PT XLSMART Telecom Sejahtera Tbk

Good morning, ladies and gentlemen. Welcome to Excel Axiator's earnings call for the first half of 2021 financial year ended June 30th. My name is Ajay, and I will be your coordinator today. During the presentation, all participants are in listen-only mode. Instructions will be given on how to register your questions when we get the question and answer session. As a reminder, this conference has been recorded for replay purposes. Now we would like to turn the conference over to our host, Mr. Inder. Please proceed, sir.

Thank you, Ajay. Good morning, everyone, and welcome to the call today. Firstly, just a small housekeeping matter. We have prepared a backup MS Teams link which we sent out for this call today. That link is in listen-only mode in addition to the main conference line. If you are using both the lines, please mute the MS Teams link to avoid any audio issues. With me on the call today are Ibu Dian, our Chief Executive Officer, Pak Budi, our Chief Financial Officer, Pak David, our Chief Commercial Officer for Consumer, and Pak Abhijit, our Chief Commercial Officer for Enterprise and Home. Now, Ibu Dian will share the highlights for the first half of 2021, which will then be followed by the Q&A session. I will now hand the call over to Ibu Dian.

Thank you, Indar, and good morning to everyone. We are happy to report a strong set of second quarter numbers, despite the ongoing impacts of the COVID-19 pandemic and the weak Indonesia economy. This is due to the improving market environment, our right product strategy, decisionality, strong liberal period, and also because of our network quality improvement. As a result of the consistent execution and implementation of our operational excellence strategy, We are on track to achieve our vision of becoming the number one converged operator in Indonesia. This quarter, we are happy to report a strong rebound in revenue growth, with our revenue growing 8% quarter-on-quarter in the second quarter, driven coupled with rising EBITDA as well by 8% Q-on-Q due to cost efficiencies. Our net profits continue to rise as well, increasing by 23% Q on Q in the second quarter to Rp395 billion. However, the situation on the ground has worsened drastically in the past month, with the latest unprecedented spike in COVID-19 cases resulting in lockdown across Java and Bali. As a result, economic activity has been severely affected with unemployment going up, which will result in incomes and consumer spending power being impacted. This current trend means there might be an impact to the industry, which is worse than our initial projection of a recovery in the second half. On a more positive note, COVID-19 has accelerated our transformation agenda for our long-term goal of becoming a fully digitalized operator. This is through a faster digitization of our business processes from the front end through distribution and our internal processes. This will create long-term benefits in the form of business and cost efficiencies. We also continue to execute on our strategy with a strong focus on giving our customers what they want. Through our customer intimacy strategy, we are focused on giving our customers the best product and customer experience in the market, and not just offering them the lowest prices. We also continue to develop our analytics capabilities, which enables us to successfully upsell our customers to better product proposition, and almost ensuring we deliver the right product for the right customer. Following the success of our Packet Accra in being the first offer for families where you can share quota with your family members, we have further expanded on this with the recent launch of Excel Satu Fiber. Excel Satu Fiber is the first truly converged offering in the market with a quota on both mobile and fixed, putting us further along our path of achieving our vision to become a truly converged operator. Although it is still in the early stages, we are seeing good traction from the market for this convergent product, indicating strong demand for a product of this type in the market, especially in the current work and school from home situation. Positively, our investment in XJava continues to do well for us, and growth continues to be well ahead of Java growth rate, increasing its contribution to our revenue to 30% in second quarter 2021. 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 in XJava guided by our operational excellence principle 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, and thus we continue to roll out our network on schedule, with our BTS count now above 156,000, with 4G present in 458 cities across Indonesia, with more than 65,000 4G BTS. The key now is that infrastructure deployment needs to be modified. What used to be thought as a temporary trend, such as work from home and school from home, is now becoming a more permanent part of living and working. Therefore, there is a need to invest in our network to ensure a higher level of service is available for those both in and outside major cities. We have therefore started putting in more investment in these areas in improving the network quality that will support the business growth. This is an addition to modernizing both our active and transport networks as well as revamping and upgrading our IT systems. Our balance sheet remains strong with net debt to EBITDA of below 1x. We have no USD debt and we have also secured committed facilities with the banks that we can tap anytime if we need additional funding. Last Friday, we announced That along with Asiata, we have entered into a non-binding term sheet with the major shareholders of LinkNet with a view to acquire a 66.03% stake in the company. At this point, we have not made any binding offer and the transaction is still subject to due diligence and negotiation between the parties. If all goes well, we have We hope to enter into a sales and purchase agreement in around four weeks' time. This is the next step in our strategy and vision to become the number one coverage operator in Indonesia, and we are well on track to executing that vision. We will make further announcements on this when necessary. Finally, we would like to reiterate our guidance for the year. In 2021, we are guiding for revenue growth to be in line with markets, EBITDA margins in the low 50% and CAPEX to be around $7 trillion for the year. However, we expect CAPEX to be on the higher end of the $7 trillion number due to the network investment we are making. Thank you, and let us proceed to the Q&A session.