Tower's Powers

The world is experiencing an unprecedented rise in Artificial Intelligence (AI), which has become a transformative technology across various industries, propelling advancements in machine learning, language processing, and computer vision.

Its ability to simulate human intelligence in machines is reshaping industries and enhancing decision-making processes. With AI, machines can think, learn, and perform tasks autonomously, leading to improved efficiency and innovation.

According to Next Move Strategy Consulting, the market for AI is expected to show strong growth in the coming decade. Its value of nearly USD 100 billion is expected to grow twentyfold by 2030, up to nearly USD 2 trillion.

(..oh..well, I bet that by 2030, AI will go beyond simple scenarios and applications. It will be expected to detect life-threatening diseases earlier, predict long-term weather patterns, and become a digital collaborator for the human race).

The way this things are trending, AI will soon become an undeniable part of human life and society.

Artificial intelligence (AI) market size worldwide in 2021 with a forecast until 2030

Refik Anadol, a well-known artist and trailblazer in AI-driven art, explains the transformative power of AI and the metaverse, and how AI plays a crucial role in making the metaverse more immersive and engaging for its users.

By using the power of AI and the metaverse, Anadol has fully embraced the unexplored potential of data and technology to create captivating and thought-provoking works of art.

One of the major factors driving the current wave of AI growth is the strong interest of Venture Capital investment in AI start-ups. Similarly, open-source platforms are promoting and enabling collaborative learning, which is conducive for the growth in AI.

The current wave of growth in the AI industry is as much about the abundant availability of big data as it is about software and hardware. The amount of big data being generated by today’s increasingly digitized economy is growing at a rate of 40% each year and is expected to reach 175 trillion gigabytes by 2025.

To support the data-intensive requirements of AI algorithms and ensure seamless real-time interactions within the metaverse, high-speed and reliable connectivity is crucial.

That's where 5G, the fifth generation of wireless technology, comes into play.

With its unparalleled speed, capacity, and low latency, 5G becomes the ideal infrastructure for AI and the metaverse. It enables quick data transmission, enhances responsiveness, and facilitates the delivery of high-quality multimedia content.

A key component of 5G networks is fiber optic cables, which form their backbone. Fiber optics offer significantly higher bandwidth and reliability compared to traditional copper-based networks.

They can transmit large amounts of data over long distances without degradation, making them essential for meeting the massive data demands of 5G networks. The reliability and efficiency of fiber optics make them the preferred choice for enabling seamless connectivity and powering the infrastructure of the future.

You might be curious to know how much it costs to build such a fiber optic cable and which company owns the largest fiber optic network in Indonesia.

Taking the recent example of MTEL's fiber optic acquisition, where they acquired 6,012km of fiber optic cable for a total of IDR 603 billion, the cost per kilometer can be calculated as approximately IDR 100.33 million per kilometer. By the end of 2022, MTEL had expanded its fiber optic network to over 20,000 km.

However, despite MTEL's impressive growth, their network size pales in comparison to our beloved tower company, TOWR. It has 180,000 km of fiber optic infrastructure and spanned over 100,000 connections. And not to forget its FTTH business who currently connected almost 15,000 homes.

TOWR's vast network and diverse range of services make them the dominant force in the realm of fiber optics in Indonesia.

Though the tenancy ratio growth for TOWR has been moderate, the growth of digitalization has seen a rapid acceleration, largely driven by the transformative effects of the COVID-19 pandemic.

Furthermore, TOWR is known for delivering the highest ROE and ROIC in the industry, reaching an impressive 22.3x and 5.9x respectively in 2023F, and it has experienced a remarkable CAGR in revenue, surpassing its competitors in the industry.

Based on Chris' recommendation to BUY, our DCF-based TP for TOWR is Rp1,600. This is derived by assuming a WACC of 8.6%, with a risk-free rate of 4.9%, Beta of 1.75, and an after-tax cost of debt of 4.9%.

Furthermore, Chris TP implies a 12.8x multiple of the estimated 2023F-24F EV/EBITDA, which represents a premium of +1.4 SD from its 10-Year mean.

In conclusion, as digitalization in every business continues to evolve, TOWR is well-positioned to capitalize on emerging opportunities and solidify its position as a key player in the industry.

With the fiber optics business becoming increasingly crucial, TOWR stands to reap big rewards. Their impressive revenue growth, seamless adaptation to digitalization, and strong financial metrics make them a force to be reckoned with.

Get ready for a wild ride as AI, 5G, and the metaverse reshape our world, and TOWR takes the lead in this epic transformation. Buckle up and embrace the future!