PT XLSMART Telecom Sejahtera Tbk

Good morning, ladies and gentlemen. Welcome to Excel Axiata's earnings conference call for the first nine months of the 2019 financial year. My name is Rishi, and I'll 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. And as a reminder, This conference is being recorded for replay purposes. Now we would like to turn the conference over to our host, Mr. Indar. Please proceed.

Thank you, Rishi. Good afternoon, everyone, and welcome to the call. On behalf of the Extra 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, Pa Adlan, our Chief Financial Officer, and Pa Allen, our Chief Commercial Officer. Now, Ibu Dian will share the highlights for the first nine months of 2019, which will then be followed by the Q&A session. I will now hand the call over to Ibu Dian.

Thank you, Indar, and good afternoon, everyone. We are pleased with our continued strong performance this year, despite the challenges in the market since July with increased competition. This is now the fifth consecutive quarter we have recorded a sequential increase in service revenue, and we are seeing strong growth across all financial metrics as well as consistent profitability. The continued positive performance despite increased competition is a direct result of the consistent execution and implementation of our strategy, which aims to position us as the mobile data provider of choice in Indonesia. Our strategy continues to be focused on our attractive dual-brand data-led product proposition, enhanced with analytics-driven customer value management initiatives, continued network investment in building out our 4G network, and focus on growing our X-Java market share. In the first nine months of 2019, our revenue increased 11% year-on-year, mainly due to service revenue which rose 60% year-on-year and driving this is data revenue which increased 30% year-on-year. Data growth continues to be driven by increased customer usage of data through our product and analytics driven strategy. As a result, data revenue in third quarter now accounts for 90% 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 efficiencies, with margins increasing 3% year-on-year to 39% in the first nine months of 2019. This strong growth in EBITDA is driving our return to profit this year, with 9 months normalized net profit at 505 billion rupiah. Indonesia's data safety customers have continued to respond well to our improved network, as we are increasingly being recognized as the brand of choice for SaaS smartphone users. As the third quarter of 2019, our smartphone subscribers stand at 47.7 million, a 14% growth compared to same period last year. This makes up 86% of our subscriber base, which is significantly higher than the industry average, and we also continue to see a fast rate of migration of subs to 4G, where 4G customers make up 70% of our total subscriber base. Our customer numbers declined this quarter to 55.5 million, compared to the previous quarter, although on a year-on-year basis it is still up. This is mainly due to more intense competition in the market, which is not affecting our longer-tenured customers. However, there is an impact to the shorter-tenured part of the base. Given that our revenue as well as our R2 increased QoQ, it is clear that the subs we lost are in the lower-value segment. Our customer value management initiatives are the key part of our efforts in driving higher ARPU and our success in upselling our customers. These are based on analytics through our omni-channel platform. We are doing pilots on cross-selling non-Telco products and offers through our customer interaction. In addition to that, we are also doing real-time contextual interception of customer transactions to upsell our products. We intend to do more in this space with tailored and dynamic pricing, as well as expansion of our customer retention and upsell activities. In parallel, we continue to ensure high-quality data experience to our customers through the ongoing rollout and upgrade of our network. Thus, our total BTS count is now above 129 BTS with our 4G LTE service covering 410 cities across Indonesia. We also continue to invest in fiberizing our network as this will help in handling the increase in data traffic we are seeing. At the same time, we continue to increase the number of our tower sites that are fiberized. Our network investment continues not only within Java but with a focus also on X-Java, which has translated to better coverage and network performance in these areas, and we are increasingly known as a nationwide brand. This has also translated to a stronger revenue performance outside Java, which continues to grow at an exponentially faster rate than Java, and increased overall contribution to revenue. We intend to continue to execute on our strategy to finish the year on a strong note, in line with our objective to become the preferred mobile internet operator in Indonesia. However, we continue to monitor competition in the market and hope it doesn't further intensify. Thus, given our strong performance in the first nine months of 2019, our revenue guidance is raised where we expect revenue to now grow at better than market. Our EBITDA margin guidance is also raised, where we expect EBITDA for 2019 at closer to 40%. We maintain our capex spend guidance at around 7.5 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.