Business Context and Reporting Period
Company: Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (Telkom Indonesia)
Filing Type: Form 6-K (Unaudited Consolidated Financial Statements)
Reporting Period: Nine months ended September 30, 2020
Authorization Date: November 4, 2020
Telkom Indonesia is a state-owned public limited liability company providing telecommunication networks and services in Indonesia. The Group operates through four primary reportable segments: Mobile, Consumer, Enterprise, and Wholesale and International Business (WIB). The financial statements are prepared in accordance with Indonesian Financial Accounting Standards (PSAK), including the adoption of new standards for financial instruments (PSAK 71), revenue (PSAK 72), and leases (PSAK 73) effective January 1, 2020.
Key Financial Metrics (Nine Months Ended Sept 30, 2020)
| Metric | 2020 (Billions IDR) | 2019 (Billions IDR) |
|---|---|---|
| Total Revenues | 99,941 | 102,631 |
| Operating Profit | 33,011 | 33,454 |
| Profit Before Tax | 29,754 | 31,114 |
| Net Profit for the Period | 22,951 | 23,200 |
| Net Profit Attributable to Parent | 16,679 | 16,459 |
| Basic EPS (IDR) | 168.37 | 166.15 |
| Net Cash from Operating Activities | 47,450 | 38,263 |
| Net Cash Used in Investing Activities | (19,290) | (22,133) |
| Net Cash Used in Financing Activities | (29,190) | (18,386) |
| Total Assets | 233,219 | 221,208 |
| Total Liabilities | 115,330 | 103,958 |
| Total Equity | 117,889 | 117,250 |
Material Changes vs. Prior Period
- Revenue Decline: Total revenue decreased by 2.6% to Rp99.9 trillion, primarily driven by a decline in the Mobile segment (down 5.1%) and Enterprise segment (down 23.1%), partially offset by growth in the Consumer segment (up 14.6%).
- Cost Management: Despite revenue pressure, operating profit remained relatively stable (down 1.3%). This was achieved through significant reductions in Operation, Maintenance, and Telecommunication Service expenses (down 19.2%) and Marketing expenses (down 20.1%).
- Depreciation Increase: Depreciation and amortization expenses increased by 21.9% to Rp21.0 trillion, reflecting continued capital investment and the impact of new accounting standards.
- Impairment Charges: The Group recognized an impairment of long-term investment in associated companies of Rp308 billion, primarily related to Tiphone, which reduced profit before tax.
- Accounting Standard Adoption: The adoption of PSAK 73 (Leases) resulted in the recognition of Right-of-Use assets of Rp17.8 trillion and corresponding lease liabilities, significantly altering the balance sheet structure compared to 2019.
Guidance, Outlook, and Risks
- Management Commentary: Management highlighted the impact of the COVID-19 pandemic on the business environment. While mobile data usage increased, voice revenue and enterprise services faced headwinds. The Group continues to focus on cost optimization and digital transformation.
- Capital Expenditures: Capital expenditures for the nine months totaled approximately Rp17.9 trillion. Significant commitments remain for submarine cable systems (SKKL), radio IP backhaul, and network modernization.
- Dividends: The Board of Directors proposed a cash dividend and special cash dividend for 2019 totaling Rp15.26 trillion (Rp154.07 per share), which was approved by shareholders and paid during the period.
- Key Risks:
- Regulatory: Tariffs for basic telephony services are regulated by the government. Changes in interconnection tariffs or Universal Service Obligation (USO) requirements could impact profitability.
- Taxation: The Group is involved in ongoing tax assessments and disputes regarding VAT and income tax for various fiscal years (2007–2018). While many appeals have been successful, outcomes of remaining judicial reviews remain uncertain.
- Foreign Exchange: The Group has significant exposure to foreign currency (USD and JPY) regarding borrowings and equipment purchases. A strengthening of foreign currencies against the Rupiah could increase debt service costs.
- Competition: Intense competition in the mobile and fixed broadband markets may pressure pricing and market share.
Important Facts for Investor Verification
- Accounting Changes: Verify the impact of the new lease standard (PSAK 73) on the balance sheet, specifically the recognition of Right-of-Use assets and lease liabilities, which are not directly comparable to 2019 figures.
- Impairment of Investments: Review the details of the Rp308 billion impairment charge on the investment in Tiphone and the rationale behind the valuation.
- Tax Disputes: Monitor the status of ongoing tax litigation, particularly regarding VAT on international incoming call interconnection and corporate income tax assessments, as these could result in significant cash outflows or refunds.
- Debt Covenants: Confirm compliance with debt covenants, specifically the debt-to-equity ratio (currently 43.6% net debt-to-equity) and debt service coverage ratios required by lenders.
- Segment Performance: Analyze the divergence between the Mobile segment (revenue decline) and the Consumer segment (revenue growth) to understand the shifting revenue mix and future growth drivers.