Telkom Indonesia (TLKM IJ)

KTA from meeting with TSEL CFO: reaffirmed defensive mode with profitability as top priority

• TSEL’s CFO reiterated its defensive stance amid peers’ expansions by positioning in new segments and empowering sales. 
• TSEL launches ‘EZnet’ product under Indihome at lower price points to tap new markets and maintain ~70% market share amid shift to FMC.
• Maintain BUY rating on TLKM and TP of Rp4,400, as we see TSEL’s FMC grand plan to be taking shape in 2H24.

New CFO reiterates TSEL’s defensive stance amid competition in ex-Java.

As a nationwide player with 1Q24’s 49.0% mobile revenue share/ 52.4% EBITDA share/ 45.0% subscribers share, TSEL is laying out its strategy with TSEL Lite amid increased competition from peers in ex-Java. Although TSEL Lite is an acquisition starter pack by nature (as showed in TSEL’s positioning on 30day small quotas with Sakti and Hot Promos in our tracker), TSEL does not guide on subscriber growth and instead aims to defend its market shares and to compensate rotational churners in ex-Java. TSEL guides for stable ARPU in FY24 at current level Rp45.3k. Additionally, the new HR Director in TSEL is in coordination with the CFO for plans to empower the sales teams in ex-Java and counter the threat from peers.

En-route to for 800k-1mn new Indihome subs in FY24.

As part of the Indihome initiative, TSEL has recently launched ‘EZnet’ the new home BB internet product EZnet based on FTTH. The product is designated to be available in 450+cities (as per website) with max. 10mbps speed at Rp150k/month in Java, Rp170k in Sumatra, and Rp200k for the rest of country. As previously guided, TSEL aims for subscriber growth (“the next new ~10mn Indihome accounts”) through exploring new segments with lower price points to maintain its ~70% subs market share amid its move to FMC.

FMC masterplan set to take shape in 2H24 with billing integration due.

We see pathway for TSEL's two key initiatives (i.e., strategic mobile positioning in the mass market and Indihome’s new EZnet FTTH product) to converge and support its aim to build robust new subscriber base. TSEL guides that the integration of billing systems for mobile (incl. prepaid) and Indihome will be completed in 3Q24 - early 2025, to bind the unification of these FMC efforts.

Maintain Buy rating with unchanged TP of Rp4,400

We see the CFO's primary goals (ie, efficiently manage the legacy decline, achieve 45-46% EBITDA margin upon acquiring new spectrum, streamline Indihome's revenue reporting by 2Q24) to be aligned with goals to preserve TLKM’s profitability. Key risks are FMC implementation delays.

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