Perusahaan Perseroan Persero Pt Telekomunikasi Indonesia Tbk Q3 FY2024 Earnings Call

Ladies and gentlemen welcome to the PT Telekom Indonesia Earnings call for the unaudited results of 9 months of 2024. We will start with an overview from our CEO and CFO of Telkom Group, followed by the Q&A session. Before we start, let me remind you that today's call and the responses to the questions may contain forward-looking statements within the meaning of safe harbor. Actual results could differ materially from projections or estimations that may involve risks and uncertainties that may cause actual results to be different from what we discuss today. Ladies and gentlemen, it is my pleasure now to introduce Telekom's Board of Directors who are joining us today Bapak Ririek Adriansyah, as President, Director, and CEO; Bapak Heri Supriadi as Finance Director and Risk Management Director; FM Venusiana as Enterprise and Business Service Director; Bapak Bogi Witjaksono as Wholesale and International Service Director; Bapak Budi Setyawan Wijaya as Strategic Portfolio Director; Bapak Honesti Basyir as Group Business Development Director; Bapak Herlan Wijanarko as Network and IT Solutions Director; Bapak Afriwandi as Human Capital Management Director. Also present are the Board of Directors of Telkomsel, Bapak Nugroho as President Director; Bapak Wong Soon Nam as Director of Planning and Transformation; Bapak Daru Mulyawan as Finance and Risk Management Director; Bapak Derrick Heng as Marketing Director; and Bapak Adiwinahyu Basuki Sigit as Sales Director. I now hand over the call to our President Director and CEO, Bapak Ririek Adriansyah, for his overview.

Thank you. Good afternoon, ladies and gentlemen. Welcome to our earnings call for the unaudited 9 months of 2024 results. We appreciate your participation in this call. Ladies and gentlemen, in the past 9 months, Indonesia's economy has proven to be resilient. The confidence transpired to Bank Indonesia-led monetary decision to maintain the benchmark rate of 6% to ensure inflation will remain within the target of 2.5%, plus/minus 1% for 2024 to 2025. Headline inflation recorded continued deflation to 1.8% year-on-year in September compared to 2.1% year-on-year in August. This marked the fifth month of consecutive deflation since May. The threat of deflation has been affecting the consumption pattern of the mass market and middle-income segment as they opted to reduce credit spending when possible. Consumer spending tracked by credit and debit card transaction value is tightening. However, the slight pickup in debit card transaction value also shows that consumers are still mindful in spending their income. The third quarter is seasonally a soft quarter for the Telco sector, and Telecom is not immune to this. Nevertheless, data payload recorded growth of 12.4% year-on-year for 9 months of 2024, indicating stickiness and ongoing sales from legacy business. We also note some stabilization in the competition landscape indicated by the improvement in the supply-demand dynamic and price increase from other operators in starter pack and data packages, albeit selectively. Telkom Group remains committed to repairing the market structure by refraining from engaging in price wars as we believe in more sustainable revenue generation by focusing on increasing data consumption and productivity of our client base. With President Prabowo's inauguration on October 20 and the formation of his working cabinet, we see potential support in purchasing power due to various social welfare programs being launched. Before I share updates from our corporate transformation journey via the 5 Bold Move strategy, which started in 2022, please allow me to express our gratitude to our shareholders who have been with us through this process. We remain confident and committed to executing transformation strategies to future-proof Telkom Group leadership. However, we have to be more prudent when executing transformation during a relatively soft purchasing power environment and heightened competition in the sector to solidify market leadership. As part of the 5 Bold Move strategy implementation, our corporate transformation group ensured that all business processes achieved efficient results with no duplication processes. An example being the procurement process, where the rate of CapEx purchases for devices and networks have improved quite meaningfully due to group procurement initiatives. This has been evidenced by our ability to serve broader market segmentation, notably in our consumer business segment. Such group negotiation processes have additionally made a positive impact on digital content offerings, resulting in a better experience for our end customers and efficient content costs for the company. On the B2B business front, we continue to be agile yet focused on creating long-term sustainable revenue growth in digital connectivity supported by platform expansions with data center cloud as its business enablers. Apart from organic capacity expansion, we are exploring partnerships to unlock value while leveraging their expertise to manage the data center business. Through the partnership, we believe we can establish better positioning in the market and optimize our core competencies, creating long-term sustainability value for the group. We aim to conclude such initiatives by early 2025. In Telkom initiatives, progress has also been encouraging. We have confirmed that the operational day 1 for PT Telkom Indonesia as Telkom's infrastructure-managed service entity was on August 1, 2024. The establishment will also enable us to transfer efficient asset deployment while also improving existing infrastructure assets with additional investment to increase CapEx efficiency. With that, I would like to hand over the session to Pak Heri Supriadi, our Group Finance and Risk Management Director, to give you an overview of our 9 months' financial performance. Thank you.

Thank you, Ririek. Good afternoon, ladies and gentlemen. During the past 9 months of 2024, Telkom Group delivered a positive revenue growth of 0.9% year-on-year to IDR 112.2 trillion with EBITDA of IDR 56.6 trillion, a slight decrease of 4.1% year-on-year. The growth in our revenue has been mostly contributed by our continued efforts in promoting data and Internet services revenue amid a continuing natural decline of our legacy business. The slip in our EBITDA, however, has been largely attributable to our investment in initiatives toward talent rejuvenation via the early retirement program during the second quarter. This has resulted in personnel expenses jumping by 12.7% year-on-year in the 9 months of 2024. Stripping out the one-off costs from the program, our normalized EBITDA stood at IDR 57.8 trillion, which declined by 2.1% year-on-year, making the normalized EBITDA margin decelerate to 51.5%. Meanwhile, our operating net income declined by 5.1% year-on-year to IDR 18.6 trillion after adjusting for the market effect from GoTo ARPU costs and one-off asset unlocks at the Telkomsel level. Taking a deep dive into our expenses breakdown, aside from the strategic initiative of the early retirement program during the third quarter, we identified an accelerated cost of general and administrative expenses, which came following a low base effect last year as a result of a better recovery rate in collection during the third quarter of 2023. Furthermore, we continue to accelerate investment in marketing spending on the back of our ongoing efforts to expand fixed broadband networks in our consumer business. The total CapEx spend during the period reached IDR 17.5 trillion, largely used for connectivity, followed by spending for digital platforms and services. CapEx realization to revenue was at 15.6%, and we still aim to accelerate CapEx spending towards the year-end to a level of 22% to 24%, setting the foundation for future revenue growth. By the end of the third quarter, our total liability is relatively flat at IDR 130 billion. Our gearing ratio also maintained a healthy level with net debt-to-EBITDA standing at 0.6x during the period. On the B2C business front during the 9 months of 2024, Telkomsel posted a strong 16.4% year-on-year growth. This came on the back of the integration of our IndiHome B2C business as part of the FMC initiative. During the third quarter alone, however, Telkomsel recorded a slight decline in revenue by 2.1%, attributable to low seasonality effects coupled with weakness in purchasing power. Our digital business posted a healthy 2.5% year-on-year growth, highlighting potential in broadband and digital services. This performance is supported by a healthy subscriber base, as our mobile customer count grew to 158.4 million, accompanied by improved usage patterns enhancing productivity and customer quality. Despite macro challenges and heightened competition, Telkomsel continues to showcase its resilience by optimizing operational excellence. Our efforts in continuing product innovation have been able to safeguard our position as a dominant market leader. The encouraging trend of data payload growth is believed to be a positive momentum for us to monetize should we see an improvement in the domestic economy. The fixed broadband business continued to show solid growth, marked by a 200.6% year-on-year increase as we integrated IndiHome into Telkomsel in the third quarter, growing by 0.3% quarter-on-quarter. This growth is driven by our expansion strategy, targeting a broader segment and accelerating the addition of 682,000 new customers, bringing the total to 9.4 million with ARPU at IDR 239,000. Thanks to our synergy from the FMC integration, this strategy has provided us better agility to scale up our network penetration with comparable returns to our shareholders. Our convergence ratio under the FMC strategy has reached a 53% penetration rate, and we are committed to further bolstering this with appealing convergent offerings. This initiative supports customer retention and strengthens defensive value aligned with our ongoing execution of one billing system. The ninth month of 2024 is deemed to be a seasonally weak quarter for B2B, where our enterprise business and Telkom International, as part of wholesale international business revenue recognition, are expected to be backloaded. Mitratel, however, continued to show solid revenue contribution of IDR 6.82 trillion or 8.7% year-on-year growth, with an EBITDA margin improved to 83.2% in the 9 months. We maintain our high single-digit revenue growth for the two business segments for the full year of 2024. In the past 9 months, the overall achievement and the latest development in the economy and the sector have been soft. Nevertheless, we maintain our guidance for 2024. We aim to grow revenue by low single-digit for 2024. We maintain EBITDA margin in the range of 50% to 52% and CapEx to revenue ratio of 22% to 24%. We continue to maintain market leadership initiatives by targeting CapEx to revenue to decline further from 17% to 19% by 2024. That would be the end of my remarks. Thank you. I now hand over to the Operator to moderate the Q&A session.

We have one question from Arthur Pineda.

Three questions, please. Firstly, on the mobile side, I'm just curious, why are we seeing data revenues decline faster than your legacy revenues? Is this symptomatic of reduced top-ups due to the larger data allowances from the recent campaigns? The second question I have is with regard to the fixed mobile conversion strategy. Could you please remind us of the targets for the synergies for this project? We've yet to see any margin improvements on this account nor any revenue acceleration for broadband, which remains flat on a year-on-year basis and Q-on-Q basis. How should we see this going forward? And just a housekeeping question as well on your cost bookings. I do know that your G&A was down a fair bit quarter-on-quarter. Were there any one-off adjustments being done for the third quarter? Or will these cost items be the baseline going into the fourth quarter?

Arthur, this is Derrick. I will answer your first question. To give more color to the digital business revenue, Telkomsel's digital business revenue saw a decline primarily due to increased competition and price pressure, especially in the mobile environment, which has led to strategic adjustments in pricing to retain market share, particularly in price-sensitive segments. We have seen more pick-up in the lower denomination and sachet product lines. This shift is essentially to address the macro backdrop of economic pressure. Despite this, our focus on quality customer experience and network investments remains our priority as we navigate the very challenging current market dynamics. So besides the seasonal aspect of the quarter-on-quarter comparison between quarter 2 and quarter 3, it is important to note that we also had a peak season in Q2 because of Lebaran. Therefore, there is a slight decline in our data revenue. However, it is actually not faster than the legacy. In fact, our legacy revenue is actually declining even faster than the data revenue. Of course, our main focus now is to ensure that this digital business remains robust, which comes from two parts: the digital connectivity and the non-connectivity sectors. We aim to maintain our connectivity base in the digital space, but we also face some pressures in the non-connectivity aspect of the digital business. This has been affected by governmental policy changes regarding certain illegal gaming activities that were previously acceptable. This, combined with the macroeconomic situation, has impacted the business.

On the second question regarding convergence, what we have seen so far is that as we go through the transition period of the fixed mobile convergence integration in Q3, we are doing well in migrating our back-end systems, and we are starting to see value from the revenue side. However, I think in terms of the synergy value, we continue to maintain our tracking on progressing in the same target on cost optimization, where we are doing a lot of cost optimization on various activities in terms of sales and also part of the services. We have also closed down some duplications of stores, which has impacted the cost positively. On top of that, we expect improvements in the top line due to cross-selling initiatives. In terms of convergence customers, we have seen a continuous increase. However, part of the EBITDA impact and improvement is still not yet reflected in the financial figures. It is important to consider that the value of the synergy in terms of revenue is still not yet maximized in the first years of our integration efforts. To add that context, please remember that although we are in the middle of the system integration post the migration of IndiHome from Telkom to Telkomsel, we have still managed to achieve year-on-year growth in our fixed broadband business of around 2.8% and a quarter-on-quarter growth of about 0.3%. This is crucial for us to progress, as our key focus for future growth in fixed broadband is through FMC. This visibility is essential in ensuring a smooth integration of the two systems post consolidation. Additionally, we have made investments to ensure that costs related to our FMC, including fixed broadband, will be lower moving forward.

So the cost savings benefit will only materialize in 2025. Is that how we should see this?

Actually, not only for next year. If we look at the synergy value targets, our target for this year is around IDR 1.9 trillion. However, year-to-date until Q3, we have actually overachieved this target, but we won't stop at that point because we can still see potential improvement that we can achieve through further investments that can continue to reduce costs in the future.

Allow me to answer your question, Arthur. Yes, we see in the G&A year-on-year increase, which is mainly contributed by the provision that we have. The increase in the provision was due to the low base effect of last year following a better recovery rate at that period. As a result, we have a lower base in 2023. In 2024, this reflects a bit of normal growth. However, if we consider the backdrop of this, we are also facing some pending collections coming from the enterprise segment, particularly from large enterprises and upper-tier enterprises, which we believe is highly collectible moving forward. Based on the procedures or SOP that we have, we need to provide some level of provision on this, which we regard as very healthy receivables. This has resulted in the increase we experienced in the third quarter of this year.

Sorry, just to add on that, Arthur, to add to the answer from Basuki and also from Mulyawan. The increase, if you see on the G&A, is largely attributed to the more prudent approach towards our enterprise business. This behavior is partly due to the nature of the business, where the revenue recognitions tend to be back-loaded. Later on, as we book the revenue, for example in the fourth quarter, we may see some reversals based on the nature of the provisions that we added. On the quarter-on-quarter basis, what you saw last quarter reflected more on the accounting recognitions, where in the second quarter, we had an increase in tax related to properties, especially concerning the subsea cable business. Last year, this was more loaded in the third quarter, but for this year, it was recognized earlier in the second quarter. Thus, what you see in the third quarter reflects a normal run rate that we should expect to see in the fourth quarters. Hopefully, that answers your questions.

Next question coming from Piyush Choudhary.

A few questions. Firstly, on Telkomsel, what is leading to the increase in the cost of services and O&M quarter-on-quarter? Like EBITDA margin is now down to 44% in the third quarter. So if you could throw some light on the outlook for the EBITDA margin for Telkomsel separately? Secondly, on the mobile, can you let us know how are the trends during September and October? Is the revenue improving month-on-month? And your peers, XL and Indosat, have raised tariffs towards the end of Q3. Have you also done that? Or what's your strategy here? And if I may ask one more third question. On FMC, can you update us on your billing platform integration? Is it complete? And when do you expect to launch new Telkomsel One plans?

Okay. Thank you. First thing is about the costs on the Telkomsel side. In the third quarter, the higher costs are mostly attributed to operating and maintenance expenses, which increased due to higher frequency, transmission, and lease expenses tied to network upgrades and home integration, as well as for marketing costs driven by intensified efforts to expand our customer base, particularly in youth segments and to accelerate fixed broadband growth aligned with our commitment to maintaining market share in Java and surrounding areas. For the cost of services increase related to enhanced digital capabilities and improved service quality to boost customer profitability across both mobile and broadband sectors in line with the revenue.

This is Derrick. I'll answer your second question regarding the trend moving forward. We have seen improved conditions over the past two months as supply and demand have begun to stabilize, signaling a healthier competitive landscape. This is further supported by the fact that, as you mentioned, the competitors have started to raise pricing. We have been able to withstand the market pressure through several initiatives aimed at addressing affordability and capturing the mass segment market through our offerings like Telkomsel Lite, by.U, as well as our short-term sachet packages. In this context, we have enhanced productivity and driven data payload growth. We have also improved products and services for our high-value customers to monetize through customer value management with more initiatives. Our FMC play is also on track. If you observe the traction of our FMC convergence penetration, we started at 37% in July 2023, and we are now at 53% in September 2024, indicating that our strategy of multiproduct holding within our customer base is gaining traction. Our hypothesis is that the more products our customers engage with, the stickier and more loyal they will become to Telkomsel.

Regarding the FMC integration, we expect that the integration will be completed in this Q4. We are currently migrating the majority of our customers today. We have plans for the Telkomsel One plan, which is being piloted. Right after the integration is complete, we are confident about introducing attractive convergence services to customers, not only to attract new customers but also to offer enhanced value bundles to our existing customers. Regarding potential pricing adjustments, as market leaders, we are always careful and rational in managing our pricing strategy, ensuring we apply the right pricing and offering to relevant segments. Price increases will depend on various conditions, especially macroeconomic factors and competitive pressures. However, from a seasonal perspective, we typically see year-end pricing adjustments occur. So, that’s on track with our plans.

So you have not taken price hikes so far, but you think seasonally it's a relevant quarter in Q4, and that's why you may be able to take up prices?

From a seasonal perspective, we historically make pricing adjustments. However, from a strategic sustainable growth standpoint, we look closely at the productivity of our customers to offer targeted adjustments. For segments with higher capacity to pay, we will look for 'more-for-more' opportunities. For the mass market segment, we will focus on very affordable sachet pricing packages.

Yes. To add some more information on the pricing adjustment: last month, we implemented a price increase for legacy services because we understand that the number of users in legacy is consistently declining. To slow down this decline, we have raised prices in an effort to maintain the existing revenue. Additionally, in line with the seasonal pricing mechanisms employed at year-end, as we have done over the years, we have seen opportunities to monetize our mid-high segments of customers in response to the macroeconomic situation and competition; thus, we feel it's the right time to pursue these opportunities, particularly in the broadband arena.

And one question was missed on EBITDA margin outlook for Telkomsel, if you can.

Yes, regarding the expectations for EBITDA margin, we observed that the EBITDA margin declined as a result of expenses related to the cost of sales and operational maintenance. We expect that for year-end '24, considering the current macro conditions and the competitive landscape, the EBITDA margin will be around 45% to 46%.

Our next question comes from Sukriti Bansal.

Two quick questions from my side. Firstly, on FMC, I understand that you mentioned you've overachieved your IDR 1.9 trillion synergy target for the year. Can you help us with a breakup of this? And if I understand correctly, this is the gross synergy. Is it possible to share a figure, given you would have incurred costs, what is the net synergy value that you've observed? Additionally, if there's any guidance from FMC, what kind of synergy are you expecting going forward? And the second question is on cellular. On Telkomsel, I understand this is a seasonally soft quarter, but we've now seen ARPU declines quarter-on-quarter for multiple quarters. What is our outlook going forward, given how much room we actually have to increase prices? And are we witnessing greater traction in our more mass market segments like Telkom satellite and By.U? Given the combined effect of these two, what is the ARPU outlook going forward?

On the synergy value, I think the value that we have today mostly comes from the cost side. The upside on the revenue is primarily from cross-selling initiatives. However, as we shared with you, the integration period will be completed by the end of this year in Q4, and we believe that there is room for us to continue to improve our synergy value due to revenue uplift from the FMC products and convergent services that we offer to the customers. Additionally, we still see potential to leverage costs on several fronts. We are consistently evaluating our customer touchpoints, such as Plaza and Grapari locations that we have duplicated in terms of efficiency. We have also made some eliminations regarding the call centers and other operational systems, including our backend systems like analytics. We aim to improve our cost structures in the near future. To answer your question about ARPU, the decline in ARPU is primarily driven by the ongoing contraction in legacy services as discussed by Basuki. The legacy services are declining at a rate of 20% to 30%. Of course, Q3 is traditionally a soft quarter, and that has been compounded by challenging macroeconomic conditions. Nevertheless, our customer base has remained stable as we navigate market demand and affordability concerns through low-denomination and sachet packages. We have observed positive signs in productivity, demonstrating strong data growth in traffic, indicating resilient demand and an ability to leverage our superior service and product offerings. Going forward, we anticipate that if market conditions stabilize, we aim to boost customer productivity and achieve ARPU uplifts through initiatives to promote higher-tier package upgrades and enhance digital content to drive higher value from our customers.

Adding to that, regarding traction on mass and youth market segments, we have been seeing positive progress using Telkomsel Lite and By.U so far throughout Q3. We've witnessed improvements in the productivity of our broadband customer base since launch, particularly in the Java market. These strategies address the economic conditions and macro pressures faced this year, with Telkom Satellite also playing a significant role in our strategy to maintain our customer base while remaining competitive in the market. Compared to ex-Java markets, our main concern remains with the legacy segment, which is still prominent in these areas. However, we are pleased to see that our CVM progress is helping us maintain competitiveness and sustain our dominant position in ex-Java markets. Combining these strategies with the FMC approach, we believe that we can stabilize our ARPU and strategically plan for price adjustments in response to the market conditions.

This is Oki from IR. Just to add some color regarding the synergy on FMC. Regarding CapEx efficiency, we have started to see improvements, which have enabled us to broaden our market segmentation at the Telkomsel level, making it more economically viable. This improvement results from our ability to lower CapEx rates conducted through mega-vendors.

Adding to Oki’s point regarding synergies, these do not only happen at the Telkomsel level but across the Group level. For instance, in terms of CapEx discussed at the Telkomsel level, both Telkom and Telkomsel are integrated. Telkomsel primarily leases networks from Telkom. Consequently, the remaining lease ratios from Telkom will continue to decrease over time. Currently around 59% of revenue is projected to decrease to 57% next year. This means that Telkom also needs to enhance operational efficiencies, as mentioned by Oki at the Telkomsel level. Through the last two years, we have successfully reduced CapEx per line by around 30% and lowered operational and maintenance costs per line by approximately 15%. Thus, we maintain the flexibility to penetrate the market while ensuring margin preservation in our fixed broadband business. I hope this provides additional clarity.

We will move on to Marissa.

Same question as the previous one actually, but if I can follow up on the cost side. Were there other posts or areas where you see meaningful increases that offset the savings and cost, given if you look at the normalized margin, for example, it continues to trend lower. So it's not really reflected in the margin. And if you expect to see some sustainable synergy come to 2025, should we then expect margin improvement next year or if you actually still see some challenges on margins?

Marissa, I think the offset savings, as we have already mentioned in some cases, the fixed-mobile conversion is happening across the group. Furthermore, regarding cost in the upcoming year, we are aiming to continue to limit the growth of costs. We acknowledge that our increasing CapEx implies more networks being deployed, which will incur some operational and maintenance cost increases. However, we intend to manage these increases through more marginal management of operational and maintenance costs. Therefore, we expect to handle costs effectively moving forward. Excluding the significant personnel cost rises we faced this year due to the early retirement program, which contributed heavily to employee cost management initiatives, we anticipate a reduction of 5% in our workforce based on our current plans. Overall, we expect this will stabilize our employee cost growth at around 4%. Consequently, we are confident that revenue growth next year will improve margins compared to this year.

This is Oki from IR. Just to add what Ririek was saying. Regarding CapEx, in previous years, personnel contributed heavily to spending. However, our next cost initiative is to shift towards O&M, which makes up 60% of our CapEx. Hence, we are planning to reduce CapEx ratios to revenue from the current 22% to 24% down to 17% to 19% by 2028. Ririek previously mentioned that these initiatives are viable, as we will review our network technologies to ensure they remain efficient going forward. New technologies are crucial in the evolving competitive landscape. Group-wide renegotiations will also enable us to serve broader market segments, improving our overall CapEx efficiency.

Okay. Maybe just one more. Maybe it's a bit further out as well. But do you foresee a steady state level on the EBITDA margin? I'm talking about the normalized EBITDA margin level. Is it probably possible to achieve more than 50% in the next two years with this FMC synergy and related strategies?

Okay, Marissa. I think with the growth, we expect our medium-term growth to be mid-single-digit. Most of the costs are already well-managed. We are also addressing costs through new technology and by enhancing procurement results, as mentioned by Ririek. We believe then it is very possible for us to achieve a sustainable EBITDA margin over 50%.

We will move on to Henry Tedja for the next question.

Perhaps two questions from my end. First on Telkomsel. I mean, we understand that the lower or basically the revenue decline on Telkomsel could be attributed to the macro and also the competition. But, I mean, if you look at the data traffic or data payload, I think the management mentioned several times the customer productivity increase and how Telkomsel basically gained the market share. So I'm just curious whether the management focus right now has changed from profitability to market share? Can you also share some color on what is driving this higher data traffic growth? I mean, do you think that comes from the cannibalization as Telkomsel now prioritizes the low segment and new segment, which perhaps deliver a lower ARPU compared to the existing customers? And then my second question, I think if you look at on the Datacom and Telkomsel performance in the third quarter, it seems the non-Telkomsel products performed better in the third quarter. So perhaps can you share some color on which businesses really drove the performance in the third quarter for Telkom Group?

Yes, Henry, I will address the context of ARPU. The ARPU decline is really reflecting the typical seasonal trend and our increasing share of the entry-level data packages targeted at the more price-sensitive customer segments in light of economic pressure. Consequently, we have observed data traffic growth due to higher consumption, especially in entry-level and promotional plans. However, this traffic growth has not fully translated into ARPU uplifts due to the lower price points in these packages. Our focus, however, remains on addressing ARPU resilience by promoting stability and upselling higher-tier packages while delivering more digital content that adds value beyond raw connectivity. We are navigating market demand and affordability concerns through low-denomination and social packages.

To add to that point, I think our focus will continue to be on profitability. Although we are improving traffic growth in segments where we provide greater data quotas and bonuses, we need to ensure that this is backed by our existing capacity, maximizing utilization without incurring additional investments. Our consistent growth in traffic, both in Java and ex-Java markets, indicates that we are maintaining productive growth overall.

On the non-Telkomsel business performance, as we've explained, several subsidiaries performed quite well, which include Mitratel and Telkom International, as well as our DC, which has grown around 9% year-on-year. In addition to that, our B2B business has recorded a growth of 3.8%, and we believe, as mentioned in the presentation, that this B2B business can achieve high single-digit growth by year-end.

Sorry, perhaps one follow-up question on Telkomsel. I mean, you basically mentioned that all this data traffic growth is coming from the entry-level kind of products and also some promotional packages. So I'm just curious whether you can really monetize it in the future, considering that the segments subscribing to these products may be the lower customer segments that could potentially churn when you increase product prices, etc. I'm just curious about that.

Yes, we are optimistic. The strong data traffic growth indicates resilient demand and underlines our capability to leverage superior services and product offerings effectively. This gives us confidence in maintaining a positive outlook in productivity, even when marketing to lower or more price-sensitive segments.

Apologies for interrupting, Henry. This is Oki from IR. To reiterate on your first point regarding the broader market segments. Rest assured that this strategy has been executed thoughtfully. As we serve more diverse segments in both mobile and fixed broadband, we maintain a strong focus on managing costs. Thus, even as we expand our customer base, we ensure economic sensibility remains a priority and that we are not cannibalizing the core products. We’re targeting segments where we see growth potential while protecting our primary offerings.

Moving on, we will have a question from Ranjan Sharma.

I have two questions. First, regarding the current discussions on data usage. There seems to be a lot of emphasis on consumer productivity, but it appears that the increase in usage is due to the amount of data provided. As a result, we are seeing significant growth in usage, but it is not being monetized effectively, which is concerning for shareholders. I would like to understand why management is focusing more on the productivity of customers instead of finding better ways to monetize them, especially given the pressure on earnings. Are you considering segmenting the market differently to better monetize higher-end users, so you can support the lower-end users? I'm trying to grasp the management strategy. My second question is about InfraCo; could you update us on the progress of opening it up and efforts to grow it further?

Can you repeat the second question, Ranjan?

Yes. The second question is on the InfraCo. I understand the plan was to open up the InfraCo and to grow the business further. If you can tell us where we are with respect to the fiber InfraCo?

Ranjan, I’ll answer your first question. From a monetization perspective, we always carefully evaluate based on market conditions, competitive dynamics, and the macroeconomic factors. I think Telkomsel's strategy has proven that we are on the right track. We are adapting to macro conditions while maintaining our competitive edge. We are optimistic that as market conditions stabilize, with a dynamic balance in terms of supply and demand, we are well positioned to seize opportunities for recovery, and we will capture the ARPU uplift momentum once the demand rebounds.

On the InfraCo, we have already established our fiber company called Telkom Infrastructure Indonesia, and since August 1, 2024, Telkom Infrastructure Indonesia has been managing all Telkom fiber assets under a managed service and operations scheme. By the end of this year, Telkom Infrastructure Indonesia will commence the commercialization of our fiber assets. Thank you.

Can I have a quick follow-up on that point?

Yes, please.

So as we open up the InfraCo through wholesale access, can you tell us how you are going to approach the market? Is it going to be on non-exclusive, non-discriminating pricing? Or is there a different pricing for Telkom versus other players in the market?

Of course, we have to follow the regulation of the antimonopoly laws equally, Ranjan. However, there is some business scheme that will involve considerations like volume consumption among other factors that we will refer to as part of our pricing strategy.

Thank you. Ladies and gentlemen, due to the interest of time, we would like to limit the questions. We understand there are still a couple of questions that have not been addressed. We will get back to you. I will now hand over the session back to Pa Oki.

Thank you very much, ladies and gentlemen, for joining the call today. I would like to conclude our call for today. Please feel free to contact us anytime should you have any more questions for IR, and we will be happy to answer your questions. Thank you. You may leave the call.