Summary of PT Telekom Indonesia (TLK) Q3 2024 Earnings Call

1Key Financial Results and Metrics

Revenue: IDR 112.2 trillion, up 0.9% year-on-year.

EBITDA: IDR 56.6 trillion, down 4.1% year-on-year; normalized EBITDA at IDR 57.8 trillion, a decline of 2.1%.

Operating Net Income: IDR 18.6 trillion, down 5.1% year-on-year.

CapEx: IDR 17.5 trillion, with a CapEx to revenue ratio of 15.6%, targeted to increase to 22%-24% by year-end.

Gearing Ratio: Net debt-to-EBITDA at 0.6x, indicating a healthy leverage position.

2Strategic Updates and Business Highlights

5 Bold Move Strategy: Continued focus on corporate transformation, with improvements in procurement efficiency and digital content offerings.

B2C Performance: Telkomsel reported a strong 16.4% growth year-on-year, despite a 2.1% decline in Q3 due to seasonality and purchasing power issues.

Fixed Broadband Growth: 200.6% year-on-year increase, driven by IndiHome integration and customer acquisition.

B2B Performance: Mitratel contributed IDR 6.82 trillion, growing 8.7% year-on-year.

FMC Integration: Progressing well, with a convergence ratio of 53% and synergy targets being exceeded.

3Forward Guidance and Outlook

Revenue Growth: Expected low single-digit growth for 2024.

EBITDA Margin: Projected between 50%-52% for the year, with Telkomsel's margin expected to stabilize around 45%-46%.

CapEx Guidance: Aim to reduce CapEx to revenue ratio to 17%-19% by 2024.

4Challenges and Points of Concern

Declining EBITDA: Driven by increased personnel costs from an early retirement program and rising general and administrative expenses.

ARPU Decline: Ongoing contraction in legacy services and a shift towards lower-priced entry-level data packages affecting overall revenue.

Competitive Pressures: Increased competition leading to pricing pressures and strategic adjustments to retain market share.

Macroeconomic Environment: Weak purchasing power impacting consumer spending and overall market dynamics.

5Notable Q&A Insights

Data Revenue Decline: Attributed to increased competition and strategic pricing adjustments; management emphasized a focus on customer productivity rather than just profitability.

FMC Synergies: Overachievement on cost synergy targets, with expectations for revenue uplift post-integration.

Pricing Strategy: Management indicated cautious pricing adjustments, with potential increases in Q4 based on market conditions.

InfraCo Development: Telkom Infrastructure Indonesia established to manage fiber assets, with plans to commercialize by year-end. Overall, while TLK reported modest revenue growth and strong performance in certain segments, challenges such as declining EBITDA, ARPU pressures, and a competitive landscape remain significant concerns for the company moving forward.