Business context and reporting period
Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (Telkom) filed this annual Form 20-F for the fiscal year ended December 31, 2018, not a standalone fourth-quarter report. The audited consolidated financial statements are prepared under IFRS as issued by the IASB. Unless stated otherwise, amounts below are in Rp billion. Telkom is a diversified Indonesian telecommunications and digital-services group; its 65%-owned Telkomsel generated 65.3% of 2018 consolidated revenue. The Indonesian Government held 52.09% of common shares and the special-voting Dwiwarna share.
Key financial metrics
| Metric | FY 2018 | Change versus FY 2017 |
|---|---|---|
| Revenue | 130,788 | +2.0% |
| Operating profit / margin | 38,533 / 29.5% | -12.2%; margin 34.2% in 2017 |
| Profit for the year | 26,711 | -18.2% |
| Profit attributable to parent owners / EPS | 17,802 / Rp179.71 | -19.5% for both; 2017 EPS Rp223.30 |
| Net comprehensive income | 31,665 | +4.4% |
| Operating cash flow | 45,671 | -7.6% |
| Cash and cash equivalents at year-end | 17,435 | Down 30.7% |
| Capital expenditures | 33,620 | Up from 33,154 |
| Total debt / net debt | 44,082 / 26,647 | Net debt was 10,327 in 2017 |
| Current assets / current liabilities | 42,843 / 46,322 | Current ratio 0.93; net working capital -3,479 |
Total assets were Rp205,900 billion, total liabilities Rp88,894 billion, and total equity Rp117,006 billion. Finance costs increased 27.2% to Rp3,523 billion; finance income fell 29.3% to Rp1,014 billion. The company reported a Rp71 billion foreign-exchange gain. Approximately 40% of bank borrowings were floating-rate.
Material changes versus the prior comparable period
- Data, internet and IT-services revenue grew 4.6% to Rp71,647 billion and rose to 54.8% of revenue. Cellular data revenue increased 8.1%; non-cellular internet, data communication and IT-services revenue rose 20.3%, supported by IndiHome growth.
- Legacy services weakened: cellular voice revenue fell 7.6%, fixed-line voice revenue fell 12.7%, and SMS revenue fell 29.5%. Telkomsel’s reported cellular subscriber base declined 17.0% to 163.0 million, primarily following prepaid SIM-registration requirements and market competition.
- Total expenses rose 10.1% to Rp93,947 billion. Operations, maintenance and telecommunications-service expenses increased 19.9% to Rp43,893 billion, including higher network-maintenance costs. General and administrative expense rose 25.4%, including higher expected-credit-loss provisions.
- Cash used in investing activities increased to Rp35,090 billion, including Rp31,562 billion for property and equipment and Rp2,972 billion for intangible assets. Financing cash outflow was Rp18,458 billion; the group paid Rp16,609 billion in dividends to company shareholders.
- Other comprehensive income swung to Rp4,954 billion from a Rp2,332 billion expense in 2017, principally due to actuarial gains on defined-benefit plans. This lifted comprehensive income despite lower profit.
Outlook, management commentary, risks and unusual items
Management’s 2018 strategy emphasized customer experience, digital-business expansion and selective inorganic growth. It expected continued growth in data, broadband, cloud and digital services, alongside ongoing pressure on legacy voice and SMS. Management projected 2019 capital expenditure at approximately 25%–30% of revenue, with significant spending directed to broadband. The filing does not provide formal revenue or earnings guidance.
- Competition and pricing: A data-services price war in the first half of 2018 pressured operator economics; management said pricing had returned to more sustainable levels by year-end. OTT substitution continues to weigh on voice and messaging.
- Network and natural-disaster exposure: Submarine-cable damage and the 2018 Lombok and Central Sulawesi earthquakes disrupted services and damaged assets; the full impact of some damage was still being assessed.
- Regulatory and legal exposure: Proposed rules could require infrastructure or capacity sharing. Telkom received a KPPU summons in November 2018 concerning unspecified competition allegations. Telkom and Telkomsel previously paid Rp18 billion and Rp25 billion, respectively, in penalties related to an SMS price-fixing case.
- Currency, rates and investment: Rupiah depreciation can raise foreign-currency equipment and debt costs; higher rates could affect floating-rate borrowings. Sustained network investment and the ability to realize returns on new businesses and acquisitions are key execution risks.
- Accounting changes: IFRS 9 and IFRS 15 were adopted in 2018 using modified retrospective approaches; prior-year figures were not restated. The changes affected expected-credit-loss provisions, contract assets and liabilities, contract costs, and revenue presentation, limiting direct comparability in some areas.
- Controls and audit: Management and the auditor concluded internal control over financial reporting was effective. However, management found disclosure controls and procedures ineffective at December 31, 2018 because the annual report was not filed within the SEC filing deadline. The financial-statement audit opinion was unqualified.
- Dividend: The 2018 dividend had not been determined in the filing; it was to be considered at the 2019 annual general meeting. The 2017 dividend paid in 2018 was Rp167.66 per share.
Most important facts an investor should verify
- Reconcile FY 2018 IFRS results with Indonesian Financial Accounting Standards (IFAS), which Telkom uses for local reporting and dividend decisions; the filing gives IFAS parent-attributable profit of Rp18,032 billion versus IFRS Rp17,802 billion.
- Review the causes and sustainability of the operating-margin decline, including network-maintenance spending, radio-frequency costs, receivables impairment and pricing trends.
- Assess liquidity and refinancing needs: cash fell, current liabilities exceeded current assets, and scheduled debt repayments and contractual obligations are substantial.
- Confirm the 2019 capex plan, expected funding sources and anticipated returns from broadband, digital businesses and acquisitions.
- Track developments in the unspecified KPPU investigation, tax matters, proposed infrastructure-sharing rules, and the effectiveness of actions addressing the late SEC filing.