Telkom Indonesia (Persero) Tbk PT Q1 2021 Earnings Call Transcript

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

Question: Kresna Hutabarat - PT Mandiri Sekuritas - Analyst : Hi. Thanks for the time. I have two questions. My first question is on Telkomsel. Congratulations anyway on the recent corporate rebranding. But can you please give some update on what does this corporate and product rebranding exercise mean in terms of prepaid product positioning and pricing policies going forward? And would you mind sharing what are the immediate areas to improve and the low-hanging fruits from this exercise? That's my first question. Second question is on IndiHome. Would you mind elaborating more on the key drivers to IndiHome ARPU improvement in the past two quarters? And also, how does management view the potential competition from the (inaudible) [city company PRN] in the (inaudible) market? Thank you.

Question: Choong Foong - CIMB Bank - Analyst : Hi, this is Foong from CIMB. Thank you so much for the call. A couple of questions for me. Firstly, on the mobile business, appreciate if you can give us an update on competition. I have seen some tariff optimization that's been carried out by Telkomsel in recent months. Do you think that this is sustainable? Are peers following what you are doing? And is the price premium still at a reasonable level at this point? Do you see perhaps room for further optimization in the coming months? That's my first question. Second question, with regards to IndiHome, as mentioned during the earlier part of the call, the net adds were a bit weak due to the challenges from the restrictive measures because of COVID-19. Can you just give us a bit more color as to what were the challenges that you faced? And given REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 29, 2021 / 8:00AM, TLKM.JK - Q1 2021 Telkom Indonesia (Persero) Tbk PT Earnings Call that there could be further tightening in the near future, is there a way to get around these restrictive measures or are we likely to miss our 1 million net target substantially for this year? And also for IndiHome, the ARPU continues to rise, which is a very good sign. What are your thoughts on further potential for increases here? And where do you think this can ultimately go to, say, in the next 12 or even 24 months? And my last question enterprise: revenue still seems a little bit weak in the first quarter. What is the outlook for the full year? Those are my questions. Thank you.

Question: Piyush Choudhary - HSBC - Analyst : Yes, hi. Thanks a lot for the call. A couple of questions. Firstly, on the mobile segment, with the recent branding and 5G launch, I think Rachel did mention but I missed probably the initial remarks. Are there any changes to your pricing strategy? And secondly on the 5G side, could you elaborate what your network coverage target for 2021 and 2022, how many subs are already there and in your base with 5G phones? And what is the incremental 5G shipment in the country? So that's the first one. Secondly, on the Gojek investment, now it's standing at IDR450 million. So can you help us understand what would be your stake in the enlarged merged entity? And are there any other ADRs which you have identified of collaboration post Tokopedia merger? Thank you. Unidentified Company Representative [I think on contributions] of 5G, I think the [second] (inaudible) operator is a good commercial party [during on me]. I think we still are going with our plan [according to] just our [budget] plan. And also, we will be excluding the states with on the business visibility and economic market condition. So we have to take a look in terms of [like our] system [relevant] discussed for the B2B and also the (inaudible) [affordability]. Because as we know, currently we (technical difficulty) using the 2.3 spectrum. [However by], this will only limit [operator] in what we see in the 2.3. Mostly the operator is in 700, 2.6 gigahertz, and also 3.5 gigahertz. And also, we do also (inaudible) markets south of Korea. If we take a look in term of the 4G from the [base] in South Korea, they did in 2011, [where either Telkomsel just lost the 4G after] (inaudible) after them. And if we take a look just on the 4G representation in South Korea, maybe an Indonesian matter (inaudible) starting I think three years from now and (inaudible), which are starting to deploy after we got the spectrum, especially spectrum 700, 2.6 gigahertz, and 3.5 gigahertz. As we know, 700 I think [adds own] will start to do the meeting on the unlimited, but the 2.6 gigahertz I think is still quite far from now. And so Telkom (inaudible) already from the (inaudible). REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 29, 2021 / 8:00AM, TLKM.JK - Q1 2021 Telkom Indonesia (Persero) Tbk PT Earnings Call And so in terms of pricing for the 5G, I think we still keep reminding the same (inaudible). We are not giving the differentiate the pricing in the 5G. That is all for -- Unidentified Company Representative This is for the [budget infraspend]. I think we do [that in addition] for spectrum service with the Google [profile, we start with the] benefit. And also, we do the [differentiation] 2.4 million of the Gojek lever. Currently we are 1.8 million using Telkomsel's numbers. And also, we [take on] the (inaudible) [papers]. And also, we do the synergy in terms of our division. We do the Telkomsel part of our business. And you see on waiting for the Gojek SME want us to become a Telkomsel partner. And also, we are giving affordable better [opportunities] for Gojek level partners and also continuing efforts for the Telkomsel outlet and standard (inaudible) and also the comarketing for gaming [system] at Telkomsel [video games]. And so we [can guess the rupiah] and we just launched a corporation (inaudible). I think that's all from the operation.

Question: Peter Milliken - Deutsche Bank - Analyst : Good afternoon. My question follows on from that, this product simplification. So if I understand it correctly, it's mainly the brands unification and so as that happens, you get fewer packages. Should we expect that to lead to any change in spend of the users? Like, would the lower-end brands be going away, for example, as part of this?

Question: Peter Milliken - Deutsche Bank - Analyst : Okay got it. Thank you very much.

Question: Ranjan Sharma - JPMorgan - Analyst : Hi, good afternoon and thank you for the presentation. Two questions from my side. Firstly, if you can share our revised guidance for 2021 for revenues, EBITDA margin, and CapEx. And the second question is on your plans to monetize assets or companies that you invested in, two listings on various exchanges, if you can share an update to some of the things that have been disclosed previously. Thank you. Unidentified Company Representative Thank you, Mr. Ranjan. On the guidance for the 2021, on the revenue, we believe the revenue going to be still continued growth by around low- to mid-single-digit. And then on the margin, we do expect that we can maintain the EBITDA margin as we have in the previous year. We believe we are on track on that one. Of course, we are going to be happy if we can improve some margin on this one, but put in worst conservative view that we can be able to maintain the EBITDA margin. And the third I think in the CapEx, basically the CapEx that we prepare for this year is around 25% of revenue as we see that we still need some investment in the (inaudible) in IndiHome. And then we have also still continue to grow our network, operate and improve the quality in the mobile. And the total CapEx spend is going to be around 40% in the mobile and then around 30% to 35% in the -- for the IndiHome. And the balance goes to supporting infrastructure. That are basically the guideline that we can provide to you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 29, 2021 / 8:00AM, TLKM.JK - Q1 2021 Telkom Indonesia (Persero) Tbk PT Earnings Call Unidentified Company Representative On the (inaudible) part. Unidentified Company Representative Okay. Ranjan, can I clarify which asset that you mentioned in Telkomsel or [in Telkomsel]?

Question: Niko Margaronis - BRI Danareksa Sekuritas - Analyst : Yes, hi, good afternoon, everyone. I just want to ask about the IndiHome and the recent media talking about this [new unit's folks] channels will stop broadcasting via satellite and will be showing content only via OTP, via streaming online. What do you think -- how you think this will affect your -- the performance of IndiHome and the add-on strategy, the upselling strategy? And how you will address this development? That's question number one. Number two, I understand about the unification of the brands and the Telkomsel and being able to communicate better, more simplified proposition. Do you think this may affect the value of Telkomsel as a premium brand in the country? That's part of the second question. And secondly, do you have -- do you see the opportunity to tap further into the core services of Gojek and Tokopedia? For instance, like ride hailing, perhaps fintech, and penetrating deeper into the (inaudible) of Tokopedia. These are my questions. Thank you.

Question: Niko Margaronis - BRI Danareksa Sekuritas - Analyst : Can I have a follow-up question on this? Does this [partner] (inaudible) allow the Gojek or Tokopedia to tap into your subscriber base and your data analytics? That's the follow-up question number one. Number two is Bayu, after the Bayu brand, is it -- under the rebranding, is it going to be merged under Telkomsel prepaid? Thank you.

Question: Niko Margaronis - BRI Danareksa Sekuritas - Analyst : Sure, sure. Thank you so much.

Question: Samuel Chen - AllianceBernstein - Analyst : Hi, thank you for your time. Three questions. The first one is you mentioned about IndiHome. The ARPU uplift seems to be coming from the speed upgrade. Would you be able to tell us roughly what's the most frequent package that the subscriber is subscribing on right now? That's my first question. Thank you.

Question: Samuel Chen - AllianceBernstein - Analyst : Got it. Just maybe a very quick follow-up. If I am a customer and I want to upgrade to a faster package, there is no hardware upgrade involved or any additional investment either from your side or their side? It is basically just changing the speed, right?

Question: Samuel Chen - AllianceBernstein - Analyst : Okay. All right, thank you. That's very helpful. My next question is on the EBITDA margin. I noticed the IndiHome EBITDA margin has been on the upward trend; very substantial ever since I started tracking it. Would you -- but then you guys have never mentioned your EBITDA margin on either the enterprise side or the wholesale side. Would you be able to give us just a rough range for those two business? And I understand especially for the enterprise side what we have been doing over the year is focus on revenues that are more high-quality revenues. So I just want an idea there. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 29, 2021 / 8:00AM, TLKM.JK - Q1 2021 Telkom Indonesia (Persero) Tbk PT Earnings Call Unidentified Company Representative Okay, on the other segment, basically for example on the enterprise side, actually we have low- to mid-tens of EBITDA margin on this one. It is in the -- actually you mentioned purposely in the process of improvement on this one, we hope are getting (inaudible) from time to time. And in the wholesale, wholesale I think our EBITDA margin --- it is a mix of I think some products here, some kind of -- in the wholesale, we have tower as well here and then data center as well. But what we can tell you, this is quite healthy and comparable to our global benchmark here. I think I need to come back to you maybe directly from my IR to provide you some further detail on this one.

Question: Samuel Chen - AllianceBernstein - Analyst : Okay, thank you very much.

Question: Arthur Pineda - Citigroup - Analyst : Hi, thanks. Two questions, please. Firstly, on the mobile side, I know that you mentioned that you raised rates from March, April, May. How have your competitors reacted to this price increase? Are they following suit on the price [repair]? Or if not, does this (technical difficulty) subscriber share momentum into the second quarter? Second question I had was with regard to the expenses. I'm just wondering, are there any one-offs in 1Q? So if you look at OpEx, it seems to have declined across the board on a Q-on-Q basis. Even D&A had declined significantly, which is quite unusual. Any driver behind this? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 29, 2021 / 8:00AM, TLKM.JK - Q1 2021 Telkom Indonesia (Persero) Tbk PT Earnings Call

Question: Arthur Pineda - Citigroup - Analyst : Sorry, I'm just a little confused with that. So does that mean they have not really followed with regard to price increases? And does that market share, because basically you are becoming an outlier if you raise rates and they don't.

Question: Arthur Pineda - Citigroup - Analyst : Okay. Because if you look at D&A, it's down like 7% Q-on-Q. So if you were to model this, we should view 1Q as the baseline. Is that the right way to look at this? Unidentified Company Representative Yes, basically yes. Because of the I think asset, there's no change in the I think amortization or anyone of (inaudible).