Telkom Indonesia (Persero) Tbk PT (TLK) 2013 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Telkom first-half 2013 results conference call. At this time, all participants are in a listen-only mode. There will be a presentation, followed by a question and answer session. All the material for today's conference is available on our website at www.telkom.co.id.

Please be advised that this conference is being recorded today.

Right now, I would like to turn the conference over to our moderator for today, Albert Tan, the SVP of Business Strategy Integration. Please go ahead.

Ladies and gentlemen, welcome to PT Telkom Indonesia's first-half results ended June 30, 2013, conference call. There will be an overview from our CEO and after that, the question and answer session will be conducted for all participants on this call.

Today's presentation is available on the webcast and an audio recording will be provided after the call for the next seven days. We released our financial results of the first half ending June 30 on July 19, and the reports are available on our website, www.telkom.co.id.

Before beginning, let me remind you 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, estimations or expectations voiced during today's call.

These may involve risks and uncertainty and may cause actual results to differ substantially from those discussed in today's call. Telkom Indonesia does not guarantee to any actions which may have taken in reliance of the discussion held today.

Ladies and gentlemen, it is my pleasure to introduce you to the Telkom's Board of Directors who are joining us today; Mr. Arief Yahya, as President, Director and Chief Executive Officer; Mr. Honesti Basyir, as Director of Finance and Chief Financial Officer; Mr. Sukardi Silalahi, as Director of Consumer Services; and Mr. Indra Utoyo, as Director of Innovations and Strategic Portfolio.

Also present are the Board of Directors of Telkomsel; Mr. Heri Supriadi, as Director of Finance; and Mr. Alastair Johnson, as Director of Marketing.

Before Pak Arief delivers his remarks, I would like to take this opportunity to give a brief overview of Telkom Indonesia. Telkom is the single largest integrated telecommunication company and network provider in Indonesia with over 163 million customers at the end of the first half 2013.

Telkom provides a strong business portfolio of TIME, which stands for Telecommunication, Information, Media and Entertainment directly or through our subsidiaries. We also deliver services to multi-customer portfolios, retail, enterprise, wholesale and international.

As of June 30, 2013, the majority shareholder of our common stock was the Government of Indonesia with 53.7% ownership. And the remaining 46.3% was under the public ownership.

I now hand over the call to our CEO, Mr. Arief Yahya, for his overview. Pak Arief, this is your turn.

Thank you, Albert. Good afternoon, ladies and gentlemen. A very warm welcome to each one of you to our conference call for the six-months period results ending June 30, 2013. We sincerely appreciate your participation on this call.

In today's call, I will give you the overview of our operational and financial results for the first half. And secondly, I'd like to update you on the progress of our cellular and fixed line business development, as well as other business portfolios.

Ladies and gentlemen, let me start the overview by sharing the highlights of our six-month results. First, Telekom's consolidated revenue increased 9.4% year on year. This is in line with Telkomsel performance with reported 12% year-on-year revenue increase.

Second, Telkomsel gained 4.5 million retail customers during the second quarter, make total customer base to be 125 million. And third, Telkomsel continued to expand its network coverage and capacity by adding close to 8,000 new BTS during the first half 2013, with almost 70% of them are 3G BTS.

Ladies and gentlemen, our fixed broadband users increased 42% year on year to 2.8 million, and the revenue increased to IDR2.2 trillion in the first half 2013.

Our mobile data users also increased. In the first half, it increased 9.9% from last year to 51.8 million users. We booked IDR4.8 trillion revenue from mobile data services, a [37.9%] increase year on year. Total mobile data services and fixed broadband revenues increased around 25% year on year to IDR7 trillion.

During second quarter, Telkomsel recorded 4.5 million net add customers; that made total customer base to be 125 million. In the first half, we added 7,928 units new BTS and almost 70% of them are the 3G networks. Until end of the first half, Telkomsel own 62,000 BTS and 20,800 of them are 3G Node-B networks.

Ladies and gentlemen, consolidated revenue growth remains strong with 9.4% increase year on year, and Telkomsel's revenue growth maintained at double digit, 12% increase year on year. Revenue contribution for the first half 2013 was still dominated by cellular voice revenue, which made 38% to our total operating revenue.

Data, Internet and IT Services came second, contributed 37%, followed by Fixed Line Voice that contributed 12.5%. The remaining 11.7% is contributed by connections that was in Other.

Total expense increased by 7.8% year on year, totally due to the increase in operation and maintenance, which in line with the acceleration of network deployment in our cellular subsidiary. During the first half of 2013, we build more than 1,500 BTS per month.

Ladies and gentlemen, during the first half of 2013, Telkomsel [could] maintain double-digit growth year on year for its revenue, EBITDA and net income, Mobile Data Services still being the growth driver with almost [38%] revenue growth; a bit better than the first quarter growth which had [36.5%.]

This is backed by the increase of Flash BlackBerry and our pay-as-you-use customer, as well as our focus on increasing customer [world] share and sustaining revenue growth by maintaining a good quality of customer.

During the first six months, we deployed more than 1,300 new BTS per month with almost 70% of them are 3G Node-B. We are consistently improving our 3G coverage and capacity to cope with growing demand for better access.

Telkomsel data and digital business grew [36%] year on year for the first half 2013, contributed 18.6%. This is higher than contribution in first half last year which is 15%.

We expect Telkomsel to maintain its performance by consistently exploiting its [legacy] business such as voice, SMS and network [leads], strengthening its core business such as mobile Internet and mobile broadband, and [continuing to develop the system] such as improving the digital services and platforms. By that, we expect double-digit revenue for 2013 could be maintained.

For the Fixed Line business, let me share our Indonesia Digital Network 2015 progress for the first half of 2013. On the Indonesia Digital Access until end of June, we have 5.7 million broadband (inaudible) blended of fiber-to-the-home, fiber-to-the-curb and ADSL. On top of that, we have installed 64,000 Wi-Fi access points in public area. These Wi-Fi access points are accessible for cellphone and Telkomsel customers, and expected to offload Telkomsel wireless broadband traffic.

Meanwhile, on the transport side, we call it Indonesia Digital [Ring], we have completed 68,000 kilometers of national and regional backbone network [of anticipated] 75,000 kilometers in 2015.

Fortunately, we are consistent with our current strategy by maintaining our flagship operation to be a very healthy share. And we'll allocate this spectrum to be used for broadband services for Telkom Group. We believe that, with such an arrangement, we will be able to improve productivity of our flagship asset and, at the same time, improve our offer of broadband service quality to our subscribers in a more efficient way.

As mentioned in previous conference call, we are looking at opportunities to do business overseas. We are committed to have more international business exposure to gain more experiences and enhance our [total services] (inaudible).

In Hong Kong, with MVNO scheme, at end of June this year we have already have around 49,000 customers with ARPU of [$16]. Meanwhile, in Timor-Leste, we have more than 21,000 customers with ARPU of $4.3.

We are now looking on initiating our MVNO operation in Malaysia. We expect by the third quarter this year it will be started. Other than that, we also look forward to initiating MVNO operations in Macau and Taiwan, countries where we have significant numbers of Indonesian migrant workers. We expect to be able to make it by next year.

In line with our goal to becoming leading TIMEs player in the region, in the [Media] business, Telkom is continuously enhancing the portfolio, not only organically, but also non-organically, by executing some appropriate action.

As most of us already aware, recently Telkom signed strategic partners. The partnership is focused on providing more value to our subscribers, and create a strengthened alliance, empowering Telkom Vision to advance and to be increasingly competitive in the media market.

With the partnership the completion will become the main source of good quality content for our overall TIMEs media, that enable us to further develop our Media business, including online CT service, and plan more for less CT service, what we call (inaudible).

Those actions are in line with our overall strategy where Telkom wants to further strengthen media through partnership strategy.

Our business. Currently, we are still in the process of initiating corporate action to unlock the value of our business. From our deep analysis of our businesses in Indonesia and our current situation, the most preferable option for Telkom to unlock our business is by inviting strategic partners that will enhance our business capability and competitiveness. And after that, unlocking the value of our enhanced (inaudible) business, (inaudible) this Company. However, we are still considering preparing IPOs as another option.

We believe this corporate action will enable us to unlock the value of our available [power] assets in the right time, with the best value for Telkom.

As part of our overall strategy to optimize our growth opportunities, we are combining with organic and non-organic activities. We divide our non-organic activities into two parts. (technical difficulty) activities, we call them as acquisitions and clients [A and A].

With these A and A activities, Telkom will maintain the value discipline, where we'll [always provide] three possible acquisitions, just by calculating the value enhancement opportunities for (inaudible) business portfolio. By doing so, we will ensure that all A and A activities will create a synergy value with current Telkom Group business.

Ladies and gentlemen, let me now reiterate guidance for 2015, (inaudible). For 2015, we expect Telkomsel revenue will grow in line or better than market growth. Meanwhile, for fixed line business, positive revenue growth recorded in first half 2013 could be maintained. With that, we expect our consolidated revenue growth between 8% to 9% year on year.

For EBITDA margin, it will be stable or slightly declined, for Telkom consolidated and Telkomsel.

By forming partnerships and looking opportunities to pay as you grow and revenue sharing scheme, we expect CapEx spending for 2013 to be 20% to 25% of revenue.

That's ending my remarks. Thank you.

Thank you, Pak Arief. We will now begin the question and answer session. When raising a question, we'd appreciate if you could speak clearly, and state your name and your company. Operator, may we have the first question please?

Sachin Salgaonkar, Goldman Sachs.

Congratulations for a good set of numbers. I have three questions. First, if you could provide a little bit more clarity on Flexi being used to improve the broadband connectivity [sentence] you mentioned. And then can this spectrum be used for providing [E-GSM] services and if so, what is the timeline we need to look for that?

My second question is on tower. Now you said two options; one is to looking for a strategy partner; and second is a potential IPO. So any timeline on each of this would be helpful.

And the third question is on the non-organic external opportunities which you mentioned. Anything you could guide us in terms of what could be the maximum size of investment you are looking, and secondly, on the areas of interest, as if any other potential operator has been looked on, or some other value added services, that could be helpful. Thank you.

Indra Utoyo will take the next question.

So thank you for the (inaudible). I think, as we already decided, we will plan for this business and we will try to use the resource so the network will be agreed to be [proposed] by network sharing; we will share the infrastructure.

Then for the spectrum, yes, we are about to implement on the E-GSM approach by consolidating with Telkomsel. So I think the license or permission has been -- okay, maybe the detail will be (inaudible) when the E-GSM will start to implement. But that's become our direction, to combine between Flexi and Telkomsel to support the E-GSM implementation.

Second, about the tower; tower and (inaudible) tower, yes, the timeline hopefully on this Q3, we will come to the -- as stated we are starting to - able to start the embracing of strategic partners, then and after that we hope we can move into unlocking the value after that. So by having these strategic partner, hopefully it will improve the story and the capability of the tower management and also input the [talent] team, and we'll unlock -- including help to unlock tower therefore it's gets recycling at Telkomsel after that.

So Q3 (inaudible) for tower, and for the external, especially (inaudible) expansion. So the guideline we are actually looking for portfolio where provide the good projections for future, not about (inaudible). We are not interested in buying (inaudible) of the portfolio in (inaudible) international mobile or whatsoever, but we are trying and searching the portfolio in the [regional] where it can provide the better projection and good story.

So we have done a budget, but maybe you still cannot disclose at this moment. Thank you.

Okay, we can (inaudible) to the area where we think a good area for growth, like [Myanmar] we will focus our resources to grab Myanmar potential market. There is one already that we are winning the international proposition for Internet connectivity in Myanmar and get the contract from Myanmar. Okay, thank you. (inaudible)

Okay. In regards for our progression for E-GSM, our [existing] frequency can be reused for the E-GSM and we are just waiting for the approval from the regulator. And we expect that the decision will come in the second half of this year.

But not for the nationwide. The nationwide we expect for next year, so it will only be on the eastern part of Indonesia for the year of 2013. Thank you.

This is very clear. One small follow-up option on the tower point which you mentioned. Now I presume that if you find out a strategic partner there could be permission needed from the government, our government authorities, is there any risk we could see for getting that permission, given that we are coming very close to the general elections in Indonesia?

Okay. I think yes, we will -- we also (inaudible). What we are trying -- a solid plan, which we believe it can create the optimum value, and second, also giving the certainty [of the State]. Because timing is also important for this tower.

We believe that this the best moment for us to unlock this [area], but we still maintain also how to be seen as also good [telecom] company; that's already been in our strategy.

Roshan Raj Behera, Merrill Lynch.

Three questions from me. First one, just the big picture of strategy level. Looking at asset utilization, you seem to be working a lot towards monetizing your land. On the other hand, you are looking at options to divest or list towers and pay-TV.

Now, this is very different from what other telcos in the region are doing, which is to grow assets like pay-TV and sell assets like land. I just want to understand what kind of opportunities and risk do you see in this approach, and why take this approach at all?

The second question is on the treasury shares expiring in August. What has been the plan for the remaining shares?

And third is on interim dividend and stock split. Any color there in terms of the quantum of dividends and the timing? Thank you.

Can you repeat your first question again please? And can you please speak a tad slower? Thank you.

The first question is towards improving asset utilization. So news reports suggest that possibly you are working towards utilizing your land to develop buildings. On the other hand, you are looking at options to divest towers and pay-TV.

This is different from what many telcos in the region are doing, and this is to divest assets like land while looking at growing assets like pay-TV. So I just want to understand why this different approach from PT Telkom, and what are the risks and opportunities you see with this approach?

I'll hand over to Pak Indra for the first question, and second and third question will be Pak Honesti.

Okay, yes, about the asset utilization. Yes, since the Telkom have been our [sell up] of land and of the building, yes, we have a plan to unlock the asset, but the final corporate action to [intrigue] partners that they are hopefully is coming from the real player, the best player in the industry.

So we try to find partners to leverage and also unlock our land asset. Also, we will transform our property (inaudible) into -- all to the (inaudible), or [GSG] our subsidiary. So, hopefully, they will leverage and unlock our asset through the corporate action.

The second about (inaudible), actually, as we already define our portfolio with TIMEs, the [Commission Media Entertainment] show that we are about to actually growing the portfolio of media. But we already studying about how we can leverage and create value on the media business. We do the study (inaudible) and there are assessment that mostly the media business in Indonesia is based on our advertising business.

So at the current model of [tough condition], that we don't have the skill in terms of content production, so everything about the content, we buy. So that will pressure -- will give the pressure to us about the costs.

So cost of content is very high by doing that model, so that's why we try to embrace the better models. So from the suggestion that we -- it will be [consolidated free to app] since it is a very good and very dominant in Indonesian media business, or we go into low-cost pay-TV.

So we will implement those two directions, so we embrace the partner which has a very strong content and also media expertise, and we will combine this (inaudible) and the (inaudible), becoming the first of content and media asset for all the other (inaudible) Group. So maybe that's the direction we will go. Thank you.

Just regarding the follow-up on the first question. So just on the land, can I just confirm that by regulation, you are not allowed to sell any of those assets, land particularly?

Yes. We can (multiple speakers) If we want to sell our assets, we get a report from [the government] first. It doesn't mean we cannot sell. If we want to sell, [governments will approve of that].

I see.

Okay. For second question, regarding the treasury stock. Treasury stock from the (inaudible) it's one program, so we execute before August 2013. Now, we are considering to do the block sell for (inaudible) one stocks. Now also, in process, to do the block sell. Hopefully, that before August 16, we can do -- we can finish the block sell.

Also, for subsidies, we are also in the process, we just get approval from the Ministry of Law before we (inaudible) in the (inaudible) Exchange. So I think the timeline will be middle of August, we can do the [subsidy].

For interim dividend, now we are in discussion with our [government] because we propose to pay interim dividend around third quarter. I think it may be around fourth quarter, August, maybe we can inform better about the progress of interim dividend.

All right. Thank you so much.

Arthur Pineda, Citigroup.

Four questions from me. Firstly, can you elaborate on your international business aspirations? Is this more on acquiring assets, or are you focused more on MVNOs? Is there an amount tagged to this as well?

Secondly, with regard to the asset sales, particularly the share sales that you may undergo in August, what are your plans with the proceeds from this?

Third question I had is with regard to your property assets. How much property can actually be freed up; what locations and what valuations are assigned to this?

Lastly, you mentioned the sale on the tower assets; you're looking at a strategic partner. Will this be a local strategic partner? If I recall correctly, you can't spin off assets to foreign entities on an unlisted entity. Has this changed in Indonesia? Thank you.

Okay. I'll hand this over to Pak Indra/Pak Honesti to look after the questions.

Well, about the international aspirations, I think that our CEO has defined the direction (technical difficulty) -- introduced two strategies because we follow the people and follow demand.

So we start with the hanging fruit strategy first. We like the strategy for (inaudible), we start with MVNO. Actually, we try to reach our Asian market first where our [exist] in many countries like Malaysia, Hong Kong and Middle East. So this becomes also good learning for us to -- for our [talent to export] with the international expansion, while, at the same time, we look for the opportunity to find room for growth maybe with (inaudible) maybe also [find] asset, that is one option, but also entering a [Greenfield]; that was another option for the telecommunication portfolio.

We also have the second strategy is [follow the money]. Follow the money is like what we are doing currently in Australia, we start to provide the [BPO] services since we like that in Australia, that the cost there is almost everything [10 times] Indonesia, so we can play possibly there if we can provide service which are less, maybe 40% or 30% which is already quite competitive for that market.

For that kind of approach, we will start and we will do it in a very disciplined and also [well] plan to enter into other markets and also in finding a good portfolio starting with the area where we do it, it can create a good projection in terms of the future. Thank you.

The second question about the tower company, yes, I think the regulations still require that tower (inaudible) Indonesian company. So our partner will be a local company, one of the -- this will be from the best player in the tower business in the Indonesian market. Thank you.

So the first question regarding the proceeds from [treasury] stock, I think that we will spend this cash (inaudible) and expand our infrastructure, especially for high-growth business like broadband and cellular. As you know that now we have the big project, what we call the IDM, and I think that the profit from this we will be able to finance the IDM project.

How much can be freed up? The questioner asked how much can be freed up?

Yes. I think now we are in the process to have from the (inaudible) what we call the (inaudible). And I think if we want to unlock the value from this asset or from this business, I think that in 2014, maybe we can discuss about it. Now, we are in the process to clear the growth story for property business.

Understood. Very clear. Thank you.

Rama Maruvada, Daiwa.

Just one question from me, please. Can you talk about the early retirement program? Do you intend to undertake any (inaudible) this year? What sort of one-off costs are we looking at for this year? Thank you.

Pak Honesti will take this question.

I think we will continue the early retirement program this year; hopefully, the timeline is about October this year. Maybe we already secured the early retirement program last year, spending is around IDR700 million. You see, I think we budgeted about IDR400 million for it, [early in January quarter].

Thank you very much.

Colin McCallum, Credit Suisse.

Two questions from me. First of all, on the broadband revenue growth, it was mid single digit; was that disappointing? The ARPU seems to have fallen a long way because of the prepaid offering. Are you having any success yet in monetizing the upgrade to fiber? When will we see the broadband revenue growing a bit faster? That was the first question.

And then the second question is just on the towers issue. Obviously, you have a subsidiary already which builds towers; you have obviously finance capability internally. Why are you even considering a partner? Why not just go straight to IPO? Could you just explain the thinking there as to what you're missing that would require getting someone else involved, which obviously will potentially slow you down or leave you with less upside than doing it alone? Thank you.

Pak Indra will take the first question.

About the tower, actually I would like to unlock the business. It's what industry would like to see, not from our own interest. But our interest is how to make that -- we see it as a good portfolio and will be valued as optimal as possible. So tower actually is the shared facilities, the (inaudible) shared facilities. So the industry, they work to see it as an independent, more independent, better than non-independent.

So we already get the study provided by our advisor. If it is becoming independent, [separatist] or effectively sharing the facility, it will be valued higher than if we do it alone as an operator. I think that's quite logical. So if we do it alone -- I think we already calculated the value.

So compared to if we try to create the growth story first, embrace the best partner first, to improve the tenancy and also management capability in the tower, hopefully that can create a better portfolio and better structure, which in future will be providing a better value for us.

So after comparing that -- so we understand the IPO (inaudible), and doing the partners, the partner will give more value to us compared to IPO by being (inaudible). I think that's the answer.

The next question, we'll hand it over to Pak Sukardi Silalahi on broadband.

I think, yes, right now the growth of speedy broadband is still single digit but, as you see, January to June we had improvement for the growth of the revenue of the broadband again. For January, we get 4-something-% growth and then in June already improved to 6.5%.

And then how to monetize the fiber optic. Right now, we have also the new product, the first product, we call it -- our product is Speedy (inaudible). Speedy (inaudible) is for the low affordable customer. We just sell it about IDR5,000 per day. And then the second product is in the home, we call it (inaudible), a solution for home, for house, and it is also (inaudible) and Speedy. That's all, I think. Thank you.

Luis Hilado, HSBC Bank.

I just had two questions. The first was again on the tower business. I'm just wondering if part of the process of unlocking the value will continue to be buying out Singtel's effective stake in Telkomsel's towers before the process can push forward.

And the second question is, if you can give us an update on the Telkomsel side about the penetration of 3G feature phones in the system as well as smartphone penetration and whether there's any impact yet to SMS revenues as a result.

The first question, I'll hand it to Pak Indra; the second question, I'll hand it over to Pak [AJ] from Telkomsel.

For the tower, yes, we decide the stages to unlock the two stages. The first is focus on the tower in Mitratel, which is our subsidiary which manage their own tower and also the tower from Telkom, from our infrastructure division. That's currently managed by Mitratel, so 100% owned by Telkom. So that's the first stage, to unlock tower.

And so on the first stage, we will then try to improve the [tenancy] ratio from being only 1.1, so that's why we need partner. That way (inaudible) in the market, that we are assured that they will be able to also improve the capability of Mitratel.

Then the second stage, actually, that will go the (inaudible). That is resite on the Telkomsel tower which have currently around 15,000/18,000. So the real unlocking will be the tower that the (inaudible) Telkomsel. So the second [six] will be listed after they are in the listed company which can be IPO or (inaudible) that they go for. So then Telkom tower can get into the Company. So in that case, I think after we discuss it with Singtel because they would like to be protected the interest still in the tower. So in theory they still own [35%] of tower in Telkomsel. So by doing that so the interest of Singtel can be accommodated, can satisfy by that (inaudible). Thank you.

Next question to AJ.

Okay, so the first question around 3G devices. So we currently have about 20 million 3G devices, 3G capable devices on the network, which is about 17%. In terms of smartphones, we also have about 20 million, and those two categories are obviously over (inaudible) because there are some 2G smartphones out there.

We're now starting to see, I think, increasing growth in both 3G and smartphones driven primarily by device pricing. So we've always said that around the $50 mark is really where smartphones 3G becomes mass market, and we're seeing a lot of players in that space who are (inaudible), but also a lot of what we call local China brands which have got in. So I think we're expecting that to accelerate.

In terms of SMS revenue, the answer's no, we're not seeing cannibalization yet, so although our data service revenue growth was 38%, actually our SMS service revenue was 8.6%.

And we do see that when a customer migrates to either 3G or a smartphone device, the overall ARPU increases, and we seeing an overall ARPU increase of anywhere between 30% and 50%. So very much converting a customer to being a daily using, smartphone using, 3G using customer, [and that is good] value.

Let me ask one follow-up for clarification rather. You mentioned that the 3G devices and the smartphone devices are roughly the same, so that means most of the 3G devices are actually smartphones?

No, you have 3G feature phones and you have 3G smartphones. But on the whole, the trend we're seeing is towards 3G smartphones, but absolutely you still get 3G feature phones and 3G smartphones out there in the marketplace.

Okay. Thanks a lot.

Tien Doe, GIC.

I just have a question on your BTS additions in the second quarter. I think they've been the highest that I've ever seen in a quarter; I think you were running at about [15] per day. I don't think there's been a higher figure previously compared to that. So what should we expect for the rest of the year? These BTSs are going into areas where you're not present yet, or your increasing capacity in urban areas, but I guess it was quite an impressive, aggressive figure for the second quarter.

Second question is just on your admin expenses. They ticked up a bit both year on year and QonQ in the second quarter. Were there any one-offs in that figure?

The third question was just on your fixed line revenues; I think they grew QonQ in the second quarter. That doesn't normally happen; normally there's a bit of a decline or they're flat, so should I read anything significant into that QonQ growth for your fixed line revenues?

Okay. I'll hand it over to Pak AJ for the first question on your BTS question.

Okay, so you're absolutely right; we had an aggressive quarter of network rollout. I think the guidance for network rollout is still pretty much the same, so we're looking at CapEx of around $1 billion. We're looking at about, on average, 1,000 new BTS per month of which 70% are 3G, and I think will continue at that rate. We're probably a little bit ahead of the curve at the moment, which is no bad thing.

In terms of where we put it, we actually have a demand model which is generated based on -- well, it's generated by sales and marketing data to determine where demand for 3G exists. So obviously, we look at 3G handset penetration, and we look at a bunch of other population data, demographic data, and then we target. Obviously, we have one eye on current demand and current capacity, and we have our other eye firmly on future demand and future requirements. So it's a bit of a tradeoff.

We have 100 cities that are key focus cities for broadband, but indeed we have a presence in about 300 cities, or at least we will do towards the end of this year.

Okay. Thank you.

For the second question, I'll pass it to Pak Honesti.

Yes, thank you. We don't have yet projection for QonQ revenue or [EBITDA]. But as mentioned by our CFO at the beginning, as a guidance for you we expect that our consolidated revenue will grow between 8% to 9% year on year.

And for EBITDA, I think just talk about the EBITDA margin, and I think that our EBITDA margin will be stable or maybe slightly decline in terms of (inaudible) Telkomsel. And if you see that our EBITDA for first semester is around 7%, I think we try to keep it the same or maybe a little bit better. I think that (inaudible).

Is there any more questions? No, okay, thank you. I think, operator, we can probably [close the call].

Okay. Thank you very much. Now thanks, everybody, for participating on today's call. Apologize for those whose questions could not be addressed. Should you have any further questions, please do not hesitate to contact us directly. Thank you.

That does conclude our conference for today. Thank you for participating, you may all disconnect.