Telkom Indonesia (Persero) Tbk PT (TLK) 2006 Q1 法說會逐字稿

... being recorded. At this time for opening remarks, I would like to turn the call over to your moderator for today, Mr. Harsya Denny Suryo. Please go ahead, sir.

Thank you, Operator. Ladies and gentlemen, all participants of the conference call, this conference call will start with a speech by the CEO on the first quarter 2006 financial and operational results.

After the speech, we will have a question-and-answer session and we'll end at 5:00 PM, Jakarta time. The tape recording of this conference call will be available one hour from now and will last 24 hours thereafter.

I'm delighted to host also Mr. Arwin Rasyid, Telkom's President, Director and Chief Executive Officer, Mr. Garuda Sugardo, as Vice President, Director, Chief Operating Officer, Mr. Rinaldi Firmansyah, as Director of Finance and the CFO, Mr. Guntur Siregar as Director of Consumer, Mr. Abdul Haris as Director of Network & Solution. We also have Mr. Arief Yahya as Director of Enterprise & Wholesale, and also as acting Director of Human Resources. We're also delighted to have among us today Mr. [Kiskendas Huria Haja] of the Telkom Sales, President Director.

Ladies and gentlemen, we would also like to introduce to you three new team members of management. Among others, we'd like to introduce to you Mr. [Pracitio], who is the EVP for Risk Management, Legal and Compliance. We have also added to the members of the management team [David Burke], who is the Executive Vice President for Strategic Investment and Corporate Planning, and we also have among us Mr. [Abing Achmed], who is the EVP for IT and Supply.

And I would also like to introduce myself. My name is Harsya Denny Suryo, or Denny. I'm the VP for Investor Relations and also Corporate Secretary. The idea of this is to strengthen the management team, and we are so delighted to have them also on board as part of Telkom members.

Ladies and gentlemen, I would like to take it clear that some statements made during this conference call may be related to matters that are not historical facts, and therefore they shall be considered as forward-looking statements. These may involve risks and uncertainty that may cause actual results and developments to differ substantially from those expressed or implied in these statements. The company does not guarantee that any action which might have been taken in reliance on those statements bring about specific risk faults, as expected.

Now, without further adieu, let's focus our attention to Mr. Arwin Rasyid's address, the CEO of P.T. Telkom.

Mr. Rasyid, the time is yours.

Thank you, Denny. First of all, I want to thank everyone for attending this call. We greatly appreciate all of you for taking the time out of your busy schedule to be with us. At P.T. Telkom, we'd like to mention that on behalf of management, we'd also like to apologize for not being able to [meet] the delivery of Telkom's 2005 year-end financial results by March 2006.

The debt line was in accordance with the final requirement set under Indonesia's local [phone] regulations. The reason is mainly due to Telkom's recent performance as results in [mentioning] the new international accounting standard called [CFAP 38] revision. This new accounting standard correlates to the cross-ownership transaction which Telkom had with Indosat in 2001 and the sale of Telkom shares and Telkomsel to sink down in 2002.

Therefore, we are required by this new standard to increase prospective adjustments to our account. However, we are currently undergoing discussions with various parties to ensure that adjustments required for Telkom's consolidated financial statements are in accordance to [inaudible] com and U.S. Securities and Exchange Commission regulations.

Nevertheless, we expect that Telkom will be able to file the company's year-end 2005 financial statements not later than June 30th, 2006, as stipulated under the U.S. SEC rules. Ladies and gentlemen, the year 2006 will have some changes that will have a direct bearing on our business due to several more [various] changes in 2005. The most significant one of this year will be from the new ruling from the Indonesian telecommunications authorities, requiring Telkom to migrate certain [inaudible] from the exact [consistency] of 1,900 megahertz in Jarkarta, West [inaudible] and Bantam Province to the new frequency of 800 megahertz.

Another highly published [inaudible] issue in 2005 was the pre-statement registration requirement for all operators or customers during the period of December 12, 2005, until April 28, 2006. We want to report that this deadline was extended by the government for one month, and as of today, already more that 97% of our customers [inaudible] have registered.

However, customers who still have not registered before the deadline may receive incoming calls but cannot make a joint call until they are fully registered. Nevertheless, the registration [inaudible] is still open, whereby they may still be served by SMS through the [generate] number available.

In hindsight, the year 2006 was a new era for the total of business in Indonesia, especially for the 3G business. As a majority shareholder of Telkomsel would create a more positive value to the entire Telkom group. The issue of implementing new interconnection regimes based on termination targets may have to be considered this year.

The Minister of Information and Communication for [inaudible] mentioning that all operators must submit their reference interconnect hardware not later than 60 days since the issue [inaudible]. Furthermore, the minister will also announce the timing of implementation of the new [inaudible].

Participants on the conference call, please allow me to convey that 2006 first quarter results highlights as follows. Overall, the growth of Telkom's five business pillars, which consist of fixed wireline, fixed wireless, [teleware], network and interconnection and [based] Internet indicates strong progress.

We are continuing to develop our main business portfolios,. as reflected of the allocation of Telkom's gross CapEx for the year 2006, which has been revised, amounting to more or less around 20 trillion rupiah, including Telkomsel CapEx of around 14 trillion rupiah, or around $1.5 billion.

In fixed-line business, including wireline, as of March 31st, 2006, Telkom achieved a total of 11.8 million lines in service, which consisted of 8.7 million lines in service of fixed wireline and 3.1 million lines in service of fixed wireless.

You are aware, as we are, that our revenues from the fixed wireline are more or less flat, and we have already embarked on our initial bid to increase revenues coming from services over the fixed wireline network. We are concentrating to focus on our business customers by providing them the VPN, and we are also starting to launch aggressively our new broadband Internet access for the [highly connected] users and known as the product brand, Telkom Speedy.

As of March 31st, 2006, there are almost 40,000 Telkom Speedy subscribers available in Jakarta, [inaudible], Makasar, and we plan to launch Speedy altogether in the 16-largest cities in Indonesia, hoping at the end of this year we will achieve about 400,000 subscribers.

In the fixed wireless business, Telkomsel was available in more than 230 cities nationwide, with about 1,460 BPS. TelkomFlexi kept its market leader position in fixed wireless, with approximately 85% market share. In the DID business, Telkom international calls has commercially launched since June 7, 2004. As of March 31st, 2006, Telkom recorded incoming and outgoing international traffic of 145 million minutes and 35 million minutes with [inaudible].

Telkomsel as Telkom's main vehicle in [inaudible] business has contributed a high growth of revenue [inaudible]. As of March 31st, 2006, Telkomsel was still the market leader, with 53% of the subscriber market share and about 65% of the revenue market share.

With an aggressive rollout plan which is very well on track, we believe the company will grow its revenue, EBITDA and net income at least 25% this year, while maintaining its market share of subscribers about 50%. Telkomsel will also start to rollout its 3G network in the second half of 2006 in a few major cities.

Telkom and Telkomsel will continue to synergize in various skills of businesses with the intention to improve its overall competitiveness such as in collocation, co-facilities, joint marketing promotion as joint services point. We anticipate that this synergy between the two companies will greatly contribute to cost savings for both companies in the Telkom Group.

For further review, please refer to Telkom's [inaudible].

New analysts, allow me now to explain our business performance in the first quarter of 2006 compared to the first quarter 2005. As of March 31st, 2006, the total consolidated operating revenues was 11.8 trillion rupiah of [inaudible] by 26.4%, attributable to a 49.3% increase in cellular revenues, 51.5% increase in [inaudible] revenues and 10.6% increase in interconnection revenues.

In addition, in the consolidated income statement indicated that a growth of operating revenues was higher than the growth of operating expenses. With respect to the 66.8% consolidated EBITDA margin for an increase of 7% compared to the first quarter in 2005.

Meanwhile, the total [inaudible] expenses increased by 11.3%. The main factors contributing to the growth were a 28.9% increase in depreciation, 23.8% increase in operation maintenance and services and 21.8% increase in general and administrative expenses. Personnel expenses decreased by 14.7%. This was mainly due, there was no early retirement program implemented this year.

For further [in-depth] detail, please refer to our info memo. Ladies and gentlemen, this ends my remark and we can continue with the Q&A [inaudible] moderated by Denny Suryo.

Thank you very much.

Thank you very much, Mr. Rasyid. We will now continue with the question and answer session, but before we raise your questions, please provide your name, as well as your company name.

Before we even begin the questions, there is a possibility that we might end the session a little bit early with our CEO, because we have also a very tight schedule and therefore we will still continue onwards at 5:00. So, please, the first question, please?

Operator, would you take question and please open the lines? Thank you.

Thank you. [OPERATOR INSTRUCTIONS]

We have the first question in queue. I'll open the line, sir.

Hi, this is Sundeep Bihani from Lehman Brothers. Congratulations for an excellent quarter and full-year 2005.

I just have a couple of questions. My first question is on Telkom Flexi. You seem to have cleaned out about 1.5 million subscribers in quarter one. Can you share some color there, and what would be your full-year guidance on both the margins for Telkom Flexi, as well as the subscribers?

The second is, on CapEx of 6.8 trillion, how much was CapEx for 2005? It seems like you under-spend. And in 2006, what is the breakout for specifically Telkom Flexi and broadband?

The third question is for Telkomsel. In your memo, you have mentioned that you have increased the bonus on starter packs. Do you think that could lead to a calling-card phenomenon, as seen with some of your other competitors?

And you also mentioned the [Behler] commissions and interconnection costs, after seeing an increase last year have actually come down as a percentage of gross revenue this quarter. I really appreciate your answers on these questions. Thank you.

Thank you very much, Sundeep from Lehman Brothers. I think the first question, we will first answer the three questions from Telkom, on Telkom Flexi. I will give it to Mr. Rasyid.

Okay. Thank you, Sundeep for your questions. With respect to Telkom Flexi, [inaudible] the total subscribers that we have as of the end of March of around 3 million subscribers. There was churn during the three months. We actually started in the late of 2005, mainly for two reasons. One was an action [inaudible] and, second, we must say that we are facing increasing competition from challengers, but as newly set-up operators of [inaudible]. We found them to be very aggressive, but, however, we know their strategy already and have taken necessary countermeasures to meet the competition.

Having said that, we're looking to [achieve] another net add anywhere between 2.5 million to 3 million for the year 2006, and that will give us a total of Flexi customer base of around 6 million as of year end 2006. Now, I know you asked about the broadband.

For the broadband, I did mention to you just now in my introduction that we already achieved about 38,000 subscribers. The pick up was a bit slow because of deployment challenges that took place in the first quarter of 2006. But we are very pleased so that you know that we have already prepared all the necessary preparation in various cities, altogether comprising of the 15 largest cities in Indonesia and through our promotion both above the line and below the line, we believe that the pick up rate will increase significantly in the months to come, especially when we finish our second quarter of 2006.

We still maintained our target for achieving 400,000 subscribers for this year. It was already initiated since the early of this year, mainly because we believe there's a high demand for these services. As you know, we've been very successful in our dial-up Internet, and we feel that our broadband Internet access will receive a positive response from our subscribers, especially when we're able to reduce the tariffs in the months to come.

With regard to the [KPAC], I think I'll refer to my CFO, Mr. Firmansyah, to answer that. Please go ahead, Rinaldi.

Well, thank you, Sundeep. On the CapEx, on the year 2005, we basically spent on cash payment was around 3.7, 3.8 trillion rupiah. Yes. On the year 2006, we are planning to spend of around 2.1 trillion on the Flexi and around 350 to 300 billion for the broadband.

On total CapEx for the Telkom Group, basically on the Telkom side its' going to be around 6.6 trillion, while on Telkomsel, while you [read it could be more], it's 9.5, but due to the acceleration of the infrastructure, the total amount together with Telkom would be around 20 trillion on this year alone.

Rinaldi, just a question on CapEx. Do you see any savings because of the rupiah appreciation, and secondly, is the 3D spectrum fee included as part Telkomsel CapEx guidance?

Well, definitely, we'll see, but the saving will be later on, realized on the payment date. So, for the time being, what we do is we have a [inaudible] for incoming payment for the CapEx. However, you would only see the same thing later if [realized] on the payment date.

On the Telkomsel market?

Thanks, Sundeep. Maybe there are two questions about the Telkomsel. The first for the bonus, actually, there is no bonus for the last period from the Telkomsel, but there is the changing about the strategy for the discount. It was recognized upfront, but then for the Q1 it is recognized for [end users] through the Telkomsel [point]. Talking about the calling card, I think for the right period it's a little bit decreased, because the impact for the [inaudible], the new features and also the impact of the prepaid registration. Thank you.

Okay, thank you.

The CapEx you were asking, that was including the 3G.

Oh, yes, for 1.5 billion, it's including for the 3G. But for the 3G itself, it's less than 10%, actually.

Yes, my question was if 3G spectrum fee, the license costs, are also included in the CapEx number.

Yes, yes, 436 billion rupiah for the two signs of the upfront fee until 10 years is 2 trillion rupiah.

Okay, thank you very much for the call. Thank you.

Thank you very much.

We'll move on to the next question.

Good afternoon, Karen Ang from Citigroup. I have three questions. First relates to CapEx, again, for Telkomsel. I noticed that you again increased it. Is it safe to assume that peak CapEx is in 2006 and that Telkomsel CapEx will fall in 2007? The second question is on the personnel expense. What is your guidance for consolidated personnel expense for 2006? In particular, is there any early retirement program planned for this year, and if so, how many employees will that involve and how much will that cost? And the third question is on broadband ARPUs. Can you please disclose what the broadband ARPUs are currently and how much do you expect it to decline, given that you mentioned that you planned to cut prices. Thank you.

Okay, thank you very much, Karen Ang. I think on the CapEx of Telkomsel the question was whether there will be also some pieces in 2007.

Karen, for the 2006 and '07, a little bit decreased if you compare it with the 2006, but it's basically for the 2006 they have increased significantly if you compare it with the last year, because we will achieve for the 500 and 600 BPS, it will increase more than 40%. And, also, for this year, because of the quality, the year of the quality, we also focus on the quality enhancement, especially for the capacity and traffic handling. And the last, as I mentioned, area is also for the 3G deployment.

Yes, thank you. Rasyid also wants to add some comments.

Yes, Karen, your question about - on the total expense, yes, we'd like to share with you that we undergoing any methods for the retirement for 2006, simply because we have been advised by our auditors that if we do this we need to make some [boasting] of significant value in our balance sheet.

For these accounting reasons, we are postponing this and we will resume again 2007 and onwards. With regards to the ARPU for broadband, I think [inaudible] therefore is around 200,000 rupiahs.

It's currently ...

... on our future pricing that we think it's going to happen. So [basically] we will average the broadband ARPU average in a month. A month is about 400,000, but however we are addressing our pricing over time just for your references. So if I were you, adjusting a calculation of about 200 to 300,000 rupiah a month, right about that.

Thank you, Karen.

Just as a quick follow-up on the personnel expenses, can you give some sort of guidance as to what sort of increase do you expect for personnel expenses for the full year, year on year on a consolidated basis?

Okay, I think it will be single digits. Yes. There are a few reasons. One is because of the decline in interest rates, which affects our non-tax benefits. So it will be single digits.

Thank you.

So we answered both the questions there.

We'll go to the next question. Please go head.

Hi, it's [Freddie Buriman] from Merrill Lynch. I just have a follow-up question on your personnel expense guidance. Except when you say single digit, it's single-digit growth year on year on personnel expense consolidated. Secondly, can you give us some long-term target for personnel efficiency, how much headcount reduction we should be looking at over how long of a period. Thank you.

Sorry, we didn't get the first question. What was your first question, again?

Oh, you mentioned about the personnel budget [inaudible] from Kevin's question, but Rinaldi answered single-digit growth in expense.

Yes, yes. I think when we say the single digit, it's the single digit in total consolidated growth of the personnel expense for 2006, as compared to 2005.

If you want me to add on this question, as you know, one of the [measures] we use is the question of cost of revenues. We already that in our [inaudible] information memorandum. You will see that in 2005, our personnel cost of revenue is at 21% and that's for the first quarter. And in the first quarter of 2006, it's come down to 14.2%, but please note that not to be perplexed by this huge decrease because you very well know that for the same period last year, we underwent our voluntary retirement program. So that as a guidance, we will try to maintain a key personnel cost to revenue in [inaudible] between 17 to 20% over time.

And we hope that after two or three years, it will go down to below 18%.

Okay?

Okay, have we answered your question, Freddie?

Yes, thank you.

Okay, thank you. Next question, please.

We have the next call in line. I'll open the line. Go ahead, please.

Hi, this is [Naveen Kilda] from Morgan Stanley. Thank you for the conference call. I actually had a couple of questions. The first is on the new interconnection regime which is being talked about. How do you see that impacting, I guess, your interconnection revenues for the next couple of years, and, second, what is your full-year 2006 consolidated EBITDA margin target?

Clearly, the first quarter was very strong, but how do you see the full year shaping up. The last question I had, really, was on your fixed-line revenues, which were really flat year on year, despite the additional subscribers, both on the fixed-line side, as well as on the fixed wireless side. How should we really look at this segment going forward? I mean, should we expect the decrease in core voice to literally offset the increase from fixed wireless and broadband for these. Do you think that you can still be able to grow this business on the two to three-year [view brand-new] line? Thanks.

Okay, thank you very much. I think I will pass that on to the CEO to ask that question.

I ought to have my COO to add onto this with regard to the interconnect. Let me begin with our view of revenues coming from the fixed wireline. For actually now year to year the trend has been somewhat flat, in fact, with some assets declining, and I think this is a natural phenomena happening in all markets, where more and more subscribers are more on the mobile rather than on the fixed wireline.

However, what we like to emphasize is that we put in more on the dial-up Internet and broadband, this will more than compensate the decrease in revenue coming from the fixed wirelines. In fact, over time, we can expect that we'll be reducing our tariffs on our domestic long-distance calls, but then again, once again, this will be more than compensated by the increase in revenues coming from the dial-up Internet, as well as the broadband.

Now, with regard to the interconnection regime, I would like my COO, Mr. Garuda, to give information on that.

Yes, thank you, Arwin. So, according to the interconnection, we would like to inform you that the government already released a new decrease on the interconnection scheme. And this Minister of Communication and Information decrease was released on February, this year. The differentiation between the existing interconnection with the new regime is that the determination of the new regime is based on [inaudible] cost base interconnection schemes, comparing to the existing one that is revenue-sharing base case.

So the impact of the new interconnection schemes is that in Telkom it will be slightly lowering revenue growth, because it will be changed from the revenue setting to the cost base. But, anyhow, from Telkomsel, where they have a lot of subscribers, the [inaudible] revenue growth will be achieved in this year. You're seeing the new regime interconnections.

That is, Naveen, according to the interconnections.

Sorry, just to follow up on this, on a net basis, do you expect the new regime to be positive for the group or negative, and do you have any preliminary estimate of the impact.

Yes, Naveen, if there is any decline, it will be not more than 3%. I think it will be slightly lowering, but if it won't be much more than 3%. According to the calculation, it will be 1 to 3% only.

Sorry, and this is 1 to 3% impact on your total revenues?

Total quarter from group revenues.

Okay, thank you.

Thank you.

Yes, thank you. We can open it up for the next question please.

Thank you.

Thank you very much. Colin McCallum here from Credit Suisse. Just two questions. First of all, just on the fixed-line side, I know it's difficult and I know people have been asking questions directed toward personnel costs, but just looking at your fixed line EBITDA margin, it's extremely volatile, quarter on quarter, and I was just wondering if you'd give us any guidance on a kind of full year basis. I mean, broadly will do. Do you think 50% is achievable, or more than 50% as you managed in the first quarter, or more in line with what we saw last year, which I think was maybe 47, 48%. Any guidance as to the rest of that would be useful.

Secondly, on the cellular side, obviously Telkomsel has done extremely well, and I noted that you've increased your guidance to 25%-plus growth for the year. However, just looking at the strength of the first quarter numbers, I'm actually slightly surprised that the guidance isn't more like 30%-plus to 35%-plus revenue and EBITDA growth. Why is it that the guidance for the full year is not going to match in what we're seeing in the first quarter? And do you expect, or are you already seeing, some softening in second quarter.

Thank you.

I think for on the fixed line revenue, we will pass that on to the CFO to answer that question on the EBITDA margin.

Yes, thank you. I think I would also like to answer what Naveen was answering previously. While you see that the EBITDA margin was growing healthy in 2000 on the first quarter, but as mentioned, you know, we still are basically looking into more stabilized EBITDA margin of around 60% by year end. Basically, Q1 is yet to be seen a little bit on how it is going to be on the full-year basis.

On the fixed-line side, while the EBITDA margin has improved, please again check on the personnel cost, which was not there in the Q1. So if you - I think our guidance for full year of fixed line business is going to be around 45%, and for the consolidated it's going to be around 60%. On the reason why, you know the guidance and the first quarter performance of cellular is quite different, I think [inaudible].

Yes, it's [under], for this quarter, we achieved more than 48% revenue growth, but for moderate and for the estimation to quote the competition and also to strategy for the marketing. We kept for the estimate more than 25%. That will moderate strategic [inaudible].

Well, I think that is the estimate we give. Should there be an upside of it, it will be a bonus.

Do we have more questions, please?

Would you like me to open the line, sir?

Yes, please.

Okay, we'll move to the next question, then.

Good afternoon. This is Suresh Mahadevan from ABN Amro in Hong Kong. Congratulations on an excellent set of numbers. Just, actually, most of my questions have been answered, but I just thought I'll ask a couple of quick questions. One of them, Telkom Flexi, I just wanted to get an idea of the revenues and EBITDA for Telkom Flexi and what you are going to guide for full year there. The second thing I wanted to know is really quickly on the mobile side, are you seeing pricing pressure, because I understand that [inaudible] Indosat has been promoting a little bit more aggressively. Just wanted to hear your views on how do you see mobile pricing in the coming quarters, especially probably towards the end of the year, when some of your new competitors could launch.

Thanks a lot.

Thank you for your question. The CFO will answer that question on the mobile pricing and also [inaudible] for the full year.

Yes, I think on the Flexi, if you add all of the revenue from the interconnection, from data, et cetera, and the revenue is for the first quarter, is around 650 billion rupiah.

And what did you say that that would be, roughly, percentage?

Let me come back after - you know the mobile ...

Sure.

The pricing for the mobile business, but [inaudible] competitors, in terms like [inaudible]. Actually, there is after all [inaudible] the price war, but little bit changing on the strategy for the charging. For instance, like the Indosat, Indosat got only to [inaudible] on the free talk for the midnight, but the price actually is still [varied]. Also, for the Telkomsel there is no price war and reduced [inaudible], but a little bit changes the strategy for the charging. We just only focused on the calculating and the [guarding].

So if we're talking about the [inaudible] based on the second, we just put the 20 rupiah, but the calculating for the charging based on segment.

Yes, Suresh, I think I've got the number now on the [inaudible] of the Flexi. It is improving as compared to last year. I think that is relative to the first question by Sundeep on the cleanup, et cetera. So now we have more appropriate numbers to be accounted for, so the EBITDA margin is around 47%.

So just for the first quarter, right?

Correct, yes.

Okay, thanks a lot.

Thank you. We can still have also another question. Please open the line, please.

Certainly.

Hi, my name is [Raymond Totavi] from Deutsche Bank. I have a couple of questions. Number one is on the cost side. I understand that you have not any [time] on programs this year and you will [inaudible] again in 2007. So my question is, come 2007, will you be doubling your annual pension early retirements?

Number two, I understand that Flexi will move to [inaudible] in the three regions. A question for this is how much is the frequency cost will be allocated to [inaudible] for this year, and also next year, and how much is the total?

And, number three, on Telkomsel, you're getting a lot of revenue market shares in the third quarter, and your ARPU for the quarter is flat, and this plan is partly because of your off-peak pickup in the minutes of users due to your latest promotions. Now you look at both [XL] and also Indosat, they have launched off-peak, peak carriage structures. Just wondering how much of the additional ARPU or revenue that you have gained from the optic area.

Thank you. That's it for me.

Okay, thanks. Hello, yes, on the pension?

Thank you, Raymond. As we mentioned this year, we do not do the early termination. On the [inaudible], we are still in line with our target of reducing our [purse], so next year you will see that the number of the early termination will double than year 2005.

Second to my colleague comments', Raymond, [inaudible] that the company's been about more or less hasn't been a good year for the early retirement program, more or less.

So next year you will spend trillions?

We are contemplating doubling it. We're looking at maybe [inaudible] a ballpark figure. It's too early in [inaudible] 1.2 to 1.4 trillion.

Okay.

[inaudible - microphone inaccessible].

Mr. Raymond, these are being the cost of integration from [inaudible] for 1900 to 1800. The 800 Telkom will be 1.8 trillion rupiahs from 2005 up until 2007. But it is not significant cost impact to the customer. And then Telkom would [inaudible] more efficiency [inaudible].

This will compared to [inaudible].

Okay, so you have raised your [inaudible] cost from 1.3 to 1.8. Have you expensed a portion of that in the first quarter? About how much will that be for the full year this year?

Okay, I think to answer that, there are two things. On the new 2005, we had already expense the [inaudible] migration of around 855. That is the [actual] depreciation and the impairment writedown of the assets. However, on 2006 ongoing, basically, Q1 we have not spent any cash, but we have spent in terms of the [inaudible] of around 130 billion rupiah.

Okay.

Yes, if I can add to what was mentioned by my colleague, the figure that were [inaudible] to you I treat it as a [most servicing] assumption, meaning that we're looking forward to lower than the figure that was mentioned to you just now, so that figure that was disclosed to you really consists of two components. The first component, which is the biggest contribution, is the replacement of the handset.

And, of course, we need to recalculate the actual number of subscribers we [inaudible]. We are told that many subscribers already have dual-band [entries]. We also want to distinguish between our subscribers compared to users [existing] more on the prepaid level. And the remaining, the other component, refers to the equipment.

Just for your information, in the Jakarta and [West Jaba] area, we have a capacity of around 2 million [inaudible]. We have a capacity of 2 million, and at the moment we have existing subscribers of around 1 million, and so when you made a calculation, the equipment that we need to create will not cost of $50 million.

So all together, it gives you the number, the combined number that was disclosed by my colleague, but, again, this is a very conservative number. Thank you.

Okay, thank you.

Okay, [inaudible] for the next question on Telkomsel.

Okay, Raymond, regarding the off-peak promotion, that's for the [information] based on our analytics. In terms of the traffic compared with the normal traffic, for the off-peak promotion is approximately it's three times and if you're looking at for the impact from the total revenue, I think compared with the minutes of usage, approximately for the minutes of usage it's double and the revenue is up for the 48%. I think that's all.

Okay. Thank you. For everyone, is there any other questions? Okay, may we have the next question please?

Denny, there seems to be no questions at this time.

Okay, since there are no further questions.

I'm sorry, Denny. We have just somebody who's queued for question as we speak. Would you like me to open the line, sir?

Okay, yes, please.

Okay, one moment, please?

Hi, this is Sundeep from Lehman Brothers again. Just a follow-up part. Arwin Rasyid had recently mentioned about strategic initiatives at the Telkom Group level, including the appointment of Executive Vice President. Can you share any developments there, and what should we be expecting in 2006? Thank you?

Thank you, Sundeep, this is the $1 million question. Okay, it's like this, [inaudible] much [later], Denny, you can see that now we have someone [inaudible]. We had this three members to the executive committee, which is differentiated from the board of directors. One is strategic investment, the other one is in risk management and the third one is our CIO and procurement. Against that, you can see that we are very focused in trying to create value through synergy and alliances. We hope, you know, in some [happy] way can be achieved in the next few months.

More importantly, as we are talking now, we are about to close the collection of the strategic consultants that will prepare the strategy roadmap going forward and into the year 2010. I think I did mention this to you in our previous conference call, that we will prefer a strategy roadmap, so in contrast the whole Telkom Group, not just P.T. Telkom only, because, as you know, we're not just a fixed wireline and cellular. We also have our satellite business, we have the call center, we have the financial application, we have the pay TV where there is cable TV or [DPVH]. We are doing a big screen on our broad band, so there are so many businesses that we are right now, it's very important that we have a very clear direction of where we want to go in the next few years going forward.

Now, this strategy or [diagnostic] roadmap will require around 10 to 14 weeks. So if we believe that a consultant will start work in May, then they will finish sometime around, say, August. So by August when we have our conference call ending the third quarter of 2006, we'll have a good picture of where we want to go.

A lot of work is being done, [inaudible] the cost transformation [reduction] initiative. That is something that we will do only after the roadmap is completed, and [inaudible] for you when we have the next conference call.

Thank you.

Okay, thank you very much for the insights.

Thank you. Ladies and gentlemen, that ends our conference call for today. We'd really like to thank you for all of you participating on this conference call, and a lot of encouraging questions. We also thank everyone here attending, in this case - yes, I would like to ask our CEO for his closing remarks and therefore we can end this session. Thank you.

Okay, thank you, Denny. So, analysts, once again thank you for this opportunity to be here in our first quarter conference call. We started with a good year, but we don't want to be too optimistic, because we are aware that the market is becoming more competitive. But we are also feeling optimistic, as you know, because of [inaudible] Indonesia is still somewhat low compared to other countries in the region. We have a [inaudible]. However, what I would like to show you is that the Telkom Group that covers Telkom and Telkomsel and all our subsidiaries are putting all efforts into it, to develop our business and to create more value for our shareholders.

So I want to thank you very much for your participation today, and we look forward [inaudible] Telkom. Have a nice day.

[To end] the conference call, Operator, thank you.

Thank you. And that ends today's conference call. Thank you, everyone, for your participation.