Thank you for standing by. Welcome to Telkom Earnings Call for the first half of 2024 results. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a Q&A session. To ask a question during the session, you need to press star one one on your telephone. You'll then get an automatic message advising your hand is raised. Please be advised that today's conference is being recorded. I'd now like to hand the call over to Pak Oky, VP Investor Relations. Thank you. Please go ahead. Thank you, Desmond. Ladies and gentlemen, welcome to PT Telkom Indonesia Conference Call for the unlisted results of the first semester of 2024. There will be an overview from our CEO, and CFO, of Telkom Group, followed by the Q&A after the 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. It may involve risk and uncertainty that may cause actual results to be different from what we discuss today. Ladies and gentlemen, it is my pleasure today to introduce Telkom's Board of Directors. Joining us today, Bapak Ririek Adriansyah as President Director and CEO, Bapak Heri Supriadi as Finance and Risk Management Director, Ibu 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, and Bapak Afriw andi as Human Capital Management Director. Also present are the Board Directors of Telkomsel, Bapak Nugroho as President Director, Bapak Daru Mulyawan as Finance and Risk Management Director, Bapak Derrick Heng as Marketing Director, and Bapak Adiwinahy u 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, Oky. Good afternoon, ladies and gentlemen. Welcome to our conference call for the unaudited first semester of 2024 results. We appreciate your participation in this call. Ladies and gentlemen, we have seen 2024 as the year of better economic stability and growth compared to the year of 2023. Indonesia targets a 5.2% economic growth rate in 2024 as compared to 5.05% growth in the previous year, despite challenges such as declining commodity prices and global economic conditions. Domestic consumption is predicted to contribute more than half of Indonesia's economic growth, supported by a high level of employment and a stable inflation rate of 2.5% ±1%. Indonesia is the highest employment rate country among G20 nations, with an employment level of almost 70%, although the source of employment comes from the informal sector. Moreover, the elected President Prabowo Subianto and his administration commit to several current administration policies, signaling a stable investment climate and reduced political instability. Energy and food price volatility, along with the stronger U.S. dollar to Indonesian rupiah, should be watched carefully. However, the remaining significant potential for further growth, as expanding rates of high-tech products and maximizing their impact on employment, could help bolster the economy in the face of external financial pressures. The telecommunication industry contributes to the growth of high-tech products and poses great opportunities in increasing the economy of micro, small, and medium enterprises, or MSME's less equal position. GDP and household spending growth in Indonesia will also create an effect of increased spending, including in the telecommunication sector. As Telkom Group has been transforming into a digital telecommunication company, serving both B2C and B2B segments, we are ready to catch up the opportunity of increasing telecommunications growth. Our dominance as an incumbent telecommunication company enables us to become the retail economy catalyst for the nation. This is important while the industry is in the fast evolution, having the fast-changing technology coupled with the tension of the global geopolitical environment. On the B2C segment, we have implemented Fixed Mobile Convergence, or FMC, strategy for one year since the 1st of July 2023 and proven that the strategy is an effective track. Further tactical strategy by launching Telkomsel One as a multi-product offering, Telkomsel Lite and by.U as secondary brands to maintain market share interest while remaining focused on profitability, so far yields a positive impact and does not create price instability in the market. This has been evidenced in the survey of our ARPU during the first semester of 2024, while mobile customer base grew at a healthy 4.3% to 159.9 million subscribers. As a result, our normalized EBITDA margin has also been sustained at 51.9% for this semester. We remain of the view that investor consolidation and healthy pricing could be developed toward healthy competition. Moreover, the synergy effect from the FMC initiative, such as revenue uplift, OPEX efficiency, and CapEx effectiveness, has also been conducted carefully to ensure maximum effect of FMC strategy to our company's financial. As part of improving our Five Bold Moves strategy, our Corporate Transformation Group makes sure that all business processes achieve efficient results and no duplication processes within our organization. This includes, for example, the process of procurement, where, thanks to a product of group purchase initiative, the rate of CapEx purchase for devices and network has improved quite meaningfully. Such a group acquisition process has additionally made a positive impact on digital content offerings, which, in the end, have resulted in a better experience for our end customers and efficient content costs for the company. Moreover, we are also successful in maintaining real transfer payments, mostly in Indonesian rupiah contracts, to offset foreign exchange uncertainty. Similarly, in June 2024, Telkom Group has also initiated an early pension program with attracted more than 1,000 employees, which profiles in line with our target to optimize and freshen the workforce up as well as to create a leaner organization in accordance with the Five Bold Moves strategy. The program costs us a total of IDR 1.24 trillion, with a payback of three years. Such initiatives aim to lift the productivity of our capital and enhance our shareholders' value in the future. On the B2B business, we continue to be agile and yet focused to create long-term sustainable growth of revenue on the digital connectivity supported by platform expansions with data centers and IoT as a business enabler. Our additional data center capacity by 2024 will be contributed mostly from hyperscale data centers by 18 MW in Cikarang, as well as capacity expansion of our enterprise data centers and edge data centers. Improvement of the established capacity in our data centers could be allocated to anticipate more cloud storage and processing demand driven by artificial intelligence standards such as ultra-high-definition content, virtual reality, and gaming. Telkom Indonesia International or Telin, as a profitable subsidiary of Telkom Group, also supports end-to-end data center connectivity by building from data center premises up to international gateways. With international sea-cable backbone business as Telin's main source of revenue, internet connectivity quality and latency will improve since international internet traffic could be rerouted to resources in the international gateway. It needs not to be passed to Jakarta and Singapore anymore as the main international gateway. InfraCo initiative progress has also been encouraging. In this, our business vehicle, PT Telkom Infrastruktur Indonesia, will serve as a mandate to commence infrastructure asset management service period of Telkom's fiber optics as a maintenance. We have confirmed that the legal day one for PT Telkom Infrastruktur Indonesia as a Telkom's infrastructure management service entity will be on the 1st of August 2024. Then, it assumes to have a higher duty as the asset owner of Telkom's fiber infrastructure in 2025. We also hope that besides the FMC initiative, the establishment will also enable us to transfer efficient asset deployment while also improving existing infrastructure assets with additional investment to increase CapEx efficiency. On the B2B digital IT services and digital company initiative, besides preparing for internal capability enhancement, we also realign our portfolio, especially in our subsidiaries such as Sigma, Bosnet, and Metraplasa. That will be the ending of my remarks. Next, I would like to hand over the presentation to Pak Heri Supriadi, our Group Finance and Risk Management Director, to give you a brief overview in regard to our financial performance. Thank you. Thank you, Pak Ririek. Good afternoon, ladies and gentlemen. During the first semester of 2024, the unaudited financial result, Telkom Group has delivered a healthy revenue growth of 2.5% year-on-year to IDR 75.3 trillion, and with the EBITDA achieved at IDR 37.9 trillion, a slight decrease by 1.3% year-on-year. The growth in our revenue has been mostly contributed from our continuing effort in promoting data and internet services revenue, amidst the continuing natural decline of our legacy revenue. The slight decrease in EBITDA, however, occurred as during the second quarter, we initiated an early retirement program, which has attracted a total of around 1,000 employees and expenses of IDR 1.24 trillion. This made personal expenses jump by 20.9% year-on-year during the semester. On the other side, we believe this initiative will not only create leaner organizations but also increase youth talent, efficiency, and productivity. Stripping out the one-off costs from the program, our normalized EBITDA stood at IDR 39.1 trillion, of which grew by 1.9%, making the normalized EBITDA margin stabilize at 51.9% as compared to that in the first quarter of 2024. Meanwhile, our operating net income grew by 4.2% year-on-year to IDR 13 trillion after stripping out of mark-to-market effect from GoTo, ERP costs, and one-off from unlocking assets at Telkomsel level. Taking a deep dive into expenses breakdown, besides the strategic initiative on the early retirement program, as the highlight during the quarter, the higher costs in interconnection have been attributed to the growth in revenue related to voice hubbing. The dilution of margin in the business, however, came following the decline in legacy business, including voice and SMS A2P revenue. Up to the first semester of 2024, we have realized a total CapEx of IDR 11.7 trillion, largely used for connectivity, followed by spending for digital platforms and services. CapEx realization to revenue was at 15.5% and hopefully accelerated toward the end of the year at an ideal level of 22%-24% and gradually created significant additional revenue. At the end of June, our liabilities saw net additional indebtedness position. The increase was seen as we withdraw a short-term debt used for dividend payment. Our gearing ratio, however, was maintained at healthy level, with net debt to EBITDA stood at 0.67x at the end of June 2024. On B2C business, despite the deterioration of household spending post-Eid al-Fitr, combined with the increasing dynamic of competition in the industry, the second quarter of 2024 has been a steady quarter for Telkomsel. In the second quarter of 2024 alone, mobile revenue came at IDR 28.6 trillion, which modestly grew by 0.4%, while IndiHome revenue was IDR 6.6 trillion, with an increase of 0.3% from the previous quarter. This drove our revenue for Telkomsel to grow solidly by 29.9% to IDR 57.2 trillion for the semester, with the EBITDA margin steady at 47%. We have also managed to further accelerate our convergence penetration to 47% and reach digital asset users to around 80 million. Productivity improved driven by data payload, of which increased by 11.7% year-on-year, while customer base reached 159.9 million, an increase of 4.3% at the end of June 2024. Our continuous efforts to give better customer experience in digital services, together with further push in synergy value initiatives, yield positive impact and maintain ARPU at a healthy level of IDR 45,000. This is despite our recent introduction of Telkomsel Lite, which has proven to maintain healthy pricing and not creating price war. Our IndiHome business has also been showing a consistent positive growth trajectory to capture the tremendous opportunity for growth in the fixed broadband business. We believe the journey of our next 10 million growth in customer lives in the mass market segment. This has become our main strategic focus and marked by the recent launch of EZnet, of which not only aims at expanding our fixed broadband business into new segments but also to grow our converged use further. Moving to wholesale and international business segment, in the first semester of 2024, the segment contributed Telkom Group revenue in the amount of IDR 9.2 trillion, grew by 13.1% year-on-year as the result of growing international wholesale voice business and digital connectivity infrastructure business. Telin remains as one of the major contributors to the segment, with international connectivity as the main driver of the growth. In the meantime, we are continuing our journey in our attempt to unlock value of our data center business. We are exploring new strategic partners, of which together could accelerate the growth of our DC business, not only for domestic but also in regional Asia. As of the first semester of 2024, our data center business has contributed IDR 1 trillion to total group revenue, a solid increase by 20.2% growth year-on-year driven by higher traffic in content delivery network, or CDN. On tower business, as of the first semester of 2024, Mitratel keeps maintaining its position as the largest tower provider in Southeast Asia in terms of tower owners, with more than 38,600 towers and more than 58,600 tenants. The tenancy ratio was improved to 1.52x. On the standalone business, in the first half of 2024, Mitratel recorded revenue of IDR 4.5 trillion, or grew by 7.8% year-on-year, driven by tower leasing revenue. EBITDA and net income grew by 10.2% and 4.1% year-on-year, respectively. This resulted in strong EBITDA and net income margin of 83.1% and 23.9%. Furthermore, Mitratel demonstrated a strong financial position with a relatively low leverage ratio of 1.8x net debt to EBITDA as compared to the industry. Enterprise segment recorded revenue of IDR 10.2 trillion during the first semester of 2024, or grew by 9.4% year-on-year, driven by digital connectivity contributed by high-speed internet and digital services contributed by e-payment. We continue to strengthen our capabilities in the cloud business, digital IT services, and cybersecurity. This initiative is among few, building strategic partnerships with global technology players. Lastly, in regard to our guidance for 2024, looking at the latest developments in the economy and further dynamics in the industry environment, we are now aiming for our revenue to grow by low single digits for the year. This will come with EBITDA margin in the range of 50%-52% and CapEx to revenue ratio of 22%-24%. That would be the ending of my remarks, and thank you for your kind attention. Thank you very much, Pak Heri. Ladies and gentlemen, we will now begin the Q&A session. For raising your questions, please speak clearly and state your name and also your institutions or the company. Operator, may we have the first questions, please? Thank you. As a reminder to ask questions, please press star one one on your telephone. To cancel requests, please press star one one again. First question comes from the line of Kelsey Santoso of Goldman Sachs. Please go ahead. Hello, good afternoon, management. Thank you for the opportunity. This is Kelsey speaking. A couple of questions from my side. Firstly, on your two cost items. First one is your G&A costs. So if we look at the quarterly basis instead of on semester basis, Q2 actually saw a 20% increase quarter-on-quarter and year-on-year. So can I check what led to the spike? And second one would be your personnel costs. I understand that the spike in Q2 was due to the ERP, but can I confirm if this is already largely behind us or if there's still some headwind remaining in the upcoming quarters? And my second question would be on your mobile business. So we saw that ARPU still declined slightly Q-on-Q, while subs were still flatish. So how should we expect these to trend in the upcoming quarters? Should there be any uplift that we can expect as you continue executing on the FMC strategy? Thank you. Okay. Okay, Kelsey, on your question, allow me to answer that one. In the second quarter of this year, we have a kind of spending in the bonus for the Tantiem as part of the remuneration of the BOD and also the employee. And BOD, second, personnel, will there still any headwind upcoming quarters? Basically, the ERP is the program that follows our transformation in making fixed mobile business becoming more efficient with the remaining those employees who cannot really, let's say, catch up with our plan with the new skill set and so on. We provide this ERP. We see this ERP in the, I think, a few more years becoming, I think, unseen that we're going to do this again because this is part of the transformation and this transformation in the process of, I think, implementation and basically we strengthen that one. This one, I think, one of the bigger parts of the transformation. We don't have any plan in the near future for another ERP. The first question, ARPU decline versus subscriber plateau. I think this question comes to you, Pak Derrick. Yes. So good afternoon. This is Derrick. I'll share some color on ARPU. In our context, Telkomsel sustains stable ARPU at IDR 45,000. And there are several factors that we think are attributing to this. From a macroeconomy perspective, we see contraction of consumer purchasing power. And when we look at it from a festive perspective, the Lebaran incentive out in the end of March impacted the spread of spending between Q1 and Q2. And we have maintained the current state of our average pricing. In fact, there was a higher monetization rate. We want to stay relevant and affordable to our customer needs and manage the competitiveness. We have been selective to expand our engagement to the mass and youth segment. Our strategy with our new plans of Telkomsel Lite and by.U has helped us to maintain our churn rate. There was also downside risk in terms of ARPU, which is maintained at a minimum. We are maximizing our CVM strategy, our digital adoption through engaging digital ecosystems. We have also enriched our content offering to stimulate customer usage, which is seen in the payload growth both year-over-year as well as Q-on-Q. So if we look at what's next to come, we want to increase our product competitiveness to targeted segments to ensure ARPU stability through productivity gain, addressing the mass segment, youth customers, as well as maintaining and monetizing our high-value customers. We want to maintain subscriber growth and base through healthy market conduct. That will also support our FMC rollout strategy, increasing penetration into multi-layer of segments by leveraging to grow unserved segments. If we look at our convergence penetration, year-on-year, we have already done to reach a state of 47% multi-product holding in our base. So that will continue our strategy to drive more engagement at the household segment perspective. Thank you. Thank you for that. Can I just double-check on the G&A costs? Didn't really catch that. On the G&A, basically, the increase on the second quarter mostly coming from the Tantiem and bonus for the group of management. Okay. Thank you. Thank you, Kel. Thank you for the questions. One moment for the next question. Next question comes from the line of Ranjan Sharma of JP Morgan. Please go ahead. Hi. Good afternoon, and thank you for the opportunity. Sorry, can I just again request clarification on why G&A costs are up 20% quarter-over-quarter? I apologize. The line is very unclear, so I'm asking this question again. The other question that I have is on the early retirement program. Are there any costs booked in the Telkomsel level as well? I'm not the Telkom Group. Lastly, on data center side, if you can help us understand how the lease rates are trending in Jakarta. Thank you. Hi, Ranjan. Can you repeat again your second and third questions, please? Sorry. The early retirement program costs, are there any costs booked within Telkomsel? On the data center, if you can help us understand how the lease rates are trending in Jakarta. Sorry. Your third question sounded the same as you asked in regards to lease rates trending in Jakarta. Am I correct? Yeah, for the data center business. Data center business. Okay. And number two, it's in regards to your Telkomsel costs of early retirement? Well, the early retirement program costs that you have booked, are there any costs booked within Telkomsel? Oh, within the Telkomsel for that ERP-related cost? Okay. Thank you. Okay. On the G&A costs, as we explained before, that's mostly coming from the payment of the bonus for the top team for the management of the company. On the cost level, ERP-related costs in Telkomsel, we don't have that program in Telkomsel. This is from Telkom, the parent company, because with regard to the, I think, transformation following the fixed mobile convergence and some also following the, I think, establishment of InfraCo, we need to basically map the talent that we need to increase the business. Those who cannot really follow after we do retrain and so on, we offer them the early retirement program. Please see this cost as, I think, basically our investment for the future. As we do expect by having this ERP, we then can free the space for the new talent with the more, I think, relevant skill set with the business. And also this ERP, the way we calculate, basically, we get the net present value of what we pay to them as compared if they stay with us. So this basically puts in financially. This will benefit us in the short and medium term. And strategically, we also can fill up the talent in the company with the right, I think, skill set. Data center, how is rate trending? Okay. Thank you. Yeah. Since the demand is still higher than the supply side, we believe that the leasing rates still trend, increasing the trend. But I think in the long term, because so many players will come into Jakarta, maybe we'll be rational, the rates, and maybe we'll slightly decline. Did that answer your question? Thank you for that. Thank you very much. Yeah. Can I just have a quick follow-up on the G&A side? Sorry, can I just have a quick follow-up on the G&A cost? Yeah. Sure. So if the G&A costs are up because of payment of bonuses, I mean, that would have been paid last year as well, right? Why is it up 20% on a year-on-year basis? It is more to the timing, but timing issue. By the end of the year, it is toward the full year. This is supposed to be normalized again. I think increased by, I think, the rate of how much the bonus increase. And second, also this G&A, one of the big contributions also coming from the, I think, allowance for bad debt in which we also believe it is in good shape right now. This is supposed to be quite normal after the end of the year. Okay. Thank you. Thank you. Thank you for the questions. One moment for the next questions. Our next question comes from Luis Hilado from Citi. Please go ahead. Hi. Good afternoon. Thanks for the call. We had three questions. The first is on the wireless side. It seems to be that your revenue market share is still slipping. What's driving this growth gap? Is it because your usage is flowing to the other operators? And is it mainly in Java that this is happening or in the ex-Java areas where you're seeing the usage shifting? Second question is on fixed broadband. It seems to be quite slow for the entire industry aside from yourselves. What's the key bottleneck in driving better broadband subscriptions going forward? And last question is on the ERP. As you mentioned, there will be savings from that as well as having room to hire new talent. But in terms of the savings, can you quantify for us what the amount you're looking at for the medium term in terms of savings? Thank you. Okay. This is Derrick. I'll answer your question on wireless. Well, what's our view on the current market mobile competition? We see that our competition is expanding aggressively outside of Java, and that's a space that we want to make sure that we will defend aggressively. With regards to our strategy, we will continue to tailor fit pricing strategies coupled with sachet packaging. We will also be double down on physical voucher and personalized offerings. So we will want to synchronize pricing with specific needs of each customer segment. We want to deliver superior customer experience. So we have also been working very hard to make sure that at our touchpoints, we have convenient as well as seamless, efficient experience for our customers and flexibility to respond to market dynamics to deliver maximum value. We aim for a revenue share along with profitability while expanding footprint to maintain market share. If you look at our new initiatives like Telkomsel Lite as well as by.U, it has gained traction when we see Facebook share as a proxy as well as our youth market share in terms of gaining customer share. Your next question on the fixed broadband business. We are really focusing on accelerating fixed broadband penetration as a first mover by leveraging on our assets. If you look at our strategy in terms of FMC, we want to maintain our leadership as the nation's largest convergence operator. So we want to drive productivity gains by bringing more value to customers at a household perspective. Hence, our increasing net adds have shown strongly in our Q2 2024, aligned with positive growth in revenue. This is to context to our strategy that we ultimately want to secure and lock up households and grow via the ARPA, the average revenue per household. Let me add on the fixed broadband growth in the household context. I think where we have seen in the market so far, of course, yes, there's a competition among the fixed broadband players. However, we've seen there is a potential growth that we have addressed since Q2, where we have launched the penetrations aggressively on ARPU below IDR 200,000, where we have EZnet. This has addressed the affordability on the fixed broadband. And at the same time, it is aligned with our strategy to increase the penetration on fixed broadband. I think as we are aware since the beginning when we transferred IndiHome to Telkomsel, our main objective is how to increase aggressively our penetration of fixed broadband from 15% in the current situation to, of course, above that. The only way we have to do it is with addressing affordability. With EZnet, we've seen that it is still maintaining the net add in terms of additional subscribers. However, of course, there's an impact on ARPU. We believe that this impact on the ARPU will be able to balance with how we can able to improve our IndiHome both from the quality as well as on our value add. We have improved our speed and also additional value add service for our IndiHome subscribers in order to improve our ARPU in IndiHome segments. So basically, in a way, our strategy is to continuously improve our mid to high segments on the fixed broadband and also continuously penetrate our fixed broadband scenario with EZnet. Hi, Luis. On the ERP, I can basically describe to you how we can calculate this one. In one of the, I think, parameters we use is NPV, of course, by calculating this one with the pay that we give to the early retirement as compared to if they stay and we still pay them the salary. And the NPV, the difference is positive. The other way to see this one is these activities actually resulted in the IRR around 21%. Or if we see in the average, I think the remaining term of most of the employees that follow this one is around five years. The payback period is around two and up to three years of period. So this is basically more positive to the company. That's maybe my explanation, Luis. Thank you, Pak. Just one follow-up question. I didn't catch the earlier answer to the question on whether there is going to be ERP in the second half or next year or you're done for the year? I think for the near future, we don't see that we need to do this one because in the fixed mobile convergence, the FMC, most of the employees that cannot really have a catching with the new skill set that we need already been, I think, identified and already followed this program. Also, with regard to the, I think, InfraCo that we established with the business model that we have, we also can reduce some people. The people also already followed this program as well. So with this, we see that in the near future, there's no additional plan for the ERP. Thank you, Pak. Thank you, Derrick. Thank you. Thank you, Pak. Thank you for the questions. One moment for the next question. As a reminder, if you'd like to ask a question, please press star one one and wait for an email announcement. Once again, if you'd like to ask a question, please press star one one. I'm seeing no more questions from the line. Allow me to hand the call back to management for closing. Okay. Thank you very much, everyone, for participating in the call today. We apologize for those whose questions could not be addressed yet. If you have any questions further, please do not hesitate to contact us directly through the investors@telkom.co.id, or you could always reach out to me directly. Thank you very much. Good afternoon.