Enterprise Finally Turned the Corner - Six Quarters After This Dataset Started Tracking It
Every quarter since Q1 2020 has carried the same open question: what's driving the Enterprise segment's persistent weakness, a pattern Telkom's own filings have never once explained in the segment footnote. This quarter, the segment's own numbers finally answer the direction of the question even without the cause: Enterprise posted a Rp575 billion profit (11.2% margin) this quarter - its strongest result across the entire dataset, following the narrowing losses flagged in Q1 and Q2 of this year (see Segment Comparison).
The consolidated numbers were solid on their own terms: revenue grew 10.5% YoY to Rp36,563 billion, and net income attributable to owners grew 12.8% to Rp6,421 billion - both accelerating from Q2's pace, continuing the trend line of 2021 from a roughly-flat Q1 through an accelerating Q2 and Q3.
The Prescription
Telkom should treat Enterprise's turnaround as the single most important disclosure gap left to close, not a solved problem now that the number is finally positive. A segment that goes from a six-quarter losing streak to an 11.2% margin quarter, with no explanation offered for either direction, leaves shareholders unable to tell whether this is a durable structural fix (repricing, cost restructuring, demand recovery) or a one-quarter accounting or timing effect that reverses next quarter. Telkom has now had two full years of data (per this dataset) to build a credible narrative here and hasn't - that's no longer a minor omission.
Telkom should also start communicating its subsidiary IPO strategy proactively rather than through subsequent-event footnotes. Mitratel's IPO landed just after this quarter closed (see Beyond the Usual) with essentially no advance framing in the earnings materials about what it means for consolidation, minority-interest dilution, or capital raised - shareholders deserved to see this coming, the same critique flagged for the AKAB/GoTo investment back in Q1's post.
Key Financial Metrics
Q3 2021 (three months ended Sep 30, 2021) vs Q3 2020, consolidated - discrete-quarter figures derived by subtracting H1 from each year's nine-month cumulative filing
FX: approximately Rp14,329 = US$1 (Sep 30, 2021) and Rp14,879 = US$1 (Sep 30, 2020) - quoted market rates for each date, used only to convert the USD columns below.
| Metric | Q3 2021 (Rp) | Q3 2021 (US$) | Q3 2020 (Rp) | YoY (Rp) | YoY (US$) |
|---|---|---|---|---|---|
| Revenue | Rp36,563B | ~$2,551.7M | Rp33,085B | +10.5% | +14.8% |
| Adjusted EBITDA» | Rp20,171B | ~$1,407.7M | Rp17,869B | +12.9% | +17.2% |
| Operating Income» | Rp12,686B | ~$885.4M | Rp10,758B | +17.9% | +22.4% |
| Net Income (attributable to owners) | Rp6,421B | ~$448.1M | Rp5,690B | +12.8% | +17.2% |
| Free Cash Flow» (OCF - capex) | Rp10,478B | ~$731.3M | Rp9,458B | +10.8% | +15.0% |
| Total Cash | Rp17,491B | ~$1,220.7M | Rp17,420B | +0.4% | +0.4% |
Every mandatory metric grew both in Rupiah and (more so) in US dollar terms, the latter partly reflecting a modestly stronger Rupiah at quarter-end than a year earlier. Cash fell sharply sequentially, from Q2's Rp36,613 billion, almost entirely explained by the Rp16,644 billion FY2019 dividend that actually left the bank in early Q3 (flagged as a subsequent event in Q2's post) - the same seasonal pattern flagged in Q3 2020's post a year earlier.
Every mandatory metric grew double digits, and the Enterprise segment finally posted a real profit after six quarters of unexplained losses - the strongest quarter of 2021 on every measure that matters. See Target Valuation Range for what the market is pricing in.
Key Operational Metrics
- IndiHome subscribers: 8.46 million, up 9.2% YoY on 450,000 net additions over the nine months to date - growth continuing but decelerating slightly from the 11-12% YoY rates seen in Q1 and Q2
- Mobile subscriber count: not separately disclosed in this quarter's presentation
- Capital expenditure (discrete quarter, derived): Rp7,409 billion, down from Q2's Rp8,192 billion
Segment Comparison
Q3 2021 vs Q3 2020, discrete-quarter figures derived by subtraction from cumulative filings
| Segment | External Revenue Q3'21 | External Revenue Q3'20 | YoY | Segment Result Q3'21 | Margin Q3'21 | Margin Q3'20 |
|---|---|---|---|---|---|---|
| Mobile | Rp21,180B | Rp20,301B | +4.3% | Rp7,315B | 34.5% | 35.4% |
| Consumer (IndiHome) | Rp6,431B | Rp5,435B | +18.3% | Rp2,243B | 34.9% | 30.5% |
| Enterprise | Rp5,142B | Rp3,731B | +37.8% | Rp575B | 11.2% | -20.6% |
| WIB | Rp3,605B | Rp3,418B | +5.5% | Rp2,379B | 66.0% | 51.8% |
| Others | Rp108B | Rp21B | +414.3% | Rp45B | n/m | n/m |
| Total segment | Rp36,466B | Rp32,906B | +10.8% | Rp12,557B | 34.4% | 29.9% |
Enterprise's swing from -20.6% margin a year ago to +11.2% this quarter is the single largest margin move of any segment in this entire dataset - a genuinely different quarter, not an incremental improvement on the trend flagged in Q1 and Q2.
Mobile
Revenue growth accelerated to 4.3% YoY, but margin kept compressing slightly (35.4% to 34.5%) - now four consecutive quarters of gradual margin erosion in this dataset, still without a disclosed cause.
Consumer (IndiHome)
Both revenue (+18.3%) and margin (30.5% to 34.9%) grew together this quarter - Q2's margin dip (see that post) looks like it was a one-quarter blip rather than a new trend.
Enterprise
Turned a real profit for the first time in this dataset's tracking - see The Prescription and Beyond the Usual for why the cause still matters even now that the number is positive.
WIB (Wholesale and International Business)
Margin expanded further to 66.0% from 51.8% - WIB's margin has now expanded YoY in every quarter of 2021.
Beyond the Usual
Telkom's Tower Subsidiary Completed Its IPO Days After Quarter-End
A subsequent-events footnote discloses that on November 22, 2021, Mitratel (Telkom's tower infrastructure subsidiary) completed its initial public offering of 23,493,524,800 shares on the Indonesia Stock Exchange, reducing Telkom's ownership stake to 71.87% with the remaining 28.13% now held by the public. This is the largest corporate action disclosed in this dataset so far - a major infrastructure subsidiary going public, diluting Telkom's economic interest in exchange for a capital raise, disclosed only as a brief subsequent-event line rather than framed anywhere in the quarter's earnings materials as a strategic milestone worth walking shareholders through in advance.
A New Tax Law Cuts Telkom's Corporate Rate to 22% Starting Fiscal Year 2022
The same subsequent-events note discloses that Indonesia's Law No. 7 of 2021 (Harmonization of Tax Regulations), passed October 29, 2021, revoked the provision that would have raised the corporate income tax rate, keeping it at 22% for fiscal year 2022 onward rather than letting it drop further as previously scheduled. A modest, economy-wide tax-policy tailwind rather than anything company-specific, but worth noting as a factor in 2022's after-tax profit comparisons going forward.
Target Valuation Range
Telkom is richer than a quarter ago on every multiple shown: ~5.2x EV/EBITDA (TTM) against ~4.6x, ~15.9x P/E against ~14.0x, and ~3.49x P/B against ~3.17x. The stock closed at Rp3,690, up 17.1% on the quarter, on a strong operating quarter; no peer table is shown here, so there is no peer verdict.
Telkom's shares closed Q3 2021 at Rp3,690, up 17.1% from Q2's Rp3,150 close (see that post) - a real recovery that partially tracks the quarter's stronger results, though Q2's post had already flagged the stock as undervalued even before this quarter's Enterprise turnaround. Over the trailing 2 years (October 2019 through September 2021), the stock moved from a Rp4,110 close to Rp3,690, a 10.2% net decline.
| Market cap → enterprise value | Q3 2021 (period-end) |
|---|---|
| Share price (period-end) | Rp3,690 |
| Shares outstanding | 99,062,216,600 |
| Market capitalization | ~Rp365,540 billion (~$25.5 billion) |
| Plus: total debt | Rp54,368 billion |
| Less: cash | Rp17,491 billion |
| Enterprise value | ~Rp402,417 billion |
| Peer-multiple sanity check | Q2 2021 | Q3 2021 (TTM) | Change |
|---|---|---|---|
| TTM EPS | Rp224.75 | Rp232.13 | up |
| P/E | ~14.0x | ~15.9x | up |
| Book value per share (owners) | ~Rp993.4 | ~Rp1,057.0 | up |
| P/B | ~3.17x | ~3.49x | up |
| TTM Adjusted EBITDA | Rp74,530B | Rp76,832B | up |
| EV/EBITDA (TTM) | ~4.6x | ~5.2x | up |
Every multiple rose this quarter, from a low base after Q2's close. Enterprise value here is market capitalization plus total debt less cash and does not add non-controlling interests (Rp14,093 billion at September 30, 2021), although Adjusted EBITDA is consolidated; adding them would put EV/EBITDA at about 5.4x instead of 5.2x.
The market looks to be waiting to see whether Enterprise's turnaround holds for a second quarter (see Q4/FY2021's post) before extending it any real credit.
Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk's unaudited consolidated financial statements as of and for the nine months ended September 30, 2021 (with the six-month filing used to derive discrete third-quarter figures), plus the Company's 3Q21 corporate presentation.