...Constrained by Sovereign Rating: PT Telekomunikasi Indonesia Tbks (Telkom) IDRs are capped by the ratings on the Indonesian sovereign (BBB-/Stable), due to the governments 51.2% shareholding in Telkom as at end-June 2014. The government, through its control of Telkoms board of directors, has significant influence over the company. Telkom is strategically important to the government as the countrys incumbent telecommunications company and dominant wireless and broadband operator. Reduced Ratings Headroom: Telkoms large ratings headroom is likely to shrink. Fitch Ratings forecasts that 2014 FFO of IDR30trn-32trn will be just sufficient to fund capex and dividends, leaving little free cash flow. We expect capex to rise to IDR24trn, or 27% of Telkoms revenue, in 2014 (2013: IDR21trn) as the company expands 3G coverage and adds over 1,600 base transceiver stations (BTSs) each month. During 1H14, Telkom invested IDR12trn, mainly to add 9,696 BTSs, about 75% of which were 3G BTSs. Telkoms 2014-2015...
