Telkom Indonesia FY2022 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing. Consolidated financial statements are audited and prepared under IFRS as issued by the IASB; amounts below are in Indonesian rupiah (Rp) unless stated otherwise.
Business context
Telkom is Indonesia’s largest telecommunications company by revenue and subscribers. Its businesses include mobile services through 65%-owned Telkomsel, fixed broadband and consumer services, enterprise ICT, wholesale and international services, data centers, and digital products. The Indonesian Government owns 52.09% of Telkom and holds a special-voting Dwiwarna share.
Financial and operating performance
| Metric | FY2022 | Comparison |
|---|---|---|
| Total revenue | Rp147.306 trillion | Up 2.9% from Rp143.210 trillion |
| Operating profit | Rp39.716 trillion | Down 16.7%; operating margin fell to 27.0% from 33.3% |
| Profit before tax | Rp36.430 trillion | Down 16.7%; pre-tax margin was 24.7%, versus 30.5% |
| Profit for the year | Rp27.720 trillion | Down 18.7% from Rp34.099 trillion |
| Profit attributable to parent shareholders | Rp20.736 trillion | Down 16.6%; EPS was Rp209.32 versus Rp251.13 |
| Operating cash flow | Rp73.354 trillion | Up 7.3% from Rp68.353 trillion |
| Capital expenditures | Rp34.146 trillion | Up from Rp30.329 trillion |
| Cash and cash equivalents | Rp31.947 trillion | Down 16.6% from Rp38.311 trillion |
| Total debt | Rp62.853 trillion | Down from Rp68.579 trillion |
Revenue growth was led by data, internet and IT services, which rose 5.1% to Rp86.410 trillion and represented 58.7% of revenue. IndiHome revenue increased 6.4% to Rp28.020 trillion, with subscribers rising from 8.6 million to 9.2 million. Cellular data and internet revenue grew 7.0% to Rp69.006 trillion. In contrast, cellular telephone revenue declined 18.2% to Rp12.052 trillion and SMS revenue fell 9.4% to Rp4.309 trillion, reflecting substitution by OTT services.
Operating cash flow was Rp73.354 trillion; investing cash outflow was Rp39.122 trillion and financing cash outflow was Rp40.965 trillion. The company reported current assets of Rp55.073 trillion and current liabilities of Rp70.235 trillion, a current ratio of 0.78 and negative working capital of approximately Rp15.162 trillion. Management said cash, operating cash generation and available borrowing capacity were sufficient for current requirements. Net debt to equity was 0.24 and debt service coverage was 1.6 times. Approximately 56.1% of bank borrowings carried floating rates.
Material changes and notable items
- Revenue increased modestly, but operating profit and parent-attributable profit declined as expenses rose and investment fair-value movements turned sharply negative.
- The income statement included a Rp6.438 trillion unrealized loss on investment fair values in 2022, compared with a Rp3.432 trillion gain in 2021. The filing attributes the loss primarily to the valuation of Telkomsel’s GoTo investment; MDI investment valuations provided a partial offset.
- Depreciation and amortization rose 4.5% to Rp33.129 trillion. The company accelerated depreciation of multi-service access node assets as it transitions from copper to fiber; the reported 2022 impact was Rp1.494 trillion. It also extended estimated useful lives of certain towers from 30 to 40 years, reducing 2022 depreciation by Rp93 billion; the filing estimates a Rp373 billion reduction in 2023.
- Mobile segment external revenue was Rp85.493 trillion, but segment results fell 24.1% to Rp26.122 trillion. Consumer segment results increased 28.6% to Rp7.579 trillion, while enterprise results turned positive at Rp831 billion.
- Telkomsel’s cellular subscriber count fell 10.9% to 156.8 million, which the company attributed mainly to efforts to promote a healthier subscriber base and sustainable growth. Annual ARPU increased 1.3% to approximately Rp44,200.
Outlook, risks and contingencies
- Management expects 2023 capital expenditure to be approximately 25%–30% of revenue, with investment focused on broadband infrastructure. It also says elevated capital spending should be reduced toward a level more consistent with long-term funding capacity.
- Strategic priorities include fixed-mobile convergence, infrastructure and data-center expansion, enterprise digital IT services, digital services, and phased 5G deployment. Telkom expected a high-throughput satellite launch around mid-2024 and continued data-center development.
- Key risks include intense mobile and broadband competition, substitution of legacy voice and SMS by OTT services, spectrum availability and cost, network-sharing rules, and the substantial capital required to expand and modernize networks.
- Operational risks include submarine-cable and other infrastructure damage, natural disasters, cyberattacks, supplier concentration and equipment delays. The filing reports 40.6 million detected cyber threats to servers in 2022; it says none required specific remediation. A reported 2022 leak of alleged IndiHome user data was determined by the company’s investigation to be fabricated.
- Financial and regulatory risks include exposure to interest-rate changes and Rupiah movements, a current ratio below 1.0, tariff and licensing regulation, and the implementation of Indonesia’s 2022 Personal Data Protection Law. The Government’s controlling position may not always align with minority shareholders’ interests.
- The company reported no material litigation or arbitration and no material contingency reserves at year-end, and no off-balance-sheet arrangements reasonably likely to have a material effect. It disclosed small ordinary-course 2022 transactions involving Iranian entities under Exchange Act Section 13(r).
- The auditor issued an unqualified opinion on the IFRS financial statements and on internal control over financial reporting. The critical audit matter concerned estimates of property and equipment useful lives.
Most important facts for investors to verify
- Reconcile the large year-over-year swing in unrealized investment gains and losses, particularly the valuation and carrying value of the GoTo investment.
- Review the sustainability of cash generation and funding plans given negative working capital, Rp34.146 trillion of 2022 capex, and committed capex obligations of Rp14.203 trillion.
- Assess the effect of floating-rate debt, future interest-rate changes, foreign-exchange exposure and debt maturities on finance costs and liquidity.
- Track subscriber quality, ARPU, pricing and margins as Telkomsel’s subscriber base contracts and competition and OTT substitution continue.
- Verify the 2023 capex outlook, spectrum auction assumptions, 5G deployment economics, data-center returns and satellite project milestones.
- Confirm the 2022 dividend decision: the filing states that the dividend was to be determined at the 2023 AGMS, but gives inconsistent scheduled meeting dates (May 4 and May 30, 2023). It reports a 60% payout ratio and Rp149.97 per share for 2021.