Business context and reporting period
Telkom Indonesia (NYSE: TLK; IDX: TLKM) filed this audited Form 20-F for the fiscal year ended December 31, 2023. The filing reports full-year results, not standalone fourth-quarter results. Consolidated financial statements are prepared under IFRS as issued by the IASB; amounts below are in Indonesian rupiah (Rp) unless stated otherwise. Telkom is Indonesia’s largest telecommunications provider by revenue and subscribers, with the Government holding 52.09% of its common shares and a special-voting Dwiwarna share.
A major structural change was the July 2023 transfer of the IndiHome business segment to Telkomsel as part of fixed-mobile convergence (FMC). Telkom’s effective ownership in Telkomsel rose from 65% to 69.9%; Singtel’s interest declined from 35% to 30.1%.
Key financial and operating metrics
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | Rp149.216tn | Rp147.306tn | +1.3% |
| Operating profit | Rp44.485tn | Rp39.716tn | +12.0% |
| Operating margin | 29.8% | 27.0% | +2.8 percentage points |
| Profit before tax | Rp40.855tn | Rp36.430tn | +12.1% |
| Profit for the year | Rp32.068tn | Rp27.720tn | +15.7% |
| Profit attributable to parent-company owners | Rp24.427tn | Rp20.736tn | +17.8% |
| Operating cash flow | Rp60.581tn | Rp73.354tn | -17.4% |
| Investing cash flow | (Rp36.911tn) | (Rp39.122tn) | Cash use down 5.7% |
| Capital expenditure | Rp32.858tn | Rp34.146tn | -3.8% |
Revenue growth was led by data, internet and IT services (+5.1% to Rp90.820tn) and IndiHome (+2.7% to Rp28.785tn). Cellular data and internet revenue rose 6.1% to Rp73.187tn. Interconnection revenue increased 7.0% to Rp9.067tn. These gains were partly offset by cellular telephone revenue falling 32.0% to Rp8.194tn, fixed-line telephone revenue falling 41.5% to Rp899bn, and SMS revenue falling 21.6% to Rp3.380tn.
Total expenses declined 2.7% to Rp104.730tn, mainly as depreciation and amortization and marketing expenses decreased. Operating margin improved, while finance costs rose 15.1% to Rp4.692tn, primarily due to a higher average balance of long-term bank loans. Net profit margin was approximately 21.5% of revenue.
Cash and cash equivalents were Rp29.007tn at year-end, down 9.2%. Total assets were Rp286.592tn and total liabilities Rp130.357tn. Total debt was Rp68.001tn; net debt was Rp38.994tn, with a net-debt-to-equity ratio of 0.29 and debt-service coverage ratio of 1.9 times. Current assets of Rp55.628tn were below current liabilities of Rp71.451tn, resulting in negative working capital of about Rp15.823tn and a current ratio of 0.78. The filing also reports undrawn committed borrowing facilities of Rp28.995tn and US$96m.
Material changes versus the prior comparable period
- Mobile broadband subscribers increased to 127.1m from 120.9m; cellular subscribers rose to 159.3m from 156.8m. Annual ARPU increased 7.5%, to approximately Rp47,500.
- IndiHome integration shifted fixed broadband operations into Telkomsel and affected the comparability of segment results and costs. Fixed broadband subscribers reached 10.1m, including 8.7m B2C subscribers.
- Despite higher operating profit and net income, operating cash flow fell Rp12.773tn, as operating cash disbursements rose 17.9% to Rp90.200tn.
- The unrealized loss on investment fair values narrowed to Rp748bn from Rp6.438tn, including valuation effects related to GoTo and MDI investments.
- Other comprehensive income swung to a loss of Rp1.454tn from income of Rp1.767tn, mainly due to a Rp1.389tn actuarial loss on the defined benefit pension plan.
Outlook, commentary, risks and unusual items
Management expects 2024 capital expenditure to equal approximately 25%–30% of revenue, with investment focused on mobile and fixed broadband infrastructure. It also expects to reduce capital expenditure from the elevated 2022 level over time. The filing does not provide specific revenue or earnings guidance. Telkom’s FY2023 dividend and payout ratio remained subject to the May 3, 2024 annual general meeting; dividends are determined using Indonesian Financial Accounting Standards (IFAS), which differ in certain respects from IFRS.
Management attributes growth opportunities to rising data use, low fixed-broadband penetration, FMC synergies, and expansion in data centers and digital services. It also identifies risks from intense competition and pricing pressure, substitution of legacy voice and SMS by OTT services, spectrum availability and network-sharing requirements, high capital needs, interest-rate and currency movements, customer collections, evolving data-protection rules, cybersecurity, and natural disasters. Telkom reported 65.9m cyber-attack threats detected in 2023; it said these did not materially affect the company. It also reported 14 community disputes involving tower sites.
As of December 31, 2023, the company reported no material litigation or arbitration and no material contingency reserves. It stated that no off-balance-sheet arrangements were reasonably likely to have a material effect. The independent auditor issued an unqualified opinion on the IFRS financial statements and internal control over financial reporting; management also concluded disclosure controls and financial-reporting controls were effective. The auditor identified useful-life estimates for telecommunications infrastructure as a critical audit matter; infrastructure carrying value was Rp158.516tn, about 55% of total assets.
Most important facts for investors to verify
- Review the audited IFRS statements and notes, particularly cash-flow conversion, debt maturities, lease obligations, and the negative working-capital position.
- Assess whether the 2023 operating-margin improvement and IndiHome integration benefits are sustainable, given higher operating cash outflows and rising finance costs.
- Track mobile and fixed broadband subscriber growth, ARPU, pricing discipline, legacy-service declines, and the competitive and regulatory effects of infrastructure sharing and spectrum access.
- Check the 2024 capital-expenditure plan against the stated 25%–30% of revenue range and monitor returns from network, satellite, and data-center investments.
- Confirm the FY2023 dividend decision and payout basis at the 2024 AGM; reconcile IFRS earnings with the IFAS figures used for dividends.
- Monitor investment fair-value changes, pension assumptions and actuarial impacts, receivables and collections, and floating-rate debt exposure (43.7% of bank borrowings).