Indonesian cellco PT Smart Telecom (Smartfren) closed out 30 June 2019 with 17.8 million 4G LTE subscribers on its books, up from 12.3 million at the start of the year, with strong gains coming on the back of its popular ‘unlimited’ data starter packs. Whilst the operator is expected to gather new users for the rest of the year, Fitch Ratings Indonesia notes that Smartfren’s ability to grow quickly depends on its ‘ability to continue its large investment to strengthen 4G infrastructure’. The ratings agency has raised its long-term national rating to CCC+ from CCC on the basis of its expanding customer base driving profitability, but warns that Smartfren’s credit profile ‘remains constrained by weak cash flow, which causes the inability to finance its operations without external funding that is equity’.
Although 1H19 financial metrics are not currently available, TeleGeography notes that Smartfren reported EBITDA of IDR975 billion (USD69.1 million) in 2018, while its EBITDA margin improved to 17.8% from 14.2% in 2017, as revenues rose to IDR5.490 trillion from IDR4.343 trillion. Furthermore, the cellco said that the popularity of its faster 4G network helped boost average ARPU which increased to IDR44,200 per month in 2018 from IDR34,600 previously. According to IndoTelko, Fitch now forecasts that the operator’s customer growth will slow to around two million net additions per annum in 2020-21 in a competitive domestic market in which Smartfren is struggling to fully compete – given its coverage is more limited than its larger rivals. The Sinar Mas Group subsidiary has 23,472 4G LTE base transceiver stations (BTS) on air, up from 19,032 BTS at the start of the year.