XL Axiata sells 2,500 towers to reduce debt

  • US$266.5mil sale works out to US$106K per tower
  • Not selling 4,000 core networks towers
XL Axiata sells 2,500 towers to reduce debt

IN a widely anticipated move to further pare its debts, Indonesian telco PT XL Axiata has signed an agreement with PT Profesional Telekomunikasi Indonesia (Protelindo) to sell 2,500 of its 6,500 towers.
The purchase price of Rp3.5 trillion (US$266.5 million) works out to Rp1.4 billion (US$106,000) per tower. The all-cash transaction will be completed by June 30.
Protelindo is an independent tower company that put in the highest bid from seven competing parties, XL Axiata director and chief finance officer Mohamed Adlan Ahmad Tajudin told a media briefing at the company’s office in Jakarta on March 29.
This marks the second large sale of towers by XL Axiata. It completed the first sale of 3,500 towers to Solusi Tunas Pratama at the end of 2014 for Rp5.6 trillion, which translates to a tower price of Rp1.6 billion (US$121,000) each.

The lower per tower price for the Protelindo deal is due to the lower tower tenancy ratio of 1.5x compared with the 1.67x tenancy ratio for the Solusi deal, according to Adlan.
The sale to Protelindo concludes XL Axiata’s selling of its towers, he said.
“The 4,000 towers left are for core networks and could disrupt network configuration if sold,” he explained.
“Secondly, after selling the 2,500 towers, the financials of XL are getting better,” he added.
Under the deal, XL Axiata will rent back 2,342 towers from Protelindo for a 10-year period at a cost of Rp10 million (US$754) per tower, with Rp8 million as fixed payment and Rp2 million adjusted for inflation based on Indonesia’s official inflation rate, and capped at 7%.
XL Axiata chief executive officer Dian Siswarini said that the lease-back is part of its strategy of using company assets to maximise its competitive position, while providing additional flexibility.
“We will use the proceeds to optimise our balance sheet. This transaction also demonstrates our strength and discipline in conducting strategic transactions, and is one of several important transactions successfully executed within the last two years,” she said.

Another important initiative XL Axiata has executed from last year is its 3R (Revamp, Rise and Reinvent) programme, designed to change its customer mix to the mid- to high-end and change the company’s image as well.
As a result, its subscriber numbers have dropped rapidly from 46 million in the first half of 2015, when they began the “cleaning process” as Dian described it, to the current 41 million customers.
For 2016, it is aiming to triple its 4G subscriber base to nine million, with one million being postpaid users.
Meanwhile, with the additional 2,500 towers from XL Axiata, Protelindo now has 15,000 towers.
A subsidiary of PT Sarana Menara Nusantara Tbk, controlled by the Djarum Group and iForte Solusi Infotek, Protelindo is one of the top three tower players in Indonesia besides PT Tower Bersama and Solusi Tunas Pratama.
Protelindo, which has an existing business relationship with XL Axiata, has the balance sheet to make the tower deal.
“For several years, XL has been a trusted partner for us and with this deal, we can help reduce its level of debt,” said Protelindo director Aming Santoso.
The debt situation

XL Axiata sells 2,500 towers to reduce debt

XL Axiata will use the proceeds from the sale to repay its rupiah-based debt, while its US$ debt will be paid after a rights issue.
“The rights issue is still in process but the money from the tower sale will be used to repay the rupiah-based debt and some bank loans, while there is around Rp3.99 trillion in debt that will be due this year,” said Adlan.
Based on its third quarter 2015 financial report, XL Axiata’s debt reached Rp19.78 trillion, with Rp3.33 trillion in short-term debt and Rp16.38 trillion in long term debt.
In the same period, the telco operator with 41 million customers nationwide suffered a loss of Rp506 billion, which was smaller than the second quarter 2015 loss of Rp838 billion.
Its dollar-denominated debt amounted to US$500 million. This amount was loaned to it by its parent company, Malaysian-based Axiata Group Bhd, when buying Axis Telekomunikasi Indonesia, two years ago.
Meanwhile, to repay debt maturing in 2019, XL Axiata will offer a rights issue of as much as 2.75 billion new shares, adding 30% to its share base, to raise US$500 million.
This is expected to be completed in June, with PT Mandiri Sekuritas selected as underwriter.
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