Business Context and Reporting Period
Company: Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (TELKOM)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: First Quarter (Three months ended March 31, 2011)
Filing Date: April 29, 2011
Accounting Standards: The Company adopted revised Indonesian Financial Accounting Standards (PSAK 1, 2, and 3) effective January 1, 2011. This resulted in the "Statement of Income" being presented as the "Statement of Comprehensive Income."
Key Financial Metrics
| Metric (Billion Rp) | 1Q 2010 | 1Q 2011 | Change (%) |
|---|---|---|---|
| Operating Revenue | 16,356 | 16,706 | 2.1% |
| Operating Expense | 11,037 | 11,512 | 4.3% |
| Operating Income | 5,320 | 5,194 | (2.4%) |
| Income for the Period (Net Income) | 2,786 | 2,828 | 1.5% |
| EBITDA | 9,059 | 8,642 | (4.6%) |
| EBITDA Margin | 55.4% | 51.7% | (3.7 pts) |
| Total Assets | 99,758 | 100,685 | 0.9% |
| Total Liabilities | 43,344 | 40,455 | (6.7%) |
| Total Equity | 56,415 | 60,231 | 6.8% |
Liquidity: Cash and cash equivalents increased to Rp 10.65 trillion (approx. $1.22 billion) as of March 31, 2011, up from Rp 9.12 trillion at year-end 2010.
Material Changes vs. Prior Period
- Revenue Composition: Total revenue growth of 2.1% was driven by a 14.4% increase in data, internet, and IT services (up Rp 688 billion) and a 0.9% increase in cellular revenue. These gains were partially offset by a 19.5% decline in interconnection revenue and an 11.4% decline in fixed line revenue.
- Expense Drivers: Operating expenses rose 4.3%, primarily due to an 8.9% increase in operations, maintenance, and telecommunication expenses, and a significant 74.2% surge in marketing expenses. Conversely, depreciation/amortization and general/administrative expenses declined by 7.8% and 14.7%, respectively.
- Profitability: Despite revenue growth, Operating Income decreased 2.4% due to higher operating expenses. Net Income (Income for the period) increased 1.5% to Rp 2.83 trillion.
- Balance Sheet: Total liabilities decreased 6.7% to Rp 40.45 trillion, while Total Equity increased 6.8% to Rp 60.23 trillion.
Operational Highlights and Management Commentary
- Subscriber Growth:
- Cellular: Total customer base grew 21.3% to 99.4 million. Prepaid subscribers surged 21.6% to 97.2 million, while postpaid grew 5.8% to 2.2 million.
- Fixed Lines: Total fixed line subscribers increased 11.1% to 27.0 million, driven by a 17.3% increase in wireless fixed-line subscribers, offsetting a 0.6% decline in wireline subscribers.
- ADSL (Speedy): Subscribers grew 39.6% to 1.79 million.
- Usage Metrics: Cellular Minutes of Use (MoU) increased 53.4% to 43 billion minutes. However, blended Cellular ARPU (Average Revenue Per User) declined 14.0% to Rp 37,000 per month.
- Management Outlook: President Director Rinaldi Firmansyah attributed positive performance to cellular subscriber growth. Management stated the company is transitioning from a domestic incumbent to a leading innovative player in digital, information, media, and edutainment (TIME) businesses.
Investor Verification Checklist
- ARPU Erosion: Verify the sustainability of the 14% decline in blended cellular ARPU despite a 53% increase in usage minutes.
- Marketing Efficiency: Assess the return on investment for the 74.2% increase in marketing expenses.
- Fixed Line Decline: Monitor the continued contraction in traditional wireline revenue and subscriber base.
- Interconnection Revenue: Investigate the 19.5% drop in interconnection revenue and its impact on future margins.
- Accounting Changes: Confirm the impact of the new PSAK standards on the comparability of the "Statement of Comprehensive Income" with prior periods.