Half Year 2023 Telkom Indonesia (Persero) Tbk PT Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Hussaini Saifee - UBS Investment Bank, Research Division - Analyst : Several questions from me. First is on the Telkomsel revenues where we had seen some softness or market share decline versus your competitors? I understand that legacy is one part of that. But do you see your competitors becoming a bit more aggressive or gaining market share in the ex-Java region? And the related question is that the data volume growth of Telkomsel, which is around 7%, 8% is significantly below compared to the competitors at around 15% to 20%. So I wanted to understand what is driving a slower data volume growth? The second question is on IndiHome. The growth is softer compared to the previous quarters. I just wanted to understand that how should we see second half for IndiHome in terms of customer additions. Any color on will the focus will be more on fixed wireless access customers or a combination of IndiHome or fiber and wireless access customers. And finally, Telkom is focusing or going to focus more on B2B business. And then the focus will be more on the collaboration. So I just wanted to understand that, will there be any initial investments required to grow B2B business? Derrick Heng This is Derrick. I will address your questions. With regards to competition, competition continued to remain rational. We see all our business focused on profitability and long-term service. However, we see aggression in some areas, which translates to price competition. And that's aligned to coverage expansion outside Java and offerings for [ship pricing] with prior quarter. So right now, we will continue to lead the healthy conduct, and we focus on profitability. With 2 CVM selected decreasing pricing, and we want to monetize data traffic and improve the renewal journey. So our initiative is to drive smart acquisition to defend market share aligned with profitability. If you look at our last Q, we have grown 0.5% Q-on-Q, over 153 million subscribers. We have applied consistent, healthy market conduct with smart customer acquisition strategy. With optimized CVM, we focus on renewables. So if you look at the customer base, we have improved productive and quality of our customers, as indicated by the growth payload and the strong ARPU growth, which is a plus 9.8% Q-on-Q and plus 13.1% year-on-year and that's aligned to our strategy to lead healthy conduct, drive market repair and industry pricing rationalization. So thoughts on paid load. Traffic will still grow positively aligned with our network quality improvement and increasing productivity by CVM and FMC and product simplification. So in addition, with the initiative of healthy conduct and high-quality staff, we will continue to drive productivity and ARPU improvement in the long run. So we want to manage pricing in a very prudent manner. Payload growth aligned, managed sustainability in terms of yield. I hope that answered your question. Unidentified Company Representative On the IndiHome side, I think going forward, what we see the growth is in the various levels, 1 on how we capture the additional of home additions it's both combination between fixed broadband and visual assets. The way we see it we continuously drive the adoption of fixed broadband where it is available. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 01, 2023 / 8:00AM, TLKM.JK - Half Year 2023 Telkom Indonesia (Persero) Tbk PT Earnings Call And on top of that, the growth of revenue, which is also coming from driving the ARPU up for the high value customers. Where we see that -- to date, our hero product that we just launched is 100 Mbps. We pushing towards higher speed, higher ARPU in high dollar segment, including the addition or combination between Telkomsel, fixed and mobile in the Telkomsel One product. And on top of that, we also accelerated (inaudible) fixed broadband assets to address the competition as well as to address the market penetration where our fixed broadband is not available. And we also use fixed broadband access in order to address an interim solution before we can actually serve the fixed broadband. So with that, I think our weapons to really attract the customer and address the customer of home broadband will be complete when we compared to our competitors. So we believe that sort of win for us. Heri Supriadi - Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk - CFO, Director of Finance & Risk Management and Director On your question, when Telkom focused on B2B, what the investment looks like. If we see the B2B, the base of the B2B, of course, we have connectivity. We still invest on that one. Of course, it is similar to basically a fixed broadband with the focus on the enterprise subscriber, of course, in this one. And above that one, there's something called specialities that we need to cater on that one. But mostly, actually, coming solution that -- some of that we come with the agreement in the term of partnership with our partners who provide such cloud, I think solution, but we did really want to add some. Unidentified Company Representative So thinking of the growth, we also invest on the data center, since we also have started to the groundbreaking of second Hyperscale Data Center in Batam to capture the speed of demand from surrounding country include Singapore. We also expected that we can have additional capacity more than 21 megawatts this year.

Question: Ranjan Sharma - JPMorgan Chase & Co, Research Division - Analyst : Thank you for the presentation. A couple of questions from my side. Firstly, if I can just go back to the cost discussion. I'm seeing O&M cost up 9% quarter-on-quarter. Personnel costs, 10% up quarter-on-quarter. I'm sorry, I missed the part of the discussion on why the costs are up so much if you can revisit that. . Second question is again on if I look at your P&L, you have recorded like IDR 288 billion of nonoperating expenses if you can kindly explain like where that comes from? And the last question is more strategic Starlink seems to be getting licensed in a number of countries, most recently like Malaysia. If they were to get licensed in Indonesia, how would that impact your broadband strategy for IndiHome?

Question: Ranjan Sharma - JPMorgan Chase & Co, Research Division - Analyst : Pak Ramzy, sorry to interrupt. The spectrum costs, when did they start from?

Question: Ranjan Sharma - JPMorgan Chase & Co, Research Division - Analyst : So I'm making a quarter-on-quarter comparison versus first quarter, so that will not affect your cost comparison from the first quarter to second quarter? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 01, 2023 / 8:00AM, TLKM.JK - Half Year 2023 Telkom Indonesia (Persero) Tbk PT Earnings Call

Question: Ranjan Sharma - JPMorgan Chase & Co, Research Division - Analyst : Can you come back to cost again, like because you explained it via spectrum but that will not have an effect on a quarter-on-quarter comparison. So why is the cost up so much from the first quarter? Unidentified Company Representative Okay. I think let's Pak Ramzy collect some more information on that question. But and then on the second question, in the profit and loss, you mentioned about our nonoperating expenses. How much you refer the number is?

Question: Ranjan Sharma - JPMorgan Chase & Co, Research Division - Analyst : Last question... Unidentified Company Representative For salary we only operate debt already and is starting in Indonesia is platform and how we manage the filing in Indonesia. And starting right now the licenses has already been published by government is only for the big wholesale services not for consumer services. So for the Telkom (inaudible) will be used for the take hold of the cellular for the remote, extra remote area and also for the IndiHome and the calling. We started telling that selling in the assumption with will be increasing significantly as well as the better consumption of IndiHome and cellular being increasing significantly.

Question: Ranjan Sharma - JPMorgan Chase & Co, Research Division - Analyst : Looking at different numbers, because I'm seeing 9% growth quarter-on-quarter. Maybe I'll send the calculations after this call. Unidentified Company Representative Yes. I think we'll give more detail on that one after the call.