PT XLSMART Telecom Sejahtera Tbk

Good afternoon, ladies and gentlemen. Welcome to Excel Axiata's earnings conference call for 2019 financial year. My name is Revati and I'll be your coordinator today. During the presentation, all participants are on 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. Now we would like to turn the conference over to your host, Mr. Inder. Please proceed.

Thank you, Revati. Good afternoon, 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, Pa Adlan, our Chief Financial Officer, Pa Alan, our Chief Commercial Officer, and Pa Budia, our Deputy CFO. Now, Ibu Dian will share the highlights 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 incredibly proud of our performance in 2019, which was a record year for the company. Through hard work and consistent implementation and execution of our strategy, we posted our highest ever revenue of R25.1 trillion, and highest ever EBITDA of 10 trillion rupiah, as well as return to profitability of 713 billion rupiah. Our strategy of continuing to invest in 4G, especially in xJava, as well as consistent execution of our dual-brand strategy with an increased focus on operational excellence, has enabled us to outperform the market both on revenue as well as EBITDA this year. In 2019, our service revenue grew 15% year-on-year, driven by growth in data revenue, which increased 28% year-on-year. As a result, data revenue in the fourth quarter now accounts for 91% of service revenue and continues to be higher than our peers. Data growth continues to be driven by increased customer data usage, through our product and analytic driven upselling initiatives. The customer value management initiative that we continue to employ has been a key factor in our success in attracting and upselling customers. Our analytical engine that we developed using a unique omni-channel approach to create, among others, personalized offers encouraging our customers to up-size to bigger data packets, delivered solid results in 2019. Evidence of this is our blended ARPU which rose 9% year-on-year to 35,000 rupiah as our customer base increased 3% to 56.7 million. We intend to do more and make our system smarter to enrich our portfolio and become the new standard in our channel management in 2020. Our focus on operational excellence meant that EBITDA rose faster than revenue, growing 17% year-on-year with margins increasing 3% year-on-year to 40%. This strong growth in EBITDA is driving our return to profit this year, with full-year net profit of Rp713 billion. Indonesia's data safety customers have continued to respond well to our data network, as we are increasingly being recognized as the brand of choice for smartphone users. As of the fourth quarter of 2019, our smartphone subscribers stand at 48.8 million, an 11% 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 faster rate of migration of subs to 4G. At the end of 2019, 4G customers make up 73% of our total subscriber base. Both our Excel and Access brands were successful in addressing their target segments with unique and differentiated product offers in 2019 as part of dual brand strategy. The extra combo VIP that the Accel brand launched in early 2019 has been a key example of our success in upselling. For Axis, the focus has been attracting the youth segment with sachet-based products, as well as customization of offers through partnerships with content providers with mainly social media and gaming. Our post-paid brand, Accel Prioritas, also continues to grow with a focus on smartphone bundling with the latest handsets. In 2019, Excel and Axis grew their respective net promoter score, strengthening their position within their target segment. In parallel, we continue to ensure a high-quality data experience to our customers through the ongoing rollout and upgrade of our network. Our total BTS count is now above 130,000 BTS with our 4G LTE service covering 425 cities and areas across Indonesia with more than 40,000 4G BTS. We also continue to invest in fiberizing our network, building on our efforts from last year as this will help in handling the increase in data traffic we are seeing. At the same time, we continue to increase fiberization of our tower site and in the next two years, the majority of our sites will be fiberized. In 2019, our network investment continues not only within Java, but with a focus also on XJava, following on the efforts from previous years. This 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. Despite our record performance in 2019, we are seeing increased competition come into the market from the second half and especially towards the end of the year. We are seeing that even smaller operators are becoming aggressive in product offering. As a result, we have tactically made selective package adjustments in several areas to remain competitive, which impacted our yield this quarter. We hope that competition eases in 2020, as the industry needs data price repair to continue to improve returns and profitability. Today, we have also announced the successful completion of our third tower sale and leaseback transaction, where we sold 2,000 782 towers to Protolindo and Sentratama for total proceeds of 4.05 trillion rupiah. The objective of this transaction is not maximize upfront cash collection, but to monetize our assets and lock in tower lease rates for the next 10 years, as well as to make our operations more efficient. This deal is accretive to us as the EV to EBITDA transaction multiple is more than 10 times, which is higher than our company's trading multiple. The proceeds from this sale will go towards strengthening our balances with additional capital to be used for capital expenditure and working capital purposes. Due to our strong performance in 2019 and aligned with our dividend policy, we are declaring a dividend equivalent to 30% of our normalized net income, subject to approval at our upcoming AGM. Finally, our guidance for 2020 is as follows. For revenue, we are guiding for revenue to grow in line with market. Our EBITDA margin guidance is low 40% on pre-IFRS existing basis, and our capex spend guidance is 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.