Business Context and Reporting Period
This Form 6-K filing by Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (Telkom) reports the audited consolidated financial and operational results for the fiscal year ended December 31, 2008. The filing was submitted on May 13, 2009. Telkom is Indonesia's leading telecommunications provider, operating fixed-line, wireless (Flexi), and cellular (Telkomsel) networks. As of December 31, 2008, the Government of Indonesia held a 51.2% stake, while the public held 46.4%.
Key Financial Metrics
| Metric (Rp Billion) | FY 2007 | FY 2008 | Change (%) |
|---|---|---|---|
| Operating Revenues | 59,440 | 60,690 | 2.1 |
| Operating Expenses | 32,967 | 38,382 | 16.4 |
| Operating Income | 26,473 | 22,307 | -15.7 |
| EBITDA | 37,067 | 34,621 | -6.6 |
| Net Income | 12,857 | 10,619 | -17.4 |
| Net Income Per Share (Rp) | 644.08 | 537.73 | -16.5 |
| EBITDA Margin (%) | 62.3 | 57.0 | -5.3 |
| Total Assets | 82,059 | 91,256 | 11.2 |
| Total Liabilities | 66,081 | 76,934 | 16.4 |
| Cash & Equivalents (End of Year) | 10,141 | 6,890 | -31.1 |
Capital Expenditure: Total Capex for the group was Rp 22,244.5 billion, primarily allocated to Telkomsel (Rp 15,915 billion) and Telkom (Rp 6,087 billion).
Material Changes vs. Prior Period
- Revenue Growth vs. Expense Pressure: While total operating revenue grew modestly by 2.1%, operating expenses surged by 16.4%. This divergence caused a 15.7% decline in operating income.
- Profitability Decline: Net income fell 17.4% to Rp 10.6 trillion. The primary driver was a foreign exchange loss of Rp 1.6 trillion, alongside increased operational costs.
- EBITDA Compression: EBITDA decreased by 6.6% due to a Rp 788 billion expense from an Early Retirement Program (ERP) and a Rp 1.3 trillion increase in radio frequency usage charges driven by Telkomsel's Base Transceiver Station (BTS) expansion.
- Subscriber Growth: Despite margin pressure, subscriber bases expanded significantly. Cellular subscribers grew 36.4% to 65.3 million, and Fixed Wireless (Flexi) subscribers doubled (100% growth) to 12.7 million. Broadband (Speedy) subscribers grew 167.6% to 645,000.
- Legacy vs. New Wave: "Legacy" revenues (wireline, traditional cellular) declined 0.8%, while "New Wave" revenues (data, internet, IT services) grew 42.9%, increasing their contribution to total revenue from 6.6% to 9.2%.
Outlook, Risks, and Management Commentary
- Strategic Shift: Management is executing a strategy to "strengthen the Legacy business and aggressively grow New Wave business" to offset declines in traditional voice services.
- Competitive Environment: The company faces an aggressive price war in the cellular industry and regulatory changes in interconnection tariffs, which have pressured revenue growth and ARPU (Average Revenue Per User). ARPU for Flexi dropped 28.3% and blended cellular ARPU dropped 26.9%.
- Foreign Exchange Risk: Significant forex losses impacted the bottom line. Management noted a strategy to minimize this risk by reducing the portion of debt in US Dollars (from 31% to 21% of the portfolio) and utilizing natural hedging.
- Early Retirement Program: A voluntary ERP was implemented in December 2008, covering 1,156 employees at a cost of Rp 788 billion, aimed at improving business efficiency.
- Liquidity: Cash and cash equivalents decreased by 31% to Rp 6.9 trillion, attributed to increased cash payments for operating expenses and capital expenditures.
Investor Verification Checklist
- Forex Exposure: Verify the sensitivity of future earnings to Rupiah depreciation given the Rp 1.6 trillion loss in 2008.
- ARPU Trends: Monitor if the aggressive price war and declining ARPU in both Flexi and Cellular segments will stabilize or continue to erode margins.
- Debt Servicing: Review the impact of increased total liabilities (up 21.2%) and the rising Debt-to-EBITDA ratio (from 42.5% to 57.1%) on interest coverage.
- New Wave Growth: Assess the sustainability of the 42.9% growth in New Wave revenues as a counterbalance to the declining Legacy business.
- Capex Efficiency: Evaluate the return on the Rp 22.2 trillion capital expenditure, particularly regarding the 28.8% increase in Telkomsel BTS units.