Telkom Indonesia (Persero) Tbk PT (TLK) 2014 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Telkom nine-month 2014 conference call. (Operator Instructions). All the materials for today's conference is available at our website, www.telkom.co.id. Please be advised that this conference is being recorded today. The first speaker may now begin.

Thank you, Wayne. Ladies and gentlemen, welcome to PT Telkom Indonesia nine-month results ended September 30, 2014, conference call. Director of Innovation and Strategic Planning will give you the overview and then continued by question-and-answer session for all the partakers.

The presentation of this earnings call is available on the webcast and an audio recording will be provided after the call for the next seven days. We released the report of nine-month financial results ending September 30 on October 27, 2014, and could be accessed through our website www.telkom.co.id.

Before we continue, let me remind you that this 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 the call. This may involve risks 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 the reliance of the discussion held today.

Ladies and gentlemen, we are glad to name you our Board of Directors who are currently joining with us. Mr. Indra Utoyo as Director of Innovation and Strategic Portfolio, Mr. Honesti Basyir as Director of Finance and Chief Financial Officer, Mr. Heri Supriadi as Director of Finance of Telkomsel and Mr. Alistair Johnston as Director of Marketing of Telkomsel.

Before Pak Indra delivers his remarks, I will take this opportunity to give a brief overview of Telkom Indonesia. Telkom is the single largest integrated telecommunication company and network provider in Indonesia, with over 153m telephony customers and more than 82m broadband users at the end of nine month 2014.

Telkom provides a strong business portfolio of TIMES, telecommunication, information, media and edutainment, directly or through its subsidiaries. And Telkom also delivers services to multi-customer portfolio, which is retail, enterprise, wholesale and international.

As of September 30, 2014, the majority shareholder of our common stock was government of Indonesia with 52.6% ownership. And the remaining 47.4% was under public ownership.

I now hand over the call to Pak Indra Utoyo for his overview. Pak Indra the time is yours.

Thank you, Prakoso. Good afternoon, ladies and gentlemen. A very warm welcome to each one of you to our conference call for the nine-month result ending September 30, 2014. We sincerely appreciate your participation on this call.

As you may already aware, Pak Arief Yahya, our CEO, has been appointed and assigned as Minister of Tourism of Republic of Indonesia by President Joko Widodo. Therefore he could not join the call today. By regulation, he could not assume other position in the corporate while being a minister. I hope there will be a new CEO appointed, replacing Pak Arief, within a short time period. While waiting for the new CEO, Telkom Board of Directors will continue all the programs that already planned for this year. I wish the best for Pak Arief Yahya.

In today's call I will give you an overview of our achievement in the nine month 2014. Until the end of September we could maintain a good performance in operational and financial result. I would like to update you on the progress of our cellular and fixed line business development. as well as other business portfolio.

Ladies and gentlemen, let me start the overview by sharing the highlights of our nine-month result. First, Telkom consolidated revenue increased 7.1% year on year and EBITDA grew by 4.2% year on year. This is in line with Telkomsel's performance, which recorded 10% year-on-year revenue increase and 5.6% year-on-year EBITDA growth.

Second, Telkomsel gained more than 7.8m net additional customers during the nine month 2014, making total customer base to reach 139.3m.

Third, Telkomsel continued to expanding its network, adding more than 13,400 new BTSs during the nine month of 2014, with around 7.5% -- I repeat, with around 75% of them are 3G BTSs.

Ladies and gentlemen, our fixed broadband users increased by 14.1% year on year to 3.3m, and the revenue increased to IDR3.6 trillion year on year in the nine months.

Our mobile data users also increased 14.8% from last year to 33.5m -- 63.5m users. We booked IDR11.1 trillion revenue from mobile data, a 32.5% increase year on year.

Total mobile data and fixed broadband revenues increased 25.2% year on year to IDR13.7 trillion.

Ladies and gentlemen, revenue contribution for the nine months of 2014 was dominated by data, Internet and IT service revenue, which made 40.9% of the total Group revenue, with 15.4% growth compared to end of September 2013. Cellular voice revenue being the second contributed 38%, with 5.8% growth year on year. Those two segments, followed by fixed line voice, which contributed 10.3%, whereas the remaining 10.8% was contributed by interconnection, network and others.

On the expense side, in the same period operation and maintenance expense was the biggest contributor, with 38% of total expenses. The second and the third contributors were depreciation amortization and personnel expenses, making 27.5% and 16.5% of total expenses respectively. While the composite of interconnection, G&A, marketing expenses, ForEx net and others net contributed 18% to total expenses.

Total expenses increased by 8.7% compared to same period last year, mostly due to the increase in operation and maintenance expenses following our accelerated network deployment in our cellular subsidiary. During the nine months of 2014, on average we built nearly 1,500 BTSs per month.

Ladies and gentlemen, as mentioned in our previous calls, we are now focusing our efforts and resources on supporting three-pronged strategy, as stated by our CEO. First, maintain leadership in cellular business; second, developing our broadband infrastructure; and third, expanding international business.

In our first prong strategy, we maintain our mobile leadership in continuing last semester's achievement. Telkomsel is in the process of growing its digital business. For the nine month 2014, digital business contributed 23% to Telkomsel's total revenue, significantly increased from 19.1% last year.

Revenue from digital business grew by 32.5%, contributed from data broadband, which grew 32.9%, and digital services increased 28.4% year on year. We believe that these businesses will keep on being the main engine of growth in the future.

The other attracting potential growth will be from penetration of smartphones. Adoption of smartphones is one key to accelerating customers' data consumption. Meanwhile, we are pleased to notice that our continuous effort has resulted in increase of smartphone penetration from 23% to 25% of Telkomsel's customers in just one quarter.

To support the development of Telkomsel's digital business, we need to enhance the digital ecosystem, which encompass device, networks and application. We made strategic partnership through our subsidiary, PINs, by acquiring 25% of TiPhone shares. TiPhone is a leading company that trades and manages IT and telecommunication devices. Partnership between PINs and TiPhone is expected to enhance our subsidiary and, at the same time, support Telkomsel's digital business. TiPhone is one of the biggest Telkomsel's voucher distributors and is also distributor for many branded smartphones.

We also make efforts to protect our legacy business, which brings 4.7% revenue growth over last year, with voice revenue grew 7.2%, whereas SMS increased 2.8%. We will continue to focus on geographical clusters and customer segmentation, by which we could protect and maintain our legacy revenue growth.

We are in the process to cease our fixed wireless service, Flexi, as the government has decided to reallocate 800 megahertz frequency, which previously belongs to Flexi, to be utilized by Telkomsel. We offer Flexi customers to migrate to Telkomsel with some incentives. We expect we could complete the migration process no later than December 2015. We believe this will bring more advantage to our cellular business as Telkomsel will have additional 7.5 megahertz frequency to strengthen their quality of services.

We have been and are looking at the possibilities to unlock our tower assets. We see that strategic partnership with one of the listed prominent tower companies will make our tower assets perceived as more independent, that at the end will increase tenancy ratio. Currently tenancy of our tower subsidiary, Mitratel, is 1.1, much lower than the other tower companies, with tenancy ratio of 1.7 to 1.8.

We have come to an agreement with Tower Bersama to acquire up to 13.7% Tower Bersama's share that will be exchanged with Mitratel's shares that will be done in two stages. For the first stage, we will acquire 5.7% of Tower Bersama's share in exchange with 49% of Mitratel's shares. Under the agreement, on the second step, we have an option to increase our ownership in Tower Bersama by 8% through swapping the remaining of 51% of shares in Mitratel. The option is valid for two years.

The second prong strategy is our Indonesia Digital Network, our fiber backbone network connecting major islands in Indonesia that we expect by end of 2015 could make 75,000 kilometers. Until the end of nine months, already completed 73,600 kilometers. This backbone network will connect Papua and Maluku with other major islands, Sulawesi, Java and Sumatra

Fiber network deployment is made to serve both cellular business and fixed broadband. Until end of September 2014 we have 11,957 node B/3G BTS sites connected through fiber, which is 40% of total 3G BTS sites.

In order to extend value in our networks, we have initiated IP value-added services for enterprise and government in partnership with Telstra. Telstra is the largest Australian telecommunication company that's well known for its success in network application and service globally. A joint venture is established between our subsidiary, Multimedia Nusantara or Metra, and Telstra to provide network and application services for corporate business. Metra is our subsidiary that focuses on the ICT and media business.

We aim to monetize potential and opportunities that we have in our fixed line asset by extending managed services leveraging our IDN networks. Under this managed services portfolio, we will develop managed network services, managed security services and unified communications for corporate customers in Indonesia and in Asia Pacific regions.

With this initiative, we will utilize Telkom Sigma datacenters and expect this will also spur pull-through growth in our datacenter business, conducted by Sigma Citra Caraka, one of Metra subsidiaries.

Within our third prong strategy in international business expansion, our progress has been rapid. We firstly focused on expanding our international Internet traffic gateway, which we call it Indonesia Global Gateway. To support this, together with other regional telco companies, we initiated and developed the submarine development cable consortiums, South East Asia-United States or SEA-US consortium, and South East Asia-Middle East-Western Europe 5, or SEA-ME-WE 5 consortium. The two projects have been commenced and scheduled to be in operation in 2016.

We have also extended above our networks into contact center business to drive services revenue in the acquisition of Contact Centre Australia or CCA. We acquired 75% of CCA's shares through our subsidiary, Telkom Australia. CCA provides contact center services and business process outsourcing. We have subsidiaries focused on those services under Metra, in particular two subsidiaries. First is Infomedia, is the one that focused on contact center business. Second is Sigma, focused on BPO and integrated IT solutions.

By acquiring CCA it is expected that synergy could be made. With Telkom's support, CCA could expand in the larger corporate or government end of the market within a relatively short period of time. In the meantime, Telkom is expected to improve its contact center operation by adopting the systems and expertise that CCA has. We believe that this path will intensify our business process outsourcing and contact center business globally.

Ladies and gentlemen, let me now reiterate guidance for the year 2014 as a wrap up. For 2014, we expect both consolidated and Telkomsel's revenue could grow in line with or better than market growth. Telkom consolidated revenue expected to grow between 6% to 7%. Meanwhile, Telkomsel could maintain revenue growth in line with or slightly above the industry.

For EBITDA margin, it will slightly decline for Telkom consolidated and Telkomsel.

Consolidated CapEx spending for 2014 expected to be 20% to 25% of revenue. Allocation for Telkomsel purpose is around 70%. Meanwhile, for broadband business it's around 20% and other subsidiaries is 10%.

That's ending my remarks. Thank you.

Thank you, Pak Indra. We will now begin the questions-and-answers 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.

I have three questions, if I may. Firstly, I just want to understand this drop in the interconnect revenue. It's quite a sharp drop and I understand it might be because of traffic patterns. But just wondering what has changed or anything else happening for interconnect revenues to be dropping in the quarter. That's one.

Secondly, just your thoughts on data pricing trends. It looks like they have dropped once again, but obviously volumes are good. But is that what the intention of the strategy is going forward, given yourselves and some of the others have talked about looking to increase data pricing, but obviously that's not coming through?

And lastly, I think you just mentioned the CapEx guidance of 25% or so. But in the first nine months you are running at about [33%, 34%] anyway. So does that mean the CapEx could actually increase for the year? Yes, that's it. Thank you.

Sachin could you repeat the question?

So, Sachin, perhaps I can take the question and comment actually. The first one on drop on interconnect revenue, yes, entirely due to change in traffic patterns. In fact, we've seen less -- in particular less SMS coming from our mobile competitors, in particular Indosat and XL, which seems to tally back to a decline in SMS and voice volume on their networks, which I think also tallies back to just the market performance but also the fact that they've been putting price up quite aggressively. So I think we're comfortable with the pattern. There's been no significant change in either international traffic or any of the rates, which are of course regulated.

Number two, in terms of data pricing trends, really the same trend this quarter as we've observed previous quarters with another decline. Really the same reasons behind that, principally migration from pay-as-you-use to Flash packages, a migration from BlackBerry to Flash, Flash being our general Internet packages, and finally customers taking up midnight-to-8am data offers.

During this period, we haven't reduced any data prices. And in fact we have initiated a program of increasing data prices. But in fact what has happened is that those trends have really accelerated so the growth in traffic is really outstripping growth in revenue.

So I think looking at the latest revenue per meg situation, I think we will more aggressively raise price than perhaps we have done to try and manage that decline. I think I've spoken quite a bit on previous occasions about our desire to flatten out that decline and ultimately raise the data yield in the market.

Okay. Thanks. And just on the CapEx?

Yes. The increase in the CapEx for this quarter, it's because we accelerate some programs because it's to support the new program of the new cabinet [utilization] cost. We effectively do the discussion with the transition team at the time, so we also try to see what sector Telkom can support. That is why we accelerate our CapEx estimation.

But overall for full year, we still keep our guidance for CapEx, 20% -- up to 20% of our revenue. So the total CapEx up to the third quarter 2014 is still in line with our program.

Okay. Thank you.

Can we have the next question?

Luis Hilado.

Hi. Good afternoon. Thanks for the call. I also have three questions regarding the results. Just wondering, you've mentioned in the info memo that G&A expenses are down 41% Q on Q due to a decrease of collection fee. I was just wondering if you can give us more color on that and whether this is a recurring cost reduction for you.

And second is other income for the quarter up 112% Q on Q. Just wondering what that other income was.

And last question is you mentioned, of course, that Flexi will gradually be migrated to Telkomsel, but we saw this quarter that the Flexi subs seemed to have increased. Is there a reason for that trend? And will we see that again coming off in the next few quarters?

Okay. I will try to answer the first question regarding the declining collection fees. That's happened in our enterprise market because some corporates in our enterprise segment, they review their budget. And especially in the government sector, because of some regulation, the change, for example, for military and also the government sector, they revise their budget. That's why there's some collection that we already planned in third quarter, we cannot book. But in the fourth quarter we can collect -- we can report this collection into our revenue.

Okay. So this -- it sounds like a provision, in a way.

Yes. Yes. Provision collection, yes. Exactly.

Other income, this is part of our network modernization because we have the TITO and also non-TITO projects. When we replaced all the copper cables with fiber, we can sell the scrap value of our copper cable. So this is why the other income also increased.

Okay.

Luis, could you please repeat the question for Flexi?

Yes. I saw the subscriber numbers increased this quarter. Is there a reason for that? And should we expect next few quarters that will be again more migration to Telkomsel?

Yes. This may be. I believe that since we announced in the newspapers regarding the incentives that we will give to Flexi's customers as they will move to Telkomsel side, maybe some customers are starting to join Flexi for this, even though it is only for temporarily.

Okay. That's very clear. Thank you, Pak.

May we have the next question, please?

Roshan Raj, Merrill Lynch.

Hi. Thanks for the opportunity. Three questions from me. First one, just some color on competition. How do you see your pricing in the market versus your competitors? And what sort of premium would you be able to support, particularly if any of your competitors do not follow through in terms of raising tariffs, be that in voice, SMS or data?

My second question is on fiber. Recently we have heard some of your -- or some smaller operators, they are looking at broadband services on fiber in some of the high-end retail segments. What has been your approach to this segment and when and how will you be launching fiber broadband?

And the third question is on the trends for fourth quarter. Is that going to be similar to what we have seen in the first nine months or one could expect margins to improve as you pull back on your CapEx moving into fourth quarter and so cost could possibly decline?

If I can comment on the first one, Roshan, in terms of competition. I think the environment's fairly stable. I think the market is very focused now around the big three, although obviously Hutch [of the three] remains active. But I think the real price setting is being done by the big three.

I think my three big competitors have all indicated that they wish to improve pricing generally and in particular on data. And certainly the plan that we've been executing for some time now remains, which is to continue to price up incrementally and tactically on voice and SMS, but also on the data price, as I said before, to look to stabilize that in the market and hopefully to increase that yield.

In terms of our premium, in terms of XL, our voice price is roughly double theirs. Our SMS price is three times. Our premium on data as of the first half of the year -- I haven't seen the results yet -- is about 40%, so the premium on data is smaller. And I think those -- we would look to sustain that premium and perhaps build it on data going forward.

Thanks, Alistair. If I could just quickly follow up on that. Are you getting any trends on the ground which suggest your two big competitors are raising tariffs?

Yes, I think so. I think so. I've seen some evidence of that happening. And in general -- in general, I imagine the trends for Indo and XL are very similar to ours, which is a yield going down very quickly and that their traffic is growing very quickly. Our traffic growth year on year is 150%. I expect the same to be happening to them. So that's not, in my opinion, an environment in which to reduce price. When there's that much demand in the market, I think it's the environment to raise price or at least stabilize it. So I -- yes, I'm seeing that being carried through in the market.

Thanks, Alistair.

Colin McCallum, Credit Suisse.

Excuse me, we haven't finished the answering.

Yes. Regarding the fixed line broadband, I think we improved the performance of our fixed broadband. For example, last year, the revenue just only grew around 6%, but this year the growth went up to 8%. And also in terms of the subscribers also we increased the number of subscribers.

But again, we can say that regarding the fixed broadband, we have [three focuses] on the broadband, also the [selling packet]. For us, we focus on the fiber for the mobile segment. And second, the fiber for the high end-market, and third, fiber for the [area] residential. But regarding the residential, this really depends on our plan to mapping the location of the new residential that's deployed by also maybe for the [private] sector onto the government sector. And now we have around [9%] for -- ready to promote for the fiber.

(Multiple speakers). For [four quarter] figures, as mentioned by Pak Indra (inaudible), I think for margin, we try to keep the -- to maintain the growth not decline up to 2%. So I think the numbers for the third quarter we still try to maintain.

Shall I go ahead with the question? It's Colin McCallum here at Credit Suisse. A couple of questions first of all just on Flexi. Will you need to take any impairment on Flexi? What sort of book value is left on Flexi?

And can I also just ask in terms of the incentives to move to Telkomsel, what kind of incentives are we talking about? Would you go to the extent of things like free handsets?

And are we -- where -- in which line items are we seeing these incentives? Is it visible within the Telkomsel profit and loss account or is in the PT Telkom's fixed line P&L account? Where is it currently sitting? That's the two questions on Flexi.

If I could also just ask another question, I suppose really of the Telkomsel team, just regarding the kind of squeeze that we see here in the terms of the EBITDA in the third quarter and in the first half. It was more the EBIT level we saw the squeeze. At what point would you look to try and claw back some margin particularly from what you're spending on the tower side? And in particular, does that become more difficult now that the transaction between PT Telkom and Tower Bersama has occurred? Is it more difficult for you now to lower the lease rate you're paying and is there any intention to still attempt to do so?

The final question was just on there was an article recently talking about a significant increase in Group CapEx in 2015, partly to support WiFi. I just wanted to get management's comments on whether those comments in the press regarding quantum are correct and any color on how you will actually monetize a big nationwide WiFi rollout. Thanks very much.

Colin, could you please repeat the second question regarding Flexi again?

I think the questions on Flexi were, first of all, is there an impairment charge on it? Is there any -- what's left in terms of book value?

And secondly, the incentives for people to move from Flexi to Telkomsel, which line item or whose accounts are those incentives in? And what sort of incentives are you talking about? Is it affecting revenue or is it costs?

Regarding the Flexi migration process, because of the regulation, we still have time to migrate up to December [2015]. So I think this year we still will -- we will book -- if we still book the impairment of Flexi not more than [moderate], I think there's the same number as last year.

And also for the incentives that we give to our Flexi customers, we will see that the customer is an eligible customer, means that the minimum IDR10,000 they spend for Flexi. They have two options actually, whether they will choose the incentive in terms of (inaudible), or maybe they will choose in terms of handset replacement. (Inaudible).

And whose accounts does that appear in? A cost saved by Telkom, not Telkomsel.

Yes. Right. For Telkom.

If I can just add some color, Colin, actually just to emphasize what [Pak Indra] was saying, it's basically the incentives are scaled to a customer's historical ARPU level. So basically we only make and investment based on the value of that customer. And like [Pak Indra] said, it can either be handset-based or time-based. And actually the evidence we see at the moment is that everyone is going for air time. But we'll see how that pans out.

My understanding in terms of the accounting is it is visible in Telkomsel's accounts initially as a revenue hit for us or as a cost for the handset. But as part of the conditional transfer agreement that we have agreed for the transfer of Flexi spectrum and customers, with the reinvestment process in that, so in fact there's a commercially agreed sharing of that cost between Telkomsel and Telkom, which has obviously been agreed.

Okay. I'm going to answer the second question on the figures. If we can improve the figure of margin in the last quarter of this year, we can answer from two sides.

From the revenue side, we are expecting in December the revenue will be going up. [It's going better] compared to the [end of Q3] month because December always becoming the strongest month for us in the revenue side. So far we already build our network to support all our requirements for having that -- I think there's peak traffic.

And the second in the cost side, the cost side, we continue to improve the efficiency of our network, continue to have a better [scheme] in the tower base and also in the transmission base. Based on that [scheme], we expect that overall the figure can be improved in the last quarter and improve the whole figure of this year. That we are starting to do over and over and we continue to do so.

For the CapEx, I think we still -- the guidance is not changed yet. We still give the guidance, 20% -- up to 20% of revenue for the CapEx next year.

Got it. Thanks very much for all those. Any quick comments from Telkomsel regarding tower leases and trajectory and conflict?

I think we're not seeing any conflict whatsoever because we also have the [competition] in the market, we're going to have, I think, the schemes that are appropriate for us. I think we'll try to improve from time to time.

Got it. Thank you.

May we have the next question, please?

Arthur Pineda, Citigroup.

Hi. Thanks for the call. Arthur here from Citigroup. Three questions from me. Firstly on the mobile side, revenue growth has been strong, but the monetization appears to be quite muted at just 5% to 6%. Do you think it's actually cost-effective to continue our investing period given the impact on your OpEx levels, or would it be more profitable to actually scale this back?

Second question I had is on Flexi. What are the operating cost implications should you totally shut down Flexi by 2015? What is the rate of OpEx linked to Flexi basically?

Third question I had this is with regard to your VoIP revenues under the ICT segment. This jumped significantly from IDR90b in the first half to IDR3.7 trillion as of nine months. What's accounting for this massive jump? Thank you.

On the revenue growth of the mobile, I think as mentioned by Pak Indra, we have tried to continue to keep our revenue slightly higher compared to the industry. For already three years we have a good result. And we'll try to do so again until the end of this year and next year.

And cost effective you mention here. What about the margin? So we have that quite strong growth in the revenue. Yes, the way we see the costs is like this because we tried to do the (inaudible). Of course in the beginning of the year, the costs are quite higher compared to the revenue growth. Over the time, we try to monetize the assets that we already [feel]. So we expect the improvement will come until the end of the year.

And the way we manage the cost effective, we know 53% of our costs are coming from the operation and maintenance related to our networks. As long as we can monetize this better, I think the margin will be better one. That's what we're going to do until the end of the year. We'll try to control the costs whilst keeping the revenue continue to grow higher than the industry. By having that one, we expect we can achieve our results better than what we see in this quarter. I think that's my explanation on the -- how we're going to do cost effective.

On the Flexi cost implication, the direct implication is coming from the spectrum fee. This costs around IDR526b for a year. That will come to our books next year.

And corresponding to that, actually we can use the spectrum by having less BTS compared to using higher [circle]. So we can expect the efficiency in the investment and also in our OpEx. This kind of long-term investment, but after all the direct impact will be seen by, I think, fewer BTS that we're going to build by using that spectrum. And also because it is also related to the operation and maintenance cost directly, we expect also some operational and maintenance costs will be lower.

Okay. Talking about WiFi business, yes, we were in the early stage to implement the WiFi decision on our business [target as a Goup]. Even though we don't optimize yet the monetization of the WiFi [moving through], but month to month we increase the performance.

For example, up to the third quarter this year we already booked more than IDR130b for WiFi revenue. But we believe [individual] that on our discussion with [Telkomsel] whether we want to support Telkomsel with WiFi uploading. I think if we can achieve at least 60% of WiFi network attracting using by 3G or LTE uploading, we believe that WiFi (inaudible) [performance] also increase directly.

Sorry, my question was on the VoIP side, given that there's a big jump from IDR90b to IDR3.7 trillion under your ICT segment.

Can you repeat again?

My third question was actually pertaining to voice over Internet protocol revenues. When you look at the first [six months], this is IDR90b; now it's at IDR3.7 trillion. Was there any reclassification here?

Okay. We're regrouping the how we [record] the revenue before from the interconnect and now we move into the data Internet revenue. And also (inaudible).

So it was reclassified this quarter?

Yes.

Okay. All right. Thank you.

Can we have the next question please, operator?

Anand Ramachandran, Barclays.

Yes. Hi. Thank you. I had just two questions. Firstly, if I look at the Company as Telkomsel and then ex-Telkomsel, i.e. everything else, the fixed line and other revenues and EBITDA both have declined sequentially or year on year materially. I'm just wondering whether there's any one-off in here or are these structural trends? Or is there something we're missing in this particular regard? So that's question number one.

Question two, in terms of the recent transaction with Tower Bersama, do you have any further clarity on whether this will have any material impact on financials at all at this stage? Thank you.

I think on your first question on the -- if any other -- of restructuring in terms of revenue in [their side] or [of course in our side], no we don't have that one so far. It is still normal condition. No change so far.

Okay. For the tower transaction, I don't think there is material impact to Telkom materially in the consolidation because the contribution of Mitratel revenue is not more than 3%. But I think maybe the story will be changed. When we already (inaudible) majority (inaudible) maybe after the second step [of execution].

Understood. Thank you.

May we have the next question, please? Maybe this is the last one.

Choong Chen Foong, CIMB.

Hi. Thanks for the call. I've got two questions. The first question is on the mobile business. Given that you've done quite a bit of tariff adjustments so far, could you give us some sense as to whether you think there's further room to raise the tariff going forward or are you starting to see some strain in terms of usage among your subscribers?

Secondly, can I confirm whether there's going to be an ERP that's going to be done in the fourth quarter of the year? Thank you.

Okay. On the first one on tariff adjustments, I think the honest answer is it's fairly difficult to predict. At the moment our MOU on voice and our SMS is actually growing still, so it's up 2% year on year in both cases, as well as our prices increasing. So we've been able to balance our price raises quite carefully so as not to destroy volume.

How long that can continue for, I just don't know. Our methodology is pretty sound in that we obviously have a large number of geographic pricing clusters. And we look at the particular circumstances in terms of network competition and customer behavior in a geographic cluster before we make a change. But I would hope we would be able to continue to support voice and SMS for some time, but we will see. We can change price and then await the impact, and so far it's been pretty positive.

In terms of data, I'm convinced that there's generally an opportunity to initially flatten the decline in yield and then increase it. And I think it's important for the industry that we do that. I think in particular on monthly data packages, if you benchmark Indonesia prices against other countries, that's the area where Indonesia tends to be cheaper. So that's the area where we'll look to increase our pricing around this kind of large-volume monthly prices. So I think if we do that, I think we should be able to stabilize the price and hopefully raise it.

Second question regarding the ERP programs, we cancelled our program for this year because we are in the process to review our ERP policy, because based on our experience for the last ERP situation, we see that the target is not effective. So that's why we -- now we improve our database employees based on the performance. So the next ERP program that we plan to be executed next year will target the low-performance employees.

Okay. Thank you very much.

Yes. I think we can still take one more question before we wrap this up. Next question, please.

Utkarsh Mehrotra.

Hi. This is Princy Singh from JPMorgan. I had a question on the CapEx. I know you've given the full-year guidance at 20% to 25%. If you look at the info memo, the absolute number for the first nine months is about IDR22 trillion. That's a run rate of about IDR7 trillion per quarter. So just on an absolute number or absolute CapEx perspective for the fourth quarter, could you share some guidance or would it be safe to run with a IDR7 trillion kind of a run rate and extrapolate that to the fourth quarter as well?

Yes. As we mentioned the previous Q&A, we did some acceleration in the CapEx deployment. But for full year I think that we still keep our guidance for 20% up to 25% of our revenue. [Based] on our data up to the September 2014, [repayment] CapEx is around IDR19 trillion.

Understood. Thanks for the clarification. That's all from me.

(Inaudible) the full-year budget.

Understood. Thank you.

Okay. Thank you, everyone, for participating on 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. Thank you.

That does conclude today's conference. Thank you for your participation. You may all disconnect.