A Lockdown Quarter That Didn't Break the Business
Indonesia enforced large-scale social restrictions ("PSBB") in Jakarta and other major cities through April and into May 2020 - offices closed, mobility collapsed, and much of the country's economic activity moved indoors. Against that backdrop, Indosat's six months ended June 30, 2020 posted revenue growth of 9.4% year-over-year to Rp13,451.7 billion, actually faster than the 7.9% growth Q1 2020 alone posted before the lockdown began. Data-hungry customers stuck at home, working and studying online, appear to have more than offset any COVID-era pressure on discretionary telecom spending - a pattern several telecom operators globally reported the same year, as connectivity became infrastructure for a locked-down economy rather than a discretionary purchase.
The loss narrative also improved: net loss attributable to owners was Rp341.1 billion for the full six months, only modestly worse than the Rp331.9 billion loss in H1 2019, and - because Q1 2020 alone had already posted a Rp605.6 billion loss - that means Q2 2020 in isolation swung to a roughly Rp264.5 billion profit, even as Indonesia's strictest lockdown measures were in force. The employee-cost spike flagged in Q1's coverage continued (H1 employee expense +43.2% year-over-year), but it no longer dominated the quarter's result the way it did in Q1 alone.
The Prescription
Indosat should treat this quarter's result as evidence that its core connectivity business is close to recession-proof, and lean into that positioning rather than downplaying it. Revenue accelerating during the country's harshest lockdown - not just holding steady - is a genuinely strong data point for a telecom operator, and one Indosat should be using in investor communications and vendor/lender negotiations alike (its debt covenants explicitly reference EBITDA-based ratios, per the loan agreements disclosed in prior quarters' notes). A business whose demand goes up when customers are stuck at home has real defensive value that a widening quarterly loss on the income statement obscures.
What it should stop doing: letting operating cash flow gains get eaten by a financing-activity outflow without explaining the capital-allocation logic. Net cash used in financing activities was Rp3,557.1 billion this half, more than offsetting the Rp4,621.7 billion generated from operations - largely debt repayment, per the falling total-debt figure in Key Financial Metrics below. Deleveraging into an uncertain pandemic year is a defensible choice, but the filing doesn't say whether it's opportunistic (paying down debt because cash is available) or defensive (reducing leverage because management is worried about the environment) - those are different signals, and only one of them should change how a reader weighs Beyond the Usual's findings below.
Key Financial Metrics
H1 2020 (six months ended Jun 30, 2020) vs. H1 2019, consolidated
FX: Rp14,265 = US$1 (Jun 30, 2020) and Rp14,141 = US$1 (Jun 30, 2019) - period-end market quotes, used only to convert the USD columns below; the rupiah figures are the company's own disclosed numbers. Unlike the sharp depreciation seen at the end of Q1 2020, the rupiah had largely stabilized against the dollar by mid-year.
| Metric | H1 2020 (Rp) | H1 2020 (US$) | H1 2019 (Rp) | YoY (Rp) | YoY (US$) |
|---|---|---|---|---|---|
| Revenue | Rp13,451.7B | ~$943.1M | Rp12,291.5B | ✅ +9.4% | ✅ +8.2% |
| EBITDA» (operating income + D&A, company doesn't disclose its own figure this quarter) | Rp6,049.3B | ~$424.1M | Rp5,507.7B | ✅ +9.8% | ✅ +8.7% |
| Operating Income» | Rp1,087.8B | ~$76.3M | Rp797.0B | ✅ +36.5% | ✅ +35.0% |
| Net Loss (attributable to owners of the parent) | -Rp341.1B | ~-$23.9M | -Rp331.9B | ⚠️ loss widened 2.8% | ⚠️ |
| ...of which, consolidated total (incl. non-controlling interests») | -Rp317.7B | ~-$22.3M | -Rp321.3B | ✅ loss narrowed 1.1% | ✅ |
| Free Cash Flow» (operating cash flow - capex) | Rp2,160.2B | ~$151.5M | Rp315.5B | ✅ +584.7% | ✅ |
| Total Cash (vs. Dec 31, 2019 year-start; no year-ago half-year balance sheet was disclosed) | Rp4,537.9B | ~$318.2M | Rp5,881.2B (Dec 2019) | ⚠️ -22.8% | ⚠️ |
Basic loss per share attributable to owners was Rp(62.77), against Rp(61.08) a year earlier - almost flat, despite the headline profit-attribution split shifting (non-controlling interests' share of profit rose from Rp10.6 billion to Rp23.4 billion, meaning slightly more of this half's underlying result flowed to minority stakeholders rather than Indosat's own shareholders). Capital expenditure fell 41.7% year-over-year (Rp4,226.4 billion to Rp2,461.5 billion) - a much sharper pullback than Q1 alone showed - which, combined with operating cash flow holding roughly flat (Rp4,541.8 billion to Rp4,621.7 billion), is the entire reason free cash flow nearly septupled. Total debt (loans, bonds, and sukuk, excluding lease liabilities) fell to Rp19,138.6 billion from Rp20,439.1 billion at Q1's close - real, continued deleveraging.
Revenue accelerated and operating income grew 36.5% during the country's strictest lockdown months - the opposite of what a discretionary-spending business would show. The net loss barely widened, and Q2 alone was actually profitable. See The Prescription above.
Key Operational Metrics
No investor presentation was located for this quarter - the same gap flagged in Q1 2020's coverage - so subscriber count, ARPU», and network/traffic metrics are not available for this specific post.
Segment Comparison
Indosat reports three segments: Selular (cellular), MIDI (Multimedia, Data Communication, Internet), and Telekomunikasi Tetap (fixed-line). Segment operating profit below is measured before financing costs, taxes, and unallocated items, per the segment footnote.
| Segment | Revenue H1 2020 | Revenue H1 2019 | YoY | Segment Op. Profit H1 2020 | Margin | Share of Revenue |
|---|---|---|---|---|---|---|
| Selular (cellular) | Rp11,141.0B | Rp9,961.7B | ✅ +11.8% | Rp336.0B | ✅ 3.0% | 82.8% |
| MIDI (enterprise/data/internet) | Rp2,036.4B | Rp1,988.0B | ✅ +2.4% | Rp252.5B | ✅ 12.4% | 15.1% |
| Telekomunikasi Tetap (fixed) | Rp274.3B | Rp341.8B | ⚠️ -19.8% | -Rp119.9B | ⚠️ -43.7% | 2.0% |
| Total | Rp13,451.7B | Rp12,291.5B | ✅ +9.4% | Rp468.6B | ✅ 3.5% | 100% |
Selular
Grew fastest of the three (+11.8%) and swung from the small operating loss seen in Q1 alone (-2.6% margin) to a modest 3.0% margin for the half - consistent with a lockdown-driven demand pickup for mobile data that outran the segment's own cost growth over the second quarter.
MIDI
Still the highest-margin segment (12.4%), though revenue growth slowed sharply from the double-digit rates this site has seen in Indosat's later years - only +2.4% this half, likely reflecting reduced enterprise IT/connectivity spending as corporate customers themselves cut budgets during the lockdown.
Telekomunikasi Tetap
The weakest segment by a wide margin: revenue fell 19.8% and the operating margin deteriorated further to -43.7%, worse than Q1 alone's -36.5%. Fixed-line demand appears to be actively eroding, not just structurally low-margin - continuing the multi-year decline from the 43.0% margin this segment posted in Q1 2009.
Stock Price: A Round Trip Through the March 2020 Crash
Indosat's shares closed H1 2020 at a split-adjusted Rp587.50 (nominal Rp2,350, after applying the 4x conversion for the October 2024 forward split) - a partial recovery from the Rp388.75 (nominal Rp1,555) close at the end of Q1 2020, but still well below the Rp877.50 (nominal Rp3,510) level the stock traded at two years earlier in July 2018. Over the two years into this quarter's close, shares fell as low as Rp421.25 in December 2018 and Rp388.75 in March 2020 - the latter squarely inside the global COVID-19 market crash - before recovering roughly 51% off that trough by quarter-end. This tracks the broader Indonesian and emerging-market equity recovery through Q2 2020 more than anything specific to Indosat's own numbers, which (per the operational metrics above) were actually holding up better than the stock price implies.
Beyond the Usual
The Same Termination Program Flagged Last Quarter Kept Running
Q1 2020's coverage flagged a Rp295.3 billion termination payout effective April 1, 2020. This filing discloses a second, similar event: in July 2020, Indosat made a further cash payout to employees whose termination took effect July 1, 2020 - the exact amount isn't broken out separately in this filing's face disclosures, but employee expense for the half grew 43.2% year-over-year (Rp1,000.7 billion to Rp1,432.4 billion), a smaller jump than Q1 alone's 141.9% but still well ahead of revenue growth. Two consecutive quarterly termination events, both timed to the start of the following month, increasingly look like a structured, ongoing workforce-reduction program rather than a one-off event - worth tracking for a stated total program size or completion date in future quarters.
The Legacy Corruption Provision Remains Unchanged
Indosat's Rp1,358.6 billion "provision for legal case," covered in detail in this site's FY2018 special post, stayed flat again this quarter - no new disclosure on the case's status.
A Tax Payment Nearly Doubled Even as Pre-Tax Results Stayed Weak
Corporate income tax actually paid in cash rose from Rp104.2 billion to Rp193.9 billion year-over-year (per the cash flow statement's supplementary disclosure), even though the company posted a pre-tax loss both years. This is a normal feature of Indonesian corporate tax administration (installment payments based on prior-year profitability, reconciled later against the actual result) rather than a red flag on its own, but it's a real cash outflow that doesn't show up as prominently in the income-statement tax line, which reflects an accrual-basis expense of only Rp56.5 billion this half.
Target Valuation Range
Bottom line: roughly Rp1,850-Rp4,050 fair-value range (bear-to-bull, EV/EBITDA-based) against a Rp2,350 actual nominal close - the stock sits in the lower half of that range, which looks reasonable given the still-unresolved net loss, even as the underlying operating trend (accelerating revenue, improving free cash flow) points toward the higher end over time.
| Market cap → enterprise value | H1 2020 (period-end) |
|---|---|
| Share price (period-end, nominal) | Rp2,350 |
| Shares outstanding (1 Series A + 5,433,933,499 Series B) | 5,433,933,500 |
| Market capitalization | ~Rp12,769.7B (~$895.3M) |
| Plus: total principal debt (loans, bonds, sukuk; excl. lease liabilities) | Rp19,138.6B |
| Less: cash and cash equivalents | Rp4,537.9B |
| Enterprise value | ~Rp27,370.4B (~$1.92B) |
| Peer/multiple sanity check | H1 2020 | Q1 2020 |
|---|---|---|
| EBITDA (annualized ×2) | Rp12,098.6B | Rp10,655.6B |
| EV / EBITDA (annualized) | ~2.26x | ~2.23x |
| Net debt (total debt - cash) | Rp14,600.7B | Rp15,277.6B |
| Net debt / EBITDA (annualized) | ~1.21x | ~1.43x |
| P/E | not meaningful (net loss this half) | not meaningful |
The annualized EV/EBITDA multiple is essentially unchanged from Q1's ~2.23x, despite operating income growing 36.5% and free cash flow improving sharply - the market hasn't re-rated the stock even as the underlying operating trend improved through the lockdown quarter. Net debt/EBITDA improved from 1.43x to 1.21x, continuing the deleveraging trend The Prescription above raised a question about.
| Scenario | Key assumption | Multiple | Implied EV | Implied nominal price |
|---|---|---|---|---|
| Current (H1 2020 close) | actual market price, for reference | ~2.26x annualized EBITDA | ~Rp27,370B | Rp2,350 |
| Bear | Multiple stays depressed; pandemic disruption to Indonesia's economy worsens through 2H 2020 | ~2.0x | ~Rp24,197B | ~Rp1,847 |
| Base | Multiple holds near today's level as the lockdown-resilient revenue trend continues | ~2.5x | ~Rp30,247B | ~Rp2,884 |
| Bull | Multiple re-rates toward a more typical mature-telecom range as free cash flow keeps improving | ~3.5x | ~Rp42,345B | ~Rp5,058 |
A full multi-year DCF still isn't attempted this quarter: with two consecutive net-loss halves now on this site's record for Indosat's 2020 coverage, and COVID-19's economic path through the rest of the year still unknown as of this filing's August 2020 signing date, a projected cash-flow model would be built on assumptions nobody - including Indosat's own management - could reliably make yet. The EV/EBITDA read above is the more trustworthy signal for now, and it says the stock is pricing in continued uncertainty rather than the operating improvement this quarter's numbers actually show.
PT Indosat Tbk's unaudited interim consolidated financial statements for the six months ended June 30, 2020 and 2019, as reviewed and signed by the Board of Directors on July 28, 2020.