PT XLSMART Telecom Sejahtera Tbk

Good afternoon, ladies and gentlemen. Welcome to Ex Alexiades Earnings Conference Call for the first quarter of 2020. My name is Alisa, 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. Now we would like to turn the conference over to our host, Mr. Indar. Please proceed.

Thank you, Alyssa. 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, Pak Adlan, our Chief Financial Officer, and Pak David, our Chief Marketing Officer. Now, Pak Adlan will share the highlights for the first quarter of 2020, which will then be followed by the Q&A session. I will now hand the call over to Pak Adlan.

Thank you Inder and good afternoon everyone. We are happy to report a good result to 2020. Despite the rising competition and what is usually seen as a weak quarter, we managed to deliver quarter-on-quarter growth in revenue and EBITDA. Through consistent execution of our data strategy and our focus on operational excellence, we have managed to deliver a good set of Q1 numbers. Our service revenue grew 2% quarter-on-quarter as customers continued to gravitate towards our attractive product proposition for both our brands and improved quality network across Indonesia. EBITDA also rose strongly by 22% quarter-on-quarter as a result of rising revenue and our continued focus on operational excellence and will continue to be in positive net profit position. This is despite increased competition in the market since Q4 2019, where we have seen most of our competitors launch aggressive unlimited offerings and reduce the prices of their entry-level sachet packets, which have negatively impacted the overall yield and pricing in the market. This, to a certain extent, has impacted our customer acquisition during the quarter, which led to lower customer numbers at the end of Q1 2020. However, the environment is getting increasingly more challenging as COVID-19 continues to have a major impact to the business and economic landscape, not only in Indonesia, but also globally. While our Q1 performance has been resilient, with data traffic increasing as more people start working from home, the impact of a full city or country lockdown is yet to be seen at this juncture. We are going through an unprecedented period of increased uncertainty and the outlook remains cloudy as to how long this impact will last. Our priority now is to focus on business continuity and employee well-being. I am pleased to say that most of our organizations have started to work from home, effective from 10th March 2020. And our crisis management team has ensured all operations run smoothly and business can continue as normal during this period. So far, there is no delay in our network roll-up and upgrade plan, as our early planning and procurement process has helped us secure all the materials needed to meet our Lebaran plan. We are seeing several key trends emerging across our business as a result of COVID-19. The first is an accelerating shift to digital across our distribution channel. when it comes to purchasing our products and services. Thus, we have seen that more and more customers are purchasing data packets and reloading through digital channels. Moving to digital has been one of the key pillars of our transformation program and it seems that COVID-19 has helped us accelerate this process. Through digital, we have a greater degree of control on our pricing and products as well as sell in these channels as well as a lower cost structure. We are also seeing rising traffic across our network, driven by most people working and students schooling from home. The traffic increase is also partly attributed to our CSR initiative to support the government by giving customers an allocation of 2 gigabits per day to access government websites, e-learning portals and university websites, as well as Office 365. However, during this period, we are also seeing an accelerated decline of legacy services of voice and SMS, which is negatively impacted to revenue. We have also started to see massive movement of people back to their hometowns before the border closure implemented by the government in early April. Thus, a lot of traffic has already moved out of Jakarta and the Greater Jakarta or Jabotabek to the regional areas as the typical mudik or going home ahead of Lebaran by many people has happened earlier this year. This is likely going to be prolonged wherein people will remain in the regional areas until the border control eases. Finally, our unlimited booster plan that we have launched in early March he's seeing strong traction in the market and is especially helping us to drive acquisition. This plan was designed with our customer needs in the forefront of our minds and we are pleased that it's being well received by the market. We continue to invest in our network and we continue to roll out on schedule with our BTS count now above 133,000 with 4G presence in 49 countries 449 cities and areas across Indonesia with more than 43,000 4G BTS. We also continue to fiberize our network to ensure that we can handle the rising traffic that we are seeing. Our balance sheet is strong with net debt to EBITDA is below 1 and strengthened further with additional proceeds we have received from the completed tower sales. We have no USD debt and we have also secured committed facilities with the banks that we can tap to refinance our debt. It is key in this time to have a strong balance sheet and healthy cash position, which is what we have today. Although our results are positive, we are seeing some short-term impact from COVID-19, from rising traffic and shift to digital. If the effects are prolonged and last for the next six to nine months, there will be likely a negative impact to the industry revenue, especially if unemployment of the population starts creeping up and continues to be so for a long time. This will impact discretionary spend and the cellular industry will eventually be negatively impacted by a reduction in the spending power of our consumers. We are hopeful that we will be able to weather the storm and return to business as usual as quickly as possible. However, as a result of this uncertainty, we are withdrawing guidance for now until we have better clarity on the situation. Finally, I would like to introduce David on this call, who has been with the company for the last five years and will be taking over from Alan Bonke as our Chief Marketing Officer. I would like to thank Alan for his contribution to Excel Growth over the past few years as he pursues his next step of his career at our sister company, Salcom. I am sure David will do a great job for us going forward. Thank you, and let us proceed to question and answer.