PT XLSMART Telecom Sejahtera Tbk

Good morning, ladies and gentlemen. Welcome to XL Axiata's earnings conference call for the first nine months of 2018. My name is Jeff, and I will be your coordinator today. During the presentation, all participants are in a listen-only mode. Instruction will be given on how to register your question when we get to the question and answer session. As a reminder, this conference is being recorded for replay purposes. Now we would like to turn the conference over to our host, Mr. Inder. Please proceed.

Thank you. Good morning, everyone, and welcome to the call. On behalf of the Excel Management Team, I would like to thank all of you for taking the time to join us today. With us on the call today, we have Ibu Dian, our Chief Executive Officer, Pak Adlan, our Chief Financial Officer, and Pak Alan, our Chief Commercial Officer. Now, Ibu Dian will share the highlights for the first nine months of 2018, which will then be followed by a Q&A session. I will now hand the call over to Ibu Dian.

Thank you, Indar. And good morning, everyone. We are pleased to report that this quarter, we have seen a pickup in revenue growth, where our gross revenue managed to increase 6% Q&Q. And this is a direct result of our successful data monetization effort as part of our overall strategy. Thus, despite the challenges during the first half of 2018 with intense data price competition and structural changes of prepaid SIM registration, we see that market conditions are improving, and if this continues, we are confident that we can finish the year on a strong note. The positive performance this quarter is attributed mainly to consistent execution of our strategy throughout our transformation journey, and this has enabled us to gain traction in the market and particularly in winning data safety customers. Further, as we have executed on our plans to monetize data since mid-May, coupled with our strong product strategy and continued network investment program, we continue to outperform the industry in the first nine months of the year. This quarter, our gross revenue increased 6% queue on queue, and this was mainly due to continued growth in data revenue, which remains our main growth driver. Innovative data offering and improvement in data service quality have successfully pushed data revenue growth in the nine months of the year to 14% year-on-year. Data revenue contribution now makes up the majority of our service revenue at 80% in this current quarter. This percentage is far higher than our peers, which enables us to weather the negative effects of declining legacy services of voice and SMS far better than others. Positively, our EBITDA has also increased by 9% QoQ this quarter, while margins have also added 1% to 37%. Our continuous efforts in driving cost savings have started to show positive results, with total operating costs for 9 months of 2018 remaining flat despite the increase in the number of new network sites, as we expand our coverage at Java, and additional network elements installed to improve network quality during the year. This cost-sufficiency program will continue and will be a key catalyst to drive higher EBITDA and margins going forward. Data continues to be our main engine of growth. Indonesia's data-safety customers have continued to respond well to our improved networks. As of the first nine months of 2018, our smart phone subscribers spanned at 42 million, a 15% growth compared to the same period last year. This makes up approximately 78% of our subs base, which is significantly higher than the industry average. We continue to see a fast rate of migration to subs to 4G, where 4G customers now make up more than half of our total subs base. As more of our base moves to 4G, we are seeing lower utilization of 2G, which will enable us to free up even more spectrum for 4G. This puts us in a better position than our peers, and will enable us to continue to best position to raise the goals in data on our journey to become a data centric company. We are pleased to report that our customer numbers, post the prepaid SIM registration, implementation has continued to rise while ARTO remains stable. This is due to our focus in 2015 on sustainable customer acquisition, and thus we have added another one million customers taking our overall base of registered customers to 54 million this quarter. In establishing the Excel brand as a choice for high-value customers, both reliable high-speed data and superior network quality are essential. As such, we continue to ensure a high-quality data experience to our customers through continued rollout and upgrade of our network. Thus, our total BTS count is now over 116,000 BTS, with 3G totaling more than 50,000, and our 4G LTE service is now available in 387 cities and areas across Indonesia with more than 28,000 4G BTFs. To solidify ASEATA's position as the leader in data innovation, this year showed the first outdoor 5G and YG live trial in Kota Tua, Jakarta. 5G and YG have the potential to enable a variety of services, including enhanced mobile broadband, smart cities, smart home broadband, and digital transformation for vertical industries. We also continue to invest in transmission, backhaul, and network modernization to support the rising data traffic across our network and deliver stability, expand our network capacity, and improve quality of our data services for our customers. Our network investment continues not only within Java, but with a greater focus on XJava this year, following the strong performance last year, which has translated to better coverage and network performance in this area. This has also translated to a stronger revenue performance of the Java, which continues to grow at a better rate than Java. The dual-brand strategy has successfully led to XR as data, making strong enrolls in different segments through innovative offerings in each segment. During the quarter, we launched a higher-spec version of our popular Xtreme smartphone called the Xtreme Ultima. This offering has done well and is a key part of our strategy to continue to drive smartphone adoption across our base of customers. Access also continues to do well with the youth segment as we have expanded our product offering to appeal even more to the gamers and the music lovers. Our post-paid brand, XL Prioritas, also continues to do extremely well, attracting customers through attractive offerings and smartphone rebate programs. Our performance in the first nine months of 2018 was very promising, and we are seeing signs of improvement in the market with gradual price increases, both by us and our peers, which is positive for the industry. This is evident from our strong performance this quarter as we have undertaken monetization of data. With our positive results, strong fundamentals, coupled with our focus on transforming into a data-centric company, we are confident of delivering a strong finish to the year. Nevertheless, we will closely monitor how the market unfolds, which will have bearing on our overall performance. Taking all this into account, and recent developments in the market, our guidance for 2018 is maintained with revenue to grow above market, EBITDA margin guidance of high 30s, and CAPEX plan guidance for 2018 of around 7 trillion rupiah, which will remain focused on data network investment in 4G, and continuous network improvement and modernization in and outside Java. Thank you, and let us now proceed to the Q&A session.