Business Context and Reporting Period
Company: Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (Telkom Indonesia)
Reporting Period: First Quarter 2011 (Ended March 31, 2011)
Filing Type: Form 6-K (Unaudited Results)
Telkom Indonesia, a state-owned telecommunications provider in Indonesia, reported its Q1 2011 results. The company operates through its primary subsidiary, Telkomsel (cellular), and provides fixed line, broadband, and data services. The Government of Indonesia holds a 52.47% stake.
Key Financial Metrics
| Metric (Rp Billion) | Q1 2011 | Q1 2010 | YoY Change |
|---|---|---|---|
| Total Operating Revenues | 16,706 | 16,356 | +2.1% |
| EBITDA | 8,642 | 9,059 | -4.6% |
| EBITDA Margin | 51.7% | 55.4% | -3.7 pts |
| Net Income (Parent) | 2,828 | 2,786 | +1.5% |
| Net Income per Share | Rp 144 | Rp 142 | +1.5% |
| Total Assets | 100.7 Trillion | 96.5 Trillion | +4.3% |
| Total Liabilities | 40.5 Trillion | 43.2 Trillion | -6.4% |
| Cash & Equivalents | 10.6 Trillion | 6.8 Trillion | +57.7% (vs Q4 2010) |
| Consolidated Debt | 19.2 Trillion | 19.6 Trillion | -2.2% |
Material Changes vs. Prior Period
- Revenue Mix Shift: While total revenue grew 2.1% YoY, it declined 3.5% QoQ. Fixed line revenue dropped 11.4% YoY, and cellular revenue grew only 0.9% YoY. Conversely, Data, Internet, and IT services revenue surged 14.4% YoY, now contributing 32.6% of total revenue.
- Margin Compression: EBITDA margin decreased to 51.7% from 55.4% in Q1 2010, driven by declining Revenue Per Minute (RPM) in cellular services and increased marketing expenses.
- Customer Growth: Cellular subscribers grew 21.3% YoY to 99.4 million, driven by prepaid additions. Fixed broadband (Speedy) subscribers grew 39.6% YoY to 1.79 million.
- Balance Sheet Strengthening: Total liabilities decreased 6.7% QoQ due to bank loan repayments. The Net Debt to Equity ratio (Gearing) improved to 13.4% from 21.1% in Q4 2010.
Outlook, Commentary, and Risks
- Management Commentary: Management highlighted a strategic shift toward data services ("broadband-ready" year). Aggressive promotional programs (e.g., "Kartu As" Rp0/minute) successfully drove subscriber growth but pressured ARPU and RPM.
- Capital Expenditure: Q1 2011 Capex was Rp 3.5 trillion for Telkom and Rp 1.2 trillion for Telkomsel. Network expansion included 1,273 new BTS units for Telkomsel.
- Share Buyback: The company announced a plan for a Phase IV stock repurchase program up to 2.07% of paid-up capital, with a total cost not exceeding Rp 3.0 trillion, subject to AGM approval.
- Risks & Contingencies:
- Competition: Intense competition in the cellular market continues to drive down ARPU and RPM.
- Regulatory/Accounting: The company adopted new Indonesian accounting standards (PSAK) effective Jan 1, 2011, affecting financial statement presentation.
- Foreign Exchange: The company maintains a natural hedging strategy, keeping cash equivalents at ~50% of current maturities to mitigate FX risk.
Investor Verification Checklist
- Sustainability of Data Growth: Verify if the 14.4% growth in Data/IT services can offset the structural decline in voice revenue (RPM down 39% YoY).
- Buyback Execution: Confirm the timeline and funding source for the proposed Rp 3.0 trillion share buyback program.
- Debt Covenants: Monitor Telkomsel's compliance with financial covenants (EBITDA to Debt Service ratio is currently 3.79x vs required 1.25x).
- ARPU Trends: Assess the long-term impact of aggressive pricing promotions on blended ARPU, which declined 14.8% YoY.
- Capex Efficiency: Evaluate the return on the significant network expansion (17% increase in BTS units) relative to revenue growth.