JAKARTA (TheInsiderStories) – PT Indosat Tbk (ISAT), the second-largest telecom player in Indonesia, reported 29 per cent growth in net profit, at Rp1.09 trillion (US$81.34 million) for Jan-Sep 2017, compared to the same period last year, supported by better revenues and higher cost efficiency.
The company’s revenues rose 4.8 per cent to Rp22.6 trillion in the period with cellular business contributing Rp18.7 trillion (4.7 per cent growth). Data services grew significantly, by 38.7 per cent to Rp10.5 trillion, contributing 56 per cent to total cellular business revenues.
On a quarterly basis, however, Indosat’s revenues declined 4.7 per cent in the third quarter (Q3) this year, with cellular falling 5.8 per cent. Operating profit was down 28 per cent and EBITDA (earnings before interest, taxes, depreciation and amortization) declined 9.6 per cent to Rp3.23 trillion. Indosat reported a 50 per cent drop in net profit in Q3, compared to the previous quarter.
Its competitor PT XL Axiata Tbk (IDX:EXCL) appears to have performed better in the third quarter, as its revenues grew 14 per cent. However, the company only reported a 5 per cent growth in revenues for the nine-months period.
The market leader PT Telkom Indonesia Tbk (IDX:TLKM) enjoyed a 12.84 per cent growth in revenues.
Meanwhile, Indosat has a positive cash-flow of Rp1.65 trillion in the nine months period, but less aggressive in investment with Rp4.24 trillion of cash used in investing activities; the cash-flow dropped significantly by 24.8 per cent from the same period last year.
Indosat’s major concern now is the spectre of a tariff war for data communication between telco players, dropping below cost of service for Indonesia. The market mechanism doesn’t work anymore, and accordingly government intervention, such as floor regulations on tariff for voice communication and SMS, is necessary.
TheInsiderStories secured an interview with Joy Wahjudi, the new President Director and Chief Executive Officer of Indosat Oreedoo, to get her view of Indosat’s focus of actions in surviving growing competition between players in the data business.
Below are excerpts from the interview:
Q: What is your vision for the future of Indosat?
I want to focus on Indosat’s basic business, to strengthen the growth of the holding, instead of pursuing adventures in many new areas of business. Now we opt to stop and get back to basics, as a network provider. I will focus on developing our network, as this is the pillar of growth for all business.
Q: So, your investments could center on BTS (base transceiver station) tower development?
That’s right. The investment will focus that direction, as we want to expedite it. We allocate 80 percent of capital expenditure (capex) for our core business (BTS tower development). The remaining capex will go to subsidiaries such as Lintas Artha and Artha Jasa.
(Indosat added 6,035 BTS during Jan-Sep 2017, mostly 3G and 4G BTS. Cellular users reached 97 million, up 15.4 million in 9M for 18.8 per cent growth).
Q: Indosat earlier had a plan for setting up new unit, managing BTS Towers. How is the progress?
For the moment, we have no plan for this. While we are adding new BTS towers, we intend to boost their tenancy. Many other telecom tower operators have been busy building towers, so we better rent available towers rather than building our own. In the future, we will only spend capex for BTS network, and make no more investment in towers.
Q: Could you please comment on your fiber optic project?
Fiber optics and data are crucial and are to be developed in one package, not separately. We have many fiber optic facilities but are less exposed, with intensive development for fiber optic both in Java and elsewhere. We have also secured fiber optic projects from tenders but we are now remapping and re-conciliating those blocks, starting from eastern Indonesia. All operators are target the blocks of fiber optic to be utilized by May of next year.
Q: What the focus of fiber optic for Indosat?
We will focus on developing fiber optic in big cities which serve 4G network for data. Oreedo Doha has installed a 5G network in Qatar, so Indosat should prepare to benefit from a 5G network in the future as well.
Q: Your growth target this year?
In line with its business plan. For boosting the growth of revenues (top line), we should be more aggressive in marketing, also focusing on cost efficiency. Now we have more room for funding sources, along with a lower level of dollar debt exposure. We will maintain our capex at Rp7 trillion for this year and next year, as we want to reduce the level of debt.
(Indosat’s total debt (bank loan and bond) declined 11.8 per cent in Jan-Sep 2017 period with dollar debt falling 76.1 per cent to US$44.6 million or 3 per cent of total debt).
Written by Linda Silaen, email: email@example.com