Telkom Indonesia (Persero) Tbk PT (TLK) 2016 Q1 法說會逐字稿

Thank you for standing by and welcome to the Telkom's first quarter of 2016 results conference call. (Operator Instructions). I must advise you that this conference is being recorded today, May 3, 2016.

I would now like to hand the conference to your first speaker today, Mr. Andi Setiawan, Vice President of Investor Relations. Please go ahead Mr. Setiawan.

Thank you for standing by. Ladies and gentlemen, welcome to PT Telkom Indonesia first quarter 2016 conference call. We released our results on April 22, 2016 and the reports are available on our website www.telkom.co.id.

This 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 with this 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 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 [lieu] 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. Harry M. Zen 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 and International Services, Mr. Dian Rachmawan as Director of Consumer Services, Mr. Indra Utoyo as Director of Innovation and Strategic Portfolio, Mr. Muhamad Awaluddin as Director of Enterprise Business Services and Mr. Herdy Harman as Director of Human Capital Management.

Also present Board of Director of Telkomsel, Mr. Ririek Adriansyah as President, Director, Mr. Heri Supriadi as Director of Finance and Mr. Edward Ying as Director of Planning and Transformation.

Before Alex delivers his remarks, I will take this opportunity to give a brief overview of Telkom Indonesia. Telkom is the single largest independent telecommunications company and network provider in Indonesia. Telkom provides a strong business portfolio of clients; telecommunications, information, media and entertainment, directly or through its subsidiaries. We also deliver services to multi-customers' portfolio in retail, enterprise and wholesale.

As of March 31, 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 afternoon ladies and gentlemen. Welcome to our conference call for first quarter 2016 result, ended March 31, 2016. We sincerely appreciate your participation in this call. Ladies and gentlemen, Telkom recorded a remarkable achievement with triple double-digit growth in revenue, EBITDA and net income of 16.6%, 18.8% and 20.3% year-on-year respectively.

We also successfully maintained healthy level of profitability with EBITDA margin of 53.2%, improved from 52.2% in the first quarter last year. Net income margin was recorded at 16.7%, increase from 16.2% last year.

Data, Internet and IT services remained the biggest revenue contributor with 37.4% of total consolidated revenue and increased 45.1% year-on-year.

In the meantime, our expense increased by 11% year-on-year, lower than revenue growth, driven by operation and maintenance and personnel expenses. Operation and maintenance expense accounted 43% of total expenses, grew by 22.3%, in line with the aggressive network deployment both in our cellular and fixed line businesses, in particular to support digital business growth.

While personnel expense increased by 29.5% year-on-year, as we simplified salary payment method by [displacing] quarterly incentive and other benefit into monthly salary proportionally and bonus in line with the Company's performance.

Our strongly result in first quarter of 2016 was in line with solid performance of our cellular business. Telkomsel gained 1 million net additional customers during first quarter of 2016; grew total customer base to 153.6 million, [amidst rapidly] high SIM card penetration.

Telkom continued expanding its network infrastructure by adding 7223 new BTSs during the quarter with around 90% consist of 3G and 4G BTSs. It is reflecting our focus ongoing in data business.

Mobile data payload significantly increased by 89.6%, driven by strong growth in 3G and 4G capable device adoption which increased 47.9% (sic - see press release, "47.5%") year-on-year to 64.5 million users.

Ladies and gentlemen, Telkomsel continued its strong momentum in the first quarter 2016 by delivering another triple, double-digit growth where revenue grew by 17.8%, EBITDA 26.5% and net income grew by 33.9% year-on-year.

Digital businesses remains our engine of growth as a result of leading network supplier strategy. The segment recorded strong performance, with 48.7% year-on-year growth to IDR6.9 trillion, and subsequently increased its contribution to total revenue to 34% from 27% last year. Digital businesses' growth was mostly driven by healthy growth in 3G and 4G capable device adoption.

We also successfully maintained healthy level of profitability, with EBITDA margin of 53.2%, improved from 52.2% in the first quarter last year. And net income margin was recorded at 16.7%, increase from 16.2% last year.

Data and Internet -- Data, Internet and IT service remained the biggest revenue contributor -- excuse me. Excuse me, let me repeat again the last paragraph.

Ladies and gentlemen, I will repeat the last paragraph. Telkomsel continued its strong momentum in the first quarter 2016 by delivering another triple, double-digit growth where revenue grew by 17.8%, EBITDA 26.5% and net income grew by 33.9% year-on-year.

Digital businesses remains our engine of growth as a result of leading network supplier strategy. This segment recorded strong performance, with 48.7% year-on-year growth to IDR6.9 trillion, and substantially increased its contribution to total revenue to 34% from 27% last year. Digital business' growth was mostly driven by healthy growth in 3G and 4G capable device adoption, successful migration of pay-as-you-use, that we call it PAYU to Flexi package, as well as continued strong growth in data payload.

Our focus on digital businesses was reflected from our prime quality network infrastructure, which are developed and modernized on continuous basis.

On the other hand, Telkomsel could maintain healthy growth in legacy business, where voice grew by 8.9% year-on-year and SMS by 4.8%. Voice revenue growth was mainly attributable to higher voice traffic, while for SMS the decline in traffic was offset by higher price as a result of smart cluster-based pricing.

Our 4G LTE deployment is on a demand basis, taking into account 4G handset penetration and level of demand [in broadband cities]. We have deployed more than 4000 4G BTSs in 100 cities across Indonesia and recorded 3.1 million customers that have swapped to using -- to utilize 4G service. Telkomsel total BTS on air reached 110,000 units at the end of March 2016, where 56% were 3G and 4G BTSs.

In the meantime, we continue to aggressive rollout in fixed broadband business, with our Flexi product in the home triple-play. Supported by around 4300 technicians, we added 286,000 new subscribers during the quarter. And as of March 2016 we already have 1.35 million IndiHome customers. Combined with non IndiHome, we have total fixed broadband customer of 4.2 million.

Ladies and gentlemen, we are still in progress to complete our Indonesian digital network program. On the backbone side, during the first quarter we successfully laid down additional 320 kilometers fiber optic backbone cable. And total fiber backbone now reached more than 82,000 kilometers, connecting from Aceh to [Papua].

We are also in the process of launching Telkom-3 satellite and also has kicked off the preparation for Telkom-4 satellite. We expect Telkom-3 to be launched by the end of this year, while Telkom-4 in the second quarter of 2018.

Meanwhile, on the access side, we have around 10 million fiber homes passed, that further will be monetized through IndiHome triple play.

In international [aspiration], although we remain focused on domestic market, we continuously seek opportunity in the regional market to strengthen our international footprint. Regarding with the acquisition of GTA Teleguam, the plan is still being evaluated by United States authorities.

Ladies and gentlemen, on April 22, 2016 we have annual general meeting of shareholders. Two of the key decisions were made. Number one, dividend payout was maintained at 60%. And number two, there was management change, as we have new Finance Director Mr. Harry M. Zen, replacing Mr. Heri Sunaryadi, a new commissioner, Mr. Pontas Tambunan replacing Mr. Parikesit Suprapto.

Now let me reiterate guidance for 2016 as wrap up. With strong set of result in first quarter 2016, we expect both Telkom and Telkomsel revenue to grow better than market rate by continued effort to increase digital business revenue. We estimate the industry will grow around 9% in 2016. Telkom growth will be on the back of strengthened mobile digital business and revived 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 around 22% to 25% of revenue. With investment focus on broadband infrastructure, around 60% to 65% of CapEx will be allocated for mobile-related business, around 25% for fixed broadband related business. And the remaining will be for other businesses.

Finally in terms of M&A aspiration, our inorganic growth initiative helps to enhance and increase digital business portion of Telkom growth, with guidelines of 80/20 rules, where 80% is representing digital or new-wave portion of inorganic programs.

Ladies and gentlemen, that's ending my remarks. I thank you and I give back to Andi.

Thank you 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.

(Operator Instructions). Arthur Pineda, Citigroup.

Hi. Thanks for the call. Congratulations on your first quarter performance. Just three questions from me. Firstly on the regulatory side, is there any update with interconnection changes? What's the risk that you could actually see asymmetric regulations coming in for Indonesia?

Second question I had is with regard to your pricing. You mentioned your cluster-based pricing a while ago. I was just wondering, how different would your pricing be in Java versus the non-Java areas?

And the third question I had again is on the mobile side. Your peers have talked about network sharing, especially outside of Java. How would this actually impact you and have you provisioned against any increase in competition on this side? Thank you.

I will take one by one. (Inaudible).

Okay, thank you. I want to answer your -- the first question regarding the interconnection regulation. Actually just today we still discuss with the Government because Government didn't decide yet regarding the new formula for the interconnection. But, based on our discussion, actually Government want to make it the interconnection costs decline from 10% up to 20%, the costs. And I think all the (inaudible) will discuss again regarding the impact into the industry.

But we think maybe the regulation will be implemented is around -- after June I think, because we still discuss with Government regarding the new formula. Thank you.

But is there any chance it will be asymmetric in terms of pricing?

Implication.

The -- I think it will be symmetric, the formula, yes. Yes, and the discussion, the last discussion with the team of Government's. And the impact, I think, because the contribution of interconnection, [expected to accomplish] around 4% up to 5%, yes --

On the gross --

On the gross, on the gross revenue. So I think yes, the net's around 1% up to 2% impact. So I think if the interconnection costs decline up to 10%, I think we still manage [data fee], (inaudible) performance (inaudible).

On the cluster-based pricing, the difference between Java and non-Java is around -- maximum is around 60% in outside Java (inaudible) between Java.

Okay. And then the next question on the network sharing impact, so basically the network sharing as, I think, (inaudible) by the Government, it is supposed to be done by B2B basis.

Yes, non-mandatory.

Non-mandatory. And it [mainly depends] on the availability of the capacity and so on. And then also, mostly, what we consider, because we developed our network based on our needs, not really the plan on the selling side when we developed for the current network, mostly the selling supposed to be considered for the new network that will be built. So this one, still some time impact to us.

So will spectrum sharing be allowed as well?

No, not yet.

No.

Can you say that again?

Sorry. Does it include spectrum sharing?

I think it's not.

For the time being, it's only network sharing. Spectrum sharing is not yet.

Understood, thank you.

Thank you.

Miang Chuen Koh, Goldman Sachs.

Hello. A couple of questions from me. One is on competition. Can you provide an update on the competitive landscape both for the mobile as well as the fixed broadband business? I think we've seen some of your competitors, for example, on the mobile side, providing a lot more free data on their plans recently.

And secondly is on margins. If you look at EBITDA margins for first quarter it was very strong. How sustainable is this for the remaining of the quarters, because it's obviously tracking above your full-year guidance. That's from me; thank you.

Hi, this is Edward. So first on the mobile landscape or competition in Indonesia, so simply put, it's highly competitive, like you mentioned. Some of our competitors are offering free 4G data. You spend a certain amount of money and then you go on 4G, you get certain allocation for free. So I think that goes on, because, as you know, 4G penetration in handsets are still low compared to the total base that we have. So everyone is trying to capture that audience. And also we have more or less a (inaudible) network, close to [54,000], each of us. So that remains competitive.

But having said that, as you can see, we continue to grow on the payload, continue to grow on our advertising -- sorry, continue to grow on our data revenue. So I see this is just the start to hook on more customers to the network. So that's on the 4G free data.

On the 2G, 3G I think, yes, they are still highly competitive. As you probably know that our competitor like XL, some of the areas where access is, they also lower their price. And these are some of the things that goes on which has not changed, like before.

So, in short, I think this is as usual. We quite aggressively win the trade and win the business. So I think [all of us] do quite well in the first Q and we hope to continue that.

Mr. (Inaudible) on the second question on the EBITDA margin, as you say, the EBITDA margin on mobile last quarter is very strong. Some reason for this is, one, out of the revenue, because in February we had one more day compared to last year. It is attributable around IDR229 billion additional revenue for that one. And in the cost side, actually we had one-time of ERP last year, about IDR169 billion. It's also I think not happened in this year for our first quarter. This brings us to very good margin that we experienced.

But moving forward, yes, we also believe that competition in data, as mentioned by the CEO and also as you evident in the competition landscape, we still need to see what is the trend of the competition. If the competition can be well, let's say benign, quite calm like last year, we expect we can maintain the EBITDA margin around let's -- the same like last year was 56%. Otherwise maybe the EBITDA margin will slightly decline about 1%. So basically, in overall, what we expect we still can continue to beat market growth, slightly higher than market growth. That will bring us to -- we expect another [triple, double-digit] growth.

Sure. Can I just quickly -- a couple of follow-up questions. One is on ERP, right? I mean for this year when will we expect -- how much and which quarter, if you could give some guidance on that?

Yes, we do have ERP program in mind for 2016 which would be third quarter. And the budget maximum around -- [it will be much] similar, about the same as the previous years.

[Plans to be executed in] -- (multiple speakers)

Third quarter (inaudible).

Okay.

Thank you.

Thanks.

(Operator Instructions). [Jack Tanhan Ming], SuMi Trust.

Hi, good afternoon everyone. I would just like to find out if -- what will be the changes that we can expect if the Government moves to the spectrum auction, compared to previously it was a [bidding] contest, because there are some talks on it. I just would like to share -- to see if you can share some of the colors on that. Thank you.

Well, we have been preparing some of the (inaudible) the auction, whether it's going to be the same as what we had a couple of years back or it's going to be more on the new way of auction. We have prepared some scenarios on it, and now we do believe that we can have some more spectrum of -- we do not know yet when the auction will be held, but we believe that it will be sometime this year.

Okay. Can we just get some color on what is the Government's thought process on it? Should we be worried, because maybe for overseas investors we have to look at [us] and Thailand was a big concern for us and continues to be until May. So how should we read the situation for Indonesia, if you can share some colors for us?

Well we prepare ourselves to optimize the spectrum that we have for now and to maximize the throughput of our network. Yes, so we do need some spectrum at some point along the way, but we do believe we can survive until the end of this year before this additional spectrum [comes].

Okay, thank you.

If I may add -- this is Edward. I think the auction process, we are not -- have not been told clearly what the Government intention is. At the moment if actually this is an open or closed auction, we don't know, but it will come out sometime end of the year.

So the question you asked whether we are -- what will change the dynamic. Actually I think the dynamic, I think there are a few bidders who will go in aggressively to bid. So we will also stay in the same way that we'll go in and bid for the frequency. We need the capacity.

And I think we are in a good position. Due to our financial position and strength of our business, I think we should be able to (inaudible) give it a good fight to win the spectrum for the Company. That's all.

Okay, great. Thank you.

(Operator Instructions). Foong Choong Chen, CIMB.

Hi. Thanks for the call. Three questions from me.

Firstly, on your legacy SMS business. I notice you mentioned in the info memo that your SMS banking and SMS advertising revenues were up almost 3 times year-on-year. So I'm wondering whether this was significant enough to have driven your SMS revenues up or was it really the higher [RP] SMS that was actually driving up your SMS revenues in the quarter?

Secondly, for Telkomsel, a very big base station addition in the first quarter especially for 4G. Should we expect a much bigger increase in the O&M costs from the second quarter onwards on the back of this big base station additions in the first quarter?

And then thirdly, my question on the personnel expenses. I just wanted to get some additional clarification on how you're going to be booking your personnel expenses across the quarter and the year. You said that you've simplified the salary payment methods. So does it mean that we should be expecting a more even booking of personnel expenses across the four quarters of the year? Thank you.

So I will take the number one question. This is Edward. I think you asked about digital advertising that whether it's incorporated into the legacy business. The simple answer is no. Digital revenue is booked under -- digital advertising revenue is booked under digital revenue business and that we grow year-on-year 100%.

So you could see that, so our total revenue, digital revenue including broadband to total revenue is 34%. Growing a year ago to about 27% before, something like that. So that number I can verify, but 34%. So actually it's not, in short.

Advertising revenue grow because more and more people now want to use digital advertising. More contractual and more [profile-driven] so they know -- they have insight on the customers, so we send them advertising. So our revenue actually has gone up. As well as (inaudible) know, we're still developing, we're still very new to this business, it is true we've grown year-on-year 100% for the last three years. So I think that's [about all].

For the second question on the BTS addition, no (inaudible) to the exact figure in operation and maintenance costs. It is not necessarily that way because most of the 4G BTS will be (inaudible) in the same BTS and the same site that we have right now, which is our 3G BTS or 2G BTS.

Basically the only additional on space and also on antenna, that may be contributes about -- compared to the original cost about 60% additional for this (inaudible) and not (inaudible).

Responding to your question on personnel expenses, actually the idea of simplification is just to make sure our salary, our remuneration is competitive in the market. So we just tried to simplify.

However, in the sense of the numbers, the yearly basis is relatively the same. So if we -- if you ask how we disburse on (inaudible) basis, on this year actually under the new scheme, we just divided into two elements, which is the fixed one in every quarterly basis and bonus on a yearly basis. And the same amount in every quarter for the fixed one and for the bonus it will depend on the achievement of the performance.

Does that answer your question?

Yes, it does. Can I just put in a follow up question, an additional question on the dividend payout? Post the AGM the payout ratio has been maintained at 60% and obviously your balance sheet is in a very strong position.

So I'm wondering going forward, any thoughts on maybe perhaps you could progressively raise the dividend payout ratio going forward. Maybe from the Board of Directors, is that something that you could propose? And from the shareholders' point of view as well, would that be something that would be deemed to be favorable?

Hi, it's Harry here, the new CFO. Thanks for the question.

Obviously the dividend decision is within the domain of the Government, being our biggest shareholder. Yes, we could propose, but at the end of the day, the decision comes from their side. 60% is actually -- as you may be aware it's rather on the high side. If you compare with the other state-owned companies, maybe it's one of the highest.

Okay, thank you very much.

Nathania Nurhalim, Macquarie.

Hi. Thanks for the opportunity and congratulations on your results. I have one question on your voice operational results.

So your voice minutes are still growing quite strongly year-on-year. However, we saw one of your competitors' volumes actually halved. So just wondering what you think is the main difference driving this contrast? Is there a difference in some strategy going on in the first quarter or is it just really because Telkomsel has a higher proportion of their subscribers outside of Java?

So firstly, I think we have a higher proportion of customers compared to the competition. And we have about 45 -- still about 45% -- let's say about 30%, 40% of our customer base are still mostly using voice. So there's that's one.

And point number two is also we now try to bundle voice, you buy a package where you can use the voice. So therefore that also drive up MOU. Last but not least, I couldn't tell you the client, but we have a very important customer that has a big member base that use a lot of voice call. So it actually gets driven up as well.

So in short I think it's the package voice, the bundle that we sell, the customers that we acquired and last but not least, we have a bigger customer base that drive up this (inaudible).

And also we have improved our network to provide for this as well.

I think I may have some additional information on this one. First we have prepared network coverage across Indonesia that differentiates us from the others. And the second also the quality improvement that we see in the past couple of years. They provide us the room for improvement for any opportunities that are [available] in that investment (inaudible) market.

Thank you.

Thank you.

(Operator Instructions). Jimmy Chen, Bernstein.

Hi. Thank you for the opportunity. Two questions.

First, we've seen Indosat's mobile service revenue accelerating along with yours and also XL Axiata's revenue starting to climb back. Can you explain what is making it possible for you and your competitors to grow revenues together? Are you taking revenue share from the small players or is there something else going on?

And also how do you see this trend? Is it -- would there be increasing competition? Do you see this positively or negatively? How do you see this kind of development?

The other question is on the accounting side. I see in Q1 there's a big reversal in one of the non-operational expenses items. The delta is around I think IDR800 billion to IDR900 billion. Can you explain what's causing that big reversal? Thank you.

Jimmy, this is Edward. Let me take the first question and if I hear you correctly it's explain to me about the competition, is this too aggressive.

So I think I started to first answer to one of the investors or analysts, that actually the competition continues to be aggressive. That has not changed. So the fight continues at the ground, at the advertising above the line, targeting customers. I think that continues.

Then I think if I'm not wrong, your second question is how do you continue to compete and can you win revenue from each other or take it away from the small guy. Now I think simply put, it's like what I think our CFO had just mentioned. We continue to put our network -- continue to improve our network performance. With that actually the customer now gets to make more call -- can make more call and that increase our usage. And it clearly showed in our first quarter results, more voice call and more voice revenue. That's what happened. So that to me is no easy fix, but we managed to do somehow.

Now going forward, (inaudible) where do we take our revenue. I think voice and SMS as we get more and more smartphone user then I think you will see there's some impact on it. Our growth is actually we're looking at data for which we are working on data customer, broadband customers. You can see we grow [48%] of it year-on-year. So we are working towards to get more and more people to go on broadband, to connect to the Internet, to make YouTube call and so forth. So that's one area of growth.

The other area of growth that we're looking at is the digital business that we try. Not easy, but some were successful. Like the gentleman asked just now our advertising grow year-on-year 100% of revenue. It's quite substantial, but not big enough, but still quite substantial.

So the other one we're working on would be to grow the new revenue stream is T-Cash, if you look at the M2M, IoT, where we've introduced, [T-Buy], T-Drive. And these are new services, in the future big data so these are the new revenue streams that we look to grow other than just basic voice and SMS. So we are saying that in short, we need to extend our business into M2M, more B2B. This is where we think there's new avenue of growth.

Now obviously the smaller players who don't have frequency, who doesn't invest in the CapEx, I think they will slowly find that the customers are changing their lifestyle. They want to connect to the Internet, they want high speeds, they want good network, good backbone, transmission. So I think we will take advantage of that to win the business across. So I think those are my short answer to you and I hope I've addressed your concern.

For the second questions on the expense, it was mainly due to the penalty that we had to pay the early termination of our CDMA towers, the Flexi business that we decided to desist. The amount was around IDR471 billion. So that's slightly more than 50% of the total. So the rest of the items include some tax expenses and other non-operating expenses.

The penalty was paid this quarter or the quarter last year?

This quarter. First quarter this year.

Got it, thanks.

Yes.

Great, thank you.

(Operator Instructions). Lucky Ariesandi, Yuanta.

Hi everyone. Thanks for the call. I have two questions basically.

The first one is on Telkom's plan for Mitratel after the cancellation of the deal with Tower Bersama. What's your plans for Mitratel going forward?

And also related to your tower asset, I notice that you haven't exactly revalued your tower assets. I understand that back in fourth quarter 2015, there was like a mandatory restatement of tower assets based on the expected future cash flow. I haven't seen it anywhere in your financial statement.

My second question is on Telkom's marketplace, blanja.com. I notice that Telkom has so far opted to go for a low key approach for this particular business and the acceptance and awareness of Telkom's marketplace is lagging behind the peers. What's your plan going forward for Blanja? Thank you.

Okay, thank you for the questions. Regarding the plan for Mitratel, we're still expanding our tower business as the [business] tower is (inaudible) business in the telco industry, in particular for Mitratel to support Telkomsel. And we are still evaluating all possible options to improve Mitratel performance and also to unlock the tower asset value. But currently we are still in the evolution -- (multiple speakers).

And we are still using Mitratel to protect the towers.

Yes, we are still using Mitratel protect our interest in Telkomsel. (Inaudible).

On the, I think, tower revaluation, most of the tower we discuss here is in Telkomsel. The Government incentive on the (inaudible). We'll also give the consequences. If we do the valuation of the tower assets [let's say], we didn't do here, if we do corporate action such as we sell the towers, they are incremental to the valuation subject to 25% of tax, because we still keep this option [available] to any corporate action, we decide to not do any asset revaluation on the tower base.

Okay. So regarding our blanja.com services, we are now in the process of reevaluating our position not only on blanja.com but on the e-commerce as a whole. And we are trying to maximize our subscribers and our Group's assets for the e-commerce business.

Whilst waiting for the reevaluation, we are now in the process of improving the customer experience, maximizing synergy with the Group and also other state-owned enterprises and also developing mobile commerce apps and also developing logistics for e-commerce.

As a Group having an integrated digital strategy is important and e-commerce is a key part of our digital portfolio. Thank you.

We can continue to the next question please.

Foong Choong Chen, CIMB.

Hi, thanks. Just two more questions from me.

Firstly, do you expect more penalty payments for early termination of the Flexi towers in the future quarters?

And secondly, can you also provide what was your fixed broadband revenues in 1Q 2016?

Yes, there could be some more penalties coming up later this year for the early termination of the --

Do we know how much, [Pak]?

We are still in the process of negotiating it with Tower [Bersama].

Okay. And your fixed broadband revenue?

For IndiHome, the ARPU is around IDR326,000 multiplied by 1.35 million customers.

Okay. And for your balance of broadband subscribers.

Yes, for the non IndiHome 3 million customers, ARPU was about [IDR107,000].

Okay, got it. Okay, thank you so much, [Pak].

(Operator Instructions). Miang Chuen Koh, Goldman Sachs.

Hello, a couple of follow-up questions from me.

One is on the pricing for your voice and SMS and you have been raising that over time. Is there still scope for more increases as you see it going forward?

And secondly, on fixed broadband as well. From one of the conference calls from your competitors, it has been mentioned that Telkom's IndiHome pricing is quite at a premium to theirs. And presumably you're also considered higher than some of the other smaller competitors as well. How do you see that price -- your pricing trends going forward? Will you be looking to potentially reduce prices even to be more competitive or not? Thank you.

So let me try to answer the first question. Actually, if you follow the industry, actually in Indonesia, data voice SMS prices are probably one of the lowest in South Asia or Asia. I think [it will be] lower than India. So is there an option for us to increase prices, then I think the answer simply will be yes.

But I think we need to watch the competition. We're very mindful that we are not alone, we compete in the market. So we're sensitive to that. But [also] I think there's room for improvement and that we can increase if we want to, because we're the lowest in this region. I hope I answered your question.

Yes. And on fixed broadband, I guess if you could also talk about that a bit.

Let me answer to your question number two. In fact, it can be said that our service proposition is quite different to the other competitors. While they are offering not triple play, we are offering triple play services. So that's why we are able to offer higher prices instead of competition. Thank you.

Okay, thanks.

Thank you. There are no further questions at this time. Mr. Setiawan, please continue.

Thank you everyone for participating in today's call. We apologize for those whose questions could not be addressed. If you have any further questions, please feel free to contact the IR team. Thank you everyone.

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