Telkom Indonesia (Persero) Tbk PT (TLK) 2012 Q3 法說會逐字稿

Thank you for standing by, and welcome to the Telkom nine months 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).

All the material for today's conference is available on our website at www.telkom.co.id. Please be advised that this conference is being recorded today, October 25, 2012.

I would now like to hand the conference over to your speaker today, Albert K. Tan, Senior Vice President Business Strategy Integration for Telkom. Thank you, sir. Please go ahead.

Ladies and gentlemen, welcome to PT Telkom Indonesia nine months result ended September 30, 2012, conference call. There will be an overview from our CEO, and, after that, the question-and-answer session will be conducted for all participants on this call.

Today's presentation is available on the webcast, and an audio recording will be provided after the call for the next seven days.

We released our financial results of nine months ending September 30, 2012, on October 23, 2012, and the reports are available on our website; www.telkom.co.id.

Before beginning, let me remind you that today's call and the responses to the 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 to differ substantially from those discussed in today's call.

Telkom Indonesia does not guarantee to any actions which may have been taken in reliance of the discussion held today.

Ladies and gentlemen, it is my pleasure to introduce you to the Telkom Board of Directors who are joining us today. Mr. Arief Yahya, as President, Director and Chief Executive Officer; Mr. Ririek as Director of Compliance and Risk Management; Mr. Indra Utoyo as Director of Strategic Portfolio.

Also present are the Board of Directors of Telkomsel. Mr. Heri Supriadi as Director of Finance; Mr. Alastair Johnson as Director of Marketing.

Before Pak Arief delivers his remarks, I would like to take this opportunity to give a brief overview of Telkom Indonesia.

Telkom is the single largest integrated telecommunication Company and network provider in Indonesia. We provide a strong business portfolio of T.I.M. E, Time, which represents for Telecommunication, Information, Media and Edutainment service, directly or through our subsidiaries.

We also deliver a service to multi-customer portfolio; retail, enterprise, wholesale and international.

As of September 30, 2012, the majority stakeholder of our common stock was Government of Indonesia with 51.2% ownership. The accumulated treasury stock was 5% from the total issued shares, and the remaining 43.8% was under public ownership.

Our shares are traded on Indonesian Stock Exchange, the New York Stock Exchange, the London Stock Exchange and also publicly offered without listing in Japan.

I now hand over the call to our CEO, Mr. Arief Yahya for his overview. Pak Arief, the time is yours.

Thank you, Albert. Good afternoon, ladies and gentlemen. It is a very warm welcome to each one of you to our conference call for nine months results ending September 30. We sincerely appreciate your participation on this call.

In today's call I will give you the overview of our operational and financial result for the nine-month period. Secondly, I'd like to update you on what we have done to accelerate the infrastructure, merger and acquisitions and on the latest issues.

Let me start the overview by sharing the highlights of our nine months results.

The first, our consolidated and cellular subsidiaries revenue showed a satisfactory result. Consolidated revenues increased by [7.6%] (Company corrected after the conference call) year on year to IDR56.9 trillion and Telkomsel revenue increased by 10.6% year on year to IDR39.9 trillion.

Our broadband usage increased significantly compared to either last year or last quarter position. By end of September 30, the total broadband users were 15.9 million, 42.5% increase year on year or [34.7%] (Company corrected after the conference call) QonQ.

Ladies and gentlemen, it is encouraging that our mobile data users increased 47% from last year. By the end of nine months, we booked IDR5.5 trillion revenue from mobile data services, 53.2% increase year on year.

Fixed broadband users increased 8.9% QonQ to 2.1 million. And the revenue increased to IDR3.2 trillion. Total mobile data service and fixed broadband revenue increased more than 30% year on year to IDR8.7 trillion.

Telkomsel recorded substantial net adds in the nine months period, with total net adds of 14.5 million. Total cellular subscribers became 121.5 million; strong customer growth drove increase in voice, SMS and data revenues.

In the third quarter, we added 3,752 units of new BTS. 2,252 units of them are 3G Node-B BTS. BTS, on average, was more than 1,000 units per month compared to the average of 275 units per month in first half 2012.

This acceleration was urged to accommodate the increase of mobile broadband demands. With strong efforts and successful marketing campaigns, we could harness the Ramadhan and Lebaran festive. Telkomsel revenues increased to IDR39.9 trillion, 10.6% year on year and 9.9% QonQ positive growth.

Ladies and gentlemen, thinking about the financial results, we are delighted that the results came out as expected. As you may read on the infomemo, the growth of the consolidated revenue reached 7.6% year on year. And Telkomsel managed its revenue to grow double digit, 10.6% year on year and 9.9% QonQ, the highest QonQ growth for the last 14 quarters.

Revenue contribution for this period was still dominated by cellular voice revenue, which made 39.7% to our total revenue.

Data, Internet and IT services came second, contributing 35.3%, followed by fixed line voice that contributed 14.3%. The remaining 10.7% is contributed by interconnection, network and others.

The contribution of data and Internet steadily increased, as it grew quite significantly from time to time.

Cellular revenue, the highest contributor, showed a very positive result, which increased 7.9% year on year.

We have seen that this benign competition gives a positive impact to the Company's results.

In the meantime, on the expense side, O&M was the biggest contributor with 33.7% of total expenses.

The second and the third contributors were depreciation and personnel expenses, with 27.8% and 16.5% of total expenses respectively.

Interconnection, G&A, marketing expenses all together contributed 20.5% to the total expenses.

Total expenses for nine months to 2012 increased by 4% year on year, which is very good since it grew much lower than the revenue increase. It was also lower than the expenses growth of the same time period last year that reads 7.7% year on year.

Let's continue to CapEx spending. Until the end of September, we have spent IDR10.9 trillion. As planned, Telkomsel spent the biggest portion that reads IDR6.9 trillion. And most of this spending was for radio access network.

Until the end of this year, we will spend CapEx up to around IDR19 trillion.

Ladies and gentlemen, Telkomsel as a major contributor to the Group's revenue has made an excellent growth. It is expected to sustain the increase through the current strategy in data business, maintaining voice and SMS revenue.

Telkomsel contributed 70% of consolidated revenue as of September 30 and made to increase the revenue 10.6% year on year.

As you know, data service continues to grow significantly and the contribution to the total revenue increased from time to time. The right strategy on broadband and data services are very important to accommodate the growing demands of data services both for capacity and coverage.

The modernization, faberization and IT network deployment are unavoidable and has to take place continuously. From this nine months' result, we can see that the network development has been expedited.

On the mobile broadband until the end of September this year, the total number of 3G BTS increased 49% year on year to 13,415 BTS.

On the fixed broadband side, we also continued to aggressively and creatively modernize our national broadband infrastructure and services called Indonesia Digital Network 2015 or IDN 2015 intiative.

This is in support to government master plan for accelerating economic development or MP3EI. IDN 2015 initiative includes deploying 15 million true broadband access based on fiber and 1 million WiFi public access, completing Sulawesi, Manado and Papua submarine cable system backbone rings, as well as nurturing broadband convergence multiplay and multiscreen services.

Let me update you that currently our broadband capacity has reached 4.4 million. It will continue to the next deployment and we expect to have more than 4.6 million lines ready for broadband by the end of this year.

International business. PT Telekomunikasi Indonesia International or Telin, one of Telkom's subsidiaries, on July 2012 awarded licenses to operate mobile telecommunication services in Timor-Leste. By bagging the license, Telin is ready to hold service for GSM and 3G. With the total investment amount no less than $50 million during the first five years. Telin will provide a full service in Timor-Leste with strong support from Telkomsel. Telin will provide the core service in the form of wireless broadband, business solutions and digital lifestyle.

Data center. In the third quarter of 2012, we did an acquisition for datacenter business. As you know, Telkom has a wholly-owned subsidiary that engaged datacenter business called Telkomsigma. Telkomsigma had acquired 3,200 square meter datacenter in Sentul, West Java.

This will increase our capacity to serve demands on datacenter services. The acquisition makes total capacity of Telkom Group's datacenter to be 11,500 square meter. We aim to increase our datacenter capacity to 24,000 square meters by 2016. We remain open to merger and acquisition opportunity, both in domestic and overseas, as long as it could increase value and leverage our current business.

Flexi transformation. To strengthen broadband business, Telkom is transforming fixed wireless business which is Flexi business from narrow band into wireless broadband.

The business unit that is in charge of Flexi is also transformed from division of Telkom Flexi into division of Wireless Broadband, which is responsible for managing Telkom WiFi business under Indonesia WiFi brand.

I would like to reemphasize here that there will be no more CapEx for Flexi business and simultaneously, we reduce OpEx for Flexi significantly.

Ladies and gentlemen, you may be aware during the third quarter, we experienced a couple of unforeseen events, failure of Telkom-3 satellite launching and dispute between Telkomsel and PT Prima Jaya Informatika.

Telkom-3 satellite. We have received a letter from ISS Reshetnev Rusia; that's the main contractor of Telkom-3 satellite. It has officially stated that Telkom-3 satellite has been lost since it could not be returned to the intended orbit.

Telkom fully insured the satellite and we have already obtained a commitment from the insurance company that will make a full payment of Telkom's claim for the lost satellite.

Telkomsel appeals to the Supreme Court. Following the dispute between Telkomsel and PT Prima, ,a Telkomsel's distributor of pulse reload vouchers under distribution agreement by both parties.

Central Jakarta District Court accepted the bankruptcy petition against Telkomsel filed by PT Prima based on its verdict on September 14. Actually, PT Prima has no right to claim receivable from Telkomsel considering that PT Prima has not made any payment to Telkomsel on its order.

PT Prima also breached the terms and conditions as stipulated in the above-mentioned agreement, therefore the requirement for a bankruptcy petition should have not been made. The decision of Jakarta Commercial Court at the Central Jakarta District Court, it's not in favor of Telkomsel.

Telkomsel has taken necessary action and legal remedy to challenge the above court decision by filing an appeal to Supreme Court on September 21. Currently, the appeal to the Supreme Court is still in process. Notwithstanding the bankruptcy status, considering that Telkomsel is a healthy Company, with sufficient resources to fulfill its obligation, the supervisory judge has allowed Telkomsel to continue its business activity normally.

Ladies and gentlemen, to maintain our growth in the future, we will make sure that Telkomsel revenue grows at least 10% annually in the three years, with EBITDA margin minimum 55%. The revenue at least steady for fixed line side. And we continue our cost transformation for the whole Group, among others, through network modernization, green energy implementation. We will also continue early retirement program to optimize our personnel structure. Thank you.

Thank you Pak Arief. We will now begin the Q&A session. When raising your questions, we would appreciate if you could speak clearly and state your name and your company. Operator, may we have the first question, please?

Sachin Gupta.

Congratulations on the result. I just have a few questions. First of all, just trying to understand the trend in your Wireless Broadband business. You've had very strong net adds in the quarter, so just wondering what's actually driving that, or can you talk about some of the upward trends in that business? That's number one.

And number two, Pak, I think you just mentioned that for Flexi you're not looking to spend any more CapEx and perhaps contain your OpEx as well. So just wondering how does this business survive, or what's the intention of the Flexi business going forward?

And lastly, just on the share buyback, it states in the release that 75% of the buyback is done and it expires in November this year. Just wondering what's the intention with the buyback or what's the average buyback price? Thank you very much.

Mr. Gupta I'm going to hand you to Mr. Alistair from Telkomsel to answer your first question.

Yes, it's quite an exciting time, I think, in Indonesia generally, with the growth of mobile Internet. I think there's a number of things happening that are contributing to it. It really characterizes, what I would call, the DNA infrastructure, so we have all the big device manufacturers increasingly offering data center devices, smartphones, at around $100 level or below, which means that smartphones are now -- are much more affordable for consumers.

I think also we're seeing a lot of investment and attention to the Indonesian market from content companies. So for example, a few months back Google launched the Indonesia version of YouTube. So certainly there's a lot of activity in the market. And obviously we're playing our part in terms of building out our 3G network, so as Pak Arief mentioned, we really stepped up the level of 3G investment in terms of creating a network which gives a good customer experience. So off the back of that, we, along with a lot of the other operators here, are seeing very good growth, both in connections to our network using smartphones, but also our customers buying data bundles and using data, which explains the strong growth in data revenue in the nine months of this year.

Mr. Gupta, for your second question on Flexi transformation, I'm handing you to Mr. Indra Utoyo.

Okay, thank you. For Flexi service itself, what we are going to do is -- we will only focus on the area which is still positive, and we will do a kind of reducing the operational maintenance cost by share infrastructure and shut down some negative areas. Then we still continue to serve the customers by doing so, and at the same time I think we just put Flexi as just a product we keep maintaining so long the customer is there.

And then the focus of the transformation is -- currently the division is expanding the infrastructure for wireless broadband infrastructure based on WiFi technology, that hopefully can complement our broadband strategy. Thank you.

Okay, for the share buyback. Until now we already have in the level of 1.06 billion shares, with an average price in the level of IDR7,972 per share.

And for the second question, the program will continue going forward, I think, because this amount was mandated in the AGMS until this month. So, so far, we don't have any plans to increase the number of share buyback. Thank you.

Operator, can I have your next question, please?

Sachin Mittal, DBS.

Just, first question is, the early retirement expenses, they were incurred in 3Q last year and now, are you expecting ERP expenses to incur in 4Q of this year, since we are not seeing them 'til 3Q?

The second question is, a rather related question is, do you see stable EBITDA margins over the medium term, given high tower leasing expenses, which is probably -- in Asia, I think they are the highest tower leasing rates which Indonesia has seen, actually, as of now, and substantial 3G investment going on, so this question is about the margins?

And the third question is, this is the second successive quarter of ARPU increase. Is it due to Lebaran season, or is it a secular trend, in your view?

And lastly, about the PT business, any budgeting, and what kind of timing are we talking about the PT business? Thanks.

Sachin, can you repeat your first question, please, again? We lost you a little bit there.

ERP expenses, are we expecting them to incur in the 4Q of this year?

Yes.

Okay, and can you repeat your fourth question?

Pay TV business, so any budgeting and timing of this business?

I'd like to clarify the question number four. Is it budgeting and planning of Pay TV for --

Budgeting and timing, yes, yes.

In terms of actual revenue numbers, or market share, or subscribers?

Whatever you (inaudible)

Okay.

Okay. The first question is on the ERP program. Basically, it's been budgeted in the -- this year, amounted IDR500 billion. It is going to cover in the level of 600 to 700 employees.

But management will execute this program, but we know that also we have to consider also the net income performance, so we are maintaining in the double-digit -- in the net income growth, so we may execute this program this quarter, but didn't decide yet how much, the exact month in the ERP program. But we are going to do it this quarter.

So are you saying that, depending on your earnings growth, you may decide how much can be booked this year, and how much can be booked next year?

Exactly, exactly. We are going to do the ERP, but we didn't decide yet how big would the ERP be this year, because we are also considering that maintaining the double-digit growth in the bottom line.

Okay. That's clear.

The second question is about the margins. We believe that, going forward, we are maintaining the margins. It could be decline, but we calculated the declining no more than 2% within the two or three years coming.

You think they will drop by 2%?

No more than 2%.

Drop.

I may add some explanation from Pak Teguh beside only tower, we're also doing some initiative in try to make our costs more efficient, and of course, let us save in terms of electricity and so on. So basically, if we talk about our tower leasing, we also do the tower leasing in a very competitive ways, so basically we've tried to take the most efficient source of supplies for our systems. That will help us to sustain the EBITDA margins that we're on now, and I think what's been explained by Pak Teguh, we expect we can maintain margin at the most a decline of 2%.

Just to clarify, did you say that margins can either maintain, or in the worst case, they can decline by 2 percentage points?

Yes.

Okay. And that's for next two years?

Yes.

That's clear.

Okay. Thank you.

Your third question was in connection with ARPU, and the relative stability. I think really there's a number of reasons for that. I think the primary reason is probably the state of the market competitiveness, which obviously with so many players Indonesia will always be a competitive market, but relatively speaking, there's been a fairly high level of stability, which has meant that pricing, by and large, has been fairly sensible, and that all operators are really benefiting from that, and certainly we watch our pricing very closely so as to not, in any way, start some kind of price war. So I think that's one thing, stability.

I think the second part is really going back to what I was saying about data, where really we're seeing data becoming a really quite significant part of our revenue, and obviously going forward, it will become more and more significant, and in many ways that is an additional product that we sell.

What I didn't mention before and I should probably mention, in terms of our data revenue growth, is really around our pricing, which, along with most other operators in the world, we're learning much more how to price effectively. We're backing away from truly unlimited packages, and increasingly having capped packages, which properly -- which charge appropriately. So I think those are probably, in my mind, the main trends impacting ARPU.

Just to verify, are you expecting cannibalization of voice by data?

No, not in the next couple of years, would be our expectation. I think we're still going to see fairly healthy growth in both voice and SMS, and we're going to see a very significant growth in data. In the longer term, beyond that, who knows. But certainly in the next couple of years in this market, we'll still see voice, SMS, and data growth.

And are you talking of ARPU level, or each -- are you saying that each person will be contributing more voice and SMS revenue, or are you saying overall voice and SMS revenue can grow? Because I think the trend is already there, that voice usage and SMS usage may come down.

Yes, I agree. I was actually talking about the overall business, actually, in terms of our voice revenue as a business, our SMS revenue and our data revenue.

In terms of ARPU, yes, I think there is some evidence that people use OTT messaging applications, etc., you may consume less SMS. But no, overall as a business, we'll see continued growth of voice, SMS and data.

Okay.

The question on Pay TV.

All right. Okay. For the Pay TV, it is a part of our media strategy. If you see from the -- just Pay TV from the DTH services through our subsidiary TelkomVision, currently, the subscriber is around 1 million subscribers; with the postpaid customers around 350,000. And the revenue is around IDR311 billion; with the EBITDA positive around IDR35 billion.

But to give you some insight about the media strategy, as we go into more integrated media strategy. We also have the interactive media TV strategy through OTT TV. We've just launched USeeTV which also can be seen through multiscreen from the mobile; and also from the small screen, from medium screen, and also from TV.

And we also have the DTH services, but for the DTH services, as you may know that a media business in Indonesia, I think, is quite unique, that mainly the revenue is based on the advertising. So we would like to also save this business model based on advertising.

And for the strategy in this media business, for sure, we will do through alliance, not doing by ourselves. And I believe in the coming future, we will re-launch our DTH services with the new business models; seizing the opportunity from the advertising, and maybe with low cost subscription fee. Thank you.

Operator, can I have your next question, please?

Kelvin, CIMB.

I have a few questions. First one's on your Indonesia digital network, 2015. You're looking to deploy 15 million fiber lines by -- over the next three years. I'm wondering what sort of demand you expect for fiber -- from fiber by then? And related to that, where do you think PT's penetration is today, and where PT penetration will be in three years? That's the first question.

The second question's on the -- just looking at the interconnect trends, interconnect at Telekomsel. Revenues -- interconnect revenues have risen. I think, if I'm not mistaken, it's up by about 14%. But interconnect costs went up faster than interconnect revenue. I'm just trying to understand why this is so. I would imagine that, by virtue of you being the largest telco out there, you would be receiving more minutes, more SMS than you will be sending out, if I understand the net trend there.

And lastly, on your 3G rollout, I see you're expanding very quickly. Just like to understand what -- how much of your 3G -- how much of your tower space, going forward, would you be looking to -- will you be -- will be fulfilled internally, and how much will it be done on an outsourced basis? Thank you.

The first question, I'll hand you to Pak Indra.

Okay. About the deployment of fiber to around 15 million through broadband access, based on fiber. I think this is the foundation because we believe that the future will be broadband as the opportunity for growth. So we see this as a long term foundation for our growth in the fixed line business.

And this is also in line with government master plan to penetrate for 30% of households; which is around 20 million houses here, combined with our WiFi strategy. So the demand is based on the household. The total household is around 60 million. So we have 15 million-plus WiFi 1 million. Hopefully, can address for 30% of households. Thank you.

Sorry, I didn't quite understand that. So, do you have any data as to what PT penetration is?

Currently, the penetration for broadband, less than 4%.

For PT or broadband?

For fixed broadband 4%. Yes.

Okay. So you expect that to rise to 30%. When do you think demand penetration will hit 30% for fixed broadband?

Yes, we plan on 2015.

So that's the home pass, but what do you think demand will be in 2015?

Yes. I think at least the current 10 million customers will be converted into broadband. So we believe there are another 10 million new customers from the broadband deployment.

Right, okay. Thank you.

Okay. The question two, I'm going to hand it to AJ.

Okay. So the question was around the impact of the new interconnect regime in SMS. In fact, you're absolutely right in suggesting that Telkomsel is a net beneficiary of this. So we receive more revenue than we pay out in cost.

I think the reason for your question was maybe in terms of the percentage changes in revenue versus percentage change in cost. And I think that's just because of the starting number. So actually, the main message is that, absolutely, we do have a positive margin when it comes to SMS interconnect.

Right. So you think it's just a one quarter phenomenon, but you hope to maintain the net positive?

Well, we do. It was first introduced in June. And each month since then, we've seen a decline in the net margin that we make, to the point now where it's starting to stabilize.

The reason for that was, obviously before the interconnect was brought in, SMS price plans here didn't really distinguish between on-net and cross-net. But once this was brought in, operators were forced to effectively put the prices up of cross-net SMS.

So in effect, the overall volumes sent by customers, once these price changes were made, it decreased. So our revenue's gone down but our cost has also gone down, with the result that the margin's down. But we think it's now starting to stabilize out, but it's still a positive margin.

All right. Thank you.

Could you kindly please repeat your third question?

Yes. You're rolling out 3G aggressively. I'm wondering how much of your Node-B's requirements will be fulfilled by your -- on your -- mounted on your existing towers, and how much would it be, going forward, on outsourced towers?

Okay. Thank you. Basically, we only provide the BTS and Node-B by ourselves, and the tower will be provided by our affiliate, Mitratel and some from third party. Basically we provide the core and the BTS.

Could you give us some color as to how much the breakdown would be between Mitratel, and how much would be third party?

I think, at the moment, we put around 50% will be carried by our affiliate. And the remaining will be competitively, we seek our partners who will be deployed it in certain area.

Sorry, 50, 50?

Yes.

And then you see this proportion continuing going forward?

This we do kind of almost monthly review on the performance of each of our tower provider companies. So basically, we provide the PO always based on their performance month by month, quarter by quarter.

Okay and just quickly following on that, so even with you outsourcing more of your towers, are you still looking to maintain your margins going forward, is that right? And just wondering, where do you think the cost savings will be to offset the higher rental costs?

I think the biggest expense is coming from the electricity and so on. And we try to digging deeply into each of our costs, which can be managed and can be, I think, more efficient because of the scale of business.

I think our expenses not only coming from the tower leasing, but we have also other cost from operation and maintenance that we can seek the efficency from.

Okay, thank you.

Operator, can I please have the next question?

Navin, Morgan Stanley.

I had three questions. You talked about your CapEx budget for this year. I don't know whether it's too early to talk about your CapEx plans for next year or at least directionally, would you expect it to be higher or lower than this year?

Is there a CapEx to sales number that you target? Or is there an absolute CapEx number that you target?

The second question I had was with regards to consolidation in the industry. Obviously with SMS Interconnect, we have seen some of the smaller operators starting to struggle. Do you see any rationale from you, as the largest operator, to probably acquire some of them, just to prevent some of that spectrum going into the hands of other potential new competitors? So, is there something of that sort that you're thinking about?

And then lastly on dividends, obviously, the cash flows are strong and increasing and that's great. How should we look at your dividends going forward? I guess for this year you have a guidance of 65% payout, is there an upside to that?

And going forward one or two years, would you see that 65% payout ratio increase, as the cash flow increases?

I'll hand you for your first question to Pak Indra.

Yes, just for the next year plan -- okay, the guideline -- for guidance for 2012, I think the CapEx towards revenue is around 22%. Combining between Telekom and Telkomsel, so in total around $2 billion.

For 2013, I think it's our plan will be aggressively to deploy broadband infrastructures. So there will be a need for CapEx more. And if we calculate the estimated CapEx required is around $4 billion for -- in between three years, to support the proper infrastructure deployment.

So if we deploy the existing CapEx strategy, the total CapEx to sales ratio will increase to -- up to 50%. But we are aware that this strategy may make you, our investors, not happy. So we are looking at many financing alternatives, which is hopefully more a creative models for getting the financing operative, such as Pay as you Grow or revenue sharing and any other alternative to minimize the cash CapEx up to similar level of around 25% of revenue.

So as a guidance for CapEx in 2013, yes, we try to make it a level of 25% of revenue. Okay, that's the first question.

Okay, about the intention to consolidate -- to acquire the smaller operators, currently the initiative is to consolidate not by acquisitions, but it's in the terms of infrastructure consolidation, I think that's the first initiative that we are especially -- there for the Flexi, CDMA business. I think that's the first consolidation that will happen in the market and in the industry for consolidating the CDMA business.

Then maybe the third question about DPR, yes, dividend payout ratio policy. The dividend payout is also maybe based on the policy from the government as the major shareholders. But we will propose because we understand the investor concerns to improve the DPR or dividend payout ratio. So we are going to propose, if we could maintain CapEx to revenue ration less than 25%, so the DPR may increase more than 65%.

It means that maybe it can be in the form of 55% base rate plus a special dividend of more than 10%.

The second proposal is if CapEx to revenue around 25%, so we will maintain the DPR at the level of 65%, consisting of 55% base rate plus 10% special dividend.

But if CapEx to revenue is more 25%, so DPR stays on base rate 55% without special dividends.

Operator, can I have the next question please. This will be our last question.

Harry Su, Bahana Securities.

Okay, my questions will be related to TelkomVision. Can you provide us some color about the region breakdown of the subscribers? I note you have 1 million subscribers. How many percent is located in Jakarta and Greater Jakarta? And how many percentage is in Java and outside Java?

On top of that, can you provide a breakdown about the transmission, how many percent you transmitted through cable and how many percent through satellite? Thank you.

I'll hand it over to Pak Agus then.

Harry, I think I would appreciate if you could drop me an email and I will answer this in written, yes?

All right, thank you.

Okay.

Okay, thank you everyone for participating in today's call. Apologies for those whose questions could not be addressed. Should you have any further questions, please don't hesitate to contact us directly.

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

Ladies and gentlemen, from time to time we have stated and still believe that the key to sustainability of the profitability is to offer more and better services to customers.

To that end, we will continue to focus and commit to realize Indonesia Digital Network 2015 initiative. We are optimistic that we could maintain our leading position in telco industry in Indonesia.

I would like to thank again to all of you. We appreciate all the questions. See you all soon for the 2012 year-end results. Have a pleasant day, thank you.