Telkom’s 1Q18 revenues up 4.3%, but net profits plunge 14.3% due to competition

2 May 2018

PT Telekomunikasi Indonesia (Telkom), the country’s largest communication services provider by subscribers and revenue, has published its financial results for January-March 2018. In its quarterly ‘InfoMemo’ the carrier highlighted that revenue increased by 4.3% year-on-year to IDR32.343 trillion (USD2.320 billion) from IDR31.022 trillion, but EBITDA slipped 12.9% to IDR16.116 trillion, operating costs rose 15.8% to IDR21.465 trillion and net profits declined 14.3% to IDR5.734 trillion from IDR6.688 trillion in 1Q17 amid tight competition in the domestic market. The firm’s financial director Harry M Zen confirmed: ‘We managed to sustain growth in the first three months, amid increasingly fierce industrial competition and the dynamics of the telecommunications industry that shifted from our legacy (voice & SMS) business to digital.’ Data, internet and IT services contributed turnover of IDR15.921 trillion to the group total, up 23.3% when compared to the IDR12.917 trillion booked in the corresponding year-ago period, with Zen noting that Telkom has seen increased popularity for smartphones, IndiHome fibre broadband services and increasing demand for ICT Solution services from corporate customers. By contrast, cellular revenues decreased by 17.6% y-o-y to IDR10.709 trillion, primarily the result of a decline in the legacy business due to ‘cannibalisation from instant messaging (OTT) applications’. Fixed line revenue declined by 17.1% on an annualised basis, to IDR1.546 trillion, due to mobile substitution and falling fixed line traffic, and interconnection revenues dipped 7.6% mainly due to lower incoming voice/SMS from other operators.

Operationally, Telkom closed out 31 March 2018 with a total of 5.740 million fixed broadband subscribers (30.5%), with its IndiHome service surging to 3.501 million connections from 1.778 million in 1Q17. Telkom noted that the increasing number of IndiHome customers is due to the expansion and improvement of network quality, improvement of IT systems, improvement of technician productivity and marketing personnel and supported by an aggressive marketing programme. IndiHome revenue stood at over IDR2.5 trillion, an increase of 48.0% compared to 1Q17. Meanwhile, the group’s mobile arm Telkomsel reported a total of 192.752 million subscribers at the end of the period under review, up 13.8% y-o-y, of which some 108.733 million were classed as ‘mobile data users’ (21.3%). The mobile division generated revenue of IDR21.874 trillion (down 1.9%), EBITDA of IDR11.986 trillion (-9.2%) and net income of IDR6.416 trillion (-16.7%). More positively, Telkomsel reported that an 18.1% fall in legacy sales was partly offset by a 24.8% increase in its Digital Business to IDR10.506 trillion – or 48% of the unit’s total turnover. To help drive the Digital Business, in the first quarter of 2018 Telkomsel completed the addition of 6,944 units new base transceiver stations (BTS) all of which are 4G BTS. With the new additions, Telkomsel reported that the total number of BTS ‘on air’ at 31 March 2018 stood at 167,649, of which around 70% are 3G/4G BTS.

Indonesia, Telkom Indonesia, Telkomsel (Telekomunikasi Selular)