Business Context and Reporting Period
Company: Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (Telkom)
Reporting Period: Year ended December 31, 2012
Filing Type: Form 6-K (Annual Report)
Accounting Standard: Indonesian Financial Accounting Standards (IFAS)
Business Overview: Telkom is Indonesia's largest telecommunications provider, operating fixed line, fixed wireless, and cellular services (via subsidiary Telkomsel), as well as data, internet, and new economy businesses (Information, Media, Edutainment, and Services - "TIMES"). The company is a State-Owned Enterprise with the Government of Indonesia holding a 53.9% stake.
Key Financial Metrics (Year Ended Dec 31, 2012)
| Metric | 2012 (Rp Billion) | 2011 (Rp Billion) | Change (%) |
|---|---|---|---|
| Total Revenues | 77,143 | 71,253 | +8.3% |
| Adjusted EBITDA | 40,154 | 36,821 | +9.1% |
| Operating Profit | 25,698 | 21,958 | +17.0% |
| Profit for the Year | 18,362 | 15,470 | +18.7% |
| Net Income (Attributable to Owners) | 12,850 | 10,965 | +17.2% |
| Net Income Per Share | Rp 669.19 | Rp 559.67 | +19.6% |
| Capital Expenditures | 17,272 | 14,603 | +18.3% |
| Total Assets | 111,369 | 103,054 | +8.1% |
| Total Liabilities | 44,391 | 42,073 | +5.5% |
| Net Working Capital | 3,866 | (931) | Turnaround to Surplus |
Key Ratios: Return on Equity (ROE) was 24.9%; Operating Profit Margin was 33.3%; Current Ratio improved to 116.0%.
Material Changes vs. Prior Period
- Revenue Growth: Driven primarily by a 7.5% increase in cellular revenues and a 15.5% surge in data, internet, and IT services. This growth offset an 8.2% decline in fixed line telephone revenues.
- Subscriber Growth:
- Cellular: Increased 16.9% to 125.1 million subscribers (Telkomsel).
- Broadband: Total broadband subscribers grew 82.8% to 19.1 million, driven by a 99.5% increase in mobile broadband (Flash) and 30.9% in fixed broadband (Speedy).
- Fixed Line: Subscribers grew 4.0% to 8.9 million, though revenue declined due to substitution by mobile services.
- Unusual Items:
- Telkom-3 Satellite Failure: The launch of the Telkom-3 satellite failed in August 2012. The company derecognized the asset (Rp 1,606 billion loss) but received an insurance claim of approximately Rp 1,772 billion, resulting in a net positive impact on "Other Income."
- Early Retirement Program: Personnel expenses increased partly due to Rp 699 billion in early retirement program costs.
- Share Buyback: Completed Phase IV of the share buyback program, repurchasing 520 million shares worth Rp 3.8 trillion.
Guidance, Outlook, and Risks
Management Outlook:
- Strategy: Continued focus on the "TIMES" transformation, prioritizing broadband infrastructure (Indonesia Digital Network) and cellular growth via Telkomsel.
- 2013 Targets: Budgeted capital expenditure of approximately Rp 27.2 trillion (significantly higher than 2012). Targets include deploying 10 million homepass connections, 5 million Speedy lines, and 1 million WiFi access points.
- International Expansion: Exploring opportunities in Macau, Taiwan, and Myanmar.
Key Risks:
- Regulatory: Changes in interconnection tariffs, SMS pricing (shift to cost-based), and tower sharing regulations could impact margins.
- Competition: Intense competition in cellular and fixed wireless markets; threat of Over-The-Top (OTT) services eroding voice/SMS revenue.
- Macroeconomic: Fluctuations in the Indonesian Rupiah against the US Dollar and Japanese Yen (significant portion of CapEx and debt is foreign-denominated).
- Operational: Risks related to satellite operational life (Telkom-1 and Telkom-2) and natural disasters affecting infrastructure.
Investor Verification Checklist
- Satellite Replacement: Verify the timeline and cost for replacing the failed Telkom-3 satellite and the operational status of Telkom-1 (estimated end of life ~2015).
- Fixed Line Decline: Monitor the rate of decline in fixed line revenue and the success of mitigation strategies (e.g., triple-play services) to offset mobile substitution.
- CapEx Execution: Confirm the ability to fund the significantly increased 2013 capital expenditure budget (Rp 27.2 trillion) through operating cash flows and external financing.
- Regulatory Impact: Assess the financial impact of the shift to cost-based SMS interconnection and potential further reductions in interconnection tariffs.
- Dividend Policy: Note that the 2012 dividend payout ratio was not yet decided at the time of filing (pending AGMS in 2013); verify the final payout decision.