A Revenue Decline That Isn't the Story It Looks Like
Indonesia's largest telecom operator posted a rare year-over-year revenue decline in the first quarter of 2020 - the three months ended March 31, 2020 - with revenue down 1.9% to Rp34,194 billion from Rp34,840 billion a year earlier. The quarter overlapped with the arrival of COVID-19 in Indonesia: the country recorded its first confirmed cases on March 2, 2020, and Jakarta's large-scale social restrictions ("PSBB") didn't begin until April, so this quarter captures barely two weeks of the actual lockdown - not the full disruption. Management's own framing in the corporate presentation is candid about this: "Covid-19 pandemic has impacted all sectors, including in telecommunication. For Telkom, the degree of impact for each segment is different."
The more interesting number sits one line below revenue. Adjusted EBITDA» actually grew 6.3% to Rp18,778 billion, because operation, maintenance and telecommunication service expenses fell 22.9% (Rp10,709 billion to Rp8,252 billion) - a much larger drop than revenue's decline. That's not a COVID cost-cutting story either, since the quarter was barely touched by restrictions yet; it traces mostly to Telkomsel's legacy voice/SMS/cellular business continuing its multi-year shrinkage (down 21.4% YoY per the presentation) faster than the network-cost base built to support it, while IndiHome (+19.7%) and Telkomsel's digital business (+16.3%, now 70.6% of Telkomsel's revenue vs. 61.4% a year ago) kept growing underneath. This is a company mid-transition from a legacy voice/SMS carrier to a broadband-and-digital one, and Q1 2020 is a snapshot of that transition happening regardless of the pandemic that would soon dominate every subsequent quarter this year.
The Prescription
Telkom should keep separating "COVID impact" from "structural mix shift" in its own disclosures going forward, because this quarter shows they aren't the same thing and conflating them would make every subsequent 2020 quarter harder for a reader to interpret correctly. The legacy-to-digital shift that's actually driving this quarter's EBITDA growth predates the pandemic by years - management's own segment breakdown already shows it - and if Q2 or Q3 revenue also falls, a reader needs to be able to tell whether that's PSBB-driven demand disruption or the same legacy-revenue runoff continuing on its existing trajectory.
The Enterprise segment's Q1 strength (external revenue +31.6% YoY per the presentation) is worth protecting explicitly as restrictions widen. Corporate clients cutting IT and connectivity budgets is one of the more predictable ways a lockdown quarter could turn into an enterprise slowdown a quarter or two later - see Beyond the Usual for the segment note's own early signal of exactly that pattern already forming inside Q1's numbers.
Key Financial Metrics
Q1 2020 (three months ended Mar 31, 2020) vs Q1 2019, consolidated
FX: approximately Rp16,367 = US$1 (Mar 31, 2020) and Rp14,244 = US$1 (Mar 29, 2019) - quoted market rates for each date, used only to convert the USD columns below; the filing itself does not disclose a single period-end rate.
| Metric | Q1 2020 (Rp) | Q1 2020 (US$) | Q1 2019 (Rp) | YoY (Rp) | YoY (US$) |
|---|---|---|---|---|---|
| Revenue | Rp34,194B | ~$2,089.4M | Rp34,840B | ⚠️ -1.9% | ⚠️ -11.4% |
| Adjusted EBITDA» (operating profit + D&A) | Rp18,778B | ~$1,147.3M | Rp17,671B | ✅ +6.3% | ⚠️ -3.9% |
| Operating Income» | Rp11,929B | ~$728.8M | Rp12,029B | ⚠️ -0.8% | ⚠️ -10.4% |
| Net Income (profit for the period) | Rp8,301B | ~$507.2M | Rp8,504B | ⚠️ -2.4% | ⚠️ -11.9% |
| ...of which, attributable to owners of the parent | Rp5,862B | ~$358.2M | Rp6,224B | ⚠️ -5.8% | ⚠️ -15.1% |
| ...of which, attributable to non-controlling interests» | Rp2,439B | ~$149.0M | Rp2,280B | ✅ +7.0% | ⚠️ -3.9% |
| Free Cash Flow» (operating cash flow - capex) | Rp12,816B | ~$783.0M | Rp8,229B | ✅ +55.8% | ✅ +43.0% |
| Total Cash | Rp24,365B | ~$1,488.7M | not available | n/a | n/a |
Consolidated net income fell 2.4%, but the drop hits Telkom's own shareholders harder than the headline suggests: profit attributable to owners of the parent fell 5.8%, while the share attributable to non-controlling interests» - overwhelmingly Telkomsel's outside 35% shareholder - actually grew 7.0%. Free cash flow jumped 55.8% on the back of a sharp capex pullback (property/equipment purchases fell from Rp4,565 billion to Rp4,051 billion, and total capex including intangibles fell from Rp4,826 billion to Rp4,787 billion) combined with stronger operating cash generation (Rp17,603 billion vs Rp13,055 billion), partly helped by a Rp1,816 billion tax refund received this quarter that wasn't there a year earlier. Total cash's year-over-year comparison isn't available - the filing's balance sheet only shows March 31, 2020 against December 31, 2019, not March 31, 2019 - but sequentially cash grew 33.6% from Rp18,242 billion at year-end.
Revenue fell for a rare quarter, but Adjusted EBITDA actually grew as legacy-voice cost runoff outpaced the revenue decline - the real 2020 story here is a years-long mix shift toward IndiHome and digital services, not yet the pandemic. See Beyond the Usual for the early Enterprise-segment signal worth watching as restrictions widen next quarter.
Key Operational Metrics
- IndiHome subscribers: net additions of 252,000 in Q1 2020; total subscriber base reached approximately 7.3 million by end-2019 (+31.4% YoY, per the presentation's FY19 reference point)
- IndiHome ARPU: Rp240,000/month in Q1 2020; add-ons contributed roughly 14.0% of total IndiHome revenue this quarter
- IndiHome mix: Dual Play (internet + one other service) 54% of subscribers, Triple Play (internet + pay TV + voice) 46%
- Telkomsel total customers: 168.6 million at end-Q1 2019, declining to 162.6 million at end-Q1 2020 (-3.6%) as the legacy-subscriber base continues to shrink even as revenue per remaining customer rises
- Telkomsel data users: 111.1 million (Q1 2019) to 105.1 million (Q1 2020), -5.4%, while per-user data consumption rose 42.4% (4,588MB to 6,533MB/month) - fewer but heavier data users
- Telkomsel 4G BTS on air: 147.2 thousand to 169.0 thousand (+14.8%); 3G BTS essentially flat (82.1 to 82.1 thousand)
- Committed capital expenditure under signed vendor contracts: Rp10,761 billion as of quarter-end, principally for data/internet/IT and cellular network procurement (Note 36a)
Segment Comparison
Telkom now reports under a different four-segment structure than the Personal/Corporate/Home/Others split used in its 2015 filings: Mobile, Consumer (IndiHome), Enterprise, and WIB (Wholesale and International Business), plus a small residual "Others" (digital-service operations too small to meet reportable-segment thresholds). This reflects Telkom's own strategic reorganization since 2015 around IndiHome as a standalone growth engine and WIB as the wholesale/infrastructure arm - a structural change worth noting for readers of the earlier 2015 posts, whose segment tables aren't directly comparable to this one.
| Segment | External Revenue Q1 2020 | External Revenue Q1 2019 | YoY | Segment Result Q1 2020 | Margin 2020 | Margin 2019 |
|---|---|---|---|---|---|---|
| Mobile (voice, SMS, mobile broadband) | Rp21,573B | Rp21,332B | ➖ +1.1% | Rp9,145B | ✅ 42.4% | 38.7% |
| Consumer (IndiHome + home services) | Rp4,772B | Rp4,079B | ✅ +17.0% | Rp859B | ⚠️ 18.0% | 6.7% |
| Enterprise (corporate/institutional) | Rp4,324B | Rp6,321B | 🔴 -31.6% | Rp116B | 🔴 2.7% | 16.5% |
| WIB (interconnection, wholesale, IT services) | Rp3,359B | Rp2,918B | ✅ +15.1% | Rp1,641B | ✅ 48.9% | 61.9% |
| Others (digital services) | Rp64B | Rp32B | ✅ +100.0% | Rp8B | 12.5% | -84.4% |
| Total segment | Rp34,092B | Rp34,682B | ⚠️ -1.7% | Rp11,769B | 34.5% | 33.7% |
Two things jump out. First, Mobile's segment margin expanded sharply (38.7% to 42.4%) even as external revenue grew only marginally - consistent with the legacy voice/SMS cost runoff described above. Second, Enterprise's external revenue fell 31.6% year-over-year and its margin collapsed from 16.5% to 2.7%, the steepest deterioration of any segment this quarter and a genuine outlier against every other segment's growth. (Note: the presentation's own "Enterprise Business Revenue" figure of Rp4.3 trillion, +31.6% YoY, appears to describe a different, narrower revenue definition than the segment footnote's Rp4,324 billion external-revenue figure - the presentation's YoY direction is the opposite sign from the footnote's; this post uses the audited segment footnote as the primary source, per the playbook's rule that a deck is marketing material, not the filed statement.)
Mobile
Telkom's largest segment (63.3% of external revenue) posted essentially flat revenue growth (+1.1%) but its best margin quarter in this dataset, expanding nearly four full points. The presentation's own breakdown shows why: legacy cellular voice/SMS revenue fell 21.4% year-over-year while data, internet and IT services revenue grew 7.2% and Telkomsel's digital business overall grew 16.3% - a shrinking, low-margin legacy base being replaced by a growing, presumably higher-margin data base, with the network cost base not yet catching up to the mix shift. Telkomsel's own disclosed EBITDA margin rose from 55% to 62% year-over-year, corroborating the segment footnote's direction.
Consumer (IndiHome)
IndiHome-led Consumer segment revenue grew 17.0% and segment margin nearly tripled (6.7% to 18.0%), Telkom's clearest structural growth story this quarter. With 252,000 net subscriber additions in the quarter and ARPU holding at Rp240,000/month, the segment is scaling with real operating leverage rather than just adding revenue at a flat margin - a pattern worth tracking as the subscriber base keeps growing through the disruption still to come this year.
Enterprise
The one clear weak point this quarter: external revenue fell 31.6% and segment result nearly evaporated (Rp1,041 billion a year ago to just Rp116 billion). The segment footnote doesn't narrate the cause, and unlike Q1 2019's number this isn't a small base effect - Enterprise is normally Telkom's third-largest segment by revenue. Corporate and institutional clients paring back IT and connectivity spend is a plausible explanation given the timing, but Indonesia's PSBB restrictions didn't begin until April, after this quarter closed, so a pandemic-driven demand pullback can't yet be the primary explanation for a decline this large inside Q1 itself. This is flagged as a segment to watch closely next quarter (see Beyond the Usual).
WIB (Wholesale and International Business)
Revenue grew 15.1% but margin compressed from 61.9% to 48.9% - still comfortably the highest-margin segment, but the compression is worth noting alongside Mobile's expansion in the opposite direction; more of the group's incremental margin this quarter came from Mobile's cost runoff than from WIB's wholesale/infrastructure growth.
Beyond the Usual
An Rp1,500 Billion Share Buyback Was Approved Mid-Quarter but Went Unused
The subsequent-events note discloses that the Company approved a share buyback program of up to Rp1,500 billion, to be carried out in stages from March 30, 2020 through June 29, 2020 - timed almost exactly to the market's COVID-driven trough (TLKM's shares fell from Rp3,960 at the end of Q1 2019 to Rp3,160 at the end of Q1 2020, a 20.2% year-over-year decline, and continued falling into a low of roughly Rp2,560 by September - see Target Valuation Range). Notably, the filing states that as of the end of the buyback window, no shares had actually been repurchased under the program. A state-owned incumbent authorizing a meaningful buyback right as its stock cratered, then not executing any of it during the approved window, is worth tracking into subsequent quarters to see whether the authorization is ever actually used.
A Rp217 Billion Arbitration Award Against the Government Is Still Only Partly Collected
The commitments footnote repeats a long-running dispute: Telkomsel filed an arbitration claim in January 2016 over unpaid receivables from a government-run rural connectivity program ("USO"), and in June 2017 received a BANI arbitration award ordering Rp217 billion in compensation. As of this quarter's filing date, Telkomsel had received only Rp91 billion of that award, with no additional payment received from the government's telecom-funding body (BAKTI) since. Roughly Rp126 billion of an already-awarded, uncontested arbitration ruling against a government counterparty remains uncollected more than three years after the award was issued - a small number relative to Telkom's scale, but a genuine data point on how slowly the state settles its own obligations to its own majority-owned operator.
Radio Frequency Surety Bonds Show the Real Cost of Telkomsel's Spectrum Holdings
Telkomsel is required to post an annual Rp20 billion performance bond for its 2.1GHz spectrum and a Rp1.03 trillion annual surety bond for its 2.3GHz spectrum, alongside annual frequency usage fees payable under a government-set formula for its 800MHz/900MHz/1800MHz holdings. These aren't new obligations this quarter, but the scale of the 2.3GHz surety bond specifically - over a trillion rupiah tied up annually just as a guarantee, not a fee - is a real, ongoing capital cost of Telkomsel's spectrum position that doesn't show up as an expense line in the P&L.
A Trillion-Rupiah Dividend Was Declared Just After Quarter-End
The subsequent-events note discloses that Telkom's June 19, 2020 shareholder meeting approved cash dividends of Rp11,198 billion (Rp1,130.61 per share) plus special dividends of Rp4,065 billion (Rp410.32 per share) for the 2019 financial year - Rp15,263 billion combined, paid out after a quarter in which the Company itself pulled back on capex and built free cash flow. Committing to a full-scale ordinary-plus-special dividend right as the pandemic's economic impact was becoming clear elsewhere in Indonesia is a capital-allocation choice worth watching against how capex and leverage move over the rest of 2020.
Target Valuation Range
Bottom line: too early to call a firm range from this single quarter alone - Telkom's EV/EBITDA sits at roughly 4.6x trailing annualized Adjusted EBITDA against a Rp3,160 close, cheap by mature-telecom standards, but the stock fell 20.2% year-over-year into this quarter and the Enterprise-segment weakness flagged above hasn't yet been tested against a full quarter of actual lockdown.
Telkom's shares closed at Rp3,160 on March 31, 2020, down 20.2% from Rp3,960 a year earlier and down 16.8% from Rp3,800 at the start of the year - a sharp move even before the worst of Indonesia's COVID-driven market selloff, which continued through the second quarter.
| Market cap → enterprise value | Q1 2020 (period-end) |
|---|---|
| Share price (period-end) | Rp3,160 |
| Shares outstanding (Series B, ex-treasury) | 99,062,216,600 |
| Market capitalization | ~Rp313,036 billion (~$19.1 billion) |
| Plus: total debt (short-term bank loans + current and long-term borrowings) | Rp60,428 billion |
| Less: cash | Rp24,365 billion |
| Enterprise value | ~Rp349,099 billion |
| Peer-multiple sanity check | Q1 2020 |
|---|---|
| EPS (annualized, ×4) | Rp236.68 |
| P/E | ~13.4x |
| Book value per share attributable to owners | ~Rp1,074.6 |
| P/B | ~2.94x |
| Adjusted EBITDA (annualized, ×4) | Rp75,112 billion |
| EV/EBITDA | ~4.6x |
These multiples sit well below the 11-12x EV/EBITDA range TLKM traded at in the 2015 posts, reflecting both a genuinely cheaper market (COVID selloff) and a much larger EBITDA base than five years earlier (annualized Rp75,112 billion here versus roughly Rp47,832 billion in mid-2015). A full DCF isn't attempted here - this is the first post in this quarter's backfill sequence, without yet the several years of trailing free cash flow history a defensible long-run projection needs (that history exists in the 2015 posts but with a five-year gap and a segment-structure change between them and this quarter). The table below applies a mature-telecom EV/EBITDA range to this quarter's annualized Adjusted EBITDA:
| Scenario | Key assumption | Multiple | Implied EV | Implied price |
|---|---|---|---|---|
| Current (Q1 2020 close) | actual market price, for reference | ~4.6x annualized Adjusted EBITDA | ~Rp349,099 billion | Rp3,160 |
| Bear | Multiple stays compressed as the market prices in a full year of pandemic disruption still to come, plus the unresolved Enterprise-segment weakness | ~4x | ~Rp300,448 billion | ~Rp2,668 |
| Base | Multiple recovers modestly toward the low end of the historical mature-telecom range as the market differentiates COVID-hit segments from structurally growing ones (IndiHome, digital) | ~5.5x | ~Rp413,116 billion | ~Rp3,807 |
| Bull | Multiple re-rates toward the historical mid-single-digit-to-high-single-digit range once IndiHome's and Mobile's margin strength (see Segment Comparison) is understood as structural, not a one-quarter blip | ~7x | ~Rp525,784 billion | ~Rp4,943 |
The stock's 20.2% year-over-year decline already prices in real caution, and the ~4.6x EV/EBITDA multiple looks inexpensive against Telkom's own 2015-era multiples and against mature-telecom peers generally - but this quarter alone can't distinguish a genuinely mispriced stock from a market correctly anticipating a much harder Q2 once Indonesia's actual lockdown period begins. The Enterprise-segment weakness flagged above is the single biggest open question for that base-case scenario.
Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk's unaudited consolidated financial statements as of March 31, 2020 and for the three months period then ended, reflecting subsequent events through the report's issuance in mid-2020, plus the Company's 1Q20 corporate presentation.