Telekomunikasi Indonesia (Persero) Tbk PT Q3 2019 Earnings Call Transcript

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

Question: Kresna P. Hutabarat - PT Mandiri Sekuritas, Research Division - Analyst : I have 2 questions. One on revenues and also the other one on cost. My first question on the 4G user penetration at Telkomsel. Can I just check what the latest effort to migrate more customers to 4G subscriptions? I understand there are some discrepancies with mobile subscribers with 4G handsets and a number of customers with live 4G subscriptions on the network, and I'm just wondering if there's any ARPU uplift opportunity from that front. That's my first question. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. NOVEMBER 05, 2019 / 8:00AM, TLKM.JK - Q3 2019 Telekomunikasi Indonesia (Persero) Tbk PT Earnings Call My second question on the OpEx structure. If you look at your personnel costs, your personnel cost has taken greater portion of your cash OpEx structure in third quarter '19 relative to marketing, IT and G&A. I just want to check, is there any ERP ongoing right now? Or is there any driver to the pick up in personnel expense as in proportion to the total cost structure? And secondly, how much more decline in marketing costs and IT costs can be expected in the fourth quarter '20 and also in 2020?

Question: Kresna P. Hutabarat - PT Mandiri Sekuritas, Research Division - Analyst : Okay. But is there anything that you can share in terms of like the total 4G customers on your network, where it is today, let's say compared to last year, let's say?

Question: Kresna P. Hutabarat - PT Mandiri Sekuritas, Research Division - Analyst : 55 million. Okay.

Question: Ranjan Sharma - JP Morgan Chase & Co, Research Division - Analyst : Two questions from my side. Firstly, on competition. I mean, a lot has been said about the smaller players in the market and the price aggression. But I see -- if I see the price points, such as on the website. I find that unlimited plans are beginning at IDR 50,000 or even IDR 75,000. So are you seeing something else on the ground which is more aggressive? Because at this price point, it seems it's quite expensive and ARPU accretive for the telcos to provide plans at these levels. Secondly, you have a new cabinet in Indonesia. Anything can share on how policy or regulation might change and how that might affect the wireless industry?

Question: Ranjan Sharma - JP Morgan Chase & Co, Research Division - Analyst : Okay. So it's more for new SIMs. Got it.

Question: Choong Chen Foong - CIMB Research - Analyst : Two questions from me. Firstly, on the provisions for trade receivables in the quarter. Noticed that it has actually gone up further in the quarter. Is that largely due to the enterprise business? And given the change in the enterprise business mix, are we sort of expecting that (inaudible)? For some of these hardware sales and the less profitable segments, could that still yield more provisions for trade receivables going forward? That's my first question. Second question, coming back to the Mitratel acquisition of the Indosat towers. I just wanted to understand whether that's the first time Mitratel has gone up to the market to acquire towers from other telcos? And going forward, do we expect to see more acquisitions once some of these other towers from your telco competitors come up for tenders? And what is the end game here? Is this just merely an expansion of the portfolio for business growth? Or are we sort of looking at potentially monetizing this as large portfolio sometime down the road? Yes, those are my 2 questions. Harry Mozarta Zen - Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk - Director of Finance, CFO & Director Thank you, Foong. On the provision side, yes, enterprise is contributing to the higher provision in the 9 months, but not all because of the enterprise. Because if you are looking at the proportion, the provision was contributed by around IDR 850 billion from enterprise and then about IDR 450 billion from consumer and another IDR 460 billion from the mobile as well. So it's quite spread. So the provision was attributable to, first, the implementation of IFRS 9, in particular, in the mobile side that make the provision is getting higher. And also because, you see in the enterprise side, the government projects, normally, the government pays only once. That is in the -- at the end of the year. So normally, towards the end of the year, the receivables from the government project is getting higher. So we have to provide some provision as well. So that makes the provision is getting higher in the 9 months period.

Question: Choong Chen Foong - CIMB Research - Analyst : Okay. And just a quick follow-up again on the Mitratel acquisition of the Indosat towers. Can I just sort of clarify that the towers that you were able to win, 2,000 towers. Was that...

Question: Choong Chen Foong - CIMB Research - Analyst : That's around 100, yes. Is that a result of Mitratel beating the highest price? Is that -- was that the main criteria for winning that?

Question: Ranjan Sharma - JP Morgan Chase & Co, Research Division - Analyst : So 2 more questions. Firstly, on the CapEx side. You've seen a pretty strong expansion of your fixed broadband network. Should we expect this to now -- this expansion to now moderate? And can that lead to CapEx savings for the company? So if I adjust for the data center expansion that you have, could the underlying CapEx trend lower? If you could share thoughts on that. And secondly, like you are -- if I understand correctly, you are building a big data center. When do we start seeing the revenues contribution from that? And how big or how material could the revenues be? Harry Mozarta Zen - Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk - Director of Finance, CFO & Director Yes. This is something that we are planning to achieve next year with regards to the CapEx efficiency. So for next year, our plan is to reach a lower CapEx to revenue ratio of 26%, which is slightly lower than 27% that we are likely going to have by end of this year. And most of this would come from fixed broadband business, for which we would be -- we think that we can be more efficient -- and given the economic of scale of the business. And sorry, what was your second question again?

Question: Ranjan Sharma - JP Morgan Chase & Co, Research Division - Analyst : Okay. Can I just say like what should the revenues expectations from the data center? Harry Mozarta Zen - Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk - Director of Finance, CFO & Director Can I -- can we get back to you on the one-on-one call that we're going to have tomorrow?