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.

Okay, thank you, Parlan. So finally, as per our announcement on Monday, Parlan is leaving Excel Axiata to continue his professional career within the Axiata Group as CEO of e.co. We are currently in the process of identifying his replacement and will make the necessary announcement when it has been finalized. Parlan will be here for the next few months to help with the transition and handover process. We wish him all the best in his future endeavors, and thank him for his many contributions to Excel Axiata over the past nine years. Thank you, and let us proceed to the Q&A session.

Thank you, Ibu Dion. To ask a question, please press star one. To cancel, please press the hash key. Please kindly... but strictly limit your questions to only two and to allow other participants to raise their questions. Should you need to ask more questions, you can go back to the queue by pressing star and one again. We shall end the conference call sharp at 2 p.m. Jakarta time. Again, it's star and one if you wish to ask questions. And our first question comes from the line of Arthur Pineda. from Citigroup. Our third line is now open.

Hi, thanks for the opportunity. Two questions, as noted. Firstly, are you seeing any notable changes in the momentum following the unlimited time launch from Calcom Cell? Is this impacting your business outside of what you've seen in the second quarter? I'm just wondering if you need to react there. Second question I had is with regard to the growth trajectory that you're seeing. Are you able to provide any color in terms of how the growth momentum is trending within Java and outside of Java in revenue terms, and what the revenues is now between those two regions. Thank you.

Yeah. Okay, so regarding the telecom sale launching the unlimited, right? I have to say that we had already anticipated that that Telkomsel will have a movement like this sooner or later. So answering to... I think there were two questions on you. One is whether we have seen a change in our momentum. That's number one. And number two, whether we are thinking on reacting, right? So let me start for the second one. We are not thinking on reacting, so we are not thinking on cutting prices or entering in a price war. We are going to try to keep the market stable. Having said that, of course, you know that we have a regional pricing strategy that, depending on our competitive dynamics and our network capabilities in each of the regions, we keep adjusting prices. So that we will keep as a BAU business. So that's answering to the second question. Answering to your first one, to be honest, our acquisition and our new subscriber acquisition is still in good momentum. So we are seeing still a strong momentum in that area during August.

So also on your second question, I think if you look at year to date, I think we are still growing in both island, Java and XJava. Of course, I think the growth that we are seeing in non-Java is still showing very strong momentum. So I think that will probably continue. And I think we think that we are also gaining market share in those areas. However, I think the situation in Java, for example, has been quite competitive. Nevertheless, we are seeing some growth, but we expect that this is going to be the battlefront in the second half of the year. So I think that We have also seen that as a result of the pandemic as well, that people, especially the mass low-end purchasing power, are impacted given the rising employment and all that. But we expect that the challenge in the second half will be more in Java. Momentum in Java has been good, and I think we think that it will continue in the second half.

Thanks. Do you split out the revenue space from Java?

Now, I think XJava is already accounting close to 25%. Got it.

Thank you. Well, congratulations as well on the new move, Adlat. All the best.

Thank you. Thank you, Arthur.

Thank you so much. And your next question comes from the line of Calvin McCallum from Credit Suisse. Your line is now open.

Thanks a lot. And yeah, congratulations, Adeline. Two questions for me. The first is, obviously, the second quarter numbers look pretty decent, given the circumstances, but the price per megabyte did obviously decline quite sharply. Strategically speaking, are you worried that you've You've got decent growth short term out of that, but it might store up problems for the longer term growth trajectory, just the pace of that price per megabyte decline. That's the first question. Second question is noted on your comments on finalizing long-term plans on fixed broadband. Are you looking organic or inorganic for that following your experiments over the last year or two? And if

inorganic have you firmed up anything on acquisition plans thank you thank you so let me take the first question around the the yield so yes you are right our yield or the price per megabyte has decreased in this in the second quarter there are i will say three factors that has that has affected us right so the first one is that customers have moved themselves to packet with higher gigabytes, but they use the packet, they sweat the packet more. So with packets with lower yield by definition, higher packets, they sweat them more, right? So that's part of the yield decrease. There is a second part, a second factor, that is the CSR packet that we offer our customers in such difficult situations. So as you know, we offer two gigabytes per day for certain applications and certain URLs for people to be able to work from home, study from home, etc. So that, I would say, is the second. And the third one, as you say, is also the unlimited product that we have in the market. Now, when we look at our... yield or our unlimited product what we try to do always is try to optimize the share of wallet of our customers and in order to do that we also take a look to our competitive dynamics and the network capability on where we are playing with this right in this sense one thing that i think is clear is that our app has increased our app has increased so we are taking a bigger share of wallet from our customers. So we believe that this is the correct step and we are in a sustainable path.

So, Colin, on your second question, fixed broadband, I think you probably have seen, not only from our side as well, but in the market as well, the demand for fixed broadband has actually increased with this current pandemic. So I think looking at the situation and the new norm moving forward, I think the demand for the fixed broadband would be positive. I think maybe increasing growth expected as well. So of course, I think we are also seeing the same in our numbers. So I think from that perspective, I think we are looking at both, organic and inorganic. So So I think there are challenges in both, but definitely we see also big opportunity coming up with both. So to answer your question, yes, we are open to both organic or inorganic in terms of expanding our footprint on the fixed broadband.

Understood. Thank you very much.

Thank you so much. And your next question comes from the line of Chongqin Huang from CIMB. Your line is now open.

Hi, thanks for the call. Two questions from me. Firstly, I just wanted to reconfirm. You mentioned that XJava is already accounting for 25% of Excel revenue for the second quarter. Is that correct? And in terms of the profitability for the XJava region as a whole, Where are we now on that? And when do you see the region breaking even for Excel? That's the first question. And second question, the EBITDA margin continued to improve very nicely into the second quarter. How do you see costs trending into the second half? Any major upward pressures or do you see even more savings coming through in the next half? Those are my two questions. Thank you.

Yeah, so you're right. Yeah, so XJava revenue is actually account for about 25% of total revenue today, right, of our service revenue, right? So I think you see that generally, I think you see that we have actually started investing in XJava starting from second half of 2016 to 2017, right? So I have to say that... some of these early investments have already started breaking even. However, I think our investment in XJava has actually continued throughout this year. So as a region on its own, total region, I think we are still not breaking even yet. But I have to say that we are quite happy to announce that some of the clusters that we have invested earlier in XJava are already breaking even and showing good progress. And looking at the momentum that we are seeing today, the progress that we are making in XJava is also ahead of plan. So I think and we expect that this momentum will also continue in the coming quarters. I will pass to Pak Budi to... To answer the second question.

So regarding the EBITDA, you're right, our EBITDA has awesomely higher compared to the same period last year in the first half, increasing 37%. But please take note within that increase, that includes our IFRS 16 adjustment, counting almost $1 trillion. So if you remove that factor, our EBITDA will increase significantly around 15%. So, contributing by two factors. One, the revenue that as you can see increased by 7%, and also our ability to manage our cost better. And then, you know, sweating the asset better, that's why we're able to get lower OPEX and resulting at the higher EBITDA, even after remove the FRS-16 impact.

Okay, and if I can just quickly follow up on those two questions as well. Back to the xJava side, if I can sort of pin you down on a timeframe for breaking even for the whole region. I mean, given the fact that the coverage in xJava is already at a pretty high level, I presume the expansion there will not be as much as previously in terms of the coverage. When do you sort of think that we can break even as a whole for the xJava region? And on the EBITDA margin, just coming back to that into the second half, any sort of key cost items where we expect to see any cost pressures on the upwards or even some savings?

Phuong, I think if you look at when we do our investment, typically in XJava and Java, we are actually looking at payback around three to four years. So I think you see that maybe the bulk of the investment on an average, you would say that it's around average that we have invested in X Java in around 2019, right? 17, 18 and probably 19, right? So if the philosophy on a payback three to four years, if you take that into account of what we have invested before as well, right? So effectively, if the trajectory continues as what it is today, with a strong momentum, we could be looking at around another at least 18 to 24 months.

Regarding the second half, we cannot give guidance, but roughly it's going to be the same big-ticket items that we are focusing on. One would be around the tower rental and also fiber costs. Those are a few things that we really closely look at because there are some tower contracts that are coming due. As you know, we are always able to bring it down. Those contracts that have been signed with higher costs per tower, we're going to sign with the new rate. So that will help us in terms of cost saving. The rest of costs, we'll do the same thing, closely monitor. and then spend as needed. We make sure that every single dollar we spend is going to optimize in terms of contribution to the revenue.

Okay, got it. Thank you so much, guys, and congrats, Adlan, on your promotion.

Thank you, Phuong.

Thank you so much. And your next question comes from the line of Krishna Huthabarat from Mandevi. Your line is now open.

Hi, thanks for the opportunity and all the best for Adelan in your coming new role. I have two questions. My first question is on the revenue contribution from online channels. Can we get some color on the revenue contribution size from online channels today, say in comparison to the same period last year? And how big do you think this revenue contribution can increase to? That's my first question. My second question is on your new product, LiveOn. So basically, this is your challenger product, right, to dot-com sales by you or smart sprint switch. But what's the rationale for Excel in launching such a fully digital product? Is it pricing or segmentation? Any comment on that would be helpful. Thank you.

Thank you, Krishna. So, to your first question regarding the revenue from online channels, I cannot give you a number, but I guess that we all know that with all this pandemic, the traffic to certain outlets even to Excel centers has been reduced, right? And the amount of data that we are selling now in our own online digital channels or digital touch points, it's increasing significantly. I mean, it's increasing double digit and has been like that already since March. So I think we are very happy with the result and it's very promising. So that's in the first question. Regarding the second question, you are correct. So Lipon is our new digital product in partnership with Circles as a managed service. We believe that there is a demand in Indonesia for end-to-end digital products that are more customizable and there is a segment that we were not tackling as of now, that is the the higher-end digital savvy that we expect to attract with this new product proposition.

Okay, thanks.

Thank you so much. Once again, ladies and gentlemen, if you wish to ask a question, it's star and 1 on your telephone keypad. Again, it's star and 1 if you wish to ask a question. And your next question comes from the line of Sachin Mittal from DBS. Sachin, your line is now open.

Yeah, I have a couple of questions. Firstly, we saw almost 15% sequential drop in data pricing. Is there a reason for the sequential data pricing drop to slow down to 15% in the quarters ahead? Any factor or should it further accelerate given that price war we have seen? That's question number one. Question number two is on telecoms have lost 2.5 million customers in 2Q, but only 200,000 came to Excel and bulk of them went to the other telcos. So, I mean, this is in the post SIM card registration exercise error, right? I mean, I'm trying to understand what's really hampering those customers coming to Excel's network. Is it network quality? Is it the pricing? What's really the issue there? And lastly, Telkomsel has launched unlimited plans in 65 cities. Could you give an idea of like these 65 cities comprise what percentage of customers for Excel? Anything on that will be appreciated, thank you.

Okay, so thanks for the question Shashi. The first one regarding the price per gigabyte, right? So you are right, it has decreased. I think, as I was explaining before, there are mainly three factors that have made this decrease. Factor number one is people have upgraded themselves to packets that are more expensive, bigger, but also lower price per megabyte. And they are sweating them more than they were before. This is a trend that we have been seeing also. So people who buy the packet now use it much more. They complete it. more than before. So I think there is a factor there. A second factor is our social responsibility program that we launched. We were giving two gigabytes free for every customer to access certain URLs and certain applications. So I think that was another area of this decrease. and the third one yes it's price adjustments price adjustments specifically well in many things but specifically our unlimited proposition right or what we call the the unlimited turbo so this has also affected now couple of things that i want to clarify around around this when we take a look to the price per gigabyte we take a look to our network utilization and we take a look to how to improve our art so we always try to increase the revenue and as you can see in the results as well our r2 has increased this this quarter so i think the strategy has been positive yes the price per gigabyte has decreased but the r2 of the customers have increased so that's number one number two i would also like to to explain a little bit um how our what we call unlimited turbo is different from what you will find in the market. And there are three things that I believe that are worth mentioning, right? Our unlimited gives unlimited access only to certain applications. For example, Facebook and Instagram, only to certain applications. It's not a true whole unlimited like our competitors, number one. Number two, this access, this free access only happens after the main quota has been finished. That's also a big difference from our competitors. And the third one is for the high consumption applications, like streaming applications, for example YouTube, you need to proactively activate them in our digital touch point. So I think these are three factors that make our proposition very sustainable. But as I was saying in the beginning, I think for us the most important is that the ARPU increased. So we control that in how we are able to increase the share of wallet of our customers. So that's in the first one.

Yeah, so the second one here, you asked about TACOM Cell losing 2.5 million subs, but what came in. So we cannot comment much on that, but one thing that I probably want to draw attention, right, The definition of customer between operator differs. Obviously, I think we know how we define our customer and I think we believe that ours is probably the most conservative in terms of and reflecting the real situation in the market today. Therefore, we are seeing good momentum in terms of our acquisition at this point in time, but we really cannot comment where the rest of the other customers that TACOM lost went to. But definitely, I think from our perspective, since we launched the Unlimited in the month of March, I think our acquisition has been seeing good momentum and I think it has even continued even up to today. And I think we probably would see better trends for us moving forward with the current trends that we are seeing in our acquisition. The last one on unlimited, yes, Telkomsel has actually limited the launch in 65 cities. Obviously, we probably will not disclose what percentage of our customers are in these cities. But so far, as David mentioned earlier, we have not seen much impact at this point in time. And I think we probably do not have intent to react because we believe that our products are quite competitive in this area, right, to be able to compete with this tech-on-sell offering.

Okay. Just to follow up on that, now the rules to acquire SIM cards are more stricter than, you know, three years back or two, three years back. So... Is it helping you? Is it helping the competition being more rational? Have you seen that? Sorry, can you repeat that? You were breaking up. Yeah. My question is, now the... Can you hear now?

Yeah, yeah, yeah.

Hello? Can you hear me?

Yes, yes.

Go on, go on. The process of... Yeah, the rules to acquire new SIM cards is more strict than before, right? I mean, there's a limited number of SIM cards people can have. So are you seeing that having some positive impact on the industry? And is that a factor that the competition will not intensify further due to the restrictions on SIM cards?

Yeah, so we believe that the impact has been positive. So the use and throw churners have reduced. The lifetime of our acquisitions have increased, which is, I mean, it's positive. So I think the the impact for sure has been positive and we hope that this continues like this and that all competitors complain with the given regulation.

Okay, I understand. Thank you.

Thank you so much. And your next question comes from the line of Ranyan Sharma of JP Morgan. Your line is now open.

Hello, hi, can you hear me?

Yep, go ahead, Ranjan.

Hi, can you hear me?

Yes, Ranjan, go on, go on.

Okay, good afternoon and thank you for the presentation. It's Ranjan Sharma from Jigmeet. The questions from my side, firstly, on the news flow that you have seen on Huawei and the predictions on the company,

Rajen, we lost you.

The second question is... Rajen, we lost you just now.

We didn't hear your first question, actually. We didn't hear. We lost you just now.

Yeah, my question is on the impact of U.S. restrictions on Huawei on Excel's current and future network build plans. The second question is on the sales and marketing. How much is the reduction sustainable due to the digital channels? Thank you.

On Huawei, I think if you look at our policy today, in all the layers of our network, we have actually a two-vendor policy. In all these layers, we are not dependent on one vendor. and we always have two or more. That's the first thing. As a group, we have actually made this assessment on the impact of Huawei. I think the impact of this US ban on the chip and all that will actually primarily impact Huawei on their smartphone business. However, in terms of their network product today, I think they do not have much reliance, for example, to the US chips or products and all that. So that assurance we actually got from Huawei. Nevertheless, I think you don't know where this battle is going to go. Maybe now it's about chip ban. Later, if they ban everybody to integrate with Huawei and all that. So we are assessing that situation today. And I think, of course, In all these cases, for example, we have actually simulated scenarios on how we are going to react. But at this point in time, at least from the country perspective, Indonesia today as an industry, you would say that 60-70% of the industry rely on Huawei. So the likelihood of the country banning Huawei at this point in time, I would say is not significant. But nevertheless, I think we are preparing plans, for example, what we do, for example, in times when, for example, those situations or scenarios emerge.

Regarding the second one, if I understood properly, it's marketing and sales, the digital transformation, the digital improvement there. So regarding marketing, since the pandemic started, we have moved a big part of our budget from more traditional channels to the digital channels. So now most of our efforts are in the digital channel, all the marketing that we are doing. So that's number one. Number two, regarding the channel or how we are selling, again, I cannot disclose the numbers, but what I can disclose is that our digital touchpoints are growing at double digits. So it's a very healthy growth and ahead of expectations as well.

We are very happy with that. Just to add what David comments about our sales and marketing expense, as you can see, our sales and marketing expense has been decreased here on year 11%, Q&Q 4%. That's mainly because of what David just explained, that we're shifting more towards digital. Just to add.

Okay, thank you.

Thank you so much. And your next question comes from the line of Prem Jirajisunga from Macquarie. Your line is now open.

Hi, thank you for the opportunity. Prem Jarajasingham from Macquarie here. Two questions from me. First of all, I know a lot of time has been spent talking about data yields in Indonesia, but I suppose the bigger question for me really is we're still comparing Indonesian data traffic to some of the other markets like Malaysia and Thailand. data traffic is still half of what we're seeing in these two countries. So I suppose the key is, can our networks, with the current networks that we have, can we handle 15, 16 gigabytes of data without a substantial increase in capex? Because I think that's where telecom cells are really going. They've spent the capex, and now they're just turning on the pipes. What do you think is happening on this front, and can we afford for data to jump towards 15, 16 gigabytes? That's one. Secondly, consolidation in the market. I was quite interested in your comments around inorganic and organic growth on the fixed side of things. Have we also watered down our expectations of consolidation within or our role in consolidation of the wireless market? And are we now focusing more on the fixed side or is that wireless consolidation still something that we want to partake in?

Thank you. Okay. Thank you, Prem. So first thing is on data yield. So if you look at today in terms of 4G subs, I think average usage for our 4G subs today is probably around 12GB per month. So essentially if you compare to other markets, it's probably slightly lower. But definitely I think if you look at the rate, the rate of usage per sub is actually accelerating. Next question is, can our network cope with this data increase? I think there are two parts here. We have actually continued to build not just coverage but also capacity, increasing capacity of our network. If you look at where we are for 4G capacity today, utilization is still at around 45%. there's still ample room for us to take on, headroom, for example, for us to take on the increase in data traffic moving forward. And secondly as well, not just at the access side, we are also fiberizing all our towers, at least one hog to fiber, right? So, and I think where we are today, in the next one or two years, you would say that we would actually achieve 100% of our site with one hop to fiber, right? So, and typically that's one of the critical point or the bottleneck that you see, right? The transport layer. And we are actually investing in both at this point in time. Yeah, no doubt that Takomcell building put in more money, investment in the network side. But bear in mind, they also have, are carrying more traffic than us today, right? So, relative to our growth, to the traffic that we have today, I think we think we should be able to take on more traffic increase based on our forecast at least in the next one or two years. But we are also continuously building as well as we speak today. Secondly, on consolidation, yes, I think if you look at the situation today with the With the pandemic, with the slowdown in economy, with, I think, consumer retail demand also softening as well, especially in the low-end segment, I think you would expect that that would probably put pressure on operators to probably accelerate the consolidation process. I mean, at least this is our internal assessment. So our view has not changed on this. I think it's in line with our shareholders as well. We are fully in support of in-country consolidation and we are willing to play a part on that. Even if we are not, I think we are also fully supportive because any consolidation will probably be good for the industry. Having said that, I think you know the challenges in consolidation today, right? I think that's one of the areas that probably need to be addressed first, especially on the regulation and the retention of spectrum. So yes, I think whilst in-country consolidation on the mobile side, at the same time as well, we also see opportunity and how the fixed fibre to the home is also growing as well. And it is becoming a more and more interesting proposition. As we can see as well, some of the investment that we have put on fiber to the home are actually showing great progress. And I think lately also we are seeing record growth as well. So it is interesting. And hence that's why we are pretty open in terms of how we want our plant to move forward, be it organic or inorganic, or be it in mobile or even the fixed site.

Thank you very much, and look forward to seeing you back in KL.

Thank you, Prem.

Thank you. Thank you so much. And your next question comes from the line of Sebastian Tubing from Omega. Your line is now open.

Hi. First of all, congratulations, guys, for the good result in the middle of the pandemic. And congrats, Adnan, for your next position. Now, if you look at the competition, I mean, we've always, you know, there's always competition dynamics between the big three. But we see how, I mean, SmartFriend, I mean, pretty good revenue growth in the past few quarters. So, Is this something that you start worrying about in a smartphone and three gaining some revenue market share? Or is it maybe just in the fringes? Maybe if you can provide a little bit of color in that. And you mentioned earlier about looking at ARPU rather than simply data yield price. Now, if you look ahead more of the next three years, perhaps, given that I think in terms of the number of subscribers penetration among the big three telecoms is already quite high. So the revenue growth will be driven more by ARPU. So what sort of, you know, how much higher could the ARPU be? I mean, ideally, you think in the next three years, yeah. And thirdly, I mean, I know Excel has been talking about fibrillization. So could you share a bit on how the progress of that fibrillization, i.e., of all your BTSs, how many or what sort of percentage is already fibrillized? Thank you.

Okay, so thank you, Touyai. Regarding your first question, smart friend and trees increasing in revenue, right? And increasing penetration, whether it's worrying. As you can imagine, everything that is taking part of what will be our market share is worrying for us. So, of course, we worry about all of our competition and how they are doing, right? So, we monitor very closely competition. each of the cities and each of the competitors in each of the cities and every product of the competitor in each of the cities. So yes, it's something that worries us and we keep monitoring and part of our regional pricing comes exactly from there, right? So that's the first question. To the second one, you were asking that, yeah, the yield traditionally, I think historically always has come down, right? The ARPUs have increased. This time is good. So what we meant is that, yeah, yield is something that is important, but the yield that you see, it's an average. It's an average of different yields in different cities. And it's an average of different yields in different cities where we have different network capacity, different market share, different competitive dynamics. So that is what we try to optimise. Now, having said that, I'm sure that you have been also following the market for a few years, right? And you can see that there are moments where competition is tighter and deals go, accelerate in one direction, then can be some kind of recovery. So you know that this is a market where many players are in there and the interactions it's what it's going to set up how the next few years will look like. So that's why for me it's difficult to say how I envision an ARPU in three years from now. It will depend pretty much on how the competitive dynamics move forward. But again, I want to make sure that we understand that for us, yes, the yield is important, but it's an average. It's an average of different cities with different market share, with different network capacities. And that's how we try to optimize our...

So on your last question on fiberization, so I think our topology architecture on the transport, I think we are looking at to fiberize at least one hop to fiber. So that means that 50% of our sites will actually be fiberized essentially. And where we are today, we have started this process for the last two and a half years. Where we are today, we are probably at around 60% progress, right? And we think that within the next 12, 24 months, I think we probably would achieve the level that we are aiming for, yeah, one hop to fiber for all our sites.

Okay, clear. Thank you.

Thank you so much. And your next question comes from the line of Nico Margarunis from Dinarica Securities. Your line is now open.

Yes, thank you for the opportunity. Good afternoon, everyone. This is Nico from Dinarica. I would like to ask a question on the fixed broadband. You mentioned earlier in your opening statement that You have about 300,000 home passes right now. May I ask, what is the infrastructure behind this? I mean, the last mile, how much percent is on fiber, and is there any other technology that you use, maybe fixed wireless, or is it cellular? Yeah, that's my first question. Secondly, You mentioned also that as part of the data yield came down significantly partly also because of the social responsibility. Is that something that may happen again in the second half? I noticed that Right now that you are pushing products like conferencing and educational products, is there a possibility that this might be reversed in the second half? Thank you.

So, Nico, so your first question on FIGS, when I talk about the 300,000 home passes, those are all fiber, right? The technology at the end is fiber, right? So, because that's a fiber to the home, right? So, on the second question.

Yeah, so regarding the social responsibility. So, as you say, we have already what we believe to be very competitive packets, very competitive packets in order to either study from home or work from home. So, they include... some teleconferencing, etc. So we believe that they are already very good. I don't know whether the prices will change for those packets, but we believe that the way they are today are already competitive enough and are already interesting enough for anyone who has to use them either at home or for a study or for work.

And I think on the two gig free, we are no longer offering it anymore. I think the offer has actually left up to June, end of June.

Okay, okay. That's what I was asking, basically. Can this be implemented again? I mean, is there such thoughts from maybe from the government to push this again because spending power is coming down?

Currently, there is no idea of going in that direction. As Padlam mentioned, June was the last month with the social responsibility. Currently, we have products for study from home and work from home that we believe are already good enough.

Okay, thank you. Sorry, Padlam. May I ask you, on the 300,000 home parties, what is the penetration currently?

It's slightly below 20%. So to be exact, it's 18%.

All right. Thank you so much, Pa. Good luck on your new post, Pa. All the best. Thank you. Thank you.

Thank you so much. And your last question comes from the line of Pierce Chaudhry from HSBC. Your line is now open.

Yeah, hi. Good afternoon, and... Thanks for this call. Two questions. Firstly, could you update us if there is any development on spectrum auctions likelihood and any timelines over there? Secondly, on your comment in terms of decrease in spending power in lower end, could you provide some color? Are you seeing that more in Java or it's more ex-Java? And any kind of geographical color could be helpful. Thanks.

Yeah, so I think spectrum auction, I think, is probably still in discussion, right? So both in terms of timeline and in terms of the mechanics, how it's going to be done, right? But I think looking at that discussion, there is a possibility that that may happen in Q4 this year, right? But again, I mean, the method and all that is still being discussed at this point in time, right? So... So that much that we know. Obviously, I think we can provide a little bit more color when we have more visibility in terms of where the spectrum option is heading. Spending power, I would say it cuts across the board. I don't think there is much. Obviously, I think in the case of Jakarta, for example, we are probably seeing a lot more people are taking that job cut is happening at this current stage. But obviously, I think that would also be the same in the other regional market as well. So at this point in time, there is no specific geography that would say that the spending power is actually a bit less. However, I think... The momentum for us, I think the momentum we think that the impact is probably less for us X Java because we are also seeing good growth in terms of our acquisition and all that as well. So if you were to tie the spending power to probably in terms of revenue and all that, we're still seeing good momentum in X Java given that we are probably doing pretty well in terms of our acquisition. But generally, if you talk about the weakening, softening of purchasing power, I think it cuts across the entire region. Sure.

And if I may follow up on spectrum auction, is the bands decided which bands are going to be auctioned and how much quantum?

It's the 2300 that's probably going to this thing. Okay. So, yeah, it's going to be 30 megahertz.

Okay. Thanks a lot, and congratulations, Pagadlam, on your new role. Good luck. Thank you, Vyush.

Thank you so much. There are no further questions at this time. I'll give it back to the management for the closing remarks.

Okay, thank you everyone for your participation in today's call. As always, do get back to us if you need further information. Please stay safe, stay healthy, and we'll see you next quarter. Thank you.

That concludes today's conference call. Our lines may disconnect now.