PT XLSMART Telecom Sejahtera Tbk

Good morning, ladies and gentlemen. Welcome to XL Axiata's earnings conference call for the first half of the 2019 financial year. My name is Albert and I will be your coordinator today. During the presentation, all participants are in a listen-only mode. Instructions will be given on how to register your questions when we get to the question and answer session. As a reminder, this conference is being recorded for replay purposes. We would like to turn the conference over to our host, Mr. Indar. Please proceed.

Thank you, Albert. 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 Pak Adlan, our Chief Financial Officer, Pak Allen, our Chief Commercial Officer, and Pak Budi, Finance Group Head. Ibu Dian extends her apologies for not being able to join the call today. Now, Pak Adlan will share the highlights of the first half of 2019, which will then be followed by a question and answer session. I will now hand the call over to Pak Adlan.

Thank you, Inder, and good afternoon, everyone. I think we are pleased to announce that our first half performance, where we continue to see good traction in the market. This is the fourth consecutive quarter. where we have recorded a sequential increase in service revenue. And we are also seeing very strong growth across all financial metrics, as well as growing profitability. The continued positive momentum is a direct result of the consistent execution and implementation of our strategy, which aims to position us as the mobile provider of choice in Indonesia. Our strategy is focused on three main trusts, being our dual brand strategy, where Excel and Access serve different market segments with attractive data-focused products, continued network investment in building our 4G network across Indonesia, and focus on growing our X-Java market share. In the first half of 2019, our revenue increased 11% year on year, mainly due to service revenue, which rose 15% year-on-year. And driving this is data revenue, which increased 29% year-on-year. Strong customer traction across both the Access and the Excel brands and the success of our upselling exercise to our customers, coupled with the monetization of data, actually has led to the strong growth in data revenue. Data revenue in the latest quarter now accounts 88% of service revenue and continues to be higher than our peers, enabling us to weather the effects of declining legacy services better. Profitability growth has also been strong with EBITDA rising faster than revenue at 19% year-on-year due to our focus on cost efficiency with margin increasing 2.7% year-on-year to 38.7% in the first half year of 2019. The growth of EBITDA coupled with savings of our depreciation expense meant that we have seen a return to sustainable profits. A donation data-savvy customer has continued to respond well to our improved network as we are increasingly being recognized as the brand of choice for smartphone users. As our first half to 2019, our smartphone customer stands at 48.9 million, a 24% growth compared to the same period last year. These make up approximately 86% of our subscriber base, which is significantly higher than the industry average. And we also continue to see fast rate of migration of subs to 4G, where 4G subs now account more than 65% of our total subscriber base. We are pleased to report that our customer numbers continue to increase post the prepaid registration implementation in a healthy and sustainable manner. This is due to our focus on sustainable customer acquisition and thus we have seen our base of registered customer increase to more than 56 million this quarter. Importantly, Our ARPU has also increased 3% this quarter, which is evident by the success of our efforts in upselling our customers and monetizing data. This quarter, the Excel brand saw the launch of several packages in conjunction with the Lebaran festive season, including the Extra Rezeki package, which offers attractive cashback benefits. The Axis brand also expanded its product portfolio with the launch of Awesome and Booster package catering to the youth segment. As a result, we enjoyed a very good Abaran season this year. Both Excel and Axis maintain their strong NPS within each of the brand's target segments. In parallel, we continue to ensure a high-quality data experience to our customers through the ongoing rollout and upgrade of our network. Thus, our total BTS count is now above 127,000 BTS and 4G eNodeB totaling more than 37,000 covering 408 cities across Indonesia. Our network investment continues not only within Java, but also focus in X Java. And these have actually started for the last three years, which have translated to better coverage and network performance in these areas. This has also led to a stronger revenue performance outside Java, which continues to grow at an exponentially faster rate than Java and increased overall contribution to revenue. In particular, awareness of our brand, improved network quality, Coverage as well as innovative products have significantly increased outside Java and we are now increasingly known as a nationwide operator. We intend to build on this strong first half of 2019 with continued focus on executing our strategy to become the preferred mobile internet operator in Indonesia. We will also continue to monitor competition in the market with the hope of competition remains rational. Our guidance for 2019 is maintained, where we expect revenue to grow better than or at least in line with the market. EBITDA margin guidance of high 30s and CapEx plan guidance for 2019 of around 7.5 trillion, 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 question and answers.