Telkom Indonesia (Persero) Tbk PT (TLK) 2014 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to PT Telkom Indonesia full-year results ended December 31, 2014 conference call. We released our results on March [6], 2015, and the reports are available on our website, www.telkom.co.id.

Today's presentation is available on the webcast, and an audio recording will be provided after the call for the next seven days. There will be an overview from our CEO, and after that, all participants are given the opportunity to participate in the Q&A session.

Before we start, let me remind you that today's call and the responses to questions may contain forward-looking statements within the meaning of safe harbor. Actual results could differ materially from projections, estimations or expectations voiced during today's call. These may involve risk and uncertainty, and may cause actual results to differ substantially from what we discuss in today's call. Telkom Indonesia does not guarantee any actions which may have been taken in [reliance] of the discussion held today.

Ladies and gentlemen, it's my pleasure to introduce you the Telkom's Board of Directors who are joining with us today. Mr. Alex J. Sinaga as President, Director, and Chief Executive Officer; Mr. Heri Sunaryadi as Director of Finance and Chief Financial Officer; Mr. Abdus Somad Arief as Director of IT Network & Solutions and Chief Technology Officer; Mr. Honesti Basyir as Director of Wholesale & International Service; Mr. Dian Rachmawan as Director of Consumer Service; Mr. Indra Utoyo as Director of Innovation & Strategic Portfolio; and Mr. Muhammad Awaluddin as Director of Enterprise Business Services.

Also present are the Board of Directors of Telkomsel. Mr. Ririek Adriansyah as President, Director; Mr. Heri Supriadi as Director of Finance; Mr. Edward Ying Siew Heng Director of Planning & Transformation.

Before our CEO 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 154 million telephony customers, and more than 71 million data users at the end of 2014.

Telkom provides a strong business portfolio of TIMES: Telecommunication, Information, Media and Edutainment, directly or through our subsidiaries. We also deliver Services to multi-customer portfolio: Retail, enterprise, wholesale and international.

As of December 31, the majority of our shareholders was Government of Indonesia with 52.6% ownership, and the remaining 47.4% was under public ownership.

I now hand over the call to our CEO, Mr. Alex J. Sinaga, for his overview. Pak Alex, the time is yours.

Thank you, Andi. Good afternoon, ladies and gentlemen. Welcome you to our conference call for full-year result ended December 31, 2014. We sincerely appreciate your participation in this call.

Until at the end of the year, we continue our outstanding performance, both in term of operational and financial results. I'd like also 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 full-year result.

Number 1. Telkom consolidated revenue grew 8.1% year on year, with EBITDA [and net] income grew by 7% --

9.7%.

9.7% and 3% year on year respectively, while our cellular subsidiary, Telkomsel, recorded triple double-digit growth, with revenue grew by 10.4%, EBITDA by 10.0%, and net income by 11.9% year on year.

Number 2. Data Internet and IT service, exclude SMS, recorded the highest revenue growth, with 24% increase from the last year. Their contribution to total Group revenue subsequently increased to 26.9% in 2014 from previously 23.5%.

Number 3. Mobile data users grew by 12.1% to IDR67.9 million, and 3G capable device sharply grew by 70.8%, to IDR40.4 million.

And also, number 4, in December 2014, Telkomsel launched 4G LTE service to become the first mobile operator which commercially market 4G LTE in Indonesia.

Ladies and gentlemen, our strong result in 2014 was in line with solid performance from our cellular business. Despite relatively high SIM card penetration, Telkomsel gained 9.1 million net additional customers during 2014; growth to total customer base to IDR140.6 million.

Mobile data users increased by 12.1% to 67.9 million, or around 48.3% of total subscribers. Mobile data payload significantly increased 142.9% to 234.5 terabytes, mainly supported by fast-growing 3G capable device adoption which grew by 70.8% to 40.4 million users.

To anticipate the high demand for data business, Telkomsel continue expanding its network infrastructure by adding 15,500 new BTSs during 2014, with around 75% 3G BTSs, including 200 4G BTSs.

In the meantime, our fixed-line subscribers increased from [7.4 million] and 9.4 million to 9.7 million, while fixed-broadband users increased by 12.9% year on year to 3.4 million.

Ladies and gentlemen, our excellent operational achievement has resulted in strong financial performance [with] consolidated revenue grew by 8.1% year on year, mainly supported by our cellular subsidiary with around 60% contribution.

We successfully maintained healthy level of profitability with EBITDA margin of 51.1%, improved from 50.4% last year; while net income margin was recorded at 16.3%, slightly lower than our previous year, which is 17.1%, partly attributable to one-off income from TelkomVision divestment in 2015.

On the expenses side, we successfully managed our total operating expenses during the year, which has increased by 6.5% to IDR43.9 trillion. Operational and maintenance grew by 15.3% in line with the acceleration of network deployment, both in our cellular and fixed-line business, in particular to support digital business.

However, we are disciplined to manage the other expenses, including personal, general and administrative and marketing expenses, which grew by minus 1.2%, minus 4.6% and 1.6% respectively. In the meantime, depreciation and amortization increased by 8.6% to IDR17.1 trillion in line with additional asset as a result of accelerated network deployment.

Ladies and gentlemen, our cellular subsidiary, Telkomsel, so strong result in the full year of 2014, as revenue, EBITDA and income grew by 10.4%, 10% and 11.9% year on year respectively, with triple double-digit growth for three consecutive years.

The excellent result was driven by strong growth in digital business, which increased by 33.9% year on year. Digital business consists of mobile broadband which grew by 34.2% year on year, and digital service which grew by 31.5% year on year.

As a result, digital business' contribution to total revenue significantly increased to [24%] from [19%] last year. At the same time, Telkomsel was able to exploit its legacy business growth by 6.6% year on year, with voice grew by 7.8% year on year, and SMS grew by 3.5% year on year as a result of advanced pricing strategy as relatively stable competition environment.

In terms of subsidiaries, Telkomsel still recorded growth in subscriber base of 6.9% to 144.6 million (sic - see press release, "140.6 million"), and thanks to effective sales and marketing programs.

During 2014, we successfully strengthened our leadership position as our estimated market share in terms of subscribers and revenue among the big three operators increased. Telkomsel's subscriber market share increased from [52%] to [55%], while our revenue share increased from [60%] to around [61%].

In 2014, we continued our focus on growing digital business by building our infrastructure [readiness] in terms of coverage, capacity and capability to be leading supply to anticipate high data traffic growth. By the end of 2014, BTS on-air totaled to 85,420 units, grew by 22.3% year on year, of which 45% are 3G BTSs revealing our network superiority.

Data traffic jumped 143% to 235 terabytes, mainly fueled by fast-growing smartphone or 3G capable device, which increased by 71% year on year to 40.4 million users. Total data uses were recorded as 67.9 million, or grew by 12.1% year on year.

We always adopt the latest technology to maintain our leadership, so in December 2014, Telkomsel was the first operator which commercially launched 4G LTE in Indonesia to further enhance our customer base experience.

In 2015, we will strengthen our mobile business to maintain its leadership position in the industry by continuing infrastructure development, encourage smartphone adoption, and retain our high-value customers. We will also pay more attention to youth segment, since it is the segment that is closely related to digital lifestyle. Moreover, we will trigger new business opportunities, such as machine to machine and also data analytics.

We have decided to discontinue our fixed wireless business, which we call it Flexi, and migrate its subscribers to our cellular subsidiary, Telkomsel. We expect we could complete the migration process no longer than December 2015. We believe this will bring more advantage to our cellular business, as the government has decided to reallocate frequency in 800 megahertz, which was previously used by Flexi to be utilized by Telkomsel.

Ladies and gentlemen, let me now share the progress of Indonesia digital network for the full year 2014.

On the ID-Access, until the end of December 2014, we already have 13.2 million homes passed that are ready to be connected in the near future. We also have installed more than 170,000 Wi-Fi access points, partly to help offload mobile traffic in an effort to reduce capital expenditure for our cellular business.

On the transport side, ID-Ring, we completed 76,700 kilometers of nationwide fiber-based backbone network; surpassed our target of 75,000 kilometers until the end of 2015. While, for the ID-Convergence, we have developed 54,800 square meters of data center to meet the needs of rising demand for cloud services.

In 2015, we will devote our resources to turn around our fixed-line business. With a lot of efforts put in our newly-launched IndiHome triple play, we expect to see aggressive additional customers by the end of 2015. IndiHome itself is our flagship fiber-based bundling product; consists of fixed-voice, Internet and IPTV services.

Ladies and gentlemen, we are also building activities and seeking business opportunities through international expansion initiatives. Through our subsidiary Telkom Indonesia International, we strengthen footprint in the region by business establishment in a number of countries such as Singapore, Hong Kong, Malaysia, Australia, Timor Leste, and other five countries.

We will strength and expand our businesses in those countries. We are also committed to have more international business exposure to broaden our market, diversify our business, and improve the competency of our human capital so that we are ready for ASEAN economic community in 2015.

To position Indonesia as the next TIME's regional hub, we are in progress of developing Indonesia Global Gateway -- we call it IGG project -- connecting Indonesia to West Europe through South East Asia, Middle East, West Europe 5 submarine cable system; and from Indonesia to United States of America with South East Asia, United States submarine cable system.

South East Asia, Middle East, West Europe 5 is being developed by a consortium of 16 telco operators, connecting 17 countries in South East Asia, Middle East and West Europe; while South East Asia, United States is being developed by a consortium of seven operators connecting East of Indonesia, Philippines, Guam, to West Coast of the United States.

We expect the South East Asia, Middle East, West Europe 5 cable will be ready for service by fourth quarter of 2016; while for the South East Asia, United States, and the gateway connecting to the two, will be completed by end of first quarter of 2017.

Ladies and gentlemen, let me now share guidance for 2015 as a wrap up.

For 2015, our programs will be based on the aspiration to be the king of digital. The three main programs for 2015 are slightly adjusted. First is maintaining Telkomsel double-digit growth; second is IDN 2015, with emphasizing on driving digital business; and third is strengthening and expanding international business of our current international footprint and seeking opportunity in new footprint.

In line with this aspiration, we expect both Telkomsel and Telkom revenue to grow in line with market, or slightly better than market, by continuing effort to increase the portion of digital business revenue to be close to 40% of the total revenue.

We estimate that the industry will grow by around 7% in 2015. The growth will be on the back of strengthen mobile business and rejuvenate fixed-line business.

For EBITDA margin, we expect to slightly decline, both for Telkom and Telkomsel, in line with continued investment in broadband, both for mobile and fixed-line businesses. Consolidated capital expenditure spending for 2015 is expected at around 22% to 25% of revenue, with 60% to 65% of the CapEx will be allocated for mobile-related business, around 20% to 25% for fixed broadband-related business, and the remaining will be for other business portfolio.

Finally, to support the king of digital aspiration, our inorganic and acquisition and alliance initiatives have to enhance and increase digital business portion of Telkom Group with guidelines of [80/20 rules], where 80% is representing digital or new wave portion of inorganic programs.

That's the ending my remarks. Thank you, ladies and gentlemen, and back to Andi.

Thank you, Pak Alex. We will now begin the Q&A session. When raising your questions, please speak clearly and state your name and your company.

Operator, may we have the first question, please?

Sachin [Gupta], Nomura.

I have three questions. Firstly, can I just clarify on slide 20 on the guidance? You have said the mobile business, you expect that to grow in double digit; but on the revenues, you're targeting just above market, which is 7%. So the double-digit growth, is that for earnings, or --? Sorry if I missed that one. I'm just not clear.

Secondly, just your thoughts on the competition for this year, especially in the current quarter, and what to expect in the next quarter as well, [given] some of the changes we are hearing from Indosat and the likes of Bolt and potentially [smartphone].

That's the second question.

And thirdly, is any indication on the dividends for the last year? What's the policy? What's the government thinking on that?

That would be appreciated. Thank you.

Hi, Sachin. I'm Heri speaking here. I think the guidance that already provided by our CEO is on the revenue side, because in the EBITDA margin, as he already mentioned that the EBITDA margin will slightly decline as we continue to grow our data business which provides a lower margin compared to our legacy. That's I think the clarification to your question.

The market is quite mixed, but we understand some say it was around 7%, but some in there contentious, but what we see already around 9%. So if we're slightly above the market. We can hit the double digit.

Sachin, this is Edward. I'm standing in for A.J. I think the market competition today, if I see the noise level, is about rolling out 4G in the coming months. I saw over the weekend that [boat sales] (inaudible). So I think the competition in a sense of what they focus on is actually on data customers and they are rolling out their network on carrying data customers.

And in terms of price competition, I think it's as [scratchy] as before. I notice my competition, day plan, night plan, afternoon plan for data, so this continue to grow.

Obviously, in Telkomsel, we are also looking how to manage the business. We're looking how to improve our data customers' activation, as well as engagement with us. So far, as I say, the result has been positive; has continued to be good. So that's all I can share with you for now.

Regarding dividend, this is Heri speaking here. Last year, our dividend payout ratio was 70%, [of which] of 55% annual dividend, and 15% special dividend.

This year, internally, we still plan to distribute dividend similar to last year. But however, dividend policy is at government discretion, and we already [suit] government has [however] decided to reduce payout ratio. So basically, our internal plan still under 70%. That is up to our shareholders.

If the government reduces it, the rest will be a special still?

Excuse me?

If the government mandates a lower level, are you saying you will still match it, the balance, with your special dividend to keep it at 70% for the year?

Based on our informal discussion, actually, they set up around 50%, actually, but due to our recent conditions, due to the government conditions now to pay a certain amount to the [budget], I think still enough room to increase [until] 70%. Yes? But this really depends on the government.

Okay. Thank you.

Colin McCallum, Credit Suisse.

Congratulations on the results. Two questions from me. In the fourth quarter, I think there was a maybe a write-down on Flexi. Could you actually give us the magnitude of the write-down on Flexi in the quarter? And also, just which line item did that come into? Did it come into the depreciation line? If you can just clarify.

That's my first question.

Second question is: Thanks for sharing the CapEx by division. For the CapEx that you'll spend on fixed line, what are your targets for rollout of fixed line broadband? Where do you expect to be in terms of homes passed and customers by the end of 2015?

And if you can also share what technology those customers could expect to be receiving by the end of 2015. Are they going to be fiber to the home customers? Are they going to be fiber to the node? Are they going to be ADSL? The internal targets for that would be helpful.

Thank you.

Okay. Related to the Flexi impairment, in full year 2014, the amount is IDR805 billion, most of which was recognized in fourth quarter. So IDR805 billion.

Thanks. And that just came out of -- was that just in the depreciation charge?

Yes. Depreciation; [actual] depreciations.

Got it. Thank you.

For CapEx [for] fixed-line broadband, this year, we focus on monetizing the homes passed. So we -- mostly, the CapEx is to connect the houses with FTTH. So mostly for fiber base fixed, but then connection.

Got it. And what would be the target for rollout? How many customers do you hope to have by the end of this year on fixed broadband?

Okay. Let me try to answer. In fact, we already done -- built up 13.2 million homes passed. So this year, by 2015, we are monetizing the homes passed to be homes connected. We are aiming to [sell], to [up this rate] to bring 3 million homes passed -- homes connected, sorry -- to 3 million subscriber by the end of 2015. And we focus on the selling, bundling triple play, which consists of the voice, IPTV and Internet, high speed.

Thank you.

Got it. But isn't your broadband subscriber base already more than 3 million, so does that target make sense? Or you're talking about just internal upgrades to fiber for 3 million?

Yes. We noticed that. In fact, around 3 million is consists of half portion of migration from one play or two play to be triple play, and half portion being as new sales of triple play.

Got it. And your previous subscriber base that was speedy and is now IndiHome, you expect that to decline in size is it?

Yes. Correct.

Got it. Thank you.

Luis Hilado, HSBC Singapore.

I had two questions. On the fourth quarter results, we saw that your SMS effective pricing was quite strong, and a very healthy recovery and growth. Just wondering if you could give us some highlights of what drove that and whether you can apply any of that into your wireless data pricing, which still seems to be under pressure in the fourth quarter.

And the second question is regarding international expansion. Will this include investments in overseas operations? And if so, is there a maximum budget for 2015 and 2016 that you're looking at for international expansion?

So I'll take the first question. This is Edward, Luis. If you look at overall result in 2014, actually, our MOU for voice, as well as SMS, has come down. But our revenue overall still goes up about 7% for voice and about 3.5% for SMS.

So actually, we, [lack of a better word], do the right pricing to ensure that we continue to, lack of a better word, seize the opportunity and get as much revenue as we can from the network.

So in December, usually, we look at our revenue. There's a big period where we actually look at some of the free SMS. We actually do not [implement] too many of those promotion campaign on SMS. And that is the reason why you see we raise our prices. So that's how we actually got more revenue in SMS in the last Q.

So coming back to about data that you mentioned, I think it's a different ball game between SMS and data. Data is -- SMS and legacy business we classify. Data is a new business. Data is a new business where we now engage customers, help them and guide them and actually push them how to use data for those who don't know.

For those already that use -- you can see 65 million are basically using data in one way or another. So we're engaging that in a different way and educating, and getting them to get excited to use and search the net and so forth.

So we slowly but surely will get the revenue back up. As you can see now, it's coming down. I know you noticed that. In fact, the usage, like what our CEO has say, has gone [up 24%, instead] of internal usage, but revenue [gone up 24%].

So this is an area that the management or the Board of Directors are looking at how to monetize. Hopefully, you'll see some result before the end of the year.

I hope I answer your question.

Yes. Great. Thank you.

Okay. So regarding the guideline for the international expansion, yes, so as we already signed the previous year, it's actually [temporary] strategy. So currently, we already [have an intent] countries.

In 2015, as already been stated by our CEO, the direction is stretching and extending internationally. We're expanding international business. In our current footprint, that was all searching for other opportunity at the market.

So we would like to from our current, [present], we would like to stretch the business in the current footprint, and also expand the portfolio in the existing footprint.

So we'll also keep managing the risk by applying the principles of lean investment, and also gradual investment and commitment of the resources; and also leveraging the synergy and focus on business portfolio that we believe will become the next big thing in our TIME's business.

So naturally, extending our strategy in our current business. Therefore, we have decided to -- that for inex, our focus is not on one business portfolio but it extends into [five] (corrected by company after the call) portfolios, like cable systems and satellite business; businesses that extend our international value chain, such as CDN, IPX, virtual PoPs.

And also, in the alliance in mobile business MVNO or other form of alliances.

And then the third is IT services starting with BPO and IT operations, and [for] it's a digital company or digital businesses and the fifth enterprise solution, starting with the data centers [for computing] (inaudible).

Spend for CapEx, so our --

We tried to (inaudible) to manage the risk, especially during the expansion. But talking about the CapEx, up to February 2015, we already spent almost $100 million mostly to finance our (inaudible) US and similar pipeline.

Thank you.

Thank you. One clarification for the international expansion of [Le Tap]. Is it part investment or part of CapEx budget, or it's separate line?

It is including CapEx in our total CapEx mentioned by Pak Alex as a guidance.

Okay. Great. Thank you, Pak.

Roshan Raj, Merrill Lynch Singapore.

Two questions from me, first one on your revenue guidance for 2015. Could you share some color as to where you see potential to do better than the market in terms of [cloud]. Will it come from better pricing, be that from voice SMS or data? Or you see opportunity to gain subscriber or SIM market share?

The second question is on the update on the tower deal with Tower Bersama. What sort of timeline are you looking at? And has there been any thinking on follow-on tower divestment options?

And the third bit is on the government's plan to roll out fiber in Indonesia. What is your assessment of the kind of role that PT Telkom might be asked to play in this mandate?

Thank you.

Hi, Roshan. I [feel] a good potential that we can achieve from the (inaudible). From the (inaudible), we expect we only grow the subscriber only about 4 million this year. Most of the growth coming from the data, from the existing -- our high-value subscribers, so we grow the data from them.

We expect also from the increase of the number of 3G capable device which is in the last year grown by around [57%], it will give us a lot of chance to monetizing the potential on that side.

Meanwhile, for the legacy, we still see that there's some opportunity we can really play in which our network is (inaudible). And also, I think we have quite less competition on that area, and also we have the right season. We can do some monetizing by timing and readiness of market and network. We still can also grow the fixed from the legacy side.

So based on that one, we believe that despite the fact that I think people support us, the growth is quite less. But from digital, data and also machine to machine, we still have opportunity to grow our ARPU overall. I think our potential revenue growth revenue from digital side.

Pak Alex?

And also, from the fixed line, I had already mentioned about the source of the growth in mobile side. For 2015, as I mentioned before, we revitalize the fixed line as (inaudible) mentioned. Now we have more than 3 million Speedy subscribers, and then we roll out the fiber to the home, and some of the Speedy subscribers, we plan to be around 50%, will migrate to triple play and another 1.5 million will be new subscribers.

You've seen the triple play bundling. Of course, the ARPU will be higher, so we can keep then the subscriber sustained. At the same time also, we can get the additional ARPU. So the total from the mobile business, including the revitalized, the fixed line, especially in the Speedy side, to be a triple play. I think it's a very big momentum for us in 2015 to maintaining our growth higher slightly compared to the market growth.

And number 3; back to number 2 later on by Pak [Asa]. Our rollout fiber to -- we call it like this. We now already keep sustainability of the business in digital through the air; we call it through Telkomsel. Now 2015, we plan to build our strong position in a line, through the fixed line using the fiber, and also to be strongest in this country in terms of submarine cable from the west to the east.

The direct contribution for us at the moment is to reduce the cost, especially for the eastern part, while at the moment using the satellite require high cost. And then the rollout the fiber and we migrate that from the satellite to the fiber will be saving the cost.

But for the future, digitalize all the country, I think we invest it now. So the growth I think is not only for this year but I think for the next few years will be very big opportunity for us to [strongest] our digital business from the west side to the east side, [mean] across the country.

And another question, I think it's the tower. We still keep the schedule; now still in progress with partner that we choose already, and we still have time up to the end of June this year. And at the last update for you, I think, the partner just finished the extraordinary [AGMS].

After that, I think we will provide the related procedures in Telkom side and also getting the approval for the commissioning. And hopefully, we can finish that at the end of June 2015.

Thank you, Pak. Just on the fiber question, my question was more to understand whether your targets are a part of the government's mandate to roll out fiber in Indonesia, or this is a standalone target which you have set for your Company.

Yes. Actually, there's more to our Company, but it is in line with the country target of costs; good for us. But the [3 million] is our own target, and we are -- since we are more aggressive this year so we also widened our focus last year. We focus on FTTM, fiber to the mobile, but now we are also expanding to fiber to the home; means cluster of houses, and fiber to the company means our [go-to] customers.

Thank you so much, Pak.

Hussaini Saifee, Citigroup.

I just have two questions. What is -- in fourth quarter, your (inaudible) have jumped quite a bit. I just want to know what grow that.

And the second question is: What proportion of FY15 CapEx will be on 4G services? And the next discussion is how many of Telkom cell subscribers are on LTE-enabled handsets?

And the final question is on -- in the fourth quarter fixed line [growth rate] is strong; y-o-y and quarter-on-quarter report. What grow that?

Thanks a lot.

Hi, Jose. (inaudible) speaking here.

On the LTE, [it require] around 3 million of our (inaudible). You're seeing the LTE devices right now. Up to now, we have around 150,000 customers that already use LTE. Looking forward, this year, we're going to deploy around [70-piece] LTE network. That's what LTE [survives].

This is Heri from Telkom. Regarding the dividend, I think I already mentioned in the first session that internally, our plan is still 70% with just 55% annual dividend and 15% is the special dividend.

But as you know that a dividend policy is government discretions, so we have to discuss also with the government actually, and then after that, we will know what kind of dividend that the shareholders want from us. But internally, it's 70%. But still we have to wait until what the shareholders' decisions.

Thank you.

Jimmy Chen, Sanford Bernstein.

I've got four questions. Number 1, going back to CapEx, given if the government want to cut subsidies, I think that plan is to have the companies reinvest into the businesses. So I'm wondering -- and also from (inaudible), their mandate for fixed broadband rollout is -- can be above or beyond what your current plan is. So can you talk through what the CapEx guidance would look like if the government actually want the company to reduce dividend this year? Would it be above that 22% to 25% target and how much above?

My second question is on personnel cost. We saw it declining last year despite the employee numbers in (inaudible). Just wanted to understand why there.

My third question is on Flexi. How much of that asset is still on books, and do you expect that to be all written off in 2015?

And lastly, just on your mobile investment plan, can you guide us on, 1, how much of the BTS, the 500 -- the [85,000], sorry, BTS is from 3G and 4G? And in 2015 how much of each do you plan to build?

Thank you.

Heri of Telkomsel speaking here. Total CapEx that we allocate for the mobile this year will be IDR12.9 trillion. It is around 75% will go to the 3G, and the remaining will go to the [2G], and some of -- 4G. That's I think about the total CapEx we are going to spend.

And how many BTS that we going to have this year, we expect we will have until the end of the year the [100,000] of BTS and [not be] including the LTE.

This is Heri from Telkom. Regarding the Flexi impairment, in 2015, there is no Flexi impairment any more. So we expect Flexi subscribers will be fully migrated before yearend, so Telkomsel can utilize their 800 megahertz spectrum.

Until December 31, 2014, around [550,000, up 4.4 million] subscriber were already migrated to Telkomsel under prepaid scheme as known as capital Kartu As Flexi. That has a similar tariff.

So for the guiding CapEx, we are still [propose 70%] (corrected by company after the call) for 2015, if the government decides not 70%, let's say 50%, we still --our guidance is 60% to 65% for mobile related business, 20% to 25% to fixed broadband related, and the balance is for other business.

Thank you.

Sorry. On the CapEx question, just to clarify, are you saying even if the government reduces the dividend payout from 70% to 50%, your total CapEx intensity wouldn't increase; it will still remain -- your guidance would still remain at 22% to 25% of your revenue?

(multiple speakers).

And in fact, I think [payout] related to the dividend, I think the financing that we have to find, if the dividend payout reduce compared to last year, I think we will have more strong internal financing. But if the dividend payout is similar to last year, of course, we will find another financing scheme, a normal procedure that we have done in the last few years.

Right. Okay.

Lucky Ariesandi, Danareksa.

I have three questions. The first one is related to your long-term investments in Tiphone Mobile. First, I notice that you recognize a net loss from associated companies of about IDR3 billion in 2014, and I noticed that Tiphone actually book about IDR240 billion profit in nine months of 2014. I wonder maybe you can give more color on that. I find it hard to believe that the Company booked a significant net loss in fourth quarter.

And the second thing is about the plan, the divestment of Mitratel. I wonder what's the consideration behind you not putting Mitratel under the long-term investments because it's up for sale.

And I also want to know, actually, in Tower Bersama's disclosure about a month ago, I notice that Tower Bersama said that if they consolidate Mitratel into its full-year 2014 profit, the profit will increase by about [IDR120 billion], and I notice that Mitratel actually had a higher net profit in 2013. Perhaps you can elaborate more on that.

And maybe that's all my questions for now. Thank you. Bye.

So regarding our investment at TELE, Tiphone, the objective is to have at least three things: To have our capital gain from a full year from the operation of also synergies then that we expect from this investment through Teli.

And from what we [record] at the -- from the result 2014, Teli booked the net income -- I forgot. I think around [IDR200 million something. But since the closing of the deal, it's maybe only for four months, last of the four months of the last year. So we booked the dividend around IDR30 billion; I think around that number.

We also recorded the synergy that we can create with investment. It is also to support Telkomsel to penetrate for smartphone, and also to help us in the migrating the -- in the migration of flagship program. So we record some numbers. I forget. Maybe we can send you maybe offline the synergy value that we can create through this acquisition.

And also, from the capital gain, I think the share when we do the deal is around [IDR790 million something), but at the end of last year, it's around [IDR900 million something]. So we gain from the capital. That's what we can record from the Teli investment.

Okay. Yes. The rationale of this long-term Mitratel action, I think it's based on the tower regulation that imposed by government that it's required for operator to share in terms of tower; so if we reduced the number of towers. And we also have to see the nature of tower business is actually -- the customer is (inaudible), and the value of this business --

I think it's based on two things; that the (inaudible) customer is operators [so the surface], it will be seen as the independent providers.

So currently, as we can see from the profile of Mitratel, most of the customers are coming from our own, I mean from Telkomsel. So Mitratel at this point is still not independent yet, and the (inaudible) ratio is still 1.1, while the other best performers are around 1.7 or 1.9.

So we would like to match to what actually industry would like to see. The industry is independent also increasing the tenancy ratio. I think that's the rationale behind the [divestment].

Can I have a follow-up question on that? My question about the Mitratel is: Can you perhaps give more details on Mitratel's numbers for FY14? Basically, you guide for revenue growth of similar to the industry of about 7%, but I notice that you will lose a portion of your revenue from the divestment of Mitratel. I wonder if your guidance is including Mitratel or excluding Mitratel.

And the second thing about my question is, yes, the details on the FY14 number, because from (inaudible) disclosure, the net profit for Mitratel is only about IDR120 billion for FY14, which I find a bit low actually. Maybe you can give more details on that.

Thank you, Pak.

Yes. I think we can send you directly the more detailed numbers on Mitratel.

Right. Thanks.

There are no further questions at this time. Andi, please continue.

So one more question? Already done. Okay. Thank you, everyone, for participating in today's call. We apologize for those whose questions could not be addressed yet.

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That does conclude our conference for today. Thank you, all, for participating. You may all disconnect.