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Optimal Capital Structure Analysis of Pt Centratama Telekomunikasi Indonesia Tbk

In: Proceedings of the 8th Global Conference on Business, Management, and Entrepreneurship (GCBME 2023)

Author

Listed:
  • Rafly Zahriansyah

    (Institut Teknologi Bandung)

  • Mandra Lazuardi Kitri

    (Institut Teknologi Bandung)

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.

Suggested Citation

  • Rafly Zahriansyah & Mandra Lazuardi Kitri, 2024. "Optimal Capital Structure Analysis of Pt Centratama Telekomunikasi Indonesia Tbk," Advances in Economics, Business and Management Research, in: Ratih Hurriyati & Lili Adi Wibowo & Sulastri Sulastri & Lisnawati Lisnawati (ed.), Proceedings of the 8th Global Conference on Business, Management, and Entrepreneurship (GCBME 2023), pages 81-87, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-443-3_13
    DOI: 10.2991/978-94-6463-443-3_13
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