PT Indosat Ooredoo Hutchison Tbk

Good day and thank you for standing by. Welcome to PT Indosat TVK's first quarter 2026 earning conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1 and 1 on your telephone. You will then hear an automatic message advising your hand is raised. This will advise that today's conference is being recorded. I would now like to hand the call over to your first speaker today, Pak Inder Dhaliwal. Thank you, Pak. Please go ahead.

Thank you, Desmond. Good afternoon, everyone. Thanks for joining us today. With us on the call today, we have Pak Vikram Sinha, our Chief Executive Officer, Pak Nikki Lee, our Chief Financial Officer, and Pak Bilal Kazmi, our Chief Operating Officer. I will now hand over the call to Pak Vikram for his opening remarks. Over to you, sir.

Thanks, Inder. Good afternoon, everyone. I'm proud to report a strong start to 2026 with a solid set of results in the first quarter. I would like to share with you some of the key highlights where we are seeing strong performance across our financial matrix, where we recorded strong growth in revenue, EBITDA and net profit. Our operational matrix are also moving in the right direction and we are seeing momentum across our business lines. If you go to the next slide, we have carried the strong momentum that we saw in the second half of last year into 2026 with strong double digit growth in the Q1 of 2026. Thus, across revenue, EBITDA, and net profit, we saw an increase of 12% year-on-year, 13% year-on-year, and 26% year-on-year, respectively. This quarter, we also achieved a customer ARPU of 45,000, which is 15% year-on-year increase, with the highest quarter ARPU since our merger. We remain committed to realizing Indonesia potential on ARPU and there is still upside on ARPU from here. Next slide. We have launched a first in its kind partnership in Indonesia with collaboration with Google Gemini. Under this partnership, we will offer bundled Google Gemini subscription to our customer. along with the data packages. Not only will this be customer R2 enhancing, but it will also position IOH as the AI leader on the front end as well as bringing real world application to our customers. This will further strengthen our AI portfolio along with anti-spam and scam offering and our own LLM Sahabat AI. We continue to look for ways to expand our portfolio with more planned partnership for the future. IOH is committed to build the digital economy in Indonesia with the spectrum option underway and scheduled to be completed this quarter. COMDG, which is the Ministry of Communication and Digital, has designed the spectrum option very well with a good forward-looking framework, ensuring that every operator will get enough spectrum for their 5G investment. It is good to be late on the 5G investment cycle as we have the benefit of learning from rollouts in other countries as the equipment price for 5G is significantly down. We have also seen improved handset penetration on 5G. We will utilize our AI and data-driven modeling to give us the most optimal rollout on 5G on focusing on giving our customer a great 5G experience. Our FiberCo asset monetization, we will unlock value for IOH and all our stakeholders is remain on track we are currently in the process of the operational company being set up in compliance with regulatory requirement and we remain on schedule for closing it in q3 2026. our ai neo cloud business is also performing very well after recording 28 million us dollar revenue in 2025 We have recorded 16 million revenue in the first quarter of 2026, putting us well on track to achieve the full year revenue guidance, which we have given earlier of around 60 million US dollars for 2026. Our firm contracted revenue for AI NeoCloud amount to USD 170 million, which will be recognized over a period of three years and importantly, This business is EPS applicative from day one, while also being FCF positive. Having set the foundation in 2025, we are ready to scale in 2026 and getting a lot of demand in this business, which we will share more updates on the coming months. Finally, our guidance for 2026, we are seeing very strong growth so far in the first quarter of the year. and we are tracking ahead of our guidance. We will be reviewing our guidance, and if necessary, we'll update it again in the next quarter. I will now hand over to Nicky for more detailed financial presentation.

Thank you, Professor. I am delighted to report this follow-up set of the first quarter results as we start 2026. Our first quarter revenue rose by 12.1% year-on-year to $15.2 trillion, supported by strong performance across all fragments. The primary driver was parallel revenue, where our output improvement journey continues a steady upward trajectory quarter-on-quarter as we execute our strategy to accelerate growth to pay-I and an enhanced network experience. This was further complemented by our needy segment, underpinned by GPU revenue. Below the revenue line, we delivered a 12.9% year-on-year improvement in EBITDA, which outpaced revenue growth, reflecting our strict focus on cost leadership for growth. And I will elaborate further cost in the OPEC section. As a result, our EBITDA margin rose by 0.4 percentage points to 47.6%. Normalized NPAT increased by 26.2% year-on-year, mainly driven by higher EBITDA, partially offset by higher DNA from investment in network, GPU infrastructure, and other one of mostly in quarter four of last year. That debt to EBITDA ratio continued to come down as it improved by 0.056 to 0.31 times, underscoring our commitment to maintaining a healthy balance sheet. Moving on to the next slide. On a quarter-and-quarter basis, revenue declined slightly by 0.9%. reflecting normal seasonality, as Q1 typically has fewer calendar days than Q4. If we would adjust for the number of days, the underlying revenue trend remains positive. Supported by continued cost leadership initiatives, after this EBITDA remains flat, also important. without any EBITDA margin expansion of 0.4 percentage points. At the bottom of my level, net profits decreased quarter on quarter on both reported and normalized basis by 22 and 27% respectively. Again, this is mostly due to one-off benefit. We have booked in previous year and also in queue for last year. If we move on to look at our cost analysis, during first quarter 2026, operating expenses increased on a year-on-year basis, driven mainly by high cost of services to provide to support ongoing revenue growth. Personnel costs also rose, reflecting high variable performance-based compensation for bonuses and incentives. On year-on-year basis, cost of services rose 7%, primarily driven by installation and partnership costs, supporting high MD&JS revenue. Quarter-on-quarter basis, cost of services shrank by 2%, also due to changes in installation and partnership costs. Due to the reason I mentioned earlier, partnership costs, sorry, personnel costs grew by 52% year on year and 8% quarter on quarter. There was some one-off adjustment in prior year first quarter amounting to 93 billion relating to bonus reversal and we didn't have that this year. Marketing expenses. dropped by 2% year-on-year and 12% quarter-and-quarter, reflecting a strategic shift for targeted and cost-efficient digital marketing initiatives. GMA expenses also dropped by 2% year-on-year and 24% quarter-and-quarter, again underscoring our review efforts to control spending. Overall, for first quarter 2026, costs of sales and knockbacks increased by 1.4% year-on-year, and on a quarter-on-quarter basis, a reduction, 1.6%. Depreciation and amortization expenses, up by 5% year-on-year and 4% quarter-on-quarter respectively, primarily due to acceleration of FTTH customer contract amortization and financial discharges additions. In Q1, 2026, Of the operating expense recorded, a net expense of $112 billion compared to a net income of $300 billion in the first quarter, 2025. This variance was primarily attributable to one-off project provision, lower prior year tax provision reversal, and operational one-off gains. So all of the movement is to do with one-offs. On a quarter-to-quarter basis, There was a one-off gain on investment and reversal of other provisions in Q4 of last year, accounting for the difference. If we move on to take a look at CapEx spending, we have spent more CapEx in the first quarter, 59.6% year-on-year and 64.6% quarter-on-quarter spending. This underscored our commitment to strategic CapEx investment for medium and long term. As of the first quarter, the CapEx funds constitute 32% of our full year guidance of 13 trillion. Let's move on to our net debt. Continue to strengthen our capital structure. with net debt reducing 9.2% year-on-year and 17.9% quarter-on-quarter. Solid EBITDA further enhanced our leverage profile, driving an improvement of 0.05x year-on-year and 0.08x quarter-on-quarter in our net debt to EBITDA ratio. That's all I have prepared to summarize for this quarter. Thank you very much. And I will hand over the time to Pabdi Lal for the operational performance update.

Thank you, Pabdi. And hello, everyone. On the operational metrics, I'm happy to reinforce the message from Pabdi Vikram as the key highlight of performance is the R2 growth of 15% on a steady customer base. And this is also backed by healthy traffic growth. Equally important to report is the growth of fiber to the home customers, whereby we added approximately 80,000 customers through the course of the year. Coming back to R2 growth, it stands on two key pillars. One is our 5G investment, and then it is reinforced by AI-based services. We have our flagship SAS-PAM service, which covers one of Indonesia's biggest problems, as well as spamming. But in recent times, we have further strengthened it by Sahabat AI, which is a unique large language model in five local languages. And of course, very recently, our global AI partnership with Google. Thank you.

Thanks. Desmond, can we go to the question and answer queue? We'll take the first question now.

Certainly. As a reminder, to ask questions, please press star 1 and 1 and wait for our name to be announced. One moment for the first question. Our first question comes from Sachin Mittal of DBS Bank. Please ask your question.

Hi. Congrats for a good set of numbers. Just two questions. Now that the ARPU has gone to 45,000, which is similar to what Telcom Cell has. So, essentially, there is no difference. Almost the gap has been narrowed and almost zero gap. So, how do we think about the ARPU given the macro conditions that is there a lot of reliance on the rest of the players raising the tariff so that Again, the trend can move or, you know, we should expect a stable R2 at least for the next one to two quarters. You know, given that, there's a very good progress made in 1Q. That's question number one. Question number two is the guidance is for a stable margins for this year. Now, with actually scaling up of your AI services, with the very good revenue growth Just trying to understand what are the levers here that you are worried about and not guiding for any expansion in the margins at the EBITDA level. Thank you.

Hi Sachin, this is Vikram. Your first question, ARPU, I think I spoke on my opening remarks. We believe there is a lot more upside opportunity on ARPU you know, and the reason why I say look at still, you know, similar spend to GDP and all, this is lowest in the world. Yes, I think there is a convergence now, you know, we have come a long way on our path. I think the important thing I want to highlight is two, one, all these AI and especially digital services which we are bringing and a lot of new AI services, we see a lot more opportunity on our poor upside. And you would have seen on our data traffic growth also. So not only price up, there'll be more opportunity on customers using more data. And we used to be in the connectivity business for decades. Now we have the opportunity to democratize intelligence and also monetize that. So that journey has started our partnerships with Gemini in Pro has given some good early number and that will help us on ARPU growth in the coming quarter. And there are more product, AI product on the pipeline, which gives us more confidence that the ARPU growth journey will continue. In terms of price upside, I think there's an opportunity there. But again, you know, we will want to make sure that we also ensure and drive the market in the right direction. Got it. Got it.

Hi, Sachin. Thank you for your question. This is Nikhil here. On the guidance, yes, we have started the year on the first on the time and perhaps with our guidance based on Q1 performance. We will continuously review our performance, knowing the market could be volatile, it could be unknown for the rest of the year. But they will review and share our view in the coming quarter.

So just to understand, what are the risks that you have seen?

Just to build on what Nikki said, there is no concern. It is just that, you know, we want to stay conservative. And for sure, you know, today we are looking at 13% EBITDA growth, 12% revenue growth. And this was the first quarter where full LeBron and everything was there. So after Q2, we will, if needed, we will review the guidance. Okay.

Thank you.

Please hold on for the next question. Our next question comes from Ranjan Sharma of JP Morgan. Please go ahead. Hi, good evening.

Can you hear me? Hi, Ranjan. Yes.

Hi, good afternoon. Thank you so much for taking the time and for the presentation. There's a couple of questions from my side. Sorry to hop on this again, but on the guidance, I mean, if I just analyze your first quarter performance, we get to a 9% growth. Are there any earnings headwinds that you are anticipating or trying to safeguard against so that you're not raising the guidance? because everything that you have said indicates that the earnings should keep growing. The second question is on the personal cost. It's a pretty sharp jump, and it's a seasonality we have not really seen in the previous years. So how should we think about the personal cost trending in the coming periods? And the last question is, like, as you grow your earnings base, while your traffic is stable and you're going to monetize your fiber assets, Will you be looking to pay down the debt or is that something that you could use to upstream to shareholders? Thank you.

Hi, Ranjan. This is Vikram. On guidance, your observation is very correct. You know, we are, as we speak today, we are on 12% year-on-year revenue growth, 13% EBITDA growth. We are seeing a very healthy April number also. It is just that, you know, we took a call that we will revisit at end of H1. So you will hear more. There is nothing else other than that. It looks very confident and healthy that we are heading towards very strong double digit growth for the full year. On the personal cost, you know, last year was a tough year, you know, and last year was the first time where we had to revise the guidance and that is why we have been more cautious on guiding the market. Last year was a very unique year where, you know, we had provisioned because of last five, two quarters of good performance, we had to provision some bonuses and more than what we were expecting. But otherwise, you know, you will see all these things getting better. Overall, our people cost to revenues and all these metrics are only improving. This Q4 number for last year because we had a good back-to-back quarter last year and then we had to provision for some budget on bonuses which we have not thought earlier.

Yes, Sachin, this is Minke here. If I may build on what Vikram shared, particularly on personnel expense. It just follow our pay for culture performance. So if you look at Q1 last year, it was around 800 billion. And it also went up to 1.1 billion in Q4. So 1.1 trillion in Q4, right? And then this year, a little bit more because our performance continued to improve. There was a bit of overprovision made in Q1 2005 and we reversed it because the performance was not good and now we are seeing a good problem in Q1 this year. Performance was better than expected so we pay more incentives and owners following that so we are happy with this problem. On the, yes, on the cyber, we are still cyber transaction. We are still focusing on working on the process to complete the transaction. We have not made any decision on the use of proceeds.

Got it. Thank you.

Thank you.

Questions? As a reminder, please press star 11 to ask question. One moment for the next question. Our next question comes from the line of Sukriti Bansal from Bank of America Securities. Please ask your question.

Hi. Good afternoon, management. Thank you so much for the call and congratulations on the good set of results. First question on data traffic growth. Data traffic continues to grow very strongly this quarter, actually even stronger than the growth that we saw in 4Q last year. How should we think about growth from here? I understand that you mentioned that with AI, et cetera, there could be slightly faster growth. Also, in addition to that, how should we think about data yields? I think they've largely remained stable, marginal increase this quarter, but any color you can share on that. And secondly, on CapEx, can we see some upside to full year numbers given that this quarter we did around 32% of the full year guidance?

Hi, this is Vikram. I think, yes, we have been seeing data, very early data traffic growth. And the good news is, you know, growth of data traffic and revenue growth is quite good mix. You know, we all need to understand we are getting into an AI super cycle. And telco is in a very unique position. And we want to be ahead of the curve on making sure that, you know, we are monetizing this AI super cycle. We are doing a lot of things around AI grid, getting applications, you know, you have seen some examples and there are many more which is planned. So you will see a very good, that is why we are very confident of keep increasing the ARPU from here onwards also. I think the right matrix to look at is ARPU. And there has to be a good balance between revenue and data traffic growth. Yield is not a relevant matrix, you know, at this scale for us because the cost of incremental yield production is negligible, you know. And we write what matrix we are tracking is. ARPU number one, number two, traffic. And if traffic is growing 25%, revenue is growing 12%, 13%, it's a very healthy mix. There used to be a time where traffic is growing 60% and revenue is growing 5%. That's not a good place to be. So yield is not what we look at nowadays.

Sukriti, on your tax question, if I can take it. I think there are two parts to it. One, the 32% of our four-year guidance. I think that's a combined effect of, one, the consumption has gone up, so we need to bring in more CapEx to cater for it. The more important point is we made a conscious decision to spend the CapEx in the earlier part of the year so that we will be able to get the four-year benefits of the CapEx spending. In terms of our guidance, we are comfortable with the guidance for what we are doing today. But given 5G spectrum allocation will happen, we will monitor and we will review what will be our capex spending going forward. And we will update if needed in the coming quarters.

Understood. Thank you for that. If I could just quickly follow up also on the personnel cost question earlier. Just wanted to understand if they continue performing well, should we expect, I mean, understand that the first three quarters last year were subdued in terms of performance, but should we, therefore, personnel cost was probably lower as a percentage of sales? So should we go back to where 2024 levels were in terms of percentage of sales figures?

I think with the expectation we'll continue to do well in the rest of the year, we would be happy to pay more bonuses and incentives. So what we are booking in Q1, would be more representative of our cost base going forward, assuming we will continue to deliver by double-digit revenue growth.

Thank you. Thank you so much, Dr. Vikram and Dr. Ki.

Thank you for the questions. One moment for the next question. Our next question comes from Piyush Chaudhary from HSBC. Please go ahead.

Yeah, hi. Good afternoon. Three questions. Personally, we saw ARPU improving sequentially. If I look at the mobile revenue, it's almost like flat if I exclude the interconnection revenue, implying average subsets down. So could you elaborate what is leading to average subsets down and how are the trends in the month of April? How is the trend for the challenge? Second question is, what's the IG handset penetration in our customer base? Early as, you know, AI cloud is scaling up, could you now share what is the return on investing capital for this element? Thank you.

Hi, Piyush. This is Vikram. I think if you look at you know quarter on quarter revenue also this is historically you know generally quarter one is below quarter two but our P2C revenue when you look at quarter on quarter this is also I think close to one percent up. So overall if I have understood your question right. We see a clear strong momentum, stable base, ARPU growing and we see that trend continuing. What we need to keep in mind is this quarter was a full quarter of Lebron and we need to make sure that, you know, how we can build on quarter 2, both revenue and ARPU better than quarter 1 and that is what our intent is. So you should wait for one more quarter. You will get a more clearer trend once we announce our H1 result. On handset penetration, we don't give the number exact. But I highlighted in my opening remarks, sometime it is good to be late. And 5G is a cycle where, you know, Indonesia as a country, you know, they just now today the spectrum detail has also been announced. I must say it has been a very progressive thing which the ministry and COMDG have done. The way they have structured it, the private force spectrum on reference case to what has happened earlier, first time I see coming down significantly which is very good for the industry. It will help us on the overall digital economy and the digital ecosystem which the country needs. It will help us on the 5G investment cycle. So the penetration level is quite healthy. There are countries who are launching 5G without having 5G access. So I think we are in a good place, but we don't disclose the exact percentage.

Hi, Pierce. This is Nikhil here. On the ROIC, on an average basis, it's a Rami team. All these contracts, whether in respect of the one we have or the ones we are discussing, they come in with different terms and conditions, like the GP200 we have. Actually, we don't need to make any investment. We receive all of our investment up front. So there's no investment, but if I assume that I have to make investment on day one, Then it would be the meeting number I'm talking about.

On your question on ARPU trending, we stated here the average ARPU. However, one interesting data point for you would be that our Q1 exit ARPU is actually 48.6K. So it continues to trend positively.

You mentioned Exit R2 is 48.6. Is that correct? Okay. That's very true. All right. Thanks a lot. Thank you for the questions.

As a reminder, to ask questions, please press star 1 and 1 and wait for ending to be announced. We have a follow-up question from Ranjan Sharma of JP Morgan. Please go ahead.

Thank you for the opportunity again. On the upcoming spectrum auctions, is there any details that you can share like on the reserve price, what are the frequencies that might be interesting to you? I know there are some commercial sensitivities in place, but you might not be able to say a lot. But is there anything that you can help us understand like how the spectrum is going to be allocated? Thank you.

Ranjan, this is Vikram. Today only, you know, I think we got the detailed paper we are analyzing, but two key messages. One, the way walking has been done, all the operators will be in a good position to get it. There is not too much of, you know, if you go at a reserve price, you get one block, so there is no need of too much of competing on paying higher price so it has been extremely well designed. First time I have seen you know so much forward looking to support the whole digital economy. On the reserve price we are still analyzing the number but directionally the prices if you look at the reference 700 if you put it to the reference of 900 or 2600 if you put it to the reference of 2100. I think the reserve price have come down by 60 to 70 percent. So, first time we have seen that the ministry is focusing more on the whole developing the whole digital ecosystem instead of just focusing on spectrum. Spectrum always used to be highest one of the highest price in the world. So, I think it is very impressive the way they have done this time.

Okay, that is quite startling. Good to hear. Can I request, I mean, if it's possible to share the document so we can analyze it as well?

It will be available in public domain by tomorrow. So, you know, you just wait till tomorrow. I'm sure you will have access to such document.

Okay. Thank you very much and good luck.

Thank you for the questions.

We have a follow-up question from Sachin Mittal of DBS. Please go ahead.

Yes, thank you. Just a question on your AI NeoCloud service because you are consolidating into, you know, a separate segment. Just want to get some color. There is a talk about, you know, big shortage of software and, you know, Basically, the whole data center, there is a big supply shortage. So how do you stand? Now that you already have a contracted revenue, are you seeing the benefits in any form that can spill over to you, whether it's through region in the pricing for those contracts or for the new contracts? or any color that you can share, because there seems to be complete shortage of AI-ready data center space. So how does, no, the various, the high demand and supply shortage, how can Indosat benefit from it?

Sachin, thank you for asking this question. You are absolutely right. There is a significant demand and shortage of the whole supply chain ecosystem. So one data point I can tell you, the first lot of H100, you know, which we had got, there were few customers which came for renewal. It was an annual contract. The prices have gone up by 25%. So we are renewing customers of H100. First time this has happened. Earlier, the prices were coming down because after H100, the the Blackwell and now we have Vela Rubin also but when we are renewing some of the H100 also the prices have gone up so that shows how much shortage it is and it will help us. Second I think what we are showing here is only the contracted customer where you know the revenues are all contracted and Nikki also highlighted you know because it has been very positive to our P&L from the way we have constructed this. But we are seeing lot more demand and we are also considering how do we scale up this. With the scale going to next level there are few options which we are looking at and I think within one quarter we will be in a position to give you more clarity. But we have been able to get support on the whole supply chain. We have been able to close few more contracts, but we are not factoring all those things now. At the right time, we will come back to you on the update on that.

Okay. So, I mean, does it mean that almost 100% of your ready capacity is on lease now or no, it is less than 100% How do we think about, let's say, over the next few months, if not years? Because over the years, we know a lot of new plants will come on scene. Over the few months, next few months?

I think for next few months, everything is all sold out and reached out. So there is very small portion which is coming for. And then what came for renewal, I told you, you know, there was an upside of 15-20%. I think the other good news is the useful life, you know, we always thought that it is five year and we worked on five year depreciation. I think it is getting more clear that the useful life is much more than five year. One of the customer we have contracted on H100 now, you know, is five. So, when I look at the useful life of my H100, it is very clear it will be six year for sure. So, that is another thing which we are seeing.

Exactly, because CPUs are being used for inferencing, so S100 should be good enough for inferencing, in fact. I think there's a chance of even longer life, right?

100%, but what I'm telling you is confirmed. People have contracted.

Got it, got it. And there's a tension of useful life. That also, I think, is very positive for the whole industry. Yes. Okay. Okay, thank you. Thank you, Patrick. Yes.

questions. We do have a follow-up question from Security Bansal of Bank of America Securities. Please go ahead.

Thank you for taking my follow-up. I just wanted to quickly understand on the Gemini partnership that you have with Google. This is right now a value-added service that you're offering. So how should we think about any IPO upside from this? Are you seeing any shift of customers from lower to higher value packs as a result of such a value add service and assuming this is not exclusive so do you expect that there is also something similar what could be the potential impact of that

Hi, Sokriti. So, you know, in terms of our approach, this is one of the products. We had Sam's CAM. Then we have Sahabat AI. The point which is important to note is things which was not possible, especially on AI products, which we are seeing now, is helping us on ARPU and also churn reduction. So my request will be, you know, let's see one more quarter. You will see more color on how it is shaping up. But for last three quarter, this is just one of the products. You know, if you look at our trend, every quarter there are AI application or product which is helping our customers. So we are very focused that, you know, whatever we launch, we are able to scale up and it should be useful to our customers. And that is helping us continuously on our ARPU journey and also churn reduction and also on increasing our high-value customers.

Thank you, Vikram. That's very helpful and very encouraging to see the exit ARPUs also for 1Q. I just wanted to understand most of the shift that we see in growth in ARPU that we see are likely to see and are seeing will be more customer shift to higher value products or are we actually likely to also see any headline price increase given the current macro environment?

Look, overall, you know, What customers pay for our product is a friction of a cost. You know, it is more than consumption. It is more primary. Last year, we saw a lot of low value customer optimizing. So I'll say that has not fully recovered, but especially high value customers and customers also mid-value. They continue to use more. This is what we are seeing in our network. And that is why you see our data traffic growth also.

No, absolutely. I think it's both. But let me emphasize that it's early days, but through new services like Gemini, we see clear upside on ARPU, and we plan to have such significant launches on an ongoing basis, and that would be one of our drivers of ARPU growth.

Understood. Thank you. Thank you so much.

Questions? With that, I would like to hand the call back to the management for closing remarks.

Okay. Thank you, Desmond. Thank you, everyone, for joining us on the call today. As always, if you have any further questions, please do feel free to reach out to myself. Otherwise, we'll speak to you again next quarter. Thank you, everyone.

Thank you for today's conference call. Thank you for your participation. You may now disconnect your lines.