Optimal Capital Structure Analysis of Pt Centratama Telekomunikasi Indonesia Tbk

DOI

10.2991/978-94-6463-443-3_13How to use a DOI?

Keywords

PT Centratama Telekomunikasi Indonesia Tbk; Optimal Capital Structure; Cost of Capital; Financing Strategy

Abstract

PT Centratama Telekomunikasi Indonesia Tbk has grown its telecommunication tower portfolio significantly since 2017, primarily through acquisition. In 2022, the company acquired approximately 4,000 telecommunication towers, propelling it to become Indonesia’s third-largest telecommunication tower provider. However, this debt-funded acquisition resulted in the interest expense being higher than the EBIT, which caused the net income to be negative. Recently, PT Centratama Telekomunikasi Indonesia Tbk plans to obtain an additional 397 telecommunication towers that cost IDR 1.17 trillion. PT Centratama Telekomunikasi Indonesia, Tbk intends to finance this acquisition through debt and internal financing. The most favourable financing strategy can be assessed by calculating the company’s optimal capital structure to determine the lowest cost from the financing. This research will utilise the Weighted Average Cost of Capital method to determine the optimal capital structure. Based on the 2021 restated financial report of PT Centratama Telekomunikasi Indonesia, Tbk, the capital structure of the company is currently at 38.14% equity and 61.86% debt, which incurs a cost of capital of 10.75%. Meanwhile, the optimal capital structure calculation suggested that PT Centratama Telekomunikasi Indonesia Tbk can achieve the lowest cost of capital at 9.08%, with the proportion of equity and debt at 86% and 14%, respectively. Therefore, the most favourable financing strategy for the recent acquisition plan is using equity to achieve the optimal capital structure.

Copyright

© 2024 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Download article (PDF)

TY  - CONF
AU  - Rafly Zahriansyah
AU  - Mandra Lazuardi Kitri
PY  - 2024
DA  - 2024/06/26
TI  - Optimal Capital Structure Analysis of Pt Centratama Telekomunikasi Indonesia Tbk
BT  - Proceedings of the 8th Global Conference on Business, Management, and Entrepreneurship (GCBME 2023)
PB  - Atlantis Press
SP  - 81
EP  - 87
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-443-3_13
DO  - 10.2991/978-94-6463-443-3_13
ID  - Zahriansyah2024
ER  -