Telkom Indonesia (Persero) Tbk PT Q1 2023 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 mobile side. Now we see that there has been a high level of competitive rationality and price increases in the market. But despite that, we are seeing that the revenue growth remain relatively low or relatively subdued. My question is what is needed for the industry price increases and competitive rationality to better flow through into revenues? Do you think that the weak macro economy is weighing on the growth side? That's question number one. Second question is on the fixed broadband competition. And in the earlier remarks, it was alluded that it is likely intensifying. My question is, can you please provide more color like is the competition mainly concentrated in big cities. And have you seen the churn level increasing on that side? And where do you think that the new ARPU levels in the fixed broadband is settling down? And just a housekeeping question. Why general and administrative and interconnect costs rose sharply in quarter 1?

Question: Hussaini Saifee - UBS Investment Bank, Research Division - Analyst : Movements in the fixed broadband competition, especially in the big cities? F. M. Venusiana R. - Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk - Acting Director of Enterprise & Business Service, Director of Consumer Service and Director Yes. Actually, we're facing the very high competition in the big cities. There are many local competition -- competitors coming, and we fight each other. And there are many new customers with some as you go to efficiency, they don't get to 1P only -- Internet only. So the growth of revenue as the group. But it's a level increase because of the high competition, operator offers a very attractive pricing with a fairly cheap price with high speed. So there are some customer move to the competition -- competitor. And then we offer customers to maintain the -- retain the customer by offering to increase with the only Internet because some of customers they don't want to continue with 3P, even though the 2P because they don't want to go to the 3P with the TV or the fixed phone. So the only want to go with the Internet only. This is for the ARPU level. They've been good because of this. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2023 / 8:00AM, TLKM.JK - Q1 2023 Telkom Indonesia (Persero) Tbk PT Earnings Call Heri Supriadi - Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk - CFO, Director of Finance & Risk Management and Director On your housekeeping question on why the G&A cost increased significantly. I think mostly, this is related to the, I think, first quarter seasonality in which we were conservative in recognizing the revenue, along with, I think, allocate the -- some, I think, allowance for the best step. But this is longer time, the growth of the -- I think, in terms of allowance for a bit, that's going to be like the growth of the revenue itself. This is -- it means the number of growth going to be moderating around the time. And second, growth also coming -- in the first quarter of this year coming from the provisional fees related to the cost of doing this corporate actions. We do a lot of corporate actions in the first quarter this year, along with all the professional support that we need. This is also for the time going to be becoming gradual. I think smooth growth as most of the activities are going to happen in the first half of this year. So that's about the G&A. In the interconnection expenses, it is because the -- it is following the trend of the business. Most of the business now going to the A2P, some in the more personal interconnection becoming less and the market is also becoming more competitive as some technology in the present also make, I think, the margin becoming a bit moderate as well. So this, I think, is in line with the business overall. So in the end, you're going to see, over the years, the growth of both cost going to be smoothly in line with the growth of the business. So that's, I think, the explanation that we can provide to you. I think adding to the fixed broadband competition as mentioned by my colleague, Ibu Venus. In terms of churn, we basically can maintain this one by adjusting some price and other demand because in the past during the COVID period, some of the customers really required high speed of broadband. They reduced the speed of broadband. We can basically entertain them as well on this one. This can also maintain the level of churn. As you can see, the -- although we acquired BC with, I think, the consolidation between this IndiHome with Telkomsel, we're still able to have subscriber growth around 140,000. With this, I think, combined fixed mobile convergence we do expect this number going to increase significantly over the next quarters. So that's I think...

Question: Hussaini Saifee - UBS Investment Bank, Research Division - Analyst : No. This is very clear. I will get back into the queue for more questions. Edwin Julianus Sebayang - Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk - VP of IR & Corporate Secretary Next question, please, from Ranjan Sharma.

Question: Ranjan Sharma - JPMorgan Chase & Co, Research Division - Analyst : I have a bunch of questions. So maybe one feedback. The line is not clear. If you want to speak closer to the mic, it's just very difficult for us to follow. My questions are like if -- are you expecting the wireless revenues growth to accelerate in the coming quarters with the adjustments on tariffs? Or should we expect like 1%, 2% growth for the foreseeable future? The second question is on the cost side. If your underlying revenues are declining 6%, 7% and this pressure on inflation, then does the management have any cost optimization programs in place, which can support the bottom line? Similarly, if there's less demand for triple-play fixed broadband services, is there any plans to also like reduce the content costs as well? Heri Supriadi - Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk - CFO, Director of Finance & Risk Management and Director I'll start with that. I think on the inflation and cost side, maybe later my colleague going to answer you on the wireless revenue that we do expect also going to be improved in the upcoming quarters. On the inflation side, of course, if you see the cost that we have, why, for example, operation and maintenance cost becoming slightly increased higher than the revenue because we have new spectrum that are coming this quarter in which in the similar quarter last year, the cost is not there yet. We have additional spectrum back in November last year. So this is becoming kind of -- the trends why the cost of operation and maintenance becoming high. The amount of the new spectrum costs around IDR 222 billion. And this, along with the time, we expect can maximize the use of the spectrum that can reduce the CapEx and OpEx as well. This, in the long run, is going to provide, I think, competitive advantage and also some CapEx and OpEx saving. And then on the other side, some costs also coming from the -- because the new tax on the personnel expenses that are coming this year and then some, I think, allowance for bad debt that we are using a bit more conservative approach. But if we basically normalize all that cost, actually, it is supposed to be quite manageable despite the revenue still increased around 2.5%. It means we already used some of the measurement on the efficiency. So moving forward, we do expect this going to be continue. So the top line, we try to expand the growth in mobile as well in the fixed line side, in the Enterprise and some in the Wholesale like tower and then data center and so on. The figure along the time going to be improved that we believe. So I think go to cellular side and Ramzy you can...

Question: Ranjan Sharma - JPMorgan Chase & Co, Research Division - Analyst : Can I just have quick 2 follow-ups? With all the things that the management has clarified, do they expect an acceleration of wireless growth in the coming quarters? And regarding content, again, like if people are choosing not to go for 3P or triple-play plans, not to take bundled content from telecom operators, can content be a source of differentiation for telcos?

Question: Ranjan Sharma - JPMorgan Chase & Co, Research Division - Analyst : Just 1 quick follow-up. If you can, again, remind us about the guidance for 2023 and are there any changes? Heri Supriadi - Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk - CFO, Director of Finance & Risk Management and Director Pak Ranjan, we are still keeping the guidance as we believe the cellular is going to improve over the time with IndiHome combined with mobile becoming fixed mobile convergence that can address home broadband. We also believe that with these initiatives, we can accelerate the growth in the second half of the years and also some other business, especially in the Enterprise and also in the Wholesale, for example, the tower data center can provide let's say, low 10 or double digits. And this is going to provide us with, I think, a potential to keep the growth in the same like the guideline that we already provide to you. That's, I think, explanation from us.