TLKM Revenue Fell for the First Time in a Real Lockdown Quarter - So Why Did Margins Improve?

The Lockdown Quarter That Helped EBITDA

Q1's post flagged that COVID-19 had barely touched Telkom's numbers by March 31, 2020 - Indonesia's large-scale social restrictions ("PSBB") only began in April. The second quarter - the three months ended June 30, 2020, derived by subtracting the already-reported Q1 figures from this filing's six-month cumulative totals, the same method used throughout this dataset - is the first quarter that actually captures the lockdown in full. Revenue fell 5.3% year-over-year to Rp32,662 billion from Rp34,505 billion, Telkom's first real revenue contraction of the pandemic and a sharper decline than Q1's essentially flat 1.9% dip.

And yet Adjusted EBITDA^» grew 8.7% to Rp17,402 billion, extending the pattern flagged last quarter: operating costs falling faster than revenue. This quarter the drivers are more directly COVID-shaped than Q1's legacy-runoff story - marketing expenses fell sharply as advertising and promotional activity paused during lockdown, and interconnection expenses fell as roaming and cross-network traffic dropped with reduced mobility. Operating profit grew 1.4% to Rp10,324 billion even as revenue fell, meaning the entire quarter's margin story is a genuine operating-leverage-in-reverse effect: a shrinking top line, but an even faster-shrinking cost base underneath it, at least for now.

The Prescription

Telkom should treat this quarter's cost discipline as temporary until proven otherwise, not build next year's cost base around it. Marketing and interconnection costs falling because a lockdown is suppressing demand and mobility isn't the same as a permanently lower cost structure - when restrictions ease, both lines should be expected to normalize upward, and a reader comparing future quarters against this one needs that context built in, not treated as a new baseline.

The Enterprise segment's swing to a genuine loss this quarter (see Segment Comparison) deserves the company's direct attention now, not a wait-and-see approach. This is the second consecutive quarter of Enterprise weakness Telkom has disclosed without narrating a cause - last quarter it was a 31.6% revenue decline with margin near-zero; this quarter it's an outright segment loss. A segment this large going two quarters without an explained trend is exactly the kind of gap a reader following the company should not have to infer silently (see Beyond the Usual).

Key Financial Metrics

Q2 2020 (three months ended Jun 30, 2020) vs Q2 2019, consolidated

FX: approximately Rp14,265 = US$1 (Jun 30, 2020) and Rp14,128 = US$1 (Jun 28, 2019) - quoted market rates for each date, used only to convert the USD columns below. As with prior quarters, Telkom's interim filings report cumulative six-month results rather than a discrete second-quarter statement, so every standalone Q2 2020 figure below is derived by subtracting the already-reported Q1 2020 and Q1 2019 figures from this filing's six-month totals for 2020 and 2019 respectively.

Metric	Q2 2020 (Rp)	Q2 2020 (US$)	Q2 2019 (Rp)	YoY (Rp)	YoY (US$)
Revenue	Rp32,662B	~$2,289.9M	Rp34,505B	🔴 -5.3%	🔴 -6.2%
Adjusted EBITDA» (operating profit + D&A)	Rp17,402B	~$1,220.1M	Rp16,006B	✅ +8.7%	✅ +7.8%
Operating Income»	Rp10,324B	~$723.9M	Rp10,181B	✅ +1.4%	✅ +0.5%
Net Income (profit for the period)	Rp7,132B	~$500.0M	Rp6,994B	✅ +2.0%	✅ +1.0%
...of which, attributable to owners of the parent	Rp5,127B	~$359.5M	Rp4,854B	✅ +5.6%	✅ +4.7%
...of which, attributable to non-controlling interests»	Rp2,005B	~$140.6M	Rp2,140B	⚠️ -6.3%	⚠️ -7.1%
Free Cash Flow» (operating cash flow - capex)	Rp5,722B	~$401.2M	not comparable*	n/a	n/a
Total Cash	Rp28,238B	~$1,979.9M	not available	n/a	n/a

*A comparable discrete Q2 2019 FCF figure would require subtracting Q1 2019's cash-flow statement lines from H1 2019's, which weren't fully itemized the same way in the Q1 2020 post; not restated here to avoid introducing a number this post can't independently verify against a filed document.

The owners-versus-non-controlling-interests split flipped direction from Q1: profit attributable to owners of the parent grew 5.6% this quarter while the non-controlling interest share - overwhelmingly Telkomsel's outside 35% shareholder - fell 6.3%, the reverse of Q1's pattern where NCI grew faster. This traces to Mobile's segment result growing more slowly this quarter than Consumer and WIB (see Segment Comparison), since Telkomsel sits inside the Mobile segment and its outside shareholder's profit share moves with Mobile's specifically. Cash grew 15.9% sequentially from Rp24,365 billion at the end of Q1 2020, aided by the Rp15,262 billion FY2019 dividend not being paid out until July 22, 2020 - after this quarter's close (see Beyond the Usual).

Revenue fell for the first genuine lockdown quarter, but the cost base fell faster - marketing and interconnection expenses, the two lines most directly tied to mobility and promotional activity, did the heavy lifting. The real flag this quarter is Enterprise, which swung to an outright segment loss. See Segment Comparison.

Key Operational Metrics

• IndiHome: net additions of 196,000 in Q2 2020 (down from 252,000 in Q1, but still positive through full lockdown); total subscriber base 7.45 million as of the FY19 reference point cited in the presentation (+24.2% YoY)
• IndiHome revenue: Rp10.4 trillion for H1 2020, driven by new subscribers and add-ons per the presentation
• IndiHome ARPU: Rp241,000/month in Q2 2020, essentially flat from Rp240,000 in Q1
• Employee-facing measures: not separately quantified in this quarter's presentation, but the Company's own COVID-era operating commentary emphasizes remote-work enablement and network resilience during the restriction period
• Committed capital expenditure: not separately re-disclosed at the discrete-quarter level in this filing beyond the amounts embedded in the segment note's capex line (see Segment Comparison)

Mobile subscriber, ARPU, and BTS figures for Telkomsel specifically weren't re-disclosed at the same granularity as Q1's presentation in this quarter's deck - the presentation instead emphasizes segment revenue mix and cost trends, consistent with the pandemic-era shift in what management chose to report.

Segment Comparison

Segment	External Revenue Q2 2020	External Revenue Q2 2019	YoY	Segment Result Q2 2020	Margin 2020	Margin 2019
Mobile	Rp20,729B	Rp22,191B	⚠️ -6.6%	Rp7,559B	⚠️ 36.5%	37.2%
Consumer (IndiHome)	Rp4,999B	Rp4,280B	✅ +16.8%	Rp988B	⚠️ 19.8%	13.7%
Enterprise	Rp3,410B	Rp5,621B	🔴 -39.3%	🔴 -Rp470B	🔴 -13.8%	6.1%
WIB	Rp3,456B	Rp3,065B	✅ +12.8%	Rp1,585B	✅ 45.9%	71.4%
Others	Rp69B	Rp61B	➖ +13.1%	Rp13B	18.8%	-19.7%
Total segment	Rp32,663B	Rp35,218B	⚠️ -7.3%	Rp9,675B	29.6%	26.5%*

*2019 total segment margin recalculated on the total-segment-revenue base disclosed in this filing's comparative column, which differs slightly from the discrete Q2 2019 figure implied by subtracting the Q1 2020 post's Q1 2019 segment table (a small residual from the "adjustment and elimination" line not fully attributable to any one segment); the deviation is under 1 percentage point and doesn't change the qualitative read below.

Enterprise swung from a thin Q1 profit (Rp116 billion, 2.7% margin) to an outright segment loss of Rp470 billion this quarter (-13.8% margin) - the segment's revenue fell 39.3% year-over-year, its steepest decline yet, and unlike Q1 this decline lines up exactly with the PSBB lockdown period. Corporate and institutional clients cutting connectivity, IT, and project-based spend during the restriction period is now visible not just as flagged risk (see Q1's post) but as a confirmed pattern.

Meanwhile Consumer's margin nearly tripled year-over-year for a second straight quarter (13.7% to 19.8%) as IndiHome kept adding subscribers and revenue through the lockdown - a household-broadband business that COVID-driven work-from-home and remote-learning demand appears to be helping, not hurting, even as the Enterprise and Mobile segments show the opposite pattern.

Mobile

Revenue fell 6.6% and margin compressed slightly (37.2% to 36.5%), a reversal from Q1's sharp margin expansion. Reduced mobility during PSBB likely suppressed both voice/SMS usage (accelerating the legacy runoff flagged last quarter) and some data consumption tied to commuting and out-of-home usage, even as work-from-home likely offset some of that with increased home data use. The net effect this quarter is Telkom's largest segment shrinking on both revenue and margin simultaneously - a genuine COVID hit, distinct from Q1's cost-runoff-driven margin story.

Consumer (IndiHome)

The standout segment for a second consecutive quarter: revenue +16.8%, margin 19.8%. With Indonesia's white-collar workforce working from home and schools shifted to remote learning during PSBB, household fixed broadband demand held up (and arguably strengthened) exactly when mobile and enterprise connectivity weakened - a genuine COVID tailwind for this specific segment, the mirror image of what's happening in Mobile and Enterprise this quarter.

Enterprise

Now a confirmed two-quarter pattern of weakness, deepening from a near-zero-margin quarter to an outright loss. See Beyond the Usual for what the segment footnote does and doesn't disclose about the cause.

WIB (Wholesale and International Business)

Revenue grew 12.8% and margin, while down from an unusually high 71.4% a year ago, remained the strongest of any segment at 45.9% - WIB's wholesale/infrastructure business (leased lines, data centers, international connectivity) appears less exposed to the consumer-mobility and enterprise-IT-budget pressures hitting Mobile and Enterprise this quarter.

Beyond the Usual

Enterprise's Segment Loss Still Has No Disclosed Cause

For a second straight quarter, Telkom's segment footnote discloses Enterprise's numbers without narrating why they moved. This quarter that's a genuine segment loss (-Rp470 billion) on a 39.3% revenue decline - large enough, and now consistent enough across two consecutive quarters, that it's reasonable to read as PSBB-driven corporate client spending cuts, but the filing itself never states this. A segment representing roughly 10% of Telkom's total external revenue running at a loss through a lockdown quarter, with no management commentary attached to the filed statement itself, is a real disclosure gap worth tracking into Q3.

The FY2019 Dividend Was Actually Paid This Quarter - After Being Approved Right Before Lockdown

The subsequent-events note confirms the Rp15,262 billion FY2019 dividend (approved at the June 19, 2020 AGM, flagged in Q1's post) was actually paid out on July 22, 2020 - after this quarter's June 30 close, meaning the cash outflow will show up in Q3's numbers rather than here. Telkom followed through on a full ordinary-plus-special dividend commitment made as the pandemic's economic impact was becoming clear, rather than trimming or deferring it - a real test of capital-allocation discipline during genuine operating stress, resolved in favor of the original commitment.

Telkomsel Drew Down Roughly Rp3 Trillion in New Bank Facilities Right After Quarter-End

A subsequent-events note discloses that on July 9, 2020, Telkomsel drew facilities from five separate banks - HSBC, Bank of China, BNI, MUFG Bank, and Bank Mandiri - totalling roughly Rp3,000 billion (Rp500bn, Rp500bn, Rp575bn, Rp750bn, and Rp675bn respectively). Drawing new debt across five separate lenders in one week, immediately after a lockdown quarter and immediately before the FY2019 dividend cash outflow noted above, points to Telkom actively managing liquidity around two large simultaneous cash calls - the dividend payment and continued capex - rather than funding either purely from operating cash flow.

Target Valuation Range

Bottom line: roughly Rp2,700-Rp4,750 fair-value range (bear-to-bull, EV/EBITDA-based) against a Rp3,050 actual close - modestly cheap on the EBITDA multiple, but the stock is down 26.3% year-over-year and this quarter's revenue decline is the company's first genuine, lockdown-confirmed contraction, arguing for the lower half of that range until Enterprise's trajectory is clearer.

Telkom's shares closed at Rp3,050 on June 30, 2020, down 26.3% from Rp4,140 a year earlier and down 3.5% sequentially from Rp3,160 at the end of Q1 2020 - a much smaller quarter-over-quarter move than the revenue and segment-level disruption inside the quarter would suggest, since the market had already priced in much of the COVID shock during Q1's steeper decline.

Market cap → enterprise value	Q2 2020 (period-end)
Share price (period-end)	Rp3,050
Shares outstanding	99,062,216,600
Market capitalization	~Rp302,140 billion (~$21.2 billion)
Plus: total debt (short-term bank loans + current and long-term borrowings)	Rp64,327 billion
Less: cash	Rp28,238 billion
Enterprise value	~Rp338,229 billion

Peer-multiple sanity check	Q1 2020	Q2 2020	Change
EPS (annualized)	Rp236.68 (×4, single-quarter)	Rp221.87 (×2, six-month actual)	⚠️ down
P/E	~13.4x	~13.7x	⚠️ up slightly
Book value per share (owners)	~Rp1,074.6	~Rp968.3	⚠️ down
P/B	~2.94x	~3.15x	⚠️ up
Adjusted EBITDA (annualized)	Rp75,112 billion	Rp69,608 billion	⚠️ down
EV/EBITDA	~4.6x	~4.9x	⚠️ up

Every multiple moved slightly higher despite the weaker quarter, because the enterprise-value numerator grew (higher debt from the new bank facilities, partly offsetting higher cash) faster than the EBITDA base did. Book value per share fell as retained-earnings distributions (the FY2019 dividend accrual) outpaced quarterly profit. The table below applies the same mature-telecom EV/EBITDA range used in Q1's post to this quarter's annualized Adjusted EBITDA:

Scenario	Key assumption	Multiple	Implied EV	Implied price
Current (Q2 2020 close)	actual market price, for reference	~4.9x annualized Adjusted EBITDA	~Rp338,229 billion	Rp3,050
Bear	Multiple stays near current levels as Enterprise's confirmed weakness and Mobile's revenue decline are read as a genuine multi-quarter COVID hit, not a one-off	~4x	~Rp278,432 billion	~Rp2,703
Base	Multiple holds roughly flat as IndiHome's continued strength offsets Enterprise/Mobile softness, with the market waiting for restrictions to ease before re-rating either direction	~5x	~Rp348,040 billion	~Rp3,406
Bull	Multiple re-rates toward the higher end of the mature-telecom range on the view that IndiHome's structural growth (see Segment Comparison) more than compensates for temporary lockdown-driven weakness elsewhere	~6.5x	~Rp452,452 billion	~Rp4,753

The current multiple sits almost exactly at the base-case scenario, suggesting the market is largely pricing this quarter correctly rather than over- or under-reacting - the real swing factor for the rest of 2020 is whether Enterprise's loss is a temporary lockdown effect or the start of a longer erosion, a question this quarter's numbers alone can't yet answer.

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