Feasibility Evaluation Analysis of Mobile Tower Using Sensitivity Analysis and Monte Carlo Simulation

Abstract

In 2013, PT X received a request for the construction of 2,109 tower units which would later be rented out by PT Y. Thus, PT X started planning the tower construction in 2014. However, only 242 sites of the projected 856 towers were completed in the first quarter of 2014. This could lead to a potential withdrawal of the tower construction request by PT Y. As a consequence, PT X's management attempted to speed up the tower construction process by procuring mobile towers to serve as temporary replacement towers before conventional towers could be established. Therefore, feasibility study analysis was necessary for the purchase of the mobile towers. The data were collected by distributing questionnaires, conducting interviews, and gathering historical data of the company. Calculations were made based on these data for two alternative decision-making scenarios: without the purchase of mobile towers (alternative A) and with the purchase of mobile towers (alternative B). In addition, the calculations were done using several methods, namely net present value (NPV), internal rate of return (IRR), payback period (PBP), and profitability index (PI). From the two alternatives, alternative B was determined as the best alternative with an NPV of IDR 273 billion, an IRR of 13,81%, a PBP of 14 years and 10 months, and a PI of 1,14. Subsequently, a risk analysis was performed using sensitivity analysis for three variables, namely the possibility of increasing tower construction costs, decreasing revenue from tower rentals, and increasing tower operational costs. Among the three variables, the variable that most influenced NPV and IRR was a decrease in revenue from tower rentals with an NPV of IDR 32 billion and an IRR of 11.78%. Furthermore, Monte Carlo analysis was performed for three risk analyses simultaneously. From 10,000 trials, the probability of NPV < 0 was 1.06% and IRR < WACC was 1.03%, indicating that the chosen alternative (B) has a very small probability of failing. The study's findings led to the conclusion that alternative B would be the best option for PT X. The results of this study can also be a recommendation for other tower providers and further researchers to conduct further studies on the procurement of mobile towers.