Telkom books 3.5 percent profit growth in 2019 as demand for internet services rises

Publicly listed state telecommunication giant PT Telekomunikasi Indonesia (Telkom) booked Rp 18.66 trillion (US$1.11 billion) profit in 2019, a 3.5 percent rise from the preceding year, as the company’s mobile and internet services businesses were on the rise.

Telkom’s cellular operator subsidiary Telkomsel saw its digital business earning jump by 23.1 percent to Rp 58.24 trillion as mobile data consumption grows, while Telkom’s home internet provider arm IndiHome also recorded a 28.1 percent increase in its earning to Rp18.3 trillion last year.

“Our achievement in 2019 reflects that Telkom is on the right path in becoming a digital telecommunication company,” Telkom president director Ririek Adriansyah said in a statement on Tuesday.

Stocks of Telkom, traded at Indonesia Stock Exchange (IDX) under the code (TLKM), were down 2.77 percent at 2:04 p.m. on Wednesday while the exchange’s main gauge, the Jakarta Composite Index (JCI), was only down a marginal 0.04 percent. The stocks have fallen more than 13 percent over the past year, Bloomberg data show.

The company recorded 3.7 percent annual growth in its revenue to Rp 135.57 trillion last year, while its expenses fell by 1.2 percent to Rp 70,73 trillion.

Despite posting profit growth over the full year, the company’s net profit in the fourth quarter dropped by 42 percent year-on-year (yoy) to Rp 2.2 trillion and came in below the market’s consensus expectation, according to brokerage company Mirae Asset Sekuritas Indonesia.

“Despite mild top-line growth in the fourth quarter of 2019, we saw decreased earnings largely due to the combination of impairment loss on investment asset and higher operations and maintenance expenses,” read the research note issued Tuesday.

“We think operational performance should be in line with our estimates regarding flat subscriber growth and data yield, exponential growth in data traffic with rising data consumption per subscriber, declining use of legacy services and so forth,” it added.

Telkom spent Rp 36.59 trillion, or around 27 percent of 2019 revenue, to improve its digital services capability by procuring broadband infrastructure, such as 4G LTE base transceiver stations (BTS) and undersea internet fiber-optic cables, among other things.

The company expects data traffic to continue to grow significantly, in line with the expansion of digital services, such as games, video, advertising and payments, which are still in the early growth phases.

Mobile data consumption in Indonesia stands at 5.2 gigabyte (GB) on average per month per customer, which compares to 13 GB in Thailand and 11 GB in India, according to Telkom.

Telkom’s enterprise segment, which includes data center and cloud services, booked Rp 18.7 trillion in revenue and thereby contributed around 14 percent to the telecom giant’s total revenue, according to the company’s statement.

“Telkom has been striving to develop various digital services that are based on smart platforms, such as cloud, big data and the internet of things (IoT), to match the customers’ needs,” Ririek said.

“We believe our digital business division will become a growth booster for Telkom in the future,” he added.

Telkom announced earlier this year that the company would transform its business strategy to focus more on digital services, following criticism from State-Owned Enterprises Minister Eric Thohir in February toward the company's overreliance on Telkomsel, which contributes 70 percent to its income.

Telkom should focus more on big data and cloud computing, Erick said, and he expected Telkom’s cloud services to be on a par with the more established services in other countries, like China's Alibaba Cloud.

Ririek later said the company was transforming its services from off-the-shelf products to solution-based software.

“We will enter what we call the digital platform, for example the data center and then the cloud. Because looking ahead, [the future] of computing is the cloud,” he said during a business forum in February.