Telkom Indonesia (Persero) Tbk PT (TLK) 2010 Q4 法說會逐字稿

Good day, everyone, and welcome to the PT Telekomunikasi Indonesia fiscal year 2010 results with investors conference call. Today's call is being recorded. All lines are in a listen-only mode at this time. At the end of the presentation, we will conduct a brief question and answer session. (Operator Instructions). We are still in the process of uploading today's presentation. If for any reason we are not able to get the webcast uploaded, we will email that information out to you. And now, it is my pleasure to turn the conference over to Mr. David Burke, Executive Vice President. Please go ahead, sir.

Thank you, [Mel]. Ladies and gentlemen, thank you for participating in today's conference call to discuss the full year of 2010 results.

Yesterday, on March 31, 2011, we released our financial results for the full year 2010, ending December 31, 2010. The press release and other materials are available at our website, at www.telkom.co.id. Today's presentation is also available on the webcast, and an audio recording will be provided after the call for the next seven days.

With me on the call is Mr. Rinaldi Firmansyah, Telkom's Chief Executive Officer. He will be giving you an overview of the results, after my opening remarks. I will then conclude the brief overview, after which we will take your questions.

Before beginning, let me remind you that today's call and the responses to questions may contain forward-looking statements within the meaning of Safe Harbor. Actual results could differ materially from projections, estimations or expectations voiced during today's call. These may involve risk and uncertainty, and may cause actual results and developments to differ substantially from those expressed or implied in the statements. The Company does not guarantee that any action which may have been taken in reliance to the statement.

Ladies and gentlemen and all participants, it is my pleasure today to introduce Telkom's Board of Directors, who are joining us today. Firstly, as I mentioned, Mr. Rinaldi Firmansyah, as President Director and Chief Executive Officer; Mr. Sudiro Asno, as Director of Finance and Chief Financial Officer; Mr. Ermady Dahlan, as Director of Network and Solutions and Chief Operating Officer; Mr. Prasetio, as Director of Compliance and Risk Management; Mr. I. Nyoman G. Wiryanata, as Director of Consumer; and finally, Mr. Indra Utoyo, as Director of Information Technology and the Chief Information Officer.

Also present are the Board of Directors of Telkomsel, who are joining us today. Mr. Sarwoto Atmosutarno, President Director; Ms. Triwahyusari, Director of Finance; Ms. Herfini Haryono, Director of Planning and Development; and supporting them, Mr. Hendri Sjam, SVP of Sales.

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

Thank you, David. Ladies and gentlemen, good afternoon. On behalf of Telkom's management and employees, I would like to thank all our valued shareholders and stakeholders for your support and business to the Company. We sincerely appreciate your participation on this conference call.

Before presenting the full year of 2010 result, I'd like to remind you that, actually, it is the first time after a long period that we released a full-year annual report on March 31. And I think this is also an achievement from our finance and accounting divisions, and we believe that we can also give you the information on time in the future.

And please, I would like to take this opportunity to give you a brief overview of Telkom Indonesia. Telkom is the largest integrated telecommunications company and network provider in Indonesia, serving more now than -- serving more than 120m customers nationwide. We provide a strong portfolio of information and communications services, including wireline, fixed wireless, mobile, cellular, data and Internet, network and interconnection services, IT services and media directly or through our subsidiaries.

As of December 31, 2010, the majority of our common stock, 52.47%, was owned by the government of Indonesia, with the remaining 47.53% under public ownership. Our shares are traded on the Indonesian Stock Exchange, the New York Stock Exchange and also in the London Stock Exchange, and publicly offered without listing in Japan.

Ladies and gentlemen, Indonesia, with its strong economic growth, stable political landscape and open market policies, is becoming one of the most attractive investment opportunities in the region. Indonesia PTT in the year 2010 contributed almost 40% of the aggregate GDP in the pan-Asian countries, with an economic growth in excess of 5% in the same period. In 2010, the GDP of Indonesia was approximately $0.9b, with economic analysts forecasting this rising to $4.3b over the next five years. Against this background, growth of economy, combined with a young developing population, the data and telecommunication sector is contributing to the growth of Indonesia.

Our internal analysis, based upon independent research reports, shows that Indonesia currently has in excess of 45m Internet users nationwide. These are projected to grow in excess of 100m users by 2015.

Telkom Indonesia is strategically positioned, as the leading provider of data services in both fixed and wireless broadband market, to take advantage of this opportunity supported by Indonesia's robust economic growth. Hence, we have continued to develop our network content application businesses, to provide a longer-term return on investment.

Our continued dominance in the data services space is reflected in the operational highlights. I shall clarify shortly. These are enhanced by our preparation of critical go-to-market services, such as IPTV, music distribution application and services and remittance services, to serve the growing demands of our data customers and to support the traditional business we have in the fixed, wireless and the normal cellular businesses.

We have presently undertaken a fundamental and comprehensive transformation of our entire business, including our portfolio, infrastructure and systems, organizations and human resources, and lately cost optimization initiatives. This is part of our initiative to reduce our dependence of the legacy telecommunication portfolio of fixed-line telephony, mobile telephony and multimedia, and encompass a broader portfolio of telecommunication, information, media and edutainment.

We are developing and expanding our core competencies internally and through acquiring companies and talents that have potential to leverage our business group. With our commitment to ongoing innovation, we are now positioned as a strongly competitive [communication] company.

Ladies and gentlemen, during 2010, we have enhanced and modernized our network infrastructure, connecting main islands in Indonesia with submarine cable and fiber optic. We have started replacing our old copper and TDM technology with MSAN, GPON and IP-based technology that will reach capacity of 245,000 lines in 2011 and 6.3m in 2015.

All these strategic network initiatives are further confirmation that Telkom Indonesia is the most prepared to supply through nationwide data services, or we call it [Indosat].

Ladies and gentlemen, now let me present the operational and financial performance results for the full year of 2010. Over 94m subscribers, we are still the leading provider in the cellular market, with around 46% market share. In the full year, total cellular BTS reached 36,500 units, 18% growth compared to the same period last year. Cellular revenues contributed IDR29.1b, a 2% increase compared to the same figure in the previous year.

Our broadband subscribers showed excellent growth, with a total of 1.6m subscribers in fixed broadband and [3.8m] subscribers in mobile, a 44% and 128% increase, respectively. Fixed and mobile broadband revenues contributed IDR3.6 trillion and IDR980b, a 38% and 82% increase respectively compared to the previous year.

Our total number of fixed wireline is flat or decreased by around 0.6% to 8.3m subscribers. Meanwhile, our fixed wireless business Flexi subscribers increased to 18.2m. Total BTS of Flexi reached 5,600 units, an increase of 2% compared to the previous year. MOU decreased to 12b minutes and ARPU blended decreased to 16,000 in the full year of 2010. In this period, Telkom maintained its position as a market leader in the fixed wireless business, with 56% market share. Fixed wireline and fixed wireless revenues totaled IDR12.9 trillion.

We continued defending the decline in voice revenue through a flat tariff program in the fixed line. We call it Fixed Business Improvement Program, FBIP. We are seeing more and more subscribers actively participating in the program. As of December 31, 2010, there were more than 2m subscribers registered in FBIP program, amounting to more than 29% of total fixed wireline subscribers. The total incremental revenue during the fourth quarter of 2010 from this program was over IDR160b.

Ladies and gentlemen, I shall now briefly present the financial results and try not to repeat all the information that you may have read in the info memo posted on our website.

First, balance sheet, year-on-year basis. Total assets increased by 2% to IDR99.8 trillion. Total liabilities decreased by 10% to IDR43.3 trillion. Minority interest increased by 10% to IDR11.9 trillion. Total equity increased by 15% to IDR44.4 trillion.

Second, income statement, year-on-year basis. Operating revenue increased by 1.4% to IDR68.6 trillion. Total expenses increased by 2.8% to IDR46.1 trillion. EBITDA increased slightly, 0.9%, to IDR37.1 trillion. Meanwhile, EBITDA margin is stable around 54%. Net income increased by 1.2% to IDR11.5 trillion.

Revenue contribution for this period was still dominated by cellular, with a contribution of 42% to our total operating revenue, excluding SMS. The second major revenue contributor was data, Internet and IP that contributed 29%. That's including SMS. Followed by fixed line, with a 19% contribution. Interconnection, network and others totaled 10% contribution to total revenue.

Meanwhile, for our expenses, O&M was 35% of total expenses. Depreciation and amortization expenses were at 32% of total expenses. Personnel expenses reduced to 16%. Interconnection, general and administration and marketing total a 17% contribution to total expenses.

As of December 31, 2010, total CapEx spending for the Group reached IDR12.7 trillion. CapEx allocated to Telkom, Telkomsel and other subsidiaries amounted to IDR3.6 trillion, IDR8.2 trillion and IDR831b, respectively. Telkom's CapEx was utilized to enhance backbone infrastructure and the new wave businesses. Meanwhile, Telkomsel's CapEx was utilized for acquisition of network infrastructure and IT systems.

Overall, we have a strong quarter four data, Internet and IT services. We -- in this sector, this is a sector which is important growth driver for us. We are particularly pleased with the surge of broadband customers and feel that our investment in high-speed Internet infrastructure, along with our aggressive marketing, is providing a positive result today and shall continue into the future. We still have to work harder in the 2011 on our cellular, and we basically are defending our fixed line in a positive way.

Ladies and gentlemen, that ends our presentation on the full year of 2010. Let us continue onwards now with the question and answer session, and shall be moderated by David Burke. Thank you.

Thank you, Pak Rinaldi. Now, let us open up for the Q&A session. Before raising your questions, it's very important for us and we would appreciate it if you could very clearly state your name and company. We will limit the questions to three per participant. Please note that the Board of Directors will answer questions directly after they are posed by the participants.

Operator, may we please have the first question? Thank you.

And first caller, your line is open.

Hello. Could you speak up, please?

(Technical difficulty) Citigroup. I have some questions. Firstly, can you elaborate on the reported share buyback plans? What kind of extent are you looking -- are you willing to go, and so that we have any guidance for 2011?

Secondly, wondering what the Company's acquisition and expansion plans are. What would be the criteria for expansion? And where are we with regard to the fixed wireless asset acquisition and regional acquisitions? I have been hearing Cambodia as something which is coming up.

The third question I had is with regard to the mobile business. Wondering how you plan to achieve 9% growth on mobile, if you only achieved 3% for the last year. What is going to change, going forward? Thank you.

We missed your name, sorry.

Sorry. My name is Arthur Pineda from Citigroup.

Hi, Arthur. Okay, Arthur. Just to quickly repeat, first of all, you asked questions on the share buyback and the plans for 2011, give some color there. Acquisitions, you want an update on where we are with the fixed wireless progress and any international expansions. And last but not the least, how we're going to maintain the Telkomsel growth of 9% for 2011. Okay.

Okay, Arthur. I'll take it on first of all, and I'll talk about international acquisition. I think it's public knowledge that we have been looking closely at one particular asset in Cambodia. That is still under discussion. No firm decisions have been reached.

You also asked what was the criteria that we are using here, looking at international acquisitions. It's something that we've discussed with a number of analysts in the past. We basically look at assets in the region, preferably those that are in close proximity to us, that have still got some growth opportunity left, and those are the areas that we would look at. We don't particularly look at new greenfield sites, either do we look at (technical difficulty) places, especially in the case of mobile.

We do have a policy to look at some of the adjacent industries that would help support our business here in Indonesia, where we could bring to [bear] certain technologies or skill sets that would help improve our performance and also improve our return on investments.

So that should get you at a very high level a view on the international investment strategy we have. It's small steps. They were not looking at anything particularly large. But we're looking at things that have some growth.

In regards to the share buyback of Telkomsel -- Telkomsel first, 9% growth for 2011, I'll hand you over to Sarwoto (technical difficulty).

Okay. Thank you. I think, to achieve 9% growth this year, we are very optimistic that there are still around 30m addressable potential subscribers that we -- we will achieve this in outside Java and also focus on corporation. And then we also introduce new services on broadband base. We expand 24 big cities last year, becoming 40 big cities serving broadband. And we continue to build capacity expansion and IT support in terms of billing and CRM. That is our main program that we are ready to achieve 9% growth.

Thank you, Sarwoto. For the other questions regarding the share buyback and also the fixed wireless, I'll hand over to Pak Rinaldi Firmansyah.

Yes. I think we have done a share buyback in the last two years and we see that -- we believe that our share price does not really reflect our value. And we also believe that we still have a strong free cash flow going forward. So, in order to pursue an increased earning per share, then we also are thinking of doing another share buyback. We will submit the proposal in the next AGM. Hopefully, then, it will be approved by our shareholders. And I think the amount for the time being, it's too early to tell, but we have the capacity basically to do it bigger than the previous share buyback program.

I think that is for the time being. We will give an explanation in more details when we have the proposal in place.

Okay. Second, I think it's interesting, the question on the acquisition of fixed wireless. I'm not sure of which one is the topic, but I assume this is one related to the Bakrie performed in the past. So, if that is the case, it's not yet progressing. I think it's on hold now. We -- that is if you are asking on the fixed wireless. Yes.

And for your -- I think everyone understands that the regulator has now issued the new license that can be applied for most of the fixed wireless operations, that we can apply for the full cellular license which we have not applied. However, on our side, on Flexi, last year we have not really invested. We only invested quite a small percent of our CapEx. So this year we will invest in -- basically on the EVDO too. The objective is basically to maintain the position of Flexi and the investment is to make Flexi still attractive for the consumers, for the subscribers, and while waiting for any corporate actions, if any. I think that is the explanation of the second one. Thank you.

Thanks, Pak Rinaldi. Okay. Please can we move on to the next question?

And next caller, your line is open.

Good afternoon, guys. It's Riaz Hyder here from Macquarie Research. Just a couple of questions. Just firstly on your data ARPU, could you just confirm what that is for the full year?

And then also, just on your data Internet division, just looking at your notes to the accounts, it looks like the data and Internet position in particular is actually -- only reached about 6% growth for the year. It was actually up about 43% Q-on-Q in the fourth quarter. If you could just clarify what drove that.

And then also, just for SMS revenues, similar. I think they were about 20% off Q-on-Q in the fourth quarter. If you could just confirm if there is any one-offs there, or give a bit more -- shed a little bit more light as to what is driving that. Thanks.

Okay. Thank you, Riaz. And also, thanks for sending us the questions prior to the call, so we were aware that you were coming on. Sudiro Asno has got himself prepared for this.

Yes. Thanks for the question. As reported on the Q1 to Q3 2010, Internet and data revenue was [purposely] reported on gross basis. And you know it's based on our understanding with our auditor Telkom basically presented Q3's [formula] (technical difficulty) net basis. And after normalization, the data based on the net basis, Internet data and communications Q-on-Q basically increased around 0.9% and year-on-year increased 6.5%. And --

Sorry. 0.9%, sorry, the 0.9%, that was for data, was it, Q-on-Q?

Yes, Q-on-Q. Correct. And year-on-year, it's 6.5%.

Year-on-year, 6.5%. Okay. But on the -- sorry, just to clarify it, up to the nine months, it was tracking at about 80% to 90% up year-on-year, up to the nine months. Can you shed any more light as to what kind of adjustment we are talking about that would get it back to 6% or 6.5% growth year-on-year? Sorry.

The adjustments are basically in the Telkomsel mobile front-end revenue, because this is a principle in (inaudible) accounting. Previously, we reported as a principle of standards, so we reported in gross basis. And as I said, basically, now we change it into a net basis.

Okay. Thanks.

So, basically, we restate them from Q1 to Q3 reporting.

Okay. And if you could just clarify data ARPU for Telkomsel.

No. I said we changed this lot in Telkomsel; we changed it in the consolidated Telkomsel data, with (multiple speakers) reported based on net basis, while in the Q1, Q2 and Q3, on the consolidated, we reported initially on the processes, now changed to the net basis.

Okay. Thank you.

Okay. Thank you, Riaz. Could we have the next question, please?

Next caller, your line is open.

Hi. Good afternoon. This is Rama Maruvada from Daiwa. Basically, just following up on Riaz' question before, when I look at your info memo, it says fourth quarter data revenue is IRD4.7 trillion, in the third quarter as of restated basis is IRD5.3 trillion, so there is a sequential decline there. If you could provide a bit more color on what is driving this.

Yes. I think this is basically almost the similar question here. One is because the changes of the accounting treatment from a gross basis to net basis. One is data revenue. Of course you know this includes SMS data, SMS revenue. So, yes, we are aware that in SMS revenue last year decline was around 10% to 11%. That's the -- so the impact is basically to our data and Internet revenue.

But my question specifically is why is it not down on a restated basis, quarter-on-quarter.

Okay. Yes. After we restated Q1 to Q3 reporting, the declining is not 7.7% but just 1.6%. That's the operating revenue Q-on-Q.

Okay. Maybe I'll follow up offline. Thank you very much.

Yes, yes.

May we have the next question, please?

And next caller, please go ahead.

Good afternoon. It's Colin McCallum here at Credit Suisse. Thank you very much for the opportunity. Two questions. The first is, just looking at Telkomsel, the promotional tariffs you launched in the fourth quarter have clearly resulted in lower revenue, lower EBITDA and lower net profit, quarter-on-quarter. I was wondering if management could explain how they thought that it could have any other conclusion.

My second question is regarding the answer to the first one. Given that this has proven to be painful for you in terms of your revenue, EBITDA and net profit, are you looking at changing your strategy and actually raising prices again? Thank you.

Thank you, Colin. From Telkomsel, two questions. Yes. Hendri will quickly run through the promotions and the impact of the promotional tariffs, and also then moving forward what would be the strategy to compensate by potentially increased prices.

Okay. First of all, if we take a look end of Q3, our competitor is also doing a price war. That's why we come up at October. We do also the promotion in the pricing. We used the Kartu As at that time, the promotion at IDR20 per minute. This is to get the market share back, because previously we lost the market share. That's why we are going to gain the market share, using the IDR20 per minute.

And secondly --

Sorry, if I can just stop you there. Your competitor grew revenue in the fourth quarter. You lost revenue in the fourth quarter. And this is exactly what happened previously, when you tried to compete on pricing. So the question again is who thought that you'd get a different conclusion? Can you explain your logic as to how you thought a IDR20 offer would have resulted in increasing revenue market share? What was the logic behind that?

I think basically the fourth quarter promo [and decline] has two objectives. First is there was a loyalty program, and it's already stopped on December 31. And the second one is because of the intensive competition starting again in the fourth quarter. And then we are changing strategy to follow the pricing on SM -- on Kartu As promo, and that with a good result on -- indicating on first quarter this year.

Colin, are you -- do you still need back-up question?

Well, as I say, I think it's not very clear that -- you've said that -- you've not explained why you thought cutting prices more than your competitors had cut them would result in higher revenue. And clearly it didn't result in higher revenue. So, that was really the question. And have you then changed strategy again? Are you raising prices yet?

Yes. Let me clarify for you. Actually, what Telkomsel did was basically just a common strategy is offering the discount, etc. Plus, in December, Telkomsel was offering the loyalty program in which, using the Telkomsel TIME, a subscriber can basically convert their time into the products. What happened was that, contrary to what was the norm in the past, the subscriber actually changed the time into the passes, so that was directly impacted to the revenue. And that's why then we stopped the program in December, although the impact is going into the month of January as well.

So, however, the program shows that the Telkomsel subscribers are still taking on the promotion that we launched, and that was shown also by the pickup in terms of the net adds. And if you recall, in the beginning of year 2010, the net adds was affected by the promo by the market. This is also now. We do not like to lose the market share. That was part of the program. The only difference now that the customer, instead of taking the goods, the products, they converted this into the passes.

Got it. Okay. Thank you very much, Pak.

Can we have the next question, please?

Next caller, your line is open.

Hi. Good afternoon. This is Navin Killa from Morgan Stanley. Thanks a lot for organizing this call. I have three questions. First, if I look at your consolidated operations and maintenance expenses, that seems to be down quite a lot on a quarter-on-quarter basis. If you could explain whether that has anything to do with any restatement, and particularly with regard to the new frequency charging mechanism, if it is in any way related to that. So that's question number one.

Second, I know in the past you've talked about consolidating your tower business and then potentially doing some strategic activity around it. If you could give us any latest update on that.

And then the last question I had was kind of related to the second one. When you look at your 2011 network expansion plan for Telkomsel, and let's say you come across a certain number of towers that you need to build, how are you splitting those towers between those that will be built by Telkomsel itself, those that will be shifted to the [Dimetra] and those that will be shifted to independent tower companies. So, just a rough proportion of your 2011 tower build out. Thank you.

Hi, Navin. We'll start off with the third question. We'll move into -- we'll have Ibu Herfini really on the strategic network expansion. I'll then give you a quick update on the tower consolidation aspect.

Hi, Navin. What are we doing regarding the strategy on the tower, two. I think with a direction that we will build less towers due to the fact that Telkom plans to relocate -- the plan is -- the tower (inaudible). I think we are hoping (inaudible) building our own. Yes? Additional to that, actually, also due to the total capacity evaluation. So, definitely, building towers needs a full-time job, so that we are not building massively any more (inaudible), only the area that we are able to get a permit, yes, we're building in a very minimum way. The rest, actually, we are talking as a first priority of (inaudible), where roughly split is actually about 70/30. Dimetra will do around 70 and 30 we're still hoping to be other tower providers.

A review is going on per monthly basis, in case Dimetra are not able to build the towers that we refer to, that we have given to them. Then we'll take over and then we'll talk to the other tower companies. I think that's how we (inaudible).

Sorry, if I can just clarify the numbers, so 70% Dimetra, 30% other tower guys. So basically your own self tower build out is probably close to zero?

We can say that, but I think there are still one or two cases. Yes? I'm not saying that it will be zero. It's the minimum number. This is more on the take up of (inaudible) and we don't see any danger to build. Yes? So it's become a last priority. If we're not able to get confirmation from Dimetra whether they're going to do it in a very big way, only by then that we can let ourselves build again. So, in a very minimum way.

Right. And can you throw any absolute numbers here, like 1,000 towers, 2,000 towers?

Yes. Quite similar with previous years, around [100]. We don't change the strategy, obviously, so it keeps like the previous years.

Navin, just to follow up quickly on the tower consolidation, I think one thing's clear from what Ibu Herfini just said is that we are allocating the resources to Dimetra to grow out the business. Recently, as you're well aware, we had a transfer of some of the key staff from a number of the various units from Telkom and Telkomsel, to move across there as a management team, in order to be able to provide the service level that we expected from them, not only for Telkomsel but also in the future for other operators.

I think the number they were given quite recently is 1,800 towers that they're going to be building. So we're going to focus on growing that tower company. In the meantime, we're still in discussions with our partners regarding the existing Telkomsel towers. We'll get back to you as and when there is further development there. But rest assured that what we are doing, despite the consolidation, while not being executed as we wanted it in the last couple of months, but what we are doing is actually building those capabilities, building the skill sets and building the value that we can in Dimetra as we go along.

Okay. I'm going to pass it on now to Sudiro, regarding the consolidated expenses, that they were down, and what impact that has [and frequency of that].

Yes, David. Yes. As you know, that now we have a new decree of the [top NCP], previously we had [RS] or BTS basis, and now we have bandwidth basis. Based on that decree, we have basically a negative -- I mean a positive impact to the top NCP of -- by more than IDR500b in Telkomsel, while of course we had some increasing of CPA cost, around IDR200b. So that's two biggest driver to basically -- on the [OM] costs in 2010.

I hope we were able to answer all your questions for you, Navin. So we'll move on to the next question. Thank you.

And next caller, please go ahead. And next caller, please go ahead. Your line is open. And hearing no response, we'll move on to our next caller.

Hi. Thanks for the call. This is Foong here from BNP Paribas. I've got two questions. Firstly, how do you see competition in the mobile market evolving this year, particularly in the ex-Java areas? Are you concerned that competitors could move more aggressively into these markets this year and put further pressure on ARPU?

And second question is with regard to the news that you guys would like to buy back the 35% stake in Telkomsel from Singtel. Could you just tell us whether -- at what stage are these negotiations at, when do you expect to complete it and basically what are the benefits for Telkom? Thanks.

Foong, thanks for those two questions. First of all, what are we experiencing and how are we handling and planning the strategy for the ex-Java competition, right, and the fact that as others move in. So I'll pass it on to Hendri Sjam to answer that. Thank you.

Again, the competition in Java I think is becoming fierce. Mostly it's coming from our competitor. And also, in Sumatra currently they are overtaking us, this not on the region basis, but this on the cluster basis. That's why we also fight with them in the cluster basis. This is the competition between Java and ex-Java. Okay.

Are there pressures for ARPUs in the ex-Java areas?

Yes. For the ARPU, we expect its declining, because currently we are trying to get the key segment in the Java and also in the outside Java.

Okay. At the moment, you look at ex-Java versus Java, right, what is the -- is ex-Java ARPUs a lot higher than Java? And do you expect it to come down to parity over time?

Yes. Especially ex-Java in eastern part of Indonesia is the highest one, and after that Sumatra is the second one. And the last one is Java from the ARPU side. I think with this year it's coming down also in ex-Java and also in Java for the ARPU.

Okay. Let me basically add to that. Basically, Telkomsel also is fighting with the region of [Parasingk]. So we have been competing with the competitors in the past few years. It's not only now, actually. For outside Java, our presence is very strong. And being the first one there, actually, it's not that easy for the competitors to really come in, and it has been proven. Actually, if you look into the competition, it's much, much more still in Java, while in outside Java we have been able to defend our position with the regional pricing and a strong distribution channel that we have.

However, definitely, we look carefully into it and we basically are doing various marketing and sales strategies to get our market share and to defend our position and to defeat the competition.

The second question, on the buyback, I think it's a share of Singtel. One, we have not talked to Singtel. It basically is coffee shop talking only. So I think we cannot comment much on that [matter] until we know what is happening, because that news first comes from our Minister. That is not even really in our budgeting plan.

Thanks, Pak Rinaldi. We'll move on to the next question now, please.

Next caller, your line is open.

Hi. This is Roshan calling from Merrill Lynch. I had one question on the fixed wireless segment. Just looking at FY10, the revenue, expenses and investment in that segment actually were pretty low and declined. So what are the thoughts for that segment going into FY11? And just for FY10, why was this the case, of low revenue, expenses and investment in that segment?

The second question is, maybe I missed out on the guidance, could you give some color on the guidance for FY11? And just talking about the 9% growth in cellular segment, what are the underlying assumptions or expectations which would lead to this 9% growth in cellular segment?

Thanks, Roshan. I think we will quickly run through with Nyoman. The first question basically is what was the fixed wireless strategy going through 2010. You noticed that we had not invested particularly into that business, and the revenue up-tick was there but it wasn't as high as it was prior. The second question is the guidance of the Company moving forward for 2011 and, more importantly, maybe going back to Sarwoto on that one, to reiterate what he mentioned earlier on the 9% growth.

So, to begin with on the fixed wireless, I will start with Pak Nyoman on our strategy moving forward for Flexi.

Thank you, Roshan. As Pak Rinaldi is giving you this afternoon, Flexi right now is under pressure. We cannot divide the differences between CDP and GSM any more. The products in the market are the same. And then, this year we try to offer TPDU, because voice is particularly had to compete and lifestyle already changed. Not only voice, the users, they need data. So that's why maybe our strategy going forward we will try to offer data in -- even into the major cities.

I will add on that one. Actually, on Flexi, in the past our focus was really on the consolidation. So we've put a specific team there and we didn't really put an investment there, not really on the new BTS. But now that the investment is put on hold, then we basically go back, we refined the team in Flexi and (technical difficulty). And we also are going to utilize one of our carriers' spectrum, to be used for the data. So, on the cellular industry, if you don't have the data it's going to be lapped up by the customers. So that is on the Flexi side.

If I could just ask a second question?

Second question, what is the (technical difficulty), Pak Sarwoto.

Yes. Thank you. I think for the strategic action on 2011 that we will be more aggressive in outside Java, and then improvement on distribution management, building capacity and IT support, and aggressive on promotion and below-the-line, and so on. Our guidance this year is revenue growth will be 7% to 8%, similar to industry, with the EBITDA around 58%. And then we use -- we will use our CapEx is around 1.1 to 1.2 in Group tower. That's around IDR1 trillion, with the net adds around 50% in the market. That is Telkomsel guidance on 2011.

Hi. If I could -- hello?

Yes.

Just a question on Flexi. So is it likely that we will see a bump in terms of investment in Flexi?

And just in terms of cellular segment, Telkomsel, are you implying that you're going to be really aggressive in terms of pricing and in that sense not change your strategy?

On Flexi, you will not see a big jump in the investment, because we are still currently using our existing infrastructure, so that's not so much on the coverage. It will be more into the data for the EVDO services. So we think that will be around something like $40m to $50m for the Flexi.

I think, for Telkomsel, what we do is, one, the objective. We want to basically maintain our market share, so of course we will look into the competition landscape, what is happening. And definitely we have the adds in terms of number of the subscribers. We will use our on-net tariff to be -- we have 90% of the traffic is on-net, so we will do that as a good marketing strategy.

Of course, we do not really intend to have a price war again. What we'd like is how do we monetize, based on the time zone, based on the region. That is today what we are trying to do, including improving our distribution channels and above-the-line strategy.

Thank you.

Thanks, Roshan. Operator, can we can have the next question, please?

Next caller, your line is open.

Hi. I'm Roshan from JP Morgan. I have a question on your merger talks with Bakrie Telecom. Earlier, it was stated that the merger's on hold. Can you let us know why the merger is on hold? And what are the chances that the talks will resume and make progress? Thank you.

Hi. I think, if you don't mind, we will take that question offline. So if you don't mind giving us a call or sending an email through to Pak Agus, and both Rinaldi and myself will be able to give you some visibility on that. It's not the kind of subject we'd like to discuss in an open conference call. So, apologies for that, but please go ahead and do send in the question. We shall answer it.

Okay. Thank you.

Operator, I think we've got to the end of the session. It's now gone five o'clock. So, apologies to all the other participants who could not make it into the questions, because quite a few questions came in and quite a few people had a number of questions. So, please, if you don't mind, can you prepare all your questions that we did not answer on the call, please send them through to our Investor Relations Department. Our Investor Relations Department will pick it up, and from there we shall move on and answer you as quickly as we can, which will be in a couple of days' time.

Now, so what we'd like to do at this point is we'd like to thank everyone for participating. We really do look forward to updating everyone in the next few weeks, to review first-quarter results. If you have any further questions, please feel free to contact us directly, as I stated earlier, via email.

Before we end our conference call, I would like to pass it back to Pak Rinaldi Firmansyah, our CEO, for his closing remarks. Thank you.

Thank you, David. Ladies and gentlemen, as I mentioned in my earlier introduction, Telkom Indonesia is positioned as the dominant player in the Indonesian marketplace, combined with the country's positive growth plus the need by the Indonesian subscriber for more services in information, media and edutainment sector. With our continued presence in the data services space, Telekom Indonesia is the leading company that can truly take advantage of this strong growth potential, enhanced by our preparation of critical go-to-market successes such as the PTT music distribution application and services that work IT services to serve the growing demands of the data customers.

2011 is an exciting and challenging year, and we confidently expect that our strategy in this market shall continue to provide all of our investors with positive returns.

I would like to thank you all, again, for participating in this conference call, and look forward to meeting you again in the near future. And I wish you all a good day.

Ladies and gentlemen, that does conclude today's conference call. Again, thank you for your participation.