PT XLSMART Telecom Sejahtera Tbk

Good afternoon, ladies and gentlemen. Welcome to Excel Asada Earning Conference Call for the first nine months of 2020. My name is Don, and I will be your coordinator today. During the presentation, all participants are in a lesson-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 has been recorded for replay purposes. Now we would like to hand the conference over to our host, Mr. Inder. Please proceed.

Hi, thank you, Dawn. 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 this afternoon, we have Ibu Dian, our Chief Executive Officer, Pak David, our Chief Commercial Officer, and Pak Budi, our Chief Financial Officer. Now, Ibu Dian will share the highlights for the first nine months of 2020, which will then be followed by the Q&A session. I will now hand the call over to Ibu Dian.

Inder and good afternoon everyone. We are happy to report a good set of numbers in the first nine months of the year. Despite tough competition and the challenging economic environment to the COVID-19, both of our revenue and EBITDA have increased and we continue to remain in a net profit position this year. In the first nine months of 2020, service revenue grew 8% year on year. driven by strong demand for data as many Indonesians continue to work and school from home. EBITDA rose by 34% year-on-year over the same period as a result of revenue increase and cost efficiency, with EBITDA margin now above 50%. We continue to be profitable, reflecting our focus on executing our operational excellence strategy with an emphasis on profitability and returns. However, competition remains tough, 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 strive to win shares of customer wallets, driving data yields down. This aggressive competition is expected to continue into the end of the year. The mass low-end segment continues to see weak demand. As a result of COVID-19 impact with many businesses struggling, job cuts and rising unemployment taking its toll on consumer spending. As the Indonesian economy is expected to contract in the second half of 2020, and this may prolong into first half of 2021, the industry will likely be negatively impacted as well. Despite this tough environment, the growth we have recorded this year is due to the structural demand for data, but also a result of the measures we have put in place to ensure our business continues to grow in the light of COVID-19, and its impact to the business environment. The main benefits are from cost optimization and increased productivity as a result of digitization and simplifying our operations. These measures will benefit us beyond the short term. On the commercial side, the shift to digital continues rapidly with more customers buying data through online channels. We have ensured that customers are able to get the best deals on these channels and have started introducing personalized offers as well. This will have benefits in the longer run as we can control the products and pricing that we want to deliver to customers. On the traditional channel side, we continue to support these channels by ensuring enough stock availability while also redesigning our processes to allow for virtual visits and remote audits. On the network side, we have continued to invest to handle the unprecedented increase in data traffic, upgrading thousands of sites to ensure we have the adequate capacity while ensuring our quality of service remains high. Due to COVID-19 pandemic and the rapid digitalization of daily life, we have seen a faster shift and migration to 4G with now almost 80% of our subscribers and 80% of our traffic on 4G and increasing rapidly. As a result, we are allocating more capacity and resources of our network to 4G and continue to reduce capacity on other services, especially on 3D. We have also launched several new initiatives in the second half so far, including the implementation of SAP HANA Cloud Enterprise Management System. We are the first telco in Southeast Asia to implement this, and it will generate huge benefits by streamlining our internal data and processes and increase our productivity. We have also refreshed our My Excel app, simplifying the user experience, thereby making it easy to use. Finally, as we mentioned last quarter, our fully digital brand, LiveOn, has been launched, and this will help us tap into a growing customer segment, which are the sophisticated data users. Positively, XJava continues to do extremely well for us and is growing well ahead of the Java growth rate, increasing its contribution to our revenue. Our investments that we have made there are delivering returns and payback in line with what we had initially planned. We will continue to invest there, guided by our operational excellence principles and strategy, and ensure that we can continue to see growth and deliver returns for our stakeholders. Our network rollout and upgrade continues to be on track. 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 142,000, with 4G present in 458 cities across Indonesia, with more than 53,000 4G BTS. 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. Our balance sheet is strong with net debt to EBITDA of below 1x. We have no US dollar debt and we have also secured committed facilities with the bank that we can tap anytime if we need additional funding. This is very important today given the uncertainties in the coming quarters as a result of the ongoing pandemic. The Omnibus Law has been passed in Indonesia in October 2020 and is landmark piece of legislation in line with the nation's aspiration to increase investment by simplify regulation and reduce red tape. The telco sector will see many new opportunities as a result of this and will benefit massively from this regulation. The main benefits are through spectrum where spectrum sharing and spectrum leasing are now allowed, allowing for B2B arrangements between operators. Further benefits would come from the digital dividend or the shift from analog to digital, freeing up more spectrum for the operators. Finally, the regulation will make it easier to facilitate M&A as the rules regarding spectrum retention post-merger are clearer. Although our results are positive so far, the situation in the market remains tough with impacts from COVID-19 on rising unemployment and lower income for many Indonesians, coupled with intense price competition. This creates an unprecedented situation, and as a result, it is difficult to predict what the end of the year will look like. Therefore, we are not able to provide any guidance until we have better clarity on the situation. Finally, as per the results of our eGMS last week, I would like to formally introduce Pak Budi as our new Chief Financial Officer on this call. He has a wealth of financial experience and will help drive our business forward, I am He will do a great job in the next phase of our growth journey. Thank you, and let us proceed to the Q&A session.

To ask a question, please press star 1. To answer, please press hex. 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 entering Start one again. We shall end the conference call sharp at 2.30 p.m. Jakarta time. The first questions come from Sachun Patel from DBS Bank. Please ask your questions.

Hi. Thanks. Two questions I have, or rather three.

Firstly,

Can you talk, we saw Excel gain 1 million subscribers in the quarter versus Indosat gaining 3.2 million. So my question is, does it indicate that you need to change your plans so that you can gain more subscribers compared to your competitors, some kind of unlimited plan? That's question number one. Secondly, were there any one-offs in this quarter? Because while network costs decreased, you know, substantially. We also saw it was partially offset by rising the staff cost and the marketing cost sequentially. So could you explain the drivers behind these cost increase? And lastly, of course, you want to know our impact on the data margins. Is it sustainable? And you also disclosed 25% revenue contributions from XJava last quarter. Where are we now? Thank you.

Hi, David here. So I'll take your first question regarding the acquisition. So you were mentioning that we increased our SAPs in one million versus competition, in this case Indosat that got three million and whether we are thinking on changing our strategy, right? As you may know, how to count acquisition in this market is a little bit complex, I would say, right? Depending on how you measure the number of saps and who do you consider, whether it's a SIM card that is active or whether it's an existing sap, it can change a little bit. So what we are seeing in our own data is that our share of acquisition stays healthy. Competition has increased, that's true, especially from the incumbents. But we believe that our acquisition strategy is still holding, and we are acquiring in those places where we should be acquiring. So we will continue with our regional pricing and regional acquisition strategy as we have been doing until now, because we believe that the numbers for us are still okay. For the second and the third questions, I will let Pabudi.

On the second question, you're asking about is there any one time off in this quarter regarding the labor costs and network costs. For labor costs, yeah, there is. There's accruals on our LTI program. As you know, the LTI, with this high competition, the talent is the key, so we try to do what is necessary. That's why we do this accrual for LTI. And in terms of network costs, why the cost is lower? Yeah, we have significant number of towers that coming due this quarter, in third quarter, and also some in Q4. So those new contracts under, I mean, the rental under the new contract is significantly lower compared to what we used to pay. I think we already indicated this in the few calls before that we're going to enjoy some costs coming from this contract that due in second half of the year. Hope that answer your question, yeah? The third one, the question is about EBITDA. EBITDA, is it really sustainable? If you're looking at the 34%, the EBITDA that's getting better, you have to take out the portion of IFRS 16 impact first. As you know, IFRS 16, we have to count the book, the rental as a capitalist. So with that, our EBITDA actually increasing by 16% instead of 34%. So that 16% impact growth with the rate of 50, our current EBITDA is going to be sustainable because going forward we continue implementing this IPR system. Okay.

And the last question, this is the last on the XJava contribution. How has it changed compared to the last quarter?

We continue seeing the same growth. XJava continues to be the right decision for us. The traction is still there. The growth compared to Java, actually, the growth is quite significantly higher. It's almost tenfold, tenfold of Java, the growth. So we believe that's going to continue in the future.

Okay, great. Thank you very much. You're welcome.

Your next questions come from Brandon Sharma from JP Morgan. Please ask your questions.

Hi, good afternoon, and thank you for the call. Two questions from my side. Firstly, I believe Ibu Dyan mentioned that the omnibus law facilitates M&A by giving clearer rules on spectrum retention. Can you elaborate on this? Like, what do you see? and also any insights on when do you expect the implementing regulations. The second question is if I can clarify that the decline in infrastructure costs, quarter on quarter, is all driven by revisions in tower leases, and there's no one-off. So does that become the run rate for the following quarters as well? Thank you.

Okay, I will take the first question on the omnibus law. So as I mentioned, we are very positive on the recent omnibus law because this law will open opportunities both Excel and also for industry. Especially the biggest benefit is on spectrum sharing and leasing and also the shift from analog to digital that further will freeing up the 700 spectrum for industry to use. In terms of the M&A, yes, of course, it will be easier for M&A to happen as the confirmation that we do not have to return the spectrum after the consolidation. The industry today is not sustainable for long term health of the industry. So we believe that further consideration is really needed and Excel is ready to play in this part. However, we understand that this omnibus law will require government decree to be operationalized. So this government decree will need to be constructed by the leading sector with the cooperation with other sectors. So usually this process will take around three to six months. So we believe that we need to wait until those time frames to enjoy the benefits of this omnibus law.

On the EBITDA, the one time of adjustment of IFRS 16 is not going to happen again. So there's a 1.3 trillion adjustment there related to IFRS. If you compare year on year, you have to normalize the number first. So the figures, 50% EBITDA that you can add, because we only do the adjustment one time, is going to be the figure that we're looking at. But however, this structure will continue to be evolved, depending on how fast we do the rollout, how big the revenue increase, et cetera. So for now, this is how we can comment so far.

OK, thank you. Maybe just one clarification from Ibu Deyan. So Ibu Deyan, you're saying that the omnibus law specifically mentions that operators will be allowed to retain spectrum after M&A?

Yes.

Okay, thank you.

Your next questions come from Chongqing Feng from CIMB. Please ask your questions.

Hi, thanks for the call. This is Phuong from CIMB. Two questions from me. Firstly, I wanted to ask a bit more colour on competition. I know what you mentioned about the incumbent having been more competitive, but can you give us a bit more colour as to what you see on the ground maybe in the last one to two months? Have there been further moves to be more aggressive by the incumbent as well as the other operators in the market? And any in terms of the intensity of competition in the different geographies, if that applies? That's my first question. And then my second question on the cost, I just wanted to go back to what Pak Budi mentioned about the labor cost one-off from the LTI program, the accrual. Will we see more of that being booked in the fourth quarter of this year? And also on the... Tower rental cost reduction. You mentioned renewals in the third quarter and also more to come in the fourth quarter. But my question is into 2021, will there also be a very sizable number of towers that will come up for renewal? Maybe if you sort of quantify for us, maybe over the next one, two, three years, the amount of towers that will be up for renewals, that will be helpful. Thank you.

Okay, thank you. So, I will take the first one. I'm David. So, regarding competition, what we have seen in the last couple of months, as I was saying, is that the incumbent has become much more competitive. What do I mean by this very specifically? They have launched an unlimited portfolio in many cities, not in the whole Indonesia, but in most of the big cities. So that's number one. And number two, they have also jumped into something that is fairly new for them, that is all the low denominations and short validities. In both cases, both in the unlimited and in the short validities or the low denominations, they have taken a price leader position. So they are like the cheapest from all the offers out there. We are now in a situation where the incumbent is the price leader, which is not usual to see this in the market, but I guess that because of the COVID and the current situation, the incumbent in this market has gone into that direction. On top of that, we of course have the rest of the players, the smaller players and not so small, who always have been very aggressive and are continuing also with that with that aggressivity. So that's a little bit the competitive dynamics that we are finding on the ground in the last few months, especially in the last couple of months with these incumbent changes.

On the second question, related to the labour cost, the catch-up is the one that we do in third quarter. Fourth quarter, we should back to the normal run rate in terms of labor costs. For network costs, the rental that I was talking about, the biggest chunk actually happening in third quarter. So fourth quarter, that number going to be the new normal. And then more coming up to the end of the year. 30% up to until the end of the year will be towards the coming June. So that's the figure I can share for now.

Okay, and if I can just throw in one follow-up question. In terms of the xJava contribution to your total mobile revenue, what is the percentage as of the third quarter? And am I right to say that because your service revenue was flat Q and Q, you saw your xJava revenue growing, but Java revenue is actually declining in the quarter?

So, both revenues have been positive for us. As we were saying before, the growth in both year-on-year are positive. Ex-Java is growing ten times higher than the Java one. Now, regarding the split between Java and non-Java, currently we are around 25-75%.

Okay, and Q&Q, going from second to third quarter, did Java revenue decline?

The service revenue is positive in both Java and X-Java. Okay.

Sure. Thank you so much.

Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. Straightly limit your questions to only 2 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 1 again. Your next questions come from Yos Chondri from HSBC. Please ask your questions.

Hi, good afternoon. This is Piyush from HSBC. The question is for Ibu Dayan. Thanks for the presentation. But can I clarify again on the omnibus law? In case of M&A, is it clear that both the participating parties can retain their entire spectrum? Or is there a formula which is now clear how much of spectrum can be retained? That is the first one. Secondly, what kind of spectrum leasing arrangements is allowed under the new regulations?

Sorry, can you repeat number two question?

In your opening speech, you mentioned spectrum leasing is also allowed B2B. So can you elaborate like what kind of arrangements are allowed over there? Thank you.

Okay, so number one, yes, it is for M&A that it is mentioned that for two parties that is doing M&A, there is confirmation that we do not have to return the spectrum for consolidation. However, as I mentioned, this, to be operationalized, needs to be explain further in government decree, which is the presidential decree or ministerial decree. That's something that we have to wait for a few months from now. So for the second one, what you mentioned about the leasing, our understanding in the omnibus law that the leasing can be done to operators that have already licensed. So it cannot be done for any parties, but it has to be done between telco operators.

Right. So basically this can give us opportunities to acquire large block of same band of spectrum and enhance capacity then?

Yes, yes. Correct. But if we refer to countries that have done this kind of scheme before, usually the government actually asks for kind of like fees from this transaction. That's something that will be clarified in the government decree.

Got it. This is very clear. Thanks a lot, Ibu Diana.

Thank you.

Your next questions come from Kusna Hantabaran from Mandiri Cigaritas. Please ask your questions.

Hi, thanks for the opportunity. Congratulations on the strong profit growth and also the congratulations to Pak Budi on the appointment as the new CFO. Two questions from me please. Question number one is on the quarterly DNA run rate. So the quarterly DNA has been on a decline in the past two consecutive quarters. Can you get some sense if the latest DNA run rate would be the new DNA run rate going forward, especially after your Tawasil deal has completed? That's my first question. My second question is on the other telecommunication revenues. The growth in nine months 20 is only 5.6% year-on-year, but I recall that within this revenue line, the revenue from handset bundling activities has dropped quite materially. So the other component of the other telecommunication revenues must be growing way faster. So can we confirm what are these other components? And does this include XL fiber to the home business? And if yes, would you mind sharing some color on the development and performance of that business line? Thank you.

Yeah. So the question regarding the depreciation, the number that you're looking at, sorry, let me get this. Yes, so the Q3 number, depreciation that you're looking at, there's a bit some adjustment there, but the running rate will be around 2.4 trillion in terms of depreciation per quarter. Yes, that's clear, yes. Okay, that's clear.

On the second question, on the other telecommunication revenues.

Oh, yeah. On the other revenue, the one that you're seeing is coming from the tower leak revenue. As you know, we saw a significant number of towers at the beginning of the year. So that's the main impact from that revenue.

But I think there's another revenue item there, which is the other non-cellular items. In the past, you used to... showed he disclosed the bundling revenues. But I think Excel stopped disclosing that as of first quarter 20. And I think the has slowed down quite a lot. So there's another revenue line called Others. It's just going, I think, going quite fast. So I just want to get some color what's driving that part.

Yeah, the biggest chunk of our other revenue coming from this tower. And the rest, we got this line. We also got some rolling. So roaming is the other one that's also coming down. But the bundling, we don't really do it anymore since last year. So, I mean, it's very limited amount since last year until now. It's not really one of the divers for the bundling. The biggest jump coming from tower is Christmas.

Okay. Got it, Pak. Thank you. Thank you, Pak.

Your next questions come from Prem Jara from Macquarie. Please ask your questions.

Hi, thank you for the opportunity. This is Prem Jara Jasingam from Macquarie. Just one question from me really with regards to competition again. Has there been, you know, if you were to dissect that competitive response from the incumbents, Has that been greater within Java or ex-Java? And do you think that this is just an interim move given the economic situation? Or should we assume that this aggression is here to stay and therefore industry dynamics may be permanently impacted from it? Your thoughts on this would be most appreciated.

Yeah. So, well, as I was saying, the first thing that we have seen is that they have jumped into two different areas, right? One is the unlimited proposition. The second is the short validities or low denominations. Both of them were new to the incumbent, but they have jumped in both. It's both in Java and ex-Java, so they have... focus in different geographies, but all around Indonesia. So it's not only in Java, for example, or only outside of Java. So I think we have seen cities in both Java and ex-Java being, I would say, attacked or at the very least implemented with these new propositions. Both of them have different cities. So some cities are going for the unlimited, some cities are going for the short-valued is unloaded now, some are going for both. So they have like a very widespread strategy on moving this. We have even seen this in cities where they are really strong or they are a true big incumbent. So they have gone to the level of being aggressive in, to somehow say, where they are really big versus the second one, right? So that's what is happening. Why did this happen or for how long it's going to be? It's something that we don't know, right? I mean, we cannot know what's going on on their mind. We assume or we guess that they have been also impacted by COVID and probably this is a response on trying to acquire as many customers as they can in this year, given that potentially the profit or the revenue is going to be tough in any case. So that's an assumption. But again, why are they doing that? It's difficult to answer. The reality, though, as I was saying, is that we are in a, I would say, different scenario, right? Where the incumbent is taking the price leadership position, which is not the common in most of the markets. and even less when the incumbent has such a gap with the second player, right? But this is the reality. This is the reality where we are today.

Perfect.

Thank you very much. Does that answer your question?

Yes, I get it. Thank you.

Once again, if you wish to ask a question, please press star 1 on your telephone. and wait for your name to be announced. Straightly 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 one again. Your next questions come from Alex Koo from MBank Malaysia. Please ask your questions.

Thanks for the opportunity. I have two questions. The first is regarding your CAPEX, which you have spent about $5.1 trillion for the nine months Earlier in the year, before the COVID-19, your target was $7.5 trillion for the full year. Is that achievable or has the COVID-19 slowed down that impact? How is that going to affect your tower expansion going into the fourth quarter and maybe next year? Is there going to be a slowdown because of that? My second question is regarding your spectrum bids. Given the fact that 700 megawatts will be available, will you be bidding for that and Could you give us a bit of color on, you know, are your spectrum fees going to go up, you know, taking into account that you'll be sharing and leasing perhaps with other people, you know, how would that trend, is that trend going to go up or is it going to come down? Thank you.

Yeah, on the first question regarding CapEx, you're right, we are currently at around $5.07 trillion capitalized CapEx. uh the the we continue monitoring as you know the situation uh with this uh we always do uh uh the with our own approach our operational excellence approach we always make sure that the investment giving the highest return for the company so that's our fundamental operational decision basically uh right now uh i cannot give the phone number but we are really monitoring the amount whether it's really necessary to the benefit of shareholder we do full speed as the plan or we revisit the amount but definitely is going to be some adjustment towards the target to make sure that we don't overshoot our investment unnecessarily so i think that's the comment i can give

The second question in terms of spectrum. Yes, with this new omnibus law, actually it provides availability of the spectrum. So the availability of the spectrum, it will be higher because, as you mentioned, the 700 will be available in 2022. And the second one is also the ability of operator to tap into new spectrum is higher as well because now we can have additional spectrum by sharing leasing on transferring spectrum. So these new opportunities actually give new perspective to operators on redefining our spectrum strategy. With the supply that seems to be higher, Actually, logically, the spectrum price should be lower. If you follow the logic, if the availability, if the way to tap into spectrum is easier, then the spectrum price should be lower.

I see. Okay. So we should expect spectrum fees to be lower in that case going over the next few years. Is that?

That's not really the spectrum from government is lower, but the cost that we can actually that we have to pay in terms of cost per giga, for instance, it will be lower. Okay. Perfect. Thank you so much. But the per bandwidth that the government can get might not be lower, but the operator, our cost per gig, can be lower because there are several methods that we can tap into. Okay. Thank you so much. Wonderful.

Your next questions come from Chan Chee from J.M. Morgan. Please ask your questions.

Hi, good afternoon. Thank you for hosting the results call. Just want to ask about your network capacity and also a related question on KPEX. Given that your data usage is up around 49% year-on-year, how do you see your network capacity or utilization right now? And given that tower sales have happened and also balance sheet has successfully delivered, Are you looking to ramp up KPEX to meet the kind of data capacity obligations going forward? And how do you plan to fund, if you plan to ramp up your KPEX, how do you plan to fund it? Is it just using internal cash or will it be via a mixture of debt and internal cash?

Yeah. So on the first question, in terms of utilization of our network right now, we are somewhere around 50% right now. So we still have room to play further. I think that's the position that we have. In terms of the cash, our balance sheet, as you said, really, really healthy. There's room for us if we want to do more. But as of now, our work chest, we believe, is enough right now. We have a facility with bank almost $5 trillion. 5 trillion ready to be utilized, mixed between committed and uncommitted. So that figures enough to give us a bigger war chest to deal with any potential situations in the near future.

Okay. So just one quick follow-up. So it is very likely, you know, KPEX going forward will stay around the kind of amount, the dollar amount that we have seen in the last couple of years.

Yes, it's going to be toward this direction because we see the impact of this COVID going to be dragged further. So the recovery will not be as efficient. It's going to be a bit longer. You see a kind of recovery. So we continue carefully looking at our investment decisions. I guess to the benefit of maximum and optimum return for the company. Understood. Thank you.

Your next questions come from Otter Pinata from Citigroup. Please ask your questions.

Hi. Thanks for the opportunity. Firstly, on the towers, are you able to indicate where the pricing is on your renewals versus prior levels? Maybe what percentage would be up for expiry in 2020-2021? Second question I have is with regard to the network. It seems that your peer has actually caught up in terms of VTS count, and now they're able to actually get some market share back. Is this a point of concern for you that the networks have basically converged? Do you feel that there's any need to actually invest more to deliver better growth? Thank you.

On the first question related to rental cost per tower, I can give an indication. The new contract that we're signing, the price is somewhere between $10.5 to $13.5. That's the new per month, million. That's the new number that we're looking at, depending on which area, depending on how long the contract is, so it's very mixed. uh compared to the previous uh quarter it was around 18 to 22 million per month per tower so uh you can calculate the math uh that's that's on the first question second question okay so regarding the second question um yeah it's true that if you take a look to the number of btss it looks like we are converging

Now, how we think about it is we need a good network to give a good customer experience to our customers. And number two, it needs to be a network with a reasonable cost. So we believe that now we have the correct network and we have the correct cost to maintain the network. So I think that's also very important. We are able to provide a good customer experience at a reasonable price, which allows us to give a good customer experience. So I think that's how we think about it. It's like the network is there. We have still some spare capacity, as we said. And we have a very good cost in order to maintain the network. Moving from there, of course, we will do all that is in our hands to keep improving the network and expanding to areas where we are still not strong enough.

Thank you. Sorry, just to clarify my first question earlier, would you be able to provide what percentage of your tower portfolio is up for renewal in 2020, 2021? Yeah.

So the one that we're looking at in run rate, yeah, so not necessarily the fixed amount because we also are being reasonable in trying to negotiate on the price because we know below what we're aiming for, 10.5, it's not going to be healthy for the industry and for us as well. So the one that we're looking at right now, somewhere between 20% to 30% in terms of rental running rate that we are trying to aim.

So around 20% to 30% of your tower portfolio will be up for renewals. Is that right? Oh, the one that's up for renewal? Yes.

My question was what percent is up for renewals? Okay. It's going to be around 30% in the next two years.

Got it. Thank you very much.

Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. Straightly limit your questions to only 2 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 1. Once again, it is star 1 to ask a question. Once again, it is star one to ask a question. Your next questions come from Ken from Fidelity. Please ask your question.

Hi, I'm Carlos from Fidelity. Thanks for the opportunity. Just a quick follow-up on the omnibus bill, especially network sharing. So I would like to know what the exact definition of new technology would be. Is that something you can answer at this moment? Does that only include 5G or does that include 4G as well as 5G? Or we just have to wait for the clarification from the degrees going forward? Thank you.

Yeah, actually at this point, we don't know what is the real definition of this new technology because it's actually debatable. Whether it is only for 5G or we can say, for instance, like 4.5G is new technology or not. So you're right, we will have to wait until the government decree is out, so then we can get more clarity on this definition.

Okay, thank you.

Once again, it is Star 1 to ask a question. Your last questions come from Lamy Pin from Pin Investment. Please ask your question.

Hello. Hello. Yep.

Hi. Go ahead. Hi. This is Lamy from CIM. Thank you for the opportunity. and congratulations to Buu Dien and team for the good results. I have one question in regards to the actual realization of the education subsidy from the government. I understand that it is only effectively running in the last month of the third quarter, but can you give some color on the impact to your operation or perhaps revenue in regards to this education subsidy program. Thank you.

Yeah, so thank you for the question. Yes, you are correct. The program started to run in September, so we only saw it in the last month of the quarter, and we have also some data from October. So, well, as you know, we got around 6 million subs involved in that program. So far, what we are seeing is ARPU cannibalization in the program. So the ARPU that we are receiving from the subsidy plus whatever the customers are using is below what they were using before. So the impact of the program so far is not positive. It's not positive in the sense that ARPU is being cannibalized. So we will see how November, December goes, but that's the early signals or the early signs that we can see.

So just to clarify, the current program is effective until the end of year only, or what is the validity period?

Yes, correct. So the current program is until the end of the year.

Okay, thank you.

I now would like to pass back the call over to your host, Mr. Indra.

Okay. As there are no more questions, I think we will end the call today here. Thank you, everyone, for joining, and we'll speak to you again next quarter. Thank you.