Telecom Infrastructure (Neutral/Maintain) - Two Towers, One Survivor

Merger talk between Mitratel (MTEL) and Tower Bersama (TBIG) has resurfaced, reviving a thesis dating back to 2014, when TBIG sought to acquire MTEL from Telkom via a share swap. Bloomberg reported active discussions in Jul-25, with renewed speculation emerging in Aug-26. Should a deal materialize, the combined entity would hold 65.8k towers and 106.1k tenants, implying a tenancy ratio of 1.61x (MTEL 6M26: 1.57x), with annualized FY26F EBITDA of IDR13.7tr on a c.100bps margin uplift to 83.9%, and a combined equity value of IDR69.6tr at prevailing prices.

Control is the crux. At market prices, TLKM's 71.8% MTEL stake translates into only 37.9% of the combined group, against BDIA's 38.4% from its 81.3% TBIG holding, which would leave TBIG's sponsor as the largest single shareholder. We expect MTEL to emerge as the surviving entity given its SOE status and Danantara linkage, with TLKM retaining at least 51%. Preserving that on relative value alone implies a minimum MTEL price of IDR964 (+119.2%), or 12.8x FY26F EV/EBITDA, against 7.2x today and TBIG's 10.5x.

The practical route is a cash injection. Issuing 74.7bn new MTEL shares at IDR440 to absorb TBIG's IDR32.9tr equity takes the count to 158.2bn, after which TLKM or Danantara would need to subscribe c.42.3bn shares for IDR18.6tr to reach 51%. Industrially the fit is sound: MTEL is concentrated ex-Java (52.4%) while TBIG is anchored in Java (57.4%), limiting overlap and preserving most of the combined asset base, and TBIG's 4.95x net debt/EBITDA, near its 5x covenant ceiling, would fall to 3.53x combined, restoring capacity to fund the 5G densification cycle.

We reiterate our Neutral view on the sector, awaiting a clearer catalyst to revive growth after several years of modest tower and tenant demand. Consolidation could provide that impetus alongside an MNO 5G capex cycle, narrowing the landscape to two dominant players in MTEL-TBIG and TOWR and shifting renewal bargaining power modestly back toward the towercos after years of rate compression (MTEL -3.5% YoY, TOWR -6.8% YoY), with a positive read-across for TOWR (Buy, TP IDR700) without bearing integration risk. Ratings unchanged: MTEL Buy (TP IDR670), TBIG Trading Buy (TP IDR1,700). Upside risks: stronger than expected tenant additions and faster FWA rollout. Downside risks: higher for longer interest rates and execution risk.