Fitch Ratings Indonesia has assigned
The bonds will have a maximum maturity of up to 2027 and the entire net proceeds will be used to refinance part of Protelindo's existing debt.
The issue is rated at the same level as Protelindo's National Long-Term Rating because the notes represent senior unsecured obligations of the issuer.
'
Key Rating Drivers
Low Rating Headroom: Fitch expects Protelindo's net debt/EBITDA to improve to 4.5x-4.6x in 2022 (FY21: 5.5x), the threshold above which we would consider negative rating action, in the medium term. The debt-funded acquisition of
Commitment to Existing Ratings: Protelindo's management have expressed commitment to maintaining its financial discipline and significantly lower leverage than that of global tower peers. The company has historically demonstrated a conservative financial policy in shareholder returns and debt-funded M&A.
Market Leadership in Consolidated Industry: Protelindo is
Protelindo and second-largest tower company,
High Cash Flow Visibility: Protelindo's business profile is supported by the presence of non-cancellable long-term contracts with Indonesian telecommunication operators. Its cash flow visibility is high as the company has locked in contracted revenue of around
Fitch expects revenue to increase by 22% in 2022 on full integration of STP, before moderating to mid-single digit growth in 2023 on organic growth. We expect the company to organically add about 1,000 towers and 1,800-2,500 colocations each year during 2022-2023.
Manageable Contract Renewals and Counterparties: We expect Protelindo to manage the renewal of its tenancy contracts, as only about 11% of its contracts are up for renewal during 2022-2023. Protelindo generated around 82% of its revenue from the top three operators in
Higher Capex: We expect Protelindo's free cash flow (FCF) margin to decline to 11% in 2022 (2021: 14%) on higher capex. We forecast 2022 capex to increase to 38% of revenue (2021: 25%) on higher capex on fibre and renewal of ground leases. Capex on fibre networks will remain high as the company aims to expand its fibre connectivity services aggressively.
Wider Diversification: We believe revenue diversification will continue to improve as non-tower businesses, such as metropolitan wireless fibre optic and tower fiberisation, expand by 15%-30% in 2022-2023 and contribute about 20%-23% (2021: 18%) of 2022 revenue. Tower fiberisation has a similar business risk profile as the tower segment due to long-term non-cancellable contracts (10-14 years) and possibility of multiple tenants. However, its 70%-75% EBITDA margin is lower than the tower business's above 80%.
Standalone Rating: We rate Protelindo on a standalone basis because of weak legal and operational linkages with its 52% ultimate parent, PT Sapta Adhikari Investama (SAI), based on a weak parent-strong subsidiary approach under Fitch's Parent and Subsidiary Linkage Rating Criteria. We do not have detailed financial information on SAI as it is a private company. However, Protelindo management have informed Fitch that there are no operations or debt at SAI.
Limited Upstreaming Cash: We believe that SAI's access to Protelindo's cash is limited to its shareholder return policy as 46% of Protelindo's immediate parent,
Derivation Summary
Protelindo's higher '
Protelindo is rated two notches higher than
Key Assumptions
Fitch's Key Assumptions within Our Rating Case for the Issuer:
Organic addition of 1,000 towers annually in 2022-2023 (2021: 537)
Decline in average tower rentals of 2% annually to 2025
EBITDA margin of 84% in 2022-2023 (2021: 84%)
Capex at 38% of revenue in 2022 and 35% in 2023 (2021: 25.4%)
Dividend payout of
Share buybacks of
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Protelindo's Long-Term Foreign-Currency IDR cannot exceed
For the National Rating of '
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Debt-funded M&A or a default by a tenant, leading to FFO net leverage remaining above 4.5x on a sustained basis.
Deterioration in revenue contribution from top-three telcos to below 60%.
Downgrade of
Liquidity and Debt Structure
Adequate Liquidity: At
We expect liquidity to remain strong, supported by contracted revenue and robust refinancing ability with access to capital markets and local banks. Protelindo's cost of debt is one of the lowest in the industry at 5%, relative to TBI's 8% and STP's 11%, on a hedged basis.
Issuer Profile
Protelindo is the largest independent tower operator in
Date of Relevant Committee
Sources of Information
Protelindo's ultimate shareholder, SAI, is a private company for which we do not have detailed financial information.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
RATING ACTIONS
Entity / Debt
Rating
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