Providing debt financing to scale up network coverage in rural Indonesia
Indonesia is the fourth most populous nation in the world with 258 million inhabitants, whereby 43% of the population lives in rural or remote areas. It is an archipelago nation, comprising more than 17,000 islands, of which 6,000 are inhabited. This has resulted in challenges with the provision of nation-wide broadband connectivity, as the laying of submarine cables is often not economically viable, especially for the more sparsely populated islands.
It is estimated that only 3% of Indonesia’s population has access to fixed broadband connectivity and that there are more than 26 million people with no connectivity or only 2G connectivity across Indonesia. In Indonesia’s rural regions, access to mobile networks is even more limited. For most users, the internet is only accessible via mobile phones and from limited locations.
InfraCo Asia Investments is participating in the debt financing of the Indonesia Rural Wireless Broadband Project as a senior lender and will provide US$15mn in commitment to Mobile Internet Holdings BV (“MIH”), an indirectly owned subsidiary of Net1 International Holdings AS (“Net1 International”). MIH, through its subsidiaries, specialises in delivering broadband connectivity to underserved populations in emerging markets.
To address the connectivity gap in Indonesia, the Project will expand a fixed wireless broadband network by installing 1,500 Base Transceiver Station (BTS) across Indonesia. This network will use the 450MHz spectrum and provide wireless broadband access to households and small businesses.
The Project’s target population group has household income of IDR 4-5mn per month (c. US$ 280-350 per month, or US$ 3,360-4,200 per annum), which is between the fourth and last (poorest) quintile of the population in Indonesia. Through the Project, an estimated 300,000 beneficiaries are expected to be connected to the wireless broadband network.
By connecting rural households, the Project will allow rural consumers control over their access and flexibility of connectivity, which is expected to bridge the digital divide in work and education opportunities. In addition to benefiting individuals, the Project will also allow small and medium enterprises an opportunity to diversify their revenue streams by providing Wi-Fi services to their customers (such as at local grocery stores) or additional services to customers (such as at local eateries and cafes).
The Project has supported local medical centres, schools and village head offices through the lockdown and movement restrictions due to the COVID-19 pandemic, as well as enabled the government to accelerate e-government initiatives by lending router equipment free-of-charge.