Telkom Indonesia (Persero) Tbk PT (TLK) 2016 Q4 法說會逐字稿

Thank you for standing by and welcome to the Telkom's full year 2016 results conference call. (Operator Instructions). I must advise you that this conference is being recorded today, Tuesday, March 7, 2017.

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

Thank you. Ladies and gentlemen, welcome to PT Telkom Indonesia's conference call for full year 2016 results. We released our results on March 6, 2017 and the reports are available on our website, www.telkom.co.id. Today's presentation is available on the webcast and an audio recording will be provided after the call for the next seven days.

There will be an overview from our CEO and after that all participants are given the opportunity to participate in the Q&A session.

Before we start, let me remind you that today's call and the responses to questions may contain forward-looking statements within the meaning of Safe Harbor. Actual results could differ materially from projections, estimations or expectations voiced during today's call. These may involve 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 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 Finance Director and Chief Financial Officer; Mr. Abdus Somad Arief as IT Network and Solutions Director and Chief Technology Officer; Mr. Honesti Basyir as Wholesale and International Services Director and Acting Enterprise Business Services Director; Mr. Dian Rachmawan as Consumer Services Director; Mr. Indra Utoyo as Digital and Strategic Portfolio Director and Mr. Herdy Rosadi Harman as Human Capital Management Director.

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

I now hand over the call to our CEO, Mr. Alex Sinaga, for his overview. Alex.

Thank you, Andi. Good afternoon, ladies and gentlemen. Welcome to our conference call for the full year 2016 results. We really appreciate your participation in this call.

Ladies and gentlemen, in 2016, Telkom recorded a remarkable set of results as we achieved triple double-digit growth with revenue growing by 13.5% while EBITDA and net income grew by 15.7% and 24.9% year-on-year respectively. The last time we had such triple double-digit growth was in 2007.

We also successfully maintained a healthy level of profitability with EBITDA margin of 51.1% improved from 50.2% last year and net income margin at 16.6% better than 15.1% last year.

Data, internet and IT services became the engine of growth. It jumped [31.5%] (corrected by company after the call), with contribution to total revenue reached 37.0%, significantly increased from [31.9%] (corrected by company after the call) last year.

On the other hand, we successfully managed our expense which increased by 10.1%, lower than revenue growth in line with manageable operation and maintenance expenses. Operation and maintenance expense grew by 11.2% in line with the continuous infrastructure deployment, both in cellular and in fixed line businesses in an effort to grow digital businesses. These accounted for 40.5% of total expenses.

Ladies and gentlemen, in mobile businesses, Telkomsel once again delivered outstanding results as in five consecutive years, Telkomsel achieved triple double-digit growth. Telkomsel's revenue grew by 14.0% while EBITDA and net income increased 16.9% and 26.1% respectively.

The result was driven by strong growth in digital businesses and healthy performance of its legacy businesses. Telkomsel's superior network including from Telkom Group synergy through collaborative network optimization project was one of the key success factors.

Digital businesses grew by 36.9% with data increased by 36.6% year-on-year and digital services increased by 38.8%.

In 2016, digital businesses accounted for 35.4% of total revenues, increased significantly from 29.5% a year ago, reflecting this business transformation was on the right path.

In the legacy businesses, voice still increased by 10.1% due to strong traffic while SMS experienced a decline for the first time of 3.3%. In blended basis, we still maintained our legacy business revenue to grow by 4.5% as a result of successful execution of cluster-based pricing, innovative products and superior network quality and coverage.

Profitability improved further, though it has been pretty high. EBITDA margin increased to 57.4% from 56.0% while net income margin improved to 32.5% from 29.4% in 2015.

The main driver of the margin improvement was successful, cost efficiency resulting from Group synergies, such as CNOP project. To maintain network quality and to ensure its business sustainability, Telkomsel continued to build infrastructure by installing more than 25,700 new BTSes during the year of which around 90% of 3G and 4G BTSes, reflecting our strong focus to grow the digital businesses. At the end of 2016, total BTS reached 129,000 of which 61% were 3G and 4G BTS.

In terms of 4G LTE services, by the end of 2016 Telkomsel covered 169 cities across Indonesia, supported by 6,362 BTSes.

Lastly, Telkomsel gained more than 21 million new customers, brought total customers base to 173.9 million or grew by 13.9%.

Ladies and gentlemen, in the fixed line businesses, by the end of 2016 IndiHome Triple Play recorded total subscribers of 1.624 million. The figure was achieved in about two years after IndiHome was launched, which is a remarkable achievement even for a global standard.

Last year we started to enrich IndiHome with more content including video streaming platform and attractive features such as Movin', an Android based application that allows subscribers to enjoy IPTV through their smartphones.

We also launched IndiHome Netizen which is a 2P product consisting of high speed Internet and home phone to cater a wider market segment. This year we are committed to add around 1.3 million to 1.5 million new IndiHome subscribers.

We also expect the ARPU to improve by encouraging customers to sign up for higher broadband speed, offering various add-on content and exploring new revenue stream, including advertising.

In the meantime, ARPU in the fourth quarter of 2016 was [IDR341,000] (corrected by company after the call) improved from IDR313,000 in the previous quarter.

Ladies and gentlemen, in enterprise market our focus is on the provision of total end-to-end solutions from basic connectivity to various managed services for our clients in corporate, SME and government institution. These integrated services are supported by our superior network in access, backbone and datacenter.

Last year our enterprise client consumed 2,524 gigabit per second bandwidth in service, with estimated 65% of traffic market share. We also started to tap business opportunity arising from changing trends in the market through the implementation of CapEx to OpEx scheme in relation to ICT provision.

On the smart city initiative, Telkom continued to provide broadband infrastructure and cloud-based solution to help the government improve their services to public. And by end 2016 Telkom implemented smart city system in 219 cities in Indonesia.

Ladies and gentlemen, we keep enhancing our IDN, Indonesia Digital Network, as the key foundation for our transformation process towards digital telco company.

In id-Access, during 2016, to complement fiber homes-passed we added 213,000 Wi-Fi access points that can help offload mobile traffic in order to maintain service quality of our mobile broadband customers.

On the transport side, Id-Ring, in the last quarter of last year, we completed Sulawesi-Maluku-Papua cable system, we call it SMPCS, so that now in total we have more than 106,000 kilometers of fiber based backbone network connecting islands from Aceh in the west to the very east of Indonesia, Papua.

While for Id-Convergence, data centers that support cloud service and is integrated to Telkom Group network, we just completed a 20,000 square meters world class data center facilities in Jurong, Singapore in November last year.

Ladies and gentlemen, as part of our expansion to be an international data hub, in December 2016 we completed SEA-ME-WE-5 which is 20,000 kilometers submarine cable system connecting Dumai, Indonesia to Marseilles, France. This cable system is owned by a consortium of several telco operators, including Telkom.

We're also still constructing SEA-US submarine cable system which stretches almost 15,000 kilometers from Manado, Indonesia to California, USA. This cable system is scheduled to commence operation in the third quarter of 2017.

To integrate those two submarine cable systems with our domestic network, we already started the construction of Indonesia Global Gateway cable system from Dumai to Manado.

Ladies and gentlemen, we would like to share with you a significant recent development. On February 14, we successfully launched Telkom 3S satellite from Guiana Space Center, Kourou, French Guiana. It carries 42 transponders, consists of 24 C-Band, 8 extended C-Band and 10 Ku-Band. The satellite can cover all parts of Indonesia, Southeast Asia and some part of East Asia.

Telkom 3S was designed to provide high definition television service, faster mobile communication and better Internet broadband services. With this satellite, Telkom can increase its capacity to serve customers better, including in Indonesia's remote areas.

Furthermore, next year we are also going to launch another satellite with bigger capacity. Both these new satellites will help Telkom reduce its dependency on external satellite operators.

Now let me provide guidance for the full year of 2017. With expectation of relatively stable competition in the mobile space and continued expansion in fixed broadband businesses, we expect both Telkom and Telkomsel's revenue to grow better than industry rate. We estimated the industry will grow at around 8% to 9% in 2017.

The EBITDA and net income margins are expected to slightly decline as Telkom is shifting towards digital telco company with a higher proportion of revenue from digital business and continued strategy to enhance infrastructure.

Capital expenditure for the Group is expected at around 23% to 25% of revenues with investment focused on mobile and fixed broadband infrastructure. That's ending my remarks. Thank you.

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

Thank you. (Operator Instructions). We have the first questions come from Colin McCallum from Credit Suisse. Your line is open. Please go ahead.

Great. Thanks for the call and congratulations on the good results. A couple of questions from me.

First of all, can I just confirm whether there were any sort of one-off items in the 4Q 2016 numbers? And secondly, can you give some guidance on 2017 if there would be any one-off items for example, early retirement charges that we should be expecting in 2017.

Second question is just on IndiHome. Do you have any targets for rollouts and for customers for 2017? And are you intending to continue what you've recently done in terms of focusing more on higher ARPU customers? If you could give some color on that it would be helpful. Thank you.

Hi Colin. It's Harry here. Thanks for the questions. So for the one-off items in the fourth quarter of 2016, we have a couple of them. First is there is a small amount of ERP that we booked in the fourth quarter, which was IDR66 billion. And then there was also a special bonus paid to all the employees, amounted around IDR280 billion given the excellent performance of the Company. And we also booked a tax benefit arising from the asset revaluation of IDR1.4 trillion.

And in terms of IndiHome target in 2017, the new customers targeted are about 1.3 million to 1.5 million customers. And we are also working hard to further increase the ARPU, although the expectation would not be that high, particularly coming from new revenue stream such as advertisement and some add-on features that was mentioned earlier by the CEO.

For the ERP (multiple speakers). Just one more on the ERP, on 2017 there is a plan to do it. But we haven't -- we cannot disclose the amount yet. But we expect the amount probably is going to be a bit smaller or at least not larger than 2016. Of course, this would depend on the Company's condition later in the year.

Understood. Thanks very much.

Thank you. We will now move to our next question to come from Roshan Raj from Bank of America Merrill Lynch. Your line is open. Please go ahead.

Hi. Thanks for the opportunity. Three questions.

First on guidance for 2017, on margins you are suggesting slight decline. Just trying to understand what would change in the cost items versus 2016 wherein you saw a margin improvement to lead a margin drop in 2017. So that's related to guidance.

Also on dividends, what sort of payout should one look for in 2016? Any scope for special payouts? Some thoughts there will be helpful.

Second question is on your views on competition and how it is evolving in Java and areas outside Java. Particularly when you look in areas outside Java, how will you defend your market position as competitors start targeting those areas going forward?

The third question is on your subscriber trends in the fourth quarter. Any particular plan that was popular and hence the subscriber, strong subscriber adds or it was just a function of an active or aggressive marketing campaign during the quarter? Thank you.

Okay, thanks for the questions Roshan. On the margin, this is pretty much in line with the plan to be -- to have more and more of digital revenue. As you are -- you probably know, that the data pricing, the margin is pretty low on that one. So as we are having more data and digital revenue, that's why we expect the margin to be slightly declined.

For dividend, I think the fair assumption would still be around 60% dividend payout just like in the past two to three years. Even though from the Company's perspective we don't have any objection whatsoever just in case the government decides to ask for a larger dividend payout.

The last two questions will be responded by our colleague from Telkomsel.

Hi Colin. Heri from Telkomsel. Hi Roshan.

First on the question on the competition in Java and outside Java, how are we going to defend our market position. First [I think in] outside of Java, we continue to expand our reach, which is larger than our competitors. Second, we continue to increase the quality from time to time -- along with our investment. Third, we try to see the demand in the market, to meet the demand size with our package offering. So we expect this will defend our position in the long run as we have that position right now.

In Java, we believe actually each operator already has the market base. It's not too far, one from another. But we see also the increase in smartphone penetration is quite high in Java. It is -- bring the demand for the payload higher, so we focus to increase the quality and capacity. We still see the room of the growth for each operator. With the better and healthy competition, including the pricing, we believe it's going to bring value to anyone in this Java area.

And then in the subscriber trend in the fourth quarter of 2016, yes, we experienced quite high increase in the fourth quarter because of seasonal festive in December, we have quite a significant increase in demand. So we provide a lot of package in this one. We believe this is quite seasonal in -- I think in the first quarter of 2017, the number is going to be stabilizing. And this we expect also the -- will bring to the increase of the payload demand of the subscribers.

I just want to add -- this is Edward. I just, further to our CFO, I just wanted to say that we won't differentiate whether it's in Java or outside Java in terms of quality of the network because our investment continues to roll out 4G network.

We also differentiate through content, which we're now putting two major content, HOOQ and Viu. And use that to differentiate other than price, plus also other services like now we put on T-Cash, our MFS service, mobile financial services, and M2M, and obviously we need our dealers support to continue to push ahead against the competition. I think those are the things I'd add on. Thank you.

Okay. Thank you very much everyone.

Thank you. We will now move to our next question, which comes from Gopa Kumar from Nomura. Your line is open, please go ahead.

Yes, hi. Thanks for the opportunity. Sorry, I missed the early part of the call so I'm not sure if these questions have been answered already. So apologies if they have been. So three questions.

Firstly, can you talk a little bit on the data monetization in mobile. It seems like on a price per GB this has been coming off at double-digits. So what are your thoughts on this in 2017? Currently you are at some premium to XL Indosat but given the data focus is it realistic to expect this premium to come down and narrow in 2017?

Second, is it seems like there is a lot of noise on competitors selectively looking at areas outside Java. Have you seen any traction on that? Your subscriber addition is quite strong, but in terms of your revenues, if there are any -- is there any traction that you have seen further competition on those areas?

Lastly, can you remind me why were the taxes lower in 4Q? Thank you.

So Gopa, this is Edward again. Let me try to answer your question on data monetization. I think today all the operators, especially now on 4G, are giving substantial bonuses airtime on 4G. In terms of street price, obviously you see us very aggressive but at the end of the day, the RPM and actually the true value, we give free airtime on fringe hours. We also give packages for usage on video services.

But our core access to Internet and core access data is still what we charge at a premium at least twice if not more than the competitors -- sorry, Telkomsel's competitors. So actually, we are actually monetizing. For that reason, also on our network if you notice in most of the study in JP Morgan, we won in most areas being the top best network in terms of uploading and downloading. So we were -- we are still (inaudible) position to continue to win subscribers and that's probably one reason in last Q4 we have more subscribers than others.

Now is the competition aggressive question, I think they are continuing to be aggressive. You might notice that people are rolling out 4G, not all of them are rolling out. One of the operator are quite aggressive, so we are actually watching them closely. We are also improving our own 4G roll out as well as also how to manage our digital content services to bundle along. So I think that will answer that part. On taxes --

Let me just clarify the question again. You asked why the taxes were lower in the fourth quarter compared to the third quarter.

Yes.

Okay. Yes, I think if you look at the -- on the full year perspective there shouldn't be any unique trend. But the fact was it is true that the net income slightly declined in the fourth quarter. But if you look at in total there shouldn't be any such unique trend.

Sorry, my question was on taxes; income tax. I can take it offline as well.

So, I have just a follow-up question on the data; so, for 2017 are you expecting data pricing to come down further for Telkomsel?

Gopa, this is Edward. I think it all depends on competition, right. But, so far, I watch in the first two months, I notice my competitor has started to withdraw bonuses. I think they have not dropped their price so, if they continue that way, then I think it's good news. But I think you want us to be competitive anyway, right, so we will watch the competitor and see what they do and then we will discuss with you at the next quarter. So far, as I say, in the first two months I watch my competition; they've been quite sensible, they've withdrawn some of their bonuses and they keep their price as it is.

You don't think there is any real need to narrow the premium that is there currently?

Not what we saw, because we are still really most (inaudible) the best network in data download and uplink. We are still continuing to rollout our 4G, so we think that we still can keep that premium until we watch what the competition does.

All right, thank you so much.

Thank you so much Gopa. Miang Chuen Koh, Goldman Sachs. Your line is open, please go ahead.

Hello, a couple of questions from me. The first is on Telkomsel; so, we notice some of the cost items actually rising quite significantly on a quarter to quarter basis in the fourth Q, so I think you have explained a bit on the personnel expenses, but can you also talk a bit about cost of services, that has ran up marketing and in particular (inaudible) quite a lot more season, than what was seasonally observed in 2015? So, can you describe what those marketing campaigns were and expectations for 2017?

Second question is on margins for IndiHome; is it possible you can disclose whether margins actually improve in the fourth quarter versus the quarter given the increase in ARPU and higher subs and, if so, any numbers you can share any expectations for 2017, please? Thank you.

Hi Mr. Koh, Heri Supriadi from Telkomsel here. On the cost side, I think you address to costs that we need to explain to you. First, on the personnel costs. Yes, it has increased in the fourth quarter or year-on-year. First, the number of employees also drives the costs. The second, also it is performance related cost, because we already see that the performance is quite significantly higher compared to our target. So we're giving the bonus in line with the performance. The third is ERP, in the fourth quarter it's around Rp150 Bn, it drives the cost of personnel.

In the marketing expenses, there are two drivers for this one; first there's marketing campaign for 4G related to our effort to try to encourage people using 4G. And then the second is in line, actually, with our performance which you can see that the growth in revenue is about 14%, of course the (inaudible) performance fee is supposed to be in line with that one. This combined altogether brings to the cost of the marketing increase about 20% plus. This is the situation.

Sorry, specifically what kind of -- if you don't mind me jumping in here, I'm just wondering whether a bit more color on what exactly those marketing campaigns were and how that would actually translate in 2017, will that continue?

No, we see quite traction in fourth quarter of 2016, we see the opportunity. So we do some initiative on that one. We return back to the normal, I think, program in first quarter of 2017. Okay.

Yes. On the second question, the ARPU of IndiHome increased to around IDR340,000 by end of 2016. The margin is not as high as we expect, but we're still working hard to keep improving the margin and the expectation for 2017 is the ARPU would be to increase a little bit given the new revenue streams that we are introducing as part of the IndiHome package.

Do we expect margins will be improved in 2017 for IndiHome and, if possible, any sense of where those EBITDA margins may be?

We still don't disclose the EBITDA margin per se, but along with the improvement in ARPU, of course you expect the margin would be improved as well.

Okay, thank you.

Thank you so much. We will now move to our next questions. It comes from Hussaini Saifee from Citigroup. Your line is open, please go ahead.

Hi, thanks for the call. Three questions from me. Firstly, on the dividend, so you are expecting the full-year dividends -- you said that the full-year dividend would be 60%, so will it be inclusive of the interim dividend you paid earlier or it will be on top of that? That's question number one.

Second question is on the CapEx breakdown for FY2017. So, is it possible for you to guide how much you will spend on Telkomsel and on the fixed line?

Third question is on the IndiHome subs additions. So, 1.3 million to 1.5 million additional subscribers; will it be through upgrading the existing ADSL subscribers or will you get the subscribers from the competitors or the new additions?

Just finally on the spectrum auction, so what's your thoughts on the spectrum auctions in FY2017, is it possible or will it drag to 2018? Thank you.

Okay, so the dividend, the 60% figure I mentioned earlier was like a safe assumption and it would include the already paid dividend interim from last year, from end of 2016; but then again, if the government decides for us to pay a higher dividend then we have no issue with that.

For the CapEx breakdown, about 50% to 60% of our CapEx this year would be for mobile and mobile-related business and for fixed line around 25% to 30%.

Then, for the additional subscribers of IndiHome, roughly it will be 50-50 from upgrading the existing ADSL customers or subscribers and from adding new customers from competitors.

Hi Hussaini, this is Riri from Telkomsel. On the spectrum auction, last week the government just published a public consultation paper and we did respond with a paper with our own feedback and we expect that the auction will be held sometime in Q2.

Okay, thanks for that. Just on the CapEx, so 50% to 60% on mobiles, 25% to 30% on fixed, where will you spend the remaining portion?

For other businesses, including for the recapitalization of our subsidiaries and towers.

Noted, thank you very much.

Thank you. Wei Shi Wu, BNP. Your line is open, please go ahead.

Thank you very much. Firstly, on the 2016 CapEx, I couldn't find a breakdown of the CapEx into Telkomsel versus Telkom, so can you provide the breakdown please for 2016?

Is there any -- I know there is a total CapEx number provided, does that include the intangibles and if it does then what is the intangible number for 2016?

Then the other question related to this is the CapEx has been increasing over the past couple of years, but you've actually managed to keep your depreciation amortization flat in 2016; so, can you provide a little bit more detail as to what was happening there and what we can expect going to 2017 please? Thank you.

Okay, the breakdown of CapEx in 2016 for Telkomsel around 41% and for Telkom itself around 37.5% and for other subsidiaries the remaining amount, about 20%, 21%.

Okay, so the flat depreciation that you saw was basically because there was an accelerated depreciation in 2015 related to the flexi products. So, if we take that out, the depreciation in 2016 would have been increased.

Thank you. And just a follow-up on my first question. The IDR29.2 trillion CapEx number in 2016, does that include the additional intangibles and can you provide the 2016 additional intangible number?

No, it doesn't include that.

Would you have the number on-hand or should I follow-up later on offline?

Yes, we'll follow-up offline later.

Thank you very much.

Thanks.

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

Jasmin, are there any more questions? Is there any more question, Jasmin?

[Faisal Smith], JP Morgan. Your line is open, please go ahead.

Hi, Faisal Smith here from JP Morgan. Can you quickly explain what lead to the significant increase in other expenses and the decrease in other income please? Thanks.

Yes, mainly it came from a couple of things. Firstly, there was a VAT tax that we have to pay around IDR667 billion in the fourth quarter and there was also the difference between the realization of the sale of scrap copper from 2016 and 2015. Those were the two factors.

Do you have the amount? So, the majority of the other income is from the sale of scrap copper in 2015, is that correct?

Yes, I think the amount from the scrap copper is around IDR600 billion, about IDR650 billion difference.

Thank you.

(Operator Instructions). [June Soper], Goldman Sachs. Your line is open, please go ahead.

Hi, thank you for your time, I just had two questions. So, firstly, I wanted to follow up on the 2016 CapEx. What percentage did you say is for Telkomsel versus Telkom? I just didn't hear really clearly

Then also secondly, I just wanted to ask whether -- what trend you're expecting for legacy revenues going in 2017, particularly voice; do you expect a decline or do you still expect to be able to defend that next year? Thank you.

Just one second. Okay, for Telkomsel it was 41% and for Telkom it was 37.5% in 2016.

Okay, second question for legacy revenue, what is the trend for 2017? Legacy was coming from voice and SMS. In voice, we believe we can sustain the revenue as we achieved in 2016 by continuing to seize seasonal opportunity and by partial monetizing. In SMS, we believe as we also experienced in the last three years that SMS traffic already declined about 16% per years. We believe that the trend will continue; so, to some extent, we try to monetizing it to manage the decline to achieve our targets. That's the situation of legacy. Definitely we always see that the opportunity coming from the connection, which is from broadband and digital service, as mentioned by my colleague, Edward.

Okay, thank you so much.

Thank you so much. We will now move to our next questions. Coming from Henry (inaudible). Your line is open, please go ahead.

Hi, thank you for your presentation, but I have a couple of questions. Firstly, on IndiHome, can you share the geographical breakdown of the expansion of the 1.3 million to 1.5 million new customers? Is it going to be mainly in Greater Jakarta or in other cities as well?

Secondly, do you mind commenting on the recent news that KPPU is investigating on the monopoly allegation on the bundling between Telkom's fixed line and IndiHome, the triple play? Thank you.

On geographical breakdown is -- we go pretty much across Indonesia, so there's no specific target that we purposely set out.

The second question?

Yes, Pak Heri. According to the KPPU investigation, now is undertaking in progress now, but I apologize we cannot disclose any confidential matters here. Thank you.

Alright, noted. Thank you.

Thank you. We will now move to our next questions. Come from Wei Shi Wu from BNP. Your line is open, please go ahead.

Hi, so on the 2016 CapEx question earlier, so if I assume that 40% of 2016 CapEx was spent at Telkomsel, that would have implied quite a big drop in year-on-year CapEx for the mobile business. So, was there anything -- what was the driver for the big drop in CapEx and is that a trend that we should continue to see going into 2017?

On the Telkomsel side there is no decline in CapEx. We spend about IDR13 trillion last year; previous year we spent about IDR12.9 trillion also. It is similar to the previous year's numbers so it is not dropping at all. You also can see from the report last year we did 25,000 plus of new BTS, so I think we still commit to the investment.

The CapEx intensity has dropped off though, so it was IDR13 trillion in 2015 would have been about 17% and then at IDR12 trillion it's closer to 14%, so can we expect the intensity to continue to drop off in 2017%.

I think that the difference is only on the price per unit of the BTS and so on as we also have the -- from time to time the competitive price depending on the market price of the BTS. I think the number that drives us capacity, quality and coverage that bring us to the CapEx commitment. We can spend at least near that number and if there's an opportunity we can increase the number, so there's no decline in commitment; in fact, any opportunity we will take it.

All right, thank you very much.

We will now move to our last question, coming from Mohammad Faris, from Kresna Securities. Your line is open, please go ahead.

Okay, I just have one question, what kind of strategy that Telkom will apply to maintain for its revenue? Do you expect to increase the pricing on the voice or how? Thank you.

Well, perhaps I can start on the fixed line business first. I think we will continue to monetize the existing homes-passed to add more customers and, at the same time, we are also implementing cost efficiency program on the fixed line business. At the same time, we are introducing new revenue stream from advertisement from add-on features and so on.

Okay, I think I can add some more colors on this one. In Telkomsel, yes you may aware actually that data consumption in Indonesia compared to our peers in the region is still relatively low and also the increase in payload we experience last year 95% year-on-year, this year also the figure even higher. We still see the opportunity, which was driven by the penetration of the smartphone and also I think a more young population using the smartphone, which will increase also the need for data (inaudible).

We believe the data will be the main driver for the revenue growth. We will try to optimizing the opportunity along we try also, as I explained before, to monetizing this data growth becoming the driver for the revenue for sustainability.

Hi, this is Edward. Just to add on I think basically we are seeing that today data is still -- Indonesia is a big country and data -- access to internet is very important. And more and more people go online, whether (inaudible), whether it's SME or whether as individual.

So we believe data consumption can go up, firstly. The usage year-on-year growth is about 100% anyway, so we will see that as a good avenue to increase our revenue.

More importantly, if competition is not aggressive on prices and then I see a big increased cup of data revenue.

Obviously, we are also building new digital content versus, for example, we hope our customers buy one movie a month. We will get some new revenue from that. In addition, we are looking at mobile financial services or transaction, today is small business but over time I think it will pick up.

The other avenue we are looking is end-to-end and big data where we can grow some revenue initially. Okay, it will be small but, over time, I think it can be a new growth engine for us. That's all I can add. Thank you.

Jasmine, so can we end the Q&A session?

Sure. We will now handover the call back to you Mr. Andi. Thank you.

Thank you everyone for participating into this call. We apologize for those whose questions could not be addressed yet. If you have any further questions, please do not hesitate to contact us directly. Thank you everyone.

This concludes today's call. Thank you for your participation; you may now disconnect.