TLKM The Stock Fell 33% This Half - The Numbers Didn't

A Business That Held Steady While Its Multiple Didn't

Telkom Indonesia (TLKM) - Indonesia's state-owned telecom and digital-infrastructure incumbent, owner of Telkomsel (mobile), IndiHome (fixed broadband), Mitratel (towers), and NeutraDC (data centers) - reported H1 2026 (the six months ended June 30, 2026) revenue of Rp75,878 billion, up 3.9% year-over-year, with operating profit up 4.4% to Rp20,133 billion and company-disclosed EBITDA^» up 3.8% to Rp37,464 billion at a margin of 49.4% - essentially flat versus 49.5% a year ago. By the standard this site used to judge FY2025 (a year defined by one-off charges distorting an otherwise-stable business), H1 2026 is the clean version of that story: no early-retirement charge, no depreciation restatement, just ordinary operating performance holding up.

And yet TLKM shares closed the period at Rp2,350 (June 30, 2026), down roughly 33% from Rp3,480 at the end of FY2025 - the steepest six-month drop this site has recorded for the stock. That's not a business getting worse; it's a market re-pricing the same business at a meaningfully lower multiple (see Target Valuation Range below for the arithmetic). Some of that de-rating has a real, disclosed cause: a subsequent event shows Indonesia's tax authority rejected Telkom's request to use book-value accounting for the Rp35.8 trillion wholesale-fiber transfer to its TIF joint venture that closed January 1, 2026 (see Beyond the Usual) - an unquantified tax exposure sitting on top of an otherwise unremarkable quarter. There's a second, quieter tension worth naming up front: net income attributable to owners of the parent grew just 1.4% to Rp10,623 billion, while the profit captured by non-controlling interests (mostly the 35% of Telkomsel Telkom doesn't own) grew 13.7% to Rp3,583 billion - minority shareholders in Telkom's own subsidiaries captured a disproportionate share of this half's profit growth (see Key Financial Metrics).

The Prescription

Telkom should keep leaning into the B2B Infra segment's recovery - external revenue up 4.9% and, more importantly, segment profit up 8.2% this half, a real reversal from FY2025's 36.3% segment-profit collapse as the Mitratel/UMT and NeutraDC depreciation load finally stopped outrunning the growth it's meant to fund (see Segment Comparison). That reversal is the actual evidence the capex bet is starting to pay off, and management should keep capital flowing there rather than diverting it toward the buyback program it just expanded (see Beyond the Usual) while the tax dispute over the fiber spin-off remains unresolved.

What it should stop doing: authorizing a second, larger share buyback (Rp4,000 billion approved June 8, 2026, on top of an existing Rp3,000 billion program) while an unquantified tax liability tied to a Rp35.8 trillion asset transfer sits open and unresolved. A state-owned company spending cash on its own stock is a reasonable response to a beaten-down price, but doing it before the size of a known contingent liability is known is sequencing the decision backwards - buy back shares once the tax exposure is quantified and the balance sheet can absorb it, not before.

Key Financial Metrics

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

FX: Rp17,935 = US$1 (Jun 30, 2026) and Rp16,709 = US$1 (Dec 31, 2025, for reference) - period-end quoted market rates, used only to convert the USD columns; Telkom's own filings report only in Rupiah.

*The USD YoY columns are weaker than the Rupiah ones purely from currency: the Rupiah weakened roughly 7.3% against the US dollar between the two period-end conversion dates used here (Dec 31, 2025 and Jun 30, 2026), so a Rupiah figure that grew can still show as flat or down once converted - this is an FX-translation effect on the comparison, not a change in the underlying Rupiah-denominated business.

Why each moved: Revenue grew on an 11.0% jump in Telkomsel's Digital Business alongside a 9.0% rise in mobile ARPU^» to Rp45.6k, even as the mobile subscriber base kept shrinking (153.5 million, down 3.1% YoY) - a "fewer, higher-value customers" trade that's now recovering revenue growth after several quarters of ARPU-repair effort. Net income attributable to owners grew far slower than consolidated profit because non-controlling interests captured a larger share of the gain (see above) and because a Rp335 billion unrealized loss on investment fair-value changes (vs. Rp276 billion a year ago) sits above the operating-profit line. Total cash roughly doubled year-over-year, but this is a timing artifact, not organic cash generation: FY2024's dividend was paid in 1H25 (a Rp21,047 billion outflow that year), while the FY2025 dividend (Rp21,999 billion) wasn't paid until July 10, 2026 - after this period closed. Expect a large cash drawdown in the Q3 2026 numbers when that payment actually clears.

Key Operational Metrics

• Mobile (Telkomsel) customer base: 153.5 million, down 3.1% YoY (158.4 million in 2Q25) - the subscriber base continues shrinking as Telkomsel keeps prioritizing ARPU over headcount, the same trend flagged in the FY2025 post.
• Mobile ARPU: Rp46,000 in 2Q26, up 11.6% YoY from Rp41,300 and up 2.0% QoQ from Rp45,100 - the "quality-led" pricing push is still gaining ground.
• Data yield: Rp3.1/MB, up 10.4% YoY, with mobile data payload roughly flat (+0.8% YoY) - the company is extracting more revenue per unit of data rather than relying on traffic growth.
• IndiHome (fixed broadband) ARPU: declined 5.9% YoY but improved 3.4% QoQ; convergence ratio (customers taking both mobile and fixed services) improved to 65% in H1 2026 from 55% a year earlier.
• Mitratel tower tenancy ratio^»: improved to 1.57x from 1.53x in 1Q26 - more tenants sharing the same tower base.
• Capex-to-revenue ratio: 14.2% in H1 2026, well below the FY2026 guidance range of ~17-19% - either capex is genuinely running light this half, or it's back-loaded into H2.

Segment Comparison

Telkom 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) - the business-pillar structure adopted in 2025 (see the FY2025 post's Segment Comparison for the full restructuring detail).

*Margin = segment result ÷ total segment revenue (external plus inter-segment), consistent with how the FY2025 post computed it.

B2C (69.1% of external revenue) delivered the strongest result improvement of any segment - profit up 14.5% on a smaller revenue gain (4.8%), meaning the segment's margin genuinely expanded, driven by the ARPU-over-volume strategy described above.

B2B Infra's turnaround is the real update to last quarter's story. FY2025's post flagged this segment's profit collapsing 36.3% as fresh depreciation from the Mitratel/UMT consolidation and the NeutraDC data-center buildout outran the segment's revenue growth. This half, segment profit is up 8.2% - the depreciation load has stopped growing faster than the business it supports (segment D&A rose 11.0% YoY here, versus 27.9% in FY2025), and total segment revenue (including the inter-segment infrastructure services that dominate this segment's real book) grew 19.0% YoY. This is early evidence the capex-ahead-of-demand bet is starting to convert into profit, though one half of recovery doesn't yet prove the trend is durable.

B2B ICT's profit collapse is a new and largely unexplained development. External revenue fell a modest 1.3% YoY, but segment result more than halved (down 51.0%), a far larger swing than the revenue decline alone would suggest. The segment's own disclosed cost drivers don't explain it either: depreciation and provisions both fell this half (D&A -34.2% YoY, provisions -50.1% YoY) rather than rose, meaning the profit drag traces to other operating costs the segment note doesn't itemize. Neither the corporate presentation nor the financial statements offer a specific explanation for this - see Beyond the Usual.

International slipped 11.9% on profit as voice-hubbing interconnection revenue kept declining (-8.0% YoY) toward OTT platforms, partially offset by 42.4% growth in subsea connectivity revenue sold to global hyperscalers - a genuinely growing niche inside a shrinking legacy line.

Others narrowed its loss by more than half, continuing the trend flagged in the FY2025 post, on 10.4% external revenue growth led by e-payment (+36.8% YoY) and digital gaming (+63% YoY).

Beyond the Usual

The FCPA and SEC Investigation Remains Open, With No New Developments This Half

The parallel U.S. Securities and Exchange Commission and Department of Justice investigation into roughly 140 transactions (2016-2019, mostly the enterprise segment) that Telkom's own internal review found "lacked economic substance" - first detailed in the FY2025 post - remains open as of this filing, in essentially identical language to the prior disclosure: Telkom's internal investigation is "substantially complete," the SEC and DOJ inquiries continue, and the Group still cannot estimate a potential loss or range of losses. Nothing in the H1 2026 filing suggests the investigation moved toward resolution or expanded in scope this half - it's a genuinely dormant thread from a disclosure standpoint, worth continuing to track but not a new development in its own right. One concrete side effect did surface: as of December 31, 2025, the Group wrote off Rp1,762 billion of gross trade receivables tied to transactions reviewed as part of the internal investigation, fully offset by an equal existing allowance for expected credit losses - so no fresh income-statement hit, and Telkom states the write-off doesn't waive its collection rights.

The Tax Authority Rejected Book-Value Treatment for the Rp35.8 Trillion Fiber Spin-Off

On July 22, 2026 - three weeks after this period closed - the Head of the Large Taxpayers Regional Office of Indonesia's Directorate General of Taxes rejected Telkom's application to apply book-value accounting to the transfer of assets underlying the Rp35,787 billion wholesale-fiber spin-off into its TIF joint venture, an arrangement first disclosed in the FY2025 post as effective January 1, 2026. Book-value treatment is what would have let Telkom avoid recognizing a taxable gain on the transfer; a rejection means the transaction may instead be taxed at fair value, which - given the size of the underlying asset transfer - could mean a materially larger tax bill than Telkom's own accounting assumed. The filing states only that "the Company is currently evaluating the impact of the decision" and discloses no estimated amount. This is a fresh, unquantified contingent liability layered on top of an already-open SEC/DOJ investigation, and it lands in the same filing as an *expanded* share buyback authorization (see below) - a combination worth watching closely next quarter. The same book-value-versus-transaction-value dispute mechanism shows up again, already quantified, in the Telkomsel/IndiHome tax assessment below.

Telkomsel Faces a Rp14,467 Billion Tax Assessment Over the IndiHome Business Transfer

On October 6, 2025, Telkomsel received two Underpayment Tax Assessment Letters for the 2023 fiscal year: Rp12,844 billion for Article 23 Income Tax (including Rp3,823 billion in penalties) and Rp1,623 billion for Corporate Income Tax (including Rp445 billion in penalties) - a combined Rp14,467 billion. Both concern the transfer of the IndiHome consumer broadband business from the parent Company to Telkomsel: the tax authority is seeking to remeasure the business transfer at fair value rather than the book value Telkom used, and separately disputes the transaction value applied to the IndiHome operational activities between the two entities - the same book-value-versus-transaction-value mechanism at issue in the fiber-spin-off dispute above, this time already crystallized into a specific assessed amount rather than sitting unquantified. Telkomsel filed an objection on December 10, 2025, and as of this filing's completion date the result of that objection had not been received - the exposure remains open and unresolved. At Rp14,467 billion, this assessment alone is larger than this half's entire net income attributable to owners of the parent (Rp10,623 billion, see Key Financial Metrics), and it's the second time in this filing that the same book-value dispute mechanism has surfaced against the company - a pattern worth watching rather than two unrelated one-offs.

Telkom Just Expanded Its Own Share Buyback Program

Telkom's AGM approved a Rp3,000 billion share buyback in May 2025, and a second Notarial Deed dated June 8, 2026 approved an additional Rp4,000 billion program - taking total authorized buyback capacity to Rp7,000 billion. As of June 30, 2026, the company had repurchased 481,275,800 shares for Rp1,510 billion under these programs - a small fraction of what's now authorized, but notable timing: the expanded authorization was approved the same month TLKM shares were trading near the low end of their two-year range. Buying back stock at a depressed price is a defensible capital-allocation choice on its own, though see The Prescription for why doing it before the fiber-spin-off tax exposure above is quantified is a sequencing concern.

Telkom Completed the Ad Medika Divestment Flagged Last Quarter

The FY2025 post noted Ad Medika (a healthcare claims-administration subsidiary) had been classified as held-for-sale, pending a conditional agreement with a Singapore-based buyer. That sale completed on June 2, 2026: Metra sold its entire stake in Ad Medika to Global Assistance & Healthcare Singapore Pte. Ltd. for Rp857 billion in proceeds against a Rp307 billion carrying value, booking a Rp550 billion gain on disposal - a clean resolution to a thread this site was already tracking, and a modest one-time boost to this half's other income.

Telkom's Ownership Structure Quietly Moved Under a New State Holding Vehicle

Effective March 22, 2025, the Indonesian government transferred its 52.09% ownership stake in Telkom - via an "inbreng" capital contribution - to PT Biro Klasifikasi Indonesia (later renamed Daya Anagata Nusantara Investment Management Agency, or "DAM"), the operating vehicle for Indonesia's new sovereign investment fund, Danantara. On January 6, 2026, DAM handed a small sliver (0.52% of total shares) to a separate regulatory body, BP BUMN, while the bulk of the government's stake (about 51.6%) remains consolidated inside Danantara. The Indonesian government remains Telkom's ultimate beneficial owner throughout - via a single Series A "Dwiwarna" golden share carrying special control rights - so this is a restructuring of how the state holds its stake, not a change in who controls the company, but it's a genuinely new layer in Telkom's ownership chain that a reader tracking governance should know about.

Telkomsel Secured New Spectrum After the Period Closed

As a subsequent event, Telkomsel was designated the successful bidder for 100 MHz of new spectrum (2x10 MHz in the 700 MHz band plus 80 MHz in the 2.6 GHz band) through Indonesia's 2026 spectrum-allocation process, with the objection period expiring July 14, 2026. Neither the acquisition cost nor the payment terms are disclosed in this filing. More spectrum capacity supports the ARPU-and-payload growth strategy described above, but the cost - and how it affects the capex-to-revenue guidance discussed under Key Operational Metrics - isn't yet knowable from what's been filed.

Target Valuation Range

Bottom line: the market is pricing TLKM at roughly a 3.5x TTM EV/EBITDA multiple, down from 5.3x at the end of FY2025 on essentially flat trailing earnings - the stock now trades toward the low end of a reasonable Rp1,950-Rp3,150 fair-value range built from that same multiple's plausible bounds, meaning the recent selloff looks closer to an overcorrection than a re-rating justified by this half's actual numbers.

Market-cap and enterprise-value buildup (98.82 billion weighted-average shares outstanding for H1 2026, per the company's own EPS disclosure):

Peer-multiple / trailing-twelve-month comparison (TTM figures = FY2025 minus H1 2025 plus H1 2026, since this is an interim period):

TTM revenue and EBITDA both grew modestly (+2.0% and +1.9% respectively) while enterprise value fell 32.9% - the entire move is multiple compression, not a change in the underlying earnings base. Peer check against Indosat (ISAT): Indosat's Q1 2026 quarter traded at roughly 2.62x annualized EV/EBITDA at a 47.6% EBITDA margin. Telkom's current 3.51x multiple, against a comparable 49.4% margin, still commands a premium over Indosat - but that premium has shrunk considerably from the roughly 2x gap this site found at the end of FY2025, meaning the market is now pricing Telkom's scale-and-infrastructure advantage far less generously than it did six months ago.

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

Reading the table: the Rp2,350 actual close sits almost exactly at the bear case, meaning the market has already priced in something close to a worst-case outcome on the fiber-spin-off tax dispute without that outcome actually being known yet. If the tax authority's rejection resolves into a specific, bounded number rather than an open-ended exposure - which is the single biggest catalyst likely to move this stock over the next two quarters - even a partial re-rating toward the base case implies real upside from here.