TLKM A 20% Profit Drop That Turns Into 6% Once You Strip the One-Offs

The Data-Center Bet That's Squeezing Profit Before It Pays Off

Telkom Indonesia (TLKM) - Indonesia's state-owned telecom and digital-infrastructure incumbent, owner of Telkomsel (mobile), IndiHome (fixed broadband), Mitratel (towers), and a fast-growing data-center business - closed FY2025 (the year ended December 31, 2025) with a set of headline numbers that look worse than the underlying business actually performed. Consolidated revenue fell 2.2% year-over-year to Rp146,742 billion (~$8,782.2M), operating profit fell 16.4% to Rp34,648 billion (~$2,073.6M), and net income attributable to owners of the parent fell 20.5% to Rp17,814 billion (~$1,066.1M).

That 20.5% decline is the number that will show up in every headline, and it's mostly noise. Three items explain almost the entire gap between "revenue down 2%" and "profit down 20%": an early-retirement program (ERP) charge taken in 2025, a change in fixed-asset depreciation policy (useful lives shortened from 25 years to 5-10 years for certain network assets, applied retrospectively - see Beyond the Usual), and the disappearance of a one-off FY2024 gain from "unlocking" value in Telkomsel's in-building antenna assets that flattered the prior-year comparison. Strip all three out and management's own normalized net income fell just 6.0% (Rp22,655 billion vs Rp24,113 billion), not 20.5% - a genuinely different story about how the core business actually performed.

But the real driver worth a reader's attention isn't the ERP or the accounting restatement - both are one-time or non-cash. It's what's happening inside the B2B Infrastructure segment (towers, fiber, data centers, backbone - the growth engine Telkom is explicitly betting its future on): external revenue grew a healthy 9.2% to Rp8,929 billion, the fastest of any segment, but segment profit fell 36.3% to Rp10,487 billion from Rp16,467 billion, because depreciation and amortization on that segment jumped 27.9% as Mitratel's newly consolidated UMT subsidiary and the NeutraDC data-center buildout both hit the books at once (see Segment Comparison below). The capex is real and the growth is real - but right now it's showing up as a profit drag, not a profit driver, and a reader has to look past the consolidated number to see that this quarter's story is actually about a specific segment, not the whole company.

The Prescription

Telkom should keep pushing capital toward the B2B Infrastructure segment - data centers, fiber-to-the-tower, backbone - even though it's currently a drag on consolidated profit, because it's the one part of the business genuinely growing revenue faster than the legacy mobile/fixed businesses are shrinking it (B2C fell 3.4% YoY, driven by a 25.3% collapse in Legacy/SMS-voice revenue). The mistake would be judging this segment on this year's depreciation-suppressed margin instead of on unit economics once the data centers actually fill up - a 3rd-largest data-center operator in Indonesia with hyperscale ambitions needs to build ahead of demand, and the segment's underlying revenue growth (the fastest in the company) is the number that matters here, not this year's margin.

What it should stop doing: presenting "normalized" net income and EBITDA figures - which strip out ERP, depreciation adjustments, unrealized investment losses, and the prior year's one-off gain - as if that's simply how the business performed, without also giving the B2B Infrastructure segment's depreciation surge the same kind of explicit, quantified explanation. Management gets specific about why net income missed (three named items, dollar amounts attached); it doesn't get equally specific about why the segment it's betting the company's growth on just had its profit cut by more than a third. A reader following the actual capital-allocation story deserves the same rigor applied to the segment burning the capex as to the headline number explaining away the miss.

Key Financial Metrics

FY2025 (year ended Dec 31, 2025) vs FY2024 (restated), consolidated

FX: Rp16,709 = US$1 (Dec 31, 2025) and Rp16,086 = US$1 (Dec 31, 2024) - period-end quoted market rates, used only to convert the USD columns; Telkom's own filings report only in Rupiah.

Why each moved: Revenue fell as Telkomsel's legacy voice/SMS business kept shrinking (-25.3% YoY) faster than data and B2B Infrastructure grew, though 4Q25 revenue actually rose 1.4% QoQ as mobile ARPU began recovering in 2H25. Operating income and net income fell more than revenue because operating expenses were roughly flat (-0.6% YoY) even as revenue declined, and because of the ERP charge, the depreciation-policy restatement, and the fading FY2024 one-off gain described above. FCF rose because capital expenditure fell 9.4% YoY (Rp25,768B vs Rp29,663B combined property/intangible capex) even as operating cash flow grew 3.6% - a company spending less on capex while collecting roughly the same cash from operations, which is the one line in this report that's unambiguously good news.

Key Operational Metrics

• Mobile (Telkomsel) customer base: 156.1 million, down 2.1% YoY (159.4 million in FY2024) - the subscriber base is shrinking as Telkomsel prioritizes ARPU over headcount.
• Mobile ARPU^»: the company's own charts show a full-year average in the low-Rp40,000s, with quarterly ARPU recovering through 2H25 (from Rp41,300 in 2Q25 to Rp45,000 in 4Q25) as "quality-led" pricing initiatives took hold.
• Mobile data payload: 22,895 petabytes, up 15.0% YoY - traffic keeps growing even as the subscriber count shrinks, meaning existing users are consuming more.
• IndiHome (fixed broadband) subscribers: 10.3 million B2C (+712K net adds in FY2025) plus 1.3 million B2B, for 11.6 million total; IndiHome ARPU fell to Rp214,000 as the company deliberately traded subscriber growth for customer quality.
• BTS (base transceiver stations): 293,000, up 8.2% YoY - continued network densification even as capex fell overall.
• Mitratel towers: 40,230, up from 39,404 (+826 net new towers); tenancy ratio^» improved to 1.57x from 1.52x - more tenants sharing the same tower base, the core lever of a tower company's margin.

Segment Comparison

Telkom changed how it defines its reportable segments in 2025 - moving from a "Customer Facing Unit" structure to a business-pillar structure - and restated FY2024 to match, so the segment numbers below aren't directly comparable to how this site (or Telkom itself) reported segments in earlier quarters. The Group now reports five segments: B2C (mobile and fixed broadband to individuals/households), B2B Infra (towers, fiber, backbone, data centers, satellites), B2B ICT (system integration, IT services, digital solutions for enterprises), International (wholesale/connectivity for foreign carriers), and Others (media, consulting, trading, e-payment, and other ancillary businesses).

*Margin = segment result ÷ total segment revenue (external plus inter-segment), which is how Telkom's own chief operating decision maker reviews performance, since B2B Infra in particular derives most of its revenue from leasing towers and fiber to Telkom's own other segments rather than to external customers.

B2C (69.9% of Group revenue) is still the anchor, and its margin held up better than its revenue - the segment's Legacy voice/SMS collapse is a low-margin business shrinking, which cushions the blended margin even as headline revenue falls.

B2B Infra is this quarter's real story. External revenue grew fastest of any segment (+9.2%) on data-center and Fiber-to-the-Tower expansion, but segment profit fell more than any other segment (-36.3%) because depreciation on the segment jumped 27.9% YoY (Rp15,894B vs Rp12,424B) - the newly consolidated UMT subsidiary (acquired by Mitratel in December 2024) and the ongoing NeutraDC data-center buildout both hit full-year depreciation for the first time. This is a segment where revenue and profit are temporarily moving in opposite directions, which is a normal pattern for infrastructure being built ahead of demand - but it means B2B Infra's current margin understates what the segment should look like once utilization catches up to the capacity being built.

B2B ICT posted the best result of any segment (+25.5%) despite revenue declining 2.8% - a genuine efficiency story: management describes the segment as "undergoing restructuring" toward a more selective approach to new contracts, and the profit improvement suggests that selectivity is working, at least on the bottom line, even as it costs the segment topline growth.

Others narrowed its loss by 23.9% even as its revenue grew 5.1% - the segment (media, e-payment, digital gaming, consulting) is still loss-making at the segment-result level but improving in both directions at once.

Telkom's Stock Round-Tripped a 41% Drawdown in Two Years

TLKM shares closed FY2025 at Rp3,480 (December 30, 2025), up 28.4% from Rp2,710 a year earlier - but that year-over-year comparison hides a much rougher ride. The stock opened this two-year window near Rp3,960-4,000 in early 2024, fell as low as Rp2,350 by February 2025 (a 41.3% peak-to-trough drawdown), and then recovered steadily through the back half of 2025 as mobile ARPU began improving, closing the year almost back to its starting level. A reader looking only at the FY2025-vs-FY2024 close would miss that the stock spent most of the two-year window well below where it started, and that the FY2025 recovery happened while net income was falling 20.5% - the market re-rated the stock's multiple upward on an earnings decline, not on an earnings recovery (see Target Valuation Range below for what that re-rating actually implies).

Beyond the Usual

An Ongoing SEC and DOJ Investigation Into ~140 Transactions That "Lacked Economic Substance"

Telkom disclosed that it remains under parallel investigation by the U.S. Securities and Exchange Commission and Department of Justice, stemming from a 2023 SEC document request about Telkom Infra's work with Indonesia's BAKTI Kominfo on 4G base-station infrastructure. The SEC's inquiry has since broadened to cover the Group's revenue recognition, financial reporting practices, and internal controls, and in May 2024 the DOJ opened a parallel inquiry under the U.S. Foreign Corrupt Practices Act^{[»](/glossary/#fcpa)}. Telkom's own internal investigation - now "substantially complete," while the government probes continue - identified approximately 140 transactions, primarily those occurring prior to 2021 and particularly between 2016 and 2019, mostly in the enterprise business segment, that "lacked economic substance" and didn't comply with the Group's own financial reporting standards and internal controls, resulting in an overstatement of revenue and trade receivables, with the disclosed year-by-year table spanning 2014 through 2024 (as much as Rp2,285 billion of revenue overstated in a single year, 2017). Telkom states it does not believe this constituted a quantitatively material misstatement in any period, and that as of this filing's issuance it cannot yet estimate a potential loss or range of losses from the SEC/DOJ investigations, while acknowledging the final outcome "could have a material impact" on its financial position.

A Retrospective Depreciation-Policy Change That Moved Nearly a Decade of Retained Earnings

Telkom reclassified "drop cable" (the last-mile connection to a customer) as a separate asset component and shortened the useful life assumption for certain fixed assets from 25 years to 5-10 years, applied retrospectively as a change in accounting policy under PSAK 208 rather than prospectively. The company restated FY2023 and FY2024 to reflect the new policy and adjusted pre-2023 retained earnings directly (no cash flow or dividend impact, per management), but the mechanical effect is that a meaningful share of this year's - and every prior comparative year's - depreciation and net income now reflects a materially faster write-off schedule than what was originally reported. This is a legitimate accounting judgment, not a red flag on its own, but it means any reader comparing this year's depreciation or net income to a pre-2025 TLKM post from this site (or to Telkom's own previously-published numbers) is not comparing like-for-like without checking which basis each figure uses.

Telkomsat Is Now Reselling Starlink

On December 22, 2025, Telkomsat (Telkom's satellite subsidiary) signed a one-year agreement with PT Starlink Services Indonesia to resell Starlink's satellite internet services and equipment. Telkom - Indonesia's incumbent state-owned operator - is now a distribution channel for a low-earth-orbit competitor that, in most other markets, has been framed as a threat to legacy satellite and rural-connectivity operators. It's a pragmatic move (better to capture the distribution margin than lose the rural-connectivity customer entirely), but it's a quiet admission that Starlink's technology is now good enough that partnering beats competing in the segments Telkomsat used to own outright.

A Rp35.8 Trillion Fiber Business Is Being Spun Off Into a Joint Venture

Effective January 1, 2026, Telkom transferred a large portion of its wholesale fiber-connectivity business and assets - valued at Rp35,787 billion - to TIF (an entity Telkom holds jointly with a co-investor) in exchange for new TIF shares, alongside Rp9.8 trillion of associated bank loans that also moved off Telkom's own balance sheet onto TIF's. This is a significant restructuring of how Telkom's fiber infrastructure is owned and financed going forward - it converts a wholly-consolidated asset into a jointly-held one - and because it's effective the day after this fiscal year closed, none of its effects are in the FY2025 numbers above; it's worth watching in the next quarter's balance sheet for how much debt and revenue actually move off Telkom's own books.

Telkom Is Quietly Divesting Its Healthcare Insurance-Administration Business

Ad Medika, a healthcare claims-administration subsidiary held through Telkom's Metra unit, was classified as an asset held for sale as of December 31, 2025 (carrying value Rp285 billion), following a March 2026 conditional sale agreement with a Singapore-based healthcare and assistance company. It's a small, non-core divestment relative to Telkom's overall balance sheet, but it's a real data point on Telkom continuing to prune businesses outside its core telecom/infrastructure footprint.

Indonesia's High-Speed Rail Operator Pays Telkomsel for Its Spectrum

Under a March 2023 cooperation agreement, KCIC (the operator of Indonesia's Jakarta-Bandung high-speed rail) shares part of Telkomsel's 900 MHz-paired spectrum band, and in exchange pays Telkomsel annual utilization fees totaling Rp878 billion plus a one-time Rp1,250 billion network recovery fee, running through December 2030. It's an unusual, capital-light revenue stream buried in the commitments footnote - a national infrastructure project paying a telecom operator for spectrum access rather than the more familiar direction of a telecom paying the government for spectrum.

Target Valuation Range

Bottom line: roughly Rp2,707-Rp3,801 per share (bear-to-bull, EV/EBITDA-based) against a Rp3,480 actual close - the stock is trading in the upper half of that range, closer to the bull case than the base case, which means the market has already priced in more of a recovery than FY2025's own numbers (EBITDA down 3.7%, net income down 20.5%) currently support.

Market-cap and enterprise-value buildup (99.06 billion shares outstanding, derived from FY2025 EPS of Rp179.83 on Rp17,814 billion of net income attributable to owners):

Peer-multiple / historical comparison:

The multiple expanded meaningfully even as both revenue and EBITDA fell - EV/EBITDA went from 4.15x to 5.34x in a single year. That's the arithmetic behind the stock's 28.4% price recovery: the market didn't pay more because the business grew, it paid a higher multiple for the same (declining) earnings, presumably on the expectation that the ARPU recovery visible in 2H25's quarterly numbers continues into 2026.

Peer check against Indosat (ISAT): Indosat's Q1 2026 quarter traded at roughly 2.62x annualized EV/EBITDA, at a comparable ~47.6% EBITDA margin to Telkom's 49.2%. Telkom trades at roughly double Indosat's multiple for similar core profitability - a scale/liquidity premium for being the market leader with the towers-and-data-center growth option Indosat doesn't have at the same size, but a real gap worth noting for a reader comparing the two.

DCF-lite scenarios (single-year EV/EBITDA multiple applied to a projected FY2026 EBITDA outcome, not a full multi-year discounted cash flow - a labeled sanity check, not a precision estimate):

Reading the table: the actual Rp3,480 close sits between the base and bull cases, closer to bull - the market is already assuming EBITDA growth resumes in 2026, not merely that it stabilizes. That's a real bet on the ARPU-recovery trend visible in Telkomsel's 2H25 quarterly numbers (see Key Operational Metrics) actually continuing, not yet a bet the FY2025 annual numbers on their own have proven out. If B2B Infrastructure's depreciation drag (see Segment Comparison) also eases as the data-center buildout matures, both legs of the bull case could land together - but neither has happened yet as of this filing.