Feb 21, 2011

Tower Bersama assigned BB rating

Fitch Ratings has assigned Indonesia's PT Tower Bersama Infrastructure Tbk (TBI) long-term foreign and local currency issuer default ratings (IDRs) of BB. The outlook is stable.
TBI's ratings reflect the strong credit quality of its tenants, with around 60% of its revenues and EBITDA derived from the leading four Indonesian telcos, PT Telekomunikasi Indonesia Tbk (Telkom, BB+/stable), PT Telekomunikasi Selular (Telkomsel, BBB-/stable), PT Indosat Tbk (Indosat, BBB-/stable), and PT XL Axiata Tbk (XL, BB/stable).
Fitch notes TBI's management policy to ensure that over 60% of its revenues continue to originate from the top-four telcos over the long term, and to only construct new tower sites after obtaining a long-term lease commitment from a telecom operator.
TBI is the second-largest independent tower company in Indonesia, in terms of telecom sites and tenancy. The company's cash flow has strong visibility and stability due to its long-term agreements (eight to 10 years) with all Indonesian telcos (10 operators), which involve tight exit conditions and in-built escalation clauses (linked to the country's inflation rate).
While the average remaining life of TBI's contracts is 6.5 years (as of end-December 2010), contract maturities are well-spread out (2012-2021), with no more than 25% of contracts expiring in any single year, except for 2018.
TBI is well placed to grow over the medium term, considering its track record, robust order book, financial flexibility and the agency's expectations of strong demand for tower sites from telcos on the back of increasing 2G capacity and higher 3G popularity.

Disclosure: No position at the stock mentioned above.
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