 1,000 (249) 390
Currency Adjustments 0.0 0.0 0.0 0.0 0.0
Chg in Cash 504 977 360 2,100 2,747
Opg CFPS (Rp) 249 278 362 383 424
Free CFPS (Rp) 66.6 19.9 (62.7) 230 231
Target Price & Ratings History
Source: DBS Vickers, DBS Bank

Analyst: William Simadiputra
Sachin MITTAL

Page 6
Industry Focus
DBS Vickers recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
Share price appreciation + dividends
Completed Date: 13 Feb 2017 09:07:45 (WIB)

Dissemination Date: 13 Feb 2017 15.46:56 (WIB)
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Page 16
Industry Focus
ANALYST CERTIFICATION
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COMPANY-SPECIFIC / REGULATORY DISCLOSURES

1. PT. DBS Vickers Sekuritas Indonesia ("DBSVI" have a proprietary position in Tower Bersama Infrastructure in this report as of 10 Feb 2017.
Compensation for investment banking services:

2. DBS Bank Ltd, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have received compensation, within the past 12 months for
investment banking services from Tower Bersama Infrastructure as of 31 Jan 2017.
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Page 17
Industry Focus
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Industry Focus

Indonesia Industry Focus

DBS Group Research . Equity 13 Feb 2017

TOWR is our top pick given its valuation discount

2017 is the inflexion year for organic sites and tenants

data usage and subscriber base. A higher smartphone

the slower organic revenue growth, given the operators 3,00

network consolidation phase in 2015-2016 though 500 2,50

are trading at 9.3x and 11.2x FY17 EV/EBITDA, respectively, or 500

to their US peers average EV/EBITDA of 15x-16x.

ed-CK / sa- MA, PY

needs to keep an eye on its leverage level on top of generating 55.0

unlevered balance sheet that allows TOWR to absorb more 30.0

towers and sites from its competitors without taking on

1,200 Unlevered balance sheet

operators to sell their towers to TOWR.

Discount to its regional peers, despite more lucrative

Revenue per tenant (US$ per tenant) EBITDA margin comparison

Source: Companies, DBS Vickers Source: Companies, DBS Vickers

Relative valuation table

American tower companies

India tower company

Source : DBS Vickers, Bloomberg Finance L.P, as of 3rd February 2017

ed-CK / sa- MA, PY

We believe the current share prices of tower companies provide

growth on the back of stable and visible revenue and earnings 0

in high double-digit y-o-y revenue and EBITDA growth of 20%-

TowerLHS Tenants LHS Shareprice RHS

Source: Companies, DBS Vickers

transactions and accessibility to financing. One of the strategies 14000

to grow in this business is to keep pursuing M&A s via the 12000

smaller operators to struggle in growing or attracting the interest Towersitesownership

of the cellular operators, no thanks to their inability to absorb

Tower transaction (US$ per tower)

Source: Companies, DBS Vickers

strategy of disrupting the existing rental rates adopted by the 90%

larger tower-cos. However, the smaller operators face a number 80%

Source: Companies, DBS Vickers

Is operators network investment sufficient to cope with

data bonus quota during its 3Q16 results announcement, 500,000

landscape will lead to a brighter earnings growth outlook, as 300,000

the telcos profitability will not compress due to irrational

Operators 2017 y-o-y revenue growth outlook 0

Source: Companies, DBS Vickers

Penetrationrate ISAT Telkomsel XL

Source: Companies, DBS Vickers Source: Companies, DBS Vickers

Moreover, this sharing scheme can maximise the effectiveness

as evidenced by the interconnection fee regulation. Our checks 30,000

three years ago is a bargain for the telco operators, especially

Slower-than-expected cellular operators BTS rollout to

Competition. If we underestimate the competition from the

Rental rate pressure. If the tower-cos fail to renew their lease

Regulatory risk. This could arise if we had somehow misread the

Scenario analysis double-digit revenue and EBITDA growth outlook, or at 14%

Our bull-case scenario target price is Rp5,800, which implies an

Our bull-case target price for TBIG is Rp7,900, which implies an

TOWR scenario summary

Target price (Rp) 3,000 4900 5,800

Source : DBS Vickers

TBIG scenario summary

Target price (Rp) 2,300 5,500 7,900

Source : DBS Vickers

DBS Group Research. Equity 13 Feb 2017