Expansion of data centres and international connectivity could\nreshape Telkom\u2019s investment strategy in 2027. BRI Danareksa Sekuritas\nhas maintained its buy recommendation on TLKM shares, with a target\nprice of Rp3,500 per share, citing growth opportunities in the company\u2019s\ndigital business. Kafi said the development of NeutraDC Batam and the\ntransformation of PT Telekomunikasi Indonesia International (Telin)\ncould strengthen Telkom\u2019s long-term prospects.<\/p>\n
However, the funding required for expansion and the risk of\ninsufficient investment in 5G networks remain concerns. The planned\ndevelopment of NeutraDC Batam has increased significantly in scale.\nAccording to Kafi, plans that initially covered three colocation\ndata-centre zones, each with a capacity of 18 MW, have shifted to a\nfacility with a total capacity of 118 MW to meet demand for artificial\nintelligence (AI) infrastructure.<\/p>\n
The development is divided into two projects. BTM-1 has a capacity of\n18 MW, all of which is under contract. Its initial 6 MW phase is\ntargeted to begin operating in the fourth quarter of 2026.<\/p>\n
BTM-2, meanwhile, is designed to have a capacity of 100 MW. It is\nexpected to begin serving customers in 2028, making it an important part\nof Telkom\u2019s data-centre expansion plans. Although Batam\u2019s market\nprospects remain promising, providing supporting infrastructure is a\nmajor challenge. The availability of electricity and water could affect\nthe smooth development of data-centre facilities in the area.<\/p>\n
Kafi noted that planned data-centre projects in Batam have a total\ncapacity of 1.5 gigawatts (GW), while their electricity requirements are\nestimated at 2 GW. By comparison, the region\u2019s installed\npower-generation capacity is currently only about 1 GW. Limited water\nsupplies are also a constraint. Batam\u2019s reservoirs, which depend on\nrainfall, are considered to have limited additional capacity to meet the\ngrowing needs of the data-centre industry.<\/p>\n
To address these issues, BP Batam requires data-centre operators to\nprovide their own power plants and water desalination facilities. These\nrequirements add to the investment companies must make before developing\ntheir facilities.<\/p>\n
Data-centre development costs rise<\/strong><\/p>\n Kafi estimates that the requirement to build supporting\ninfrastructure adds US$1.1 million per MW to the capital expenditure for\nBTM-2. This is equivalent to about 14% on top of the estimated\ndata-centre construction cost of US$7 million to US$9 million per\nMW.<\/p>\n Despite these challenges, NeutraDC Batam is considered to have a\nrelative advantage, having secured 90 MW of electricity supply. The\ncompany is also backed by Medco as its joint-venture partner.<\/p>\n Although investment requirements are substantial, the ability to\nsecure energy supplies is an important factor in keeping the project on\ntrack. Its implementation will still need to take account of funding\nrequirements and the investment timetable.<\/p>\n Telin could increase Telkom\u2019s business value<\/strong><\/p>\n Beyond data centres, Telkom\u2019s international connectivity business\nthrough Telin is seen as having growth potential that is not yet fully\nreflected in the group\u2019s valuation. Rising demand for connectivity to\nsupport AI and cloud computing is one factor underpinning its\nprospects.<\/p>\n Kafi said more than 85% of Telin\u2019s submarine-cable capacity has been\nsold. The recently launched Bifrost cable is expected to reach full\ncapacity sales in the first quarter of 2027. Telin is also shifting its\nfocus from conventional international voice services to\nconnectivity.<\/p>\n The transformation is expected to raise earnings before interest,\ntax, depreciation and amortisation (EBITDA) to Rp2 trillion in 2026, in\nline with management guidance. In the long term, Telkom aims for\nconnectivity to account for 80% of Telin\u2019s revenue. The company is also\ntargeting a valuation of Rp40 trillion to Rp45 trillion for Telin by\n2030.<\/p>\n To support these targets, Telin plans capital expenditure of Rp32\ntrillion through 2031. Kafi views the business as a valuable asset that\nhas not received sufficient attention within the Telkom group, while\nalso offering investors exposure to growth in data centres and digital\nconnectivity.<\/p>\n Telkom capital expenditure could rise in 2027<\/strong><\/p>\n Expansion at NeutraDC and Telin could drive an increase in Telkom\u2019s\nconsolidated investment. While the company\u2019s focus in 2026 is expected\nto be on controlling capital-expenditure intensity, Kafi sees scope for\nTelkom to increase investment again in 2027 to expand its\ndigital-business capacity. Telin\u2019s planned capital expenditure of Rp32\ntrillion through 2031 equates to an average of about Rp6.4 trillion a\nyear. On that basis, Telkom\u2019s consolidated capital expenditure in 2027\ncould reach about Rp35 trillion, above BRI Danareksa Sekuritas\u2019 initial\nestimate of Rp29 trillion.<\/p>\n That projection does not include the investment required for the\nNeutraDC Batam BTM-2 project, estimated at Rp13 trillion to Rp17\ntrillion. The project\u2019s implementation remains dependent on the\ndivestment process for NeutraDC, while management is said to have begun\nexploring loan financing to support construction. In terms of funding\ncapacity, Telkom\u2019s debt position is considered to leave room for\nexpansion. BRI Danareksa Sekuritas recorded the company\u2019s net\ndebt-to-EBITDA ratio at 0.6 times.<\/p>\n The ratio indicates relatively low leverage and is one factor\nsupporting the financing of investment. Nevertheless, higher capital\nexpenditure could weigh on free cash flow (FCF) in the short term. Kafi\nbelieves that Telkom\u2019s shift towards high-value data-centre and\nsubmarine-cable assets could improve the visibility of its long-term\ngrowth. This potential is among the considerations behind the positive\nview on TLKM shares.<\/p>\n TLKM share recommendation and investment risks<\/strong><\/p>\n BRI Danareksa Sekuritas has maintained its buy recommendation on TLKM\nshares, with a target price of Rp3,500 per share. The assessment takes\ninto account growth opportunities in data centres and international\nconnectivity, including the potential contributions of NeutraDC and\nTelin.<\/p>\n Investors should continue to monitor risks related to the company\u2019s\ncapital-allocation priorities. A key concern is the possibility of\ninsufficient investment in 5G networks, which could affect Telkom\u2019s\ncompetitiveness in the telecommunications business in the future.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/telkom-expands-investment-in-data-centres-and-digital-connectivity-1792889430",
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