PT Telkom: profits fall 12% on higher costs

30 Apr 2007

Indonesia’s largest telecoms operator by market valuation, PT Telekomunikasi Indonesia (Telkom), reported a 12% fall in net profits in the three months to 31 March 2007, as increased costs to access its rivals’ network coupled with a FOREX loss impacted adversely on its bottom line. Telkom posted net income of IDR3.04 trillion (USD335 million) in the three months under review, down from IDR3.46 trillion in the corresponding period a year ago. In a statement, the operator confirmed that its operating costs rose after the government forced the country’s telecoms service providers to switch to a fee-based system, rather than the old method of sharing part of their revenues. The higher costs related to the change in the way interconnect fees are levied seems to have come as a surprise. Last May Telkom said the change might result in a 1% to 3% drop in full year earnings, but its most recent release notes: ‘The new interconnection tariff scheme has resulted in an increase in revenue and at the same time an increase in expenses, eroding profit’. The Q12007 profit was also hit by a weaker rupiah which increased Telkom’s foreign-currency debt burden.

Earnings before interest, tax, depreciation and amortisation (EBITDA), as a percentage of revenue, dipped 6.6% on higher costs at the company’s network and interconnect unit, which accounts for one-fifth of group revenue. Ebitda is a measure of profitability. On a more positive note Telkom’s mobile arm PT Telekomunikasi Selular (Telkomsel), posted a 44% rise in subscribers, which helped boost operating revenues 23% to IDR14.5 trillion. Telkomsel is believed to be adding around a million new users a month, and had approximately 35 million at the end of March 2007.

Indonesia, Telkom Indonesia, Telkomsel (Telekomunikasi Selular)