Good day, and thank you for standing by. Welcome to Telkom Earnings Call, nine months of 2022. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. Now I'd like to hand the conference over to Mr. Ahmad Reza, SVP of Corporate Communication and Investor Relations. Thank you. Please go ahead, sir. Okay. Thank you, Amber. Good afternoon, ladies and gentlemen. Welcome to PT Telkom Indonesia conference call for the nine months of 2022 results. There will be an overview from our CEO, followed by Q&A after the session. Before we start, let me remind you that today's call and the response to questions may contain forward-looking statement within the meaning of safe harbor. Actual results could differ materially from projections or estimations and may involve risks and uncertainty that may cause actual results to be different from what we discuss today. Ladies and gentlemen, it's my pleasure now to introduce Telkom board of directors who are joining us today. First is Mr. Ririek Adriansyah as our President Director and CEO, Mr. Heri Supriadi as Finance and Risk Management Director; Mr. Herlan Wijanarko as Network and IT Solutions Director; Mr. Bogi Witjaksono as Wholesale and International Service Director; Mr. Budi Setyawan Wijaya as Strategic Portfolio Director; Mr. Muhamad Fajrin Rasyid as a Digital Business Director; Mr. Afriwandi as a Human Capital Management Director. Also present the board of director of Telkomsel, Mr. Mohamad Ramzy as a Finance and Risk Management Director, and Mr. Derrick Heng as a Marketing Director. Now hand over the call to our CEO, Mr. Ririek Adriansyah for his overview. Please welcome, Pak Ririek. Thank you, Reza. Good afternoon, ladies and gentlemen. Welcome to our conference call for nine months of 2022 results. We appreciate your participation in this call. Ladies and gentlemen, challenging macroeconomic situation after the COVID-19 pandemic easing gives Telkom to create breakthrough and innovation to keep overall company's performance in line with the target. Increasing competition in B2C telco market is anticipated by accelerating of FMC timeline to select the best business model that will fit both operational and financial aspect for Telkom and Telkomsel. To foster the competitive advantage of B2B digital IT telco and anticipate diminishing return on B2C business, we are seriously exploring collaboration in data center and cloud business with Microsoft and Intel, as well as with world-class cloud providers. Our initiative in InfraCo will support B2B and B2C business by providing common connectivity infrastructure both for B2B and B2C to achieve CapEx and OpEx efficiency. Lastly, on our B2B and IT digital services, an establishment of DigiCo initiative will also diversify our business to capture other opportunity in digital platform and various digital services. In the nine months of 2022, Telkom's revenue continued to grow at 2.7%, with the EBITDA and net income margin at 54.6% and 15.2% respectively. The performance contributed mostly by mobile and fixed broadband businesses, which grew healthily amidst the unfavorable macroeconomic condition in Indonesia due to the higher inflation and interest rate hike. The more rational competition in mobile industry, supported by domination of IndiHome as the main player in fixed broadband business, contributed to our revenue growth. Our mobile segment, Telkomsel study to focus on maintaining customers' value and needs resulted in better productive customer profile. Telkomsel effort to identify personalization of each customer needs is a competitive advantage and proven to be the right strategy. Telkomsel still maintain healthy growth in revenue by 1.6% year-on-year, with EBITDA margin of 37.1% and net income margin stay at 25.4%. At the same time, our fixed broadband business, IndiHome, has successfully added 438,000 customers to become 9 million subscriber, the highest intake among our competition. With this achievement, IndiHome's revenue contribute to the consolidated Telkom's revenue reach IDR 20.9 trillion, with a growth of 6.4% and relatively stable blended ARPU at IDR 269,000. In terms of enterprise segment, B2B digital IT services and enterprise connectivity still the major contributor to enterprise segment growth in nine months of 2022. Enterprise contribute IDR 13.7 trillion in revenue, slightly declined by 0.8% year-on-year due to the transfer of data center business to wholesale and international business. However, enterprise segment still managed to show significant growth in QoQ by 10.5%. While our wholesale and international business segment posted IDR 11.3 trillion in revenue and significantly increased by 7.6% year-on-year, mainly driven by growing international wholesale voice business as well as digital business including both domestic and international B2B. One of the part of this segment is Mitratel, our tower business, the biggest tower co in Indonesia. Currently, it means more than 35,000 towers with 1.44 tenancy ratio and enjoys site diversification as around 58% of the tower are located in ex-Java. Mitratel is also expanding to fiber to the tower business as part of its strategy to strengthen its product portfolio to become a digital infrastructure company. We are of the view that tower business still has the opportunity to grow, driven by increasing demand in cellular data and upcoming 5G technology implementations. Maximize the opportunities, and value creation we implement five bold move strategy. The strategy continue to intensify its effect with some material progress, particularly in FMC, Digi Co and InfraCo as follows. In FMC initiative, Telkom and Telkomsel are now in the process of finding the best business model that can bring the maximum value to our business, assisted by reputable advisors. We already have features such as Orbit, our fixed wireless product, and Smooa, a feature that shows our capability in integrating our fixed and mobile network. Smooa allows IndiHome subscriber to buy Telkomsel Internet quota under a single billing system. Our Data Center and Cloud also remain as one of the areas that become our focus. Currently, we have more than 28 data center facilities, which include both the Hyperscale Data Center and Edge Data Center, which are located both in Indonesia and overseas. We are in the process of restructuring our data center business by consolidating the business and asset under one entity, which is called PT Telkom Data Ekosistem, with the NeutraDC as a brand. The consolidation process is executed in stages, and we expect that the process will be completed in 2024. Our data center business provides several products and solutions such as shared colocation, dedicated colocation, working room, cross-connect and smart hands, including the DC interconnect. The connectivity expertise of our data center is integrated to Telkom network and also global submarine cable network, so that we are able to accommodate our customer future digital business needs, such as edge computing, 5G services, blockchain and other digital solutions. We are also pursuing infrastructure value unlock starting from tower. We will continue to expand our fiber optic connection, explore new InfraCo business model and infra sharing potential while keeping our B2C and B2B growth in harmony. This initiative aims at optimizing the consolidated Telkom's CapEx efficiency, quality improvement and coverage of service. We expect carving out Telco infrastructure asset can maximize the valuation as well as to achieve the strategic differentiation. By having InfraCo, we believe Telkom can optimize asset utility and market monetization to address Telco business challenge and create business value that meets our investor expectation. Besides these three initiative, we also continued our initiative in B2B digital IT service and DigiCo. That is the ending of my remarks. Thank you very much. Thank you, Pak Ririek. We will now begin the Q&A session. When raising your question, please speak clearly and state your name and your company. Operator, may we have the first question, please? Certainly. As a reminder, to ask a question, please press star one one on your telephone. Please stand by while we compile the Q&A roster. Once again, to ask a question, please press star one one on your telephone. Our first question comes from the line of Piyush Choudhary. Piyush, your line is open. Please ask your question. Yeah, hi. Good afternoon. This is Piyush from HSBC. Thanks for the call. A few questions. Firstly, on mobile, could you help us understand what is constantly driving subscriber decline? In third quarter, we have seen almost 9.8 million subs decline. Has the subs decline stabilized in the month of October? Why are the trends divergent from peers like Indosat? That's the first question. Secondly, on InfraCo, could you elaborate what is the strategic intent to form InfraCo? What assets would be injected? Would you lease such assets to other operators apart from Telkomsel as well? If I may ask one last question on dividend, can we confirm that dividends would be paid from normalized net profit? Thank you. All right, I'll answer the first question on mobile from Telkomsel. With regard to the declining subscriber base QoQ, it's really an effort for us in terms of consolidation. We have number consolidation, and our main objective is to push healthy conduct, and to secure more quality customers. We need to maintain a healthy state and consistently focus on renewal initiatives through our CVM approach to drive productivity of the customers by providing the right pricing and product to customers. Yeah. It's really our push to have better quality customers. Maybe to add from an ARPU perspective, that resulted to a QoQ improvement of our ARPU. That's a lift of 3.8%. Clearly it validated our strategy to have better customers. May I clarify, is the subscriber this consolidation process likely to continue for some time? Like, what will drive a change over here in terms of, you know, stability in the subscriber numbers? If you can talk a little bit about the outlook of ARPU also. No. We will continue to make sure that we will consolidate and really drive up the quality of customers. What we are trying to address is really the promotional value seekers. We will continue our efforts in terms of the number consolidation in the months to come. Second question. Hi, Piyush, this Budi Setyawan. For the second question for the intents of InfraCo set up. Actually there is several intention why we set up InfraCo. The first time because the new regulation on the investment and also infra sharing, it's already established since last year. There is a regulation that also already support for the infra sharing. If we look to the industry, Indonesian industry, actually the infra sharing also very necessary because it can create the more efficient for the operator also. We don't want to miss this momentum also by monetizing our infrastructure. We can leverage for the better financial result from the investment on the infrastructure. This, the second. The third actually is when we talk about our current infrastructure, there is many potential infrastructure that can be leveraged and shared to get more value from our investment. It is very important for us to optimize our investment to get the maximum benefit from our investment. The third, it is very important also for us to lead this competitive advantage in infrastructure that's currently already happening. Our Telkom is one of the leader on the infrastructure. It's better for us to lead this competitive advantage by set up the InfraCo. Thank you. Hi, Piyush. Heri speaking here. On the question on dividend, of course, we will consider the interest of the shareholder base to get, I think, capital gain and also dividend yield. On this dividend, we going to propose the dividend that comparable to the what actually happened in the industry. We are considering that from the normalized profit. Thanks, Pak Heri, for the clarification. Thank you. Great. Thank you for your question. Next question comes from the line of Arthur Pineda. Please ask your question, Arthur. Your line is open. Hi. Thanks for the opportunity. Several questions. First, on mobile, can you talk about your outlook on mobile price increases? It seems like there's been a pause into this quarter, contrary to, I think, what a lot of the operators have been expecting. Is this owing to the weaker economy, or do you think this is actually going to continue into the fourth quarter? Second question I had is with regard to broadband. If we look at the growth momentum, it's been slowing to around mid-single digits on a year-on-year basis, which seems very low considering the low penetration level in this market. Are you seeing increased competition evolve in this stage, given the efforts from your competitors, or is this just conservatism in terms of rollouts? Last thing I had is with regard to housekeeping. I just wanted to check, were there any one-off items outside of the GoTo impairment which was booked in this quarter? Thank you. Okay. This is Derrick from Telkomsel. I'll handle the first question on mobile. With regards to what we see in mobile pricing trend, if you look at the last few months, we have really been leading the healthier market direction. We have implemented the right pricing and a market repair initiatives. That has also encouraged the market to stop the unlimited package by our competitors. If you look at this, the current state, the mobile pricing adjustments, it is in status quo. We are, of course, on the search for optimal level in terms of pricing. We are mindful of the macro condition and the pricing to maintain competitiveness through potential opportunistic as well as aggressive initiatives. Thank you, Derrick. I will continue with your question Pak Arthur on the decreasing growth of the IndiHome today. We can say to you yes, as you may be aware, competition becoming, I think, more intense in the fixed broadband. I think most of our competitors come with the same theme of the lower, I think, offer compared to what we do offer. We do believe this offering is not really healthy. We are in our awareness and our strategy to not follow such trend, to keep our performance still healthy for sustainability of the business in the short run and the long run as well. We are becoming more, I think, selective in choosing the potential subscriber by asking them for, I think, one year of subscription and so on. This answers us with a good quality of customer. You can see the growth of the revenue in line with the growth of the customer. Also the collection still very good. Also churn becoming much better compared to before. It is in our strategy to see this softening of growth with the current situation. We believe in the future as we are so pursuing fixed mobile convergence, this going to give us another, I think, way of more efficient in providing solution for this broadband. This is going to allow us to be more competitive with good quality and a good quality of subscribers as well. We still believe that the potential of the market for home broadband is still very big as we know. Now the penetration is only about 15% of households. We still believe there's I think at least the same percentage of the market share we can attack. We going to do it I think a more efficient solution to get I think a quality of business in terms of profitability and sustainability. That's what we can explain today. On the one-off transaction, I think as we also explained here, we have an accelerated depreciation of all technology of MSAN`, which is basically a technology based on copper that we have in the past. This, I think, dates back to investments before 2010 that are not really competitive right now to provide such a solution for the broadband. We do the accelerated depreciation with the amount of IDR 1,584 billion. Almost similar amount to what we did last year. This year, we did actually in the second quarter of this year. The impact up to right now as compared to last year. I think all the MSAN base technology has already been accelerated depreciated. I think that's one-off transaction only that we have as of now. Understood. Nothing else in 3Q, if that's the case? No. It's more to comparison to last year. In last year we have in the fourth quarter, so there's no additional in this year. Understood. Thank you very much. Sure. All right. Thank you. Our next question comes from the line of Choong Chen Foong. Choong Chen Foong, your line is now open. Please ask your question. Hi. Good afternoon. Thank you so much for this conference call. Three questions from me. Firstly, on the mobile business, just wanted to ask whether, you know, do you think that there's still some ways to reach the optimum mobile pricing levels in Indonesia? Or do you see any weakness in subscriber purchasing power recently due to inflation that may lead you to pause any further pricing initiatives in the next few months? That's question number one. Number two, in terms of the personnel costs, do you think that there is some risk or pressure, upward pressure here, you know, to raise salaries and all that, you know, in line with the acceleration in inflation in Indonesia? Also, what about the other cost lines? Any upward pressures there as well? Then my third question, with regards to the new InfraCo. Can you sort of give us a sense of the value of some of these assets that may be included into the InfraCo? Just wanted to clarify here, are there any plans to list InfraCo? And if so, what would be the potential timeline for this? Yes, those are my three questions. Thank you. Hi, this is Derrick from Telkomsel. I'll answer your question on the optimal pricing for mobile. Telkomsel will continue to lead the healthier conduct, and we will consistently drive to ideal state for industry sustainable profitability. We look at competition ground, the customers' need, the willingness and ability to pay, as well as the network capacity. There are few strategies that have been in place and is validated based on the ARPU that has, as well as the RPMB that has grown QoQ. We have bring friends and stimulated high value customer segments through our CVM initiatives. We have also rationalized the traffic in terms of monetization to improve productivity. We also provided a wide portfolio for customers with regards to their requirements. That is a play in terms of what we can offer in terms of packages, whether it is through StereoMAX or the Orbit or the value positioning. In the scheme of things, we look at the telco industry. We are still looking at the opportunity to grab, as we see the cellular revenue contribution to overall GDP is below 1% versus in 2007, which is more than 1%, of course, supported by better economic condition. We will continue to look at optimal approach to deliver the right pricing, but to also ensure best experiences for our customers. Thank you. Thank you, Derrick. I'll try to answer you on the personnel cost. Yeah, there's some part of the salary of our employee related to the inflation, but it is a base salary. I think small part of the total salary. There's going to be a impact, but the impact quite limited based on the percentage of the base salary that's going to be calculated based on the inflation rate as well. So that's the explanation for the personnel first. There's not going to be any, let's say, spike up that quite higher on this one. Then in marketing, actually, marketing slightly increased this year compared to last year because I think some. With the relaxation of the COVID situation, activities that previously cannot be done now can be, I think, carry out. This make the marketing cost slightly increased. As a whole, this marketing increase, as long as general and administrative increase, with related to, for example, for traveling and so on, within our, I think, budget, within the growth that we can manage. You can see from the overall, I think, ratio of our margin and EBITDA is, or operating income and so on, still very much, I think, manageable. That are what we can explain about some of these costs. But we'll- Okay. Thank you for the InfraCo. Yeah, like I just mentioned before, from the intents actually is one of the regulation. The second is to optimize our investment. The third is to unlock potential, since the EBITDA multiple of the InfraCo is better than telecom telco. How about the asset and also timeline? Today we are still under discussion. What is the right strategy in term of the asset, also timeline? Because this InfraCo initiative will affect it also to other business. That way it should be balanced. The second, InfraCo itself should be sustained and growth because the third intents actually to unlock, it should be attractive also for the potential investor. Thank you. Thank you. Yeah. Okay. If I can just follow up on the- Oh, yeah. Yes. Okay. Yeah, go ahead, please. Sorry. For the IPO, actually, currently we are not on the plan, even though there is several scenario for the exit, not only IPO, but also to attract the PE, actually. We will start with the private investor first, I think. Also the strategic investor. Thank you. Understood. Is the plan to list the data center assets still on track for next year? Yes. Data center, we are still on track in terms of the consolidation, also in the new development. We have good progress also in terms of the consolidation and also in the new development. Thank you. Okay. Thank you very much. Right. Thank you. Our next question comes from the line of Hussaini Saifee. Hussaini, your line is now open. Please ask your question. Hi. Thanks. This is Hussaini Saifee from UBS. Just a few questions. Most of my questions have been answered. Just a few questions. The first is that, is Smooa base. Can we get how many of your subscribers, maybe IndiHome or Telkomsel on that Smooa base who have the combined billing? That's question number one. Second is on the Orbit side. Orbit revenues, how the revenues are booked? Are they booked at the Telkomsel level, or are they booked at the IndiHome level? Finally, on the fixed mobile convergence, just at the broader level, I wanted to understand it. Well, you know, marketing the fixed mobile convergence as a product, will it need some kind of bundling discounts which will need to be, you know, offered to the customers to take up those services? Thank you. Thank you. This is Ramzy. On the Orbit revenue book, sorry. Currently, all the revenue on the Orbit is booked in Telkomsel. There is no other revenue booked in Telkom side. That's on the Orbit side. On the bundling discount, actually on the FMC, the actual plan is not to giving more discount to the customer, but more on the value creation to combine users both on the fixed broadband and also mobile broadband. The intention of the FMC is not on giving more discount to the customer, but more to create additional values to overall customers. On the Smooa? Okay. We don't have it. On the Smooa, we currently don't have the numbers, but we will get back on the numbers to you, Husseini. Thank you. Sure. Thank you. Just maybe if I can ask one follow-up on the InfraCo initiatives. I mean, I understand the positive side of that, but if you open your assets such as maybe fiber, that also can give advantage to your competitors to use those assets and kind of expand their network. Do you see that as a risk, or do you see that the infrastructure side, even the fiber is highly commoditized and therefore it is the right time to open this side of the business as well or this side of the infrastructure as well? Thank you. Thank you. On this one, of course, one of the objective of such liberate the fiber because we see the multiple is different when you see integrated operator with FiberCo only. FiberCo supposed to also serve the market. That was the reason they get up a higher I think valuation multiple on this one. With this regard, of course, we going to address the market, as explained before by my colleague. I think regulation already allow us to do this one. Also we have the capacity much advanced compared to our competitor on this one. Of course, there's kind of risk for us. Whenever we open too fast, I think in the very massive way of all the fiber that we have, that's going to increase our wholesale revenue. At the same time, that's going to also provide some risk to our, I think, mostly consumer side of our business. Of course, we need to balance both of our business to get the maximum valuation on this one. We're going to be very selective as well on this one to consider all the aspect in order to get the maximum value. That's, I think, the kind of initial thing that we can share to you. Understood. This is very clear. Thank you very much. You're welcome. All right. Thank you. As a reminder, to ask a question you will need to press star one one on your telephone. So once again, that's star one one for questions. Next question is a follow-up question from the line of Arthur Pineda. Please go ahead, Arthur. Hi. Sorry, just one follow-up, please. With regard to product bundling between mobile and fixed, how can you go about this considering that majority of your mobile users are prepaid in nature? What can you do to actually tie them in together? Thank you very. Before Pak Derrick answering you on that one. We have so-called high value customer, which is the customer that's quite loyal to us, provide biggest chunk of the revenue to us. They are what we call basically high value user. We have quite complete, I think, profile of them. We know them how to address them with, I think, fixed mobile convergence. We can provide them with seamless solution technology to get them becoming more loyal to us. We represent for long-term value of the company as well as potential to increase, I think, value also coming from, I think, combined services. At the same time, we also can provide solution as we see, but I think fixed mobile convergence and cellular can be run in one hand, so this also can provide some potential of cost saving. We address both sides to get the maximum value from this one. I think Pak Arthur, Pak Derrick can have some more I think explanation on this. Derrick and I will continue just add on Pak Heri's perspective. We truly believe the benefits of FMC really the room for synergy and strengthening our position. Just from high-value customers, we want to drive loyalty and really an integrated approach to serving them both at home and on the move. To us, the value of the mobile segment is really the ability to cross-sell to the IndiHome base and capturing more share of the household. That, in turn, would reduce the mobile churn due to the capture from a total household perspective. From the value of the fixed segment, we want to really increase the cross-sell for broadband to the Telkomsel base. We will be able to drive customer stickiness. All in all, we see this as a win-win for owning the customer both at home and on the move. Sorry, sir, can this be cross-sold into the prepaid user as well? Or is it mainly on the postpaid high value user that you expect to do the bundling? Oh, yes. Even for the prepaid segment, we are also looking at a high value group of customers. Clearly their needs are very aligned to the fixed broadband customer profile. Understood. Okay, thank you very much. Thank you. Great. Thank you. Next follow-up question comes from the line of Piyush Choudhary. Please ask your question, Piyush. Hi. Thanks a lot. Just to follow up, firstly, on FMC, could you tell us if you have kind of worked out what is the cost synergies, which could come, once you integrate, you know, IndiHome with Telkomsel? Secondly, on the data center business, can you quantify what is the invested capital in the business right now? And what's the revenue, EBITDA or profit profile for the data center portfolio? Thank you. Okay. On the cost synergy side, we actually identified several cost synergy which come from go-to-market activities that currently goes in each of segment from Telkomsel and Telkom. The other part is also the agency of the marketing campaign, as well as how we can optimize our resellers in Telkomsel as well as the sales force in Telkom side. Actually on that point, we identify several synergy scenario that can also benefit to the group level. The other part is also on the CapEx potential reduction and duplication amongst Telkom and Telkomsel. Yeah. Thanks a lot. Can you quantify this? Like what is the like amount or as a percentage of revenue of the enlarged mobile and IndiHome fiber? Currently we in the process of identification and also calculate more clearly on the numbers, both on the OpEx and CapEx side. Of course, these numbers can be used as the basis of this transaction and also the value add from the FMC itself. Based on the question on the invested capital revenue, EBITDA and profit for the data center business, I think what we see, the data center business supposed to be similar to the benchmark that we see in the market. Currently in Southeast Asia, I think the investment needed for one megawatt of data center capacity around $12 million. EBITDA, it is supposed to be around 40%-50% of EBITDA whenever we reach the optimum utilization. I think accordingly with going to be also profitable in the bottom line for us. For example, our data center in hyperscale, we are not using all the capacity yet. Of course it is compared to what we have, the benchmark globally. It is supposed to be lower. Whenever the capacity has already been utilized in full capacity, it is supposed to be comparable to those in the benchmark. That's what we believe in the data center. We also see the potential of the market where it can be coming from the hyperscaler, coming from some digital company, government and so on. The business is very promising. That's what we can give you a slide, I think figure of how data center business supposed to be looks like in the upcoming years. Thanks Pak Heri. Like, is it possible to quantify what is the current revenue contribution of data center to your business? Current revenue contribution of our data center right now around IDR 1.2 trillion as of nine months. Okay. Thanks a lot. You're welcome. Thank you. Once again, to ask a question, please press star one one on your telephone. Okay. Thank you, Operator. Thank you everyone for participating in today's call. We apologize for those whose question could not be addressed yet. Should you have any further questions, please ask directly. Thank you very much. Thank you, sir. This concludes today's conference call. Thank you for participating. You may now disconnect.