PT Sarana Menara Nusantara Tbk. (TOWR) Earnings Call Transcript & Summary

Thank you, everybody. I will just wait for another 1 or 2 minutes to make sure that we have everybody dialing in. Okay. I think I'll just start. I think we have enough people dialing in. So welcome to Macquarie Indonesia Insights. Today, we have Sarana Menara Nusantara, so-called TOWR. And we are happy to present you Adam Gifari, Vice President, Director of TOWR; and also Pak Eugene Keith Galbraith, Adviser to Investor Relation. As you know that the company just reported at 3Q and we're here today, we're able to discuss about that and as possibly also what's going to happen in the next quarter. Without further ado, I'll hand over the floor and the mic to Pak Adam Gifari. Please go ahead, Pak.

Thank you, Pak Indra. Thank you, Macquarie for having us today and everybody who set the time to talk to us about our third quarter results. So let me show you some of the documents that we release during the course of the last 2 days. Let's start with the press release, just to make sure that we are on the same page for discussion. So we announced that the revenue and EBITDA for the period growth grew by 7.6% and 6.5%. Net profit for the 9 months declined by 4.3%, largely due to higher interest rates this year compared to the year before. As you can see, we continue to execute what we thought as a result of our densification. As you can see here, we want to expand our asset base, we want to diversify our capabilities, especially for the Non-tower segment. The Non-tower segment has been like serving the Home segment, the Enterprise segment, we are going to go into financial sector also as we have discussed probably 4 quarters ago, but everything is in the making. We are looking for opportunities for us to basically increase our utilization of our capabilities and asset base, obviously. That's why -- and not to mention, on the Tower side we are also on adjacent businesses, we are doing more than what we normally did back 10 years, 15 years ago, where in which year we basically a power landlord, but we are also now helping a lot on the operations of the sites which is not traditionally a part of our stock of work before, but we are now into that kind of business for our customers, do more of the different things on the same locations of assets can be towers can be fiber. That's the idea, expanding further reaching out further from where we are today. I think on year-on-year, I think we discussed on this page Q-on-Q, we grew revenue 1.6%. And then -- sorry, 1.1% and then 1.1% on the EBITDA also network after tax rose 7.3% margin at about 28%, 29% during the year. So the business basically reported is a subsidy that we acquired in 2015. We discussed this many, many years. Everybody long enough have been having met the company, I think we discussed this 7 years ago. We want to do more in market, onshore in Indonesia, following some of the tower companies that we saw listed elsewhere in Europe, in the U.S. without having to go outside of the country because we think there could be more things that we can do on the same locations that we have operations. And that resulted in the growth rates of towers and the non-towers respectively, as you can see on this page, now we have a total over 160,000 kilometers of fiber generating revenue on our FTTT and broadband business. However, we have not included in this calculation of 196,000 kilometers our fiber that we have been adding during the past 12 months, 15 months, actually on the FTTH segment because those are being calculated for accuracy, those are still construction in progress, but we should be adding substantially more than what we are showing to you today on this page on the press release. The company spent CapEx for the 9 months this year, IDR 4.5 trillion. Almost 60% of the spend is on non towers -- and including acquisitions, the 40%, which is towers, I can say, I think the bulk of that spend is actually about 30% of the 40% is the proximity for the ground leases that we continue to pay maintain those sites, getting them ready for obviously getting colocations, right? And not to mention, it's also included in that 40% of this IDR 4.5 trillion, tower segment spend for CapEx is for our client issue are relocating to new locations under the terms that we signed with them some 3 quarters ago. So I think we continue to be active on that. I think we are seeing good progress. As we speak, we are continuing to receive additional new tower locations to which -- [ Nusantara ] wants to move for new locations for their new operations. Basically trying to meet their financial liabilities to us in basically restructuring the independent patents on contracts or pay the merger. So we are executing expansion. As you can see on this page, into connectivity segment basically under enterprise clients type. We want to increase asset utilization from our existing fiber to the tower and FTTH fiber networks. And then Aming, our CEO saying, we will continue to contribute positively. We become the solutions to where the situation that IOH is in now that they have merged successfully. We are very hand over heart, very happy with their results. We want to continue to support them in what other existing ventures or new ventures that they want to do. and we want to execute accordingly. And we think the industry is heading to the right direction after a series of consolidation we've been in this business for 15 years, starting 2006. Now it's 16 years here actually that's 15. We've seen many, many consolidations. The types of things that we do for our customers, the MNOs, the enterprise, the homes have expanded, and we want to continue this basically. So now I'll move on to our presentations to talk about some of the details if you want to add and come back later for questions if you have any. So we are approaching 30,000 tower count today, as you can see here on the left side. I think we're quite confident we can become bigger than 30,000 towers in probably next quarter given that the pace is quite convincing that location is continuing fiber optics. The one thing that we have not calculated in this number, as I mentioned to you earlier on, is this one only includes the fiber we have for fiber to tower fiber for broadband business, which is included in the subsea cable that we have. So we have FTTH assets that we have been building for the past 15 months, we have not included them. Those are still being counted because our KPI under that contract is actually to deliver home passes but we actually have physical cable in addition to this 160,000 kilometers of fiber revenue generating number. Again, the model so far still build to suit 95%, 90% of the revenue incremental that we do is for build-to-suit. We get confirmation, there will be revenue stream at least 10 years going into the future. Sometimes it can be 13, 14 years in contracts. Investment-grade ratings has been very helpful to us in our various situations, including today I think we want to be in the market when it -- basically with the capability to go into market, the bond market, the bank market and then on the synthetic rupiah market that we have been deploying a strategy for getting the best cost of capital for the company. You see the growth rate 13% to 14% of the revenue and EBITDA CAGR 5 year respectively, ROI, 8.9%; ROE, 22.8%. We can talk more about costing later on. And in addition to this later of information, we also got included into Index Bisnis-27 here, which is a local -- which is a nice surprise for our stock. I think it's quite exclusive given that the number is not that big of a select number of stocks for Indonesian listed companies. So we have continued to basically discuss with banks. We don't have yet a bond program for #1 capital management under this page. We will want to set up something early next year going to the bond market. We never know what the bond market would look like. It's such a volatile market recently. As everybody can see, Investment grade ratings is really helpful for us for the banks, for the bond market and different types of financing, including our subsidiaries. Low risk business because we remain in the build to contract as much as we can. ESG-conscious company, I think we will continue to basically do something on the E side, on the S side, on the G side. Consolidating internally, agreeing internally on what we are going to achieve and then communicating externally, which we think should be a strategy to go when it comes to improving this ESG perception by the external parties. Number 4 is the attractive industry structure. I think industry is consolidating. We are hearing there could be more on the telco side. There could be more on the fiber side. I think we continue to monitor what is happening there. Obviously, the types of assets are different, even though the bigger, difficult ones that have been mentioned in the newspaper, news flows do not necessarily include everything because we are seeing also opportunities for us to buy something that is quite local in city A, city B those locations, we continue to see, but we treat these opportunities as fragmented. We can talk more about acquisitions that we have done so far in the 9 months of the year, but we have been acquiring the first ship even today. So number five, the most unique asset class, we have contracted revenue, [ IDR 67 trillion ]. I think this is a decline a bit because compared to the previous quarter, but we expect to do some renewal also because -- which is a normal thing to do for a tower company and it's going to be coming our way in both sides, we think it's just easier to do like thousands or 2,000 or 3,000 in one go with a customer or those kind of arrangement we did go in 500 or 200 leases at any point different time. So we think the free cash flow continue to be strong. We've been catching up on what we think as the third quarter was a relatively better question period than the previous quarters. It's a lot of work, different types, different contracts. They are one of the things that we do now has expanded so much. And we think, given that we have such a scale, we think even though you may hear us buying something, but actually consolidating, integrating what we have bought so far is also a bit of work that we have been doing. And I think our team has done a very good job. Slide 8, I think it's point number two, I think we know that we initially still going through an election year. So we've been talking quite a bit on 5G but now I think under 4G, still requirement for fiber is we're building new sites. We have a commodity in colocations here. So I think that's quite encouraging. I think a lot of questions came our way. What do we think should be the best technology for the industry? Is it 4G or 5G? I think from my point of view, who has been in the business, I think as long as the industry is healthy enough, it doesn't matter what kind of technology that we are deploying as long as there is good return on investment on what people can afford. So that should be the way to go. So I think if 5G should be the way to go and then the operators think they should be able to basically make a good return on that additional incremental CapEx for spectrum, for equipment, I think we're happy also to support it. But even on the 4G, I think we are seeing these trends and then not so on top of that, [ FCF ] inclusion into the strategy. And then a, number three here, we have been putting more assets like batteries or rectifiers or are doing some managed service on actually going into the ground where the allocations of the assets are -- Internet growth profile has not been updated. I think we want to wait until next year. But I think the trend is still quite interesting for a lot of people in the FTTT space for internet Indonesia growth. So moving on to this long-term cash flow. I think FTTH also falls under this predictable revenue once we get everything set up, commencing all those components also. And then the tenants will be dependent on us with a 10-year contract upset from additional revenue given that we have locations of different business activities of different customers in similar locations, we should be able to basically expand our utilization of existing assets in the future. And there are 2 entries, obviously, when we started this tower -- this fiber business, we only started with 30%, 40% EBITDA margin, but now it has become easier, better, financeable, the banks like it. The rating agencies like it. We've proven that we did a good job on creating such good scale for the towers and the non-towers operations in Indonesia. So I think return on investment, we can talk more about this later. So now Slide #8 about build our strategy built by return. We've been investing in tower and some locations. Obviously, that's our original bread and butter. Number two, the expand fiberoptic network this is the #2 on the top, it's basically very important because it's going to be providing us for future platform for doing something much more that we can deliver. And we expect to get synergies, offering that is basically different than or even better than our competitor because we have locations that are already present with our fair share amount of fiber. And obviously, number three continue to with tower fiberization. So FTTH, the fiber counts also complement the FTTT given that we want to basically utilize those different types of fiber for different types of business here and number four, under this strategy, we are using our balance sheet to support continued strategic acquisition and expansion. We spent approximately IDR 600 billion in the first 9 months of 2023, basically expanding into digital financial infrastructure going into operation maintenance support, right? And on top of that, we also bought [ cylinder ] smallish some fiber optics assets during the 9 months yet. Not too big, but we think that's a nice complementary to what we already have, that acquisitions, yes. So tower count 200 towers, 50,000 kilometers of revenue generating fiber has been added during 12 months and we added 2,274 activations showing that we are very active in the connectivity business and then the 71,000 Home Connect showed a very good performance on the FTTH side of our customers. I think we're quite encouraged by these results, and we want to do more. I think there's a good traction on the offering being offered to the market in the home segment supported by us. So that's I think very, very encouraging. On returns, I think investment grade is always very important for us, put Indonesia in the context of investable space. Our company also included in that, not many company in Indonesia from the [indiscernible] or from the private sector having that kind of investment rate there. So we feel proud about that, and we want to maintain that, obviously, for obvious reasons. So yes, dividend, I think should be continuing what we have been so far. The first product offering, we are the only one tower provider. We do other call ourself tower per se, obviously, but some people call us still a tower company, but we provide end-to-end services to telco companies, towers, fiber-to-the-tower activity here on the right side, and FTTT Asia. So all these -- the boxes, this one, this one have different types of fiber, but I think for the FTTH 1, we have not been included because everything is being finalized, being under construction. And then on this one, as you can see here, the amount of capital spent on infrastructure is now markedly higher than already than the tower segment here, the blue one. Actually, starting 2022 is already higher. The difference 2023 and 2022 is that we paid IDR 1 trillion during the first month of 2022 to pay for the mandatory tender offer STP stocks here. So that's included in the month also. So yes, I think we've been starting to invest a much bigger portion of our CapEx towards non-tower already starting last year. And then the trends of utilization is quite encouraging. So now again, I want to highlight that even though this chart may show something on the fiber utilization for the fiber backlog or FTTT. We think we will not be able to show what kind of synergies in terms of number and present here when we use 1 fiber coming, say, from fiber to the tower and use it for FTTH or maybe a connectivity. So that's one thing. But hopefully, we will be able to show it in different way such as between Macquarie. I think the trend for FTTT revenue generating continues to grow. The number of expectation also growing very nicely. I think this shows that there's a good positive perception on what we can offer to the market as an alternative, good service, good for value. And then we just manage our costs accordingly as we're getting those businesses I think you can see us becoming a more easier organization in the fiber space because we want to continue utilization of all this fiber that we have. And then some -- for financial performance, I think we can see the non-towers growing very nicely. I think we mentioned in the press release, tower revenue CAGR of 8%. 1 tower CAGR 50% over and our AFFO growing 11% over -- and I think there was a bit of a dip during 2023 compared to where it's expected from 2022 to 2023, but because of higher interest expense because that's the biggest reduction from EBITDA to arrive at AFFO. And this is the contracted revenue I was describing earlier on that there was a bit of a dip, but we expect to grow this again. But because we're with renewals here for low contract for the [ balance ] side. Even towers is already in our portfolio earlier than when we have fiber. On the leverage, we're still at the [ 4.3% ]. As you can see, we continue to spend acquisitions, but more and more importantly, we continue to spend on new towers. But those are the location sites, and we expect to be compensated in a different way. But it's something to show to the audience that we have a very good financial management, financial expense management, cash flow management that we can still arrive at this kind of leverage after the merger of IOH. So I think everybody has seen these numbers I'm not going to bore you. So let's just keep the only people have questions. Okay. Collections, IDR 8.3 trillion. CapEx plus OpEx, IDR 5.3 trillion; interest expense, IDR 2.1 trillion. Interest expenses on average about IDR 6.1 trillion by the end of the period. Cash flow plus from operations IDR 1.2 trillion. We made some payments IDR 675 billion in the 9 months and the dividends we paid out IDR 900 billion. And then we also paid for acquisition, the IDR 600 billion that I was talking to you earlier on. And then revenue 1.1% Q-on-Q, 5.5% year-on-year, EBITDA 1% Q-on-Q year-on-year, 4.5%. And net profit, 7.4% Q-on-Q, relatively flattish year-on-year for the quarter compared to the quarter -- a year ago. And then there was a bit of a decline in tower because this is the 3 months -- the 9 months in this 2023, we had a full impact of some of the short-term leases under [indiscernible] that normally would have been renewed. But since they decided to merge, some short-term contracts did not get renewed. But compared to the 9 months 2022, which we did not have impact on. But we expect 2024, we will only be dealing with long-term contracts. There's no short-term contracts to be churn for under IOH relationships. And then for FTTT, the growth is quite nice 67% year-on-year for the 9 months and in connectivity, 19%. And then FTTH, fiber to the tower, we started from practically close to 0 of IDR 6 billion last year and then this year is IDR 82 billion. So total growth of 7.6%. I think we mentioned also in the press release that FTTH will be a sizable investment in the coming quarters. Towers, 0.7% addition, tenancy decreased by 1.4%. We had a bigger impact on the revenue side because it's a full 9 months of revenue adjustment from IOH merger, whether tenancy catches up, but some of this revenue catching up is only for the end part of the third quarter. So that's why the difference in revenue and tenancy when it comes to the [ latest ] on increase. Fiber to the tower, 47% increase in terms of revenue in fiber. Connectivity, which is already stripping out FTTH Home Connect grew by about 22% year-over-year. FTTH grew but substantially 1,000% because of start a little base when we're starting. And then on this foreign exchange exposure, ladies and gentlemen, just to repeat here. So we have -- the balance sheet is hedged. So on the liability of the bonds, we already have enough assets in U.S. dollar, which is #1 here. But you can see on the following slide that we had some U.S. dollar loans that we think as a nice arbitrage when interest rate was lower, rupiah was in a good position, we decided to establish loans with banks and then we have included in the transaction, the option to buy rupiah to basically hedge a lot in our position whenever we need to pay down the debt upon maturity and the FX rate is IDR 14,500, IDR 15,000, respectively, for each of the deals that we are having here, let me walk it to the next slide. So this one is 2025, which is IDR 14,500. And this is 2018 (sic) [ 2028 ], which is IDR 15,000 and in 2029 is IDR 15,000 so it's been locked in. We know embedded inside there's some costs, but it seems already when we saw -- when there was an opportunity, the offer came our way, again, due to the fact that we have good investment-grade rating, foreign banks offer us and then we just took up upon the opportunities, including everything from the bond market as well as a lot of straight rupiah that we took the opportunity for during different times of year. So I think that's all I have and back over to you.

Thank you, Adam. [Operator Instructions] I think first we have first question from Aishwarya .

Adam. Just a few questions from my side. So first, on the interest expense, what are the plans to bring that down, say, in the next year or the next quarter and the second thing is on the FTTH business. Can you give some update on the progress there? And also just a question on why is the share price moved up by 10% today. Any thoughts on that?

On interest expense, I think we are [indiscernible] thank you for the question. So on interest expense, yes, I think the reason why we continue to spend because we think there is still attractive opportunities for us to reinvest cash flows, new towers, new fiber acquisitions to complement our operations on the operations side, on the fiber side and then including going to the feature for serving different types of segment, basically further utilization in the future for our fiber and our other solutions. So that's why. And then when we don't see opportunities like that anymore, maybe we just like pay down, right? But I think -- so that's our answer. We will obviously be vigilant in our cash flow management, collections, mature timely. I think I can say to the fact that as of today, we are still signing rupiah loans below 6% from banks. So I know some people may say, okay, yield has gone up. But again, some of the banks are -- we are still signing like that below 6% rupiah loans. And then on FTTH, I think we are continuing with what we said before for further like achieving 2 million compasses. And then you saw what we have achieved so far. I think the count is about 600,000 or 700,000 home passes already in third quarter presentation slide. And then number three, I forgot the question. Can you repeat again? Sorry. On the share price? Yes, I don't know. Eugene, do you want to say something on the share price?

No, I mean just there's buyers and sellers. Perhaps people like the results. I don't know you're in a better position why I answer that question that we ask since [indiscernible] the stock trading market, and we're not. But I would say just on the investment side, we are aggressively building our franchise. And so that will involve acquisitions and further investment going forward. And that's a top priority for us to continue to enhance the franchise. So that's why you see the investment figures that we see.

Yes. I think on the company side, personally, we are quite confident that Indonesia should be in a better position, in a better shape than previous quantitative tightening because of obvious reasons, where we have been involved in the global supply chain with the downstream investment, foreign direct investment the last time I checked with banks foreign investment into automotive stuff like that. Mineral downstreaming continues to go in. I think there's a big -- quite a big of faith in successful investment in Indonesia. So I think that's one of the things that helps we expect to help us. And then probably some of the investors also look at that as well and take into account the recent weakness as an opportunity to get in, I think.

Pak Adam, just a follow-up on the debt side. Do you see any change in appetite for your leverage level, number one. And two, when you talk about debt right and our asset, there is the duration management, right? Yes. So I'm just wondering under environment, do you see any room or appetite to widen or narrow the duration of the asset and liability in a company.

Yes, we are cognizant with that requirement. I think there's opportunity for us to basically price something that's preferable to our liking like the one, I was showing you the maturity 2028, with favorable pricing. I think those U.S. dollar effectively after hedging everything, the effect it is about 6.1% or 6.2%. When rupiah rate was 4%, 5%, that seems to be a costly proposition, you know what I mean, right? But now there seems to be a good call. But we continue to look for it. We don't think the market will always be in a weak position than what we saw during the past almost 4 weeks after the inflation, right? So other than that, I think we just go with what we have. I think we are -- again, among the borrowers in Indonesia, we are positioned as among the best borrowers here. So that helps a lot with pricing. What the bank also wants to get exposure to us. So that's why I said just to highlight, we are still signing below 6% today just this morning on my desk.

But on the shutter or the shorter duration, I suppose to go longer?

We can do like a couple of months, 6 months, 12 months, it's good to price something on the floating side short term. So it gives us flexibility to change it with something else in case somebody doesn't like the pricing to our side. And unlike when we established, we have a bond maturing in 2024 when we issued it, it was 2014, right? The coupon is about 4.5% in dollars. When we did it was such a good deal. But then during 2021, we couldn't pay down. We couldn't refinance it, right? So at one point, you will like it or you dislike it if you fix something in the long term. That's what we're trying to say.

Yes, just a follow-up on the interest expense bit. How does this high interest rate affect the IRRs are targeting [ space ].

I think the way we price business in Indonesia is there's a bit of a lucrativity if I may say, if you compare that even to the U.S., Europe, right? If you track the capital, the EBITDA per invested capital in U.S. and Europe, I think you come to about a low single-digit percentage on new organic business. Indonesia, we always look and so far has been successful to maintain like double-digit EBITDA gap rate.

I think we have Arthur and Bob online. Well, first, I will go to Arthur.

Just 2 questions, please. On the infra plans with fiber. I'm just wondering what's your outlook on this going forward? Because it seems to be getting crowded with telcom, LinkNet, Indosat-NMC are looking to open up their fiber. Second question I had is with regard to the tenancy outlook. I'm sorry, if you can just remind me what the outlook is again for the year. I recall, initially, there were some, I think, tower -- tenancy revisions on Indosat. Is it still ongoing because you're still actually adding towers as you said.

Yes, we estimated at the start of the year, it's going to be 5% full year 2023 revenue growth compared to 2022 full year revenue. We are showing 7%. So that's your number one question. Number two question about the sites moving away. We mentioned from the start of the year, and you can go back to the press recordings we already mentioned, it's going to be the impact is going to be total 1,000. And if you see us showing a positive number, then we have myself added more towers than we are losing sites, okay? That's number one. And then number two, actually, when we try to -- frankly speaking, it's becoming more difficult to basically deciding whether one site, one colocation tenant will be going away from the IOH relationship because in order for a tower with 2 tenants under IOH merger situation, the tenant number two, the colocation, which is under IOH, will have to tell us and then sign a new lease, where is the new locations and absent without that, then we will not be able to treat such situation as a relocation and then we'll still have to pay double on the same locations. Does that make sense?

Yes. Sorry, I'm just a little confused. Because you mentioned 1,000 towers over 2 years, right, your adding towers. Is it a timing issue? Or you're confident that you're actually able to add new demand to compensate for that initiative?

They should be because we are seeing colocation organic.

Okay. So it's not a timing issue. You're actually seeing faster-than-expected growth on that side. And the first question I had is with regard to the fiber side, right? Because obviously, it's growing now. But I'm just wondering what your expectations are with regard to competition given that everyone seems to be pushing out fiber. And InfraCo seeming to be a common theme now.

Yes. I mean the amount of fiber owned by people on the island of Java is already quite substantial for many, many years. But what can 1 infra company offer to the table when such demand is coming that way. And we've been doing this in to 2017. And we know Indosat has fiber, Telkom Group has fiber, right? [indiscernible] has fiber flowing. But the 1 that they need is not the fiber numbers, but they need the service. They need the availability to be there when they need it, which is to connect towers to serve as backhaul, right? And then what we have been able to do is to provide them on a timely manner on the spec that they want and that has provided us with the sheer amount of fiber that we can basically utilize it for a different impact for different things. And we are probably now the largest independent fiber owner in the country.

Sorry. I was referring to the consumer fiber like broadband rather than fiber to the tower.

Including that because if we have the capabilities to use the share amount of fiber that we use for something else and already, the floor return is underwritten by the anchor tenant from FTTH or FTTP, then we should be at least at tower or most likely to be better off. You know what I'm saying?

I'll take it offline.

Basically, we have contracts with EXCL, for instance. And then the MNO also has a fiber company, right? But so far, we are getting orders from EXCL also and what is the key to that is the mix a lot of different things that we are able to deliver on timely manner.

So my concern mainly lies with the growth going forward because, obviously, I think in the first stage, EXCL had placed those orders. But going forward, when they spin off their own fiber InfraCo via LinkNet and telecom is also opening up with fiber wides owned InfraCo and I think Indosat also looking to do the same. How does that basically change the competitive dynamics and growth outlook for fiber? Maybe that's the way...

Number one is the location where we serve is different. Many operators like some of the assets that has been divested to the news leader to Indosat located in cities, right? Also the same thing with 1 big operators such as LinkNet or [indiscernible], for instance, right? But we look for other places that basically we can marry on the backhaul side of things on towers and operate FTTH and then also at the same time later on connectivity and using same locations. This is like towers, people like it, if it's located ex Java, we happen to have substantial FTTH build-to-suit orders ex-Java, Kalimantan and Sulawesi were basically almost 60% of the FDI into the country is taking place. So Yes. So that's why we're different.

I think also just on the growth going forward, we're not really sure what kind of fiber the other companies are employing. Now all it is, how many cores they have, what the capacity for a utilization rates to go up. In addition, not long ago, we were in quite a lump, we were very struck there by the attitude of some of the investors in Kuala Lumpur to the LinkNet deal, and we've been struck that notwithstanding. We've been giving a nice contract from EXCL about $2.5 million, right? So we think that the combination of our dense network, which enables us to provide linkages at a competitive time frame to others plus the fact that our fiber is the newest and the most state of the art right now should hold us in good stand in a competitive position.

Yes. Again, the fact that people have fiber, located it in many places. It doesn't mean it's going to be up to par on what the requirement of the market. So that's where we see opportunities. So we understand the model in some places where you build -- one is built ahead of the demand. But in our case, we already have the FTTT, the FTTH contracts. That means, basically, we are receiving 10 years from the first use of those fiber and then we are just using it for something else on different types of business. So I'll get to your point, Arthur, looking at this space, I don't know if you see this, the footprint that we show growing from 2019 to 2022. Can you see this?

Yes.

Okay. So Java, right? People say, Java is already offer core fiber, right? But are those fiber belonging to the operators as a thing at the time in 2019? Are those available for the types of the power backlog that was being required at the time for 4G, right? So that's the question becomes. And now again, back to the same situation in 2022, the growth is there. We got the contract to at least 10 years. Fiber for tower -- that serves us, again, under return on returns from first anchor tenant. And now as you can see here, we will be using some of this fiber in Java here and Kalimantan also going from basically non-assisted now it's [ 2,700 ]. So I will see Maluku basically on the non-assisted 3 years ago, now it's 3,700 kilometers same thing with Sumatra, right? Again, some people have got fiber, but are those ready for scope of work, the type of specification that people want to use for at the time, power backhaul. Now we are using this set of fiber. And on top of this, we are adding FTTH for our other fiber business after.

Next, I'll hand it over to Bob.

A couple of questions for me. Number one, your power and tenancy numbers finally recover after dropping in the consecutive quarter. Just wondering what's the drives this increase in tower and tenancy in third quarter. Is it because more order from Indosat or is it from other tenants.

Because when we discussed this about the IOH relationship, any new business that we are giving or getting from Indosat new towers or colocations, we will not get new revenue, but it's sort of getting new locations, right? So in order for the net add, right, there has to be a compensating factor, which is -- this means other companies giving us our organic business.

My second question is regarding your CapEx. I think you showed that the Non-tower CapEx is also past the tower. Any guidance on the split going forward? And perhaps could you also share your expected annual CapEx, I would say, in the next 2 or 3 years?

I'm going to guess we're still repricing, before people come to the question, might as well you say. We are still repricing our budget for 2024 full year revenue, CapEx, those numbers to be one file and then getting it approved internally and then also compare that to the Jakarta [indiscernible]. So but I'm not guess it's going to be around 5% to 6% again. But without having too much detail on it. But that's just the a guess.

But on the split, Adam?

Yes. Starting 2, 3 years ago, it's already 40%, 50% on non-towers I think it's going to be around 60% or so for non-tower. Again, these are just estimates.

Yes. Maybe following up on Bob's question. Can you provide more color on where these new tenancy come in geographically? Is it coming?

Yes. I think saw on acquire sites in really densed area. Smartfren basically helped component their Java operations also. New locations that we are building is outside of Java. Again, I think that's quite encouraging given that there's already to tower companies are also listed, right? And then there's still, requirement from the towers yet. So yes, that's the situation now.

And now that you mentioned Smartfren, I think everybody here might have talked that you know that Smartfren merger is -- I think it's crystallizing more clearer than before. And what do you think the impact to our industry? Is it net positive or net negative? And what is the exposure probably to you in case of Smartfren.

Okay. Is that really that is crystallizing. I do not know. And we haven't really checked that.

No. I mean -- yes sorry, sorry, at least this is the phrase.

I think we're going to treat it like the same that we saw with IOH merger, i.e., a lot of term contracts will remain as they are, we're just helping out. I think we're quite positive if that happens because that's the kind of industry that we want to see. We continue to monitor about what's happening in India, which is, I think, among the best ASEAN telco market now after the fact 2 players that they have over there, even though there's another 2 players who cannot perform because of financial situations. But we like it if that happens also getting more ideal than before from 4 to become 3 players. I think there will be processes, contribution by each of the vendors, including us to that process. But I think we will be contributing positively. And after that, there should be better profitability, which is as always expected from consolidations here.

Yes. I mean our view very much is that the best market structure is 3 players. If the smartfren mergers, then we think that's an improvement that will make competition healthier, and it will also increase the ability of companies to invest since that has in the balance sheet will be bigger.

Thank you, Eugene. Yes. I think that's always the scenario for consolidation. I think the penetration can increase, the usage can increase, I think profitability has to be better from consolidation. That's my personal expectation.

I have a question from [indiscernible] .

I think it has been quite stable here. I think the discussion is 5 years old based on pricing.[ Indra Cahya ] just came back from the from other places, but it has been like that. But so far, there is a -- so much that pricing can go down from interest rate we're going down. But now I think there's a clear different macro environment that it is higher, not everybody can borrow as cheaply as we do. So yes, we just play by year. And then we think the pricing renewals are still making sense. And yes, we can still do it, but we want to retain profitability.

I think I have 1 more question from Henry.

Perhaps 2 questions. First, if I can, you mentioned earlier about the contract that was part in the presentation. Can we check on how big is the contract renewals that we discussed before, perhaps for the next year and also in 2025 that would be my first question. And then second, just curious on your thoughts on a few on the Starlink. Will there [indiscernible] change the competition landscape in the towers and also infrastructure industry in Indonesia?

Yes. Thank you, Henry. So we have 54,000 leases, right? So if you show 10-year release for all those tower leases. So that means every 1 year, there should be around 5,000 lease renewals. It's just that the difference the way each of the operators wants to do renewals are different than one another because simplicity sometimes they go in, okay, I want to do 1, 2, 3 -- years of expirations for like in 2019 when we renewed thousands and thousands in one go with different customers at the time. And we expect something similar could happen also. On the technology front, I think there is an advantage that Indonesian telco market can -- that people can see that price point is really affordable. I think we'll continue to expect given the share of our investment by the participant in the industry has made during the years. So there should be like infection in pricing points. So and if you compare that even current pricing points after we said, price repair has taken place, I think we still see that's still very, very much affordable. And then you compare that affordable price of mass market consumer telco pricing in Indonesia. And if you compare that with whatever new technology you see being offered out there that's Starlink and then I think $100, $200 a month per user or something. So that's obviously above. So that's how we think and now we see also -- yes, I think we see also the continuation of fiber towers, given the, again, in the market, the nice pricing point is the one that is more affordable to the mass market. Not that is much higher than the market can bear. Eugene do you want to say something?

I mean, some quarters ago, we issued a press release about an investment we have made in what are called stratospheric platforms. So these are basically towers in the sky at about 60,000 feet in the stratosphere. We think that the Starlink model is going to be too expensive to really make a big impact in Indonesia unless there are significant subsidies from someone. On the other hand, we do think that this tower in the Sky model does represent progress of a disruptive and advance in kind for the tower business. The basic technology here is you have a drone in the company in which we invested the drone is hydrogen-powered which stays up in an orbit for about 9 days. And the antenna is on the bottom of the drone, and it goes directly to that hand phone. So Starlink is hand phone to transmitter to satellite to transmit at a hand phone. This is hand phone to tower in the sky to hand phone. And this has a faster speed for 5G than the Starlink does. And we think it also is significantly less expensive. The company that we've invested in is headquartered in the U.K. and Cambridge. And they estimate that for the U.K. for the entire United Kingdom coverage of 5G with this technology, they require 25 drones. We think this is a technology which offers good promise, and that's why we've decided to invest in it. And we also see that in addition to the power in the Sky model, the antenna itself that we're experimenting right now in the U.K. and later in Jakarta, with taking these antenna and putting them on to tall buildings and using them on tall buildings, we can achieve significant economies. They say in the case of the U.K., the modeling -- this is all modeling now, but the modeling there is from British Telecom, which is another investor in this business. It's that they would save about $5 billion in CapEx every year using this technology for the country. So there are things on the horizon. There are probably several 5 or so years off, but there are things in the horizon, which could be quite promising and would be quite different in their approach.

But I think bear in mind that all these things are big on trial and then there is a side on the economics that needs to make basically local market sense. So yes, but we do have some exposure and those are still being basically on trial by other partners. Okay. And just 1 question from Niko. Acquisitions, yes, we acquired in 9 months synergize 1 company to help us on operations -- and then we also acquired [ smallish ] fiber. And then we also invested in a financial infrastructure digital financial infrastructure within the first 9 months. Niko to your question. So handing back over to Indra.

Thank you to the [indiscernible] who ask. I think we are approaching the end of time. I think we passed that maybe before we close, I'll hand over to Pak Adam and Pak Eugene for final closing remarks.

Yes. I think we have invested a lot in towers in non-towers especially fiber. So obviously, as an infra company, we want to increase utilization. And again, the key to this success is actually to be there on spec, on the service levels on the price point is affordable. But given that we have been operating on towers, price points have changed. But you can see the averages I think each of the analysts on this call have their own calculation. As you can see, averages have been very stable. And then we just want to increase utilization in terms [ focus ] or utilization of existing fiber, obviously, for with the ROE. And then we just manage our costs accordingly on to get EBITDA and then the best cost of financing.

All right. Thank you, Pak Adam, Pak Eugene and thank you for everybody who has dialed. This is Macquarie Indonesia Insights. Thank you for dialing. Thank you, everyone.