Dear Shareholders,

With an unwavering commitment to become the leading digital infrastructure company in Indonesia, PT Sarana Menara Nusantara, Tbk (“SMN” or the “Company”) closed the year 2023 with solid achievements. The outstanding results notably supported our role in providing equal access of digital information and communication to all Indonesians. We praise God Almighty for the Company’s success, which has enabled us to continue providing added value to shareholders and stakeholders at large.

MACROECONOMIC REVIEW
Indonesia reported strong growth of 5.05% in 2023 on the back of geopolitical tensions and globul inflution. Whils prsdominuntly bolstsrsd by its vibrant domestic market, Indonesia’s growth was also driven by positive developments of its industries, including the information and communication sector. Playing an increasingly central role in national development, this sector demonstrated 7.59% yoy growth and contributed 4.23% to GDP.

CHALLENGES
SMN encountered various challenges and opportunities throughout 2023, especially given a major change in the telecom sector following the merger of Indosat Ooredoo and Tri Indonesia to form PT Indosat Ooredoo Hutchinson Tbk. The business consolidation occurred in 2022, with ongoing adjustments extending into 2023.

In terms of the merger’s impacts on telecommunications infrastructure services, it has led to the restructuring of tower lease agreements with SMN to eliminate redundancy and opened up fresh possibilities for generating colocation revenue from additional towers.

STRATEGY OBJECTIVES
The Company focused on expanding its business and service quality in 2023. To that end, the Company broadened its tower portfolio through new constructions and acquisitions, diversified its services, and practiced prudent financial management. Today SMN operates 10,595 towers for its customers.

The Company marketed the tower’s available spaces to other operators to increase tower asset utilization, allowing one tower to host multiple tenants. This strategy is effective in optimizing our margins and is efficient from customers’ standpoint.

The physical infrastructure that the Company provided was complemented with its ability to provide high-quality services. Understanding clients’ growing needs was crucial to our Company’s capability to meet them. Thanks to our teams’ service excellence, the Company now has long-term commercial agreements with telecom operators.

To sustain financial strength and continuity, the Company maintained obligations and investments activities prudently. The Company’s interest expense rate was lower than JIBOR in December 2023. The Company’s cost structure remained competitive. The Company prudently managed capital and operating expenditures and synergized subsidiary assets.

Through its subsidiaries, the Company expanded infrastructure services in digital banking, payment systems, and energy-related infrastructure operations and maintenance. The company was also prepared to enter the clean energy and NRE markets, which will be crucial to addressing market needs in the future.

The Company recognized that organizational and staff synergy was crucial in 2023. To that purpose, the Company revised employee KPIs and created a company-wide KPI. The Company increased town hall and other internal communications with employees to manage this type of transformation.

ROLE OF BOARD OF DIRECTORS IN STRATEGY FORMULATION AND IMPLEMENTATION
The Board of Directors determined corporate strategies by analysing business opportunities and obstacles in the Board of Directors meetings. We also considered inputs from relevant parties, including from the Board of Commissioners, which provided feedback concerning the industry landscape and cost control.

The Board of Directors monitored strategy implementation activities quarterly. We compare accomplishments to the goal, identify bottlenecks or opportunities to accelerate target realization, and introduced adjustments where needed.

PERFORMANCE REVIEW
In 2023, in terms of tower assets, SMN built around 1,300 new towers in 2023 and expanded our tower assets. We also recorded 20 to 30 thousand kilometers of additional fiber optic cables in the fiber-to-tower segment, with additional consolidated 180 thousand kilometers of total revenue-generating fiber by the end of 2023. In the fiber to the home business line, SMN built 800,000 homes passed and delivered 20,000 activations in the connectivity sector.

In terms of financial performance, the Company boosted its profitability with equity increased to Rp16.51 trillion or grew by 14.41% yoy, while assets grew by 4.26% year on year to Rp68.42 trillion in 2023.

Additionally, the Company reported a 3.16% infrastructure leasing revenues to Rp10.53 trillion in 2023. This success contributed to the Company’s revenue growth by 6.39% year on year to Rp11.74 trillion in 2023, up from Rp11.04 trillion the previous year. By customer, Indosat was the largest revenue contributor, accounting for Rp4.48 trillion, followed by XL Axiata with Rp3.62 trillion and Telkomsel with Rp1.46 trillion. The three telecom operators accounted for 38%, 31%, and 12% of the total, respectively.

The revenue growth was also higher than cost of revenue, resulting in a gross profit of Rp8.21 trillion in 2023 from Rp8.12 trillion the previous year. Moreover, operating income stood at Rp6.94 trillion in 2023 compared to Rp6.83 trillion in 2022, or an increase of 1.66% yoy.

The solid financial position enabled the Company to fulfil its commitment to add value for shareholders. This was evidenced by payment of the remaining cash dividend of Rp901 billion for fiscal year 2022 on May 31, 2023, following the payment of Rp300 billion of interim dividends in December 2022.

On December 22, 2023, the Company paid out an interim cash dividend of Rp6 per share to registered shareholders as of December 18, 2023.

TARGET REALIZATION
SMN met its 2023 targets. Our revenue of Rp11.7 trillion exceeded 2023 target. The Company also delivered solid EBITDA performance at Rp10,0 trillion, which also exceeded 2023 target.

OPERATING REVIEW
The Company’s achievement in expanding infrastructure services and maintaining solid financial performance reflected the contribution of its human resources. To develop employee competencies, the Company organized a variety of training programs. In total, 1,611 of our employees attended a total of 122 trainings in 2023. In addition to staff training, the Company also provided training for the leadership, including BOD members to augment the Board’s effectiveness.

In 2023, IT, innovations included the development of an operational dashboard to handle business transactions and enable management to easily see the Company’s operating conditions as well as the release of a monthly newsletter, IT Hotline, to discuss current issues in IT.

GOOD CORPORATE GOVERNANCE PRACTICES
The Company is aware of the importance of good corporate governance (GCG) processes in gaining the trust of its shareholders and stakeholders. To refine GCG practices from time to time, rooms for improvement were identified through benchmarking and gap analysis exercises. Internal communication must also be improved to facilitate cooperation with all Company units, while external communication was maintained to publicize the Company’s GCG commitment to the public.

The Company also undertook an annual assessment of GCG practices, which included both third-party and self-assessments. The Company’s GCG assessment referred to the ASEAN Corporate Governance Scorecard. In 2023, PT SMN was successful in raising its assessment score and following up on feedback received.

At the Annual GMS on May 5, 2023, the Company accepted Mr. Eugene Keith Galbraith’s resignation as Director. We thanked him for his contributions to the Company. Following this resignation, the composition of the Company’s Board of Directors, sffsctivs from ths mssting’s conclusion until ths Company’s Annual General Meeting of Shareholders in 2024, is:

•    President Director: Ferdinandus Aming Santoso
•    Vice President Director: Adam Gifari
•    Vice President Director: Stephen Duffus Weiss
•    Director: Eko Santoso Hadiprodjo
•    Director: Indra Gunawan
•    Director: Anita Anwar

COMMITMENT TO SUSTAINABILITY
As a responsible business entity, the Company fulfiled its commitments to stakeholders through the three pillars of the sustainability framework: sustainable value chains, ethical organizations, and social investment.

In relation to sustainability achievements, the Company today has 23 units of solar panel as of December 2023. In terms of the distribution of economic gains, 98.4% of the Company’s suppliers today are local vendors. 

The Company also allocated around Rp1.08 billion for several environmental programs in 2023 and applied waste management strategies. The Company has also actively participated in initiatives to improve the quality of vocational education and healthcare. For employees, the Company aimed to provide a safe and comfortable working environment in line with prevailing laws and regulations

OUTLOOK 
Indonesia’s economic estimates in are optimistic, with GDP growth forecasted at 5.2% in 2024. Household income is expected to rise, boosting the information and communication industries due to stronger demand and as technology access becomes more equitable. 
In 2024, the Company will continue to seek for new opportunities, strengthen its tower service level agreements and help operators choose the best places to operator. The Company also plans to diversify into managed services, power as a service, and renewable energy. Overall, the Company looks forward to a more successful year driven by better services and a more solid organization. 

CONCLUSION 
The Company is grateful to all shareholders for their support, as well as to the Board of Commissioners for their invaluable supervision and guidance. The Company sincerely appreciates the hard work and dedication of all employees. The Company also would like to convey our appreciation to all of our customers and all other stakeholders for their continued support in enabling SMN to become Indonesia’s reputable telecommunications infrastructure provider.

On behalf of the Board of Director