Telkom Indonesia (Persero) Tbk PT (TLK) 2015 Q2 法說會逐字稿

Thank you for standing by and welcome to the PT Telkom first-half 2015 results conference call. (Operator Instructions). I must advise you that this conference is being recorded today, August 4, 2015. I would now like to hand the conference over to your first speaker today, Mr. Andi Setiawan, Vice President of Investor Relations. Please go ahead, Mr. Setiawan.

Thank you. Ladies and gentlemen, welcome to PT Telkom Indonesia first half ended June 30, 2015 conference call.

We released our results on July 31, 2015 and the reports are available on our website, www.telkom.co.id. Today's presentation is available on the webcast and an audio recording will be provided after the call for the next seven days.

There will be an overview from our CEO, and after that all participants are given the opportunity to participate in the Q&A session.

Before we start, let me remind you that today's call and the responses to questions may contain forward-looking statement within the meaning of Safe Harbor. Actual results could differ materially from projections, estimations or expectations voiced during today's call. These may involve risk and uncertainty and may cause actual results to differ substantially from what we discuss in today's call. Telkom Indonesia does not guarantee to any actions which may have been taken in reliance of the discussion held today.

Ladies and gentlemen, it's my pleasure to introduce you the Telkom's Board of Directors who are joining with us today: Mr. Alex J. Sinaga as President Director and Chief Executive Officer; Mr. Heri Sunaryadi as Director of Finance and Chief Financial Officer; Mr. Abdus Somad Arief as Director of IT Network and Solution and Chief Technology Officer; Mr. Honesti Basyir as Director of Wholesale and International Services; Mr. Dian Rachmawan as Director of Consumer Services; Mr. Herdy Rosadi Harman as Director of Human Capital Management.

Also present are the Board of Directors of Telkomsel: Mr. Ririek Adriansyah as President Director; Mr. Heri Supriadi as Director of Finance; and Mr. Mas'ud Khamid as Director of Sales.

Before Pak Alex delivers his remark, I will take this opportunity to give a brief overview of Telkom Indonesia.

Telkom is the single largest integrated telecommunication company and network provider in Indonesia. Telkom provides a strong business portfolio of TIMES, Telecommunication, Information, Media and Edutainment, directly or through its subsidiaries. We also deliver Services to multi-customer portfolio: retail, enterprise, wholesale and international.

As of June 30, the majority shareholder of Telkom was government of Indonesia with 52.6% ownership, and the remaining 47.4% was under public ownership.

I now hand over the call to our CEO, Mr. Alex J. Sinaga, for his overview. Pak Alex, time is yours.

Thank you, Andi. Good afternoon, ladies and gentlemen. Welcome to our conference call for first-half 2015 result ended June 30, 2015. We sincerely appreciate your participation in this call.

I would like to update you on the progress of our cellular and fixed line businesses performance, as well as other businesses portfolio.

Ladies and gentlemen, until end of this first half of 2015, we continued our excellent performance, both in terms of operational and financial results. Let me start the overview by sharing the highlights of our first half of 2015 results.

Number one, Telkom first half of 2015 consolidated revenue grew by 12.2% year on year, with EBITDA and net income grew by 6.3% and 2.2% year on year, respectively, while our cellular subsidiary, Telkomsel, recorded triple double-digit growth, with revenue grew by 13%, EBITDA by 10.7% and net income by 14.7% year on year.

Number two, mobile digital business continued strong growth at 37.6% year on year, resulted in healthy data, Internet and IT service, exclude SMS, revenue growth by 33.7% year on year. At the same time, Telkomsel successfully exploited its legacy businesses, with voice grew by 9.1% year on year and SMS grew by 5.2% year on year.

Number three, Telkomsel continued aggressive network deployment with 11,495 new BTSs installed, in an effort to maintain leading network supply to strengthen mobile broadband experience. Around 90% of new BTSs were 3G and 4G BTS.

Ladies and gentlemen, our strong result in the first half of 2015 was in line with solid performance of our cellular businesses. In terms of operational aspects, Telkomsel gained almost 3.5m net additional customers during first half of 2015, brought total customer base to 144.1m despite relatively high SIM card penetration in Indonesian market.

Mobile data payload jumped significantly to 207.2 petabytes or increased 121.4%, mainly supported by fast growing 3G and 4G capable device adoption, which grew by 54.2% to 48.1m users.

Telkomsel continued expanding its network infrastructure by adding 11,495 new BTSs during first half 2015, with around 90% 3G and 4G BTS. It is reflecting our focus continued on data business.

In the meantime, our fixed line subscribers increased to 10.2m from 9.5m, while fixed broadband users increased by 15.9% year on year to 3.7m contributed by our newly launched IndiHome Triple Play.

Ladies and gentlemen, our excellent operational achievement has resulted in strong financial performance. Telkom consolidated revenue grew by 12.2% year on year, mainly contributed by our cellular subsidiary with around 70% contribution.

We successfully maintained a healthy level of profitability, with EBITDA margin 48.2% and net income margin of 15.2%. Our margins were slightly lower, partly attributable to accelerated depreciation for our fixed wireless business and early retirement program for the Group's employees.

On the expenses side, it increased by 14.4% to IDR33.7 trillion. Operation and maintenance expenses grew by 30.3%, in line with the acceleration of network deployment both in our cellular and fixed line businesses, in particular to support digital businesses growth. The personnel expenses grew by 23%, which was mainly due to early retirement program for Telkom Group employees.

General and administration expenses increased by 9.2%, in line with increasing administration and outsource expenses. Marketing expenses decreased 2.8%, attributed to more efficient marketing programs, driven by relatively stable competition and effective sales channel.

In the meantime, depreciation and amortization increased by 7.7% to IDR8.8 trillion, partly due to impairment of Flexi assets.

Ladies and gentlemen, in mobile business side, Telkomsel continued its strong momentum in first half 2015, with triple double-digit growth in revenue, EBITDA and net income, which grew by 13%, 10.7% and 14.7% year on year, respectively.

Revenue grew by -- sorry, revenue grew to IDR35.399 trillion, with the growth engine coming from digital businesses that increased by 37.6% year on year. Digital businesses accounted for 27.4% of total revenues, increased from 22.5% in the previous year.

Telkomsel remarkably recorded healthy growth in legacy business, which grew by 5.8% year on year. Voice increased by 9.1% and SMS 5.2% year on year. This is attributable to the successful execution of cluster-based pricing and market segmentation strategy.

Despite high SIM card penetration, Telkomsel still recorded growth in subscriber base of 4.9% year on year to 144.1m, due to effective sales and marketing programs. EBITDA and net income margins were superior at 54.4% and 28.5%, respectively.

During the first half of 2015, we deployed more than 11,000 new BTSs, of which around 90% were 3G and 4G BTSs, in an effort to maintain leading network supply and grow our digital business.

Data traffic increased by 121.4% to 207.2 petabyte, mainly driven by high growth in 3G and 4G capable device that reached 48.1m, an increase of 54.2% year on year. It represented 33.4% of our customer base.

As of June 2015, BTS on-air totaled 96,915 units, an increase of 21.8% year on year. More than half of our total BTSs were 3G and 4G BTS.

Telkomsel made another milestone on July 6, where it officially used 1800 megahertz spectrum for LTE 4G services. We continued to strengthen our footprint with Makassar and Lombok to enjoy our 4G LTE services, following Jakarta, Bali, Bandung, Surabaya and Medan. Currently, Telkomsel's 4G subscribers reached 655,000 subscribers.

Ladies and gentlemen, we have decided and set up a roadmap to revive our fixed line businesses. This year, we are focusing our effort to build our resources capacity and capability in terms of human resources and field equipments, so that we could accelerate deployment of fiber optic network to serve our customers with our fixed broadband services.

We have superior product called IndiHome, a triple play bundling services consist of fixed line voice, Internet access and pay TV with competitive promotional price. Until end of June, we had reached 427,000 IndiHome customers.

Now, let me explain about our third focus, international business expansion. To realize our vision to be a regional player in telecommunication, IT and digital media, in the second quarter 2015 we made two corporate actions. The first is engagement to acquire a telecommunication operator in Guam and the second is expansion of our data center in Singapore.

In June, Telkom through its subsidiary, Telekomunikasi Indonesia International USA, we call it Telkom USA, has entered an agreement to acquire AP TeleGuam Holding, parent company of GTA Teleguam, a telecommunication operator in Guam. The planned transaction is subject to approval from Guam and United States authorities. This acquisition is expected to elevate Telkom's exposure in international businesses.

After obtaining the license from the Singapore regulatory body last year, Telekomunikasi Indonesia International Singapore, call it Telin Singapore, in June started the development a new data center in Jurong, with around 20,000 square meter in size. This is the third data center owned by Telin Singapore and is expected to commence operation by third quarter 2016. Jurong data center is designed to fulfill the needs for premium data center, for Singapore and regional and global market.

Ladies and gentlemen, in order to make our Company more efficient with healthy human resources structure, we have been doing early retirement program since 2002. In second quarter 2015, we conducted the early retirement program with 576 Telkom's employees and 116 Telkomsel's employees took part in the program which cost around IDR844b.

Now, let me discuss about bond issuance. Telkom successfully issued IDR7 trillion IDR bonds in June 2015. The bonds were issued in various tenor: 7 years, 10 years, 11 years -- 15 years and 30 years, with coupon rates of 9.925%, 10.25%, 10.6% and 11%, respectively. The bond issuance was part of the Company's IDR12 trillion shelf registration bonds offering, which would be carried out in a two-year period. The proceeds will be mainly used to fund our infrastructure development and also to finance our M&A activities.

On capital expenditure, until June 2015, Telkom spent IDR11.9 trillion, of which IDR5.8 trillion was for Telkomsel and the remaining IDR6.1 trillion was for Telkom and other subsidiaries. Telkom's CapEx was mainly utilized for deploying access and backbone infrastructure to support the broadband services, while Telkomsel's CapEx was mainly utilized for radio access network.

Let me now share with you about regulatory update. There are potential changes in regulation that still in progress which could give impact to cellular business. They are interconnection tariff and 1800 megahertz spectrum rearrangement.

We expect the new interconnection tariff scheme will provide fairness and incentive for operators to deploy infrastructure in the rural and remote area. The interconnection regulation change is scheduled to be done by end of this year or early next year.

Meanwhile, 800 (sic) megahertz spectrum rearrangement is expected to be completed by November this year. Post rearrangement, the spectrum will be neutral and is fully ready for 4G LTE services.

Finally, the last update that I could share with you is regarding with the Conditional Share Exchange Agreement with PT Tower Bersama Infrastructure. The CSEA is in the process of termination due to Commissioners' request to terminate the transaction.

Ladies and gentlemen, let me reiterate guidance for 2015 to conclude my remarks. We expect both Telkom and Telkomsel's revenue to grow in line with or slightly better than market rate by continued effort to grow digital business revenue. For EBITDA and net income margins, we expect them to slightly decline both for Telkom and Telkomsel, in line with continued broadband infrastructure development in mobile and fixed line businesses.

Thank you.

Thank you, Pak Alex. We will now begin the Q&A session. When raising your questions, please speak clearly and state your name and your company. Operator, may we have the first question, please?

(Operator Instructions). Luis Hilado, HSBC Singapore.

Hi. Good afternoon. Thanks for the call and congratulations on the results. I had three questions. The first was regarding the higher G&A and O&M expenses during the quarter. I just wanted to check if there were any exceptional items behind the increases, like the 25% increase Q-on-Q for O&M, or it's pure operations.

Second question is regarding the Bersama deal. Can we clarify if there is any chance at all that you will renegotiate the deal or the terms, or there is definitely no -- it will definitely be cancelled permanently?

And the last question is seems to be that data pricing for the quarter is again down double digit percentagewise. Just wondering if that is the intention by Telkomsel to do such, or is it competition driving the yields lower?

Hi, Luis. This is Heri, Finance Director, here. Regarding your question, O&M significantly increased by 30.3%. Actually, this is in line with our continued infrastructure development, especially in our mobile and fixed line businesses, which resulted in higher operation and maintenance related expenses, such as transport costs, our rental and electricity costs. In fixed business, the aggressive rollout of IndiHome also had impact to higher O&M costs. This is answer for your first question.

There is addition from Pak Heri Supriadi, Telkomsel CFO.

I may have some -- I think it is a one-off cost. It is about IDR161b for the early retirement program in Telkomsel. And also, we have about IDR107b of USO result booked, because we have dispensed with the USO program. So that's an extraordinary cost that only will come for this half one, but this is not regular.

Thank you, Pak.

(Inaudible) in Telkomsel, before we go to the Mitratel question. I think about the -- if you followed the release and also explanation from our CEO, it is clearly that we are performing well until the first half of this year. And we see that there is opportunity not only in the digital business line but also still a lot of opportunity coming from legacy business. So we do believe that we can maintain the improvement in the growth of double digit in revenue, EBITDA and net income until the end of the year.

We see despite I think it's not really profitable, at least not in Indonesia, but we really see that telephony services, especially in cellular, is kind of like basic need for the people in Indonesia. So we still see the opportunity for us to maintain our objective to keep the triple double-digit growth until the end of the year.

Okay. Your second question is regarding the CSEA. So basically, CSEA with Tower Bersama, as mentioned by CEO, is in the process of termination due to Commissioner request of per minute transactions. If you are questioning regarding what is the next effectively after we terminate this -- in the process termination, it's already clear, and then we will offer another opportunity. We will have time to looking for another way to unlock the power.

Okay. But that doesn't have to be with Bersama? You will speak with Bersama again, or it can be open to other methods?

We have to discuss it first. We cannot decide it now, actually.

Okay.

So the third question is about the pricing. Okay. We are moving now to the next.

Next question, please.

Anand Ramachandran, Barclays.

Yes. Hi. Thank you. One question. Interconnect, you mentioned you expected interconnect rate changes by yearend. Could you give us some more flavor on what kind of changes you expect? Also, if you could tell us what is the net interconnect at the Telkom Group level and then at Telkomsel at this point in time, and any -- that would be really useful. Thank you.

Thank you, Anand, for the question on the interconnection. Yes, we are waiting for the decision from the government we expect will come out by this month, by August, and we expect that regime will be implemented starting in January next year. What we do understand now, the regime will be different from what's existing now. This will be an asymmetric approach, in which every operator will disclose the cost of each operator, and then we have bilateral agreement how to reach the settlement base cost for the interconnection.

Overall, we see that the impact will be neutral for us, but the traffic of interconnection, it is about half happens in Java and the remaining half it is coming from outside Java. In Java, I think the traffic and also network belong by each operator quite similar so the impact will be slightly negative, but for the outside Java we will be stronger compared to other operators so we will get positive in that region.

So, in total, we see this is quite normal, the impact to us. Besides, also, we know that the margin from this interconnection is not as big as our total margin, 54%; it is only about 15%. So basically this will have a neutral impact.

Thank you so much for that. If I could very briefly follow up, you mentioned bilateral arrangements, so is it possible that it is not disclosed but there is just some kind of an announcement?

And then when you talk about neutral impact, is it at the Telkom Group level or at both Telkomsel and Telkom levels? Thank you.

For what? I think they are neutral basically for both because most of the interconnection traffic it is with us, with Telkomsel. With Telkom, it's normal, becoming neutral.

And about disclosed, I think we disclosed each other, basically, with each operator. So basically it is quite clear that the cost will be settled by each operator.

Understood. Thank you so much.

Welcome.

Sachin Gupta, Nomura.

Thank you very much. I have three questions. Firstly, on this Mitratel TBIG deal termination, is it possible to discuss the reason or the rationale for termination? Is it valuation or the process or anything else? And just why the deal has been terminated?

Secondly, in the wireless segment of Telkomsel, any thoughts and expectations with the upcoming launch of SmartFren? What are your expectations? And given how both is progressing as well, what could happen to the prices and market share going forward?

And lastly, any update on IndiHome? How many customers do you have? How many homes passed? And also, given the opening remarks, is it likely that the CapEx of this segment could rise materially in the next one to two years? Thank you. Is anyone there?

Yes. For the first question, regarding the CSEA, what we can mention right now is actually we asked them in the process to terminate the CSEA itself. And after we discuss with our partner, then we will make a statement together. So it is better after we close the process and then Telkom and [TBIG] will make a statement together.

It is too early if I can -- I have to answer right now regarding the next step or the next options. That is what we can answer right now. So it is more clear after we meet our partner just Tower Bersama, and then if we already agree. And then as we close the transaction, and then we can make statement together. That is what I answer right now.

Okay. Thank you, Sachin. On the question on the competition and disclosing that SmartFren will come in the second half of this year, we do know that they are planning to starting to launching of the services by August this year. We know that they are build their network to support that plan.

What we believe on this business of the data, we need to have a quite extensive network. Second, we need also enhancement in the handset operability and also the service and dealer and agency distribution. We believe there we are coming to certain cities, not as extensive as us, so we also still see the opportunity of level in the market. We believe there we will have some market share, but we also still believe by our leading network supply and also quality that we continue to improve, we can still maintain our market share in this data revenue.

Okay.

So for your third question, regarding the IndiHome CapEx, actually our CapEx, full CapEx, 60% to 65% goes to the Telkomsel Group, and around 20% for the Telkom mostly goes to the IndiHome, actually. So if you see the total CapEx, 20% of CapEx goes to the Telkom, Telkom parent, and mostly goes to the IndiHome. And end of June, the subscriber of the IndiHomes, around 427,000. This is answering your third question.

Thank you very much.

Roshan Raj, Bank of America Singapore.

Hi. Thanks for the opportunity. Two questions. First one, on your flexibility to still revise up tariffs in general, are you facing some resistance in players, particularly outside Java, and then what are your thoughts on driving through in those areas?

Second question is on ERP. What are your longer-term plans? How long will this program be continued and what sort of benefits you have seen in the past? And could you share any color as to what will this program effectively end up giving you over a three to five years period from now? Thank you.

Okay. Thank you for the question. On the flexibility that we can implement a flexible tariff outside Java with the stronger network that we have in the outside Java, basically what we see is the flexible tariff we implement this on the dynamics of supply and demand, and we also see the cost of investment and operational cost along with affordability of the market outside of Java.

We implement it very carefully, in order to not destroy the overall value to us in which we can flexible to made the gain of the tariff by saying like occasion, certain event and also certain condition in which we are not necessarily continuing to increase the tariff, but our network there, we know that the condition is need to be lowering the tariff. We do this for the optimal value.

Basically, we still believe this is well accepted by the market and despite now there is a lot of talk on this one. We already explained the real situation. The main objective for us is basically the business and also the service to the customer.

So thanks, Roshan. Regarding the ERP program, so as our CEO already explained to you, that in order to make our Company more efficient, getting healthier, we are going to propose next ERP for next year in order to get more healthier. So in our calculation, the Company's employee number has to be getting slimmer. So by 2019, we predict number around 8,400 something, the number of Telkom employee, so getting slimmer and slimmer.

Thank you, Pak. Could you just remind us how many employees you have at the moment?

It is around 16,700 employees. So it is going to be reduced by half by the end of 2019.

That is a rough number.

Thank you very much.

That is a rough number, actually.

Sure, sure, sure. Thank you.

Collin McCallum, Credit Suisse.

Thanks for the opportunity. Just two questions from me. One other follow-up on the ERP, how many staff took the ERP in the first half of the year? And can you give us the fixed line number and the Telkomsel number, the number of employees who took up the ERP?

The second question is just regarding the CapEx. The non-Telkomsel CapEx for first half was running above the 20% to 25% of revenue guidance range that you gave earlier this year. Does that mean that you will spend less on CapEx non-Telkomsel in the second half of the year, or does it mean that actually you will end up spending more than the 20% to 25% of revenue guided earlier? Thank you.

For the total number, for Telkom itself it is around -- the number is 576 employees, and for Telkomsel 116 people. So for the total Telkom and Telkomsel, we take out around IDR844b. So that is the number for all of ERP program in Telkom and Telkomsel.

Sorry. Just to clarify, sorry, I was asking for the number of employees rather than the charge in rupiah. I think you disclosed the charge in rupiah. I was looking for the number of employees who took the scheme.

Yes. From Telkomsel we did 116 people early retirement program within that one. For Telkom --?

For Telkom, 576 employees.

Okay. So that is the employee numbers. All right. Thank you. And on the CapEx?

So, for the CapEx on Telkomsel, you must be aware in the beginning of the year, actually, we -- our partners built the infrastructure. As we saw, the physical of the infrastructure actually are more than what we already paid to the developer. So as you saw, that now less than the budget is real. On the payment basis it is below of the target, but on the physical basis it is actually around 80% and 85% of the target, but on the payment basis around 70% of the target. So that is lagging of the physical and the payment.

I think it is clear that after the complete development of the physical infrastructure and then the handover to Telkom, and then Telkom will pay the infrastructure project. So it is always the payment lagging from the physical. Thank you.

Got it. But will the CapEx be a higher -- a lower number in the second half of the year as compared with what was spent in the first half?

Of course higher. I think all the physical will be completed in the second half and then we will paid it on the second half, so of course higher than the first half.

So then the CapEx to sales ratio for non-Telkomsel will be higher than 20% to 25% of revenue?

No, still in the range. Still in the range, but higher than quarter one and quarter two on the second half, the proportional of the CapEx. Still in the range.

Okay. I'm not sure those numbers work, but I will take it offline. Thank you.

Okay.

Suresh Mahadevan, UBS.

Yes. Hi. Thanks for the opportunity. I had a few questions. First is on your consumer behavior on the mobile side. It is quite interesting to see actually your voice minutes are still growing in the network, despite I think data growing very big. So I just want to understand this a little better. Both chargeable MOU as well as total MOUs have gone up year on year. So I just wanted to understand, is this -- obviously the data usage going up, your data payload has gone up by 120%-odd. So how should we think about the voice cannibalization due to data, particularly now your WhatsApp and Facebook and all this, Viber and all these things are calls now? So that is my question number one.

The second question is it seems like clearly there is a big data boom in Indonesia, both from the classic and of course from your results. I think your data revenue has grown by significantly year on year. I just wanted to understand how should we think about it in terms of 4G versus 3G, because clearly your postpaid subscriber base is very, very low, which I think should be the 4G addressable, probably, base. And is Indonesia going to be primarily a 3G market for the next two, three years, or do you think it can -- 4G is going to be a big part of it? So I would like to understand how do you plan to cover Indonesia with 3G/4G and how we should think about this. So those are my two questions. Thank you.

Okay. Suresh, I'll address your question first on the customer behavior. Later my colleague Mas'ud will comment sales activity and he'll add some color on that one.

On the wider voice traffic increase, one of the main reasons is we believe that by increasing our quality of our network, we make the opportunity to have that increase in that traffic. So we still believe there's a demand for the voice despite this also kind of substitution for the voice, but most of substitution are right now actually coming to the SMS. That is why actually the traffic of SMS by declined compared to last year, but in the voice it is still quite stable. In fact, by increasing the quality again, we believe that should strengthen the traffic increase.

I don't know, Mas'ud, if you want to comment?

Yes. Related to increasing voice traffic, we also increased our sales team with aggressive sales. Now, we empower our sales team, more than 3,000 people every year in the field to acquire our competitor. Number three, we also expand in new coverage. We very aggressive increased our new infrastructure in the new area. This is why our voice traffic still increased.

Okay. Interesting. How do you see that playing out in the next couple of years? Do you see a point where voice goes down?

Still stable. We try to maintain with our best effort and we are very confident how to acquire our competitor to maintain our performance in voice growth.

Okay. Got it.

Okay. On the 3G and 4G investment, we projected that our investment in the next couple of years will be mainly on the 3G, and we will be growing on the 4G but 3G will be still the main investment.

We (inaudible) three things for the 4G. One is that we have followed it around 500 cities and we have a ranking based on the potential market. Second, we also take a look on the -- how the [public] tariff is basically moving. And the last one actually is we are also monitoring on the -- how big is the 4G capable handset penetration in each city. Based on this, then we will decide whether we will roll out the 4G in that area.

But depending on what you are seeing so far, do you think it is time to make a big push towards 4G or --?

Yes. Based on our monitoring, the current penetration of the 4G handset is still quite low. It's about 2%, about 4m. But we know that there are going to be 4G handsets with a lower price, so we do believe that the penetration now of 4G handset will be a bit faster than 3G if we take a look on the couple years back. So based on that, then we will decide whether we will invest or how big is the investment or how much is the deployment of the network of the 4G.

Okay. Got it. Thank you so much. All the best for the rest of the year.

Thank you.

Wei-Shi Wu, BNP Paribas.

Thank you very much. Three questions. With regard to the mobile business, you mentioned earlier that in terms of the interconnection regime change you are expecting asymmetric interconnection to be implemented. Are you also -- any expectations around rates actually being lower? And presumably you're net of interconnection, so how do you expect that to especially impact your financials?

Second question is with regard to the fixed broadband market. How are you seeing competition? Have there been any new players in recent months? And what are pricing trends, etc.?

And then finally, my last question is, and I apologize if you have gone through these numbers, but could you just highlight how many 3G BTSs you had as at June as far as 4G BTSs?

I'll repeat my answer on the -- actually, the first question was the same as your question. Basically, we do expect in the Java the cost of interconnection will be lower. This also means revenue will also be lower. Overall, we will be compensated by the revenue coming from outside the total interconnection, because we know that we have a more extensive network compared to our competitor. That will make the overall impact will be neutral to us.

Second, also, actually the margin from the interconnection is only about 15%. Again, it is not really a big impact. And also, in total, only 6% revenue for interconnection coming to our total revenue, but interconnection regime impact on our performance.

The third question, 3G BTS. Currently, we have around 48,200 3G BTS. Meanwhile, for 4G we have around 1,100 4G BTS right now. It is in conjunction with the previous question already addressed by our CEO. Basically, we have the flexibility to make a priority between 3G and 4G, in which we see that actually the market is ready, we can accelerate the deployment of 4G. But currently, we see that 3G devices, a lot I think are of level a lot more compared to 4G but, again, we're quite flexible on that side of investment.

But for 2G, we expect by starting next year we'll no longer build the 2G network unless there is specific demand for that one, and also to maintain the quality for existing one we will still build 2G.

Just a little addition. The current 3G BTS that we use is basically based on RC, so it is quite easy to convert from 3G to 4G so it is basically very flexible for us.

My question about (multiple speakers).

Okay. Second question -- it is me, Dian, from consumer services. Hi, Wei-Shi. Let me address your question about the fixed broadband.

In fact, Indonesian have 60m household now which have a 20m addressable market that we link to pay the fixed broadband services. So what I see is quite huge and stable demand in Indonesia, in fact. So that is why we come up with the very new proposition which relies on the fiber to the home rollout. So in my opinion is whoever faster deploy the fiber to the home, the operator will win.

So in my view, there is quite a few capable service providers now available in Indonesia. That is why we are very confident enough to surpass our huge market now. So our lesson learned, in the six months in the first half we achieved already close to 0.5m subscriber of triple play through IndiHome.

So I believe in the long run we -- through continuing our rollout of fiber to the home, we will be winning the market amount to the competition in the Indonesia. And we see the good news is the people is accepting our high quality services through the fiber because the slow broadband through the fiber is really through to bandwidth hungry services. Thank you, Wei-Shi.

Thank you very much.

Due to time limitation, we will now end the question and answer session. Mr. Setiawan, please continue.

Thank you, everyone, for participating into this call. We apologize for those whose questions could not be addressed yet. Should you have any further questions, please don't hesitate to contact us directly. Thank you.

This concludes this conference. Thank you, everyone, for your participation. You may all disconnect.