Telkom Indonesia (Persero) Tbk PT (TLK) 2011 Q2 法說會逐字稿

Good day, everyone, and welcome to the Telkom info memo 1H 2011 results conference call. Today's call has been recorded, and will finish at [3.15.]

For opening remarks, I would like to turn the conference over to your moderator today, Mr. Agus Murdiyatno, Vice President of Investor Relations. Please go ahead.

Thank you, Vicky. Ladies and gentlemen, thank you for participating into this conference call to discuss PT Telkom Indonesia first half of 2011 results.

On July 29 2011, we released our financial results on the first half of 2011 ended by June 30 2011. The press release and other materials are available at our website, www.telkom.co.id.

So this presentation is also available on the webcast, and an audio recording will be provided after the call for the next seven days.

Joining me today is Mr. Rinaldi Firmansyah, Telkom's Chief Executive Officer; and the members of the Board of Directors and senior management members of PT Telkom and PT Telekomsel. Our CEO will give you an overview of the results after my opening remarks.

To begin the conference, let me remind you that the 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 this call. This may involve risks and uncertainties, and may cause actual results and developments to differ substantially from those expressed or implied in this statement. The Company does not guarantee to any actions which may have been taken in reliance of these statements.

Ladies and gentlemen, all conference participants, it is my pleasure to introduce Telkom's members of Board of Directors who are joining us today.

Mr. Rinaldi Firmansyah, the President Director and Chief Executive Officer; Mr. Sudiro Asno, the Director of Finance and Chief Financial Officer; Mr. I Nyoman Gede Wiryanata, the Director of Consumers.

Also present are the Board of Directors of Telkomsel, who are joining us today.

Mr. Sarwoto Atmosutarno, the President Director; Ms. Triwahyusari, the Director of Finance; Mr. Leong Shin Loong, the Director of Commerce; and Ms. Herfini Haryono, the Director of Planning & Development.

And now, I would like to give Mr. Rinaldi Firmansyah an opportunity to deliver his remarks. Rinaldi, the time is yours.

Thank you, Agus. Ladies and gentlemen, good afternoon. On behalf of Telkom's management and employees, I would like to thank all of 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 first half of 2011 results, I would like to take this opportunity to give a brief overview of our Telkom Indonesia.

We are the largest integrated telecommunication Company and network provider in Indonesia, serving more than 129 million subscribers nationwide. We've got quite a strong portfolio of information and communication services, included fixed wireline, wireless, data and Internet, network and interconnection, directly or through our subsidiaries.

As of June 30 2011, the majority of our common stock, 52.58%, is owned by the Government of Indonesia, with the remaining under public ownership.

Our shares are traded on the Indonesia Stock Exchange, New York Stock Exchange, London Stock Exchange, and also Publicly Offering Without Listing on the [back].

Ladies and gentlemen, before presenting the first half of 2011 results, I would like to take this opportunity to give a brief overview of Telkom Indonesia.

During the first half of 2011, Data, Internet and IT revenues performed well, contributing 33.5% to total revenues in first half 2011, and during this period, the revenues increased by 11.8%. Our Fixed Broadband revenues is IDR1.964 trillion, while our Mobile Broadband revenues is IDR2.19 trillion.

Cellular customer base grew strongly by 15.8% on year-on-year basis to IDR102.3 million, with net adds for second Q of 2.9 million new customers.

Our Broadband customers recorded a 63.7% growth in the number of subscribers to 7.2 million in the first half of 2011.

Ladies and gentlemen, now I shall present the operational and financial performance results for the first half of 2011.

With over 102 million subscribers, we are still leading provider in the cellular market, with around 46% market share. In the full year of total Cellular -- in the full year, total Cellular BTS reached 39,600 units, 17% growth compared to the same period last year.

Cellular revenues contributed IDR13.5 trillion, 0.3% (sic - see slide 7) increase compared to the same figure in the previous quarter.

Our Broadband subscribers showed a strong growth with a total 2 million subscribers in Fixed Broadband, and 5.2 million subscribers in Mobile Internet, a 41% increase and 74% increase respectively.

Fixed Broadband revenues contributed IDR1.9 trillion, a 14% increase, while Mobile Broadband revenues contributed IDR2.2 trillion, a 55% increase respectively compared to previous year.

Our number of Fixed Wireline increased by 0.3% to 8.4 million subscribers, while our Fixed Wireless/Flexi subscribers is now 18.7 million subscribers.

Fixed Wireline and Fixed Wireless revenues now total IDR5.7 trillion (sic - see slide 9).

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.

One; balance sheet. Total assets is IDR99.8 trillion. Total liabilities increased to IDR44.5 trillion. Total equity decreased by 2% to IDR99.8 trillion (sic - see slide 10) due to payment of the dividend.

Income statement, year-on-year basis; operating revenue increased by 2.2% to IDR34.4 trillion (sic - see slide 10). Expenses increased by 5.2% to IDR23.5 trillion. EBITDA decreased by 3.7% to IDR18.1 trillion. Meanwhile, EBITDA margin decreased to 54% (sic - see slide 10).

Income for the period attributable to the owner of the parent decreased by 1.5% (sic - see slide 10) to IDR5.9 trillion.

Revenue contribution for this period was still dominated by Cellular, with a contribution of 39% of our total operating revenue. The second major revenue contributor with a strong growth is Data, Internet and IT, that contributed 34%, followed by Fixed Line with a 17% contribution.

Interconnection, Network and Others, now total 10% contribution to total revenues.

Meanwhile, for our O&M is 35% of total expenses. Depreciation and amortization expenses were at 30% of total expenses. Personnel expenses contribution reduced to 16%. Interconnection, G&A, and Marketing now totaled 18% contribution to total expenses.

As of June 30, 2011, the total Group spending for capital expenditure reached IDR7 trillion. CapEx allocated to Telkom, Telkomsel, and other subsidiaries, amounted to IDR1.8 trillion, IDR3.6 trillion; and IDR1.6 trillion respectively.

Telkom's CapEx was utilized to enhance backbone infrastructure, to support the Broadband and New Wave businesses. Meanwhile, Telkomsel's CapEx was utilized for acquisition of network infrastructure, 3G and IT systems.

Overall, Telkom had a strong quarter for Data, Internet and IT services. This is a factor which is a very important growth driver for us. We are particularly pleased by the surge in our Broadband customers, and feel that our investment in high speed Internet infrastructure, along with our aggressive marketing, is providing a positive return today, and shall continue into the future.

To allow us in achieving our end 2011, we are preparing various programs and moves on the broadband. We see broadband as our future revenue generator, as smartphones and tablet computers are growing very fast. To anticipate broadband booming, we have invested, and will continuously spend substantially of our CapEx in increasing our broadband coverage, and capacity; including synergy, in terms of the network that is the Wireline and the Wireless.

Fixed Broadband; we see that, for Fixed Broadband, the opportunity to increase our penetration is still opening, as the penetration rate is still low. We are intensifying sales activities in the area, with high market share, but low penetration rates.

We have launched several new programs, to enrich our broadband services; among others, our IPTV Groovia, that gives flexibility for our customers; increase our hotspot presence; and allows Speedy Flash [tickets], to give greater flexibility for our customers, to switch between fixed and mobile broadband services. On top of that, this new product will enhance loyalty of our customers, and reduce the [churns]. We do expect that to happen.

To maintain customer satisfaction and loyalty, we are reviewing network capacity from time to time, and doing some improvement, where necessary. We also provide an upgrade of the (inaudible) to our customers, as a means to increase customers' loyalty and make our service more competitive.

On Cellular, we are continuously expanding our coverage, and enhancing our [network] capability in (inaudible) to make sure our long-term and long-time customers' needs are well fulfilled.

Along with the network coverage and quality improvement, we are optimizing our pricing with various time bands, and regions perspective, so that it is still very competitive.

We are also doing more micro segmentation of our customers, to make our community oriented subscribers [well addressed]. Customer satisfaction is being our first concern. With this in perspective, we continuously manage capacity of our network, and invest accordingly, to maintain sufficient service level of communication, both voice and data.

On the Fixed Line, we have been, and are continuously doing some improvements in our Fixed Line infrastructure. We are upgrading our legacy network, through a NGN which supports the new services and broadband. Our target is to provide full new generation network service by 2014.

Since end of 2010, Telkom is in the process of replacing copper cable networks with [straight in, straight off modes]. We initiated a trade in trade off migration program, to replace the existing cable -- copper cables to fiber optics; with an access network capable of accommodating data access service up to 100 megabytes per second. This program provides us a significant CapEx [saving].

We have also been introduced triple play services. We are packaging voice, data and video services, delivered through our fiber optic cable, to residential customers. In May 2011, we have launched our IPTV through our subsidiary, Indonusa Telemedia.

IPTV is a [convergence] telecommunication, broadcasting multimedia, and electronic transaction. We expect that, with triple play, our Fixed Line subscribers will, and can increase, and the churn rate will reduce.

IME, Information, Media and Entertainment. We continuously strengthen the foundation for the future growth of our business, IP services, media and entertainment. We developed our IME businesses through our subsidiaries namely Metra, SIGMA, Infomedia, and (inaudible). We do expect, with the growth of our subsidiary, of revenue of more than 65% year on year, we expect that the revenue can contribute around 12% to 15% in 2015.

If you look at our financial statement, we have a healthy and strong balance sheet. As of June 30, 2011, our current ratio is 92.6%; cash to debt ratio is 53%; and our debt to equity ratio is 34.6%. Our debt to equity ratio was 35%, and our debt service coverage ratio was 2 times; indicating a strong ability to meet our debt obligations.

Our debt levers are primarily driven by our plans to develop our existing and new strategic businesses. We expect that we can increase our cash flow and EBITDA [around the] year.

As of first half 2011, we invested around IDR4.9 trillion, to acquire property, plant and equipment to support our business. This is a fixed asset in the fixed line. We've spent (inaudible) our shareholders. And (inaudible) amounted IDR2.5 trillion to non-controlling stockholders of subsidiaries. We also (inaudible) the payment of long-term borrowings IDR3.1 trillion.

We have been doing share buyback program several times since 2005, and 2009. We purchased 490 million shares altogether, at 2.1% of total shares. This year, we are assigned by Annual General Meeting of Shareholders to do another share buyback, with a maximum of IDR5 trillion for 18 months, starting May 2011. Share buyback program will be of benefit to our shareholders, for the long-term increase in the earnings.

In 2011, we plan to invest a total of around IDR16 trillion of the CapEx; including the CapEx in the New Wave infrastructure, and Support Services.

In first half 2011, anyway we have spent around IDR1 trillion for infrastructure, IDR700 billion for New Wave, and others. Our subsidiary, Telkomsel spent around IDR6.3 trillion; and other subsidiaries, around IDR1.6 trillion.

Ladies and gentlemen, we have been spending some effort to maintain Telkom's profitability level. We are increasing segmentation base campaign, micro segmentation for cellular. This program enables us to serve its customer group with specific requirements, much better.

We also improved distribution [channel] clustering. In our operation, we found out that there are many differences among regions in terms of customer lifestyle, buying power, tariff sensitivity, and loyalty. We are leveraging these differences in our marketing programs.

New products and services; maintaining profitability level is being done, among other things, through launching new products and services. We just launched remittance and E-money businesses. We feel that this opportunity is not only to generate revenue, but also to create loyalty, and reduce churn.

We have several services, namely [Pika], Telemar, (inaudible), [AV]. And with those services, we make it easy for our customers to send money, and do transactions.

Tower business; we expect to monetize our tower assets to PT Dayamitra Telekomunikasi. Starting this year, new Telkomsel towers will be built and owned by Dayamitra. And Dayamitra currently have 1,300 towers, with [penalty] rate of 1.2 times.

Business Solutions; we are also improving our services for corporate customers, by giving them end to end debt solutions for their needs. We help [corporations] by various solutions, to enhance their business, with mobility, capability and operational (inaudible) improvements, through wireless applications.

Cost optimization, it's one of our efforts. We have formed a dedicated team, to explore possibility of cost saving, without sacrificing quality.

Ladies and gentlemen, with all of those explanations, that ends our presentation on the first half of 2011. Let us continue onwards now with the question and answer session, and it shall be moderated by Agus Murdiyatno. Thank you.

Thank you, everybody. Okay. Now, it is time for the Q&A session. Before asking your questions, you are requested to clearly state your name and the company you are with. Vicky, can we take the first question, please.

(Operator Instructions).

I just have two questions. My first question is on the SMS trends and the increase in the volumes and the increase in revenues you have seen. I just want to understand what's driving this SMS volume increase and revenue increase; they're quite different to what some of your peers have talked about. That's question number one.

Secondly, obviously in light of the first half results and the optimism we have to [start] a growth, just wondering if there's any change to your full-year guidance number for Telkomsel and for the Group as well. That's it, thank you.

The SMS growth and the revenue growth in SMS particularly comes from the rate price up on the SMS tariffs. And at the same time, we have some formal programs in both are simPati and Kartu AS.

For the data growth, what we have seen in the last quarter is consistent with the outlook that we are working on.

So Shin Loong, you're not seeing any cannibalization of SMS from this data growth at this stage?

One would expect cannibalization. We see [BlackBerry] traffic has increased a lot. We have seen heavy use-- not heavy, but we have seen uptick of usage of our [Ace] phones. So I think right now, we are probably tracking both, and see how it goes. And right now, both are growing, so we are quite happy with it.

Yes, I think second question on data Internet, I think if you look into the growth in the first half, it's around 19%. We do expect basically and up to year end, actually that our Internet should be growing faster than the first half.

So first question is, if maybe Shin Loong can give us some details on how many subscribers within the subscriber base now are on 3G-enabled phones? How many are on smartphones? And how many actually have BlackBerry's? I think that would be helpful.

And then the second question is more for Pak Rinaldi. Just in terms of strategy, can you fill us in a little bit on the overseas aspirations, things like Cambodia? And if you can also just fill us in on your strategy on Flexi; I see the numbers there continue to weaken. What can you do about that? Are you in a position to, maybe, think about reallocating, or reducing staff, or what can you do in terms of consolidation there? Thank you.

The numbers I have with me for both the products, the phones that have both are GPRS and 3G it's about 7.4 million. Flash, we are seeing about 5.2 million, and BlackBerry, we are seeing about 2.2 million on our networks.

Thank you.

I think, Colin, especially on the overseas strategy, I think on the Cambodia, as per our understanding, actually the operator in Cambodia has also -- has started talks to others. So for the time being, I think that is the status on the Cambodia.

Secondly, on Flexi, I think if you look into the q-on-q Flexi, especially on the (inaudible) has shown the improvement. However, yes, if you follow the strategy since the beginning, Flexi has never been given a big CapEx because we do have the [SM type]. So Flexi will be actually currently maintained as the appropriate business unit for the fixed wireless.

In terms of the number of employee, I think Flexi has never been overstaffed; it's just enough. However, as we think, and we explained before, we will do another early retirement program. Hopefully, we can close it before September 30; that would be around IDR500 billion.

Okay, thanks.

Just going back to the first question in terms of guidance for EBITDA growth, I'm still not clear on that. Are you suggesting that based on EBITDA growth in data, the overall growth metrics for the year should be in mid to high single digits for PT Telkom and Telkomsel. That's one.

And on the cost items, any particular cost items which you think could be lowered going forward in the next two quarters?

And a related question for marketing expense. For the quarter, the expense was up 14%, and it seems that there were some changes made in the dealer commission. Could you highlight or provide us some color in terms of what were the changes in commission, and what could be the likely benefits? Those are the two questions.

Okay, let me deal with the dealer commission. There is no change in the total percentage given out to the dealers, okay?

It's just a split of the commission that some will hold back as a performance incentive.

So compared to the past, where commission was given upfront, now we have to hold back some for dealer performance. In total it is a similar amount. So some of the marketing costs increase are basically due to the recognition of these costs.

Okay.

Yes, I think I will take the first question about the guidance.

I think, basically, we [don't] have a new guidance. So we do hope that we still have a mid single digit growth in this year, so around 4% to 6%.

And EBITDA, I think also basically, we want to increase in the 3% to 4% in this year.

Actual.

Yes in actual. (Inaudible) the margin, I think it'll slightly decrease 1% to 2%.

Okay, this is for Telkom Group or --?

Yes, that's Telkom Group, yes.

And I think to give to an estimation of the costs, what we see the opportunity to decrease is, I think, significantly in the [frequency] fee because now we have the new regime. We changed the regime from a direct base to a permanent base. That's, I think, basically the costs will decline in Q2.

Okay, just a follow up. So any quantitative guidance in terms of what could be the decline in the frequency fee in the second half?

So you are looking at a significant turnaround in terms of EBITDA growth, given that the first half, there was roughly about a 4% decline.

Yes, I think on the [bills] of the frequency fee, I think we will give you guidance later through our IR, yes?

Just to let you know, actually, for the first half our frequency fee decreased by around IDR120 billion. So up to the year end, I think we can give you separately later. I think that's for the details.

Right, okay. Thank you.

I have just two questions. Merely on the fixed line -- fixed business side, what we saw this quarter was that fixed line revenues were quite stable.

Now my question is, these are quite [voice] revenues, not even including the broadband revenues so do you think this kind of stability can be maintained, in the fixed line side of the business? It's actually kind of exciting to me because I thought this is a structural trend of decline in the fixed line business. That's number one.

Number two question is on broadband. You have indicated on the willingness to actually increase your broadband business in a major way. But when I look at all the price points for fixed broadband services, it's like $80 per month that's what they charge for [UMBPS] kind of connection.

So what do you think, going forward should be the way? Should we expect much lower pricing on the fixed broadband side?

And then, there should be some conflict between the mobile and the fixed broadband side so how do you want to resolve this conflict?

To me, $80 for [20 gig] connection looks a bit on the very high side and the penetration levels are just very low. So I just wanted to get some thoughts on that.

Yes, I think if we look into the ARPU on the fixed broadband, it is now around IDR180,000. So divided by, let's say, 9,000 for simplicity, it's around $20. So it is not $80.

So what kind of average speed are we talking about when you're saying $20. What kind of average speed can we talk about? Is it -- it's definitely not 20 gigabytes.

Yes, average speed is 512 KB.

So 512 KB. And this is something which even mobile broadband can exceed this kind of speed. So, going forward, don't you think fixed broadband should be targeting much higher speeds, in order to defend its market from mobile broadband?

Yes, I think you are right. Still it's around 75% to 80% of our subscribers is on the 512 [Kbps]. So on the -- really the top line, who are subscribed on the 1 meg, 3 megs and above.

That's why we do have a program we call a trade (inaudible) off, basically to replace our copper fibers to fiber optic, which we basically spend less CapEx because actually the copper is to be sold and then replaced with the fiber optic and that is basically a big program that we will do.

On top of this, we are talking whether it will be cannibalized with the mobile. I think that there would be a few, basically, cannibalizations but we believe that it is not really like that.

What happened is that we are now launching the combination for Speedy, which is the [fix and flex] for the wireless.

And second, we are providing an offloading for our wireless broadband through our network.

And plus the customers' behavior, actually, still some customers and many of them are also subscribing to the fixed broadband for their family purposes, while the broadband for the wireless is mostly for individual purposes. So, there are segmentations in the market.

In addition to that --

Just to follow up on that, so in how much timeframe should we expect that your average speed in Indonesia will be exceeding 1 Mbps and 2 Mbps kind of speeds with affordable price points?

And second again, when you say combination of Speedy and Flash, why should one go for the fixed broadband side when the mobile is also giving the similar kind of speed. Why should you pay extra for the fixed broadband revenue at all?

These are the two questions just so I get the hang of what is the meaning of fiber deployment and how much can the consumers benefit from that?

Yes, I think on the fiber deployment, I think we basically are doing it for the four to five years' time period.

We are expecting that we will have by 2014, 2015, 80% is capable of around 20 megabytes and 100 megabytes and 20% is capable of 100 megabytes per second and above. That is the program that we are launching since, actually, end of last year or beginning of this year.

Okay and in the medium term, one to two years' timeframe, anything we can expect in terms of speed?

Yes, we do have the details. I think later our IR will give you, basically, the description

Okay.

Not only within the next two to three years, even this year and next year.

That'll be [great] yes.

(inaudible). So we have a yearly program with -- the details, I think Mr. Agus will be able to give it to you.

Okay. [I missed] -- this is a question on the fixed line revenue was stable quarter on quarter this time. Do you think this is a sustainable kind of trend, which is a bit surprising to me? I thought there should be a substantial decline.

Okay, let me ask --

Thank you Sachin. In terms of wireline. Yes, if we look to wireline India operator, lifestyle, already changes, they're using the phone, not only in home any more but they use it outside with their lifestyle. But when we offer what we call flat tariff, (inaudible) here, right now our subscriber, our line slightly flat, a little bit increase, maybe zero going 2%. In terms of revenue, also declining but slower than previous years ago.

And talking about the ARPU, for the flat tariff, higher than average rate ARPU because not all our subscribers have taken the flat tariff. Right now, our Wireline subscribers are 8.4 million subscribers. Flat tariff, around 2.3 million subscribers. So that's why 2.3 million subscribers support the revenue, ARPU around IDR106,000 per month. So that's why our revenue in fixed line, even though it's still declining, but declining slightly slower than previous years ago. Thank you.

Just to get the understanding of what you're saying, is that -- you are bundling the BlackBerry planned for the fixed line subscribers and the attraction of BlackBerry is the cause that fixed line is declining slower than a normal decline. Is it what you are saying?

I'm just trying to understand your answer. What you're saying is that the BlackBerry plans are being bundled for the fixed line subscribers and, as a result of those BlackBerry plans, the fixed line revenue decline is either very small or not happening?

That's Speedy Flash, not BlackBerry Flash.

Sorry, so I heard it wrongly. Okay, great.

I think even the timing, we can still accommodate two more questions I guess.

I had three questions. The subscriber breakup that you provided between Flash, BlackBerry and smartphones, I just wanted to see whether that's a mutually exclusive subscriber base, as in is that all part of the 5.2 million Flash that you define?

Or maybe I can simplistically put it this way, if you could break up your total mobile broadband customer base into BlackBerrys, smartphones, other than BlackBerrys, dongles and if there's any other fourth category that I should be aware of, maybe tablets or something. If you could give any idea there, question number one.

Second, there's been a lot of news around your desire to purchase the 35% stake in Telkomsel from SingTel. I just wanted to see if you can share your views on what's driving that thought process, what should be the timeframe and what -- whether you think that is a doable transaction?

And the third question I had was if we look at your free cash flow, obviously giving the declining CapEx, etc., it's obviously growing very fast. And while the share buyback is appreciated, I was wondering if you are also looking at a sustainable increase in your dividend payout given that the gap between the annual cash flows and the annual dividends is now becoming pretty substantial. Thank you very much.

Okay, I think for mobile data tracking in Telkomsel today, we have today around 51 million data (inaudible) in our network and 23 million of that is becoming mobile data users.

And then in terms of BlackBerry and iPhone, BlackBerry is around 2.1 million, 2.2 million and Flash 5.2 million. So that is what we can track in our network today and most of the rest are using smartphone and GPRS.

When you say Flash, does that include dongles and --?

Yes.

I'm just trying to understand, what is the Flash?

Flash is -- sorry, is our branding for dongle data, yes, including smartphone, yes.

Okay. So I think, Navin, that has been answered on the BlackBerry. On the Flash, it includes the dongle and the smart phones. The details, I think is available. We can help you on the numbers later.

On the planned, basically that is instruction given by our shareholders waiting to buy the 35% of Telkomsel. I think the rationale is, basically if you look into the synergy network, marketing, distribution, etc., it is a reasonable move.

For the time being, not much that we can share except that we are forming the team here internally and then we are communicating it also to SingTel. So in terms of timeframe, I believe it's pretty hard to estimate for the time being until we are seriously in the talks with our partners of SingTel.

I think that is what we can share for the time being. And for your info, we are also asked to report regularly to the government on this issue.

Second, that relates to your second question because on the dividend payout ratio, yes, definitely we have a good free cash flow for 2011 and '12. And most of the [DPR] later will be later decided after we have good discussion with the planned acquisition of 35% of Telkomsel's shares. So I think we'll come back to you on this later on.

Good, can we go to the last question please.

Just two questions from me, one is on the OpEx side of the business. We notice that marketing expenses and O&M expenses at the consolidated level grew faster, quarter on quarter, than that of Telkomsel. So I just wanted some color on why marketing expenses, for instance, is up 14% Q on Q4 consolidated, but only 1% for Telkomsel; and O&M up 4%, but down 3% for Telkomsel?

And the last question was regards to the Dayamitra potential IPO. Any timetable for that? And any particular milestones? Like if SingTel -- are you requiring SingTel sell its share in Telkomsel towers before you can do the IPO or can you proceed without that?

I think Dayamitra, as we mentioned currently, I answer the second question first while my colleague is preparing for the first one. Dayamitra, for the time being, actually now collects already around 1,000 -- slightly above 1,000 towers.

So we do expect -- we will see until a certain level, which we believe if the number of towers they're on is already reaching around 2,500 or 3,000, then we will be preparing for the listing or making it public. Otherwise, I think it's too small to have it listed.

Whether this could be, as you were asking, part of the SingTel or Telkomsel's program, I think we will definitely -- we will discuss it. So far there is no discussion on this except how to grow the number of the infrastructure and towers that belongs to Dayamitra. So, yes, we are waiting until such a time when we see the economic upscale is okay, sizeable enough to do.

On the first question, marketing expenses. Shin Loong I'll pass that over.

Okay. I think Telkomsel marketing and sales expenses again it's [trapped] because of dealership fee. In Q-on-Q goods [this month] for sales it's only from [286%], but marketing itself is only 6.7%.

What's the Telcom's (inaudible) or any other program that the (inaudible) Telkomsel levels is driving up? And the same thing with O&M?

No, it's mostly coming from Telkomsel on the marketing. While on the [OMS] actually most of -- for [O&M] yes, most of the increase is coming from -- because of additional number of new [Bps] of Telkomsel, which consume more power costs. So that is on the Q on Q. While actually the decline is coming from the frequency fee. So that is the explanation of the Q-on-Q, O&M costs. Other than that I think it's no big gains in the O&M costs.

Okay.

So, thank you everyone for your participation. We do apologize for those whose questions could not be addressed. Please [ring] us if you still have other questions.

Before we end our conference call, I would like to ask our CEO for his closing remarks. Please go ahead.

Thank you Agus. Ladies and gentlemen, Telkom Indonesia maintains its position as the [number one] player in (inaudible) Indonesia both fixed and mobile, telephony and broadband.

We cover more than 95% of Indonesia population. With a stable, economic growth from regulations, stabilizing price and Group [joint] marketing we continue to improve ourselves so that we could answer the needs of our customers for telecommunications, IT network, service media and entertainment.

Amid the intensifying competition in cellular and broadband industry, Telkom still [preserves] to be dominant in market share, and (inaudible) share both in broadband and cellular services.

We receive acknowledgement from various institutions regarding our broadband and cellular products to some (inaudible) top brands, this shows our marketing communication and customer education programs are well apprehended.

Healthy and good strong financial position gives us flexibility to enlarge and diversify our businesses going forward. We are determined to make a substantial effort to enhance our performance and ensure that our growth targets are achieved.

As an anticipation of broadband booming, we have been investing significantly in modernizing our network and infrastructure to accommodate capacity demand and to take full advantage of the opportunities.

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. Thank you.

This concludes today's conference. Thank you all for your participation.