ISAT An 84% Profit Jump That Was Mostly a Fiber-Network Sale

A Fiber Sale Dressed Up as an Earnings Beat

Indosat Ooredoo Hutchison (Indosat, IDX: ISAT) reported first-half 2026 revenue of Rp30,653.1 billion, up 13.1% year-over-year, and EBITDA^» (a company-reported figure from the earnings presentation, not a line item in the audited financial statements - see note below the Key Financial Metrics table) of Rp14,603.4 billion, up 13.6%, holding margin roughly flat at 47.6%. Both numbers are a continuation of the same story this site covered in Q1 2026 - steady, unspectacular growth in the core telecom business. Net income attributable to owners of the parent, on the other hand, jumped 84.5% year-over-year to Rp4,308.9 billion - a headline number dramatically out of step with everything else in the income statement.

The gap has a name: on 30 June 2026, Indosat completed the divestment of PT Infra Fiber Teknologi ("IFT") - the entity it had contributed its fiber-optic network assets into earlier in the year alongside subsidiary Lintasarta - selling an 84.9% stake to a new investor ("NFT") for Rp11,685,969 million in cash, while retaining a 49.9% stake in NFT through an in-kind share contribution and signing a 10-year leaseback of the transferred fiber assets. The transaction produced a gross gain of Rp1,797,772 million, reduced by Rp279,928 million of transaction costs to a net gain of Rp1,517,844 million, booked as its own line item - "Net gain associated with the loss of control of a subsidiary and leaseback transaction" - in the income statement. That single line is 59.4% of the entire year-over-year increase in operating profit (Rp2,554.2 billion) and 77% of the increase in owners' net income (Rp1,973.6 billion).

Strip the gain out and the picture looks far more ordinary: operating profit excluding the one-off grew from Rp5,183.6 billion to roughly Rp6,220.0 billion, up ~20.0% rather than the headlined 49.3% - a healthy acceleration from revenue growth, consistent with margin discipline, but nowhere near what the reported number implies on its own. The ex-one-off net-income figure (~19.5%, below) simplifies by assuming the entire Rp1,517.8 billion gain flowed untaxed and fully to owners with no non-controlling-interest (NCI) share - a simplification, not a confirmed fact, though NCI's own profit share falling this half is weakly consistent with it. This isn't a hidden number: the company disclosed the transaction plainly in both the press release and financial-statement footnote 32 (see Beyond the Usual below for the full mechanics). This is the second time in three quarters this site has covered Indosat that a headline profit jump has ridden mostly on a non-operating item rather than the core telecom business - the FY2025 post flagged a Rp487.4 billion one-off swing behind that year's 12.2% net-income growth and explicitly noted it was "worth checking" whether the pattern repeated; it has. But a reader skimming the headline "net profit up 84.5%" without reading past the first page would come away with a materially wrong impression of how the underlying telecom business actually performed this half.

Underneath both numbers, the same theme flagged in the Q1 2026 post continues: the subscriber base kept shrinking (93.4 million, down 2.1% year-over-year) while blended ARPU^» kept climbing (Rp46,000, up 17.3%). Indosat is still growing entirely by monetizing a smaller customer base harder, not by adding new customers.

The Prescription

Indosat should keep leaning into MIDI (Multimedia, Data Communication, Internet) - its enterprise/data/connectivity segment, which grew revenue 18.5% year-over-year this half, again the fastest of the three segments, off a base that's crept up only slightly to 15.3% of total revenue. Management's own guidance upgrade this quarter (see Management's Framing below) puts real capital behind an AI/data-infrastructure push - a 5G spectrum win, a hyperscale AI-infrastructure joint venture (Zankore), an AI research center with NVIDIA and a local university - and MIDI, not Selular, is the natural revenue home for all of that spend. If none of it eventually shows up as accelerating MIDI growth, the capex will have gone toward prestige projects rather than the segment it should be building.

What it should stop doing: presenting a one-off financial-engineering gain with the same visual weight as operating performance. The FiberCo divestiture is a legitimate, well-disclosed transaction - selling a non-core asset for cash while keeping access to it via a leaseback is a sensible way to fund a much larger capex program (guidance capex nearly doubled this quarter, largely funded by exactly this cash). But burying that distinction inside a single "Net gain associated with the loss of control of a subsidiary and leaseback transaction" line, while the press release's own headline table reports operating profit "+49.3%" and net profit "+84.5%" without a single sentence separating recurring from non-recurring, invites exactly the kind of misreading this post is correcting. A company confident enough to nearly double its capex guidance off asset-sale proceeds should be confident enough to say so in its own headline numbers, not just its footnotes.

Key Financial Metrics

H1 2026 (six months ended Jun 30, 2026) vs. H1 2025, consolidated

FX: Rp17,935.00 = US$1 (Jun 30, 2026) and Rp16,230.00 = US$1 (Jun 30, 2025) - month-end market quotes, used only to convert the USD columns below; the rupiah figures are the company's own disclosed, audited-basis-unaudited-interim numbers. The rupiah depreciated ~10.5% against the dollar over the year, which is why USD growth trails Rp growth throughout this table.

Metric	H1 2026 (Rp)	H1 2026 (US$)	H1 2025 (Rp)	YoY (Rp)	YoY (US$)
Revenue	Rp30,653.1B	~$1,709.1M	Rp27,109.6B	✅ +13.1%	✅ +2.3%
EBITDA (margin 47.6% vs 47.4%)	Rp14,603.4B	~$814.2M	Rp12,855.4B	✅ +13.6%	✅ +2.8%
Operating Income»	Rp7,737.8B	~$431.4M	Rp5,183.6B	⚠️ +49.3% (~+20.0% ex one-off)	⚠️ +35.1%
Net Income (attributable to owners of the parent)	Rp4,308.9B	~$240.3M	Rp2,335.3B	⚠️ +84.5% (~+19.5% ex one-off)	⚠️ +67.0%
...of which, consolidated total (incl. non-controlling interests»)	Rp4,420.3B	~$246.5M	Rp2,513.2B	⚠️ +75.9%	⚠️ +59.2%
Free Cash Flow» (operating cash flow − capex, excl. right-of-use assets)	Rp2,244.1B	~$125.1M	not comparably disclosed this half	n/a	n/a
Total Cash	Rp15,781.6B	~$880.0M	Rp5,174.3B	✅ +205.0%	✅ +176.1%

EBITDA figures in this table match what Indosat itself reports as "EBITDA" in its 1H 2026 earnings presentation (Revenue less cost of services, personnel, marketing, and G&A expenses, before depreciation, amortisation, interest, and tax) - but that presentation is unaudited investor material, and EBITDA is not a line item defined or reconciled anywhere in the audited interim financial statements. Treat it as a company-reported, non-GAAP figure, not filed with the same accounting rigor as revenue or operating income.

The ⚠️ flags on operating income and net income aren't about the growth being bad - both figures are genuinely up, and even the ex-one-off growth rates are healthy. They're there because the headline growth rate materially overstates recurring performance, and a reader relying on the press release's summary table alone wouldn't know that without reading footnote 32. See A Fiber Sale Dressed Up as an Earnings Beat above for the full breakdown, and Beyond the Usual below for the transaction mechanics. The ex-one-off net-income growth (~19.5%) assumes the fiber-divestiture gain was untaxed and belonged entirely to owners of the parent, with no NCI share - a simplification for readability, not a fact confirmed line-by-line in the filing.

Operating cash flow grew 22.8% (Rp9,575.8 billion to Rp11,763.8 billion) - a real, cash-backed improvement independent of the one-off gain, since the Rp11,685,969 million in FiberCo divestiture proceeds sits in financing/investing cash flow, not operating. Capex for the half was Rp9,519.7 billion (excluding Rp6,570.4 billion of PSAK 116 right-of-use assets); no comparably disclosed H1 2025 capex figure was found, so no YoY free cash flow comparison is possible this half - only this half's own Rp2,244.1 billion (Rp11,763.8 billion operating cash flow less Rp9,519.7 billion capex).

Revenue and EBITDA grew at a steady low-teens clip consistent with the last several quarters. Net income's 84.5% jump is real cash in the door, but it's a one-time asset sale, not a step-change in the telecom business - see A Fiber Sale Dressed Up as an Earnings Beat above.

Key Operational Metrics

Metric	H1 2026	H1 2025	YoY	Q2 2026	Q1 2026	QoQ
Total subscribers	93.4 million	95.4 million	⚠️ -2.1%	93.4 million	93.5 million	➖ -0.1%
Postpaid subscribers	2.1 million	1.7 million	✅ +23.5%	2.1 million	1.9 million	✅ +10.5%
Prepaid subscribers	91.3 million	93.7 million	⚠️ -2.6%	91.3 million	91.5 million	➖ -0.2%
Blended ARPU	Rp46,000	Rp39,000	✅ +17.3%	Rp46,000	Rp45,000	✅ +2.2%
Postpaid ARPU	Rp98,000	Rp95,000	✅ +3.2%	Rp98,000	Rp98,000	➖ flat
Prepaid ARPU	Rp44,000	Rp38,000	✅ +15.8%	Rp45,000	Rp44,000	✅ +2.3%
Minutes of use	4.4 min	5.0 min	⚠️ -12.0%	4.6 min	4.3 min	✅ +7.0%
Data traffic	9,892 PB	8,249 PB	✅ +19.9%	4,986 PB	4,906 PB	✅ +1.6%
4G BTS	214,326	203,086	✅ +5.5%	~214K	212,305	✅ ~+0.9%
5G BTS	10,117	807	✅ +1,153.7%	~10K	9,972	✅ ~+1.5%

Postpaid is the one genuinely growing subscriber line (+23.5% YoY) even as prepaid keeps bleeding - a small but real shift toward the higher-value, stickier segment of the customer base, though postpaid is still only 2.2% of total subscribers and too small to offset prepaid's decline in absolute terms. The 5G buildout, still a rounding error against the 214K-strong 4G network, more than doubled again from a year-ago base that itself started near zero.

Segments

Indosat reports three segments: Selular (cellular - voice, SMS, data, value-added services to individual and business customers), MIDI (Multimedia, Data Communication, Internet - enterprise IT services, fixed connectivity, data center, and related services), and Telekomunikasi Tetap (Fixed Telecommunications - international and fixed-network voice). As with Q1 2026, the company discloses segment revenue but not segment-level operating profit or margin.

Segment	Revenue H1 2026	Revenue H1 2025	YoY	Share of H1 2026 Revenue
Selular (cellular)	Rp25,527.2B	Rp22,749.7B	✅ +12.2%	83.3%
MIDI (enterprise/data/IT)	Rp4,694.0B	Rp3,961.6B	✅ +18.5%	15.3%
Telekomunikasi Tetap (fixed)	Rp431.9B	Rp398.3B	✅ +8.4%	1.4%
Total	Rp30,653.1B	Rp27,109.6B	✅ +13.1%	100%

Selular

Still 83.3% of revenue, growing in line with the consolidated average on rising data and value-added-service revenue offsetting continued declines in voice, SMS, and interconnection revenue - the same legacy-to-data shift every operator in this market is going through, and the same pattern Q1 2026 described.

MIDI

The fastest-growing segment again (+18.5%, up from +17.5% in Q1), driven by IT services, fixed connectivity, and fixed internet growth. This is the segment The Prescription above argues Indosat's new AI-infrastructure capital spend should be built to accelerate - it's growing faster than Selular and is the natural home for enterprise-facing AI/data-center services, but at 15.3% of revenue it's still nowhere near large enough to move the consolidated numbers on its own.

Telekomunikasi Tetap

The smallest segment at 1.4% of revenue, growing 8.4% on higher international voice offsetting a decline in fixed-line revenue. Too small to matter to the consolidated picture either way.

Management's Framing: Guidance Up, Capex Nearly Doubled

Indosat's own 1H 2026 earnings presentation shows management using this half's cash windfall to fund a materially larger investment program, not to bank the gain. FY2026 guidance was upgraded from "mid to high single digit" to "close to double digit" for both consolidated revenue and EBITDA growth, while full-year capex guidance was raised from approximately Rp13 trillion to approximately Rp23 trillion - a figure that includes roughly Rp10 trillion earmarked for 5G rollout and explicitly excludes separate spend on AI "Neocloud" (GPU) infrastructure. That 5G commitment lines up directly with a subsequent event disclosed in the financial statements: on 21 July 2026, after the reporting period closed, Indosat was awarded 700 MHz and 2600 MHz 5G spectrum through a government auction, requiring an upfront fee of Rp879,480 million plus an annual usage fee of Rp785,400 million, with the license running from 5 August 2026 to 4 August 2036 (see Beyond the Usual below).

Read together, the sequence is coherent: sell a non-core fiber asset for Rp11.7 trillion in cash (while keeping operational access to it via the leaseback), then commit a comparable amount to 5G spectrum and AI infrastructure the same half. This is a real strategic pivot in the making, not just an accounting event - which is exactly why The Prescription above argues the one-off gain deserved more transparent framing rather than being folded silently into "net profit up 84.5%."

Beyond the Usual

A Rp1.5 Trillion Fiber-Network Sale Is Doing Most of the Work Behind This Half's Profit Growth

Footnote 32 lays out the mechanics in full: on 7 May 2026, Indosat and Lintasarta contributed fiber-optic assets worth Rp13,504,351 million and Rp218,301 million respectively into PT Infra Fiber Teknologi ("IFT") as in-kind capital, taking 98.4% and 1.6% ownership. On 30 June 2026, they completed a divestment of 84.9% of IFT to a new investor ("NFT") for Rp11,685,969 million in cash, while transferring their remaining 15.1% stake (bar one retained share) to NFT in exchange for a 49.9% stake in NFT itself - now carried as an investment in associates and joint ventures. A 10-year leaseback of the transferred fiber network was signed alongside the sale. The transaction produced a gross gain of Rp1,797,772 million, reduced by Rp279,928 million of costs to a net gain of Rp1,517,844 million - fully disclosed, but responsible for 59.4% of this half's operating-profit increase and 77% of the increase in owners' net income. This is the planned in-kind fiber contribution this site first flagged as pending in the FY2025 post; it has now actually closed, and the divestiture leg that follows it is the real driver of this quarter's headline growth rate. See A Fiber Sale Dressed Up as an Earnings Beat above for what this means for reading the growth numbers.

The Lintasarta Corruption Case Reached Final Convictions - of Individuals, Not the Company

The FY2025 post flagged an investigation naming a former Lintasarta director in a corruption probe tied to a government data-center procurement project. This half's footnotes update that thread: in March 2026, all defendants - including the former Lintasarta director - were found guilty by the Central Jakarta Corruption Court, and those verdicts are now final and legally binding. The company states plainly that "there is no determination of legal liability against Lintasarta as a corporate entity in the case concerned." That's a real resolution, not a new red flag, but it's worth tracking whether a final criminal conviction of a former subsidiary director - even absent corporate liability - creates any reputational or counterparty friction for Lintasarta's own government-facing data-center business going forward.

A Rp10.9 Trillion Vendor Commitment to Huawei, Nokia, ZTE, and Aivres

As at 30 June 2026, Indosat had contractual capital commitments for telecommunications equipment and related services of USD435,689 thousand plus Rp17,648,725 million, of which equipment and services not yet received totaled USD258,299 thousand plus Rp14,777,124 million. The company names the counterparties directly - Huawei Tech Investment, Aivres System Inc., Nokia Solutions and Networks, and ZTE Indonesia - functioning economically like forward-committed debt for network buildout, even though it never appears on the balance sheet as a liability until the equipment is delivered and invoiced.

A Rp785.9 Billion Minimum Commitment to Google Cloud

Indosat's 2021 Google Cloud Master Agreement, amended the same year, carries a disclosed minimum spend commitment of Rp785,921 million payable over the commitment period for Google Cloud Platform and professional services - the same cloud-infrastructure relationship underpinning the Gemini-in-myIM3 integration Q1 2026 covered, now quantified as a specific multi-year dollar figure rather than just a product partnership.

A Leftover Tower Lease Commitment From a 2019-2023 Sale-and-Leaseback

Following a series of tower sale-and-leaseback transactions between 2019 and 2023, Indosat holds a Take-or-Pay Agreement with EPID entitling it to a supplemental payment if it fulfills an additional commitment to lease 1,250 newly built ("Build-To-Suit") towers between 2023 and 2029. Rp354,980 million already received from EPID under this arrangement is recognized as a liability, reduced as the lease commitments are fulfilled; Rp292,504 million of that liability remained outstanding as at 30 June 2026 - a multi-year structural obligation still working its way off the balance sheet six years after the underlying deals were signed.

A 5G Spectrum Win Landed Just After the Period Closed

On 21 July 2026, three weeks after this half's reporting date, Indonesia's Ministry of Communication and Digital Affairs awarded Indosat rights to 700 MHz and 2600 MHz 5G spectrum through a government auction. The award requires an upfront fee of Rp879,480 million and an annual usage fee of Rp785,400 million, with the license effective from 5 August 2026 through 4 August 2036. None of this appears in this half's financials - it's a subsequent event - but it's the specific commitment behind the capex-guidance increase described in Management's Framing above, and the clearest evidence yet of where the FiberCo cash proceeds are actually headed.

Target Valuation Range

Bottom line: roughly Rp1,727-Rp4,895 fair-value range (bear-to-bull, EV/EBITDA-based) against a Rp1,730 actual close - the stock is trading almost exactly at the bear case, on an even cheaper annualized multiple (~2.0x EV/EBITDA) than the ~2.6x this site found in Q1 2026, despite falling leverage and (even adjusting for the one-off gain) genuinely improving underlying profitability.

Market cap → enterprise value	H1 2026 (period-end)
Share price (period-end)	Rp1,730
Shares outstanding (derived: disclosed market cap ÷ disclosed share price)	~32.25 billion
Market capitalization (company-disclosed)	Rp55,800B (~$3.11B)
Plus: total principal debt (excl. lease liabilities, per company disclosure)	Rp18,506.6B
Less: cash and cash equivalents	Rp15,781.6B
Enterprise value	~Rp58,525.0B (~$3.26B)

Peer/multiple sanity check	H1 2026
Net debt / EBITDA (company-disclosed)	0.10x (vs. 0.49x a year ago, vs. 0.31x last quarter)
EBITDA / interest paid (company-disclosed)	27.95x (vs. 22.74x a year ago, vs. 25.50x last quarter)
EBITDA (annualized ×2 from H1)	Rp29,206.8B
EV / EBITDA (annualized)	~2.00x
Owners' net income (annualized ×2 from H1)	Rp8,617.8B
P/E (annualized, as reported)	~6.5x
Owners' net income ex one-off gain (annualized ×2)	~Rp5,582.2B
P/E (annualized, ex one-off gain)	~10.0x

The net debt/EBITDA improvement to 0.10x looks dramatic, but a large share of it is the same FiberCo cash inflow driving the profit headline - Rp11,685,969 million in divestiture proceeds landed directly in the cash balance this half, not from operating deleveraging. The ex-one-off P/E of ~10.0x is the more honest read of what the market is actually paying for Indosat's recurring earnings power, and it's still a low multiple for a company management now expects to grow revenue and EBITDA close to double digits in FY2026. Telkom Indonesia (TLKM), the market leader, posted a comparable 47.6-48.3% EBITDA margin range in its own Q1 2026 results as noted in the Q1 2026 post - a full contemporaneous TLKM EV/EBITDA comparison still isn't included here for the same reason as last quarter: this site hasn't yet verified TLKM's H1 2026 share count against a downloaded source document, and stating one company's multiple without the other's invites false precision.

Scenario	Key assumption	Multiple	Implied EV	Implied price
Current (H1 2026 close)	actual market price, for reference	~2.00x annualized EBITDA	~Rp58,525B	Rp1,730
Bear	Multiple stays at today's already-depressed level; market continues to discount recurring earnings power ex the one-off gain	~2.0x	~Rp58,414B	~Rp1,727
Base	Multiple re-rates modestly as the market recognizes falling structural leverage and management's upgraded FY2026 guidance	~3.5x	~Rp102,224B	~Rp3,084
Bull	Multiple re-rates further toward (but still below) the mature-telecom range this site anchored around Telkom's 2015 coverage	~5.5x	~Rp160,637B	~Rp4,895

The bear case is essentially where the stock already sits - the market appears to already be pricing this half's earnings on something close to their ex-one-off, recurring basis, rather than being fooled by the 84.5% headline. That's arguably a healthier signal than an efficient market missing a real distortion would be, but it also means the base and bull cases here depend on a genuine re-rating (falling leverage, upgraded guidance, the AI/5G capex program actually paying off) rather than the market simply "catching up" to a number it hasn't yet noticed.

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