Earnings Transcript for TLK - Q3 Fiscal Year 2024

Operator: Ladies and gentlemen welcome to the PT Telekom Indonesia Earnings call for the unaudited results of 9 months of 2024. We will start with an overview from our CEO and CFO of Telkom Group, followed by 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 or estimations that may involve risks and uncertainties that may cause actual results to be different from what we discuss today. Ladies and gentlemen, it is my pleasure now to introduce Telekom's Board of Directors who are joining us today Bapak Ririek Adriansyah, as President, Director, and CEO; Bapak Heri Supriadi as Finance Director and Risk Management Director; FM Venusiana as Enterprise and Business Service Director; Bapak Bogi Witjaksono as Wholesale and International Service Director; Bapak Budi Setyawan Wijaya as Strategic Portfolio Director; Bapak Honesti Basyir as Group Business Development Director; Bapak Herlan Wijanarko as Network and IT Solutions Director; Bapak Afriwandi as Human Capital Management Director. Also present are the Board of Directors of Telkomsel, Bapak Nugroho as President Director; Bapak Wong Soon Nam as Director of Planning and Transformation; Bapak Daru Mulyawan as Finance and Risk Management Director; Bapak Derrick Heng as Marketing Director; and Bapak Adiwinahyu Basuki Sigit as Sales Director. I now hand over the call to our President Director and CEO, Bapak Ririek Adriansyah, for his overview.

Ririek Adriansyah: Thank you, [indiscernible]. Good afternoon, ladies and gentlemen. Welcome to our earnings call for the unaudited 9 months of 2024 results. We appreciate your participation in this call. Ladies and gentlemen, in the past 9 months, Indonesia's economy has proven to be resilient. The confidence transpired to Bank Indonesia-led monetary decision to maintain the benchmark rate of 6% to ensure inflation will remain within the target of 2.5%, plus/minus 1% for the 2024 to 2025. Headline inflation recorded continued deflation to 1.8% year-on-year in September compared to 2.1% year-on-year in August. This marked the fifth month of consecutive deflation since May. Threat of deflation has been counting the consumption pattern of mass market and middle-income segment as they opted to dump credit spending when possible. Consumer spending tracked by credit and debit card transaction value is tightening. However, the slight pickup in debit card transaction value also shows that consumers are still mindful in spending their income. The third quarter is seasonally a soft quarter for Telco sectors, and Telecom is not immune to this. Nevertheless, data payload recorded growth of plus 12.4% year-on-year for 9 months of 2024, indicating stickiness and ongoing sales from legacy business. We also note some stabilization in the competition landscape indicated by the improvement in the supply-demand dynamic and price increase from other operators in starter pack and data packages, albeit selectively. Telkom Group remains committed in repairing the market structure by refraining from engaging in price war as we believe in more sustainable revenue generation by focusing to increase data consumption productivity of our client base. With President Prabowo's inugration on October 20 and the formation of his working cabinet, we see potential support in the purchasing power due to various social welfare programs being launched. Before I share updates from our corporate transformation journey via 5 Bold Move strategy, which started in 2022, please allow me to express our gratitude to our shareholders who have been with us through this process. We remain confident and committed to executing transformation strategies to future-proof Telkom Group leadership. However, we have to be more prudent when executing transformation during a relatively soft purchasing power environment and heightened competition in the sector to solidify market leadership. As part of 5 Bold Move strategy implementation, our corporate transformation group ensured that all business processes achieved efficient results with no duplication processes. An example, in the process of procurement, the rate of CapEx purchases for devices and networks have improved quite meaningfully due to group procurement initiative. This has been evidenced by our ability to serve broader market segmentation, notably in our consumer business segment. Such group negotiation process has additionally made a positive impact to digital content offering, of which in the end resulted to a better experience for our end customer and efficient content cost for the company. On B2B business, we continue to be agile, yet focused to create long-term sustainable growth of revenue on the digital connectivity supported by platform expansions with data center cloud as its business enablers. Apart from organic capacity expansion, we are exploring to have a strategic partner to unlock value while borrowing on their expertise to manage data center business. Through the partnership, we believe to set a better positioning in the market and optimizing our core competence, which creates long-term sustainability value to the group. We aim to conclude such initiative by early 2025. In Telkom initiative, progress has also been encouraging. We have confirmed that the operational day 1 for PT Telkom Indonesia as Telkom's infrastructure-managed service entity was on the 1st of August 2024. The establishment will also enable us to transfer efficient asset deployment while also improving existing infrastructure assets with additional investment to increase CapEx efficiency. With that, I would like to hand over the session to Pak Heri Supriadi, our Group Finance and Risk Management Director, to give you an overview of our 9 months' financial performance. Thank you.

Heri Supriadi: Thank you, Ririek. Good afternoon, ladies and gentlemen. During the past 9 months of 2024, Telkom Group delivered a positive revenue growth of 0.9% year-on-year to RP 112.2 trillion with EBITDA of RP 56.6 trillion, a slight decrease by 4.1% year-on-year. The growth in our revenue has been mostly contributed from our continued efforts in promoting data and Internet services revenue amid continuing natural decline of our legacy business. The slip in our EBITDA, however, has been largely attributable to our investment to initiative toward talent rejuvenation via early retirement program during the second quarter. This has made personnel expenses jumped by 12.7% year-on-year in the 9 months of 2024. Stripping out the one-off cost from the program, our normalized EBITDA stood at IDR 57.8 trillion, of which declined by 2.1% year-on-year making the normalized EBITDA margin decelerated to 51.5%. Meanwhile, our operating net income declined by 5.1% year-on-year to IDR 18.6 trillion after stripping out to market effect from GoTo ARPU costs and one-off from unlocking asset at Telkomsel level. Taking a deep dive into our expenses breakdown, aside from the strategic initiative on early retirement program during the third quarter, we identified an accelerated cost of general and administrative of which come following a low base effect last year as a result of better recovery rate in collection during the third quarter of 2023. Further, we continue to accelerate investment in marketing spending on the back of our continuing effort expanding fixed broadband network of our consumer business. The total CapEx spend during the period reached IDR 17.5 trillion, largely used for connectivity, followed by spending for digital platforms and services. CapEx realization to revenue was at 15.6%, and we still aim to accelerate CapEx spending towards the year-end to a level of 22% to 24%, setting the foundation for future revenue growth. By the end of the third quarter, our total liability is relatively flat at IDR 130 billion. Our gearing ratio also maintained at a healthy level with net debt-to-EBITDA stood at 0.6x during the period. On B2C business during 9 months of 2024, Telkomsel posted a strong 16.4% year-on-year growth. This came on the back of integration of our IndiHome B2C business as part of FMC initiative. During the third quarter alone, however, Telkomsel recorded a slight decline in revenue by 2.1% attributable to the low seasonality impact, coupled by the weakness in purchasing power. Our digital business posted a healthy plus 2.5% year-on-year growth, heightening potential in broadband and digital services. This performance is supported by a healthy productivity subscriber base as our mobile customer grew to 158.4 million accompanied by improved usage pattern that enhance productivity and customer quality. Despite macro challenges and heightening competition, Telkomsel managed to continue to showcase its resilience by optimizing operational excellence. Our effort in continuing product innovation have been able to ringfence our positioning as a dominant market leader. The encouraging trend of data payload growth, we believe to be a positive momentum for us to monetize should we see an improvement in the domestic economy. Fixed broadband business continued showing solid growth, marked by plus 200.6% increase year-on-year as we integrated IndiHome to Telkomsel in the third quarter and grew by 0.3% Q-on-Q basis. This is driven by our expansion strategy, targeting broader segment and accelerated addition of 682,000 of new customers, bringing the total 9.4 million with ARPU at 239,000. And thanks to our synergy from FMC's integration, this has given us a better agility to scale up our network penetration with comparable returns to our shareholders. Our convergence ratio under FMC strategy has reached a 53% penetration rate, and we are committed to further bolstering this with appealing convergent offerings. This initiative supports customer retention and strengthens defensive value aligned with our ongoing execution of one billing system. The ninth month of 2024 is deemed to be a seasonality weak quarter for B2B, where our enterprise business and Telkom International as part of wholesale international business revenue recognition are expected to be backloaded. Mitratel, however, continued to show a solid revenue contribution of IDR 6.82 trillion. or 8.7% year-on-year growth and 5.5% quarter-on-quarter growth with EBITDA margin improved to 83.2% in the 9 months. We maintained our high single-digit revenue growth for the 2 business segments for the full year of 2024. In the past 9 months achievement and the latest development in the economy and the sector have been soft. Nevertheless, we maintain our guidance for 2024. We aim to grow revenue by low single-digit for 2024. We maintain EBITDA margin in the range of 50% to 52% and CapEx to revenue ratio of 22% to 24%. We continue to maintain market leadership initiatives by targeting CapEx to revenue to decline further from 17% to 19% by 2024. That would be the end of my remarks. Thank you for your attention. I now hand over to [indiscernible] to moderate the Q&A session.

Operator: [Operator Instructions]. We have one raised hand question from Arthur Pineda.

Arthur Pineda: Three questions, please. Firstly, on the mobile side, I'm just curious, why are we seeing data revenues decline faster than your legacy revenues? Is this symptomatic of reduced top-ups due to the larger data allowances from the recent campaigns? The second question I have is with regard to the fixed mobile conversion strategy. Could you please remind us of the targets for the synergies for this project? We've yet to see any margin improvements on this account nor any revenue acceleration for broadband, which remains flattish on a year-on-year basis and Q-on-Q basis. How should we see this going forward? And just a housekeeping question as well on your cost bookings. I do know that your G&A was down a fair bit quarter-on-quarter. Were there any one-off adjustments being done for the third quarter? Or will these cost items be the baseline going into the fourth quarter?

Derrick Heng: Arthur, this is Derrick. I will answer your first question. To give more color to the digital business revenue, Telkomsel's digital business revenue, we saw a decline primarily due to increased competition and price pressure, especially in the mobile environment, which has led to strategic adjustments in pricing to retain market share, especially in price-sensitive segments. We have seen more pickup in the lower denom and sachet product lines. It's essentially to address the macro backdrop of economic pressure. Despite this, our focus on quality customer experience and network investments remains our priority as we navigate the very challenging current market dynamics. So besides the seasonal of quarter-on-quarter between quarter 2 and quarter 3. Actually, we also have a peak season in Q2 because of Lebaran. So of course, there is a slightly decline in our data revenue. However, it is actually not faster than the legacy. So our legacy is actually declined even faster than the data revenue. And of course, our main focus now is to make sure that this digital business that mainly comes from 2 parts. From the digital connectivity and the nonconnectivity ones. So we have tried to maintain the connectivity base, digital, but we also have some pressure on the nonconnectivity of the digital business. And that's like it or not, also affected by the policy from government on some illegal gaming that used to be okay before. Yes. So this, of course, is on top of the macroeconomic situation.

Adiwinahyu Basuki Sigit: On the second question on convergence. I think what we have seen so far as we go to the period of transition on the fixed mobile convergence in terms of integration, we are doing the integration in the Q3 period where we have migrated our back-end system and trying to then starting to have a value on the revenue side. However, I think in the synergy value, we keep maintaining our track on progressing in the same target on the cost optimization where we do a lot of cost optimization on various of activity in terms of doing the sales and also part of the services, where we also closed down some of the duplications of the stores, which also impacted the cost. And on top of that, we of course, expect there is some improvement that we have done so far in the top line where we're able to also do some cross-selling. In terms of convergence customers, we have seen a continuous increase. However, I think part of the EBITDA impact and improvement still remain not yet seen in the financial figures. I think we have to also have to consider that the value of the synergy in terms of revenue is still not yet maximized in the first years of where we actually have the integration. Yes. To add that color, please also remember that although we are in the middle of the system integration post the migration of IndiHome from Telkom to Telkomsel, we still can hit year-on-year growth on our fixed broadband business around 2.8% and Q-on-Q for about 0.3% Q-on-Q. And this is mandatory for us to move forward, considering that our key focus on the next growth for fixed broadband is through FMC. And this is not visible without a smooth integration of the 2 systems after the consolidation. On top of it, we also have some investment that we have put to make sure that the cost on our FMC, including the fixed broadband will be lower for next year onwards.

Arthur Pineda: So the cost savings benefit will only materialize into 2025. Is that how we should see this?

Adiwinahyu Basuki Sigit: Actually, not only for next year. If we look at the synergy value targets, our target for this year is around IDR 1.9 trillion. However, year-to-date until Q3, actually, we have overachieved the target, but we don't stop at that point because we can still see some potential improvement that we can hit through the investment that can further reduce the cost in the future.

Daru Mulyawan: Allow me to answer your question, Arthur. Yes, we see in the G&A year-on-year increase, mainly contributed by the provision that we have. The increase in the provision was due to the low base effect of last year following a better recovery rate at that period. So we have lower base in 2023. So in 2024, becoming a bit of normal growth. However, if we see in the back of this one, this also contributed by some pending collection coming from the enterprise segment that's coming from big enterprise and AAA enterprise basically and also coming from the uppermment, which is, we believe, it is very much collectible later on. But based on the procedure or SOP that we have, we need to also put some provision on this, I think, a very healthy, let's say, receivable. So that is why in the G&A, we experienced upon the increase in third quarter of this year.

Wong Nam: Sorry, just to add on that, Arthur, to add to the answer from Basuki and also from Mulyawan. The increase, if you see on the G&A, yes, on top of the last year low base, what you see is, as Basuki pointed out, it is a more prudent approach towards our enterprise business. That this may -- due to nature of the business, the revenue recognitions tend to be backloaded. That later on as we book the revenue, for example, in the fourth quarter, we may see some reversals towards this nature of the provisions that we added. On the Q-o-Q basis, basically, what you saw last quarter, there was a bit of more on the accounting recognitions, where in the second quarter, we saw a bit of an increase in the tax of properties, related to the properties. This is more on the subsea cable business. That last year was more loaded in the third quarter, but for this year was recognized more in the second quarter. But what you see in the third quarter is basically a normal run rate that we should expect to see as well in the fourth quarters. Hopefully, that answers your questions.

Operator: [Operator Instructions] Next question coming from Piyush Choudhary.

Piyush Choudhary: A few questions. Firstly, on Telkomsel, what is leading to increase in cost of services and O&M quarter-on-quarter? Like EBITDA margin is now down to 44% in third quarter. So if you could throw some light on the outlook for the EBITDA margin for Telkomsel separately? Secondly, on the mobile, can you let us know how are the trends during September and October? Is the revenue improving in month-on-month? And your peers, XL and Indosat have raised tariffs towards the end of 3Q. Have you also done that? Or what's your strategy here? And if I may ask one more third question. On FMC, can you update us on your billing platform integration? Is it complete? And when do you expect to launch new Telkomsel One plans?

Ririek Adriansyah: Okay. Thank you. First thing is about the cost in the Telkomsel side. The first is in the third quarter, the higher cost is mostly coming from the operating and maintenance expenses in which the -- because of increase due to higher frequency, transmission and lease expenses tied to the network upgrades and in the home integration and also for the marketing costs driven by the intensified effort to expand customer base, particularly in youth and XL for segment and to accelerate fixed broadband growth aligned with initiative to maintaining market share in Java and defining [indiscernible] Java, while for the cost of service increase related to the enhanced digital capabilities and service to improve customer profitability, both in mobile and broadbands for in addition that the increase in the cost of service is also aligned with the revenue.

Derrick Heng: This is Derrick. I'll answer your second question on what is the trend moving forward. We have seen improved conditions over the past 2 months as supply and demand have begun to stabilize, signaling a healthier competitive landscape. This is further supported by the fact that the -- as you said, the competitors have started to increase pricing. We have been able to withstand the market pressure through several initiatives, addressing affordability and capturing the mass segment market through some of our initiatives like Telkomsel Lite, by.U, as well as the short-term sachet packages. And in that context, we have enhanced productivity and drive in payload. We have also enhanced products and services for our high-value customers and to monetize through CVM with more for more initiatives. Then, of course, we are on track with our FMC play. If you look at the traction of our FMC convergence penetration, we started at 37% in July 2023. We are now at 53% in September 2024, meaning that strategy of multiproduct holding in our customer base is moving traction. Our hypothesis is the more products they are with us, the stickier and more loyal they will be with Telkomsel.

Ririek Adriansyah: On the FMC integration, we expect that the integration complete in this Q4. I think we are starting to migrate most of the customers today. And we have the plan to Telkomsel One plan to introduce to the customers. We have the piloting being done. And right after the integration completed, we're confident that we're going to introduce upcoming attractive convergence services to the customers to really not only attract the customers for the value of the convergence but also our existing customers as we have the attractive bundling that we can offer to the existing customers. To add to your question on whether we will be increasing pricing. As market leaders, we are always very careful and rational in terms of managing our pricing strategy, really to apply the right pricing and right offering to the relevant segments. The price increase will really depend on various conditions, especially the macroeconomic factors and competition. However, from a seasonality perspective, we will see year-end seasonal pricing adjustments. So that's on track with our plan.

Piyush Choudhary: So you have not taken price hikes so far, but you think seasonally, it's a relevant quarter 4Q, and that's why you may be able to kind of take up prices?

Derrick Heng: From a seasonality perspective, historically, we will have pricing adjustments. But from a strategic sustainable growth, we look at the productivity of our customers. We look at the right offers to the right segments. For segments that have the ability to pay, we will look at more for more. And for mass market segment, we will drive our very affordable sachet pricing packages.

Daru Mulyawan: Yes. So some additional information on the pricing adjustment. Actually, last month, we have priced up our price for legacy services because we well understood that the number of users in legacy is consistently declining. So to slow down this decline, we have done the price up to maintain the existing revenue. And on top of it, besides the seasonal price in the end of the year, as we have been doing for so many years, we have seen also some opportunities to monetize further our mid-high segments of customers in response also to the macroeconomy as well as the competition that I think it is the right time, and we are looking into these particular segments for some price up, especially in the broadband.

Piyush Choudhary: And one question was missed on EBITDA margin outlook for Telkomsel, if you can.

Ririek Adriansyah: Yes. Okay. As we can see in the third quarter, the EBITDA margin declined as we explained because of the expenses related to the cost of sales and also operating maintenance. And then we expect that the EBITDA margin for the year-end '24, considering the current macro condition and also the competitive landscape, we expect that the EBITDA margin is around 45% to 46%.

Operator: Our next question comes from Sukriti Bansal.

Sukriti Bansal: Two quick questions from my side. Firstly, on FMC, I understand that you said you've overachieved your IDR 1.9 trillion synergy target for the year. Can you help us with a breakup of this? And if I understand correctly, this is the gross synergy. Is it possible to share a figure given you would have incurred cost, what is the net synergy value that you've seen? And if there's any guidance from FMC, what is the kind of synergy you're expecting going forward? And second question is on cellular. On Telkomsel, I understand that this is a seasonally soft quarter, but we've now seen ARPU declines quarter-on-quarter for multiple quarters. What is our outlook going forward given -- how much room do we actually have to increase prices? And are we seeing greater traction on some of our more mass market segments like Telkom satellite and By you? And given the combined effect of the 2, how do we see ARPU outlook going forward?

Ririek Adriansyah: Okay. On the synergy value, I think the value that we have today mostly comes from the cost side. In terms of upside on the revenue side is on the top line is coming from the cross-selling. However, as we shared with you that the integration period will be done in the end of this year or quarter 4, we believe that there is room for us to continue to improve our synergy value due to our revenue uplift from the FMC product and convergent services that we offer to the customers. Moreover, I think there is more and more on the cost side that we can continuously leverage. We have continuously evaluated our customer touch points such as the Plaza and Grapari that we have duplicated. We have also some elimination on the call centers and all others that we have today, including, I think, some of the back-end systems like analytics and all that we can actually leverage both fixed and mobile, which we're able to improve our cost in the near future. So that's something that we expect that we can improve on the FMC synergy fairly going forward. So, I'll answer your question on the ARPU, right? The decline in ARPU is primarily driven by the ongoing contraction in legacy services explained by Basuki. So it's declining at a rate of 20% to 30%. And of course, the context of seasonality, Q3 is traditionally soft. And that is also coupled with the challenging macroeconomic condition. However, we see the customer base remains stable as we address the market demand and affordability concerns through low denomination and sachet packages. And we have seen positive signs in productivity. There is strong data growth in terms of traffic, indicating resilient demand and our ability to leverage on superior service and product offerings. From a trend perspective, we see if the market conditions stabilize, we aim to improve customer productivity, and we will achieve ARPU uplift through initiatives like trying to encourage higher tier package upgrades and enhancing digital content to attract higher value from our customers.

Adiwinahyu Basuki Sigit: Okay. To add to that, I think to answer your point on how is the traction on mass and use market segments. I think using Telkomsel lite and by.U as we go along until the Q3, we've seen that the good positive progress that we have been able to get traction from the market and especially on the Java market where we've seen that the productive of broadband customer base that we have are improving from time to time since we launched Telkom satellite, and this are also addressing to the right strategy where we have seen that the economic condition and macro are impacted in this year, we have Telkom satellite to back up our strategy to maintain our customer base as well as to maintain the competitive in the market. On top of that, I think in compared to the ex-Java, our main concern is that the legacy portion are still big in ex-Java. So we are actually happy to see that our CVM progress so far are being able to continuously maintain our competitiveness in the markets to maintain our existing and dominant in the ex-Java. So with those 2 combinations, including with FMC, we believe that going forward, we would have to be able to stabilize the ARPU as well as the plan that we have on seeing the economic condition on the market and also segments, there is some segments that may be able to monetize in terms of price adjustment and all as we see the market conditions.

Unknown Executive: This is Oki from IR. Just to add some color in regards to the synergy on FMCs. On the CapEx efficiency, we have started to see some improvements and hence, our now ability to broaden our market segmentations at the Telkomsel level and make it a lot more economic viable. And that is a result from the -- our ability to lower down the CapEx rate that done through mega-vendors. I hope that answers your questions.

Adiwinahyu Basuki Sigit: Adding to what Oki just mentioned, actually, when we see the synergies, it does not only happen in Telkomsel level but also in the group level. For example, in the CapEx just mentioned by in the Telkomsel level. But actually, the business came between Telkom and Telkomsel in which Telkomsel basically leased in the network from Telkom. The rest of the lease is going to reduce from time to time. So currently around 59% to revenue next year going to reduce to 57%. And then it means the Telkom side, we also need to do some efficiencies, as mentioned by Oki in that Telkomsel level that way. For our side, in the last mile of the network for fixed broadband that we deploy in the last 2 years, we're able to reduce the CapEx per line around 30%. And also in the same time, the operation and maintenance costs on the per line is also reduced around 15%. So with that, we are going to have our flexibility in, let's say, penetrating the market while we maintain the margin in this fixed broadband business. Hope that I think adding some more color on this FMC.

Operator: We will move on to Marissa.

Marissa Putri: Same question as the previous one actually, but if I can follow up on the cost side. Were there other posts or areas where you see meaningful increases that sort of offset the savings and cost, given if you look at the normalized margin, for example, it continues to trend lower. So it's not really reflected in the margin. And if you expect to see some sustainable synergy coming to 2025, should we then expect margin improvement next year or if you actually still see some challenges on margins?

Ririek Adriansyah: Marissa, I think on the offset saving, as we also already mentioned in some cases, I think fixed mobile conversion, it is also happening across the group. And then how the cost in the upcoming year, for example, we are going to continue to reduce the growth of cost. We do understand that we continue to put our CapEx. It means more networks in the field that are going to also cost some operation and maintenance increase a bit. But this increase, we aim to try to limit the increase by having, let's say, more marginal increase in the operation and maintenance cost. So with this, we do expect the cost going to be more, let's say, manageable. Some costs that we have incurred, for example, in the personnel cost this year increased quite significantly because we have one-off of the early retirement program. That's supposed to also contributing some cost management in the upcoming year as we reduce 5% of our employees based on our rate, the growth of the employee cost actually around 4%. We do expect that this is going to basically manage the cost of personnel in the upcoming years. With this, we do expect that we're able to manage the cost in the, let's say, moving forward, I think should we have, let's say, revenue growth betterment next year compared to this year. Of course, as you mentioned, it is supposed to bring to a better margin.

Unknown Executive: This is Oki from IR. Just to add what Harry was saying. In regards to the CapEx, I mean, in the previous year and for the personnel, we have working on the 20% of our CapEx. Our next cost initiative is going to be towards the 60% of our CapEx, which is the O&Ms. Hence, our plan to reduce CapEx ratios to revenues from currently 22% to 24% to 17% to 19% by 2028. Harry earlier mentioned that this is viable in our views that should be able to be taken through a couple of reviews such as our network technologies that are expected to be more efficient going forward. And then the new technologies as now we see a different competitive landscape that we see in the market should be able for us to use the technologies adoptions that is suitable for the business. Another thing is the group renegotiations that we earlier discussed, which is now enabling us to serve a broader market segmentation. And the last part is when we prepared the CapEx in the past, as it reached 50% of utilizations, we have started already preparing the new CapEx. Now I think we can see some room for us to optimize the utilizations up until 70% before we start preparing the CapEx. So with that, we are hopeful that the cost side can be a lot more manageable to go subpar to our revenues. I hope that helps.

Marissa Putri: Okay. Maybe just one more. Maybe it's a bit further out as well. But do you foresee kind of a steady state level on EBITDA margin? And I'm talking about the normalized EBITDA margin level. Is it probably possible to get more than 50% in the next 2 years with this FMC synergy and so on, things like that?

Derrick Heng: Okay, Marissa. I think with the growth we do expect our growth in the medium term supposed to be around, let's say, mid-single digit. With that, I think most of the costs already in the very good shape. We also attack the cost with some new technology and so on and some with, let's say, better result from procurement, as mentioned by Ririek. I think we do believe that very possible.

Operator: [Operator Instructions] We will move on to Henry Tedja for the next question.

Henry Tedja: Perhaps 2 questions from my end. First one on the Telkomsel. I mean, we understand that the lower or basically the revenue decline on the Telkomsel could be attributed to the macro and also the competition. But I mean, if you look at on the data traffic or data payload, I think the management mentioned several times of the customer productivity increase and how Telkomsel basically gained the market share. So just curious whether the management focus right now has changed from profitability to the market share? And perhaps can you share some color what is the driver of this higher data traffic growth? I mean, do you think that comes from the cannibalization as Telkomsel now put more focus on the low segment and new segment, which perhaps deliver a lower ARPU compared to the existing customers? And then my second question, I think if you look at on the datacom and Telkomsel performance in third quarter, I think the non-Telkomsel performed better in the third quarter. So perhaps can you share some color on which business that really drives the performance in the third quarter for Telkom Group?

Ririek Adriansyah: Yes, Henry, I will address the context of ARPU. The ARPU decline is really reflecting the typical seasonal trend and our increasing share of the entry-level data packages given the economic pressure, we wanted to address and be more relevant to the more price-sensitive customer segments. Having said that, we saw data traffic has grown to higher consumption, especially in entry-level and promotional plans. However, this traffic growth has not fully translated into ARPU uplift due to the lower price points in these packages. But we are focusing on addressing ARPU resilience. We want to drive the stability and the upselling from encouraging high-tier packages upgrades, and we want to also push more digital content to add more value beyond connectivity. We will address the market demand and affordability concerns through these low-denom and social packages.

Derrick Heng: And to add to that point, I think our focus remain on the profitability. While we share and improve our traffic growth in those segments that we give more quota, more bonuses. We believe that we are doing that in the back of our remaining capacity utilization that are not adding any investment further. And on top of that, I think what we've seen is that this traffic growth is a good indicator for us, both in Java and ex-Java market, which we believe that besides we have maintained our productive growth of the traffic in terms of the users, both in the low segment and high segments, we are able to continuously seeing that the productivity on the broadband side is improving. In the ARPU, as Basuki mentioned, it is mainly majority impact to the -- because of the legacy portions as we -- if we dissect analysis on the ARPU base in terms of how the ARPU is actually declining.

Heri Supriadi: Okay. On the non-Telkomsel business performance, as we may explain here, some of our subsidiary performed pretty well, which is coming from Mitratel and then Telkom International as well as DC, which has grown around 9% year-on-year. In addition to that, our B2B business grew by 3.8% and we believe, as mentioned in the, I think, presentation that this B2B business can grow up to, let's say, high single digit by the end of the year. So that's about performance on Telkomsel.

Henry Tedja: Sorry, perhaps one follow-up question on the Telkomsel. I mean, you basically mentioned all this data traffic growth basically coming from the entry-level kind of products and also some promotional packages as well. So just curious whether you can really monetize it in the future as perhaps the segment that perhaps subscribe all those products might be the low customer segments that might be churn when you increase the product prices and et cetera? So just curious on that.

Ririek Adriansyah: Yes. We are optimistic because from this high data traffic growth, it has indicated a resilient demand and it is really our ability to leverage on a superior service and product offering. So we will want to remain optimistic in this positive signs for -- in terms of productivity.

Unknown Executive: Sorry, just to add on that, Henry, Oki from IR. Coming back to your first point in regards to your questions on why are we now serving the broader market segmentations. Please rest assured that this has been conducted with the -- at a very careful manner at the same time as now while we are serving now broader market, both on the mobile as well as the fixed broadband, our cost side is also something that we continuously manage. And hence, our discussions earlier on the synergies that conducted between Telkomsel through FMCs as well as from the Telkom Group levels. So with that, now despite the broader segments that we capture, the economic remains at a favorable manner to us. And as well as [indiscernible], as we discussed as well in the past that the entry by -- with the new entry point levels is focusing in the area that we are lacking in terms of market share so that in the end, it will not be cannibalizing the main products that we have. Hopefully, that answers your question, Tedja.

Operator: Moving on, we will have a question from Ranjan Sharma.

Ranjan Sharma: Two questions. Firstly, on the data usage under the current discussions. There seems to be a lot of focus on productivity of consumers, but it just seems like it's because [indiscernible] data has been given. So you're seeing a tremendous growth in usage, but it's not being monetized properly and that's never been a good outcome for shareholders, unfortunately. So I just want to try to understand why is the management now focusing so much on the productivity of customers rather than monetizing the customers better when the earnings are under pressure. I mean are you also looking to segment the market in a different way, monetize the higher-end users more so you can subsidize the low-end users? Just trying to understand the management strategy. The second question is on the broadband side -- sorry, on the InfraCo side, if you can tell us where you are with respect to opening up of the InfraCo and trying to grow it further?

Ririek Adriansyah: Can you repeat the second question, Ranjan?

Ranjan Sharma: Yes. The second question is on the InfraCo. I understand the plan was to open up the InfraCo and to grow the business further. If you can tell us where we are with respect to the fiber InfraCo?

Derrick Heng: Ranjan, I'll answer your first question. From a monetization perspective, we always carefully evaluate based on market conditions, competitive dynamics, and the macroeconomic factors. I think Telkomsel strategy has proven that we are on the right track. And we are being relevant, we are adaptive to the macro condition while maintaining our competitiveness. We are optimistic that as market conditions stabilize, then with a dynamic balance in terms of supply and demand, we are well positioned to seize the opportunities of recovery, and we will capture the ARPU uplift momentum once the demand rebounds.

Heri Supriadi: On the InfraCo, actually, we already established our fiber company, we call Telkom Intra-structure Indonesia and start from 1st of August, Telkom Infrastructure Indonesia already manages all Telkom fiber asset by managed service and operations scheme. And in the end of this year, Telkom Infrastructure Indonesia will start to commercialize our fiber asset. Thank you.

Ranjan Sharma: Can I have a quick follow-up on that point?

Operator: Yes, please.

Ranjan Sharma: So as we open up the InfraCo through wholesale access, can you tell us like how are you going to approach the market? Is it going to be a nonexclusive, none discriminating pricing? Or is there a different pricing for Telkom versus other players in the market?

Heri Supriadi: Of course, we have to follow the regulation of the antimonopoly equally, Ranjan. But of course, there is some business scheme that's [indiscernible] regard to, let's say, on the volume consumption and other that we have to be referred as a part of the pricing scenario.

Operator: Thank you. Ladies and gentlemen, due to the interest of time, we would like to limit the questions. We understand that there are still a couple of questions that has not been addressed. We will get back to you. I will now hand over the session back to Pa Oki.

Unknown Executive: Thank you very much, ladies and gentlemen, for joining the call today. I would like to conclude our call for today. Please feel free to contact us any time should you have any more questions to IR, and we'll be happy to answer your questions. Thank you. You may leave the call.