Moody's Assigns first time Ba2 rating to Tower Bersama

Moody's has today assigned a Ba2 Corporate Family Rating to PT Tower Bersama Infrastructure Tbk ("TBI"). The outlook on the rating is stable. This is the first time that Moody's has assigned ratings to TBI.

Ratings Rationale
Hong Kong, October 14, 2011 -  "The Ba2 rating reflects TBI's underlying business model which is supported by the long-term, contractual nature of its revenue base founded on non-cancellable contracts with typical 10-year duration and the crucial service it provides to its tenant base," says Laura Acres, a Moody's Vice President and Senior Credit Officer. Adding, "These strengths enable TBI to partially offset its small revenue base relative to other rated tower companies outside Indonesia."

"In addition, although TBI has high customer concentration which is a weakness of the tower sector generally, it's tenant base substantially comprises Indonesia's largest telecommunications operators, including PT Telekomunikasi Indonesia (Baa1/stable), PT Telekomunikasi Selullar (Baa1/stable), PT XL Axiata Tbk (Ba1/stable) and PT Indosat Tbk (Ba1/stable) - with PT Telekomunikasi Indonesia accounting for a substantial proportion of total tenancies. Together these four operators account for approximately 63% of TBI's revenues and under its loan agreements are to account for no less than 50% of total revenues at any time," adds Acres, also Moody's lead Analyst for TBI.

"While Moody's expectation of TBI's adjusted gross leverage at approximately 4.0-4.2x for 2011 (based on full year historical adjusted EBITDA rather than run rate adjusted EBITDA) may seem relatively high for the rating level, this risk can be mitigated by the quality and reliability of cash flows received and TBI's long-term trend of growing EBITDA. As such the overall TBI credit profile is in line with the rating," says Acres. Adding, "Such leverage also compares well with similarly rated international peers."

The rating also reflects the relatively short track record of operating a tower business in Indonesia, given that there is a limited history of tenancy renewals across the industry, the limited scale of the business and the need for acquisition if the business is to grow quickly. TBI started its business in 2004 but has been indirectly involved in the market since 2002 through PT Solusindo Kreasi Pratama (SKP), which merged with TBI in early 2010 and whose key management team has been retained by TBI.

At the same time, concerns exist regarding emerging market risk and particularly any changes to the regulatory and political environment in Indonesia as well as the potential for the dynamics of the tower industry to change as large telecommunications operators strategically review options for their sizeable tower portfolios.

The outlook on the ratings is stable in the expectation that TBI grows and delivers in accordance with its business model and that the regulatory environment continues to remain relatively benign.

Upward rating pressure in the near term is limited given TBI's small scale. However, the rating may experience upward pressure should TBI grow the business in accordance with projections and improve the fundamental credit profile; in particular Moody's would like to see adjusted debt/EBITDA to fall and remain below, 3.0-3.5x on a consistent basis and for interest cover, as measured by (FFO + interest)/interest to rise above 4.0x.

Downward pressure could arise should competition intensify such that TBI could not meet its business plan. Such pressures would be evidenced in adjusted debt/EBITDA rising above 4.5x and (FFO + interest)/interest falling below 2.0x. In addition, Moody's would be concerned should the proportion of revenues contributed by the key customer group comprising PT Telekomunikasi Indonesia, PT Telekomunikasi Selullar, PT Indosat Tbk and PT XL Axiata Tbk fall below 50-55%.

The principal methodology used in rating PT Tower Bersama Infrastructure Tbk was the Global Communications Infrastructure Rating Methodology published in June 2011. Please see the Credit Policy page on www.moodys.com for a copy of this methodology. TBI is the holding company of the Tower Bersama Group ("TBG"), one of the 2 leading independent tower operators in Indonesia, with 3,610 telecommunication sites serving 5,381 tenants as of 30th June 2011 (4,205 and 6,053 respectively pro forma for MSI acquisition). It leases space on its communications towers to cellular telecommunications operators on long-term contracts

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Laura Acres
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
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Philipp L. Lotter
Senior Vice President
Corporate Finance Group
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Releasing Office:
Moody's Investors Service Hong Kong Ltd.
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JOURNALISTS: (852) 3758 -1350
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