Telkom Indonesia (Persero) Tbk PT (TLK) 2015 Q3 法說會逐字稿

Thank you for standing by and welcome to the Telkom's nine months of 2015 results conference call. (Operator Instructions) There will be a presentation followed by a question-and-answer session. (Operator Instructions) I must advise you that this conference is being recorded today, the 10th of November 2015. I would now like to hand the conference over to your first speaker today, Mr. Andi Setiawan, Vice President of Investor Relations. Please go ahead, Mr. Andi.

Thank you. Ladies and gentlemen, welcome to PT Telkom Indonesia conference call for the nine months ended September 30, 2015. We have released our results on 28th October 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. This may involve risks and uncertainty and may cause actual results to differ substantially from what we discuss in today's call. Telkom Indonesia does not guarantee to any actions which may have been taken in reliance of the discussion held today.

Ladies and gentlemen, it's my pleasure to introduce you the Telkom's Board of Directors 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. Honesti Basyir, as Director of Wholesale and International Services; Mr. Dian Rachmawan as Director of Consumer Services; Mr. Indra Utoyo as Director of Innovation and Strategic Portfolio; Mr. Muhammad Awaluddin as Director of Enterprise Business Services.

Also present are the Board of Directors of Telkomsel; Mr. Ririek Adriansyah as President Director; and Mr. Heri Supriadi as Director of Finance.

Before Alex 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. Telkom provides a strong business portfolio of TIMES, telecommunication, information, media, and edutainment, directly or through its subsidiaries. We also deliver Services to multi-customer portfolio in retail, enterprise, wholesale and international.

As of September 30, the majority shareholders of Telkom was the 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. Alex, the time is yours.

Thank you Andi. Good morning -- excuse me, good afternoon, ladies and gentlemen. Welcome to our conference call for nine-months 2015 result ending September 30, 2015. We sincerely appreciate your participation in this call. I would like also to update you on the progress of our cellular and fixed line businesses development, as well as other business portfolio.

Ladies and gentlemen, we are very proud that in the current market economic situation we continue or even improve our excellent performance, both in term of financial and operational result.

Telkom consolidated revenue grew by 15% year on year to IDR75.7 trillion with contribution from cellular business of around 70%. EBITDA and income margins remained strong at 49% and 15.3% respectively.

In term of operational aspect, Telkom shall continue its expansion in network infrastructure with almost 15,000 new BTSs installed during nine months of 2015 in an effort to maintain leading network supply to strengthen customer experience.

Telkom shall gain almost 8 million net additional customers during the period, brought total customers base to 148.6 million as of September 2015. Mobile data payload jumped significantly to 341.7 petabytes or increased 119% year on year, mainly supported by fast-growing 3G and 4G-capable device adoption which grew by 57% to 55.6 million users. It represented around 37% of our customer base.

In the next -- in the fixed line business, total fixed line broadband users increased 13% year on year to 3.7 million customers supported by our newly launched IndiHome Triple Play, while our fixed line phone subscribers increased to 10 million from 9.6 million last year.

Ladies and gentlemen, our data, Internet, and IT services segment became the growth driver with 34.7% year on year to IDR23.5 trillion mainly contributed by our mobile digital businesses which jumped 41.6% year on year. At the same time, we successfully exploited legacy business with mobile voice grew 9.5% year on year, and SMS increased 8.1% year on year.

Nevertheless, our business expansion has some impact to our operating expenses which increased by 17.9% year on year to IDR51.7 trillion. Operation and maintenance expenses grew by 27% year over year in line with the acceleration of network deployment, both in our cellular and fixed line businesses in particularly to grow digital business.

Personnel expenses grew by 24.5% which was mainly due to early retirement program for Telkom Group employees, as well as incentive aligned with Company's strong performance. General and administration expenses increased 37.1% as we set aside allowance for doubtful account as well as higher collection fees in line with popularity of more than channel -- excuse me, more than sales channels.

In the meantime, depreciation and amortization increased by 12.2% to IDR8.8 trillion in line with continued network infrastructure development and partly due to impairment of Flexi asset.

Ladies and gentlemen, Telkom shall continue its remarkable results for nine month of 2015. We successfully maintained triple double-digit growth for revenue, EBITDA, and net income which grew by 14.9%, 16.5% and 19.5% year on year respectively. Revenue increased to IDR55.6 trillion which was driven by a strong growth in digital business revenue that grew by 41.6% year on year with revenue from mobile data grew by 41.9% year on year while digital services revenue increased by 39% year on year.

Digital businesses revenue contribution to total revenue of Telkomsel reached 28.3%, significantly increased from 23% last year. At the same time, Telkomsel successfully continued to exploit legacy business which increased 7% year on year despite popularity of instant messaging applications. The achievement is attributable to the successful execution of smart micro cluster-based pricing and market segmentation.

EBITDA and net income margin remained superior at 56.1% and 29.7% respectively. During the nine months of 2015, we deployed 14,962 new BTSs of which 88.4% were 3G and 3G BTSs which reflects our capital expenditure strategy to focus on and grow digital business. As a result, data traffic sharply increased by 119% to 341.8 petabyte mainly fueled by high growth in 3G and 4G handset users that reached 55.6 million or grew 57.3% year on year and represent around 37% of our customer base.

As of September 2015, total BTS on-air exceeds 100,000 units, an 20.4% increase year on year of which 52% were 3G and 4G BTSs. We continue to increase our footprints in 4G LTE service and now is available in eight cities, Jakarta, Bali, Bandung, Surabaya, Medan, Makassar, Lombok as well as Manado that was launched in October 2015. As the spectrum refarming in 1,800 megahertz will be completed in November, we expect to rollout 4G LTE service in more cities in the near future.

Ladies and gentlemen, IndiHome Triple Play, our flagship product in fixed line businesses, showed an encouraging progress with 678,000 subscriber only nine months after the product was launched in early this year. We believe that demand for IndiHome is huge given the fact that Indonesia has more than 60 million household with growing middle-class segment and very low fixed broadband penetration of only around 6%.

However, we have to be frank that we face some challenges in the field to absorb the strong demand. We are now working very hard to strengthen our capacity and capability in terms of human resources, especially technician, as well as business process to accelerate the deployment of last mile fiber network to the premises of the customer. Hence we are confident to achieve at least 1 million IndiHome subscribers by end of this year and we expect further acceleration in the coming years.

Ladies and gentlemen, we continue the development of fiber backbone to provide high-quality broadband infrastructure nationwide. Last month, we officially connected Merauke in Papua through submarine broadband highway, we call it SMPCS, that drastically elevate connectivity in eastern part of Indonesia.

Now let me share with you about Mitratel deal. The plan to swap Mitratel's share with Tower Bersama has been canceled off since the terms and condition of share exchange agreement could not be fulfilled. We are now evaluating a number of option to unlock value of our tower asset. We believe that we can come up with a scheme that will bring the best value for the Company as well as for the shareholders.

Ladies and gentlemen, in term of guidance, if we look at our nine-months result, we are optimistic that our revenue will grow better than market rate in full-year 2015 by continuing effort to grow digital businesses. EBITDA and net income margin will slightly decline in line with continued broadband infrastructure development both in mobile and fixed line businesses.

That conclude my remarks. Thank you.

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

(Operator Instructions) Luis Hilado, HSBC.

Congratulations on the results. I had few questions, the first two on the results. The first one is regarding the G&A expenses. As you mentioned, it's up quite substantially in the quarter and both year on year and it seems to be up the parent Company side, PT Telkom side rather than Telkomsel. I just wonder if you can give us some guidance on what that will look like going forward and what caused it?

Second question is SMS pricing up quite substantially both for Q on Q and year on year. Did you increase effective pricing across the country or just specific areas?

And the third question is regarding Project Loon. Could you give us some insights on, for example, what the shareholding is between yourself and Indosat and XL, and anything you can highlight from Project Loon?

So regarding your first questions, general expenses increased substantially compared to last year, the increase mainly due to the significant increase of provisions for impairment of receivable around IDR945 billion in nine months.

So after we look in -- we look at detail, I think in the Q4 no more allowance and then the rest are now more manageable. If we look at our accounts receivable, more than 12 months it's around IDR500 billions, so more manageable now.

Yes. The IDR945 billion is for -- both paid for fixed line or broadband?

No, no, this is account receivable of part of the -- our operations side across businesses in the Telkom Group. We are talking at Telkom Group performance now.

Okay.

Okay. So the next questions regarding SMS price I think Pak Heri Supriadi can help us.

Heri speaking here. About SMS price actually we -- first we know that SMS all maybe quite mature, a lot of this application here and also elasticity of the product already I think almost no elasticity. Our purpose of adjusting the price is to try to get the value from this business. So far despite that, I think there was a big drop by 14%. We are able to increase revenue by 5.2% because we increased the price. We apply this pricing national-wise on the SMS.

Okay. Thank you Pak.

Okay. And let me answer the other question on the Project Loon. We -- the three of us or the two of us was signing the -- as kind of a MOU or trial agreement -- technical part given, there is no commercial in it yet. So -- and we do position Project Loon as the extension of our network. The intention is to -- in the long run to use the Loon to reach the very remote area where it's very hard to reach with the current network. That's especially what we see on the Loon.

Okay. Thank you, Pak.

Next question please.

Anand Ramachandran, Barclays.

Congratulations for the good numbers. I had two questions. Firstly to follow up on the cost, I wanted to specifically check if there were any specific one-offs in the third quarter with regard to fixed asset amount impairments or anything else, and if not, we specifically saw cost increasing at a higher pace than revenues in this quarter. Is this something that you'd expect to continue or moderate going ahead for the Group?

My second question would be to request an update on where we stand on interconnect, what do you expect the scope of changes to be, and could you again remind us of specific impacts you expect at the Telkomsel level and at the Group level for 2016? Thank you.

I'm Heri. Regarding our cost gains, in the third quarter there is allowance around IDR945 billion. And then as you are talking about Indonesia, still what's going on with this -- our cost, I think IDR940 billion is allowance that we have to do it this year. And now in our books, the accounts receivable more than one year is around IDR500 billion. So I think it's manageable.

And if I could just follow up, fixed asset impairments, there was nothing more taken in the third quarter, I mean if you're assuming the first quarter's [exit].

As far as for the Flexi, right, impairment Flexi, right?

Yes.

Asset. There is no more impairment for Flexi asset. So we did it on the first half, and after that no more impairment of asset regarding Flexi.

Thank you.

Regarding tariff, Pak Honesti can agree, interconnect regulation.

On the interconnection tariff, this year actually we don't expect any change until December. Right now, government still reviewing the current scheme. We know that expectation from government want to I think expand the surface to the outside of Java, but considering that cost is quite high in -- outside Java, they try to review any possibility to implement asymmetric scheme.

Right now, I think government still considers some option on this one, but doing asymmetric which is among and between operator, will determine how much the cost will be applicable. The bit I think radical approach may be there's no change on the current scheme considering the cost outside of Java a lot higher compared to in the Java. So the possibility is quite big, also there's no change.

Overall what we see from this interconnection risk for us, actually interconnection attribute about 7% of the total revenue or in the net result is about 1% of the revenue. And with considering that most of the growth will come from the data in the legacy in enriched voice and SMS interconnection, not the kind of that will going to be a big impact in the future for us.

Okay. Understood. Thank you.

Next question please.

Colin McCallum, Credit Suisse.

Just a couple of questions from me. On IndiHome, could you share with us the ARPU level for the fiber customers, and also could you give us the ARPU level for the previous kind of ADSL customers before they were upgraded to fiber, so just we can see that the level of uplift that you're getting in revenue per user when someone shifts from ADSL onto the fiber, that would be very helpful.

Secondly, is it possible for you to give us the approximate penetration rate for homes past that you've ruled out, how many of those or what proportion of those homes as of the end of September had taken the fiber product, so just to see how well you're utilizing what you've been building on the fiber network? Thank you.

I'm Dian speaking. Let me try to answer your question about the ARPU. In fact, the ARPU of IndiHome Triple Play is recorded at 300,000 groups compared to the former (inaudible) it's about 120,000 groups.

Got it. Thank you. And the utilization?

Okay. And then the figure of the home packs were up already 6.3 millions and then we keep continue to roll out for the next year, it's about double figures. Thank you.

Okay, thanks.

Roshan Raj, Bank of America.

Two questions. First of all, this IndiHome roll out plan, what sort of impact should we look at the revenue margin and investment or CapEx because of this rollout? And can I just reconfirm that you're looking at accelerating the number of households you will be connecting on IndiHome? That's question one.

The second one on the tower deal, I believe previously you had indicated three options. First one was possibly to inject into a listed tower co. So should we assume that the other two options which is possibly listing the asset or just growing the asset organically on your own, those are the two options that you'll be focused on now going forward?

Heri speaking here. Regarding IndiHome or regarding margin of the consumer, IndiHome actually under consumer divisions, if we are talking about consumer divisions, the margin around 80%, EBITDA margin, but if you are talking specific for the IndiHome only, EBITDA margin around 29%. And about the CapEx cost for last mile, around $300 per connections, I mean. So for the next question regarding power, I think we'll pass to Pak.

So just for additional informations, actually home connected -- fiberized of home connected, not only for the home connected specifically, but also this, we have fiberized our power by [brush] our enterprise client. So basically if we pair what we call (inaudible) actually not only for the home connected, but also for the power for Telkomsel, also for our enterprise client.

Using the same.

Yes, using the same fiber, using the same backbone.

Okay. Thank you Pak. So just to kind of check a bit more on that, so is it fair to say that going forward over a period of time you'll start raising the ARPU that you kind of -- or the price that you kind of offer to customers on IndiHome price -- IndiHome plans?

First, like Pak Dian mentioned before, the ARPU of the IndiHome itself is around 300,000 and the ARPU of the blended in the consumer is around 120,000. So basically if we put more IndiHome in our network, hopefully we can increase our ARPU.

Okay.

Okay. So for the next question, I think Pak Indra will --

Okay. Yes, regarding the plan for towers, I think as we also know that tower is -- for us is -- we consider as the Group we have in the mix out there also in Telkomsel, but at this moment we are revisiting the strategy as development has been happening in Mitratel. So the tower number is also really increasing to currently around 6,500 towers.

So we need to revisit the strategy, but I think the objective is of course considering the how to have the -- what the ideal form also considering the -- and protecting also the interest of our partner from Simtel, so the form is -- of course is -- can be buy or borrow, so buy or build, but it has to be a public-listed form. Thank you.

Thank you Pak.

Next question please.

Navin Killa, Morgan Stanley.

I have three questions. First question was with regards to you base station additions which seem to have slowed down in the third quarter. I was just wondering if there's any specific reason for that and I guess in that context how should we look at your full year CapEx and if you could break it down for mobile and non-mobile as well?

Second question I had was on the old Flexi business. So with the asset being impaired, how are you -- where do you stand right now in terms of migrating the customer base into Telkomsel? And I was wondering could part of the reason why the revenue growth of Telkomsel for the last couple of quarters has been very strong could be the conversion of these Flexi customers into Telkomsel? So if there's any numbers that you can share on the customer base converted et cetera, that will be helpful.

And then lastly, I actually wanted to kind of go back to the answer you had on homes passed. So just to clarify, you mentioned 6.3 million homes passed, but that includes towers and enterprise as well. So can you please help me clarify again how should we read into this? So is this 6.3 million residential units where you network is ready to connect or how do you define that? Thank you.

On your first question on the BTS addition, up to third quarter we already add about almost 15,000 of new BTS. Actually that only be exceeding the tower number of BTS we expect to be dealed during 2015. So whether our homework is try to increase the -- I think productivity of the BTS, right now, we are not slowing down the speed of the development of the -- our network.

We are now preparing for 2016. The way we develop our BTS actually for each corresponding year, we feel until the third quarter in the last quarter we prepare for the next year. We plan on that way and that pattern we continue going to build our networking.

On the second question, on the Flexi impact to our businesses out, yes, indeed there's positive impact for us. There's about 1.4 million Flexi subscriber migrate to us. It is by option by them by incentive also because we also asking them to migrate to our network. That already provide good result for us, this I think positive result of this corporate action.

So if I can follow up, I guess before we go to the broadband question, so this 1.4 million, is it fair to say a lot of these have come through in the third quarter, and can you also perhaps share how much revenue they might be contributing in the third quarter?

It is since the first quarter, basically the speed up it is coming in the -- from the -- let's say the second half particularly, not on the, let's say third quarters. So basically we -- from the beginning of the year, we already promote to them to migrate to us and then the speed or the -- been since the second quarter and the third quarter. So at the end we already have 1.4 million of the (inaudible) that we identified obviously like system network becoming our subscribers.

Okay. And Navin, let me answer that third question about the home pass. I was talking about 6.3 million home pass is surfing only for the IndiHome excluding fiber to the mobile, fiber to the building, the one is -- what Heri is saying is the way we build up the last mile we build up the similar to the mobiles, to the homes, the building in the very integrated plan. Thank you Navin.

Thank you.

Next question please.

Arthur Pineda, Citigroup.

Three questions for me. Firstly a housekeeping question. What's driving the significant drive in depreciation expenses? It seems to have jumped up 27% in Q. Was there any accelerated depreciation booked as well?

Second question I had is with regards to your bottom line. We have seen a number of quarters where you have strong operating trends and revenue EBITDA, but it's fair to translate into bottom line growth because of guidance cost such as impairments or ERP, when can we actually see a cleaner bottom line? Should we expect fourth quarter to be free of all these one-off expenses?

Lastly just to clarify on the fiber again, sorry to belabor the point. Just -- you mentioned that you expect to double the fiber homes pack next year from 6 million to 12 million. Is that correct? Not sure if I heard that properly. And how much of it actually costs for you to pass the line to the home? Thank you.

Yes. Number one and so your first questions regarding significant depreciations, if you look at our number on the first half we have what we call Flexi impairment around IDR600 billion. So this is the most (inaudible) that pushed our precision grew quite significance. So this is -- this comes from Flexi impairment -- I mean Flexi asset impairment. And also another network infrastructure deployment on server and fixed businesses, it's create also depreciations, but the mostly it's comes from the impairment of the Flexi asset.

The second regarding EBITDA and net income, I think as we normalize our net income, is still -- has a good number. If you are talking about how long the ERP, ERP is one of the most significant impact in our net income. I think ERP will -- we have planned until 2017. So until 2017 we will the ERP as around IDR300 billion to IDR500 billion each year.

And the number three I'll give it -- pass it to --

Yes. That question Mr. Arthur, in fact the home pass up to now is 6.3 million -- around 6.3 million. And then our target sales in next year 2016 could be 3 million. So that's why we are committing to rollout the last month it's about double, it's about 12 million thousand home pass to secure our target 3 million homes connected.

In fact, in the deployment of the home pass is now purely the new home pass, but we are expanding the existing home pass, the SIM route to several type of provisioning. Thank you Arthur. Hopefully can answer your question.

If I can just put a follow-up question on the fiber, how much would it cost to double your homes pass from 6 million to 12 million?

It's not linearly double in the number of home pass. I mean it's not twice than previous 6.3 million, but it's quite complicated calculation. It's -- what I am saying the same route can be more cheaper than the new routes, something like that, Arthur. We are planning to adopt the mobile data location because the Internet users normally using Internet is in the sitting still, they are not moving, so we are intended to collect the mobile data location to be a driver to know, to recognize which location we are intended to target to mark up. So by this way we can deploy more effective and more efficient. Thank you Arthur.

Thank you.

Next question please.

Jimmy Chen, Bernstein.

Just want to get the management's broader view on the fiber rollout and the opportunity there. Firstly, can the management talk about whether there's any regulations or competition that will impede your pricing, any particular names would be good. Secondly, in terms of the size of the potential numbers of homes that you may pass, how do you sort of juggle between the economic feasibility of attaching those homes given how much of the cost and affordability of these services?

And then lastly the current EBITDA margin sounds low. Can you explain what is driving that? Is that just a scale issue and what's the long-term return on capital that you would be expecting? Thank you.

Yes. Jimmy, it's good question about the competitors. We can name the competitors, it's quite big as -- was First Media, but their deploying is not on the 100% fiber, but on the hybrid fiber quad shells. Technologically it's not so advanced and they achieve only 300 -- sorry, 800 subscriber until -- sorry, since they operate eight years ago.

And then the new coming up competitors is, we can name it MNC which is very small scale numbers and Biznet. Biznet focus on the small, medium enterprises. They are targeting those areas. And then the next I heard about MyRepublic that won the ISV from Singapore and they have operation in New Zealand I heard. And then the third country is Indonesia, but the name not -- they cannot find the operation yet here. So they are mostly operating on creamy areas in the major cities, it's not like us across country from the east or west. Thank you, Jimmy.

Thanks. And also can you expand a bit on whether there's any regulations that requires you to either provide wholesale access to your network for resale if any? Thanks.

Yes. In -- about the regulation about -- about the fiber wholesale, we don't find yet about the regulation from government, from the regulatory body, but in fact our Telkom, our Company is very well come to the -- what we call it the unbundled network elements, so we can serve as the wholesale hand in hand with the retail side. Thank you.

Yes. So this is Heri to answer your questions regarding the margins for the IndiHome itself, the margin around 30% and a bit additional from Pak Dian. Actually prices strategy we copy like Telkomsel, the cluster-based strategy if there is head-to-head with our competitor, we put a slightly, slightly below our competitor, but if there's no competitor like Pak Dian mentions, we can just even double because there's no competition there. So actually the pricings really, really depend on the market and what the -- what we call the cluster-based pricing. I think that's all.

Okay. Because you mentioned that the rest of the consumer division has really high margins and I'm assuming that's also referring to your fixed services, if that is the case given this is a highly fixed investment sort of business, do you think the margin should actually go up and the retention should actually go up over time?

No, bring down.

For the existing business as CEO mentions in the beginning our guidance is in the future the legacy business, our legacy business, slightly down the EBITDA margin because aside from the spread.

Okay. Understood. And by the way also the second question I think we missed is what is the number of economically feasible households that you think the fiber network can serve and pass through given the cost of pass through and how much ARPU they can afford?

So far if you look at the number, our ARPU on the IndiHome is around 300,000. So the drive markup for our IndiHome around 20 million households --

20 million. Okay.

From the 60,000 households, yes. 60 million -- sorry 60 million households in Indonesia.

Got it.

Alex here. Some of the question I think from all of you regarding the fiber optic. Let me explain more detail. Our strategy actually is like this. We use fiber optic for broadband highway, that's another thing, but we mentioned -- I can't remember who is asking about this, we also share the highway broadband backbone, we also share to other operators. But of course we have a strategy to protect Telkomsel. So it's not in all area. We share that or we lease that fiber to other operators, yes, number one.

Number two, we're talking about home pass. Actually we are not rollout the fiber optic only for home, but using the same fiber optic, we use the fiber to modernize the BTSs backhaul and also to modernize the copper cable to our enterprise client. We use the same fiber. Of course if we rollout the fiber, of course there is a lot of houses passing the fiber to the BTSs and also to the enterprise client, we call it as a home pass.

And then we monetize that using the same fiber optic to provide the IndiHome service to the houses. So I can say that one CapEx for three kind of services; one, modernizing the backhaul of BTSs of Telkomsel; number two, modernizing the copper cable to the fiber to the enterprise client, and the same fiber optic we use for providing the IndiHome service to the houses.

Up to now we have already around 6 million home pass, not really dedicated to the home, but passing the home because we modernize already the BTSs backhaul and also modernizing already the copper cable to fiber to the enterprise client. But addressable market in total domestic demand is around 20 million. So if we have now 6 million home pass, I mean, we still plan to rollout more using the same strategy because almost BTSs of Telkomsel also around across the country, including also the enterprise client premises.

So this I think our competitiveness, yes. We can use the same fiber to provide three services using the same fiber. So the CapEx is more cost-efficient, more efficient compared to our competitors. Our competitors rollout the fiber is only for providing the service to the home, but Telkom fiber at the same time do the three things, modernizing the BTSs backhaul, modernizing the copper cable of enterprise clients and at the same time providing the new service, we call it IndiHome to the Houses. So it's more efficient I think compared to the competitors.

The ARPU for IndiHome at the moment we can say roughly around 300,000 because it's not really the same across the country. We have a cluster-based also.

And another question I think related to the EBITDA margin of consumer, if we're talking about Telkom, we can say that IndiHome is a new engine for the future. At the moment we have fixed [phone] and also the high speed Internet, but the growing I think, how to say, start already especially the fixed phone to the houses, but even start we still can get the EBITDA margin quite high, but the scale almost impossible for the future. That's why we create the new product, we call it IndiHome, that consists triple play.

So we can bundling all those, means we revitalize the legacy business, but the EBITDA margin we cannot keep around 80% because IndiHome also there is a cost for content, that's why the EBITDA margin also becomes slow down. But the scale I think will be the new engine for us for the future.

Hopefully will answer your question also -- guided question before. Thank you.

Yes, that was very helpful. Thanks. Just one clarifying thing, for any customers that you are connecting or just starting through, but connecting onto your fiber network via IndiHome or otherwise, what are the expenses of the connections and are you expensing it or capitalizing it or is the customer actually paying for it right now?

We call it expenses on the last -- of the installation of the IndiHome. Now we put it on as an expenses.

Operation and maintenance.

Operation and maintenance. In Operation and maintenance.

Understood. Thank you.

Under operation and maintenance cost.

But again there's always -- we're all out using a CapEx. After that we need operation and maintenance. Probably -- your question probably like this, is there any difference between the legacy one using copper and fiber? Which one is more efficient between copper and fiber? I will give you the answer that fiber operation and maintenance cost is lower than copper cable and the CapEx for whole those three as I mentioned before modernizing the (inaudible) and also modernizing the -- to enterprise client.

I think I will say those strategy is very efficient compared to competitors because they only provide one service to the houses. There is no BTSs and enterprise client in the customer.

So I think for CapEx point of view, our strategy how to make it more efficient CapEx, and after that of course there is always operation and maintenance that means cost, but compared to fiber, fiber to the copper, I can say because the strategy of rollout will also mean same strategy in operating and maintenance.

So operating and maintenance cost also will be lower than reduced technology. Hopefully answer your question.

Very comprehensively. Thank you.

There are no further question at this time.

I think we --

Mr. Andi, please continue.

Okay. I think we can have one more question please. Last question I think.

Sachin Gupta, Nomura.

Just one final question. Given a lot of the comments you've made about the networks and the fixed line business and also taking into consideration the performance so far, is there any reason why we shouldn't expect revenue growth to be in high single-digit for the next -- in the foreseeable future? And even on the margins, I take your comment that the legacy business declines, but given the delta you could potentially see from a fixed line business and all of the pricing mechanisms you are implementing that margins actually may surprisingly upside as well?

I think we are going to answer you on the fixed lines. Sachin, Heri speaking here from Telkomsel. As long as we can get more for productivity with the current investment, with aim to maintain our EBITDA margin, but we know that challenge is coming from the data. Data pricing now, it's not really as competitive, as lucrative in the region, but we are assuming there's no price, I think, war in the future with more productivity. We aim at least to maintain margins.

Lot of I think initiative coming from the more efficient CapEx, more productivity of the asset, and also I think a higher utilization of the network itself, that's what we expect. But in general it is supposed to decline with the current pricing, but we expect with the more profitable environment it can be sustained in the -- I think at the current levels.

Okay. On the Telkom Group, we have still confidence that in the near future we have a good number of growth because now as you know our number of subscriber in IndiHome, the growth is double-digit. Also knowing that IndiHome itself has a ARPU higher than legacy business, having I think the revenue and EBITDA we expect that will grow also.

Our challenge is actually how we have to make our business, our IndiHome, our operation more efficient so we can have our net income growth also follow the EBITDA growth. So our challenge is actually how we are as efficient as possible in our operations to make our IndiHome in the futures more profitable.

So in the revenue and in the EBITDA, I still believe that we can grow. There's a lot of room to grow. Our challenge is how we make our operation as efficient as possible. I think this from me.

Thank you.

I think we have to conclude our discussion.

That concludes our conference for today. Thank you for participating. You may all disconnect.