Sector Update / Telecommunications / Click here for full PDF version
Author(s): Giovanni Dustin ; Ryan Dimitry
- Aggregate 1Q24 EBITDA grew to Rp31.7tr (+9% yoy/+4% qoq) and came broadly in-line at 25% of our/consensus full-year estimates.
- EXCL /ISAT posted solid results; TLKM 's results were relatively softer, but was still in-line, and also showed better operational performance qoq.
- Maintain OW, with ISAT and EXCL as our preferred picks.
EBITDA came broadly in-line with our and consensus estimates
Aggregate 1Q24 core profit was up by +23% yoy/+11% qoq to Rp8.1tr. Meanwhile, EBITDA was in-line at Rp31.7tr (+9% yoy/+4% qoq), forming 25% of our/consensus estimates with EBITDA margin expanded to 50.6% in 1Q24 (+67bps yoy/+246bps qoq). Revenue grew to Rp62.6tr (+7% yoy/-1% qoq), also in-line. EXCL and ISAT booked 1Q24 results that were relatively better than TLKM , in our view, on the back of robust revenue and EBITDA growth.
ARPU was supported by Nov23 price hikes and uptrading
Implied blended ARPU grew by +3% yoy to Rp41.4k in 1Q24, supported by a combination of uptrading and a full-quarter impact from Nov23 price hikes, though still -2% qoq partly due to seasonal factors. Meanwhile, subscribers base rose slightly by +3% yoy/+1% qoq to 354.6mn. Note that all telcos saw positive subs growth qoq, which is against seasonality, and likely an indication that the majority of additional subs came from the low- ARPU /rotational churners and/or dual-SIM segments. Data yield declined further to Rp3.1/MB (-3% yoy/-6% qoq), on our estimates, though concurrently, data consumption per sub grew by +11% yoy/+3% qoq, which likely indicated an uptrading. Data traffic rose by +14% yoy/+4% qoq, supported by the election.
Subscriber market share remained largely stable qoq
In 1Q24, EXCL /ISAT saw higher sequential cellular revenue market share at 18/25%, at the expense of Tsel, which saw lower market share of 50%. Similarly, Tsel's data revenue market share slipped to 47%, while EXCL /ISAT rose to 22/31%. However, EXCL /ISAT/Tsel saw largely unchanged subs market share at 16/28/45%, and we expect this to remain relatively stable going forward amidst healthy competition (see our previous note).
Operational metrics grew healthily; ARPU could potentially improve
In general, all telcos posted solid operational figures, in our view. We think both, EXCL and ISAT , showed relatively better operational figures, given solid growth across key operational metrics ( ARPU , subs, and data traffic). However, Tsel's metrics also improved qoq (see our previous note). Going forward, we believe that telcos' ARPU could potentially improve in 2Q onwards on the back of further price hikes and uptrading.
Maintain OW; ISAT and EXCL remain our preferred picks
Maintain OW, as we think competitive dynamics are generally moving in the right direction and thus expect to see further monetization. Although we continue to prefer ISAT and EXCL on better growth trajectories and re-rating potentials, we also believe that TLKM 's risk/reward profile looks favorable (see our previous note); we have Buy ratings on all telco names. The sector is trading at 4.7x EV/EBITDA (vs. 10-yr mean of 5.7x). Risks: 1) heightened competition; 2) higher interest rates; and 3) weak purchasing power.
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