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

All right. Since it's already 2, maybe we can start. Good afternoon, everyone. Thank you so much for joining PT Sarana Menara Nusantara Tbk First Quarter 2025 Earnings Call. We have Mr. Adam Gifari, as Adviser, Group IR as the key speaker today. This call is going to be started with presentation and then follow up with the Q&A session held by our analyst, [ Kasi ]. Please go ahead, Pak.

Thank you, [ Adeline ]. Thank you, Pak Indra. Thank you, [indiscernible] for hosting this call. Hi, everyone. Hopefully, you are all well. It's a rather hot day today in Jakarta, very hot. So there's a reason why the call is postponed by 2 weeks because I was initially wanted to go to Haj, but the travel got canceled. And then -- so -- but we're sticking to the schedule. So I feel sorry for this one. So hopefully, next quarter will be on time as per usual, 2 days after release of certain results, then we should -- we can have calls like this. So let me walk you through the first quarter presentation, and then we can kick off with more questions after that. Let me share screen. Okay. And then First slide. So we closed the last quarter, which is first quarter of 2025 with 35,500 towers and a total of approximately 170,000 kilometers of fiber optic network. And this is referring to like physical cable that we have across the country, and these are approximate numbers that we have accumulated all these years. I think the good news about 35,000 towers and then the 170,000 kilometers of fiber optic. Majority of them like 95 -- around 95% of all the fiber are based on long-term contracts. So Pak Indra since you're joining this call, trying to explain that when we started towers in the past, we call the term build-to-suit, so build-to-suit the need of the anchor tenant and we coined the term the same terms -- the same terms and condition for the fiber optic that we have build-to-suit fiber. So 170,000 kilometers of fiber optic network. I think a high 90% of those fiber were built under build-to-suit contract. So there's somebody agreeing to pay 10-year contracts to basically help us recoup the investment. And then we have excess capacity. As you know, we have excess capacity on the towers, and we look for higher utilization on those towers with colocations. And then with fiber optic, it's similar. So we built under build-to-suit long-term contracts, long-term contracts cash flow to pay for the lease of the fiber, help us to recoup the investment. And we have excess capacity and then we're going to be using the excess capacity on the fiber to basically either serve as a backhaul transmission between towers or FTTH or connectivity business as much as we can. So we call it increased utilization on those fiber. So we can talk more about details how different the fiber optic utilization ratio than that of towers colocation ratios. And we still keep this part, which is build-to-suit model for towers and fiber with long-term predictable cash flow. The reason why we like this because we have somebody needing infrastructure and we identify together with them where is the location that they need the coverage, the reach out of the towers and fiber and then we would spend the CapEx. We own the CapEx -- we own the asset and then we look for higher utilization going forward. And as of this reporting, we still retain investment-grade ratings with S&P and Fitch with stable outlook. Investment grade with S&P is BBB minus with Fitch international scale is BBB flat, and we have national scale AAA. Maintained stable returns, ROI, about 8.3%, and this is based of net profit and then return on equity 16.6%. And then these are the -- where the stocks are included various indices. We got moved into small cap index, I think, just last year. And now we also have ESG rating of single A, still included in the KEHTI ESG leaders and then IGX local small cap companies. And then now this is our strategy, how we go about this business. The first one is capital management. I think we can come to more detail about this one, but we always strive for low-cost funding. We are happy to report that seeing that [ SRBI ] is now yielding below 6.5%, I think closer to 6.25% now, 6.27%, I think last time I checked. And then we have ample activity from the banking market, including term sheets being offered to us of $100 million. So that's like IDR 12 trillion liquidity that's been offered to us for financing, helped by investment grade ratings from top rating agencies in line with global best practices. And then we have a low-risk business because high demand, difficult to replace. And then we have spent all the CapEx to basically get all cash flows going into the company as lease revenues in the terms of fiber and towers. And then I think we have consolidating company effectively by the time we release this first quarter, Telkomsel will have reduced to 3 operators, and this is already done. And we can talk more about the positive impact on us with XLS. And then we have opportunities to -- for acquisitions. And then we have contracted revenue of IDR 74.1 trillion, which is the largest in the market. And this is based on existing contracts only with -- right before our growth of renewals. And then we have [indiscernible] business with high annual recurring free cash flow that funds CapEx, dividend and share buybacks. We have been a successful consolidator. We -- I think we are one of those in this market, and we have stable EBITDA and FFO profile. We invest in strong free cash flow and low cost of capital into the business. We do acquisitions, whatever savings that we can -- in interest expense, in CapEx, in OpEx, we reinvest into the business. And we still see today Indonesia in the middle of 4G cycle still. We have also opportunities for telco companies to -- our telco business to include more scope of work in Indonesia, like batteries, privacy was gensets or shelters, but now we are seeing batteries as a very nice addition to our existing scope of work because it's cheaper, it's more efficient, and then we want to continue to do that, providing for everyone in the telco space. Let me try to remove this -- and then we are prepared for new opportunities, expanding product offering. We have successfully proven that we can do site versus managed services, power as a service. We have about 700 locations where we provide batteries for. We are going into green energy generation as well, even though not directly connected to the telcos, but at least we are seeing that we see good demand for green energies, which is more efficient and to replace some of that fossil fuel power consumption that people are using in this space. And then this is coming from us. So -- and then fixed mobile convergence is also ongoing, number 3 here, C3 and then 5G represents another set of opportunities. We are hearing that there could be additional spectrum to be auctioned sometime in the second quarter -- second half. So we have predictable revenue. We have dependent tenants. We have upside from additional revenue, high barrier to entry because we like to do things like arm's length. So we own the assets, we pay the landlords. And then we still believe that's the most sustainable model, i.e., we retain arm's length transaction with various people, the landlords, the owner of assets, right, can be corporations. And then as long as we keep our cost efficient and then we are proving to the market that we have -- we are a very good partner, good payment terms, never defaulted in any of our premises with very low risk independent companies as well coming from the private sector, not affiliated with any political parties. I think that those are the values that we see as one of the things that keeps us sustainable for the long term. And then fast-growing industry, we see like a very strong growth in the traffic. We see continued demand on traffic on Internet can be -- can be through their wireless phones, can be through their wired solution using fiber. Just to recap, it's been, I think, 18 months since the first time we heard about Starlink satellite solution for wireless mobile. We have not seen Starlink being mentioned again by various parties, by all parties. I think this proves that whatever we have we are serving the sector that we are serving is actually are here to stay at least for quite a very long time. I think 5G is only starting. And then 5G will further prove that satellite solution is somewhat more interior than the terrestrial services that we are providing using wireless phones. This is our portfolio of towers in the whole country. So we have -- we closed the quarter with 35,500 towers. Majority of them located in Java, Bali, [ Nusa Tenggara ], 21,000 towers. Sumatera is 8,000, Kalimantan 3,200, Salawasi 2,700, Maluku & Papua 519. I think it's interesting to note the 500 towers in Maluku & Papua -- it's a very bad place. A new tower over there will need also -- if there's a new build, typically, they need like fiber solutions, subsea cables provide connectivity or connections with other parts of their network in other islands. So it's challenging, but we want to play part in that as long as the economic is making sense, and we want to be playing an important role in this expansion towards the East in Indonesia. We have done a very good job in Sulawesi with the mode of entrance with FTTH. And then we expect something similar to be also in the eastern part of Indonesia as well, depending on the pace that the telcos are expanding to that part of Indonesia. And then this is our portfolio of fiber, total length 265,500 kilometers, revenue generating, meaning if you see that we have 170,000 kilometers in the first page of the presentation, those are the physical cable that we have on poles, most of them. And then if the total line is 275 that we are charging to customers, so we have a nice utilization ratio more than 1x, obviously. I think one thing to note in this discussion about fiber utilization ratio is that -- we do not count whenever fiber is being used by other entities within the group for their other fiber endeavor. So the reason why it's difficult because it's an intercompany using and then we just -- whenever we attain new revenue in other subsidiaries, what we see is, of course, consolidated revenue will go up, but the CapEx becomes smaller in comparison to the similar competitor doing similar offering that we have. So we expect that kind of the fiber we have, be it built for FTTH or FTTT, if it's used by other companies within the group including, Remala for instance, going into the future, then we see increased revenue and CapEx not necessarily going to have that high increase in CapEx. So we should be able to see increased ROE, ROIC because of such the way we are increasing utilization in the fiber that we already have in the beginning but by those contracts, but we are going into the higher utilization mode by allowing other entities within the group to basically expand the usage of those fiber and new markets, getting new customers. So first quarter discussion about build, buy and return. So we invest typically in build-to-suit towers and colocations. We see a healthy demand for colocations coming from the #1, #2. But we are seeing headwinds from the #3, which was a business combination of XL and Smartfren that took place, I think, 2 months ago, legally, formally, they successfully emerged. And then we are now in discussion to basically what kind of restructuring, what kind of help that we can give as a tower company or a fiber company for that matter to XL. XL and Smartfren is now called [ XLS. ] We are still in detailed discussion as to -- because without the agreement from our side to allow for relocation of 2 contracts in 1 tower that was for -- that was established before the merger. They could be paying twice on same tower. So we want to help them legally move the second contract to another location. So effectively, they are not making double payment, but rather effective payment, useful payment for them. So 2 payments on 1 tower because of the merger. If the second contract, the second liability to pay into the future is being moved to another location. So that's beneficial for them. So that's where we are -- I think a major theme of this -- the impact of merger XLS that took place 2 months ago. We've done successfully with Indosat. The merger with Indosat and Hutchison took place in first month of 2021. And then we started with relocation, restructuring the agreement starting like 24 months, 18 months later post that legal merger. And we're about to conclude the last batch of relocations in this year 2025. I think just to remind people, we have not concluded in full of relocation, of relocating those IOH Indosat Hutchison contracts into new locations. And then we are seeing the impact -- starting to see the impact of XLS merger, right? So that's probably what concerns many people. But at the moment, at this time of call, last time discussing with management, we have not finalized this with XLS. So nothing to report at this stage. But we believe what we are trying to offer will be like a solution that is win-win. So they need our help. We need their help as well. So we kind of need each other to become even more successful than where we are today as 2 large companies in the telcos and infrastructure companies, respectively. Now going to point number 2 is the expansion of fiber optic network, FTTH. We started this back in 2022. So if you look at -- we have about 170,000 kilometers of digital cable, probably about 10%, 15% of that 170 was generated because we were aggressive with FTTH contracts initially with XL pre-merger, and then we were also aggressive with Indosat in helping them getting access to like 600,000 home passes. So now we are in the phase of identifying together with them for more markets, but nothing to report at this stage. I think for Indosat, they are also quite busy with certain transactions and then XLS just merged. So I think we are working together closely with them, but no further detail at this stage that we can share for FTTH. Similarly, with FTTT, we see the wireless network, the wireless mobile business is -- I think the bigger companies have their very big market share. I think what market has expected at the start of 2024 for certain price repair to take place. And we have not heard from sell-side analysts or buy-side investors what kind of improvement in that part. So we don't expect FTTT and tower addition to be that great this year. We expect them to be flat, especially for towers because we have XLS that is just merged 2 months back. So we expect rather flat for towers and FTTT, FTTH this year. So -- and then the one that we expect to grow is actually the connectivity part of this. Then we can go to the next part, which is connectivities, activations that we have added during the 12 months ended first quarter. We added 4,400 towers, including about 1,500 towers of this 4,400 as relocations and then 32,000 kilometers of revenue-generating fiber, and we added 58,000 home connect assets and then we added 721,000 home passes. And then we are successful in protecting investment-grade ratings, which is our return policy when it comes to giving capital back to shareholders. I think they believe us that we are a conservative company or borrower. They can see in our collections, they can see in our margins. We can talk about detailed numbers later on. But I think we are in -- we are taking pride in the fact that we are successful in maintaining these investment-grade ratings. And we still pay dividends through 2025 already of IDR 307 billion. And then portfolios, towers, 35.5k towers and 58k tenants, tenancy ratio 1.63. I think it's a slight dip from previous quarter of [ 164. ] And then towers located in Java being 54%. We don't -- I don't expect 54% in Java to be this much different. Maybe it can come down to 52%, 53% in Java. The split has been like that for the longest I can remember because ex Java is an important market, even though people say ex-Java is growing faster, but Java is still the market that people are important. And then we still see demand for new towers to be built in Java also to basically create better capacity on the sites that they have. And then fiber to the tower, we have -- we closed the quarter with 218,800 kilometers revenue generating. And those are the kilometers that we are charging network focus to support data traffic search. And then like tower model, the noncancelable long-term contract and opportunity for higher utilization is the one that the most important factor while we go into this type of business, providing fiber to the tower. Americans or Europeans call this backhaul, but we coined the term fiber-to-the tower FTTT, FTTH is the one that people have heard before, and we have almost 1.8 million home passes by end of March, and we have about approximately 10% penetration rate. And then we're actively seeking opportunities to provide connectivity, and this is the basket of different types of communication or infrastructure solutions, various types, VSAT, wireless, wireline and then B2B and B2G arrangements, different types. And we have 17,600 activations by end of March. And this is how the business of the company has evolved so far. So cumulative CapEx first quarter is IDR 685 billion under towers, the blue one here and then IDR 423 billion for non-towers. We are revisiting how much we spend for CapEx because we want to be sure that the impact of everything taking into account the mergers -- 2 mergers we are talking about Indosat and IOH and XLS getting the most benefit that when it's -- after those are basically deployed or built ready for them to use. Utilization ratio for fiber stood at 1.84 here, which is -- does not include -- again, I repeat, the 1.84 does not include the utilization of our STP fiber in the case that connectivity uses some of it, right? FTTH fiber that was initially built for FTTH. If some of that -- some of the fiber under FTTH we use for backhaul or fiber-to-the-tower solution, then we cannot basically calculate what's the new ratio taking into account after those situations, right? So indeed, the 1.84 can be higher. It's just that we are not going to build our sister companies, right? So we don't calculate -- it's a very complex math, meticulous discussion to have -- to come up with such number. So we maintain with whatever we think is easier, which is utilization ratio based on third-party outside party using the fiber that we have. And then utilization ratio or colocation ratio for towers, 1.63 here. It used to be 1.64 just last quarter. And this is the impact fully -- I think 90% of the impact is coming from IOH [ monthly revenue. ]. But then again, don't forget, since we are very keen on maintaining cost, CapEx and borrowing costs to the benefit of the company, including shareholders, you can see that our return on equity maintained at about 16%. And this is the track record that towers for the past since 2021 tends to be stable here. And then whatever we add in tenants doesn't give us additional revenue yet because we were focusing a lot on locations, but the growth came from the light blue here, which is the FTTT and then the number of activations that has been growing nicely. But then again, I think for this year 2025, we expect the bright spot is on the connectivity. So we expect the activations to basically help us prop up the overall growth of Sarana TOWR result for the year 2025. Taking into account that, number one, we are still finalizing the impact of IOH for 2025, and we're only starting to see probably the impact of XLS merger starting second half this year 2025. So all those factors take into account, we expect 2025 to have a low single-digit revenue growth this year. Moving on to the next slide. Revenue tower grew by 7% CAGR. You see here, if you annualize first quarter, revenue tends to be flat on the towers. On the non-tower, the revenue is slightly higher in growth. And then this is basically impact of the merger IOH and then the XLS, the individual companies pre-merger have already started to scale their expansion because they were focusing on the merger. So we expect, again, all these factors into account, stable growth of this year to be like a low single digit for 2025. AFFO grew IDR 100 billion here because we save on interest expense. So we did our contribution on the financing part. So this helps our AFFO growth a little bit. So the growth between -- the gap between our AFFO growth and that of EBITDA becomes smaller. If you look at this presentation, same presentation for the previous quarter, then you see that the gap in growth for EBITDA and AFFO is actually high, bigger. And then -- and this is the contracted revenue that we have, stable around IDR 74 trillion, IDR 75 trillion. The committed one is the additional business that we received during the time that we prepared this presentation and then this IDR 68 trillion are basically characterized by contract that is already ongoing. But the orange one is the one that is already committed to give to us, something signed like a signed term sheet or something, and we added to this contracted revenue slide on this page. Leverage profile, 4.6 net debt to EBITDA after we buy IBST. So I think that's quite a bit of achievement. Gross debt stands at about IDR 51.6 trillion. Interest coverage ratio 3.5. Average interest cost 6.2%. Again, another achievement that we think is good about the company is that if you check this same slide just last quarter, then you'll see that this number is 6.3%, and this is we're looking at 6.2%. So yielding a bit lower than that of [ SRBI ] or maybe a 10-year bond yield coming from the government. I think last time I check was 6.8% for 10-year paper Indonesian [ FR. ] And corporate credit rating is BBB-, AAA and BBB flat. Okay. This is a P&L. I'm going to focus on operating income on profit before tax and EBITDA, 5.3%. The margin, even though the company is hit with headwinds, margin stays at about 83.5%. We expect for the full year 2025 this 83.5% to come down a bit to 83% and net profit margin, if you see here, 26%, 25%. So I think we are in defensive mode. It's quite a resilient business model, but we want to help our telco partners successful in the merger. So you can see us very busy for the next couple of quarters working together with merged parties to help achieve their targets. And this is cash flows, beginning cash IDR 940 billion, collection, IDP 4.2 trillion. CapEx and OpEx IDR 1.8 trillion, interest expense IDR 800 billion and then IDR 2.4 billion in cash surplus and then loan proceed IDR 168 billion and dividend IDR 307 billion so far this year and cash ending IDR [ 2,001 billion. ] Revenue minus 2.4% quarter-over-quarter, grew the company revenue 5.3% year-over-year. EBITDA minus 2.8% year-on-year at 5.3%. Net income minus 9.6% and stable net profit year-on-year compared to same quarter 2024 grew by about 0.7% Revenue analysis, towers 2.9% FTTT 15.2%; connectivity minus 5.6% FTTH grew 42.7%, so total is 5.3% consolidated revenue. Summary operational data, it's 14.4% towers increase, tenancy 7.2%. This is as a result of we're not adding tenancies while we are adding towers because of the locations, as you can imagine. So tenancy ratio out a bit, it's down a bit from 1.64 last December to 1.63 this closing March. FTTT 17.3% grew in revenue generating fiber, connectivity 30.4%, FTTH 46%. And then this is the profile of the company debt. You see this red boxes, USD, USD and USD. Those are originally U.S. dollar debt, but we have hedged them at 15,000 and 15,000 hedge rates -- financial hedging rates. So now if we assume we're going to pay down the debt today at 16,300, we are in the money. And then JPY, we have a little bit of borrowing in JPY, but not that much. So we have a very good maturity profile 2026, '27 and beyond that it's going to be lower. 66.2% floating, 33% fixed. And this is actually the result of us starting from 2024 when we paid down the bonds in fixed rates, including that of November 2024 expiration. The view is that 2025 will be with lower interest rate, including that of the U.S. treasury yield, right? We're still waiting for that, obviously, because we want to fix some rates and increase the fixed rate borrowing portion of this whole balance sheet of the company from previously 66%, maybe reduced it to 50%. We see -- we started to see interesting yields coming from AAA rated corporates. So those will be our benchmarks, obviously. Okay. I think [ Adelene ] and Mr. Indra, those are the slides I have for you today. Handing back over to you for more discussions.

Thank you Gifari, [indiscernible] .

Okay. Thank you Pak [ Adam ] for the insightful presentation. So now we will move on the Q&A session. [Operator Instructions]

I think while we're waiting for questions, let me share you what the market has been asking me for the past 2 weeks here. Number one is what is the assumptions about the impact of XLS to XL. What I told them because during IOH merger of 3 years period we dealt with them, we saw 1 year 2024 being the weakest, being the largest, the worst impact on us was about 700 leases churn in 2024. So since we do not know much about what's the outcome of XLS merger, we just assume the same 700 minus churn, i.e., nonrenewals that would impact us this 2025. This is for the sake of budgeting since we are still in long hours discussion with XLS. I think it's better to just assume that. And that's why that means if we add gross tenancy healthily from the big operators, but since we are seeing -- we are assuming minus 700, so we see a flattish tower revenue. Similarly, if the telcos, the wireless business is not that strong, so we expect FTTT to be not strong. And then FTTH, since the most party who gave us order last time was XL, XL is now merging -- busy merging and then consolidating everything with Smartfren under this newly formed XLS entity, we're not going to assume anything yet, right? So the last part, the bright spot I mentioned is actually the connectivity because that will be non-telcos, right, that we are trying to serve here, universities, hotels, hospitals, government entities. So assuming spending resumes back to normal, then we should be able to basically get some orders from those since we have the fiber anyway. So -- and then the way we look at this is that if we have the strong balance sheet, the strong rating, the sheer amount of fiber and a very efficient cost structure, then we should be at least at par or better off, if not better off than the next competitor who doesn't have any of those factors I mentioned to you. So that's what's happening with XLS now. And then the question that usually people ask me is that what's happening with the that issue? I think we can comment that we are waiting for OJK to come back to us. I think everything has been filed. We're just waiting for the last response to be heard from XL and from OJK to allow us to get approval for rights issue. We expect to get this approval by end of June, and then we should be able to get the money in next month, in July. And by the time we get the effective statement, then we will diverge what's the final structure for this rights issue to the market to everybody, right? And then another question that usually comes my way is when we consolidate -- when will we consolidate Remala, the newly acquired company with stock ticker data? We expect we will be able to consolidate at the latest quarter this year 2025, 3Q, that will be the latest time that we can consolidate because we are still in discussion with auditor whether we wait until we own -- we conclude with [ MTO ] or shall we like can consolidate like right away. So we are still in that discussion with relevant parties. So those are the 4 main items that people usually ask me, especially after first quarter release. So [indiscernible] and everybody else handing back over to you.

Yes. Interesting, you tell the bright spot for this year will be in the connectivity -- but in the first year '25 result, the connectivity revenue declined by 14% Q-on-Q.

There is one also government accounts that did not get renewed and because of that, yes. And then one question that came my way was as a result of such churn, the average revenue per activation also went down because if you deal with a big customer, right, one account and then big revenue, so that brings up the averages of everybody in the activation. If you look at revenue per unit for activations in previous quarter, then you see that distorted. So I would advise people to use the first quarter number going forward if you want to project something. Is that clear...

So is there anybody -- any question? While still waiting for the questions from the audience. Maybe just one question on your FTTT buyer. I'm just trying to understand your view on the potential fiber that can still be monetized through FTTT. And from a long-term perspective, what kind of upside do you see from increasing utilization or expanding to the underserved towers?

Yes. So today, I'm hearing operators say about 60%, 6-0 of towers that they use in Indonesia being fiberized. So I think, obviously, for that ratio to go higher is for higher utilization by higher usage by people in all places, right, for it to go up. I think I'm sensing as a personal user, seeing a bar on my phone is actually increasingly common more recently during the past 6 months, even in the dense area like downtown Jakarta. So I think actually, operators are waiting and -- waiting to see if they can monetize at higher price points or people call it higher ARPU. And then that would mean if they can manage to do that, that means there will be more allowance for better OpEx going out into the future, which means some of that can go into leasing infrastructure, including fiber, Pak Indra. Yes. So when I mentioned just now about 2024 being among the weakest year for churn, especially from the big guys like Indosat, that struck me as -- I think people are wanting to see more proof that this market can be repaired when it comes to ARPU, better price point per customer on the wireless side before they becoming more aggressive about anything. Did you get that, Pak Indra.?

Yes, I think that makes sense.

Yes. I think the price of wireless and that should translate to like better price for fiber solution as well because I think the idea is 4G has been rolled out since 2017. And some buy-side investors said to me that they were expecting something better because merger has taken place several times already. And hopefully, if this is the last one from 5 players becoming 3, more rational, less player with -- given that increasing revenue pie for everybody. So that should translate to like better allowance for OpEx, including lease of infrastructure. So that's the hope, I think, Pak Indra.

Yes. I think that's what we are...

Yes. I think from our point of view, as an infra company, I think you can see in our numbers, right? We have seen headwinds, many, many headwinds. And I think we've done a good job to borrow Mr. Trump's word when he start to say something, we've done a good job in preserving margins, borrowing at low cost, best-in-class operations, best-in-class CapEx structure per unit, whatever we spend per kilometer of fiber per towers of all types. I think we're just waiting for the right momentum in the industry to basically waiting for that inflection point.

I think we have questions from the participants. start with Indra.

Maybe if you don't mind, I have 2 questions, but I think it should be quite a quick one. The first one, can you elaborate a bit about your plan and what to do with Remala -- with Remala [indiscernible] ? I mean do you see that iForte or [indiscernible] company will go to, let's say, end user ISP provider and that makes you like a direct competition to XLSmart, which is currently now is your client? And how do we look at the long-term strategic business in terms of fiber proposition for iForte -- sorry.

Yes, let me answer that one first. I think Remala is larger in connectivity than FTTH prospect, for instance, they're larger with their connectivity with their enterprise marketing than anything else. So I think what we look for is a partner who can help us increase utilization of our fiber. And if there's anything in fiber that they need, it's better that they -- we work together with us. And the reason why we buy majority of the stock is rather than becoming competitors, maybe it's easier we work together. You use our fiber. If you need fiber, tell us and we can spend some for you. And then they're the one spreading the effort to market, penetrating new markets. And they are more likely, if you look at their split, it's actually more connectivity than anything else.

Okay. That's very clear, Pak.

Okay. your number two?

Yes, sorry. Yes. Just now that I think you're seeing some headwind from consolidation, probably they should transit to lower CapEx and probably lower growth as well. Do you see any possibility of higher dividend, Pak, maybe if not this year, then next year, just wondering if there is a significant shift in your dividend policy, given the...

I think that has a lot to do with our business case this year, whether we enter into big CapEx cycle or if some cases that the CapEx cycle is smaller, then we have more cash to pay down debt, for instance, and free up more free cash flows for more dividends. But I think for discussing dividend for this year and next year, I'm more inclined to say that it's going to be for growth CapEx or if not growth CapEx than to pay down debt. So maybe to your question about higher dividend, not the next 1 or 2 years from my point of view.

Next question from Sabrina...

I have one question regarding the connectivity business. So earlier, we expect that for towers revenue, FTTH, FTTT, we expect it to have a lower growth for this year, which for your overall revenue should be driven by connectivity. So besides from the numbers from [indiscernible] later on, have you secured any contracts besides the one from [indiscernible] and how should we see on the overall connectivity revenue contributions there?

Yes. I spoke with before the CFO, and I think we agreed that the company, Sarana would want to see a more refined approach for the new added company before it's represented what the business plan. I think we expect like next month that we will be able to talk more about Remala business plan after acquisition, Sabrina.

Okay. So for the...

This is like talking what kind of companies, what kind of customers and which locations because previously, they were working as separate companies, but now we become one to be sure that we are integrated. I think that's the strategy that we look for to refine the expansion strategy of Remala as the newly added entity within Sarana.

Okay. But besides from Remala, is there any opportunities there as a driver for your connectivity business? Or it's only from Remala that we are expecting for...

No, no. I think iForte itself is also very aggressively going after connectivity business, hotel chains, industrial complexes. We have a dedicated team to go after those types of accounts, Sabrina. So to be sure that we are not overlapping, for instance, we need to basically redo the business altogether.

Okay. And for the revenue contribution, I believe that it's roughly around 10% to 11%. So are we still expecting the same figures for this year?

The contribution from what? Connectivity...

Yes.

Yes. I think that should be higher because the other side of the company are not growing as much. So that contribution should be higher.

Adam, I think there's a question in your -- in the chat box from [indiscernible]. If you don't mind refreshing your statement or comments about progress about relocation agreement with XLS.

Yes. I think this relocation this time is a bit different, meaning in the past, we built with XL with its merger with Axis, I think that was 2016. And then the previous merger was IOH, Indosat Hutchison. So which means we have done many discussions with XL before, Indosat and Hutchison before, right? But this time, the XLS merger, the driver seat is taken by gentlemen from Smart. So we kind of like reiterate our approaches that we have taken before in previous mergers. And that means it's taking more time rather than if it's just another XL management that we can talk about. So I think that's what's been taking place for the past 2 months when it comes to initiating, making sure we are on the same page, same understanding about relocations. And now we are still in discussion. So when it comes to question whether where we are today, I think discussing terms, we are discussing terms with them and nothing to report, unfortunately at this stage. So that's where we were. No, that's what I said before, and that's where we are.

Thank you, Pak. There more questions from participants. While waiting for more questions. I think just curious with the upcoming spectrum auction, especially for the 1.4 gigahertz wireless access. We understand that operators may deploy the small cell or micro base stations, [indiscernible] supporting this rollout?

Yes. I think I mentioned this several times, and maybe I can say this again. For me, as an Adam Gifari, I think for me, you can call it 5G, you can call it 4G. But I think it's more importantly, it's about monetization than anything else. If you monetize successfully your 4G, I think it's great. But if you have to upgrade it to 5G, I think, okay, we can deal with that as well. But with 5G, if they use it for fixed wireless or maybe for wireless mobile, I think there should be more demand for infrastructure. And we want to keep our mode of operations that going arm's length with tower owners, with landlords, with whatever structure that if we need to pay somebody to allow us to use their infrastructure for us to expand and help our customers, right? So that will be the way to go. But again, the key is successful monetization, Pak Indra. Yes, of course, that's number one. Number two, it depends on also what kind of payment terms that operators have to pay when it comes to additional spectrum. Is it pay as people go that I've heard that concept some 2 years ago or if the [indiscernible] would require something like a fixed payment allowing [ 40 years, ] which means CapEx, right? And I'm not sure if everybody is happy with that kind of arrangement. But that also depends on a lot of things, Pak Indra.

We have a question from Rishab.

Pak, you had mentioned in your remarks that we spend a keen eye on the CapEx spend and the margins. Any guidance on those 2 accounts as to what are we budgeting for this year?

You mean CapEx?

CapEx and the margins and the EBITDA margins.

Yes. I only have EBITDA margin because below EBITDA is very difficult to predict too many moving parts, including tax, for instance, and interest expense. For EBITDA margin, I think 83.5% in first quarter. I think we expect to see lower to 83% -- and then CapEx, initially, we were thinking about IDR 5 trillion to IDR 6 trillion is organic. Those are the initial ranges that we have in mind at the moment.

And what are the key areas of such CapEx? Because you had brief, right, there's slightly lower growth expected in FTTT also. So what are the key areas of investment...

So the key area will be the final round of relocations with IOH this year 2025. And then we assume some also relocation for XLS. And several scenarios, frankly speaking, Rishab, when it comes to CapEx is that how much that we should be spending on FTTT, FTTH, right? If there should be more on relocations, I think a lot of that will be relocations, frankly speaking this year. And not to mention also ground leases, right, that continue to be paid.

Any more last -- one last question for Adam -- yes, no more questions, I guess Pak.

Any more questions, I guess.

Yes. Thank you, Pak Indra, and thank you, everyone. Let me make my final remarks here. I think this year will be the year of overlapping 2 impacts of mergers in 1 year. So yes, we have done some scenarios, including to reach out comments about what would be the area that we spend CapEx on, assuming just flat revenue, right, low single-digit revenue, we still have to spend CapEx. But the idea is to support these merging entities, IOH and XLS to become healthier, right, in their wireless and fiber solution ventures, relocate those redundant payments after the merger make it that their numbers assumed in the merger plan successful, reach those numbers under the new management board, new entities that they form from the mergers. And then take it from there, basically, we strongly believe if we see better monetization, there should be more OpEx to be spent on infrastructure, and we have plenty of that, right? And then it can be in many forms, as I mentioned in our capabilities. We are obviously waiting for the inflection point. I think everybody in this call, including me from the company as well as the buy side, the sell side, we can also monitor together this development. While we continue to execute whatever needed from the industry, we want to contribute our part. I think we have been doing so. And I think we've delivered very efficient lease of infrastructure to various parties. It's just a matter of making sure the whole circle works from end to end, including starting from monetization. So hopefully, that the call today is helpful to you all.

Okay. Thanks a lot Adam, for your....

Thank you, everyone. Thank you...

Thank you so much, Adam...