Good day and thank you for standing by. Welcome to the Telkom's Full Year of 2020 Results Conference Call. After this presentation, there will be a question-and-answer session. I would now like to hand the conference over to your first speaker today, Mr. Andi Setiawan. Please, go ahead.

Thank you, Rachelle . Gentlemen, welcome to PT Telkom Indonesia Conference Call for the Full Year of 2020 Results. We released our full year of 2020 results on April 29, 2021 and the reports are available on our website www.telkom.co.id. Today's presentation is available on the webcast and an audio recording will be provided after the call for the next seven days. There will be an overview from our CEO and after that, all participants are given the opportunity to participate in the Q&A session.

Thank you, Andi. Good afternoon, ladies and gentlemen, welcome to our conference call for the full year of 2020 results. We really appreciate your participation in this call. Amidst the time for business information due prolonged COVID-19 pandemic, Telkom has successfully managed business and financial performance. We recorded IDR136.5 trillion in consolidated revenue, increased 0.7% from previous year. Our EBITDA grew by 11.2% with EBITDA margin increased from 47.8% to 52.8%. While at the bottom line, net income increased by 11.5% to 20.83% with a better net income margin at 15.2% from 13.8% last year. IndiHome continues to become the engine of growth as it contributed IDR22.2 trillion, grew by 21.2% with contribution to consolidated revenue increased to 16% from 14% last year. Our EBITDA margin of IndiHome reached 38.9%, a significant increase from 33.9% last year. The IndiHome revenue growth was a result of increasing subscribers coupled with improving ARPU. Total subscriber grew by 14.5% to reach IDR8 million via ARPU in first quarter improved to 262,000 compared to 253,000 in the previous quarter. Increasing ARPU was largely by revenue from ads-on that grew by 27.8% and limited to around 14.7% to IndiHome revenue compared to 13.6% in the same period last year.

Thank you, Ririek. We will now begin the Q&A session. Please state clearly your name and your company. Operator, may we have the first question, please?

Thank you. Your first question is from Piyush Choudhary of HSBC. Please, ask your question.

Yes, hi, good afternoon. Thanks for the call and congrats for the results. Two questions. Firstly, on mobile, can you talk about the competitive dynamics in the industry and outlook for 2021? And has Telkomsel achieved the desired objective after the roll out of unlimited plans last year? Secondly, as you mentioned that you have acquired 20 megahertz in 2.3, can you share the likely network rollout plans? And when do you intend to start offering 5G services using 2.3? Thank you.

Hi Piyush, Rachel here. I'll address your question on competition landscape. So as you pointed out, the last six months or 2020 our product and pricing strategy were corrections needed to put discipline into the type of industry pricing practices back then; it was necessary for Telkom to protect our relative market position. And now we have achieved those objectives in those six to nine months of strategy. However, as the market leader needs to always stay focused on driving sustainable growth behaviors in industry, Telkom sales has already initiated price adjustments on the back of macroeconomic recovery. We see the process fiscal stimulation, we see businesses and individuals adapting much better to COVID-19 with the COVID rollout. All this lists the process of the pace of economic activity and we see this as a positive outlook. And with this positive outlook and all consideration, we felt that timing was right for us to review our product and pricing away from unlimited introducing more focus on a BTL simple and easy to understand offers for existing customers, and also introducing more affordable packages in the form of more affordable lower denominations in the areas of acquisitions. However, Telkomsel will continue to monitor closely the behaviors of other operators to avoid and prevent price wars, and to have optimum premium gaps while protecting relative market positions. I think moving forward, looking at the other players in the market, we foresee healthy, upward new recoveries and grow positively. I think overall, the industry is much more rational now and let's strive to watch the sustainable growth at the whole industry. I hope that answers.

Yes.

Hi, this is Setyanto from Telkomsel. Regarding your question about network rollout plan with regard to the 2300 megahertz that we won from the auction few weeks ago. So, by having this additional 20 megahertz in 2300; now Telkomsel holding 50 megahertz in 2300, and it will strengthen our network position in the market. So we will use it both for strengthening our 4G leadership and also preparing for 5G implementation in Indonesia as soon as possible. So as a company, as a leading digital company, we want to be remain as the leader in the technology; so we will use -- maximize the usage of this new spectrum to strengthen both 4G and 5G.

Sure. But is there any timeline when you're looking to launch 5G services?

We will launch it this year. We have some plan. I cannot reveal it exactly now, but in upcoming few months you will see the launch of the 5G.

Okay. Thanks a lot. I'll come back in the queue.

The next question comes from the line of Arthur Pineda from Citigroup. Please ask your question.

Hi, thanks for the opportunity. Two questions, please. First, can you get a better understanding of the growth of Telkomsel into the fourth quarter? You've posted a 4% Q-on-Q growth for Telkomsel as a group. But the new breakdown voice that was down and data was down Q-on-Q; so it's means that other revenues are driving this. So what is exactly classified on this side? Second question I had is with regard to the outlook for 2021. Are you able to flush out your mid-single digit growth guidance across the business lines between fixed, mobile and enterprise? Thank you.

Okay. Arthur, Heri speaking here. Let me try to answer your second question. On the guideline for 2021; basically we have diversified portfolio, of course from -- in the home going to continue to grow. And I think in the enterprise with regard the current COVID situation today, which we don't really know where it's going to be benign ; I think that provide us with vertical digit growth but our focus is to have more quality I think in terms of the customer portfolio and also profitability in this area. And then in the cellular, we see this build up presser in the industry until the consumer doesn't really happen. So we put it more I think conservative because this industry is also going to be avoiding low single digit growth in the mobile as well. So while having that combination, I think we come to the overall as my CEO previously mentioned that we're going to have a low to mid-single digit growth in revenue, overall in our company. Thus I think brief explanation to the your second question.

Yes. So from -- number one question. Actually, the impact for Q4 actually coming from the implementation of the PSAK 72, which is related with IFRS 15. So we're doing the analyze with regard to delegated revenue on queue if we have the similar comparison; it's supposed to be -- this is based on the last accounting report, it's going to be normalized 5.6. And then, if we look at the digital revenue, if it is also normalized; it's going to be an increase by 7.3 instead of decreasing 7.1 related with the digital business revenue. Thank you.

Okay. So the difference is mainly because of accounting changes, not because of value-added services being booked?

So, actually because the -- under the IFRS 15, we have to request related with the discount. So in the last quarter four, we did the reclassification and proportionate allocate for the legacy revenue and digital business revenue. Thank you.

Got it, thank you.

Your next question comes from the line of Shong Chenfgfu of CIMB. Please ask your question.

Hi, thanks for the call. This is a phone from Ong from CIMB. There from me. Firstly, on IndiHome; can you talk a bit about competition in this space? And do you see that as potentially posing some risks to your ARPU and also your subscriber targets for 2021? That's the first question. Secondly, for the enterprise business. You mentioned there are still some uncertainties with regards to the impact on COVID-19 and all that. But I wanted to find out, you know, do you expect the enterprise business to be still loss making this year or do you see a turnaround? And my third question with regards to telecom sell; how do you see OPEX trending this year, excluding depreciation? Yes, those are my two questions. Thank you.

Okay. Thank you. Shong . Let me start to answer your question on the IndiHome competitive landscape. Today, even in the -- I think, the same footprint that we have with our competitor we don't see kind of very aggressive movement from our competitors; so the competition quite profitable for us, as we have, I think end-to-end fiber that are much stronger compared to our competitors. On the other hand, with regard to DES actually -- regarding, I think ARPU correction; we don't see that in this moment because as the digital recession coming with higher speed right now, and also more people work-from-home and study-from-home, the demand becoming actually stronger. And then, many actually our customer asking for higher speed of the IndiHome services. This in addition to some of the -- I think content that we provide also in the home will give us kind of profitable situation in terms of the ARPU trend in this year.

So, with the company cost trending for this year for 2020 we see slightly decreased combination between OpEx and depreciation. And for this year 2021, though it's related with the revenue and some costs related with the spectrum that we get, it's going to be invest and it's going to be aligned with the additional investment that'll assist with our costs in the network and also the power. So, it means the trending for OpEx, the some cost related with revenue is going to be increased a little bit with the additional of our network, but some cost related with the digitalization related with how we end up with the impact of the profit is going to be decreasing. So we also do the monitoring of the cost related with our network because currently we have the program to simplify our network based on setting, our 3G is still better with those activity, the OpEx. The relative of the network can be managed, and we have also scaling out in some of the network capacity. And then, we also have the benefit of the -- from the respect of work that we are not certainly selling the power because the respect over have slightly better compared with the market. So it means the cost still can be manageable, and if it is in place it's going to be aligned with our revenue and our network value.

Thank you so much, everyone.

Next question comes from the line of . Please ask your question.

Hi. Good afternoon, management. Thanks for the opportunity. I have two questions, actually, so just bear with me. My first question is bit on Telkomsel. Can we get some update on Telkomsel's capital allocation strategy over the next two to three years? We can see that Telkomsel has monetized it's assets such as towers, at the same time invested more heavily into tech platforms such as investments in and so on. So as Telkomsel recalibrates it's asset structure, can we get some color upto how much of Telkomsel's business will actually be towards the digital mobile? And perhaps any guidance from the little CapEx budget for the next two to three years? And what sort of ROIC and enterprise solution impact that Telkomsel seeks to achieve? Second question is to Telkom management as well, similar to the questions of Telkomsel. When it comes to digital investments, we understand that some of these investments may not yield as high cash returns as traditional telecom businesses in the near-term. So, how should we balance the need to maintain steady cash returns at Telkom level with need to fulfill Telkom's strategy and leadership going forward? These -- just two questions Thank you.

Okay. So I think from the capital we have the plan to maintain the percentage of our revenue, it's going to be around 14% to 15%, aligned with the percentage of our revenues; so it means the capital is going to be slightly aligned with our -- so likely growth of decreased aligned with our revenue contribution during -- from the next two and three years. And then related with the digital investment, I think Wasono can have thoughts on this question.

Yes, thank you very much for the question. And clearly, I think we continue to look for good and strategic opportunity to invest in growth potential. And I think you highlighted about our investment in Gojek; yes, we have done our first investment. And so, if I may, you know, it has been a good opportunity for us, and in the early day we have seen good traction among the two companies; we see synergy that we can derive. So moving forward, if we continue to have opportunity like that, we will definitely look at the investment carefully. At the same time, beyond inorganic, we also actively looking at organic growth of digital; we have over the year build up a lot of digital asset. So, this will be yet another focus that we will take with regard to digital investments. Banto, you have anything to add on to that?

Yes, thank you, Wasono. As an additional information from what Wasono mentioned, so as you can see, we are transforming ourselves from telco to become a digital telco, and we show it in terms of how we allocate our capital to invest on the digital. Of course, we hope that by doing this, we will be able to cope with the recent development of the digital world and fair to become more and more close to our customer. And yet we hope that our overall movement on digital initiative will have a positive impact on our valuation multiple later on; that's the overall strategy of Telkomsel today.

Thanks. Appreciate that.

Your next question comes from the line of Niko Margaronis of BRI Danareksa. Please ask your question.

Thank you. Thank you to the management and congratulations, I think for the for the first quarter. Three questions, but I think they are straightforward. First of all, you mentioned about EBITDA margins and guidance for 2021 to be stable. Can you break it down by business pillar, mobile-to-mobile in the home and enterprise business? That's my first question. Secondly, how should we think about this -- the consequences from PSAK 72 in terms of data revenue? So, that should mean that going forward there will be some revenue -- some data revenue being allocated under legacy revenue. Is that a fair understanding? That's question number two. And number three; in terms of your 5G rollouts, and you mentioned that would be -- that would be within 2021. Is that going to be for retail segment or would it be selective rollouts? How do you plan in doing this? Or you're going to be initially focusing on the business segments? Thank you.

Thank you, Niko for your questions. I will take the first question. Under EBITDA margin guideline as mentioned by our CEO, we're going to have kind of stable EBITDA margin? I cannot -- unfortunately, I cannot provide you too much detail in the parent company on the EBITDA margin for the business pillar. But overall, I think as what we resolve in 2020 this year, of course, the next highest EBITDA margin coming from IndiHome, that was highest one coming from Telkomsel. And then from wholesale, and as we previously mentioned, we are in the under process of -- I think improving the enterprise; enterprise will be the smallest one. Why we cannot provide you so much detail on this one, a lot of actually common asset include in this accounting treatment to really understand on the cost allocation here. I think there is -- I think a brief color .

So, number two related is the PSAK 72. Actually for the quarter four, we implemented the PSAK 72; so some fiscal usage previously allocated in legacy had only with a few and then we proposition is based on the usage . So this is actually the one sub that we have aligned with the PSAK 72 first of all bankable. And then going forward, it's going to be consistent for us to allocate the digital usage based on the proposition usage; so the data is -- the usage -- the physical usage from data is going to be allocated, also proportionate to the data and the legacy is going to be consistently allocated for the legacy. So I think for this year it's going to be consistent, we implement the PSAK 72. So the impact from the data is not going to be happened like in quarter four. Thank you.

I think on 5G, let me answer it. Niko, for the 5G -- 5g is bit different with 4G. 4G is for mix usage. This year for Telkomsel, 5G will be -- we will implement it selectively not as a mass rollout of network all over Indonesia, it will be selective in certain area and certain condition. And it will be both for B2B and B2C. So, as a leader in the technology implementation, Telkomsel will always put the good surface and leading surface to it's customer, both for consumer and B2B market.

Thank you.

You have another question from the line of Piyush Choudhary of HSBC. Please ask your question.

Yes, thanks a lot. Three more questions. Firstly, on IndiHome, can you share what is the current home pause and pulls as of fiscal 2020? And what are the network rollout objectives and subs addition target for 2021? Secondly, you mentioned about synergy benefits with Gojek. Can you give us some examples of how you're able to derive such benefits? And thirdly, on Mitratel; what is the expectation for organic tower and tenancy growth for 2021? Thank you.

For number one, for the pullback in 2020. Actually for the home pause at IndiHome is about IDR20.7 million and for Quad itself it's about IDR12.7 million .

Sorry, it's not very clear; the voice.

So for the pullback in 2020 it's about IDR20.7 million, that is home buys that's ready for the IndiHome. And for the Quad itself it's about IDR12.7 million. And that gets passed in the 2021. Actually, there is still potential pathways that make connectivity for the household but in the 2021 we will be more selective for this and we believe we still can add at least another 1 million subscriber in the home and with some potential additional coming from the fixed one asset for the new customer, especially for the area that we have now ready with the infrastructure for the IndiHome.

So Piyush, let me add some -- I think some colorful to this . Basically, what we mentioned is, we expect to have additional over 1 million of the IndiHome, I think regular alliance. And also in addition to that, we also do expect we can have fixed wireless assets around 500 tb ; so at least is going to bring us to one around 1.5 million additional broadband in our portfolio.

Piyush, this is Setyanto from Telkomsel. With regard to your question about synergy connected from Telkomsel Gojek investment. So during our first investment we have several -- if I'm not mistaken, same strategy -- synergy initiative that we plan to implement during the collaboration. And until the first three months, we already launched five collaboration program and so far the result of the collaboration program synergy, value that derived from that collaboration program is above what we expect. We can name as one of it is we create special package for project Gojek-Drapper , special Telkomsel cell package, data package for Gojek-Drapper , we call it package . And then we also exchange our My-App and Go-Biz integration where our merchant and Gojek merchant and Telkomsel outlet can use their advertising together, basically Gojek merchant can use Telkomsel digital advertising, things like that. And so far, we see that the collaboration going forward with Gojek is growing better and better, and we hope that the synergy value that we plan will achieve more than 100% this year.

Thank you.

On your third question Piyush on Mitratel; as previously mentioned, actually, we are in preparation for having IPO for this company. So with regard to this preparation and process, unfortunately, I cannot give you so much color on this one. The only information that we already provide previously, I think that's the maximum that we can provide with respect to the compliance process. I think the penalty if you remember, we have around 1.65 that is our objective and our plan is to have this Mitratel ready for IPO by the end of the year subject to the market condition. I think that's our situation that we have today.

Thank you, Heri. Understood.

Another question from the line of Arthur Pineda of Citigroup. Please ask.

Hi. Yes, sorry, two follow-up questions, please. I'm not sure if you can answer this, but can you share your thoughts on the remaining Telkomsel towers? Are there any plans for any further asset transfers over the long run? Second question is on Telkomsel proceeds; given the prior sale -- given that you do have the proceeds at hand, what are your thoughts on deploying the capital on that? Would you look to recycle it by doing dividends to shareholders, i.e. which is to Telkom and Syntel or is it likely to be retained on the Telkomsel level? Thank you.

Thank you very much for the question on the tower. This is Sunam from Telkomsel. Now, one of the key strategy that we have is always to look at how we can optimize our capital structure, and of course, also unlocking the value. So we have done so with our tower, and your question is that are we looking at more? So my answer is that as long as there is an opportunity for us to unlock the value, we will do so and we will also do so according to market condition as well. So, I hope that answer the question that you asked.

Yes. And on the capital that you receive, is that just going to stay on Telkomsel?

The capital, yes. We received actually -- because if you see, the Telkomsel balance sheet is very strong, so we -- the capital that we kept from the selling of the tower is distributed to the cellular network.

Yes. Adding to Wasono's explanation. Actually, the way we see is like this; we don't reduce our investment in the tower, basically profit coming from the sale of tower -- from Telkomsel that's coming as dividend to Telkom. We put it in the Mitratel actually, so basically that is our -- in practical how we manage the guests coming from that tower selling.

Okay. So there has already been a dividend paid out on -- by Telkomsel?

Yes.

Okay, got it. Thank you.

We have another question from Niko Margaronis of BRI Danareksa. Please ask your question.

Yes, thank you. I would like to pick up on the Gojek collaboration and some news that's found in the Bloomberg terminal that you considering of increasing your investment in Gojek. Could you provide some more color on this? And what do you expect to achieve by increasing your stake in Gojek? Thank you.

Niko, Setyanto from Telkomsel. Yes, as we may aware we invest in Gojek and we have the plan to continue to invest and collaborate with them. Of course, as a strategic investor, one of main purpose of an investment is to get the synergy value between us and them, right. So, we hope that in the upcoming future with the recent development in Gojek, we will increase our collaboration. So, we will -- both party will derive synergy value from the synergy collaboration that will happen. And also -- as an investment also, we also hope that we can get a capital gain from our investment. So, it will be both side; number one is in term of synergy value that we can derive, and the second one is from the capital gain that we have.

Right, right. Thank you, Setyanto. And if I may, can I have a second question with regards to your -- to corporate actions. You mentioned about Mitratel deadline -- timeline towards the end of the year for going IPO. I also picked up news about data center business going IPO by the Telkom Group. Could you provide also some color on this? Thank you.

Okay. On the data center, we are building now as we record it as our first data center, it's in the Jakarta, it's good. And it should be ready probably in the fourth quarter of this year. And we also, actually as part of the data center, we also probably have been deploying what we call as ex-data centers throughout the country. Now we have 22 location but we plan to add some of the customer that was supporting the latest data center.

Sorry, for the IPO I think we still need quite some time. We plan to consolidate the data center first, and then we look at the appeal probably sometime in early 2022.

Sorry, let me confirm, late '23 you mentioned?

Yes, early 2020. So, basically we have some data center which is under our subsidiary Six Sigma, and also in Telkom International and parent company as well. We're going to consolidate all the data center and including the potential for future development, as mentioned also by Ririek, one in -- still in the progressing of their scale . And this -- also, I think we also potentially will invite somebody else also who can bring technology, bring market, and so on to come to Indonesia as well in the partnership. Later on when we saw this already, as mentioned before, we may come to the market in 2023, for example.

Thank you. Very clear. Thank you, Heri.

Thank you.

There are no further questions from the line at this time. This concludes today's conference call. Thank you for participating. You may now all disconnect.