Popularity of the smartphone is an important trigger for development and expansion of Indonesia's 4G network as this network is a necessity for those who use smartphones or tablets. Nielsen Informate Mobile Insights stated about a month ago that - based on their research - the number of smartphone users in Indonesia is expected to expand by an average of 33 percent compound annual growth rate (CAGR) between the years 2013 and 2017 to around 87 million smartphone users. Rapid growth occurs because it comes from a low base and due to the fact that Indonesia has a young population (around half of the total population is below the age of 30 years). Young people are more eager to use the latest technology and therefore it is no surprise that an estimated 61 percent of Indonesian smartphone users are below 30 years.

Indonesian brokerage Bahana Securities expects Sarana Menara Nusantara to perform well as the company's valuation is attractive. Sarana Menara Nusantara is an Indonesia-based investment company that conducts its operations through Profesional Telekomunikasi Indonesia (Protelindo). Protelindo is the largest-independent owner and operator of towers for wireless operators in Indonesia according to the company's website. It owns and operates 12,211 towers in Indonesia and has 20,956 tenants. This year these figures are expected to grow by six percent.

The shift to the 1800 MHz frequency (needed to support the expanding 4G network across Indonesia) implies that demand for this type of telecommunication infrastructure is set to rise in the years ahead. Sarana Menara Nusantara, with its assets and solid cash position, can benefit from this situation.

Smartphone Growth Indonesia:

   2013  2014  2015  2016  2017
Smartphone Users
(in million)
   27    38    52    69    87

Source: Nielsen

Tower Bersama Infrastruktur, one of the other leading telecoms tower companies (with the largest assets) in Indonesia, has less room for growth because the company's net gearing ratio (the amount of debt it is liable for relative to its equity) at 481 percent is very high compared to its peers.

Another Indonesian broker, CIMB Securities, is positive about another telecommunications services provider: Solusi Tunas Pratama. According to a recent report written by CIMB Securities, Solusi Tunas Pratama is bound to grow due to the arrival and expansion of the 4G network, primarily supported by the leasing of its towers to pay TV operators. Its EBITDA is estimated to grow 27.8 percent in 2016.

Indonesia's Top Telecoms Tower Companies:

Company Target Price
P/E Ratio (x)
Tower Bersama Infrastruktur (TBIG)      7,400       28.4
Sarana Menara Nusantara (TOWR)      5,000      106.9
Solusi Tunas Pratama (SUPR)     13,500       95.4
Telekomunikasi Indonesia (TLKM)        n.a.        n.a.
Bali Towerindo Sentra (BALI)        n.a.       23.7

Source: Kontan

Stock Performance Telecoms Tower Companies:*

Tower Bersama Infrastruktur = TBIG
Sarana Menara Nusantara = TOWR
Solusi Tunas Pratama = SUPR
Telekomunikasi Indonesia = TLKM
Bali Towerindo Sentra = BALI

* normalized stocks, 4 August 2015 = 100