PT XLSMART Telecom Sejahtera Tbk

Good afternoon, ladies and gentlemen. Welcome to XL Achata's earnings conference call for the first half of 2020. My name is Raph, and I will be your coordinator today. During the presentation, all participants are in the listen only mode. Instruction 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. 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 Pak Adlan, our Chief Financial Officer, Pak David, our Chief Commercial Officer, and Pak Budi, our Deputy Chief Financial Officer. Ibu Dian sends her apologies as she is not able to join the call today. Now, Pak Adlan will share the highlights of the first half of 2020, which will then be followed by the Q&A session. I will now hand the call over to Pak Adlan.

Thank you, Indah. Good afternoon, everyone. We are happy to report a good set of first half results, despite tough competition and challenging economic environment due to COVID-19. Our revenue and EBITDA grew for the second consecutive quarters, and we have outperformed the industry in the first half of the year. Service revenue grew double digit, rising 10% year-on-year in the first half of 2020, driven by strong demand for data, as many Indonesians continue to work and school from home. EBITDA rose 37% year-on-year as a result of revenue increase and cost efficiency, with EBITDA margin now above 50%. We continue to be in a net profit position, reflecting our focus on operational excellence with an emphasis on profitability and returns. However, competition continues to get tougher, with all players now having some form of unlimited product in the market. Aggressive pricing is also seen across the smaller sachet data packets as operators try to win wallet share of customers, driving data yield down. The aggressive competition is expected to continue in the second half of 2020, as demand starts to soften, especially in the mass low-end segment. As a result of COVID-19 impact, with many businesses struggling, job cuts and unemployment rising, as the Indonesian economy expected to contract in the second half of the year, the industry will also be negatively impacted. Distribution is key during this challenging environment and I am pleased to say that our digital channel and touchpoint have continued to grow double digits since last quarter. We will continue to accelerate the growth of our digital channel in line with the changes in consumer behavior. This will allow us to have a better control and visibility of movement in the market at cheaper cost. Nevertheless, traditional distribution channel remains important and we are ensuring that all our retail outlets have enough physical stocks as we continue to support this channel during this tough time. The shift to digital has been one of our key transformation pillars. In line with this, I am happy to announce that we have recently launched our new digital brand, LiveOn. This will be a new area of growth for us in mobile. LiveOn aims to give customers a fully digitalized telco experience by aspiring to be the digital brand that gives consumers power back over their digital lifestyle. It seeks to capture the upper tier of the digital savvy users whose current needs and pain points are left unaddressed by the current offers. Our home business has had a strong start to the year with increased demand for fixed broadband services. Despite not building any new infrastructure, we have expanded our home passes this year to more than 300,000 through a partnership model to increase our footprint. We are now present in 10 cities across Indonesia and we will continue expanding as we finalize a long-term plan for this business. For the second quarter of 2020, we have seen Record increase for home connect as demand for fiber to the home accelerated during this pandemic. Today, we have more than 50,000 home connect. Focus on business continuity and employee well-being remains our top priority. We have reopened our head office, but we have introduced flexibility for our employees of either working from office or continue working from home. with many are still working from home. We have seen increase in employee productivity as less traveling time has meant higher efficiency and better time management. Throughout this period, our crisis management team has ensured all operations run smoothly and that our business can continue as normal during this period. Our network rollout and upgrade continues to be on track. As we as our early planning and procurement process has helped us secure all the materials needed to meet our network rollout plan in 2020. Thus, we continue to roll out our network on schedule with our BTS count now above 139,000 with 4G presence in 456 cities across Indonesia with almost 50,000 4G BTSs. We also continue to fiberize our network to manage the accelerated growth of data traffic and ensure our customers would continue to enjoy good network experience. We will also continue to expand and strengthen our network outside Java to further accelerate our revenue momentum that we are currently enjoying in this area. Our balance sheet is strong with net debt to EBITDA of below 1. We have no USD debt and we have also secured committed facilities with the banks that we can tap at any time if we need additional capital. This is important today given the uncertainties in the coming quarters as a result of the ongoing pandemic. Although our results are positive so far, the situation in the market remains tough, with the impact from COVID-19 on rising unemployment and lower income for many Indonesians coupled with the rising competition. This creates an unprecedented situation and as a result, it is difficult to predict what the second half of the year will look like. Therefore, we are not able to provide you any guidance until we have better clarity on the situation. I'll pass to David to finish off the remaining speech.