Telkom Indonesia (Persero) Tbk PT (TLK) 2008 Q3 法說會逐字稿

This is Premier Global Services, please stand by. Good day everyone and welcome to the 2008 third quarter result conference call. Today's call is being recorded.

At this time, for opening remarks, I'd like to turn the call over to your moderator today, Denny Suryo, Vice President Investor Relations and Corporate Secretary. Please go ahead.

Yes, thank you [Felicia]. Ladies and gentlemen and all participants, welcome to the conference call of PT Telkom Indonesia Tbk. Our agenda today on Monday, November 3, 2008 is to discuss the Company's third quarter 2008 results.

The Company's info memo was released this morning and is currently available on our website at www.telkom-indonesia.com, under the heading Investor Relations.

Now we are delighted to introduce to you on this conference call, the President Director and CEO of Telkom, Mr. Rinaldi Firmansyah and also the members of the Board of Directors and Senior Management of both PT Telkom and PT Telkomsel.

Now may we remind you that the total time for this call is one hour, and we will begin with a presentation by our CEO, following a brief question and answer session? This presentation is also available currently, right now on our web cast and a tape recording of this conference call will be available after the session for the next one week.

Now ladies and gentlemen, we draw your attention to the Company's disclaimer to say that some statement during this conference call may be forward looking in nature. Actual results could differ materially from projections, estimations or expectations voiced during today's call. These may involve and uncertainty, and may cause the actual results and development 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, will bring about specific results as expected.

Ladies and gentlemen, all participants, today we are pleased to introduce Mr. Rinaldi Firmansyah as President Director and Chief Executive Officer, Mr. Ermady Dahlan as Director of Network and Solution and Chief Operating Officer. We have also among us Mr. Sudiro Asno as Director of Finance and Chief Financial Officer, and Mr. Arief Yahya who is on the conference call, who is the Director of Enterprise and Wholesale, Mr. I Nyoman G Wiryanata is Director of Consumer, Mr. Faisal Syam is Director of Human Capital and General Affairs. And we have also Mr. Indra Utoyo as Director of Information Technology and Chief Information Officer. And last but not the least, Mr. Prasetio, as Director of Compliance and Risk Management.

Now among us we also have the Board of Directors of PT Telkomsel and we are very much pleased to introduce Mr. Kiskenda Suriahardja as President Director, Mrs. Triwahyusari, Director of Finance and Mr. [Xhian Lung], Director of Commerce and also Mr. Syarif Syarial who is our Director of Planning and Development.

And now I would like to turn the call over to Mr. Rinaldi Firmansyah for his remarks. Well, Rinaldi, the time is yours.

Thank you Denny. Ladies and gentlemen, good afternoon. Telkom has announced its consolidated third quarter 2008 results on Friday, October 31, 2008.

The result shows that our operational revenue was still in the positive territory and resulted in a 2.2% growth compared to the same period last year, and is a happy competition.

However, I must stress that on behalf of management that we are not that satisfied with the Company's third quarter 2008 results. It is worth noting that the Company's subscribers and revenues are still growing, and we are seeing the telecommunications industry developing rapidly. I would like to confirm that we are maintaining a strong position in the marketplace. We do have a dominant subscriber base and are financially strong, which are all supporting the foundation for our future growth.

Ladies and gentlemen, overall, the performance of Telkom's current businesses, namely Fixed Wireless, Cellular, Network, Data and Internet indicate continued growth. However, due to the regulatory revisions of the tariff and changes in customer preference, we experienced a decline in ForEx and revenue and fixed line revenue.

Meanwhile we are -- keep on investing. Telkom Group's CapEx for 2008 is currently around IDR14.8 trillion.

For the third quarter of 2008, the Company's net income on consolidated basis was IDR8.92 trillion.

Fixed Wireline, as of September 30, 2008 the Company has recorded a total of 8.6 million fixed line in service, excluding Fixed Wireless, which is slightly decreased compared to the same period in 2007. In addition, the ARPU for Fixed Wireline was 144,000 per month.

TelkomFlexi, in the Fixed Wireless business, as of September 30, 2008 Flexi has reached a total of 9.1 million, or 63% increase compared to the same period in 2007. TelkomFlexi nationwide is supported by a network of 2,181 BTS. Moreover, the line in services production for Fixed Wireless has also increased by 32% to 514 billion second from 389 billion seconds compared to the previous year.

Flexi has kept its leading position as the market leader in the Fixed Wireless market. However, our blended ARPU for Flexi has decreased 29.8% in the third quarter to IDR40,000, as compared to IDR57,000 a year ago.

Telkom 007 in the International Direct Dialing business for the third quarter of 2008 result, Telkom [SIC] 007 and Telkom Global 017 have generated net revenues with a total amount of RDR1.2 trillion. As of September 30, 2008 Telkom recorded the incoming and outgoing international traffics of 1 billion minutes and 222 million minutes respectively.

Telkomsel; Telkomsel was able to maintain its position in the market by picking up new additions in the third quarter of year 2008, and now 5 million new subscribers, making that the total of 60.5 million subscribers as of September 30, 2008. This is an increase of 36% compared to the previous year.

Telkomsel's charge-able usage recorded a total of 59 billion minutes, a growth of 234% compared to year 2007. As a result, this maintains Telkomsel as the clear market leader for cellular DSM with more than 46% market share. As of September 30, 2008 the total number of BTS grew by 27% to more than 35,000 units, as compared to last year. As with -- as we take steps to build capacity and quality.

Telkomsel's blended ARPU, however, decrease year-on-year by 24% from 79,000 a year ago to 60,000. This was mainly contributed by significant price cut, both in Voice and SMS services.

Ladies and gentlemen, Telkom Speedy, as of September 30, 2008 Speedy has recorded a strong growth with a total number of 593,000 subscribers, a significant increase by 180% compared to 2007, which recorded 209,000 subscribers. The revenues from Speedy alone has now reached close to IDR1 trillion.

Telkomnet Instan, as of September 30, 2008 we have recorded that an average of 455,000 fixed telephone users who have access to Telkomnet Instan with a totaling 2.2 billion minutes of usage.

Ladies and gentlemen, I would like to move on now to briefly highlight some of the third quarter of the year 2008 financial results.

One, operating revenues consolidated grew by 2.2% to IDR44.6 trillion. EBITDA consolidated has shown a growth in activities at IDR26 trillion, a decrease by 6.2% compared to the same period last year. And the consolidated EBITDA margin has decreased and now is at 58.3%. The net income per share is IDR451.1, a decrease by 8.2% compared to the same period in 2007.

The three biggest revenue contributors of our third quarter of year 2008 results were mainly from Data and Internet, Cellular and Network, where each have grown by 5.9%, 9.4% and 32.4% respectively.

Meanwhile, in the area of the operating expenses, total consolidated operating expenses have increased by 15.5%. The main factors were 13.8% in depreciation, 27.7% increase in operating maintenance and telecommunication services, and 36% increase in marketing expenses. Furthermore, personnel expenses only increased by 4.9%.

Finally, I would like to mention that in the third quarter of 2008, Telkom's Group cash and cash equivalent position was maintained at IDR7.6 trillion compared to IDR6.5 trillion in the same period in the year 2007.

Ladies and gentlemen, we would like to highlight to you some important macro developments during this quarter as follows. One, on August 28 Telkom -- PT Telkom, PT Indonusa Telemedia, Telkomvision and PCCW International Hong Kong Limited signed a memorandum of understanding to co-invest in the development of Pay TV service. We will serve than 230 million population Indonesia and it will be available on three servers, the (inaudible) platform [line], the broadband Internet, Satellite TV and mobile content.

On September 19, 2008 the Company had an Extraordinary General Meeting of shareholders. The EGM has approved and decided on two results; one, approve the nomination of Mr. Bobby Nazief as Commissioner for the next five years. Two, approve the extension of the term of Company's Board of Commissioners until the closing of the Company's Annual General Meeting of shareholders in 2009. Three, we also here would like to welcome on board a new member of Telkomsel, [Mr. Xhian Lung] as the Commerce Director.

We would like to mention that Telkom has carried out a share buyback program (inaudible) regulations, which allowed share buyback of up 20% of issued and fully paid shares. This is a program initiated for a three month period, commencing October 12, 2008. The funds allocated for this program will be taken from an appropriate return earning as of December 31, 2007. And this is going to be part of the existing cash buyback program that we carrying currently.

Ladies and gentlemen, that ends my presentation for the third quarter of 2008. Let us continue onwards now with the questions and answer session, which will be moderated by Denny Suryo. Thank you.

Yes, thank you Rinaldi. Now let's open for the Q&A session. Before raising your questions we would appreciate it if you would briefly state your name and company. And please note that the BOD will answer directly after each question posed by participants.

Operator, may we have the first question please?

Thank you Denny. (Operator Instructions). Alright, Denny, we've got the first question up.

Thank you.

Hello, can you hear me?

Hello, yes, we can.

Yes, this is Arthur Pineda from ABN Amro. I have four questions. First, could you please give us some color with regard to the Fixed line performance for the quarter? It seems that it's quite weak and what are your expectations on this going forward into the fourth quarter?

Secondly, I -- could you clarify your insistence on the strategy with regard to trading pretty much revenues for market share. Is this something you would be looking to continue going into the fourth quarter or is that something you would revise going forward?

The third question I have is with regard to your expectations with regard to Telkomsel. Do you think you can actually monetize the strong subscriber growth into the fourth quarter or are you going to see a lot of these subscribers being churned out?

The last question I had is regard to margin expectations for Telkomsel and for the fixed line side. Could you please give us some guidance with regard to that in the fourth quarter? Thank you.

Okay, thank you very much and I think as we earlier suggested, (inaudible)?

Yes, I think on the fixed line -- we had estimated that you know our fixed line will continue to decline. However, we believe, because of several factors, we'll not lose this because of the -- more of the customers preference. We see actually that the decline in the fixed line is actually faster than what we expected.

We anticipated that the decline was only around 9%. In fact, now it's around 13%. So in light of those, we believe that this trend will keep on -- continue until year end. However, basically now we are reviewing our pricing strategy for the fixed line. We are basically also engaging a third party, as we mentioned that we were going to do that. So, in order to have basically a pricing plan for fixed line by 2009.

At least what we've tried to do is we are trying to combat the decline in our fixed client revenue.

And perhaps maybe we can ask (inaudible) to answer the question on revenue and the market share and how it's going (inaudible) 4Q.

Okay about the market share and revenue share. I think that the telecoms are as incumbent company have the big legacy related to the reducing tariff very significant in the short time. So I think that's unpredictable for the short-term telecom. Our growth is -- it will be decrease, but it is for the short-term.

But I believe for the long-term we have to set up -- I believe we have the strong fundamental about -- from the market size -- market side there, because our tariff is very similar with the other operator.

And also, we have -- there's six of us that customer base is bigger. And we have also one product that's very successful. It is simPATI. And as you know, the growth of the revenue is still 21% based on the growth of the customer of 72%. So relationship between revenue share and the market share I think we have to set where to get the catch first for the market share during the price war. So after that hopefully for the quarter we can hope that this increasing of the revenue.

Hi, this is [Xhian Lung] here. For the question on whether Telekomsel will monetize its calls coming in, we are looking at that. There is opportunity there for us, but this have to be taken in relationship with the competitors' pricing. So we will watch it carefully and you will see what we can do on that.

The next question on the guidance for Telkomsel we are looking at the operating revenue for 2008 to grow in the low single digit. We have no programs in place for the second half. And we hope to grow our customer base by 12 million to 15 million for 2008.

Okay thank you, thank you for your answers. May we have the next -- sorry do you have a third question, sorry.

Yes, just a follow-up on my last question. Actually that was with regard to the margins for the Group, because underlying that the question is that, would management actually expect marketing expenses to moderate in the succeeding quarters allowing margins to improve by the fourth quarter or should this kind of spending level be sustained going forward?

Well, I think in lieu of the competition and the marketing expenses that there has been a lot of marketing activities been done and contracted out. So, basically I think it will definitely be spent in the Q4. We will not stop, because if you look into our marketing expense for September we are still basically having room to do that. However, we will do more effectively by basically looking into the effectiveness of these marketing expenses here.

In terms of EBITDA margin I think it is safe for now actually until year end. Actually, we should see probably around 1% further decline there.

Okay thank you.

Okay, you're welcome.

Alright, we'll move onto the next question.

Hi gentlemen, it's Ken Yap here calling from Macquarie Securities. I've got a couple of questions. Just following on on the margin question, like on the consolidated basis now it's been two quarters of margins declining quite rapidly. It is not just marketing where the expense has gone up. It is also in operations and maintenance, general administer and also personnel. What happened to the skill benefit of being the number one telco in the market? How come we're not seeing the skill benefits (inaudible) [true]?

My second question is could you please talk about what your initial thoughts are about 2009; whether you have any guidance that you can share with us?

And then my third question is could you please give us an update on mergers and acquisitions. What are your current thoughts whether domestically or -- and internationally? Thank you.

Okay, thank you. For the number one question, for question number one on margin decline I would like to ask Kiskenda to answer that. And 2009 guidance, well perhaps also (inaudible) and requisition activities for Telkom, yes, 2009 guidance. And the mergers and acquisition activities we would like to ask David Burke to answer that question. Kiskenda?

Okay. Talking about the operating cost, it's growing faster than revenue. And I think it was the revenue, because the tariff -- reducing tariff significantly.

But about the operating cost actually Telkomsel is a very significant decrease about the growth related to the expense. From 55% in the last years and the last Q3 is only 21%.

Reducing for the expense I think this is in line with the economic scale and also because we have already aggressively done in the last three years. So for today we just only get the benefit, because we just only add the BTS without the aggressive in the number of (inaudible). I mean the towers.

Related about the marketing expense, I think we still fit in the aggressive one, because there is -- this -- the best opportunity for the Telkomsel to aggressive after we pass the situations, especially from the supply side. Actually we have already cut sales to deliver for the high MOU and also to preparing the capacity and quality through the consolidated our network in term of configuration, the traffic rebalancing and redesign. And also, we have success in a trial for many new technology. So for the next situation I think we're still aggressive for the marketing, but we still maintain about the efficiency.

And for the guidance (inaudible).

I think for 2009 we are still in the process of finalizing our budget, so I think we cannot -- we are not in the position to reveal it for the time being.

However, if you look into the situation 2008 as compared 2009, you see that the decline in the -- you know pricing has been very steep in 2008. We are not going to see that to be repeated again in 2008. That's what we expect 2009. If there is any further decline it will not be as steep as in 2008. So I think that is for the time being what we can say.

On the M&A activity I think David can --

Thank you [Mr.] Rinaldi. Hi Kenneth. Kenneth, since we last met I think we sat down and went through a number of issues with you. I think the market conditions and financial conditions have changed considerably over the last couple of months. Maybe what I'd like to highlight now is the Board decision and guidance that we have on M&A.

First and foremost, we'll not be looking at new M&A activities that are in areas that are within what we call adjacent industries, but we would rather focus on M&A activities, which are closer to our core business. Existing due diligence work that we have done on [acquisitions] we are still reviewing, but we are not undertaking any new due diligence work for new projects being put on the table.

However, it's worth bearing in mind that the reason why the Board decided on this particular strategy was in comparison to our competitors, we have a stronger balance sheet. So we think it's actually worth our while to consider investments in our core business, which would be looking at a longer term value return to the Group, and that's local and [internationally].

Thank you.

Thanks Kenneth. Can we get the next question please?

Hi, we'll move on to the next question.

Thanks, it's Colin McCallum here from Credit Suisse. A couple of -- three quick housekeeping questions first of all. Am I right in thinking that there was no early retirement charge in third quarter? I think we'd kind of expected that there would be one. Will there still be one but, I guess, revealed in the fourth quarter? That's my first question.

Secondly, the effective tax rate dropped quite sharply Q-on-Q. Can you tell us why that declined?

And then thirdly, on Flexi is looks as if the price per minute or the revenue per minute on Flexi actually increased into the third quarter. It was a bit surprising given obviously what Telkomsel sales pricing was doing during the same quarter. Can you give us a reason why that would be the case?

And then final question is just on broadband. That part of the business obviously seems to be doing very well. Can you tell us how many lines are capable of upgrade to ADSL services as of now? In other words, what sort of penetration rate do you have of enabled lines at the moment? How much room for growth in there as of the network as it stands at the moment? Thank you.

Okay thank you Colin. Number one for -- regarding RP we'd like to ask [Rinaldi] to answer the question. Also number two on the tax rate, on Flexi and revenue per minute also [Rinaldi] will be (inaudible), and on the broadband penetration rates we will also ask Rinaldi.

Yes thank you, Denny. Yes basically want to implement the new scheme for the RP. So we want to stop -- have benefit for the repaid. So now we still are under discussion for this scheme. So basically we need some time to decide and to communicate answer to employees -- to the employees.

We think we RP for this year, we will postpone the RP. So maybe we can implement this program next year.

Thank you.

Yes, this is the new [tax evolution] Indonesia, basically we had like 5% intensive for all our companies here. And -- but this is -- will have [tax effect] in 2009, but for this really for the -- just the [corporate tax]. So, for the (inaudible) and [man] and -- except for the -- after the -- beyond the 2010. So we basically have the incentive, 5% for the [cash flow] 2008 yes.

Rinaldi regarding Flexi [revenue] minutes.

Okay thank you. We have customer [OCD] until Q3 is 593,000; yes, close to 600,000. With PC penetration is around 4.2 million, and rate of the broadband until now is around 14%. We have 1.2 million capacity here, but we plan until the end of this year this is around 1.6 million capacity.

Okay, that's great and for the 1.6 million capacity is lines that are short enough distance to be upgrade DSL. That's going to be -- that's the potential number of lines you could roll out by the end of the year?

Yes, I think Colin it's basically the 1.6 million is the lines that is now reviewed with the broadband.

Great, thank you.

Actually that is, we are -- we keep on installing the ADSL, etc. So, that is what is available now, okay and we'll keep on investing and next year we will basically increase those lines.

Great, and just on the Flexi pricing?

Flexi pricing actually is the start is similar as what happened in ADSM. Basically we had lost time when we migrated Flexi from 1,900 to 800. So what we did was basically to grab market share especially in the Jakarta and West Java area.

Of course, then we offered the subscribers certain discounts on the -- on net flexi. However, for the -- that actually drives the market to basically buy and basically use it for the off net. So, I think that is basically the explanation.

Got it, thanks very much.

Okay thank you Colin. Next question please.

Hi, good afternoon, thanks for the call. It's [Lewi Holarda] from JP Morgan. I just had three questions. With regard to the Telkomsel in the third quarter going into a net interconnect expense position versus previously positive position. Just wondering if you intend to try to change the promotions to go back to reversing the situation? Or you're content with the current situation?

Second also on Telkomsel is I noticed that the CapEx this year is now at the lower end of the range at $1.5 billion. Do you feel given current competitive conditions and financial money conditions that next year your CapEx will still be maintained or do you think it will -- you can let it come off?

And just a follow-up to Colin's question on tax rate; sorry I was not able to catch for the full year what tax rate should we use and for '09? What tax rate should we use for the consolidated company and for Telkomsel?

Okay for the first question on interconnect I would like to ask [Xhian Lung] to answer, and then the second question CapEx on (inaudible). Interconnect (inaudible) sorry, I got the wrong signal here. (Inaudible), we would like to ask for the interconnect and the CapEx, yourself, Sudiro, as well as the tax consolidated.

Yes for the interconnection to change for the net out and the net in, now we make the consolidation in the other operator who makes -- now we implement the different of [the OC] of interconnect, with (inaudible) Telkomsel and Indosat and [Excel]. Now we make familiar between [the OC] Telkomsel and Excel and also we decide to reduce the out payment of their Telkomsel. This is the first. And the second, we also make the scheme of business with the [parent] to reduce the -- a payment especially for the transit. Thank you.

Thank you very much (inaudible). On CapEx, (inaudible) Sudiro.

So far Telkomsel CapEx for this year our guidance still up to $1.5 billion.

And the tax rate also they will be implemented in 2009 because we have the [pre-tax liabilities] on also [dividend] asset. So we make adjusted for the third quarter. Telkomsel is [tax fit] until 2010 at 28%, for '09 and 25% for 2010.

Thanks. Just a follow-up on the CapEx, how about for 2009, do you think $1.5 billion is going to be similar?

Yes, yes, it's going to be a lot of money.

Similar, okay thank you.

Thank you Lewi.

Also, for the tax we've got at the end of this year, I think -- yes, as I said, that we will implement new tax regulations. So, the tax rate is around 28% for the tax this year. And for the (inaudible) tax, what will basically (inaudible) in 2009 and 2010 and after that will be implemented by 25%.

However, for the next year for the whole companies we'll implement 28%, and actually for the parent Telkom, we'll implement 25% as this won't be a new regulation, unconsolidated basis. It's a parent, 25%. But we'll implement in next year.

Okay thanks a lot.

Thank you. Next question please.

Alright, and we move on to the next question.

This is Navin Killa calling from Morgan Stanley. I actually had three questions, two with regard to your fixed line revenue. I look at it on a quarter-on-quarter basis, obviously you did indicate that the decline has been faster than expectation. But still it appears to me that on a Q-on-Q basis your fixed line, particularly the local and long distance revenues, are down almost 50%. That just appears too sharp and broad to happen within one quarter. So I just wanted to understand whether there are any accounting issues there? Or is there a possibility that you over booked your revenues in the first ha lf. So if you could throw some light on that?

Second also on fixed line revenues; the installation item that was separately disclosed that was a negative number for the entire nine month period. Again I just wanted to understand what the reasons for that could have been?

And then lastly on Mobile; obviously you introduced a significant tariff cut at the beginning of the quarter, and your revenues came under pressure. But if you could throw some light on how your monthly trends have been shaping up on the revenue front. Should we expect this to be the last quarter of sequential revenue declines? Do you see the possibility of a recovery in revenues in fourth quarter and going forward?

And I guess in relation to that if you could also throw some light on how the competitive environment has been shaping up in the last few months, given all the issues that the smaller operators have been facing. Thanks a lot.

Hi Navin. Sorry, we didn't get your second question. Can you repeat the second question again please?

Well, the second question was on fixed line revenue break-up. You have this item called installation revenues, which actually went to a negative number in nine months, minus IDR37 billion. So just wanted to understand what could be the reason for that?

Okay thank you. For the first question, we'd like to ask (inaudible) Rinaldi to answer that (technical difficulty) maybe on fixed line. And then on the third question, we'd like to ask [Xhian Lung] on the trend on the monthly (technical difficulty).

I think for the first question and second, I will answer. On the fixed line, I think we'd like to confirm that there is no accounting upper booking or under booking in the second and third quarter.

This is really basically due to the -- as you know, fixed to mobile substitution, which is growing much faster as compared to our expectation, our estimation. So that is, I think, what that drives the decline in the fixed line.

Secondly, on your second question, I think that is because of -- we are experiencing also a slight churn in the fixed line. And basically the number -- and yes, the new installation is also much smaller. So that is where this revenue of new installments is also not growing, as you can see in the (technical difficulty) number. So I think those would basically explain the decline in the fixed line revenue.

Next question?

Okay on the impact of the tariff cut, we have seen month on month within the third quarter it's positive up, okay? So the trend is a healthy trend.

On the competitive environment, October is a slow month after the [look around], and not much activity has happened. We're watching the market to see how it goes. We are at the crossroad. Our competitors are happy to settle down of this decision where they are or (technical difficulty) a price war. So we are watching carefully and seeing how it goes.

But if I can just follow up on that, and I know it's a bit of a hypothetical question, but assuming your competitors decide to launch another price war below current levels, is the Telkomsel Group's strategy that you're going to match your competitors and that you're not prepared to be a significant premium to the competitors?

We will watch. Firstly, it's we'll look at the price difference, whether it's a real price drop or is it a gimmick. And we will watch to see what the impact on us is and we will do a trade-off. I know I didn't answer your question but those are the steps we will go through.

Okay.

Yes. I think, Navin, I'd just like to clarify on the fixed line voice revenue. It was a drop by 5%. You mentioned 50%, so we didn't see the decline 50%. It's only 5%.

Q-on-q.

Q-on-q yes.

Okay. Well based on your, I guess -- unless my numbers are incorrect, based on your first half and nine months financials, I have your fixed line revenue trajectory at IDR2.5 trillion in first quarter, IDR2.7 trillion in second quarter and then IDR2.2 trillion in third quarter. So that would look like a pretty significant decline; and definitely more than 5% for sure.

I think we'll come back to you on that one, because our record shows the decline of voice revenue of 5%. We'll come back to you on that.

Okay thanks.

Thank you Navin. The next question please.

And we'll move onto the next question.

Hi it's Keith Neruda from Goldman Sachs. Two questions. First, with respect to Telkomsel's dividends, that's Telkomsel, not Telekom -- I was wondering if there is any plan to reduce it for next year, given the fact that I assume the availability of funding is more difficult and you may want to save some of that cash at the Telkomsel level for CapEx? Just some comments on that.

And secondly, if I understood correctly at the beginning of the conference call, you mentioned that you were not satisfied with the third quarter results. I'm just wondering both in the next quarter but also more importantly going into 2009, what kind of KPIs you're setting for yourselves to the point which you would be satisfied with the results and what kind of strategies you plan to take to turn things around?

Keith, so there's only two questions here; one is on Telkomsel's dividends and the other is on KPI, is that correct?

Yes, KPIs that you're setting for yourselves to the point where you would say you're satisfied with the results going forward?

Okay, I got it. Right well, the first question I think we'd like to ask (inaudible) to explain (inaudible) and the second on KPIs, Rinaldi.

Yes thank you [Danny]. So, I think for the Telkomsel dividend for this year, for 2008 will -- so, I think, minimum as [last year], it be [85%]. So because this is the -- it's our policy. So I think [83%] is still the right or the perfect percentage or number. Thanks.

Yes, I think basically we could have estimated the impact of our pricing cut in Q3. And for the period coming forward, we will definitely do more astringent assessment of our pricing policies, in order for us to basically come back to the revenue growth, which is in line with our size and our scale.

So I think while we are working on the strategy and basically on the budget for 2009, we will come back to you soon on the KPI that we will set, while we are assessing our pricing policies.

Maybe just one quick follow-up, do you expect to see improved -- do you expect to be satisfied with the Q4 results? Or do you really not expect to see things turning round till next year?

No, I think as we said earlier, basically we see that the pricing that has been basically easing a little bit. So, we expect that our result is basically going to be slightly improved actually going forward, because from most of the operators, it's us who cut the price quite deep basically in the past three quarters.

Okay. Thank you.

Thank you Keith. And may we have the next question please and this is -- perhaps will be the last round?

Alright we'll move on.

Hi it's Kelvin Goh from CIMB. I have three questions. First one is on Flexi's MOU, would just like to confirm if that actually declined by about 32% and -- because there was a slight change in how you have presented the data, and now it's presented in billions of seconds versus millions of minutes previously. If you can just confirm that, and why was it so?

Second question is on -- if you can give us a guidance for 2008 for Telekom Group as a whole?

And lastly, for Telkomsel, could you explain why roaming revenue was so weak in the third quarter? And can you give us an idea what you think the rest of the year would pan out? Thank you.

Thank you Kelvin. For the first question, we'd like to ask (inaudible) Rinaldi to explain on the effects of MOU (inaudible). And then the guidance overall, I believe that's also (inaudible) Sudiro. And last one on Telkomsel, on the roaming -- weakness in roaming, we'd like to ask (inaudible) to explain that one. (Inaudible) Sudiro, on the Flexi MOU.

Sure yes. I think for the Flexi MOU, increase by around -- more than 50% year-on-year and from 6.5 million to 9.8 million. So this is I think a significant increase.

So it's not decline.

So it's not decline by 22% --

Yes that's the thing, the way it was presented, it was 514 billion seconds, which I worked out to be about 8.5, 8.6 million -- billion minutes or something. So can I just confirm that it was 9.8 billion minutes for Flexi?

Yes.

Yes billion minutes.

Okay thank you, alright.

And next question on the guidance (inaudible).

Okay. Yes for the third quarter, I can define, because of two factors. Firstly, it's because of the [seasonal], for the holiday. And the second is -- and we got a problem with our network, our partner networks. And this -- and was the problem in the -- partner network is one of our top tens. Thank you.

On the guidance?

Yes, for the -- on guidance setting, I just can say that the top line growth will be 3% to 5% growth year-on-year.

Right. And just on a question on roaming was, do you expect it to be one-off or do you expect it to recover in the fourth quarter?

Yes, I think this will be recovered in the fourth quarter.

So, in fact, there was a problem with the partner network, am I right, where you roam into that caused the decline in the third quarter?

It's a single area problem. It's already recover basically.

Alright. Thank you very much.

Okay we really have one more question and we will have to end the Q&A. The next question please.

Alright Danny, we'll proceed to the next question.

Hello this is Andrew Haskins calling from Nomura, thank you for the call, two questions from me please. Firstly, if I calculate correctly, Telkomsel's revenue per minute, excluding interconnect and roaming, was about IDR215 for the third quarter. And again if I'm calculating correctly that was down about 77% year-on-year.

Is -- by what -- is there a level which you would see as the bottom for revenue per minute, a level below which you would not be prepared to go in terms of -- because it would be too damaging to your profitability, even if your rivals remained aggressive? That's my first question.

And my second question, also on Telkomsel. Earlier this year and particularly in the first quarter, you were experiencing significant congestion problems at certain times of day. You redesigned your packages; relaunched them. Is the issue of network congestion, is that now completely resolved? Thank you.

I guess these two questions are for Telkomsel, is the bottom for revenue per minute, are we seeing this, and the second have we resolved the congestion problem. So the first one will be taken by on the revenue per minute and the second thing on the congestion [Xhian Lung]?

Okay, our guidance for revenue per minute at the bottom, so this is around IDR200.

And on (technical difficulty).

Yes on the congestion, we have certainly increased our capacity and we particularly have resolved those issues.

Right thank you. Could I just go back to my first question? Thank you for confirming it was around IDR200, but my real question was what do you see is the floor? Is there a level below which you would not be willing to cut prices any more?

I think to answer that one, you could see that Telkomsel, although we dropped the price by more than 70% but still our margin is still the highest among the several operators. So, in fact, if you ask then we still have actually the room to go further if needed.

However, as (inaudible) was saying, actually we are looking also not only ourself, but we are looking on the competitors' environments, what are the competitors are reacting to these situations. And of course, we are entering in 2009 with financials as our colleague lately says from Goldman Sachs that the financial strength is key.

So we basically do not expect the price cut will be as hot as it is in 2008, because we believe that -- and we have already seen now in the third quarter, basically it's not as aggressive as before. However, we like to reiterate our position that basically probably we are looking into the competitive environment very (inaudible).

That's great, thank you very much.

Okay thank you Andrew. Well ladies and gentlemen, that ends the Q&A session and that ends my role as your moderator. Thank you for your participation, but before we end the conference call, we would like to ask the CEO for his closing remarks; (inaudible) Rinaldi?

Yes. Ladies and gentlemen, we appreciate the questions that all of the participants have given us today. Allow me to conclude in today's discussion that Telekom Group in the third quarter of 2008 had a very challenging period. Nevertheless, we have continued to execute our strategies in all areas, including the key segments of our businesses.

For instance, in our fixed line segment we are currently undertaking a stringent assessment of our pricing policies in order to combat the decline of revenue growth. We have also expanded rapidly by gaining dominant market share, by continue adding cellular and fixed wireless subscribers and also for the real high growth of our broadband.

We hope shortly to announce the formation of the consolidated power business that will help reduce operating expenditures in our mobile business, plus deliver new corporate (inaudible).

We also have seen strong growth in our new wave services, mainly in our corporate value added services.

Taken into this consideration, Telekom continues to have a strong balance sheet and sustainable revenue growth. This allows us to take advantage and have a stronger position for gaining the momentum in this expanding market.

Ladies and gentlemen, that concludes my statement. Thank you for being on the call with us, we look forward for our next call. Good evening.

And that concludes today's conference call. Thank you all for your participation.