Business context and reporting period
Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (Telkom) filed its annual Form 20-F for the fiscal year ended December 31, 2020. This is an annual report, not a standalone fourth-quarter filing. Financial statements are audited and prepared under IFRS as issued by the IASB; amounts below are in Rp billion unless stated otherwise. The auditor issued an unqualified opinion on the financial statements and internal control over financial reporting.
Telkom is Indonesia’s largest telecommunications company, with mobile services operated principally through 65%-owned Telkomsel. Its reported operating segments are mobile, consumer, enterprise, wholesale and international business, and other. The Government owns 52.09% of common shares and holds a special-voting Dwiwarna share.
Financial and operating metrics
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Revenue | 136,447 | 135,557 | +0.7% |
| Operating profit | 43,958 | 43,994 | -0.1% |
| Operating margin | 32.2% | 32.5% | -0.3 percentage points |
| Profit before income tax | 39,147 | 38,299 | +2.2% |
| Profit for the year | 29,890 | 27,860 | +7.3% |
| Profit attributable to parent owners | 21,052 | 19,068 | +10.4% |
| Basic EPS | Rp212.51 | Rp192.49 | +10.4% |
| Operating cash flow | 65,317 | 58,966 | +10.8% |
| Capital expenditure | 29,279 | 36,485 | -19.8% |
Net margin, calculated as profit for the year divided by revenue, was approximately 21.9%, versus 20.5% in 2019. The filing does not provide a directly comparable gross margin or EBITDA figure in the supplied text.
Revenue mix shifted further toward data and broadband: data, internet and IT services revenue rose 8.4% to Rp75,816 billion and represented 55.6% of total revenue. IndiHome revenue increased 21.2% to Rp22,214 billion, with subscribers rising from 7.0 million to 8.0 million. In contrast, cellular voice revenue fell 30.4% to Rp19,427 billion, fixed-line voice revenue fell 27.2% to Rp2,183 billion, and SMS revenue declined 30.7% to Rp4,817 billion.
Cash and cash equivalents were Rp20,589 billion at year-end, up 12.9%. Current assets of Rp46,529 billion were below current liabilities of Rp68,500 billion; the current ratio was 0.68 and net working capital was negative Rp21,971 billion. Reported borrowings were Rp64,722 billion and net debt Rp44,113 billion; lease liabilities were additional liabilities of Rp14,877 billion. Net debt to equity was 0.43, and debt service coverage was 2.5 times. Operating cash flow was Rp65,317 billion; investing cash flow was negative Rp35,099 billion and financing cash flow negative Rp27,910 billion.
Material changes versus the prior comparable period
- Revenue growth was modest as data, IndiHome and interconnection gains largely offset steep declines in traditional voice and SMS and lower sales of peripherals.
- Operating profit was nearly flat and operating margin narrowed. Operating and maintenance expense fell 7.7%, but depreciation and amortization increased 6.3% and personnel expense rose 10.6%.
- Profit attributable to parent owners grew faster than operating profit, helped by lower finance costs and income tax expense. Finance costs declined 15.6%; income tax expense declined 11.3%.
- Operating cash flow increased, while capex fell, which management attributed partly to COVID-related deployment difficulties and slower IndiHome subscriber additions. IndiHome added 1.0 million subscribers in 2020, versus 1.9 million in 2019.
- Other comprehensive income was negative Rp3,581 billion, primarily reflecting Rp3,596 billion of actuarial losses on the defined benefit pension plan. Total comprehensive income nonetheless increased 2.5% to Rp26,309 billion.
Outlook, management commentary, risks and unusual items
Management expects 2021 capital expenditure to be approximately 24%–27% of revenue, with a significant share directed to mobile and fixed broadband infrastructure. This is an investment plan, not revenue or earnings guidance. The filing describes the duration and economic effects of COVID-19 as uncertain; management reported no significant negative impact on FY2020 sales revenue, while also noting changed traffic patterns, delayed projects, weaker purchasing power and increased expected credit losses.
Material risks include intense mobile and broadband competition, continued substitution of voice and SMS by over-the-top services, network and cyber disruption, spectrum and infrastructure-sharing rules, regulatory and data-protection changes, capital requirements, foreign-exchange and interest-rate exposure, natural disasters, and Government control. The Company reported 49.44 million cyber threats detected in 2020; most were non-disruptive, and 78 required specific response. It reported no significant operational impact from those incidents.
Unusual items include a Rp763 billion impairment of investments in associates, principally Tiphone and Indonusa Telemedia. Tiphone’s impairment followed trading suspension, deterioration in financial condition and concerns about business continuity; Indonusa Telemedia had an equity deficit. The company also recorded Rp234 billion of insurance proceeds for damaged or lost property and equipment. For the 2020 dividend, the amount had not yet been determined in this filing and was scheduled for consideration at the May 28, 2021 AGM; the Rp154.07 per-share dividend paid in 2020 related to 2019.
Management stated that available cash, expected operating cash generation and borrowing facilities were sufficient for present requirements. Contracted capital expenditure commitments were Rp10,727 billion, all scheduled within one year in the contractual-obligations table. The filing also reports pension and post-employment obligations of Rp12,976 billion. The KPPU concluded in April 2021 that Telkom and Telkomsel had not violated competition law in the Netflix matter; other described proceedings and inquiries should be assessed individually.
Most important facts an investor should verify
- Confirm that comparisons use audited IFRS figures and distinguish FY2020 annual results from any Q4-only data.
- Review cash conversion, the lower capex run rate, and whether delayed network investment affects service quality, growth or future returns.
- Assess liquidity and refinancing needs given the 0.68 current ratio, negative working capital, near-term debt maturities and lease obligations.
- Reconcile the filing’s inconsistent disclosures of floating-rate borrowings: one section reports approximately 58.7%, another 61.4%.
- Track receivable quality and credit-loss allowances, particularly enterprise and government customers, as well as the large actuarial pension loss and associated assumptions.
- Verify the 2020 dividend decision, later regulatory implementation of infrastructure-sharing and data-protection requirements, and the status of unresolved legal or regulatory matters.