Telkom Indonesia (Persero) Tbk PT (TLK) 2015 Q4 法說會逐字稿

Thank you for standing by and welcome to the Telkom's full year of 2015 results conference call. (Operator Instructions). I must advise you that this conference is being recorded today March 8, 2016.

I would now like to hand the conference over to your first speaker today, Mr. Andi Setiawan. Please go ahead.

Ladies and gentlemen, welcome to PT Telkom Indonesia full-year result ended December 31, 2015 conference call. We released our results on March 3, 2016 and the reports are available in 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 the questions may contain forward-looking statements within the meaning of Safe Harbor. Actual results could differ materially from projections, estimations or expectations voiced during today's call. This may involve risks and uncertainties 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 to 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 Networks and Solutions and Chief Technology 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; and [Mr. Hendri Mulya Syam], as Director of Human Capital Management.

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 entertainment directly or through its subsidiaries. We also deliver services to multi-customer portfolio in retail, enterprise, wholesale and international.

As of December 31, the majority shareholder of Telkom 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. Alex, the time is yours.

Thank you, Andi. Good afternoon, ladies and gentlemen. Welcome to our conference call for full-year 2015 results ended December 31, 2015. We sincerely appreciate your participation in this call.

Ladies and gentlemen, at the end of 2015 we recorded a milestone by achieving our target [break-to-break] [IDR100 trillion] less [IDR300 trillion] means IDR100 trillion in revenue and IDR300 trillion in market capitalization.

In terms of revenue, we maintained strong momentum by growing 14.2% year on year to [IDR102.4 trillion] (technical difficulty) and net income margin at [50.2%] and 15.1% respectively.

Those achievements were driven by our strong operational results, with 12.1 million net additional customers of Telkomsel during 2015 grew total (technical difficulty) data payload jumped significantly to [492.2 terabyte] or increase by 110%, mainly supported by the fast-growing 3G and 4G devices adoption, which increased [53%] to 61.7 million users, representing around 40% of our customer base.

Mobile broadband business performance was supported by our network infrastructure expansion, with almost [18,000] new BTSs installed during the year to maintain our network's superior performance, while our fixed broadband users increased by 17% year on year to 4 million customers, as we launched IndiHome Triple Play in the beginning of 2015. This also resulted in higher fixed line phone subscribers from [9.7 million] customers in 2014 to [10.8 million] in 2015.

Ladies and gentlemen, in consolidated level our data, Internet and IT service segment experienced the strongest growth, with increase [38%] to [IDR32.7 trillion], supported by the growth of our mobile digital business, which jumped by 43% year on year.

However, our accelerated infrastructure development had some impact on our operating expenses, which increased 15.8% to [IDR61 trillion].

Our major operating expenses was operation and maintenance, which grew by 26% to IDR28 trillion, in line with aggressive cellular and fixed line network (technical difficulty) our businesses.

Depreciation and amortization contributed to 27% of total expenditures in accordance to our network infrastructure development and modernization. And (technical difficulty) --

(Operator Instructions).

Ladies and gentlemen, our (inaudible) [cellular] subsidiary Telkomsel delivered remarkable results both financial and operational.

For the fourth consecutive year Telkomsel achieved triple double-digit growth in revenue, EBITDA and net income, which grew by 14.8%, 14.4% and 15.4% year on year respectively.

Revenue grew to IDR76.1 trillion, with the growth engine coming from digital business that increased by 43%, driven by data, which increased by 44%, and digital services, which increased by 39%.

Digital business accounted for 29.5% of total revenues; considerably increased from 23.6% in the previous year.

As opposed to industry trend, Telkomsel still recorded healthy growth in legacy business, with voice grew 10% and SMS increased 5% year on year. It is attributable to the successful smart pricing execution of cluster-based pricing and market segmentation.

On the profitability side, Telkomsel EBITDA and net income margin remained superior at 56% and 29.4% respectively.

Telkomsel continues strong operational results, with total BTSs on hand has exceeded 100,000. And during the year we deployed around 18,000 new BTSs, of which almost 90% were 3G and 4G BTSs, in an effort to maintain leading network supply and growing our digital businesses.

At end of 2015 our BTS on air reached 103,289 units, and 53% of which were 3G and 4G BTSs. As a result, data traffic suddenly increased by 110%.

On 4G LTE, as the first operator who commercially launched LTE in Indonesia, we continue to increase our footprint and the service is now available in 14 cities.

Another milestone that we made is on fixed broadband businesses. And, at the end of 2015, IndiHome Triple Play has reached 1.1 million subscribers. This is a remarkable achievement as IndiHome was initiated only at the beginning of the year.

Demand for high-speed Internet service at home is huge as middle-class segment is growing fast and they have need to get linked to high-quality Internet. Therefore, we are continuously building up our human resources both in terms of capabilities and numbers to capture the potential demand.

At the end of 2015 we already have 4,800 fiber technicians under our subsidiary Telkom Access, especially for IndiHome installations. And we will continue to strengthen our operational capabilities to accelerate our fixed broadband expansion.

Ladies and gentlemen, let me now observe the progress of Indonesia digital network for the full-year 2015.

Under id-access until end of December 2015 we already have 10 million fiber-based homes passed. We also have installed more than 320,000 WiFi access points, partly to help offload mobile traffic in an effort to maintain quality service of our mobile broadband, particularly in the cloud areas.

On the (inaudible) [site], we call it id-Ring, in total we currently have almost 82,000 kilometers of nationwide fiber-based backbone network connecting major islands from the West to the (inaudible) of Indonesia, which includes Maluku and Papua.

While for the [id-console games], the Telkom Group has a total of 74,000 square meters of datacenter that is operationally run by our subsidiary Telkomsigma. And we also have one project under construction; around 20,000 square meters of datacenter in Jurong, Singapore.

Ladies and gentlemen, we keep exploring opportunities outside Indonesia as a means to push ourselves to get a global standard in doing business to sharpen our competitiveness. We select and review potential businesses in the region and focus on businesses that create synergies to our current business portfolio in telecommunication, IT, media and content in education and entertainment.

We are in progress to develop Indonesia global network project connecting Europe to Indonesia through, we call it as a [SEA-ME-WE5] submarine cable system. And until December 2015 we have completed part of cable landing station in North Sumatra. This backbone network is expected to be completed by fourth quarter 2016.

Meanwhile, for Southeast Asia/United States, global backbone network connecting Indonesia to United States expected to be completed by first quarter of 2017.

We have a pending project, which is acquisition of Guam Telecom, that is still under review by the United States authority. We expect that we can get notification regarding this in due time.

Ladies and gentlemen, our excellent performance [has been] admitted by various independent third parties as we received many awards related to our operational and service excellence. We see this as appreciation for Telkom Group and so inspires and motivates all of us to work harder and smarter.

From time to time we are improving how we organize our businesses with one objective: to serve our customers better in effective and efficient manner.

And starting by 2016 we transform our organization into five customer-facing units, we call it [as a] CFU, which makes all elements in Telekom Group more organized to serve all our customers in the area of mobile business, digital service, consumers, enterprise and wholesale and [information] in a synergic way. With this model, we prefer competition within the Group and we manage the Company's resources in an effective and efficient way.

Ladies and gentlemen, let me now observe guidance for 2016 as a [wrap up].

We expect both Telkom and Telkomsel to continue to grow in line with or slightly better than market rate by continued effort to increase digital business revenue. We estimate the industry to grow by around 9% in 2016.

Telkom growth will be on the back of strengthened mobile digital business and the refined fixed line businesses.

For EBITDA margin we expect to slightly decline, both for Telkom and Telkomsel, in line with continued investment in broadband infrastructure, both for mobile and fixed line businesses, while consolidated capital expenditure spending for 2016 is expected at around 22% to 25% of revenue, with [increased] focus on broadband infrastructure.

That's ending my remarks. Thank you.

We will now begin the Q&A session. When raising your questions, please speak clearly and state your name and your company. Operator, can we have the first question, please?

(Operator Instructions). Arthur Pineda, Citi.

Several questions from me, please. Firstly, are there any one-offs booked in the fourth quarter? (technical difficulty) Can I just ask, are there any one-offs booked in the fourth quarter? And why is there a notable drop quarter on quarter on the fixed voice side? Is that just an accrual issue?

The second question I had is with regard to dividends and balance sheet. What are your thoughts on dividends? And what would be your ideal capital structure? Thank you.

I think will be answered by Pak Heri Supriadi, CFO of Telkomsel regarding fourth quarter

On the one-off items in fourth quarter, I can inform you that in (inaudible) we have extra incentive providing to our employees, because we reached very good result. So we have one-off extra incentive.

In addition to that, we also have to settle the USO project. The USO is already finished the business, so we go to arbitrate with Government to find a solution for -- I think there is agreement on the way we measured the performance of the USO services, which ended in 2014. So, based on the decision of arbitration, we need to settle debt and pay to the Government [Telkomsel] compensation.

So basically, because we don't recognize any more the revenue, so we do the adjustment on our cost, which is, in total, the adjustment is around IDR283 billion.

Meanwhile, in the extra incentive, we have IDR190 billion of, I think, extra incentive for the good performance in 2015.

That's the one-time adjustments in fourth quarter.

Was there any -- (multiple speakers).

Regarding dividend, I think, as you know, historically our dividend payout ratio is starting 50% [up to] 70%. Last year it's 60%. But, as you know, dividend payout ratio is domain of our majority shareholders. So I think that we should wait for the majority shareholders' decisions regarding the dividend payout ratio. But I think, more or less, still the same, even bigger than last year.

Sorry, if I can just clarify (technical difficulty) line revenue, fixed line. In the fourth quarter, there seems to be a dip. Any reason behind that?

Sorry, could you say it again, please?

Sorry, just to clarify. The fixed line revenue bookings in the fourth quarter seems to have dipped quite notably. Is there any reason behind that? Or is that just an accrual issue?

I think for the fixed line -- on the payment for the (inaudible) [reflexes] around IDR345 billion. That's it. We put it under other expenses, below EBITDA.

There was a IDR345 billion booking in 4Q?

Yes.

And on the revenue side, any reason for the big swing?

No, there is no big swing, I think.

What do you mean? In cellular or fixed line side?

On the fixed line voice.

Sorry, regarding fixed line. Yes, the fixed line of revenue decreased around 7.1%. And interconnection also fell 8.9%, on the fixed line. You meant the fixed line revenue, right?

Yes.

Okay. So that's why we created Triple Play to improve our future revenue.

I see. Thank you very much.

Colin McCallum, Credit Suisse.

Maybe I can just follow up a little bit. Could you set out for us the one-off or exceptional items in the fixed line business, or non-Telkomsel, for fourth quarter and tell us what those items were and how much they were in billion rupiah? That's the first question.

Secondly, what would be the plans for ERP, early retirement program, for 2016? And can I just confirm whether or not there were any ERP charges in the fourth quarter of 2015 as well within those one-offs? Thank you.

I think for the fixed line, as I mentioned before in the first question, the fixed line revenue dropped around 7.1% compared to last year.

Yes. Sorry, the question was whether there were any one-off items, either in the revenue side or the fixed line side -- I'm sorry, on the revenue side or the cost side or the tax side that you can tell us about in the fourth quarter. Any one-off items, yes? And how much were the amounts in question? Thank you.

So for the revenue side, I think, as already mentioned, dropped 7.1%.

For the cost, there is a cost around IDR345 billion that we put in the other expenses to pay the tower rent, because we already terminate our Flexi towers. There's a one-off further cost.

Got it. And I think there was a tax on (multiple speakers) in fourth quarter, is that right?

For ERP, there is no cost in the ERP fourth quarter 2015. So 2016 there's an ERP program around IDR500 billion. But for the fourth quarter 2015 there is no ERP.

Thank you. And was there a tax charge in fourth quarter 2015 that you can talk us about -- talk us through?

Miang Chuen Koh, Goldman Sachs.

A few questions from me. One is on the other operating expenses that rose quite significantly quarter to quarter. In fourth quarter I think it was up probably about IDR1.5 trillion. You mentioned that there was obviously the payment for the Flexi tower rents, which is IDR345 billion.

However, what then makes up the remainder? Because there is still a fairly sizeable increase quarter to quarter, even if we take away the Flexi tower rents.

And second of all is also in terms of your interest cost. That also rose quite a bit quarter to quarter but I think your overall debt level was pretty stable quarter to quarter as well.

And then lastly, on your cash and equivalents on the balance sheet that's a fairly high number that we now see at the end of the year. Are there any plans to utilize the cash because this seems quite sizeable? Thank you.

For the fourth quarter, I think in the Group, that is increase of expenses to the -- I think the first is from the Telkomsel. Telkomsel will explain.

From the cellular side, I think the operational and maintenance cost it grew along with the number of -- our network is increasing from time to time.

And, in addition to that, we also have the one-off items that we need to settle that we already explained to you. This is coming from universal wage obligations that obviously that already ended in 2014 but we need to adjust it so we book as a cost.

And then we also provide allowance for the extra incentives for the employees because the performance exceeding our expectations. That is good performance, basically, from the cellular side, whereas the (inaudible) level increased in the quarter.

Are they all booked under the other expenses because I just want to be sure? Because that particular line item wasn't explained clearly during the info memo. There wasn't much explanation. Is it all under the other OpEx items?

Yes. From [several] it is coming to the OpEx item.

Okay. So both the USO as well as the extra incentives (multiple speakers) --

(multiple speakers) but revenue in 2015 because already finish the projects. So adjustment would be made into the cost expenses, the operation and maintenance cost.

Sorry, the USO is booked under other OpEx (multiple speakers) -- right?

Yes.

Okay. And interest cost, if you could explain as well, that would be good.

Excuse me?

And also the increase in the interest cost, I guess, quarter to quarter.

Interest was because we have bigger loan compared to last year. We raised loan in April this year so, basically, as compared to last year, it is bigger.

Right, but then the -- I meant only for fourth quarter. The interest cost in fourth quarter was quite a bit larger in the quarter, but the debt level, if you look at it on the balance sheet, was similar. So I'm just wondering what was the variance.

You're talking about consolidated figure or in the (inaudible) figure?

Yes, the consolidated.

Hold on. We'll come back to you.

Okay. As we mentioned before, that, as Pak Heri mentioned before, that on 2015 we raised some funds through the obligations and, of course, starting I think we raised on June or July and then , of course, the first payment of the loan due on the fourth quarter. So the payment of the interest due on the [third] quarter in 2015, after we raised the loan on early June.

Okay. So it was only booked in the fourth quarter as interest expense, yes?

Yes. But for 2016, it will be the whole year; will be the (inaudible) the whole year.

Okay. And my last question was on the cash and equivalents. That seems like a pretty high number if I look at it by yearend. Are you going to keep cash on the balance sheet? Or is that going to be used in certain other investments?

First of all, we have to maintain our (inaudible) cash, first for the dividend for this year and also (inaudible) keep cash because there are one or two projects that (inaudible) we have to maintain the cash. That's all I'll tell you. (inaudible) because we have to be ready for cash for the [10%] (inaudible) and for the dividend.

Okay, okay. Thank you.

Wei-Shi Wu, BNP.

I just had a housekeeping question. Could you give us the breakdown of the FY15 CapEx into fixed line and mobile, please? So into Telkomsel versus Telkom.

2016 or 2015?

2015, please.

Our CapEx for 2015 is around IDR26.4 trillion and 60% is for Telkomsel for (inaudible) mobile and the rest for the fixed broadband and also for the (inaudible).

And would that split apply to your FY16 guidance as well?

Yes, similar I think. Yes. Almost [26%] from the revenue.

Thank you.

Sachin Gupta, Nomura.

I have three questions, please. Firstly, just on this tax one-off. The first info memo that came out I think you had IDR750 billion tax -- one-off tax for asset revaluation. But in the second info memo that actually disappeared. I was wondering can you explain that and is that still a one-off? That's one.

Secondly, in your costs previously, for a lot of the tower leases you used to have half as part of operating lease and half as financial lease. Just wondering is that still the case? Or every tower is under financial lease now, which could potentially help your margins? That's number two.

Number three is on IndiHome. Is it possible to give some sort of breakup on what's the cost associated with that? Given the ARPUs are quite high, should it be a profitable business?

And also just wondering. You've got 1 million customers have taken this up but that's about 10% take-up rate. What do you think the catalysts will be for this one for the take-up rates to accelerate in 2016? Thank you.

For the IDR750 billion, it was a one-off tax impact of the asset regulations. We will accrue it under 2016, not 2015. The tax office considers our payment as prepaid tax for 2015 and then we will book under 2016.

So for the next question we will pass to Telkomsel.

The question on the cost of tower, we don't change any accounting policy on the way we book the cost of tower. Basically, [Colo] tower will come to the final lease and then [Bildesit] will come to the operating lease.

Right now we have about 24 kilos of tower that we lease from outside, from tower companies. And then the other bit, about 60%, is under operating lease and the balance goes to finally (inaudible). So we don't change any accounting treatment whatever.

Sorry, and the question on IndiHome?

For IndiHome, actually current EBITDA margin is around 30%. In the longer run we believe if we have more fixed subscribers I think the EBITDA margin will increase around 35%, under 40%.

Our ARPU now is the absolute for IndiHome only around IDR310,000 compared to the blended ARPU from around IDR110,000. So IndiHome now almost 3 times the old ARPU. So we believe if we put more fixed subscribers it will reduce our cost and we improve our EBITDA margin.

Okay. And can I ask, what do you think will be the catalyst for the take-up rates to improve from here on?

I think a lot of things, yes. I think, first of all, we have to build our technicians because of the lack of technicians to make more new subscribers in IndiHome. This is our big challenge. Our big improvement is to build our technicians. And now we have around 4,800 technicians. We still need around 10,000 technicians to boost our sales in IndiHome.

Okay. Thank you very much.

Navin Killa, Morgan Stanley.

I had four questions. So the first one was on the point you made earlier about tax. So are you implying that in 2016 there will be an extra tax payment in your income statement of IDR750 billion on top of the normal tax rate? So is that -- I just wanted to confirm that.

Secondly, if I look at your quarterly trends it would appear that the fixed line voice revenues, which were running at around IDR2.2 trillion a quarter, in the fourth quarter the implied number was IDR1.3 trillion. So I was just wondering -- obviously, it can't be declining that much. So is there a reclassification there maybe because of your bundling initiatives or something? So if you could explain that a little bit.

The third question was on the discussions around potential interconnect rate reduction. Any update there?

And the last question was just I wanted to get your sense on mobile competition. So if you look at voice and SMS, obviously these segments have done well but there is some sign of slowdown in the fourth quarter numbers. So I was just wondering if you think the price increases are probably peaking out and the growth in these two segments can slow in 2016. Thank you.

I will answer regarding the tax. You are right. We have to accrue IDR750 billion because of resolutions. But, don't forget, the impact on the resources itself will give us more benefit.

We already calculated, with the higher depreciation expenses because of the resolutions, we already calculated that in the future tax benefit we will have around IDR2 trillion, so almost double, even more, to enhance times we can [set] impacts because of the resolutions.

So at the end of 2016, you're right, we have to pay IDR750 billion but we start to accumulate our higher depreciations. It means we have [asset] impacts -- tax-[driven], I mean.

So for the fixed line, actually, there is a significant drop in the third quarter because our lines dropped around IDR400 billion long distance, long distance users dropped around IDR228 billion and our prepaid long distance usage dropped around IDR150 billion. That numbers that boost the fixed line revenue dropped around 7.1%.

And how to recover, actually, we will increasing on the cellular monthly subscriptions around IDR1.9 trillion, cellular long distance plus IDR668 billion, [our feature] around IDR299 billion and local users plus around IDR130 billion. So this is the figure.

And for the SMS and --

Navin, on your third question on the interconnection rate, it's very early to update on the progress right now. So far we are still awaiting a decision from the Government. As you may be aware, the Government also already appoint consultants to help them in, I think, to determine a new scheme.

They also are asking for us to send in the proposal; all of the operators already sending the proposal. Right now Government is still receiving all the proposals. Among the (inaudible) is full symmetric, half symmetric and then symmetric, but with the intention in the Government to have a lower interconnection rate.

So far what we can say, we are still waiting for the Government decision. But, again, we can mention to you here, because interconnection only comprise about 6% of our gross revenue and around 1% of net revenue I think any change in the interconnection supposed to be quite neutral.

In addition, we also know that now the highest growth coming from the data. So basically from SMS already declined in terms of traffic. Voice still increased but not significantly. We believe with the growth of data the impact also will be more neutralized. That's the [position] of interconnection.

And then your second question, that is on the mobile SMS. Yes, mobile SMS last year we experienced about 14% of traffic decline year on year but we're still able to maintain the revenue growth because we do the price adjustment with a good opportunity that we still have.

What we see in the future, the likelihood the traffic of the SMS will continue to decline, because there are many substitutions for the SMS that's quite (inaudible) right now.

And, along with that, I think the compensation is coming from the data growth anyway, because the smartphone grows, the SMS will decline.

But, overall, we can see that the traffic of data increased significantly and we expect we can neutralize the impact from SMS decline by having better (inaudible) in data and hopefully we're still able to maintain the EBITDA, as already explained by Pak Alex on the outlook for 2016.

Additional for the fixed line. As you know, the trend is slowing down, but that's why we have a program to migrate the fixed line to the Triple Play to increase our ARPU. So we hope in the future, if we can migrate fixed line to the Triple Play in the home, we can increase our ARPU almost 2.5 times compared with our existing ARPU.

Got it. Thank you very much.

Choong Chen Foong, CIMB.

Three questions from me. Firstly, can you just give us some color on your fiber-to-the-home rollout plans, as well as your targets for IndiHome subscribers this year? And how do you see that having an impact on your operating and maintenance cost for FY16?

Secondly, you mentioned earlier on about the asset revaluation and also the tax impact this year. Can I clarify whether that asset revaluation was done at both Telkom and Telkomsel? And how much would your depreciation rise by after that asset revaluation (inaudible)? That's my second question.

And then the third question, can I ask about the IPO of Mitratel? Any progress there? Thank you.

Firstly, we have passed around 20 million households in this year and then also we already have 10 million homes passed. Now our challenge is how to make our home passed become connected so it creates our revenue.

So our challenge is technicians, the getting of technicians, because now we have technicians more on the copper-minded. We want to transfer to the fiber-minded. It is not the easy job this past year to improve our technicians become fiber-minded. I think this is the first one.

The second one -- I think that's also for the end June. The key word is how to improve, how to increase our technicians in the future.

The second one for the asset revaluations. Only in Telkom, not including Telkomsel assets. So the size of those assets is around IDR25 trillion. So with 3% of tax it's around IDR750 billion.

But from the asset revaluation IDR25 trillion, there's a lot of room for us to saving tax. So you can imagine, if IDR25 trillion we can [divide] it with the life of our fixed assets and then we can be saving a lot of tax. So this is for the financial not the commercial, so for the tax-only purposes.

And for IPO of Mitratel. I think we still don't have any plan for Mitratel. We still study. We still explore what is the best advantage for our Mitratel.

As Alex mentioned, now we have a CFU. We run under CFU model in Telkom. So that's why we will (inaudible) all our portfolio in the future what is the best for our Mitratel. Is still as it is to serve our CFU? Or we will list respect this Mitratel still under study? We cannot mention it now what is the best for the Mitratel. I think that's all for the Mitratel.

(technical difficulty) Can I just follow up on the question of the subscribers? Any targets for this year? How much -- obviously --

[Fiber to home] subscribers you mean?

Yes, I mean --

(inaudible).

Yes.

So for this year around 3 million.

Okay. 3 million. And your 4,800 trained fiber technicians, you said that you need to train an additional 10,000 on top of --

Currently we have 4,800. We need 10,000 technicians to make up 3 million homes connected.

We have half of that at the moment.

Including the partners of technicians.

Okay. All right. Got it. Thank you so much.

Prem Jearajasingam, Macquarie.

Three questions from me. First of all, just to clarify, are all those 1 million subscribers on IndiHome on fiber? Or are some of them still on ADSL? That's one.

Number two, if there are ADSL subs as part of that, does the increased density of fiber in the network then allow you to go forward and potentially up sell to these ADSL customers if that network quality actually improves?

And number three, coming back to these regulatory changes with regards to the interconnect rates, etc., I believe one of the proposals out there is for a potential cap on off-net call rates relative to on-net call rates. Could you provide some clarity on that? Or what you think will come from all of this? Thank you.

For the IndiHome subscribers, around under 60% in the fiber based, pure fiber, 100% fiber. The rest is for [hybrid].

So VDSL?

Does that answer your questions?

Yes. So those are VDSL. So it's copper last mile with the fiber backbone.

Yes. The rest, around 40%, is still fiber and copper.

Okay.

So, for the next questions, of course, in the future, we boost up sell IndiHome to 100% fiber, not on the copper any more.

So you don't want to provide -- ultimately not provide a copper service.

No, not any more.

Too expensive.

Too expensive for the Company.

To keep the networks, yes.

I think the explanation on the interconnection, yes, you're right. That will be a [review] also on the combination between on-net, off-net. Right now, we have what expands to 18 times potential to be radius to five to six times. However, if we consider most of the traffic, 90% of our traffic is on-net, I think, again, at this rate our net traffic will (inaudible).

Perfect. Thank you very much.

That will conclude the question-and-answer session. I would now like to hand the call back over to your hosts for any additional or closing remarks.

Thank you, everyone, for participating in today's call. We apologize for those whose questions could not be addressed yet. If you have any further questions, please don't hesitate to contact us directly. Thank you, everyone.

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