Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk Q1 FY2020 earnings call

Management Statement and Operational Highlights

• Leadership: Introduced new Board of Directors and Telkomsel Board members, including Ririek Adriansyah as CEO.
• COVID Impact: COVID-19 impacted sectors, but fixed broadband IndiHome, mobile digital business, and wholesale continued growth. Digital accelerations seen as opportunities.
• Capital Expenditures: Spent around IDR 3.7 trillion in Q1 2020, utilized for 4G network quality, fiber-based access and backbone infrastructure, data centers, etc.
• Accounting Standards: Adopted new Indonesian accounting standards (PSAK 71, 72, 73) affecting costs, assets, liabilities.
• Dividend: Annual General Meeting approved dividend distribution of IDR 15.3 trillion, 81.78% payout threshold.

Segment Performance

• Mobile (Telkomsel): Digital business grew significantly by 16.3%, driven by 16.7% data and 13.6% digital service increase. Digital business accounted for 70.6% of total Telkomsel's revenue in Q1 2020, up from 61.4% in the same period prior year. Overall Telkomsel revenue grew 1.1%, with EBITDA margin improving to 61.6% despite legacy business decline.
• Fixed Broadband IndiHome: Added 252,000 new subscribers in Q1, on track for full-year target of 700,000. Revenue was IDR 5.1 trillion, a 19.7% year-on-year increase. EBITDA margin improved to 35.9%.
• Enterprise: Recorded IDR 4.3 trillion in revenue in Q1.
• Wholesale and International: Recorded IDR 3.4 trillion in revenue, growing 15.1% compared to the same period last year.

Guidance

• IndiHome: Still conservative in subscriber growth due to COVID, but optimistic on maximizing assets; guidance remains to meet demand while being cautious.
• CapEx: Expect CapEx to remain around 25% of revenue, with second quarter and end of year aligning with this target.
• Enterprise: Focus on high-value customers and digital solutions, expecting improvement in volume and margin over time, with optimism about the promising market in private and government sectors.

Risks

• COVID Impact: Uncertainty around duration and impact of COVID on business segments, affecting subscriber growth and revenue projections.
• Competitive Environment: High competition in mobile market, price sensitivity, and potential impact on data revenues and market share.
• Receivables: Conservatism in provisioning for receivables in Enterprise segment due to prevailing economic conditions and business uncertainties.

Q: Colin McCallum asked about IndiHome subscriber demand and Netflix negotiations.

A: Heri Supriadi discussed conservatism in IndiHome growth due to COVID but optimism on maximizing assets, and mentioned close negotiations with Netflix near an agreement.

Q: Ranjan Sharma asked about Board changes and prepaid SIM registration.

A: Ririek Adriansyah discussed the group's 3 pillars of digital connectivity, platform, and services, and Unknown Executive from Telkomsel explained prepaid SIM registration impact on customer base focus on high-value customers.

Q: Piyush Choudhary asked about CapEx outlook and mobile competitive environment.

A: Heri Supriadi discussed CapEx remaining around 25% of revenue with second quarter alignment, and Rachel Goh discussed competitive environment with focus on high-value customers and multipronged approach to manage competition.

Q: Arthur Pineda asked about mobile consumption trends, Enterprise margins, and Netflix mutual benefit.

A: Setyanto Hantoro from Telkomsel discussed mobile consumption increase and behavior changes, Ririek Adriansyah discussed Enterprise margin improvement over time, and Ririek Adriansyah explained mutual benefit with Netflix involving content handling and cooperation.

Q: Norman Choong asked about IndiHome run rate and Enterprise revenue growth projection.

A: Heri Supriadi discussed conservative IndiHome run rate due to COVID, and Edi Witjara from Enterprise discussed promising market and optimism for growth in Enterprise segment.

Q: Kresna Hutabarat asked about leverage and tax rate.

A: Heri Supriadi and Ririek Adriansyah discussed leverage conservatism and tax rate strategy, expecting similar levels in 2 years and alignment with statutory rates.

Q: Niko Margaronis asked about Enterprise trend and IndiHome ARPU.

A: Edi Witjara discussed Enterprise growth optimism and IndiHome ARPU improvement from add-on services.

Q: Unknown Analyst asked about Enterprise performance decline and competitors.

A: Edi Witjara discussed Enterprise market potential and competition from global players, with focus on high-value and digital solutions.

Q: Prem Jearajasingam asked about COVID impact on user profiles and market share.

A: Heri Supriadi and Unknown Executive discussed data consumption increase and no significant market share change due to quarantine.

Q: Unknown Analyst asked about Enterprise performance decline cause and trend.

A: Edi Witjara discussed cyclical nature and focus on value-added services in Enterprise segment.