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

Good afternoon, everyone. Welcome to TOWR Third Quarter '24 Earnings Call. My name is Bob Setiadi. I'm the telecom tower analyst for the CGSI Sekuritas. We are pleased today to have management for TOWR, Adam Gifari with us to present the quarter and as well as the outlook. I think let's start this call with the presentation from Adam before we continue with the Q&A.

Thank you, Bob. Thank you, CGS for hosting the call. Hi, everyone. Good afternoon. Hope you are all well. I think in this afternoon, we see a bit of volatility in the Indonesian market, where rupiah a bit weaker, but I think this too shall pass in our minds that there should be a silver lining at the end of the day, how we can go about this volatility in fixed income bond market as well as the currency. So let me start with our most recent release to be sure we are on the same page. So this is our press release, at the same time, we released the third quarter results. So this is the first quarter that we consolidate IBST, the company that we bought on July 1. Revenue grew by about 8.4%, EBITDA 7.1%, EBITDA margin is around 84%. IBST is carrying a bit lower margin during the first quarter of its consolidation. And we all know also that the growth from non-tower still quite strong with lower margins, but we managed to basically control this -- maintain this about 84%. Net income sums to about a slight increase to IDR 2.478 trillion from last year, IDR 2.474 trillion. So net income margins stands at about 26.2%. Tower count on the following line, reached 35,371 towers, grew by about 18%, total tenant, 58,165 grew by about 7.2%. Tenancy ratio as a result, decreased from 1.8 last year to 1.64 this quarter, notably because IBST carries a lower tenancy ratio. But as you can see, we have worked very hard to basically maintain the margins, even though tenancy ratio has come down. Total fiber physical cable that we have, including that we have FTTT, FTTH and backbone subsea everything into one, sums to about 160,000 kilometers of fiber run, grew by about 33% year-over-year. Total fiber, the physical cable part of its total fiber grew by about 22.3%. FTTP revenue generating grew by about 20.9%, including IBST, the utilization ratio, which is being guided by over 8 sums to -- comes to about 182%. [indiscernible] came to about almost 1.5 million home passes. So it's 167% growth. And the home connect grew by about 100% to 155 -- almost 156,000. Connectivity activations remained robust to 26% comes to about 50,761 activations on the Connectivity segment. We are highlighting that this quarter, the leverage comes to about 4.35, even though we have paid all the -- most all of the debt here that we are incurring to buy IBST because we have strong cash flow management as well as compensation that we have leveraged slightly manageable to 4.35x here as of September. So again, this quarter marks the first quarter where we consolidated IBST results. I think we have mentioned in the last quarter that we should not see IBST's first quarter -- second quarter of 2024 to be reflected in Sarana, TOWR results because we have done a lot of synchronizing of accounting policies as the new owner of IBST as well as the assumptions that we used during the acquisition evaluation. So we had our own assumptions like what would be the towers, what will be the revenue that we expect from the fiber that the company carries. And then basically, not take into account anything else that we don't see as with very little value or even no value. So total towers increased to 35,000, 18% year-on-year growth. The tenancy ratio reached 1.64 due to 2 factors, which is IBST consolidation with lower tenancy ratios as well as vision from IOH tower lease contracts points to new locations. The contribution of revenue from the Tower segment to the consolidated revenue recorded a stable at around 67%, slightly increased from previous quarter because the inclusion of results from IBST towers. This is growth in non-tower segment continues to grow impressively. The contribution is about 33%, so slightly down from 34% because IBST consolidation again. And then the growth of revenue from FTTT, FTTH comes to about 18%, 13% and very low base FTTH are 69% year-on-year. The largest contributor to non-tower segment is fiber leasing. The total asset itself growing 33% to around 150,000 kilometers. The Fiber-to-the-Tower segment utilization without IBST, we are trying to show to separate the existing fiber without IBST is about 190%. And if we include the fiber utilization because of the IBST, then 182% digitalization because IBST itself was carrying 132%. The previous quarter, IBST utilization ratio was about 122%. So IBST itself is also growing organically the utilization ratio of its Fiber-to-the-Tower. In the third quarter, our CEO mentioned that the first quarter that we consolidated results from IBST, and then we are pleased to report that IBST has contributed a net profit of IDR 41 billion during the 3 months to TOWR result. We are very optimistic that operational synergies will continue to improve, so that IBST net profit contribution can increase. I think IBST EBITDA margin was below 80% during the 3 months ended September 2024. And then as an update of our process to do a rights issue, we just got approval from SMA shareholders at the GMS on November -- on October 25. The use of proceeds will be to pay down debt as well as possibly working capital needs. Strategically, we expect this right issue to basically provide new capacity to continue organic or inorganic expansion and help maintain company's investment grade of BBB from Fitch as well as BBB- from S&P. So now move on to the presentation slides, which is more of a 3Q compared to the 3Q of the previous quarters that we can look at. I think we've looked at this before. I'm going to skip. And then just to highlight, the access to low cost of funding, I think it's quite strong. We have not seen much of an impact on this quarter from the cut of interest rates by the Fed as well as BI, even though now we are seeing concerns from the market whether there will be any cut from the Fed side. And if there's no cut from the Fed side, then I may not follow -- I may follow by not doing any cut. But I think the dust from the U.S. election should be momentarily quite concerning, but I think there will be -- at the end of the day, certain cuts will happen. We don't know which quarter, but I think we have set ourselves to basically get benefit from the cut in interest rates as about IDR 15 trillion to IDR 17 trillion of our debt that we have today is linked to BI rate. So if there's a cut in Fed and BI follows, then we should be benefiting. Liquidity amounts to the company sums to about $695 million equivalent, we borrow. I think almost all, if not all of this $965 million is in rupiah, which is stating in dollars for the sake of presentation or communication and investment grade ratings still in place. And then I think one thing that I would like to highlight is that contracted revenue stands at about IDR 78.8 trillion, which is -- it used to be -- we were the largest, and we continue to be the largest. And then we expect that whenever new funding or existing cash flow that we are generating from operations can continue to fund CapEx, dividend and share buybacks. We have been consolidating. We are in the works of doing some acquisition as well as we speak, even though I cannot name them, but we continue to look for opportunities for us to continue to consolidate the market in the towers as well as the fiber segment. Moving on, on the towers that we have. This is the split of towers that we have as of September. Total towers 35,300, 52% in Jawa, Bali, the most dense areas. Sumatra is almost 8,000 towers, Kalimantan 3,200 towers. Sulawesi 2,700 towers, Papua & Maluku continue to be not so dense in its tower penetration, even though it's growing quite nicely, especially from the likes of Indosat. They want to have a good penetration on the business side of Indonesia. And then on the fiber, we have reached about 258,000 kilometers. Fiber-to-the-Tower, 250,000 kilometers revenue generating with 1.8 utilization ratio. FTTH, 20,300 kilometers of fiber, including IBST, backbone and submarine 22,000 kilometers, quite substantial, and we expect to continue to basically utilize into multi types of customers and solutions with our fiber. The build, buy, return slide about the growth of towers. We added 5,400 towers in the past 12 months. We added 37,000 revenue generating fiber during the past 12 months, which I think, in line what we have said to market before 30,000, 40,000 kind of revenue-generating fiber at during the past 12 months -- for the -- towards the end of the year. We added 33,250 activations, home connect reached almost 81,000 and then 939,000 home passes addition. Return, we're prioritizing, protecting investment-grade ratings, which I think we have delivered. We have maintained investment-grade ratings. I think both S&P and Fitch have said so and retained dividend policy, there's not -- there has not been any change, so we expect also an interim dividend in coming months here as per usual practice of the company. Diverse product portfolio, so towers, tenancy ratio 1.64, 54% towers located in Jawa. Sorry, I was mentioning 52%, it should be 54%. IBST is skewed towards Jawa, the tower presence and a 46% at ex Jawa. So there's a bit of increase in tower [indiscernible] in Jawa. This is not to say ex Jawa is not growing. I think we see a continued demand for really quite remote areas in the eastern part of Indonesia or the likes of Indosat to basically penetrate and we're trying to -- we are working with them to basically provide 1,000 fiber in those locations. And then the growing need for additional scope, I think we are working towards increasing efficiency for backup powers with batteries or stuff like that we are working with several of the operators. I think XL and Smartfren, they are still in a quite serious discussion for the merger. So not so much of a movement on the XL part. But I think the idea is that they know that the shift for more efficient energy, not just about backup power using genset, but there needs to be an increased usage with batteries as well. Fiber-to-the-Tower reached 215,000 revenue generating by end of September. I think this -- there continues to be opportunity for us to increase utilization on Fiber-to-the-Tower. I would like to remind everybody that when we say the fiber that we own, and if there is a utilization done by another segment using fiber under the Sarana Group, unfortunately, we will not be able to report it. I think but people can look at the spend of CapEx efficiency actually increased in the form of ROE or ROI. So we don't have to necessarily spend the same CapEx for FTTH, for instance, in the end -- in the same location, we can use some of the FTTP fiber that we have to support the FTTH expansion as well as connectivity segment and vice versa. So as we continue to grow the private expansion, we expect this kind of solution to continue -- synergies to continue. The home connect penetration is about 11%, the home FTTH assets reached about 1.5 home passes by September. So in line with what we said to market that by end of the year, we should be reaching 1.6 million to 1.8 million home passes. So we are on track to achieve that by year-end. And this is the CapEx spend. We -- the blue one on this September inclusive of IBST, so a bit of an increase. But organically, the spend of fiber is not basically decreasing in significance, but since there was a one-off of IBST on this chart. So it seems that the tower CapEx is higher than the fiber itself, even though that's not the case, we continue to be aggressive on the fiber side. On the tenancy ratio, we mentioned 1.78 by December 2023. Tenancy ratio 1.64, utilization ratio, 1.86, decreased a bit to 1.82, this is December compared to September. Tenancy ratio on the towers and fiber utilization ratio does not include assets and synergies operationally between towers FTTT and FTTH as well as connectivity business. Again, we should be able to basically protect our return on equity just on existing assets that we have whenever we expand on other types of fiber solutions, helped by the fact that we have sheer amount of towers in various locations as well as fiber utilization that we expect to continue to happen between different types of fiber solutions that we can offer to markets. On the Fiber-to-the-Tower, revenue -- generating revenue, we reached 125,000, which is a marked increase from 182,000 by December in this space. And then activations, 15,700 and then the number of activations as of December 12,600. So the increase continues to be quite showing how busy we are, and then the tenancies on this one increased a little bit from IBST consolidation on this chart. On the AFFO on revenue, 7.7% CAGR, revenue non-tower 50.1%, EBITDA grew by about 12.4%. AFFO growth slightly lower, even though the gap I noticed seems to be closing between EBITDA and AFFO growth because we managed to basically suppress our interest expense as a percentage of gross debt that we have, which I think we can show later -- in later slides. The amount of future revenue contracted is IDR 78.8 trillion. I think the highest that we have reached so far. And this is including that we consolidated IBST and under IBST, we have renewed a good 10 years under Smartfren contracts. So that helps with this metric, IDR 78.8 trillion. So actually an increase from last quarter of IDR 74.2 trillion of contracted revenue now almost IDR 79 trillion contracted revenue. Again, even though we have consolidated paid for a above of the price that we -- to acquire for IBST, net debt-to-EBITDA remained at about 4.3. Average interest rate is 6.3%, which is I think JIBOR stands about 7%-ish, and then the yield of IDR 10 bond sits at about 6.7% as of we speak now. So the fact that we are able to get interest rate of 6.3% blended, I think it's quite an achievement that we have continued to exhibit since the start of the year. I think in December, I remember because of the spike of BI rate taking place September last year by 25 basis points. We were as high as 6.5%, but now it's come down to 6.3% and maintain the ratings from the 3 rating agency S&P, Fitch National, Indonesia Scale as well as Fitch Global, BBB-, AAA and BBB, respectively. And then on the year-on-year for the quarter, the 3 months ended September, revenues grew by about 12%. EBITDA grew by 12.4%, including IBST, and then net income, 2.8%, yes. I mean, this is a result of finance charges. But I think on the operational level, we continue to show resilience by adding towers, more fiber, we are realizing better economies of scale on the -- basically doing the same team, running operating towers, maintaining them as well as marketing the fiber will be done by capacity that we already have for Protelindo towers that is basically duplicated all the way to STP, all the way to IBST. So that helps with fiber, the same way that we are running the fiber operations, the non-towers margins basically remain intact. So -- and then on the IBST itself, we mentioned that IDR 41 billion contributed during the 3 months ended September. We expect improvement, obviously in coming quarters here. So I think the [indiscernible] should be able to be demonstrated sometime in 2025 full year. I think we mentioned that we should be about IDR 700 million in EBITDA in -- for 2025 in the most recent press release as well. Cash flow collection, I think, quite okay for the 9 months, IDR 11.2 trillion. If we had IDR 12 trillion in revenue, IDR 12.7 trillion, IDR 12.6 trillion. So we have collected a lot of the revenue that we have accrued so far. CapEx plus OpEx sums to about IDR 7.7 trillion. Interest expense IDR 2.2 trillion. Cash ending IDR 2.5 trillion after acquisitions, yes. So we borrowed IDR 4.8 trillion, including to pay for the mandatory tender offer, which is not included in this -- because we only paid for the MTO October 4. So we're prepared for the cash, which is MTO payment took place like 3 days after the cutoff date of this financial statement. And then there was a dividend during the 9 months of IDR 935 billion, cash ending is about strong IDR 2.5 trillion consolidated. On the profit and loss revenue, we grew the quarter compared to the quarters before as well as the quarter last year, 12%, 6%, respectively. On EBITDA to 12.4%. EBITDA 8.7% and again showing strong trends upon IBST. Net income this quarter compared to the last year, decreased by 2.8%, but there was an increase just last quarter by 4.3% quarter-on-quarter, reaching IDR 842 billion during the quarter for the 3 months ended September 2024. Revenue analysis, tower grew 0.8%, including IBST. Fiber-to-the-Tower, 18%. The connectivity grew 13%, and then FTTH from a low base grew by about 370 -- 369%. So total top line growth 9 months compared to 9 months a year before 8.4%. Summary operational data, towers 18%, tenancy 7.2%. So tenancy ratio increase because of tenancy grew a little slower than we grew towers. Fiber-to-the-Tower grew 20%, connectivity 26%, and this is the 3 months this year compared to last year, FTTH 100% because, again, this is a build-to-suit process that FTTH takes a lot of time and a lot of sweat to basically execute this -- the orders. So FTTH takes quite a bit of time to basically execute, and we are showing the numbers on this page. Now rupiah sits at about almost 15,800. Again, just to show people that we have catch the debt maturing in 2028, 2029 that we borrowed in originally in U.S. dollars. The red boxes hedged at about 15,000 of our maturities, and then the USD 138 million should be done -- should be paid in the next quarter -- this quarter 4Q. We are prepared for the cash. So it should be no issue. So whatever U.S. dollar debt we have remaining are the red boxes on this page when we see again each other in the next discussion for the company's results that you should not be able to -- you should not be seeing this -- the bond again, it should be paid down the 10-year bond that we issued in 2014. I think that's it, Ruth and Bob handing back over to you for questions and discussions.

Okay. I think we can start up with the Q&A. [Operator Instructions] We've already got one. Please go ahead, Sabrina.

So I have 3 questions from my side. I know that you just consolidated your IBST figures, which from the latest available data that I can find for IBST is, actually, the tenancy ratio is about 1.74x. Correct me if I'm wrong. So that's like roughly about 5,800 tenants for IBST. But I saw that your tenant -- net tenant additions in third Q 2024 only reached like about 3,800 additional tenants. So I would like to understand where does this discrepancy comes from? That's my first question. So second question is considering there are chances of a rate cut, right? So are you looking to change your debt mix as an increasing the floating portion? Or it will remain at this? And my last question is, it seems like your goodwill on your balance sheet keeps on increasing as well. So -- but we note that this is due to the past acquisitions, right? So how should we assess its sustainability? Is there like any potential risk of impairment going forward? So only 3 questions.

Yes. So the #2, so on the borrowing, yes. So I think the rate that we borrow that is floating rate, I think we play by approximately 50% fixed rate and about 50% floating. The reason why the floating is a bit higher because we think there's an opportunity for us to borrow floating rates when the banks are offering a very good rate, including the biggest banks in Indonesia. The unfortunate thing about bonds is that we have to wait until it's being paid down before we can basically enjoy borrowing fixed rate. There's an opportunity for us to do so in the following quarter when we see the $138 million of bonds, long-dated bonds, yes, that was issued 10 years ago. When it comes due, we should be able to pay -- to replace it with the floating rate borrowing. On the goodwill, I think we are working to basically utilize the asset that we have, including the past acquisitions. The -- especially the biggest ones are the towers, STP, IBST, KIN, all those names here. We try to utilize as much as we can. The thing about the tower business is that we have to reallocate, make sure that all the segments are growing on the tower side, including the past acquisition that we have. I think we're doing that. STP and IBST, the listed one at least, we should be able to show growth on each of these 2 portfolios because if we are focusing on the audited numbers here, the listed ones, we should be able to basically protect the bottom line from further negative goodwill, as you mentioned. And then what's the first one?

Tenancy ratio increased around...

Yes. The towers and the Protelindo was about low 1.8 this last quarter. I think IBST was showing 1.2 to 1.3 last quarter. So that's resulted in a lower tenancy ratio blended in this quarter. And then the decrease is due to the decrease in the number of tenants here. Just if you strip out IBST, I noticed is that basically, we mentioned this last quarter, we experienced more than expected churn from Indosat, from XL as well, from previously we saw -- from previously budgeted numbers because during consolidation and during more intense competition on the operator side, so they would rather slow down their renewals, even though the numbers are still within the 1% to 2% churn that we have mentioned before to markets here. I think globally, 1% to 2% annual churn is something that is not unusual. So we should be -- I think we mentioned -- it used to be the number of about 300, but this year because of slower growth on the telco side, weaker selling price because of competition, the churn was about 500 to 700 for the full year, including the one that you just mentioned Sabrina. I hope that's helpful for you.

Okay. So the 500 to 700 is a net churn or...?

It's a net churn for the full year. Yes. I think we mentioned this in previous quarters already mentioned. Yes.

Okay.

So that's why I think we are looking towards better years, better quarters from the telco side. I think during the start of the year, we saw a quite exuberant dynamic telco market, but turns out second Q and third Q was more challenging turns out. So we are experiencing that on our performance on the tower side as well. And we have shared it with markets before in previous quarter.

Let's move on to the next question from chat box. This is from [indiscernible]. Congratulations on the relatively smooth acquisition process. I have got few questions. Number one, a minor question. But could you provide some insight as to why we [Technical Difficulty] [indiscernible]? Number two, would you outline your strategy for increasing the tenancy ratio of IBST tower given the current turn of industry consolidation?

Number one, I think we have not mentioned that we still standby buyer. I don't think it's been announced yet. So [indiscernible], I don't know where you got that information. It's already prospectus yet. Yes. I think the -- it's a family entity, if it's been announced yet. But it's basically -- one is of the parent, and one is the children. So -- but -- it's the intention from the family to basically continue to invest in this business, given that we have shown resilient results during various times, including difficult times of weak rupiah, higher interest rates here. So that's the intention from the family as far as I can know. And then for increasing the tenancy ratio, I think we are treating all the portfolio as one now, not just that of IBST, everything is consolidated. Whenever we market towers is always including IBST. We are utilizing whatever towers we add in the -- we own, and we add fiber from organic growth. So we are doing that as we speak. So we see lower tenancy ratios from previous acquisition as well, but we are increasing that by marketing that under Protelindo marketing effort that we use digital tools, information that we gather from markets, how signals are compared between one operator to another in certain locations and then how to improve their revenues by showing the trends of social media users, for instance, to be sure that their respective customers know that they could -- there is a need for improvement in the network quality just to -- and just to analyze one area, we can achieve that by -- to market that showing -- say, for Facebook, what kind of WhatsApp speed that is happening in certain areas from one operator to another. I think I can share that this kind of slower environment. I think there's a clear awareness on the part of the operators that the need for improvement is there. It's just that they are managing their top line as well, while there is a bit of competition, as we all know, on the wireless side and before they -- and bought into further expansion -- translating to potential increase in financial ratios, they are working with us basically. We are seeing basically intention from, say, Indosat at the moment. The 2 basically for the next couple of years thousands and thousands of new sites that they want to penetrate in the form of both collocations as well as build-to-suits. So whenever you say -- whenever you hear from Indosat that they want to basically increase top line on the wireless side, it is basically translating into new tenancies at on our side as well. So this kind of weakness, we don't expect that to happen like continuously. But hopefully, under the lower interest rate environment, the better pricing environment, the improvement is happening as -- in future quarters. But we have seen the plan from the [indiscernible] operators that to improve that to achieve whatever revenue that they need, they need to improve their quality of networks. I think I personally experiencing drop costs using GSM, I cannot accept SMSs in the places that I live just beyond stock exchange. So I think this kind of improvement argued to be fixed in coming quarters, it's just a matter of time. So hopefully, that's helpful for you, [ Melvin ].

[Operator Instructions] If not, let me continue with my question. Just some housekeeping. Have you complete the refinements of IBST debt? That's number one. Number two is you mentioned about you are still open for M&A. So what are the characteristics of your potential target? Is it more towards our fiber or any characteristics there?

Okay. I think we have done quite a bit of refinancing. We've aligned IBST pricing on the loans to be the same pricing policy as Protelindo already. I think we mentioned it used to be 8.5% to 9%. And then I think sometime in August, the company was already refinanced or at least aligned the pricing with that of Protelindo to 6.5% at least. So if there's a different dynamics in the macro environment because of U.S. election is done, for instance, and then the freight rate cut is happening more realizing than just -- and not just about expectations here. So we should be -- and looking against all this possibilities of decreasing costs here. We see a 1-year bond done by Astra, for instance, it used to be 6.3%, 6.4%. That was before U.S. 10-year was about 3.6% to 3.8%, but now the same number has increased to 4.2%, 4.3%. So a bit of a reversal, we admit, but at least we are ready with the possibility to issue more bonds or borrowing more from bank, whichever that is beneficial for the company. And what's the second question?

Second question is about the M&A characteristics.

M&A characteristics, I think we are seeing more fiber than towers admittedly, even though we are seeing smaller tower companies are trying to basically divesting themselves here. I cannot name names because we have NDA with everyone, including the nonlisted ones. I think fiber is -- continues to be quite interesting, can complement whatever we have in existing fiber locations. And then there continue to be demand for Internet in locations where we operate. FTTH is the mode of growth as well for Indosat. So that's quite encouraging. So I think we are looking more towards fiber now, frankly speaking, even though towers is not -- this is not to say that there's not much left to be acquired for towers because we see opportunity to buy more towers. But admittedly, fiber is increasingly the names that are being mentioned in our meetings.

[Operator Instructions]

Yes. We have from Kevin.

Yes, chat box.

I just wait through. Could you share more about demand for FTTH. I think FTTH is the -- the strategy that was announced just 2023, 2024, '25 will be continue to be the years FTTH is growing. I think with XL, for instance, here, we started this from the non-teleco side, they only started in 2022 and the Indosat replace the slower growth on FTTH because of XL's margin. So we continue to basically, I think, 1.6 million to 1.8 million home passes to be achieved by year-end. And then we are building a new budget for 2025, including FTTH, obviously. I think it's a market that for the likes of mobile operators who have just started FTTH continues to be the venue of growth for these guys. So yes, we're quite optimistic for FTTH opportunities. And then #2 areas, Indonesia, expressing highest demand growth for FTTH. Actually, ex Jawa is quite interesting for us. The first batch of FTTH was actually in -- so we see for us, Sumatra is also a market that we are penetrating. We continue to be providing FTTH by owning fiber, which is slightly different than most other FTTH players. And the way we mentioned the number of home passes, I think it's quite conservative because when we build FTTH, it's under a build-to-suit contract, meaning that the definition of homes being passed by the fibers are determined by the [indiscernible], the handover minutes of meetings between us and the sale operators, even though in reality, the fiber -- the Fiber-to-the-Home when we -- it is designed initially to, for instance, to serve housing complex is worth of the cable. We know there's already another housing complex into west side of those cables, so which we can obviously try to market later on -- on our own or working together with operators. So we think we're quite conservative in defining home passes in this sense because, again, the definition of home passes being passed by the fiber that we built is under the build-to-suit contract. So obviously, we can use and be more aggressive on utilizing the FTTH cable for more home passes in the future, creating into more home connections here. And then question number 3 from Kevin, Bahana is that using TOWR will focus more on acquiring fiber companies rather than tower companies. I think number three, just a bit -- just to share a bit on towers opportunity. When we were discussing IBST opportunities, we were like try to create a transaction that is workable for us accretive to the shareholders on operational and then on the EBITDA revenue growth, and then can create for a platform for consolidations or for organic growth going forward. But the process can take quite fast, including IBST. So I think we announced -- we heard the process was last announced just last year, less than 12 months ago, and then we concluded like 9 to 6 months after the sale process was basically beginning. The process letter was sent to us by the sell-side advisers. So the process of an acquisition can be quite quick. And we are fortunate that we can do a quick turnaround responding, getting the financing for it and then acquiring it after lengthy due diligence. So whichever opportunity comes our way, we try to digest and then execute can be quite -- execution can be quite quick on our side. So that's one of the things that sell-side likes doing this M&A with us because we are ready with the capacity to absorb the additional assets, and then immediately turn -- do a turnaround on the profitability on the sale asset, yes. It should be relevant also for the Sabrina questions later on about the goodwill itself. So when we do this, it's going to be whether we can extract value, complement our existing fiber, existing towers. And then whether we can basically benefit from whatever industry dynamics that we are experiencing, including the fiber itself. So the opportunities are presenting itself continuously on both towers and fiber, although admittedly, now fiber is the one that is being mentioned more during our internal meetings, just to share what is happening in the Board and management meetings of Sarana including subsidiaries.

Question from Andy...

Andy, one question. How could you share the progress of Indosat and Hutch tower allocation until now? For 2025, I think we should be less than 2,000 locations to be located as of -- this is talking about end of year until end of year -- end of year 2024 until end of year 2025, yes. So that should be in the mid-teens of hundreds here, less than 2,000 that remain to be relocated under Indosat and Hutchison relationship between us and IOH. So hopefully, that can be concluded in the next 12 months during 2025 if not some carryover may take place during 2026, yes. But we are very hopeful that this is concluded sooner than later, obviously, for the benefit of Indosat that they can -- after this, they can focus more on organic addition and just about fixing their financial liabilities to deliver under the context of tower leases. And then number 2 from Andy is that FTTH business has a good growth for connect in line with that. Could you share the rental rate trend on FTTH, it will be more than current level or low? I think for FTTH, including all fibers here, we are pricing at market. And then the good thing about our fiber presence is that FTTH has demonstrated -- has demonstrated our ability to grow FTTH piggybacking on our FTTP as well. So we are protecting returns. And typically, we have a 8-year payback on the CapEx that we spend for fiber, including FTTH [ Asia ]. So whatever efficiency that we can basically get from FTTH connectivity Fiber-to-the-Tower kind of segment altogether, we are delivering to the whole of Sarana's results here, whatever the market price. Sometimes if it's a bit difficult, then we are charging better economics. Sometimes if it's -- we can basically get more benefit by basically piggybacking on FTTT, we can use that to our advantage by getting more volumes because we are showing -- we are demonstrating with more volumes on the same business using fiber, for instance, we should be increasing our economies of scale, Andy. So hopefully, that's helpful for you.

[Operator Instructions]

The process of the right issue. We are working with the regulators now, I think by way of update, yes. So we will update markets with more details about the exact timing for it. But I think we are working that one after the EGMS that we have obtained shareholders' approval on October 25. We are working with the regulators to basically getting an effective statement for such issuance.

Yes, sorry. We have one more question from Sabrina.

Just 2 more follow-up questions. I saw that the revenue contribution from XL, Telkomsel and Indosat is lower currently. So I would like to know how much is the proportion of [ Franciscus ] revenue contribution to your overall revenue contribution right now? Previously, it was like about 5% rate cut. [indiscernible]

Yes. If you don't see it in our revenue breakdown, so it's going to be still...

Above 5%.

Yes. Yes. Yes, because the non-tower -- there was a bit of a decrease in revenue contribution on the non-tower from 34% last quarter. Now it comes down to 33%. But I think overall, Smartfren is still not that substantial compared to Telkomsel, XL and Indosat.

Okay. And then from your lease rates, I think there's a slight uptick in your lease rate in third Q 2024. So is this due to more favorable lease terms with France following the acquisition or...?

Admittedly, we recognize some of the tower revenues on a cash basis because there's certain customers who wanted to do reconciliation every time we do the annual billing. So based on those rather than we invoiced them or accrue revenue earlier, which translates to us having to pay the VAT, we decided to do a portion of that revenue to be only by the time we're about to receive the cash, i.e., after such audit or reconciliation by -- between us and the customer then we only basically accrue the revenue -- recognize the revenue in the -- on the top line. So yes, the process sometimes can be quite lengthy for certain customers.

Okay. So the current market lease rate is hovering about like 12 million, which you'd say it's about that amount.

I think quite stable in that area, the lease rate under -- including everything under the Smartfren under IBST.

I think we have no more questions, but so probably if you have any closing remark?

I think IBST margin was during the last quarter, 3 quarter, I think below 80%. So which is obviously below the normal rate of our EBITDA margin. So we are working towards consolidating more -- synergizing more between IBST assets into our existing standard operating procedures head count as well to be sure that everything is aligned, synergistic. So we expect the 2025 full year will be the better year for IBST. It's quite a complex asset admittedly, IBST compared to STP that we acquired in 2021. So it's taking a bit more time, but we have realizing -- we have realized whatever we can during the capacity of the management to basically like cost of financing we've done a lot of the operations are already done. 4Q should be better, 2025 should be better for IBST and of course, Sarana result as well from IBST.

Thank you. If there's no more questions, I think we can conclude this call. Once again, thank you, Adam for...

Thank you, Bob. Thank you, all.

I think we can close it. I hope we can see you again.

Thank you, everyone. Have a good evening. Bye-bye.