Telkom Indonesia (Persero) Tbk PT (TLK) 2018 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to Telkom's first half of 2018 Results Conference Call. (Operator Instructions) I must advise you that this conference is being recorded today, Tuesday, 31st of July, 2018. I would now like to hand the conference over to your first speaker today, Mr. Andi Setiawan, Vice President of Investor Relations. Thank you. Please go ahead.

Thank you. Ladies and gentlemen, welcome to PT Telkom Indonesia conference call for the first half of 2018 results. We released our results on 31st of July 2018, 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 7 days. There will be an overview from our CEO and after that all participants are given the opportunity to participate in the Q and A session.

Before we start, let me remind you that today's call and the responses to the questions may contain forward-looking statement within the meaning of safe harbor. Actual results could differ materially from projections, estimations or expectation voiced during today's call. This may involve risk and uncertainty and may cause actual results to differ substantially from what we discussed 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; Harry M. Zen as Finance Director; Mr. Abdus Somad Arief as Wholesale & International Service Director; Mr. Dian Rachmawan, Enterprise & Business Service Director; Ms. Siti Choiriana as Consumer Service Director, Mr. David Bangun as Digital & Strategic Portfolio Director; and Mr. Herdy Harman as Human Capital & Management Director. Also present are the Board of Director 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. Please go ahead.

Thank you, Andi. Good afternoon, ladies and gentlemen. Welcome to our conference call for the first half 2018 result. We really appreciate your participation in this call.

Ladies and gentlemen, Telkom recorded revenue of IDR 64.4 billion, a 0.5% growth year-on-year in the middle of tight competition in telco industry.

Data, Internet and IT service grew by 20.7% year-on-year as a result of strong growth in mobile broadband, ICT solution in enterprise and IndiHome. This represent 50.9% of total revenue. Despite the slowdown in revenue, we still invest to expand and strengthen our infrastructure, both in mobile and fixed segment. Therefore, our EBITDA declined by 14.7% to IDR 28.3 trillion and net income dropped by 28.1% to IDR 8.7 trillion.

Ladies and gentlemen, our mobile segment faced challenging period during the first half this year, as an impact of SIM card registration that trigger aggressive price war in Data business. At the same time, our legacy was still showing strong point, which accounted for 50.3% of total Telkom cell revenue, even though Voice and SMS businesses continued to decline along transition phase of legacy towards data, impact of OTT service cannibalization and growing smartphone penetration. Our focus in this transition phase has led to our Digital business, which recorded strong growth and increased its contribution to total revenue substantially. Nevertheless, we have seen encouraging development where by month-on-month, revenue growth of Telkomsel managed the good positive revenue growth. From April to May, Telkomsel's revenue grew by 7.3%, and from May to June, it grew by 9.8%. Throughout the first half of 2018, Telkomsel revenue decreased by 7.1% year-on-year to IDR 42.7 trillion, with EBITDA, and the income declined by 18.2% to IDR 22.2 trillion and 22.4% to IDR 11.7 trillion, respectively. As we believe that the data price has been too low, Telkomsel increased data price in a few selected areas around the Eid al-Fitr festives in June.

Further, in early July, Telkomsel did a Nationwide data price increased by around 4% to 11%. Telkomsel will continue its strategy to realize data monetization. And even if there is, at first, market dynamic in the near future, Telkomsel will maintain premium price at the right level. Given the strategy, we believe that Telkomsel performance will be better starting in the third quarter.

Ladies and gentlemen, Digital business continue to become the engine of growth for Telkomsel. The business post significant growth of 17.5% year-on-year, driven by data, which increased by 13% year-on-year, and digital service, which increased by 59% year-on-year. Digital business accounted for 49.7% of total Telkomsel revenues, increased significantly from 39.3% a year ago. To maintain and strengthen our network superiority and growing our Digital business, we deploy more than 14,900 new BTSs during the first half of 2018. All were 4G BTSs. By end of June, 2018, our BTS on air reached closed to 175,700 units, 71.4% of which were 3G/4G BTSs. As a result, our data traffic increased by 134.8% year-on-year and which was also supported by high growth in smartphone adoption that grew by 24.6% year-on-year to IDR 112.1 million, or 63% of our customer base. Lastly, Telkomsel successfully completed the prepaid SIM card registration as the number of registered subscriber by end of the registration reached more than 80% of the number of subscriber prior to the registration. With this, Telkomsel became the operator with the highest registration ratio. At the end of June 2018, Telkomsel had 177.9 million subscribers. With such certain number of subscribers, Telkomsel will be able to conduct various marketing approach, such as family-based and personalized offering. Ladies and gentlemen, on the other hand, encouraging performance in fixed line business segment continue in the first half. Consumer segment revenue grew by 20.8% to IDR 6.43 trillion, with IndiHome as the growth engine. Revenue from IndiHome itself grew by 46.8% to IDR 5.3 trillion. Moreover, we successfully improved IndiHome's EBITDA margin to around 25%, in line with bigger economy of scale, improvement in sales and technician productivity, product diversification as well as better network quality and IT system.

We successfully added 1.1 million new IndiHome customers during the first half, resulting in total subscriber to reach 4.1 million, or increased by 105% increase on year-on-year, with target by end of 2018, IndiHome customers could reach with 5 million customers. Product Enterprise segment revenue recorded 19.5% growth in revenue, mainly sub-counted by big project from various industry and healthy growth in government segment. We expect enterprise to grow around high teens on a full year basis this year. In the meantime, revenue from wholesale and international segment grew by 21.7% year on year. This segment is targeted to grow around high teens on full year basis this year.

As part of our continuous effort to strengthen our network, in September this year, we will complete Indonesia Global Gateway submarine cable system, or IGG, that connects SEA-ME-WE-5 and SEA-US submarine cable system. The completion of IGG is an important milestone for Telkom in becoming global digital hub. We also just completed the manufacturing of satellite Merah Putih that carries 60 C-band and extended C-band transponders. Areas covered by Merah Putih are Indonesia, South East Asia and South Asia. Merah Putih is planned to be launched on the 7th of August from the Cape Canaveral, Florida. The satellite will strengthen our position in the local and regional satellite business.

Ladies and gentlemen, to respond to slowdown topline growth, we have embarked on a cost leadership program in many aspects. Throughout the first half of 2018, some achievements of this program, among others: pressure] and maintenance per BTS at Telkomsel was manageable as it declined 11.6% compared to 2017; marketing expense went down by 4.5% year-on-year, mainly contributed by the new dealership scheme in Telkomsel, which focused more toward renewal initiative. Modest increase of personal expense of 4.8% year-on-year to reach IDR 7.0 trillion. This was achieved despite increased compensation, which was in line with the company performance. Key to this was the massive retirement and much smaller number of new recruits in the last 3 years. From 2018 until 2022, natural retirement in Telkom will reach around 7,200 employees. We will continue the cost leadership program towards the end of the year without sacrificing our high-quality service to the customer.

As I work up, let me reiterate our guidance for the full year 2018. We expect Telkomsel to grow better than cellular industry, with overall Telkom Group is expected to grow around mid- to high single digit supported by healthy growth in fixed-line businesses. EBITDA and Net income margin are expected to decline in line with revenue shift toward Digital Business and continuous infrastructure development. Capital expenditure for the group is expected around 25% of revenue compared to last year. We will [put] in more CapEx for our fixed broadband business this year. That is the ending of my remarks. Thank you.

Thank you, Alex. We will now begin the Q&A session. (Operator Instructions) Operator, may we get the first question, please?

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

Several questions. Firstly, in mobile. When do you think we can start seeing ARPU improvement? And if you can throw kind of some light on what has happened in terms of consumer behavior this quarter, because there is a sharp decline in legacy revenue, is it more visible in Java or in ex Java? So any kind of color between revenue trends in Java versus ex Java. We have seen Telkomsel has taken tariff hikes in starting July. But what are the risks to a better data monetization in second half of 2018? And one more question on the margins. Can you kind of give some color on what margin declines you are expecting in 2018? Is it 200 to 300 basis points, or it could be even larger for the full year?

Okay. I think I can answer the question slightly on the [quarter]. I'll talk first about legacy revenue. I think you're quite right, we've seen a significant decline year-on-year in legacy, driven by customers migrating usage to OTT applications. So we see a corresponding increase in usage of those applications. And of course, that becomes possible due to our data network being a high quality.

Moving onto July tariff hikes. Yes, we raised prices on both acquisition and regular data packages nationwide between about 4% and 11%. We are currently confident that we can continue -- we can sustain these rises and further raise the price, but that's really dependent on market dynamics. And, really, the actions of the other operators, I think at the moment, it's a bit of a mixed bag. I think from Indosat, we've seen some significant price increases from Excel. Actually, we have seeing some pretty aggressive behavior in certain cities. So, really, we'll monitoring the situation. I mean, we intend to maintain our price in premium over the competition, but, obviously, that premium has a limit, and it depends somewhat on the actions of the other operators.

The fluctuation in the subscriber numbers, and that number has moved around a bit due to the registration process, but that should stabilize. And I would expect ARPU improvement to be dependent on the success of our data price increases.

Piyush, Heri Supriadi here speaking. On the margin first, as mentioned by our CEO, that we continue to develop our network in order to provide our superior quality and increase basically ourservices. That'smean we continue to grow our network. And in the same time, we also tried to do, as much as possible, to manage the cost. Some costs resulting coming from the spectrum that we just added this year. Without that one, actually, our cost profile is supposed to be better, but we do also believe that the spectrum will give us a more benefit over the time. So with regards to both of the situation, we believe that, from currently, that we have around 52% of year-to-date margin. Maybe we can have improvement about 200 basis points in the next semester. By assuming the condition in the market, actually, at least stabilize or slightly improve.

Sorry, we're having some pauses, so we couldn't share full comments. The line is not very clear. Can I again clarify, what were your comments on the revenue trends and Java versus and ex Java. Has there been any significant kind of magnitude of change because, overall, your Mobile revenue is down 12% year-on-year. So is ex Java revenue decline significantly higher?

I mean, your original question was about the Java, ex Java for legacy. Are you wanting to ask a question about Data revenue?

No, overall. Yes, overall, also.

I would say, our sale performance has been slightly better within Java versus ex Java, but it's not a huge difference.

Ok. Thank you.

Your next question comes from the line of Miang Chuen Koh with Goldman Sachs.

So a couple of questions. First of all, most of your costs went up year-over-year despite fairly flat revenues. But your competitor, Excel was able to have a decrease in many of their cost items. Just wondering why do you think this divergence has happened. Meaning, is Telkom investing more [in terms] of future despite the current challenges. Or does this simply mean more room to cut cost in the future for the company? The second question is that based on your segmented disclosures, some of your nonmobile business, such as enterprise, WIB, grew revenues, but saw a decline in profitability year-over-year. Can we understand why, and can you give us sense of expectations for second half? And then lastly, on digital initiatives, I believe we are still, of course, early in terms of the initiatives for like TCASH, digital advertising, digital world banking, et cetera. Just wondering, like when we can see profitability from all these new services that you have launched. And where exactly are revenues recorded under? Is it more under the mobile division or the consumer division?

First, on the cost of the cellular, yes, I saw also result of my colleague there. But, again, when we talk about the cost, first, we continue to build our network because we see that from the traffic growth, you can see that payload already grew around 130% year-on-year. It means still strong demand, and we also still have a better pricing for that one. So we have a quite enough reason to continue to build our network. And then, whether it is going to have a lot of opportunity in the future with regard to the result that others also display, yes, you are right. With this kind of registration regime, we do expect that our marketing cost is going to be declined. So at least, we're going to have a, I think, marketing expenses going to drop year on year around -- let's say about 15%, 1-5 percent, year-on-year. And then we also quite see some other costs also quite stabilize in the future. So with this one, we do believe over the time, the benefit of the cost saving can be seen until the end of the year. So year-on-year, cost growth, over the time going to improve becoming, let's say, around 6% from now, around 9% in celullar. If you also can compare, without spectrum cost, actually, the cost year-on-year is supposed to be increased only around 3%. So with regards to the network, a number of network we adding around 20% more compare to last year that the cost is very much in line with good management of the cost.

I think maybe I can add in terms of the O&M cost increase on the fixed segment. I think it's fair to say that the increase is directly related with the stellar performance of the fixed segment. As mentioned earlier by our CEO, IndiHome increased by almost by 47%, Enterprise around 19%, also Wholesale by around 20%. So the O&M increase in fixed is quite related, directly, with the increasing of revenue.

I think on the digital initiatives. I think, depends on which bisnis. I think were Tcash is the concern. I think the emphasis on TCASH is building up at the ecosystem. So we're not looking to drive a profit from that in the short term, but obviously, create a valuable business over the long-term. At digi ads as a business, digital advertising is profitable already, and it's a cash flow-positive business. And then, there's a variety of digital lifestyle businesses, some of which generate a profit in the short term, some of which, we view as longer-term investments. For example, for games, we make revenue from in-game purchases, which is a healthy and growing revenue stream, whereas, for something our video service, MAXstream, we're focusing more on building up the ecosystem and building viewers. So it's a bit of a mixed answer, really.

Adding to Alistair just explained to you the digital revenue business increase by around 59% YoY

In terms of the nonmobile segment profitability, as mentioned, we saw an encouraging improvement in EBITDA margin of IndiHome, which reached around 25% right now. So we expect, on a full year basis, we would still remain around that area. In terms of enterprise business, as you probably are already aware, given the characteristic of this business, which is based on competitive bidding by which we can win the projects, it's not easy to expect a significant improvement in the margin. So we expect that, in terms of margin for enterprise, we'd still remain in the range of low to midteens.

Your next question comes from the line of Colin McCallum of Crédit Suisse.

A couple of questions for me. First of all, just on Telkomsel, a question for Alistair, really. Was -- were there any kind of oneoffs on the revenue side in second quarter? Did any kind of, for example, revenues that were in SIM cards were recognized, that then had you written off? And if you can give us any indication whether that was the case and how big it was, that would be useful. And then, on a related point, the numbers for second quarter, on revenue, obviously, were quite ugly. I think we were all expecting April was quite a bad situation and we got to prepaid registration finishing, but the May and June were probably were better because it's post-registration. So is the poor result because the April situation was so crazily poor at monetizing, that it really affected the quarter, or -- and weighed the May and June improvements? Or is the problem that you just weren't able to improve your monetization materially going from April into May and June because of the overall competitive environment and maybe some of the other playing ball when increasing prices as you'd wanted. And those are my 2 questions.

Okay, Colin, can you hear me, okay? I think some of the other people had trouble hearing. Am I speaking across clearly?

I can hear you, yes, thank you. But just be aware for all of you, I think what's been happening is that you've been talking and it's been kind of cutting out sometimes. So I think we're all experiencing that a little bit, but at the moment, I can hear you obviously, yes.

Okay, all right. I'll plow on then. I think the way to think about the 2Q revenues is really a quarter of transition, which really focused around the registration process. And I think it's a transition from a market that had become heavily focused on starter packs, which is a wholesale model back to being a model based around renewal where our customers buy their data packages directly off us. And I think clearly, over the last few quarters, there's been a fairly intense price war in the data market. And I think during Q2 or the cause of the Q2 results that situation improves and obviously, still monitoring and hoping that continues. As pak Alex said, I mean, our revenues from April to May grew by 7.3% and May to June grew by 9.8%., so the trend line is positive. And I think now, we have a business which is less reliant on discounted starter packs with high channel cost, and more reliant on our customers having a direct relationship with us. And what that means is combined with the data we now have from the registration process, we're now hoping to build up a more personalized relationship with those customers, and also at a personal individual level but also a family level. Because the one thing that the registration information has given us is quite good group information. So yes we are think about that is a transition with the positive improving trend. I think the improvement is predicated on an improving price environment. I mean, I think we've done our bit, we've put our prices up between 4% and 11%. We've taken the lead and so we're looking for the other operators to hopefully, follow that lead. In terms of your first question, there's no particular one off revenue or write off associated. We didn't -- when we were selling starter packs into the market, we always kept our validity period very short, so we didn't have any issue with having to write off stock that couldn't be sold.

Got it. And you did just cut out slightly on I think what was quite important numbers. You said revenue was up 7.3%. Was it month-on-month from April to May, was that and then 9.8% was May to June, is that what you said?

Correct.

And your next question comes from the line of Arthur Pineda of Citi Group.

Several question for me, please. Firstly, a housekeeping one, any one off items booked on the group level? I see IT and provision expenses have ballooned in the items there. Second question I had is with regard to the growth expectations in mobile. I know that you've maintained the mid- to high-single digit for the group. Any expectations on the mobile side and are you already seeing any evidence of this in July? Next question I had is with regard to the price increase. You also mentioned a 4% to 11% price increase. How much more do you need to see a rate increase so that it goes back to the pre-sim registration levels.

Arthur, it's Harry here. So there's only one, relativelly big one of item in the group level. which is the provisioning expense of doubtful accounts. This was as a result of our conservative approach, incorporating the weak performance of some segments in the business of our clients as well as the deterioration in the macroeconomic industry. But this is for sure, is not going to be automatically doubled on a full-year basis, and we will ensure that this would not be worsening compared to the number that we had on FY basis last year.

Sorry, back there, we lost you there. Sorry, what number was booked?

Okay, so I was talking about the provisioning of doubtful accounts, which is really the only single -- major single one off item on the group level. So I was saying that this number will not be automatically doubled on full year basis by the end of this year. And we will ensure that we are not going to have a worse number compared to what we have last year. And the number that we have for this matter is really based on the approach that we did incorporating the weakening performance of some clients in some segment of the industries. As well as the deterioration in the macroeconomic situation in Indonesia.

On the growth expectation on mobile side, we do expect that we can grow slightly better than the industry because we continue to invest, like you can see our numbers. So I think how much the industry is going to grow, right now, the Selular grow by minus 10. We do expect that number going to improve along with the industry becoming healthier. We believe if we can, let's say, make the numbers flat, or we're slightly better than the industry, that's going to be better for us.

I think on the final point, actually, it's quite difficult to translate the price increase into an overall RPMB level change, because obviously, customer behaviour influences that, the larger packages tend to be cheaper and the more customer uses of their package, the lower our effective rate goes. I think it's fair to say that year-on-year, our RPMB halved as we went more aggressive in the market. But actually between quarter 1 and quarter 2 this year, it's pretty stable at around 10. So our anticipation probably for the rest of the year is to be stable again in quarter 3. And maybe, if the price increases work out, then we can look to raise that or look for that to rise in quarter 4. But I think it's really more about stabilizing the previous decline in quarter 3 and growth in quarter 4.

And your next question comes from the line of Ranjan Sharma of JPMorgan.

Really, I just wanted a clarification on the cost side. Could you please elaborate on what your cost optimization initiatives are? Because we have seen a worsening in the cost in the first half of this year. I appreciate that you have been rolling out your network but even your like general and administrative expenses have been rising your -- there is a cost of IT services, which has increased like 70% or so quarter-on-quarter. So I'm just trying to understand things like that, and where do you see room for cost improvement? And I think I missed this, what do you expect for the EBITDA margin for the group for the full year? So that's the first question. Secondly, in terms of the competitive environment, is there any differentiation or segmentation in the market that you're seeing that maybe in Java that you are seeing improvement in pricing, but outside of Java, you actually see more aggressive challenges? I'll stop here.

I think I can take the second question on the competition and pricing outside of Java. Naturally, our competitor coming to outside of Java. In which, they are not existing previously, or they already exist but not really verifiable outside of Java. I think the way they come to the new area by providing no war price especially as they who does the swingers.

We maintain our -- actually, our market structure by continuously put ourselves as the premium provider as we have better coverage quality and so on. There's a quite I think, more intense competition outside of Java, but it is not kind of a big surprise. It is kind of natural situation that we are facing from time to time.

Ranjan, it's Harry here. So in terms of your first question regarding the potential cost improvement towards the end of the year. So this second semester, we are going to be more aggressive in performing our cost leadership program. So the room for that including in some items for instance in personnel, marketing, office rental, as well as network modernization. In terms of O&M, we don't think that there will be some savings there, because we still need to keep on investing, particularly on the fixed broadband, and more especially in the access level. And as you can see, the result is it's quite encouraging, the performance of our fixed broadband business this semester. So I think in terms of O&M would be still increase in line with the increasing revenue in mobile -- I mean, particularly in the fixed broadband. For the EBITDA margin on group level, we believe it will be around mid-to-high 40s, high 40% on a full year basis this year.

Sorry, we lost you in the middle when you were talking about your network monetization in terms of cost improvement. Would you please...

Yes, I was explaining about some items that could be the source of cost improvement towards the end of the year, including the network modernization, personnel, marketing, office rental, those are some of the examples. And I was also saying that in terms of O&M would most likely still increase, but this will obviouslyin line with the increasing revenue, particularly on the fixed segment.

On the mobile side, the cost leadership. First, because we already did the simcard registration, marketing cost could be lower compare to last year. We targeted on 15% decline year-on-year. On the operation and maintenance basically, the cost onlyincrease because we mainly driven by the spectrum that we have now 2,300. It is actually make the cost of O&M increase around, let's say 6% to 8%. But if we normalize it, it's supposed to around 3%. Moving towards the end of the year, we do expect from currently total of expenses growth at around 9% going to be end up around 6%. And then we also expect the next year, the cost structure becoming better as we continue to do some improvement by digitalization in some of our business process and more optimal using the spectrum that we already have right now.

And your next question comes from the line of Sachin Mittal of DBS.

My first question is on IndiHome, because this is the first quarter where we have seen stabilization of your IndiHome ARPU. There were signal change in your strategy on IndiHome, whereby, you are kind of monetizing it better and not going for the low ARPU customers, and because it looks like, so far, IndiHome contributes to EBITDA but not to the earnings. So is there a change in thinking that this decline should contribute to the better income and that is the factor in the ARPU levels being stable. That's my question number 1. Secondly, what is your -- during that first half in the mobile, we have seen I think, 10% kind of revenue declined in the first half. What is your expectations of industry revenue growth for mobile in this year and the next year? I think that will be good. And lastly for your -- I just kind of missed that, while Excel hasn't responded a lot to the pricing plans, is there something in terms of price excessiveness, which has been inside Java or it's like more outside Java. Because I mean, there's a little confusion here, you did indicate there's aggressive pricing by them, but is it like in Java or outside Java? Yes, that's it.

Yes, okay, in terms for your first question, yes, the ARPU is getting more stabilized and actually starting last June, it's getting higher and will be higher in the third quarter, because we are in the process of increasing prices for selected customers of IndiHome, not just -- so the increasing ARPU came also from the sales of minipacks and as well as other products and services using the IndiHome platform such as the digital advertising.

On the question of the mobile industry, revenue declined by 10% in the first half. Actually, if you see from the payload, Data payload actually, still very promising. We had 130% of increase XL do about around 70% of the payload increase, ISAT also experience the same thing. The thing that we missed here, I think the right pricing or monetization on this one. We believe by better pricing came in the second half if the industry can follow that way. It is supposed to be around I think becoming a lot better than the 10% that we have today. And that's why we expect that in the -- up to end of the year, the figure's supposed to be a lot better money.

I think on the third point, I think it's right. XL haven't responded to the price increases as we would hope. And I think it's an opportunity for all of us, so let's hope they do. In terms of their current more aggressive pricing, actually i mean perhaps the Java n x-Java is helpfull something we of get questions about but we dont think about the country like that. I mean XL's packages in 82 different cities, 22 of which are in Eastern Indonesia, but there's a whole bunch of that is also in cities that are in Java. I guess they choose the cities as we would do based on market share and momentum and network capacity availability. So I don't think it's really a Java, ex Java issue. It's cities where they feel they have an opportunity to attack and take market share, which is largely what we do also. But I think what we're hoping for is a general acceptance that it makes sense for all of us to back off a little bit and help the pricing environment improve.

And your next question comes from the line of Choong Chen Foong of CIMB Malaysia.

Three questions from me for Telkomsel. Firstly on the price increases that you did in early July, how has the reaction been the customers? Have you seen them maintaining their usage patterns? Or have they sort of pat down usage or even move over to Excel, for example? That's the first question. Second question on the voice revenue, a sharp decline in the second quarter. Would you say that it's purely structural? And are we heading for mid-to-high teens declined for this year? Or was there anything that exaggerated the decline in a big way in the quarter perhaps, if we put registration exercise on any short term impact on transitioning to Voice packages? And third question regarding depreciation for Telkomsel, was down q-on-q and year-on-year in the second quarter despite the network expansion. So I just wanted to understand what drove that and whether that's the run rate going forward?

First, I think reaction to price increases, no particular reaction in terms of complaints or customer feedback. I think we kept the magnitude fairly small, it's a step-by-step process. In terms of how has it impacted market share and customer behavior, we have no indication that's happening yet but obviously, we would to have a longer look at it, but no indication that it's causing customers to leave us. In terms of voice revenue, yes, I think it's structural, I think mid-to-high teens as you've said. There is a bunch of strategies we have to try and reduce the decline based on serving packages and all the pricing initiatives but i think its structural issues base on migration to OTT services.

In terms of depreciation, you're right. Actually, our CapEx is also used for the modernization of our network. Along with that, it means we expand the lifetime of the network, so adjusted accordingly our depreciation, so that's the story.

So Heri, just to clarify the depreciation in the second quarter is what you will also expect going forward at the base.

Yes, yes, that's the base going forward.

Our next question comes from the line of Sachin Salgaonkar from Bank of America.

I have 3 questions. Number one, we did hear actually on the call talking about they're looking to reduce their tower rental or in fact, already reduced it by 50% whenever the lease is coming for renewal. So any similar things we could expect from Telkomsel going forward? That's question one. Question 2 is, you did see a bit of a decline in oral subscriber numbers led by sim registration. Any thoughts that some of those customers might come back? And are you trying to do something to partially get those back? And third, I could not get the one off of provisioning expense on doubtful debt, Heri, if you quantify that?

Okay, first on the reduced tower rental. Yes, our colleague may be already capitalized the amount of reduce. That'sstill in the negotiation but that's definitely we will be on the same let say a competitive pricing like what happened in the market. We're going to close the discussion by the third quarter of this year. So we do expect that's kind of a betterment in tower pricing for us like also for the industry.

A thing on subscriber numbers. Honestly from subscriber numbers, it's difficult to interpret the trend before and after registration because the basis on which subscriber numbers is calculated has changed. Also, when the market was more focused on starter packs, you had each operator declared more subscriber because there was a lot of sim cards that have been used once. And then we're in the process of being churned, which takes 2 to 3 months. So I wouldn't read too much into overall subscribers until that's settled down a bit. What I can say is that we obviously measure our RGB for example which is revenue generating base on customer high-value customers. And actually, we are satisfied that we have captured through the process, that we've been able to capture our customers and haven't lost out versus the competition.

So on the provisioning expense, so this is based on the conservative approach that we took, incorporating some weaker performance of some of our enterprise clients during first semester. But rest assured that this will not be automatically doubled on the full year basis, and we will try our best to manage it towards the end of the year so that it will not be worsening compared to debt of last year.

Sorry, can you quantify this number. How much was it for 2Q?

Total for first semester is 921 billion rupiah

Can you repeat it? I think the line just got cut off.

It's IDR 921 billion, 9-2-1.

And your next question comes from the line of Andri Ngaserin of Bahana.

Most of my questions have been answered, but I just want to get a sense from you on what do you expect for revenue growth for the rest of the year? Just want to get your feel and confidence on that.

Yes. So the guidance for a full year basis on overall group is mid-to-high teens -- sorry mid-to-high single digit revenue Growth. Obviously, the larger growth would come from the fixed segment. So given the trajectory of the growth in first semester of the fixed segment, be it in IndiHome, enterprise as well as wholesale, we are very confident that we would reach the guidance of the mid-to-high single digit for full year basis.

Got it. Would that be the same for EBITDA, do you think you for the rest of the year?

EBITDA on overall group, we project to be at around mid-to-high 40% EBITDA margin.

Your next question comes from the line of Ranjan Sharma of JPMorgan.

A couple of quick follow-ups from my side. Maybe (inaudible) early days, but do you have any sense on how churn is changing in the industry? Have you seen that come down materially from the bounce of simcard registration regulation system? The other question would also be if you have seen any migration of customers to your networks from other players after the sim registration.

So I think it'll take a few months for the churn figures to settle down because churn obviously -- customers only churn a certain amount of months after their last active usage of a network. What I would say is that we are seeing a reduction in the intensity -- in most places, a reduction in the intensity of the competition in the outlets to starter pack, and obviously a single starter pack that they don't sold in the first place, they don't churn off. So certainly in our business in Q2, we have actively managed the business to reduce the amount of starter packs that we are selling and replace that with renewal revenue directly from our customers. That's certainly happening to us. For the other operators, we'll have to wait and see. In terms of migration between operators, hard to tell. I think we're at pretty healthy -- we're pretty happy. Obviously, a bad revenue performance but actually, our revenue market share year-on-year has actually increased by 2%., so that's possibly related to customers coming to us during the registration process.

There are no questions at this time. Please continue.

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