Telkom Indonesia (Persero) Tbk PT (TLK) 2017 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to Telkom Indonesia Full Year 2017 Results Conference Call. (Operator Instructions) I must advise that this conference is being recorded today, Thursday, the 22nd of March, 2018.

I would like to hand the conference over to your speaker today, Mr. Andi Setiawan, the Vice President of Investor Relations of PT Telkom Indonesia.

Ladies and gentlemen, welcome to PT Telkom Indonesia Conference Call for the full year 2017 results. We released our results on 14 of March 2018, and the reports are available on our website at 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 7 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 the Telkom's Board of Directors who are joining with us today: Mr. Alex Sinaga as President, Director and Chief Executive Officer; Mr. Harry M. Zen as Finance Director; Mr. Herdy Harman as Human Capital Management Director; Mr. Zulhelfi Abidin as Network & IT Solutions Director; Mr. Dian Rachmawan as Enterprise & Business Service Director; Mr. Mas'ud Khamid as Consumer Service Director; Mr. Abdus Somad Arief as Wholesale & International Service Director; and Mr. David Bangun as Digital & Strategic Portfolio Director. Also present are the Board of Directors of Telkomsel; Mr. Ririek Adriansyah as President Director; Mr. Heri Supriadi as Finance Director; and Mr. Alistair Johnston as Marketing Director.

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

Thank you, Andi. Good afternoon, ladies and gentlemen. Welcome to our conference call for the full year 2017 results. We really appreciate your participation in this call.

Ladies and gentlemen, for the full year 2017, Telkom recorded strong set of result with 10.2% revenue growth, 8.6% EBITDA growth and 14.4% net income growth. In terms of profitability, net income margin went up to 17.3% from 16.6% in 2016, while EBITDA margin remained high at 50.4%.

Our revenue growth was driven by Data, Internet and IT Service segment, which sharply grew by 28.7%, with the segment's contribution to total revenue reached 43.2%, significantly increased from 36.9% in 2016.

On the other hand, we successfully managed our total expense, which increased by 9.3%, with operation and maintenance expenses increased by 17.1% in line with continuous broadband infrastructure development, both in cellular and fixed line businesses.

Ladies and gentlemen, in cellular business, despite challenges from declining legacy businesses, Telkomsel could maintain its profitability as EBITDA margin slightly increased to 57.5% from 57.4% previously, with net income margin increased to 32.6% from 32.5%. It reflected our serious efforts on expense management. Revenue grew by 7.5%, with EBITDA and net income grew by 7.7% and 7.8% year-on-year respectively. The revenue growth was driven by Digital Business, which increased by 28.7% year-on-year. Digital Business is getting more important as it contributed to 42.3% of total Telkomsel revenues increased from 35.4% a year ago. Demand for Data was strong in line with fast-growing smartphone adoption. Our Data traffic jumped 126.2%, with smartphone users grew by 30.9% to 108.2 million or 55.1% of our customer base.

On the other hand, legacy businesses decreased by 4.1% year-on-year, as more Data users used Over the Top services. Voice revenue, however, still grew slightly by 0.2%, despite traffic dropping by 8.6%. This was due to successful customer migration to Voice packages, implementation of smart cluster-based pricing, sharp market segmentation and superior network quality and coverage.

In the meantime, SMS revenue declined by 17.8%, with traffic fell by 25.9%. By the end of 2017, Telkomsel's customer base reached 196.3 million, increased by 12.9%. In order to maintain excellent mobile broadband experience, we deployed more than 31,600 new BTSs during 2017. All were 3G and 4G BTSs. In total, our BTS on-air reached 160,700 units and around 70% were 3G and 4G BTSs, which reflected our focus to grow Digital Business. This is in line with our commitment to always have a leading network supply. And going forward, our network development focus will be on 4G BTSs, as we are committed to maintain excellent customer experience.

In attempt to prevent SIM card misuse, government required SIM registration with a valid and family card starting from October 31, 2017, until February 28, 2018. Based on Data from the Ministry of Communication and Information, by the end of February, Telkomsel has registered 134 million SIM cards. For the remaining unregistered subscribers, the SIM card registration is still ongoing before totally blocked by 1st of May. We believe the prepaid SIM card registration will have positive impact to the industry as we expect churn rate will reduce and the competition should be healthier.

Ladies and gentlemen, let me now share about fixed line side of our business. On the flagship fixed broadband service, IndiHome, we kept accelerating the rollout so that we reached 2.6 -- sorry, 2.96 million total subscribers by the end of December 2017, or increased 82.6% year-on-year. This was achieved on the back of significant improvement in sales and technician productivity and enhanced IT system that help us to manage our resources more effectively.

In the fourth quarter, net additional lines reached 626,000 compared to 323,000 in the third quarter and 237,000 in the second quarter. We expect that we will continue this positive trend in the future.

And revenue from IndiHome business reached IDR 8.2 trillion, sharply increased by 48.1% year-on-year. In enterprise market, Telkom remain focused on provision of integrated ICT solution with various smart-enabled platform for enterprise segment, which includes corporate, government and small, medium enterprise. We sell 1,400 corporate clients from various industry. 940 clients from central government, local government and government agencies and 300,000 SME clients.

For the year of 2017, enterprise business recorded IDR 19.1 trillion in revenue, significantly grew by 21% year-on-year. Corporate segment contributed 58% to enterprise total revenue, while government segment contributed 23% and remaining was from SME.

The 3 segments offer a sizable opportunity to be explored further. The corporate segment, opportunities coming from current penetration of integrated ICT service among Indonesian corporate that is still low coupled with the rising needs to digitalize business process. While in the government segment, we estimate that annual IT-related spending of Indonesia government, this year is around IDR 15 trillion.

Finally, with around 3.7 million SMEs identified in our database, with very low ICT service adoption, Telkom has a large potential to grow in SME segment.

We also have wholesale and international business, which offer domestic and international traffic carrier, wholesale connectivity, towers, satellite as well as the telecommunication and infrastructure-managed service. For 2017, wholesale and international business segment contributed revenue of IDR 7.4 trillion, it grew 26.8% year-on-year.

In regards with wholesale and international business to create sustainable value for Telkom Group and its customer, by becoming a global digital hub. We continue to expand our network infrastructure. In addition to the completed SEA-ME-WE 5 and SEA-US submarine cable system, Indonesia Global Gateway submarine cable project, or IGG, that will connect SEA-ME-WE-5 and SEA-US has reached 62% progress and is expected to commence operation in third quarter 2018.

We are also in the progress of manufacturing our new Telkom-4 satellite called Merah Putih, or red and white, which is the color of Indonesian flag. As per end of December 2017, the manufacturing progress has reached 75%. Satellite Merah Putih is expected to be launched by mid-2018.

Let me now tell about the progress of our network modernization. As a part of our transformation program, we continue to modernize our switching centers from copper-base to fiber-base. In 2017, 282 copper-based switching centers have been modernized. So in total, we already modernized 465, out of 1,234 copper-based switching centers across Indonesia. By the time the modernization is completed in 2021, all of our switching centers will be on fiber.

Last but not least, in the fourth quarter 2017, Telkom acquired 3 companies, namely PT Bosnet Distribution Indonesia, an e-logistic company; PT Nutech Integrasi, an e-transportation service; and TS Global Network Bhd, a Malaysia-based satellite communication service company. This acquisition were part of our strategy to transform Telkom to become a digital telco company.

Now let me share our guidance for the full year of 2018. We expect Telkomsel to grow in line with or better than industry rate. Cellular industry is expected to grow at around mid-single-digit. While Telkom is expected to grow mid to high single digit, supported by fast-growing fixed line businesses. EBITDA and net income margin are expected to decline in line with revenue shift towards digital business and continued infrastructure development. Capital expenditure for the group is expected at around 25% of revenue, with investment focused on mobile and fixed broadband infrastructure.

That is ending of my remarks. Thank you.

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

(Operator Instructions) First question comes from the line of Piyush Choudhary of HSBC Singapore.

Can you hear me?

Yes, please.

Yes. Several questions. Firstly on mobile. What is your expectation or outlook on the data pricing, as we saw significant price erosion of 40% plus this year. So do you expect price competition to remain high in 2018? Secondly, on prepaid SIM registration, can you provide us an update on the trends in March? And what are your expectations after 1st May 2018? Should we see significant tone down in starter pack phenomena in the marketplace once the SIM registration concludes? And thirdly, on your fixed line business, on IndiHome, can you update on the current home passed and connected ports, and what's your rollout objectives by 2020 over here?

So on the mobile data competition, yes, I think it's true to say competition currently is quite intense, which has led to a reduction in RPMB really for all operators. And I think it's pretty clear. There's been a price war in the market, especially in the kind of starter pack market. I think, outlook is probably an improving environment. I think the registration process will probably improve things. It will certainly reduce rotational churn. It will help customers going back to more traditional recharge and purchasing packages directly. So I think, we expect things in the second half of 2018 to be a bit more favorable.

Yes. On the IndiHome question, currently, the homes-passed is 18.7 million, which represented smaller increase, if you compare with what we have in 2016 because we started to focus more on building the access in 2017. For this year, we are targeting to get additional customers of around 1.5 million to 1.7 million new customers.

Sure. And can I get your comments on the IndiHome ARPU because we have seen a significant erosion on the ARPU, probably due to the dual-play penetration. But what's the kind of ARPU outlook? And any color on the IndiHome EBITDA margin? And where you are seeing them notching up?

Yes. To be honest, it's a bit difficult to project the ARPU outlook because as you rightly said, it's really driven on the composition of the 3P and 2P. On -- in terms of the EBITDA margin, as we have gained significant economic scale in the business, currently we believe the EBITDA margins around 25% of the business.

And your expectation, like with the high penetration this should go above average of the fixed line business? Would that be a reasonable expectation?

You're talking about the EBITDA margin? Expectation of the EBITDA margin?

Yes. IndiHome. Yes. Of the IndiHome...

Yes. I think, it would be this -- 2017 was really the -- kind of like the first year when the business really took off. So I think, it'll be good if we can stabilize the margin around this current level. This year, I believe -- for 2018.

Next question comes from the line of Colin McCallum of Cr�dit Suisse.

Two questions. First of all is for Pak Harry. One more just -- can you just clarify for the one, any one-off items on the costs side in the fourth quarter? And second, then I can have a related point, it looked as if the charge on accounts receivable had increased in fourth quarter. I wanted to know if there was a kind of change in your policy state on recognition of accounts receivable, have they contributed to that? Or is it actually an increase in bad debt, and if so, what's the kind of driver there? So that was the questions for Pak Harry. My second question was for Alistair on the services side. What's the current status on the 2300 rollout? And what are you seeing as a result of that in terms of network performance versus your competitors? And is that, when might that give you kind of enough confidence to redevelop more of a premium on the data side and I guess be forced to take part ways, I suppose, in the current price competition. I get on your timing of overall price increase, everyone, but can you actually kind of reestablish more of a premium data? When would you feel confident to do that from the network side?

Okay. They were 3 items. One-off items in the fourth quarter. First of all is the provisioning for the receivables, which amounted to IDR 590 billion. Secondly, there's additional benefit in terms related to the pension benefit. And this is due to the new regulation issued by OJK in the middle of 2017. The amount was IDR 650 billion. And the other one is final VAT related to the asset revaluation in line with the government program that we participated in 2015. The amount was IDR 540 billion. So in terms of the provision of account receivables, it's more towards the kind of the change in our policy to be more prudent, which reflects the historical pattern of the collection for the collectability of our customers. But if you calculate the amount that we book in 2017, it's still very low. It's still only about 1.1% of the total group's revenue. And if you compare with other global operators, it's really very -- on the low side.

Colin, Heri Supriadi of Telkomsel. I would like to, I think, update you on the utilization of 2300 spectrum. We already deployed about 1,000 of our BTS in that network right now. We do expect -- this year we're going to build another over 6,000 this year. What we can expect from benefits that we can get from the efficiency is, we -- it also over the long run, we can have the efficiency with a 15% of the net EBITDA that we need to build -- to address the demand of the traffic. In addition to that one, definitely, we can develop more services with a more superior quality of network. And AJ, you're going to, I think, continue this.

Yes. So I mean, I think, in terms of network performance versus competitors, I think network performance is always our sort of differentiating characteristic. So we spend a lot of time measuring it, and a lot of time at managing our network, so that we stay ahead. I mean, some of these measures are published. When people like OpenSignal published and city-by-city network comparisons, and in general, we top the charts if you like in all of those cities. And we also do our sales a lot more detailed measurement and research to make sure that city by city, cluster by cluster, we have the best network. And certainly, over the end of last year, we had 28,000 4G BTS. And as Harry said, I think the 2300 is only going to accelerate that quality advantage. In terms of pricing, we still have a pricing premium on Data. So by the end of 2017, our yield was IDR 14 per MB. The XL for comparison were about IDR 10. And -- but if you look back to the end of 2016, our yield was probably more like IDR 20. And XL was more like IDR 12. So it's true to say that the yield premium has reduced, and that's been an intentional act by us to make sure that we protect our market share, and in particular, our data market share. And in terms of looking ahead, I don't think we'll be able to return to premium of double the price of XL, but I do think we'll be able to maintain a premium. And as I said in my earlier comment, I think, the market situation will improve in the second half of the year. And partly, as a result of the price was running its course, but I think partly as well because of the outcome of the registration.

Next question comes from the line of Hussani Saifee of Citigroup.

Just 2 questions for me. Can you please comment on the competition in Java versus non-Java? Do you see the competition in non-Java at a higher clip compared to Java? The second question is linked to the CapEx. Is it possible for you to give the guidance on Telkomsel versus nonmobile CapEx?

Okay. So yes, I mean, I think competition to be -- probably honest with you, is intense everywhere. Obviously, we have high market share outside Java. And that's, obviously, an opportunity for our competitors to attack that. And they certainly have done that. What they've tended to do is selected certain cities, let's say in Kalimantan and Sumatera, which they build up the network and they target us. So we've had to react to that to defend our position. But the other way to look at it is within Java, our market share on average is about 35% or a little more. So actually, we are in a position to attack quite heavily in areas where our market share is less than 50%. So it's a game of loss and gain, I guess, but overall -- our overall performance was that we gained market share. I think, with some of the tools we have, we have the ability as you know, to price cluster by cluster. So we can be quite specific to the local market situation. So if we have to defend a city, we can. If we find a city or a cluster that we want to attack in, we can do that as well.

Yes. In terms of CapEx, last year about 55% of the total CapEx went to the mobile-related activities. Fixed line was around 40% and the remaining 5% was for other businesses.

Can I have the guidance -- the same guidance for 2018, the CapEx breakdown?

For 2018, for mobile related, it's in the range of 50% to 55%, and around the same about 40% for fixed business. And around 5% to 10% for others.

Yes. If I can chip in one more question. I see that last year you had upstreamed cash or dividends from Telkomsel to the Telkom level. What's your plan linked to the dividends, which you got from Telkomsel? Will it be towards the CapEx, or it could be used for capital management?

Mostly for CapEx and partially also for the upcoming dividend that would be announced at our upcoming AGM.

Next question comes from the line of Miang Chuen Koh of Goldman Sachs.

Couple of questions for me. One is on Telkomsel. I just want to understand is your mobile revenue guidance already take into account a recovery in terms of competition or stabilization of competition in the second half of this year? And second question is on the non-Telkomsel business. So if we look in the fourth quarter, revenue went up -- went down a lot Q-o-Q, whereas the O&M costs went up dramatically Q-o-Q. So the ex Telkomsel business as you appear to make a lot on the operating income level, can we understand why this happened and how this may change going forward?

First, on the revenue recovery in the second half of this year that we expect. As you know, the SIM card registration already taking place. And we believe this for some time up to second quarter of this year, going to be some adjustment because of behavioral changed in the market, as also experienced by many countries, so it's also going to -- we believe it's going to happen in Indonesia. After -- so as mentioned by my colleague, Alistair, we expect it will be kind of benign competition. And then we can stabilize the price or yield, and we expect with more rational behavior, we can get a better result at the second half of the year.

Okay. On the Q-on-Q nonmobile revenue and O&M, see, on the nonmobile revenue enterprise business, which doesn't have a specific pattern on Q-on-Q basis. Because the nature of the business, it really -- it is really different with -- if you compare with the retail business as in IndiHome or Telkomsel. So in fourth quarter last year, our enterprise business, if you compare with the third quarter, the revenue dropped by 40%. But it doesn't mean that we did not get more contracts in fourth quarter. It could be that we get contracts, but some of the revenue would not be recognized in the fourth quarter. Thus, it takes time to deliver all the surfaces in the contract. So some of the revenues can only be booked in the first quarter or the second quarter in the following year. I think, the more fair to see it is to look at it as a year-on-year basis for the end, which is last year. Our enterprise business grew 21% (corrected by company after the call) year-on-year compared to 2016. And this year, we estimate enterprise would be around 20% to 25% year-on-year. So in terms of O&M, particularly to support the growth in IndiHome, there was an increase in the outsourcing expense, which is for the technician and also for the sales force that we used to support IndiHome. So then the O&M in nonmobile, going forward, would be around 25% to 30% of the nonmobile revenue, with this outsourcing expense that we need to have to support the growth of IndiHome.

Okay. Understood. Can you, however, clarify the Telkomsel guidance side? Just to be clear, so we are expecting more benign competition in the second half. So has that been priced into what you factor into your guidance for the full year, or not yet?

What we may see or previously mention about the mid-single-digit of growth, it is already considering the 3% that we expect going to happen in the second half of this year. But this includes our cumulative result for the year-end.

Next question is from Chen Foong Choong of CIMB.

Foong from CIMB. Three questions for me. Firstly, on the mobile side. I just want to ask whether we are comfortable with our position in the data business now. I've seen some revisions in your packages in terms of the quotas and also in the below the line, you've gone into the lower denomination packages. So I just want to understand whether -- do we think that the premium data -- the yield premiums now are appropriate, or do we think that we need to narrow that further? And how do we intend to grow in line or above the industry, given the fact that this year we're going to see the decline in Voice revenues for Telkomsel, whereas I think your peers are probably a little bit more advanced in terms of that phenomenon. Number two, regarding the margins for Telkomsel, could you give us a bit of guidance on the trending for this year? I know that you do have the 2300 megahertz spectrum fees that you need to incur. But if you exclude that, how do we see the margins trending this year? And thirdly, on the CapEx for mobile. How does that big number for new base stations for this year? Those are my 3 questions.

So I think on the data business, I think, overall probably not comfortable with the absolute level of yield in the market. I think everyone's yield has deteriorated quite significantly because of the price war. So I think, we would be wanting to see some improvement in that overall. In terms of our relative position versus the competition, it's probably about right at this point. I think, if you look at costs last year, the first part of last year, we very much tried to maintain a larger pricing premium and to try and stop the market sending into a price war. And really in the second half of the year, we lowered our prices. And you're quite right, we entered into different pricing segments, and we attacked that market much more. So in quarter 4, we took about 70% of the growth in the data market. And so, I think, yes, so in summary, I think, in terms of our relative pricing and the composition of our product offers at the moment, I think, pretty happy. But I think, overall, as the industry, as a whole, really needs to see prices improve. In terms of growth, I mean, we've outperformed this market for the past 6 years. We�ve outperformed the market last year. So we'll continue to -- had to do what we do, which is to invest very heavily in our networks, really have that differentiation on the holdings and then offer a great product. So we're pretty confident that we can continue to -- well, be at the level or slightly above the market.

To the margin of that we expect as mentioned before, this can decline about 1% to 2% compared to last year due to most of the revenues come from the digital that provide us with lower margin that is the situation. And then about the CapEx, we do expect at least we're going to add about 22,000 of new BTS. All of the BTS going to be in the 4G network.

If I already -- can I just follow-up on that. So you said a 1 to 2 percentage point margin erosion this year. Does that include the 2300 megahertz annual fees?

Yes. Yes, Pak. It is include annual fees of 2300.

Okay. And the number of new base stations you said 22,000. So you are expecting lower number of base stations to be added this year compared to last year. Is that right? Because you added 31,000.

Yes. Yes. Because I think most of the BTS going to be adding quality and coverage. We also have the flexibility of it because we have already new contract with the -- I think offer about price of network element right now. So with the capacity of 16% to revenue CapEx that we already allocated, actually we have flexibility whenever we find the demand is there we can extend the developments of new network.

Next question is from the line of Wei-Shi Wu of BNP.

It's just a follow-up on the CapEx outlook. I know that you said your network modernization will complete in 2020. Does that mean that we should expect good CapEx, especially for the mobile business to remain high in terms of CapEx intensity. Would it be in the high teens on to 2020?

Okay. Yes, I believe the -- so because right now, the number of 4G network we have about -- end of the year about 28,000. If you compare also in 3G, we have over 90,000. And most of the traffic now carried by 4G. We do expect with the current consumption in Indonesia about 1.7 last year, 1.7 gig per consumer or maybe in the end of the year about 2.4 gig, it is still quite low compared to, such as Thailand about 7.5 gig. We believe this demand continue going to be increased at least in the next 2 years. But also, it's going to be kind of driving for us to continue to build our network.

Next question is from the line of Gopakumar of Nomura.

Just to confirm the guidance so that I call it right, the mid- to high single-digit revenue growth, is that for the Telkom group revenue or for Telkomsel? And also kindly quantify the EBITDA margin decline that you're expecting for 2018 at group level? Second is a general question on competition. You mentioned that you're expecting trends to improve in 1H, in the second half of this year. Would it mean that you are open to increasing the prices because you are the market leader, or do you expect the #2, #3 telcos to increase prices because of the unsustainable yield? Just wondering what's the signaling that you're going to give.

Yes, the mid- to high revenue growth is for all group, so for the entire Telkom Group. And then in terms of the EBITDA margin outlook, in terms of overall group would be a couple of points -- a couple of percent decline.

To take on the second part, on the competition, I mean, obviously as market leader, we will look to price up, improving our pricing if we can. However, we won't do that at the expense of that market share. So I think, it'll be a case of monitoring the market -- market condition very closely. And as we see signs that the competitive environment is improving, we will, of course, take the initiatives to price up. But as I say, we won't continue to do that, if we feel that we're going to be losing market share.

So just a follow-up question. At this particular stage after you undertook this multiple price cuts on the startup price on data, are you happy with your current market share or not, across Java and ex Java, again?

Yes, I mean, we're happy that in 2017 as a whole, we outperformed the market. And obviously, that would be our objective to continue to do that really in line with the guidance. And obviously happy, it's a relative thing. As I said before, I think, the market could be healthier overall. I think the price war has been quite destructive of value. And our hope and expectation is that partly as a result of registration, but partly as a result of sensible pricing decisions at the market and the market environment improves.

Okay. So if I can squeeze in just one question. On the CapEx, would you be able to give a split of how much you plan to rollout in Java and ex Java, whether it is in terms of the IDR -- I mean, dollar money or in terms of the number of base stations in 2018?

I'll give you the guidance on the proportion of Java and outside Java, it is about 55% going to be outside Java, because I think we did extend the coverage in -- outside of Java right now and about -- especially for BTS.

Next question is from the line of Rama Maruvada of Daiwa.

I have 2 questions. Firstly, with regards to your staff expenses. That seems to be relatively flat for this year, but historically, this is a line item that saw significant increases. Could you talk through on this aspect, whether do you expect a significant catch up in 2018 or what's going on here? The second one is with your CapEx to depreciation. Your depreciation run rate is way below your capital expenditure, which has increased again significantly in the past few years. So just wondering, if you could provide some forward guidance on how you expect depreciation, I think, group level to trend into 2018 and 2019.

Okay. On the first question, I think there were 2 contributing factors here: first is in 2017, we have some more people retiring as compared to in 2016. So we have around 1,400 people retire naturally in 2017. As the same number in 2016 was around 1,000 or 1,100. And secondly, in 2017, we did not do any ERP, whilst we did that in 2016.

Okay. But can you clarify on that? Even if you look at Telkomsel's numbers, you see a similar trend, but I think, there's a increase in the absolute headcount. So my question is, is there any catch-up that is due in 2018 on the staffing expenses?

Okay. Especially in Telkomsel, there is 2 nonrecurring happened in 2017. First, in early retirement, we did early retirement in 2016. So it is -- make us slightly lower in 2017. And the second performance-related salary, in which -- in -- back 2016, we have a very extraordinary performance for this kind of variable, so it is becoming quite low. In this year, again, some costs related to variable, of course, which is related to performance, but the extraordinary we did not expect any new extraordinary event.

In terms of the CapEx depreciation ratio, we do not expect that it would change from what we have in 2017. So in 2017, the ratio is around 1.6 times. CapEx was about IDR 33 trillion and depreciation about IDR 20 trillion to IDR 21 trillion. So we do not expect that to significantly change, especially this year.

And -- okay. If you can squeeze a final one. In terms of your network, could you talk about what proportion of your 4G cell sites are fiberized on the backhaul?

At least about 53% right now fiberized.

Next question comes from the line of Norman Choong of CLSA.

I have 3 questions. First is regarding to the SIM registration rate. I understand that as of February 28, the SIM registration rate is only 70%. Do you mind to explain if you know that 30%, if that's nonregistration, would that be an impact to your revenue? Or do you think our ARPU will just be -- just up? Second is on costs. I can see that marketing costs in fourth quarter has increased by about 38%. Just to get more colors on marketing costs run rate going into first quarter and first half of 2018, if you may? And my last question is actually on competition. Because you keep mentioning that the cluster-based pricing is one foundation in ex Java, right? I'm just wondering, in the fourth quarter, Voice yield actually declined by 12%, so do you expect Voice yield to decline further, or what is the expectation going forward? And in the Java side of things, if there's no data price increase throughout 2018, do you still expect Telkomsel can achieve the mid-single-digit revenue growth target?

First, on the SIM registration. I do believe that you're aware some of that with the subscriber base that we have actually, some of the active SIM cards. But in terms of the -- unique subscriber, we have definitely less than that. And that actually what we expect to be registered in our subscriber base. And on that also going to be good for us because that's going to, I think, produce less cost of marketing and also a better profiling of the customer base. So we do have our internal target to secure our revenue from our current subscriber base that we expect to be maintained and with a better profiling in the future. And then in the second of the cost of marketing, yes, in the fourth quarter this year, like the -- in the previous year too, we have kind of more active activities in the market. So we increased a bit on the marketing costs by providing more benefit to our dealers and so on in order to get the market share that we expect. And then on the voice?

Yes. I think the next question was about competition. But sorry, I actually missed a little bit of your question. Were you talking about a decline in data yield or in Voice yield?

Actually, my -- (inaudible) 2 questions into one. First part of my question is, we talked about cluster-based pricing being an advantage in ex Java, right. But I also noticed that what you have declined by 12% Q-on-Q. So I'm just curious, are you comfortable that this cluster-based pricing can still be a foundation? You see that Voice yield decline actually is just a start, or what is your view going forward the next few quarters? Second thing is, just my question is that, if there's no data price increase throughout 2018, do you think Telkomsel can still achieve the mid-single-digit revenue growth target?

Okay. Thanks for clarifying. So I'll -- and actually, in terms of our cluster-based pricing, this is not an advantage in outside Java. It's an advantage everywhere. Because every city has a slightly different competitive scenario. So I would say, it's not just for outside Java. In terms of Voice yield, yes, we did see a decline in the last quarter, but that's not really due to competitive intensity. That's actually due to our own pricing with regard to packages. One of the strategies for defending the decline in Voice is to encourage more customers to buy bulk Voice packages or buy combo -- what we call combo packages, which include Data, Voice and SMS. But when they bulk buy the price per unit -- price per minute is lower, then if they just Pay as You Use, so you end up with the effect of having a perceived price discount, but actually, it's more change in customer behavior. And from a revenue perspective that overall activity is value accretive. I think on Data yield, I mean the data yield decline that we saw throughout 2018 is absolutely due to a competitive pressure. I mean, without cluster-based pricing, I think, the impact will be much worse because we would effectively be dragged down to sort of the lowest common denominator. In terms of what we expect for this year, I think, all the comments we've made today about an improving pricing environment are already factored into the forecast. So the forecast or the guidance is based on our judgment about how the market might evolve this year.

We have a question from Hussaini Saifee of Citigroup.

Just a one follow-up question. Regarding your margins guidance, which is around 2% decline, is it based on your normalized EBITDA margin of 2017, which is excluding the one-offs, or is it including the one-offs?

I think what we're going to report as with -- it's just going to include any kind of costs.

(Operator Instructions) We've got a question from Piyush Choudhary of HSBC Singapore.

For the fixed line business, considering a strong growth in the enterprise business, which we have seen this year. Could you help us understand like what's the outlook for that business? Thanks for the additional disclosures, but you would have like order book details internally, so like how strong is the order book growing? And secondly, on the fixed line business CapEx intensity that has been significantly high over the last few years because of the aggressive fiber broadband rollout. So just want to understand when we can expect the CapEx intensity in this side of the business to come down? Like is it 2020, or is it even beyond that? And just last question on mobile, what proportion of data traffic is now on 4G?

Okay. Well, we obviously cannot disclose the detail of the order book. But I think, as a guidance for 2018, I think, as I mentioned earlier, we project that the enterprise business would grow in the range of 20% to 25%, in terms of revenue growth. And on your second question, the -- actually, starting last year in 2017, we have started to switch our focus to monetize the homes-passed. So the additional homes-passed that we built last year was smaller than what we have built in 2016. So last year, we spent in terms of the CapEx composition that we spent to strengthen our network to support the IndiHome business was more towards the access. So we expect this to happen in the near future as we have built so many homes-passed that currently now we are focusing to monetize it.

The proportion of 4G payload right now is about 58% in 4G.

Great. And can I just check on the ports like last time you disclosed 6 million ports in IndiHome were connected as of September. What that number has increased to as of December?

Oh, it is now around 7.1 million ports.

Okay. And what's the target for that? Can you share that by 2018 end?

Yes. The target is around 8.5 million ports by end of this year.

Operator, can we conclude the discussion?

Thank you. Ladies and gentlemen, that does conclude the conference for today. Thank you for participating. You may now all disconnect.