Strong growth fails to translate to rising profits for Telkom

2 Aug 2004

Indonesia’s state-controlled national fixed and mobile operator PT Telekomunikasi Indonesia (Telkom) reported an 18% fall in profits to IDR2.875 trillion (USD314.76 million) in the first half of 2004, despite increasing revenues by 27.99% to IDR16.12 trillion. Telkom attributed the poor performance to currency fluctuations and a weak rupiah, which increased the value of its foreign debt. The majority of the company’s turnover was derived from fixed line operations, which contributed just over IDR5 trillion of the total, while its mobile arm accounted for IDR4.96 trillion. Operational profit in 1H 2004 rose by 16.8% year-on-year to IDR6.73 trillion, although the telco experienced a 41% fall in second quarter net profit to IDR1.1 trillion, from IDR1.9 trillion a year ago. Nonetheless, the company still plans to spend around IDR8.9 trillion in capital expenditure in 2004 for infrastructure investment (IDR4.2 trillion), long-term investments (IDR3.9 trillion), commercial services (IDR500 billion) and other facilities (IDR300 billion).

Despite the poor quarterly performance Telkom is expected to rebound sharply in the second half of 2004 thanks to anticipated gains at the company’s mobile business. Indonesia’s mobile firms are cutting prices to entice new users in a country where cellular penetration is running at less than 12%. The total number of mobile users is expected to jump by a third this year and the telco’s cellular unit Telkomsel hopes to benefit from the upsurge in demand. The market is expected to reach around 28 million users by the end of the year, up from the current figure of 23 million and 19 million at the start of the year. Telkomsel reported profits of IDR2.65 trillion for the first six months of 2004, a rise of 45% on 2003 thanks to the addition of 2.9 million mobile subscribers which lifted its customer base to 12.5 million.