Telkom Indonesia (Persero) Tbk PT (TLK) 2013 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Telkom first quarter 2013 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. All the materials for today's conference is available on our website at www.telkom.co.id. Please be advised that this conference is being recorded today, May 1, 2013.

I would now like to hand the conference over to your first speaker today, Mr. Albert Tan, SVP of Business Strategy Integration. Thank you, sir; please go ahead.

Ladies and gentlemen, welcome to PT Telkom Indonesia first quarter results ended March 31, 2013 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 the first quarter ending March 31 on April 30, 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. Telkom Indonesia does not guarantee to any actions which may have been taken in reliance of the discussions 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 our Chief Executive Officer; Mr. Honesti Basyir as the Director of Finance and Chief Financial Officer; Mr. Rizkan Chandra as Director of Networks & Solutions; and Mr. Indra Utoyo as Director of Strategic Portfolio.

Also present at the Board of Directors of Telkomsel, Mr. Heri Supriadi as Director of Finance; Mr. Alastair Johnson as Director of Marketing; Mr. Edward Ying Siew Heng as Director of Planning & Transformation.

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 TIMEs, telecommunication, information, media and entertainment, directly or through our subsidiaries. We also deliver services to multiple customer portfolios, retail, enterprise, wholesale and international.

As of March 31, 2013, the majority of stakeholders 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% under public ownership.

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. A very warm welcome to all of you to our conference call for three months period results ending March 31, 2013. We appreciate your participation on this call.

In today's call, I will give you the overview of our operational and financial results for the first quarter. Secondly, I'd like to update you on what we have done to accelerate the infrastructure and [the latest] issues.

Ladies and gentlemen, let me start the overview by sharing the highlights of our three months' results.

First, Telkomsel continued to increase its performance by booking 13.3% year-on-year revenue increase, and made the total consolidated revenue increase by 9.8% year on year.

Telkomsel also managed to maintain the acceleration of network deployment by adding 3,367 new BTS during the first quarter with almost 70% of them is 3G BTS. Fixed line business also maintained the positive revenue growth by 0.1% year on year since last quarter.

Ladies and gentlemen, it is encouraging that our fixed broadband users increased by 40% year on year to 2.7 million, and the revenue increased to IDR1.1 trillion in this quarter.

Our mobile data users increased from time to time. In the first quarter, it increased 12% from last year. We booked IDR2.3 trillion of revenue from mobile data services, a 37% increase year on year. Total mobile services and fixed broadband revenues increased almost [25%] year on year to [IDR3.4 trillion].

As you may recall, we added more than 18 million customers in 2012, representing net add share of close to [70%]. We started year 2013 by giving more focus on increasing customer [world] share and sustaining revenue growth by maintaining a good quality of customers. Total cellular subscriber in first quarter is 120 million, a 9.8% increase year on year.

In the first quarter, we added 3,367 unit of new BTS; 70% of them is 3G BTS. Until end of the first quarter, Telkomsel owned 57,000 BTS. On March 5, 2013 Ministry of Communication & Information announced Telkomsel as one of the winner for additional 5 megahertz 3G spectrum. With the additional spectrum, we hope Telkomsel could serve its customer with a better quality of mobile data service.

Ladies and gentlemen, we are pleased that consolidated revenue grew by 9.8% year on year. This is backed by Telkomsel's continued growth that maintain a double-digit 13.3% year on year. Revenue contribution for the first quarter was still dominated by cellular voice revenues, which make [38%] to our total operating revenue.

Data, Internet and IT service came second, contributed [37%], followed by fixed line voice that contributed [12%]. The remaining [10%] is contributed by interconnections, network and other.

Cellular voice revenue, the biggest contributor, showed a quite good increase of 5.3% year on year. Data, Internet and IT services, as a second contributor, showed a remarkable increase of [20%] year on year, compared to only 12% year on year increase last year.

In the meantime, on the expense side, O&M was the biggest contributor with [36%] of total expenses. The second and the third contributor were depreciation and personnel expenses, with [27%] and [18%] of total expenses, respectively. Interconnections, G&A, marketing expenses altogether contributed [18%] to total expenses.

Total expenses increased by 10.5% year on year, mostly due to the increase of O&M, which is in line with the acceleration of network deployment in our cellular subsidiary. Since the second half of 2012 until now, we built more than 1,000 BTS per month.

Ladies and gentlemen, Telkomsel made an exceptional achievement at the end of the first quarter, with double-digit growth year on year for its revenue, EBITDA and net income. Mobile data services is the driver with more than 36% revenue growth, with 67% increase in subscriber of Flash and 66% growth of BlackBerry subscriber.

Telkomsel keeps improving data broadband services, by continuously deploying new 3G BTS to enhance access, quality and coverage. In 2013, we will deploy another 12,000 to [13,000] BTS with 70% of them is 3G BTS, to cover more cities throughout Indonesia.

Along with the infrastructure development, Telkomsel is making business transformation from legacy voice SMS to data and digital business that will include value-added services, M&A, digital advertising and machine-to-machine business. By end of 2013, data and digital business contribution is expected to be 23%, and we expect Telkomsel could maintain double-digit revenue growth for 2013.

On the fixed broadband side, as mentioned in nine-month 2012 result, we are modernizing our fixed broadband infrastructure through Indonesia Digital Network 2015, or IDN 2015 initiative. By end of 2015, there will be 15 million homes connected for broadband services, wire backbone infrastructure connecting Manado, Ternate, Halmahera, Ambon, Fakfak, [Tomika], [Kaptu Sorom] in Papua, as well as 4,000 kilometer will be initiated at the second semester this year.

With expansion of broadband infrastructure, we also offer more services for customers to enjoy fixed broadband services. Among others are by installing Wi-Fi access points in the areas with high demand. We also launched Speedy Instant that allows customers to access Internet with the scheme, pay-as-you-use. With this ease of access, we expect our fixed broadband revenue will grow better this year.

We have been doing overseas business for several years, and we will expand our operation in some more countries. In Singapore, we have started our business in 2007, in wholesale voice, bandwidth capacities and international [private leased] circuits and data center.

Starting January 17, 2013, we have been operating cellular service in Timor-Leste with Telkomsel brand. 45,000 people registered to be Telkomsel subscriber until end of March. With population of around 12 million, we expect to have 60% of subscriber by 2018.

We have initiated a [MPNO] service in Hong Kong complementing our wholesale voice and data service. On January 6, 2013, we have established an outlet Telkomsel [GraPARI], our cellular service in Hong Kong, targeting Indonesian workers and tourists totaling around 200,000. Currently, our subscribers reach around 40,000 with the ARPU of $20. This year, we expect to have 100,000 subscribers.

We are going to initiate the same service in Malaysia as there are around 2 million to 3 million Indonesian workers over there. It is an important share market to grab. Besides, there is other opportunities such as [money remittance] that could be worked on.

In Australia, we started setting up business process outsourcing portfolio that includes data management, call center and data entry service. Even though the [team] is still small, this gives exposure to our team to do business out of Indonesia.

Singapore, Timor-Leste, Hong Kong and Australia operation will give our employees an international business experience that, at the end, will be a valuable asset to realize our vision to be the [TIMEs] player in the region.

We plan to expand our business operation to Macau, Taiwan and Arab Saudi countries where we have Indonesian migrant workers looking for their fortune.

In Myanmar, even though we could not get cellular operation license, we are still looking for other opportunities in the ICT business area. We see that Myanmar Government is intensifying the efforts to provide information technology for Myanmar people and business. We are optimistic that the opportunity to expand our business to Myanmar is wide open, especially for digital media and ICT solutions that are needed by the corporation and small-medium enterprises.

Media is one of our business portfolio that will seriously develop, as we believe that digital media business is one of the opportunities for Telkom to grow competitively and sustainably. So far, we have input in media business through our subsidiary, TelkomVision with YesTV for satellite TV services.

Recently, we have softly launched our online TV services called [UCTV] that can be accessed everywhere through laptops, tablets or smartphones. We are going to [design] our digital media services from time to time so that customers could easily access it wherever they are, with various device most convenient for them; for small screen up to the giant TV set at home.

On top of that, we will offer the service economically to make it more affordable. With this scenario, we are targeting 1 million subscriber for the UCTV in 2013.

As mentioned previously, we will maintain our flagship operation to be very efficient, and we will allocate the spectrum to be used for broadband services. We hope, with that arrangement, we could make the most of our flagship asset.

Ladies and gentlemen, let me now share the guidance for 2013. For 2013, we expect Telkomsel revenue could grow double digit. Meanwhile, for fixed line business, positive revenue growth recorded in 2012 could be maintained. With that, we expect our consolidated revenue growth between 8% to 9% year on year.

For EBITDA margin, it will be slightly declined for TLKM Consolidated and Telkomsel.

By forming partnership and looking opportunities to pay as you grow and revenue sharing scheme, we expect our CapEx for 2013 to be 20% to 25% over revenue.

That's ending my remarks. Thank you.

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

Thank you. Sachin Mittal, DBS.

Congratulation on the result. Three questions, mainly. First, we have seen -- revenue-wise, fixed line is doing okay, but earnings-wise, we have seen a huge decline. Could you share with us the reasons behind the decline in profit, and what should we expect, going forward, on fixed line profitability?

Number two, on the cellular side, I think it was a fantastic quarter with more than 20% growth in earnings, was there some one-off in the result? Or why should not the growth be similar in the quarters going forward? Why do you think earnings growth cannot be 20% for the full year?

And lastly, on the CapEx, you did say that you will be doing some revenue share -- some kind of sharing with other operators. Does it mean that 3G CapEx is at its peak in 2013, or do you think that 2014 could be another peak for the CapEx? Thank you.

We have some background noise on their questions. Can you please restate your first question succinctly? I think we lost quite a lot; there's a bit of background noise.

Sorry about that. Okay, my first question is about the profitability of the fixed line business because what I'm seeing is that it is not following the revenue trends. Profitability, I think, fell about 13% in the very first quarter year on year, so what are the drivers behind it, and what should we expect in terms of profitability?

Can you please restate your second question again?

Second question is on cellular profitability, which was fantastic in the first quarter. Why can't it be sustained in the following quarters? What are the drivers? Is it the revenue? Is it the cost?

For the first question, I will pass it to Pak Honesti to answer regards the fixed line profitability. And the second question, later on, I'll pass to Pak Heri Supriadi from Telkomsel. Yes?

Okay, thank you. For first question about the fixed line profitability; I think we try to manage the growth of -- first, about the fixed line revenue. If you see that since first quarter 2012, it's the first time we booked the positive growth of our revenue on fixed line. And then, 2013, we try to modernize the network, and maybe you can see in our O&M, the cost increased because of we want to [split] up the broadband services. That's why you see the profit is slightly decreased, but we believe that because they are broadband, fixed line is also one -- our revenue driver for the future. I think maybe we will a little bit decline for, let's say, one year or two years, but we will monetize the coming maybe after 2014.

And also, in our first quarter result, we also already stated that we want to increase the network to deploy more Wi-Fi and also modernize our copper cable to be fiber to the home as our broadband network. So I think broadband fixed line is one driver and, for first or second years coming here, will be a little bit decline, but will be monetized after that.

Hi, Sachin, Heri here. Thank you for the question. About the net profit margin for the cellular, right now, it's 22%. We expect we can maintain that percentage, yes, we also love to maintain that, but [the normal line] is we want to maintain the revenue, costs and bottom line in the similar pattern.

So basically, we try to maintain the revenue will go up by double digit. We try to keep the cost lower than the growth of the revenue, so therefore, we also expect the growth in the bottom line with double digits. We give this kind of conservative figure; if we can grow by 22%, it's very good, but that's a rough figure of what we're going to expect for the whole year.

Okay.

Roshan Raj Behera, Merrill Lynch.

Three questions from me. First, going back to your guidance for margins to be slightly lower this year, could you just help us quantify that? And let us know guidance for EBITDA margins for the Consolidated business, if it'll be on a rising trajectory in the following quarter.

Second, is a follow up on the O&M expenses, could you just help us understand why was there a significant jump in O&M on a q-on-q basis?

And third, is on subscriber losses during the quarter; what led to this, and what's the trend that you see in competition in the market? Thank you.

Okay. On the first question, I will direct to Pak Honesti.

Yes, Roshan. So I think for the EBITDA margin, we tried to give the best growth here. But because the expansion of our networks, [of cost for broadband services], maybe the EBITDA margin slightly decrease, but we tried to keep the decline of our EBITDA margin not more than -- it's around 1% up 2.7%. But the best effort for us to give [its best] growth.

I may add the information from Pak Honesti, because some of our networks have (inaudible), also it occur in Telkomsel, which is previously we build our own towers. Right now, we part lease the towers, so the cost is becoming operating cost -- operational and maintenance costs. That's why the EBITDA margin will slightly decline.

To the next question on the O&M expenses.

Yes, talking about the O&M expenses, I think [already stated by Pak Arief] when (inaudible), particularly for the (inaudible).

I think this is totally related with the increasing of our revenue because the next drive for revenue is broadband. Of course, we have to deploy more broadband networks, and that's why you see O&M increase. But this is also related the increasing of revenue of 9.8% year on year.

Okay. For the third question you have on subscriber losses, I'm going to ask Alastair.

Yes, so we did back somewhat in the first quarter, about 3.6%. I think really that it's really a cleansing process on our customer base.

If you look at our performance last year, we grew the business by about IND17 million, and it's [unchanged] when we look at prepaid business that when you grow aggressively, you not only pick up good high-value customers, but you pick up your share of lower value customers, who are perhaps bargain seekers or perhaps using their phone as a calling card.

So effectively, in Q1, we have managed to cleanse the base of those customers. As you can see from the revenue, it hasn't in any way damaged for our revenue. And I think, looking forward, we can look forward to growth returning again in Q2.

Okay.

Anand Ramachandran, Barclays Capital.

I have a couple of questions. One, could I just request you to repeat the CapEx guidance? I missed that at the beginning of the call.

Second, can I also request whether you've planned anything at all in terms of timeline on how to execute on the treasury shares? Thank you.

Okay. Pak Honesti, probably I'll direct both questions to you.

Thank you. For CapEx guidance, as stated also by Pak Arief Yahya, the rate of CapEx for this year is around 20% -- up to 20% of our revenue. We give this guidance to all our investors.

For treasury stocks, it's on our [IDMS] out on April 19, last week. We already get the decision from the IDMS to use the [stocks] that's on our [Bapepam rules]. Bapepam is our Board our [financial business] in Indonesia.

The reason for our [taken] action for treasury stock; one, we can use as our source of financing. Second, we can use for a stock employees' option or maybe for management stock option plan. And the third thing, maybe also, we can use as an instrument to get financing like a [corporate bond] or maybe convertible bond.

For every single plan that we want to execute, we have, based on the IDMS decision, we have to get permission from the Ministry first. But now we are in the process because, as you know, that for share buyback stage one, the due date will be on August 2013 this year. Now we are in the process to get approval from the [State-Owned Ministry] what kind of instrument that we can execute.

And I think maybe on June or July, you can see what happens. But the plan maybe we want to place or maybe we can cancel the [debt] of the stock. But all the decisions will depend on State-Owned Ministry decision.

Thank you. And if I may just follow up? If I look up the business, ex-Telkom sales, there was no one-off costs in the first quarter. So what will come through is business as usual in terms of the cost structure for the non-Telkomsel business?

Okay. For the non-Telkomsel, [it means a decline here]. If you see our report for the first quarter, the growth is 0.1% year on year. And I think we continue the growth since third quarter 2012. For --

Sorry, [Honesti], I was looking at this cost side, right. So [this is because] the EBITDA was down 13% year on year. So there's no one-off costs in there . It's basically the investments that you were discussing earlier, that's just what I wanted to confirm on. Thank you.

Yes, I think it's really good to compare year on year growth for costs, because if you see that our report in 2012 because something happened about our growth, we tried to control the costs first. But we tend to select the [smart] costs to increase the revenue. That's why, if you see the first quarter 2012, the cost is slightly decreased. And when the new [management appointed by the former one], we tried to improve the business. That's why some costs will be increased.

Understood, sir. Thank you so much.

Arthur Pineda, Citigroup.

A number of questions from me. Firstly, on CapEx, is it possible for us to get a breakdown in terms of CapEx across the base, specifically is how much will be on Telkomsel side versus on the fixed line side?

The second question I had is with regard to the balance sheet. It's still looking excessively underutilized, and we've seen no change in payout levels or aggressive treasury share deployment. Is there any reason for the conservative approach to this?

Third question I had is with regard to the fiber rollout and Wi-Fi initiated on the fixed business. Can you elaborate on how much this project will cost and how it will actually be funded? What are the economics of this versus the DSL rollout, for example?

And lastly, you mentioned as well that you pushing out an IPTV platform. Any guidance with regard to the revenue implications, as well as the content cost implications of engaging in this kind of a business? Thank you.

Okay. First of all, the CapEx plan for 2013, it's around [20%] of our CapEx goes through to Telkomsel. It's around maybe IND13 trillion will go to Telkomsel. [IND5 trillion] maybe will go to Telkom Unconsol to deploy more broadband services.

And the rest is around 5% -- up to 10% will go to our subsidiary also to support Telkom and Telkomsel to deliver the better quality broadband services; for example maybe our tower company subsidiary, Mitratel. They also will spend, it's around IND1 trillion up to IND2 trillion to deploy BTS, a tower for Telkomsel. I think it is the composition of our CapEx.

Talking about balance sheet, yes, maybe (inaudible) is just based on experience last year here. We didn't like that. Last five years, it's no so many execution in Telkom; that's why the cap is just put in our balance sheet.

And with so many initiatives that we want to deliver to improve our business, I think we can improve the balance sheet this year. So, [so far], maybe we already inform you that the CapEx will be around 20% up to 25%. I think this also can improve our balance sheet; more revenue, control costs, and also, hopefully, improve the bottom line of our performance.

Like what Pak Arief Yahya already mentioned, [digital network 2015] which consist of access, the [ID access, ID ring and ID convergence].

In the ID access, we will deploy lots of fiber to the home, and also access points. The access points will be used not only for Telkom, but also for uploading the traffic of Telkomsel Flash. So this fiber to the home, and also access points, will be used not only for the fixed line customer, but also for the deployment of Node-Bs, the 3G Telkomsel BTS, and also for the offloading of Telkomsel traffic.

Okay, thank you. Next question on IPTV guidance and content.

Okay. For the content cost, for IPTV, we tried as much as possible, we are not using the guaranteed tariff, but we apply what we call as the [par as you grow] content.

Just to clarify my question a while ago on the deployment of capital, maybe I was misunderstood there. I think clearly at this stage, Telkom's balance sheet is looking excessively healthy. Now is there any initiative on the part of the Company to actually leverage the balance sheet or utilize the shares, at least over the next year?

Yes. I think there is [so called departmental now] for how to make our balance sheet more healthy rather than compared to last year. But actually, I cannot inform now, because we have to get some discussion with our Ministry first before we can inform the market what our plan, especially for treasury stock.

Understood. Okay. Thank you very much.

Kelvin Goh, CIMB.

I have four questions; actually, three questions. First one is on your fixed line, or fixed broadband guidance. Can I just get an understanding here; you're looking to roll out to 15 million homes, but just wondering where you think the demand is coming from. As far as I can tell, the PT penetration is somewhere in the mid single-digit level. That's the first question.

Second question is also related to that; it's your CapEx involved on the fiber to the home. Is it fiber to the home, or fiber to the node? That's one sub-question to that. And could you give us a breakdown on your CapEx for this year? I missed that. On top of that, can you give us an idea of how much you're spending on your total CapEx for the fiber broadband?

And third question is on Mitratel, are your [listing] plans on, and what are the target dates, and any numbers, [towers] to share? Thank you.

For the first question, (inaudible) [I will pass it to Pak Honesti].

Yes. I think if you see our first quarter results, the growth of our fixed line broadband is in double digits. And it seems to us we have to continue this story because our future probably is broadband. That's why now, if you still remember my colleague's information regarding we have project that we call IDM, in this year [and for 2015] where we have a target to have around 15 million home passes for 2015. And it will be combined in terms of the platform; combined between the Wi-Fi, and also fiber to the home, or fiber to -- maybe [Pak Rizkan] can explain more.

Yes. To add the explanation, we are going to deploy 15 million home passes. Comprises of FTTH, so it's fiber to the home, and MSAN, the multi-service access network. And beyond of the FTTH and also MSAN, we will also deploy what we call FTTA, fiber to the area. It means that the last mile will be utilizing also Wi-Fi. So it will be a combination of FTTH, MSAN and Wi-Fi.

And then the CapEx involved for that?

I think for what we call the [project title that didn't turn out], we tried to take out all the copper cable, and we replaced it with the fiber to the home. The mechanism is -- will set the CapEx, because to put the fiber cable into our network, the [vendor] can sell the copper to balance the cost of CapEx in fiber. So I think we can [save] this deployment of broadband services to this mechanism.

You see that it only started in 2011, and we continue this until 2015.

So what would be the net CapEx involved then?

I think the CapEx is around, totally deploy Wi-Fi, to deploy FTTH, FTTA, the CapEx is not more than [IDR5 billion] this year.

And totally until 2015?

2015?

Yes, the total CapEx for the entire project. I mean not just this year, but the entire one.

It's about [IDR15 trillion].

Sorry?

It's about IDR15 trillion, around IDR15 trillion until 2015.

One, five, yes?

Yes, one, five.

Okay. And just for your CapEx, could you give us a breakdown of the CapEx for this year? I missed that.

Yes, (inaudible), 60% up to 70% will go to Telkomsel, yes; 30% will go to Telekom; and the rest will go to our subsidiaries.

All right. And on Mitratel?

Mitratel; the big portion is among our subsidiaries. The [tariff] of 10%, I think it's around [70%] will go to Mitratel.

Okay. Sure, but I'm just wondering are you still looking to list Mitratel this year? And what sort of timeline are you looking at?

I think [Pak Indra] can answer these questions.

Okay, yes. I think for Mitratel, we will see the tower business portfolio as a group. So we would like to unlock this as how to -- at least we have two [distinct] aspects. First is how to unlock and prepare (inaudible) of tower. But second, we also have to maintain the long-term interest of our Telkomsel business.

So timing is important. Currently, we are in the process of unlocking the Mitratel towers. We put [three categories] which are the most applicable, as long as it's giving the maximum value for us. Also, speed and also the certainty of the deal happening (inaudible).

Okay. [Great, thank you].

Sebastian Tobing, UBS.

A great result. So the questions; firstly, on Telkomsel business, could you just let us know how the most recent data tariff trend, are we starting to see an inflection of this data tariff, because it has been coming off? And if we haven't seen yet, when do you expect to see this inflection in data tariff?

And then, secondly, if you could just give us a little bit more numbers here of the voice ARPU, the non-voice ARPU, and also the data revenue only?

And thirdly, could you let us know of how many percent of this data traffic actually has already been offloaded into your Wi-Fi network, as of now? And yes, I think that's just it for now. Thank you.

Sebastian, I'm going to direct you to Alastair for this question. Yes.

I think really the way to look at the market at the moment is one of relative stability and, consequently, I think the data tariff situation is fairly stable.

I think you mentioned the point of inflection; I think by that, you meant perhaps prices starting to rise again. I don't think that's quite happening yet, but I think the big three players are certainly concentrating on building data business in a responsible and intelligent way.

We have seen some competition, some more aggressive pricing from the smaller operators. But really, the customers they tend to attract tend to be the lower value, budget seeking customers and, from our point of view, have less impact on Telkomsel, given the type of customers we have, perhaps more impact on some of the other competitors.

So in summary, I don't think we're seeing upward inflection, but I think we're seeing healthy growth in data revenue, and fairly responsible pricing across the market.

In terms of composition of the ARPU, voice ARPU will be around [20 kilos per IDR1], and SMS around [8 [kilos]. And then, broadband and digital services around [7 kilos]. That is the composition of our ARPU. And the contribution of voice is around [60%] of the revenue.

Question of percentage data being offloaded into the [access points]?

Yes. With our current [permutation] of [40,000] access points [throughout] Indonesia, we currently have around 2% to 3% of data traffic being offloaded to the access points. However, with the aggressive implementation of access points 'til the end of the year, we look forward to more and more percentage of data traffic of Telkomsel will be offloaded to the access points.

What would be the ideal target of this percentage of offload (inaudible) maybe in like 2015, when you've completed the whole network?

The current benchmark would be around 30% to 50% of the data will be offloaded to the Wi-Fi traffic.

Okay. Thank you.

[Pankaj Suri, Nomura].

My first question is related to the cash CapEx for this year. Basically, I think the cash CapEx for FY '12 came out around IDR8 trillion, so I'm just wondering if you're going to have a -- cash CapEx is going to be much higher for this year. That's number one.

Secondly, my question is, why are the broadband subscribers and the Flash subscribers down quarter on quarter? They're down by around 2 million. So again, was it related to some cleaning?

Then what has been the trend for mobile broadband subscribers in the second quarter so far?

Then, again, sorry to harp on the guidance question once again; I just wanted to confirm what I've got. So you think that CapEx guidance is 20/25% of revenues, is that correct? And then, secondly, have you given any guidance for revenue as well? These are the questions for me.

The first question, I think we'll direct it back to Pak Honesti on the cash CapEx itself.

Yes, I think cash CapEx, for this year, is around IDR9 trillion. Cash CapEx.

Sorry, for FY '13 you're saying Group cash CapEx is how much?

For the Group, yes, IDR9 trillion is the mix between Telkom, excluding Telkomsel. Wait a minute -- for full year, the cash CapEx is around [20%], so I think it's still in line with our guidance, the CapEx, 20% up to 25%. The most the cash CapEx, you know that [total] go to Telkomsel is around IDR9 trillion up to IDR10 trillion or IDR11 trillion. The rest will go to Telkom, excluding Telkomsel.

Okay.

On the second question on broadband/Flash, I'll direct it to Alastair.

Yes. I think you answered the question yourself; it's really linked to discounting process. Actually, our key target is really driving digital revenue and year on year; that's up about 36%. So yes, it's really those lower value customers where our price plans aren't really optimized. They operate at the bottom of the market who have left.

Okay, fair enough. So how has been the trend in the second quarter so far?

The comment I made earlier was that fully expecting the second quarter to see us get back to growth, both in data users and overall subscribers. So I think the cleansing process has run its course.

Okay. I just want to confirm -- can you remind me of the revenue guidance for full year for FY '13 for the Group?

I think somebody mentioned in the beginning, [Pak Yahya], the guidance for the Group is around 8% up to 9%.

Okay. Thank you so much.

Dee Senaratne, CLSA.

I'm just following on from the question before. Just on that cleansing, can you just elaborate exactly what was done? Was it just inactive subs, or there were very low value subs you just got rid of? Can you just give me a little bit more clarity on that? I just want I guess more context on that.

And then the second question was just on some of your content media strategies. Could you give me the current sub numbers for TelkomVision and then UCTV?

And then some guidance as to where you see that going in 2013 and '14? And then I guess on TelkomVision particularly, how do you see that product competing with some of the other pay TV offerings in the market? Thanks very much, sir.

The first question I'm directing to Alastair.

Yes. So the cleansing, really, we have a set of business rules around getting customer count on our network, and these business rules are fairly rigorously applied. I think the reason why, in quarter 1 this year, we had negative nets was really related to some of our activities last year where we grew very aggressively. And on the prepaid business, when you grow very aggressively, you can't help but pick up some customers who are perhaps using their card temporarily, be they visitors to the country, or be they the segment of customers who are looking for value.

So effectively, in quarter 1 this year, we've turned those customers off. It's, I think, part of the natural lifecycle of growing a prepaid business but, as I say, in Q2 this year we're looking at the trend reversing and starting to grow the base again.

Sure.

The next question I'm going to direct to Pak Indra.

For the digital media, currently we have at least three products, first is the Pay TV; second is the OTT TV; and then third is the IPTV. For the OTT, currently we already have around 600,000 registered users, mostly through Telkomsel.

And then for the IPTV, we just restart again to offer the IPTV since we improved the bandwidth and also the bit rate to more adaptable to our network access. So currently we're still around 28,000 customers. And then for Pay TV it's around 1 million subscribers.

And, sorry, when you mean the -- what's the OTC, sorry? OTC, the first product, the 600,000, that's called UCTV, is it?

Yes, correct. The UCTV currently is our OTT services, but we also use the UCTV as our umbrella brand for all TV-related services.

Okay. So the IPTV business is also branded under UCTV.

That's right.

Okay. So basically, the OTC is over the DSL network, and then the IPTV is over the fiber. Is that correct?

Yes.

Okay. And, sorry, on the Pay TV, so you've got 1 million subs, that's 1 million subs now. Is there any guidance you see -- or growth rate you see for this year, and then also, what's the current ARPU you have in that business?

For the Pay TV I think our strategy is to unlock our or to leverage the business by finding the strategic partners to -- at least, hopefully, we can leverage the Pay TV business better than today.

Okay, sure. And, sorry, what's your ARPU in that business?

Let me check. Okay. I think we'll try to find the data for you. Can [you send us an e-mail], please?

Yes, sure, no worries. Thanks, anyway. Thanks a lot. Thanks for taking the time.

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Thank you, ladies and gentlemen. That does conclude our conference for today. Thank you for your participation, you may now disconnect.