Telkom Indonesia (Persero) Tbk PT (TLK) 2012 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Telkom first quarter 2012 results conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session. (Operator Instructions). I must advise you that this conference is being recorded today, April 30, 2012.

I would now like to hand the conference over to your moderator for today, Mr. Agus Murdiyatno. Sir, please go ahead.

Thank you, Jorge. Ladies and gentlemen, thank you for participating in today's conference call to discuss PT Telekomunikasi first quarter of 2012 results.

On April 26, 2012, we released our financial results for the first quarter of 2012, ending March 31, 2012. The press release and other materials are available at our website, www.telkom.co.iv. 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 CEO, and the members of the Board of Directors and general management of PT Telkom and PT Telkomsel. Our CEO will give you an overview on the results after my opening remarks.

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. This may involve risk and uncertainty, and may cause actual results and development to differ substantially from those expressed or implied in these statements. The Company does not guarantee to any actions which may have been taken in the lines of these statements.

Ladies and gentlemen, it is my pleasure to introduce Telkom's Board of Directors who are joining us today. Mr. Rinaldi Firmansyah as President Director & Chief Executive Officer, Mr. Sudiro Asno as Director of Finance & Chief Financial Officer, Mr. I Nyoman Gede Wiryanata as Director of Consumers.

Also present, and the Board of Directors Telkomsel who are joining us today, Mr. Sarwoto Atmosutarno, President Director; and Ms. Triwahyusari, Director of Finance.

Before Rinaldi delivers his remarks, I will take this opportunity to give update overview of Telkom Indonesia. Telkom is the single largest integrated telecommunication company Internet provider in Indonesia. Serving more than 133 million customers nationwide, we provide a strong portfolio of [time] telecommunications, information, media and edutainment services, directly or through our subsidiaries.

As of March 31, 2012, the majority of our common stock, 53.7% was owned by the Government of Indonesia, with the remaining 46.3% under public ownership.

Our shares are traded on the Indonesian Stock Exchange, the New York Stock Exchange, the London Stock Exchange, and also Publicity Offer Without Listing in Japan.

With that said, I will now turn the call over to Mr. Rinaldi Firmansyah for his remarks. Rinaldi, the time is yours.

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

Ladies and gentlemen, let me share some highlights of our first quarter results before getting to the detail of the results. The middle of industry cycle, which is entering a new phase, our consolidated revenue grew by 6.5% year on year. Our Cellular operation recorded an 8.9% year-on-year revenue growth to IDR12.3 trillion.

Our Broadband users grew by 36%, Fixed Broadband users grew to 1.9 million, Mobile Broadband, Flash and Blackberry users reached 8.5 million subscribers.

Total expense grew by 1.4% year on year, while on q-on-q basis, declined by 11.7%. It is partially contributed by continuous effort for cost optimization program that has been implemented for the past 1.5 years.

We recorded a 2.8% q-on-q increase in EBITDA margin to 54.1%.

Ladies and gentlemen, now I shall present the operational and financial performance results for the first quarter of 2012.

Our Broadband subscribers still showed a significant growth. Mobile Broadband grew 21% to 5.2 million subscribers with Blackberry now, and total reached 8.5 million, and our Fixed Broadband subscribers became 1.9 million.

Fixed Broadband and Mobile Broadband revenues amounted to IDR2.7 trillion, a 40% increase compared to the previous year. We have almost 110 million subscribers. We maintain our leadership in the cellular market with an around 43% market share. Our Cellular BTS rates 44,700 units, an 18% growth compared to the same period last year.

Cellular revenues amounted to IDR7.2 trillion, an increase of 6.5% compared to the same figure in the previous year.

Our Fixed Line subscribers increased to 8.7 million, and this is describing also that the customers' preference also to the triple play to the Internet.

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 on year-on-year basis , total assets increased 3.8% to IDR104 trillion. Total liabilities decreased by 0.5% to IDR40.2 trillion. Equity increased by 5.2% to IDR49.7 trillion.

Two, income statement year-on-year basis, revenue increased by 6.5% to IDR17.8 trillion. Expenses increased 3.2% to IDR11.8 trillion. EBITDA increased by 11.4% to IDR9.6 trillion. EBITDA margin increase to 54.1%, an increase of 2.4%. Net income increase 17.5% to IDR3.3 trillion.

Revenue contribution for this period was still dominated by Cellular, which contributed 40% to our total operating revenue. The second major revenue contributor was Data, Internet and IP, that contributed 34%, followed by Fixed Line with a 16% contribution, Interconnection, Network and Others totaled 10% contribution of total revenues.

Meanwhile, for our expenses, Operation & Maintenance was 33% of total expenses. This O&M expenses amount was in line with the additional number of BTS and other operating equipments. Depreciation expenses were at 30% of total expenses. Personnel expenses contribution was 17% while Interconnection, E&A and marketing totaled 20% contribution to total expenses.

We are delightful to have a 6.5% increase of our revenue, as there was only 2.1% year-on-year increase in the same period last year. The increase of revenue was still driven by the growth on Data, Internet, IP Service, and also Cellular revenues.

In terms of expenses, while still too early, the continuous cost optimization program has started to see a result. We managed the growth of expenses by only 3.2% year-on-year increase, especially on the Fixed Line side.

The safe expenses, among others, are power supply, Network Operation & Maintenance, and other O&M and G&A expenses. While still too early, we will keep the continuous effort to control the growth of expenses that we believe will help the Company grow stronger in the competitive industry.

As of March 31, 2012, total Group spending for capital expenditure reached IDR3.1 trillion. CapEx allocated to Telkom, Telkomsel and others subsidiaries, amounted to IDR700 billion, IDR1.9 trillion and IDR531 billion respectively. The utilization of our capital expenditures is still allocated mostly to enhance the backbone and access infrastructure to support Broadband businesses, radio access network for Cellular, and towers construction through our subsidiary Mitratel.

Cellular. Our Cellular subsidiary Telkomsel recorded a strong revenue growth in first quarter 2012. It reached IDR12.3 trillion, an increase of 9% year on year as a result of growth in Voice, SMS and Data revenues. Expenses grew only 4% year on year to IDR7.6 trillion, lower than the growth in the expense in the same period last year, which reached 11%. That meant -- that made EBITDA grew by 13% to IDR7 trillion, and EBITDA margin grew to 58%.

Fixed Line. On the Fixed Line side, our subscribers are increasing. The number of our subscribers are increasing. Even though the growth rate is not really significant, it shows a growing interest of people to use fixed line services. This is related to the growing of Internet access, no longer Voice, and this gives us an opportunity to expand our Fixed Broadband or triple play services in the future.

Subsidiaries, tower business. Mitratel, our tower subsidiary, has made a significant improvement in its revenue achievement, and revenue growth of almost double compared to last year. Until end of March 2012, Mitratel has more than 3,300 towers, with a significant number of tenants. We expect this year Mitratel could pass IDR1 trillion revenue.

Pay-TV business, TELKOMVision. Our Pay-TV subsidiary has reached around 1.2 million subscribers for the first quarter of 2012, 17% increase compared to the previous quarter. With pre-paid scheme, that TELKOMVision offer, they can attract more customers to try. We expect this will give flexibility for TELKOMVision customers to adjust their expense for entertainment with their budget.

The more customers TELKOMVision has, the better they can manage the content cost. Content cost is the major component of the total cost. Significant improvement on content cost ratio to revenue has been made, and this is now in the level of industry content cost average.

Ladies and gentlemen, we continue developing foundations for our business to grow and face competition more effectively. We focus our effort on the Broadband infrastructure combined with backbone as the core transmission.

Mobile Broadband. Until end of March, we have more than 10,000 Node-B, a 22% increase compared to the same period last year. We are targeting to establish 100 broadband cities throughout Indonesia in 2012. This will give our customers flexibility and ease in accessing Internet wherever and whenever they want.

Fixed Broadband. While we increased the capacity to around more than 3.5 million lines nationally, this gives us latitude to expand our Fixed Broadband. We believe that bundling program of Voice, Internet and Pay-TV, and also Cellular services, together with the strong fiber optic network, we'll be able to improve overall sales.

Partnership. We are committed to develop our Information, Media and Edutainment businesses. We do it through maximizing our internal resources and synergizing all elements, and we also explore opportunity to form partnerships with other parties to create bigger value.

We have made several partnership initiatives. Among others, we have signed a cooperation with eBay, a world-known Internet based auction and C2C e-business facilitators to enhance our business for portal Plasa.com.

On the IP Network Services, we also have signed an MoU and agreement with Garuda, a national flag carrier, and Kereta Api Indonesia, a railway operator to explore and develop new businesses in the (inaudible) Services and Network IP Services.

This will give an added value services, while maintaining the customers, and we can expand our IP Services business going forward. We will continuously look for possibilities to be able to synergize with other companies so that we could maintain our growth that, again, will give value to our stakeholders.

EBay partnership. Partnership between Telkom and eBay basically is marked by the agreement to establish a joint venture company named PT MetraPlasa between subsidiary of Telkom, Metra and eBay. We expect the partnership will support the deployment of SME in Indonesia, and at the same time as a solution to geographical constraint faced by SME players in expanding markets, and give a convenient way of doing e-commerce for Indonesians and others.

Partnership with Garuda and Kereta Api Indonesia. In April, Telkom signed an MoU with Garuda and Kereta Api. The agreement with Garuda is meant to improve services for users of both companies. The scope of the agreement in the form of [special] price, business arrangements of usage or service, and this in the business of IT, Media and Edutainment. This will mark a new arena for Telkom's transformation to provide complete convergence of services from IT network and applications.

IT businesses, Telkomsigma. In March, Telkomsigma, our subsidiary in the IT business, launched Arium, an ICT-based solution designed specifically for players in the security industry. It is integrated solution that comes with various [measures], and also using our network to connect most of the branches of companies around Indonesia. With this, Telkom and Telkomsigma strengthened its position as an IT services solution provider in financial and banking industry.

We also have launched Groovia, and we expect to later launch GrooviaLite, which is OTT services on our IP-based network. The services later can be accessed by computers, mobile terminals, as well as television sets.

In short, we will always find ways to give flexibility to our customers accessing our services, and make use of our network which is spanned around Indonesia, all around Indonesia.

Ladies and gentlemen, with that, I end my presentation on the first quarter of 2012. Let us continue on words now with the question and answer session, and shall be moderated by Agus Murdiyatno.

Thank you.

Thank you, Rinaldi. Now let's open for the Q&A session. When raising your question, we'd appreciate if you could speak clearly, and also state your name and your company. Operator, may we have the first question, please?

Certainly, sir. (Operator Instructions). Riaz Hyder, Macquarie.

Just quickly on the results. In relation first of all to the margin improvement in the first quarter, I just wanted to get a sense of the sustainability of that, and what you expect for the balance of the year in relation to especially the marketing expenses being down. Is that something that we expect to come back up during the second and third quarters as seen in previous years?

And then just in terms of your view on the competitive environment and what you guys are doing, in particular on the Data side to monetize the user base there.

Thanks.

Thank you. I think sustainability of our margins is from Telkomsel. We know that our first quarter result still come from our basic service like Voice and SMS. This shows that Telkomsel have very strong mid-low segment in this case.

But you know that handset capable in our network today among 110 million subscribers is already 64 million. And among these handsets that are enabled, it's around 44 million. So really, our potential to monetizing our Data Service until the rest of this year.

That's why we are now in effort to make improvements in network quality, and also some package offerings that are very attractive, not only for new segments, but also for the major segments that keep our ARPU on Data increasing. This is basically what we are convinced that the rest of this year the margin will be sustaining.

Thank you.

Yes. I think let me add, one is if we look into both the Cellular and the Fixed, while it is still too early, we have seen an improvement in the cost control. Last year, our cost increase was also quite small. It was on the Fixed side was actually around 1% to 2%. And this quarter on the Fixed Line, we managed to have the growth in the costs under less than 1% again. So as you understand, I think the game in the Fixed side is on the cost optimization.

So we will keep on continuing on the cost optimization, especially because we are also now trying to replace our copper cable into optic, and everyone knows that optic, while investment is high, but the operating and maintenance is lower than the copper infrastructure.

Second, also the margin improvement was due to also increase of the revenue of the Cellular and Data and Internet, so that affects the total revenue and cost efficiency. So we do expect, yes, while it is -- we need to go further quarter on the costs, but we hope that the margin will be improved as compared to last year.

So could you just clarify then what your margins and revenue guidance is for Telkomsel and Telkom?

I think on the Group level, we still are waiting until Q2. So far, we are not moving from 4% to 6% revenue increase for the Group; and for the EBITDA margin, slightly increase of around 1% to 2%.

Thanks.

Thank you.

Roshan Raj, Merrill Lynch.

Three questions, first on the cost of optimization program. I believe you stated this was started about 1.5 years ago, but we did not see much of margin benefit last year, and it looks like the benefits are coming in this quarter. Just wondering why was this delay in seeing the benefits of the cost optimization?

Second question is on competition. How do you see it currently and how is this expected to evolve over the next few quarters?

And third, on Blackberry net adds. It looks like it has been weak for the last two quarters. Any reason why this is not growing as fast as it used to?

Thanks.

Yes, I think actually if -- on the cost optimization, there are a few things. One, the real -- actually, we started last year, and if you look into the growth in the costs on the Fixed side, because we do it initially on the Fixed side first, actually, the costs last year if you exclude the impairment and the early retirement, so actually our costs grew at 0% last year. So actually, that's [up], but it was not really fact, because there was an impairment of asset and ERP.

Second, the reason why it was not really felt because it was only started, and we replaced the real replacement of the infrastructure to fiber optic just started this year. All the preparations was done until 1.5 years ago. We do expect that this will help going forward on saving on the O&M.

That's why we said it's too early, but we are waiting until a few quarters to be really able to tell you what is the real impact of the infrastructure modernization.

Thank you.

I would like to answer about competition and your question about Blackberry. You are right that the focus on competition today is going to Data Services.

And understand that in Data, we already have a stabilization of price competition. There is one [among of] the reason is that we operators already finishing to the RIM negotiation that gives us [relative] in the same level of cost of services.

So for the next, first we are already set some marketing package, including with RIM, and we would like to see that competition for the next quarter would be more stable. And hopefully, we can monetizing things about Data Services.

Yes. I think, let me add on the competitive landscape, I think since actually Q4, we saw that some players, customers, would like to attract to operators who are also strong on Data and Internet, not on the price. And since Telkomsel has the widest coverage and capacity for that, combined with the Fixed Line network, I think we can differentiate the value of Telkomsel's services as compared to our competitors. That could be seen from the numbers of Node-B, and also the improvement of our transport and transmission capacity.

So at the same time, I think if you look into the results of some of the players, especially this one, it will be hard for them to offer the services with only a price difference. It should be combined with capacity and other value added services.

So in short, you see that the competitive landscape is improving, especially also in anticipation of the next SMS interconnection. We see that -- we hope that will be sustainable, and we do not really see irrational movement from other big operators.

Okay, if I could ask a little question. So the trend you are seeing in the second quarter so far, is it in line with the trend you're actually in in the first quarter in terms of growth of margins? Any color there?

Well, the answer, yes, we see actually on April it's good, but we cannot give you more than that.

Okay. Just one follow-up question on the IT and Network Services, where I believe you're looking at segments like the railways, Garuda and other options. Could you give any color in terms of what is the revenue opportunity in this segment?

Yes, I think what's important, yes, what's important is true collaboration. With this, we put our brand as one of the prominent IT network services provider and solution providers in Indonesia.

The contract, if you combine, it's quite significant. I cannot reveal the one company numbers, yes?

Yes.

However, for one big client, we can get, while on the IT basis only probably 10%, but on the Network side, we get 90% of the total contract. So the IT solutions provides us the entry into using or enabling the network to be used, [higher] connectivity [use]. That is more and more, and we can differentiate our services against our competitors.

Right, but what I was looking at is actually the quantitative impact on your existing revenue. Will these new or incremental revenue streams be a material upside compared to what you have right now?

I'm not sure, can you repeat?

What I was trying to get out is would your new IT and Network Services, assuming you gain market share in that segment, will you see a material upside to your revenue?

Well, on the IT, no, because the size is -- the answer is no on the IT Services, but if you combine the IT plus connectivity, that maintains our margin.

Okay, thank you.

Luis Hilado, HSBC.

I also have three questions. The first was regarding, we noticed that Flash subscribers were down 5% quarter on quarter, and that's the second consecutive quarter of decline. Could you give us some color on what's happening there?

The second question is with regards to your payout. Are you still going to propose a 65% payout during the [AGM]? Or are you looking at adjusting it upwards or any form of adjustment?

And last question is on Mitratel. Could you update us again on what your plans are in terms of timetable for a potential IPO? And if you could tell us what the current tenancy ratio is for Mitratel?

Okay, regarding the technical (inaudible) on Flash, yes, it's reducing q on q, because currently, we are promoting more [pay as you use], because in terms of the profitability, pay as you use is more bigger compared to Flash.

Plus currently, what we [order] in the Flash is unlimited plan, while pay/use as your use is best on the IDR1 per [KB] or IDR2 per KB depending on the pricing consumers get it.

Okay. But is there any way to carve out how many subscribers are using the pay as you use?

Currently the pay/use is around 76 million.

Okay.

I think, actually, (inaudible), you can do the one on the dividend payout ratio.

Yes, I think this is even too early to say the dividend payout ratio right now, but we as the management basically are proposing to confirm as majority shareholders this year I think a minimum 65%. Whether this is normal dividend plus something (inaudible) or whatever, but the total is minimum 65%. However, this is still under discussion with the management and Government.

Yes, I think on the Mitratel, this is definitely now the size is good, and the tenancy ratio is already above [1.2]. Tenant ratio is already around 1.5, already around 1.5. So on the IPO, I had a timetable, I think it's not going to be this year. If any, we expect this to be next year.

Thank you.

Sachin Mittal, DBS.

A couple of questions on the costs side. If we look at the general administrative expenses, they have declined over 40% in one single quarter. Now my question is, is this more of a quarter-to-quarter change in the general administrative expenses which we are seeing, or do you think there's something behind these G&A expenses which is going to sustain for the rest of the quarters?

That's number one.

The second question is on the cost optimization. You have talked about -- you talked about your fixed cost figure on the Fixed side, because of change of fiber, probably replacing copper wire with fiber, but how about Mobile side? When you're expanding with more of the [PT] base stations, we should be expecting to see more of costs related to whether it's a tower leasing, or whether it is power costs, and all these kinds of costs. But on the contrary, we're not seeing the cost rise. So could you give us more color on what drives the cost optimization on the Mobile side?

I think I'll just have these two questions for now.

Yes. I will answer the decreasing q-on-q costs.

Yes. Last year, basically, we had cumulative adjustment of total expense for the doubthful account for receivables is around more than IDR180 billion due to the change of the accounting policy.

And secondly, last year, we also booked CSR costs IDR170 billion on the Q4, and also the personnel fee. So basically, included audit fee. Also, we booked more than IDR70 billion last year. So that's why Q1 of this year declined by around more than 40%. And hopefully, this is -- we can maintain G&A costs in the level basically -- in the level of the -- lower than last year and we can sustain the G&A costs.

Could you explain me why -- what is the factor behind lower G&A costs, if you don't mind; year-on-year basis?

Okay. In follow-up, I think also we are renegotiating power costs in the growth in solar, and also flexi. And also basically, we manage collection fee, so that's why we believe that our G&A costs we can maintain in a lower level than last year.

Okay. So you're handling your collection yourself. You're not using agencies? What kind of collection fee are you talking about?

Yes, I think we renegotiate the finance charges while giving the value to our financial institutions who help us collecting the fees. Yes, thanks. And also, expanding the number of banks to cooperate with us in the Group. So I think that it why G&A is able to be lower Group-wise.

Okay. Maybe you can talk about now O&M expenses.

You asked about costs on the Mobile side.

Yes.

I think the Mobile side coming directly from the more efficient usage of 3G networks, and if later the LTE network is coming, I think that will also help on improving the cost efficiency.

Other than that, actually, if you look into the EBITDA margin of our Cellular, it's still on the good side. Definitely, once we do and we learn from the Fixed side some of the positive impact, we will also be replicating it into the other business. The most immediate requirement is on the decline sector, which is on the Fixed side.

My question is your competitors have been incurring more charges on 3G network rollout. On the contrary, you are not seeing your charges go up. So could you help us understand why is there a difference in behavior? Why are the costs --? Why is one seeing the margin go up and the other seeing the margin go down?

Yes, I think we have disclosed it last year on the frequency fee. It started last year. Until the next five years, actually, our fee is declined. So that is one big difference with probably the others.

Frequency fee, but it will not be declining, right? Or how is the behavior over the next two or three years?

It will be declining, because in the past, it was based on the TRX base, now it's based on the bandwidth. So the charges will be high in the first year, and then slowly going down until the next -- how many years? In the next four years. I think that is the difference, the major difference.

That's very helpful. Thank you.

Navin Killa, Morgan Stanley

Congratulations on the results, and thank you for the opportunity. I had two questions, actually. The first one was, if I look at the operating data of Telkomsel, the Voice traffic on a year-on-year basis, the total Voice traffic was flat. But if you look at your competitor Excel, that just reported, their Voice traffic growth was significant. And obviously, they attributed that to the move towards the market plans.

So I'm just wondering if there is -- I know you also moved significantly into those market plans. So is there, in terms of the way you account for minutes, chargeable versus non-chargeable, etc., if you can explain that discrepancy, that would be great.

Second, I know you have some shares in your treasury account, and if I understand correctly, the deadline for that is the end of this year in terms of cancelling them. So if you could help us understand what is your plan there?

Thank you.

Okay, I think I will answer the second question first. So we are still under discussion to decide our treasury stock. So basically, we haven't decided yet whether it will be cancelled or be used as financing resources, but it's still under discussion.

Thank you.

The first question on the Voice traffic?

I think (inaudible) that Voice chargeable, comparing non-chargeable B2B is only around 1 million --1 billion minutes, yes? Sorry, 5 billion minutes from [40.4 billion] for minutes chargeable. And non-chargeable is only 35.2 million. So that is one of the drivers why we are increasing our [RTF]. And you're right that this because of our (inaudible) packet plan. So that is what we are [enjoying] now. The [RBM] is increasing and supporting our revenue on [price].

Thanks.

Yes, I think we will check data again, and I think we will come back to you on this actually, because the data is here and there. It's on the details.

Thank you.

Arthur Pineda, Citigroup.

Three questions from me. Firstly, the 3G coverage gap between yourself and competitors appears to be shrinking. Is there room for you to turn more aggressive on your network CapEx, or are you comfortable with where you are now? Basically, is there any pressure to keep your competitive advantage there on the network?

Second question I had is with regard to marketing costs. That's actually down versus the competitors who have actually stepped it up. Do you see this as changing going forward, or are you happy with where you are now?

Lastly, could you please talk about the SMS Interconnection issue and how you expect this to impact you? Can you provide any color on the incoming versus outgoing traffic and how it could potentially impact the profitability?

Thank you.

Okay. I think we are not really happy with our competitors in terms of 3D, because if we see that CapEx Telkomsel can been seen as started from quarter 4 last year, if we calculate the Telkomsel CapEx related to this year program, it's already committed plus to IDR4 trillion. This means that they're on some -- more $400 million. So this is -- consists of 34% related to Broadband.

So we will continue to invest in second quarter and third quarter, and we do hope that all of the CapEx related to broadband will finish maximum third quarter of this year. And we plan for the next year again rolling for the fourth quarter this year.

And in terms of this, the payment due CapEx paid is already around IDR2.4 trillion. So we are not really lag from our competitors in this [issue].

Second question?

Okay. For Interconnection impact, we already calculated with the Interconnection SMS effective June 1 this year, we still expected enjoy around $2 million settlement into Telkomsel, and -- but that one is not really important for us. The more important is how the impact of SMS cost base can make our competition more stable.

Just to clarify this $2 million [tax] rate, what do you mean by $2 million? Is that monthly, or --?

Yes. We expect that every month, calculating the traffic out and traffic in, we have as more positive inflow than terminating than outgoing.

Understood.

Understand?

Okay. For the marketing costs, what we did for the last quarter mostly, we do the [cluster bids] promotion instead of the (inaudible) [SDL] for [mission] of getting paid, because as you know, currently, the penetration rates mostly are more than 100%. And also, to increase our revenue, we did [BTR reducing] the micro segment campaign to up-sell our revenue to the existing [business]. That's why our marketing for last quarter is reducing.

Thank you.

Thank you.

Because of these time limitations, I think we will take our last questions.

Choong Chen Foong, BNP Paribas.

I have three questions. My first question is with regards to the Fixed Wireline. It's encouraging to see that the number of Fixed Wireline has gone up, both on a year-on-year and q-and-q basis, but at the same time, the ARPU seems to be coming down quite substantially in the first quarter of this year. Could you give us any idea what's going on there and the outlook for ARPU for the rest of the year?

And then secondly on -- for CD, the net-nets were already pretty weak over the last two quarters, and so the revenue growth associated with CD, could you give us an update as to the latest development in the market? Is there a lot more competition? Because I hear some of your competitors are now rolling out faster speed wireless broadband packages. Is that affecting your CD business? And what is the outlook for CD revenue for this year versus last year?

And my final question is on M&A. Over the last two/three years, there has been news of M&As; for example, buying the Cambodian operator, and also negotiating to buy the 35% stake back from SingTel for Telkomsel. And those two I think have now been called off. Do you see any other attractive M&As going forward, whether in Indonesia or outside of Indonesia?

Thank you.

Yes. First is number of fixed wirelines. Actually, you are right. The ARPU, which is definitely coming from the wireless keeps on declining, because Voice usage is also declining. However, more and more subscribers would like to subscribe for the Internet Services.

I am not surprised in the future that Voice will become a feature and no longer a core service.

So with the modernization of Network into fiber optic, we believe that the combination of triple play revenue would be offsetting the decline in Voice revenues going forward.

This year, the decline of the first quarter, decline of the Voice revenues were around 4% to 5%, which is better than decline of last year. We do expect that while we modernizing CD and Pay-TV, we expect this would stay, still decline, but not as high as the same period in the past few years. That is of the Fixed Line.

The same of CD. Well, I think of the competition, just like 3G and other wireless, the competition comes in a more clustered basis, not on the national-wide basis. The competition comes mostly in (inaudible) while other than (inaudible), actually our presence is still quite dominant.

We see that Fixed Line is more into the complement to the Wireless, because in any case, number of traffic in terms of terabytes, Fixed Line still dominates traffic of the Internet.

So that is I think, yes, we should admit in some areas, because we are still using copper, than the speed of us is less than few competitors. However, now we have finished few hundred thousand in (inaudible) area. We hope this would strengthen our positions of fixed broadband area in (inaudible), whilst also growing in outside (inaudible) area.

The third one on the M&A, I think we basically see whether there is an opportunity, as long as it will give value-added above of our threshold return, we will do. But definitely, we'll be quite selective in line with our strategic plan going forward.

I think I cannot tell you more than that on the M&A. We'll inform you as there would be any opportunities arise. So for the time being, we just basically are preparing for everything if any opportunities arise.

Thanks.

Okay, one follow-up question for me on the CD revenue growth outlook for this year. What do you expect to achieve this year versus last year?

Yes I think on the revenue CD, we still expect double-digit revenue growth of 15% to 20% revenue growth this year, because we see the take-up is especially -- is still quite healthy.

Okay, thank you so much.

Okay. I would like to thank you for everybody for participating in this conference call. I would also like to apologize for everybody who already queuing for questions that we couldn't address because of time limitations. Please contact me directly, call or email if you still have more questions.

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

Ladies and gentlemen, we appreciate your attendance and the questions that all of the participants have given us today. Let us assure you that your concerns are indeed our concerns as as well. We will make every effort to have a more focused business along with a good execution.

With strong base in both Cellular, Fixed Line and Internet subscribers, we are optimistic to be able to leverage them to increase our position in the market. Our widest coverage of Cellular network, combined with Fixed Line backbone connecting from the West to the East of Indonesia, are key factors in providing reliable and high quality of fixed and mobile broadband for the whole county.

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.

Thanks.

Ladies and gentleman, that does conclude our conference for today. Please take note the [encore] replay of this call with be available within two hours from now. Thank you participating. You may now all disconnect.