PT XLSMART Telecom Sejahtera Tbk

Good afternoon, ladies and gentlemen. Welcome to XL Axiata's first quarter 2023 earnings conference call. I am Christopher, investor relations for XL Axiata, and I will be your coordinator today. During the presentation, all participants are in listen-only mode. After the speaker's remark, there will be question and answer session. The Q&A session will be in hybrid mode to ensure we can accommodate to everyone. To ask questions, please kindly type it in the Q&A box with your full name and company name. If we have time, we will circle back for follow-up questions. As a reminder, this session is being recorded for replay purposes. With me today... With me today are Ibu Diyan, our Chief Executive Officer, Pak Ferus, our Chief Financial Officer, Pa David, our Chief Commercial Officer, Consumer. Pa Gijit, our Chief Commercial Officer, Home and Convergence. Now, Ibu Dian will share the highlights for first quarter 2023, which will then be followed by Q&A session. I will now hand over the call to Ibu Dian.

Thank you, Chris. Good afternoon to everyone. Thank you for attending today's earnings call. I'm pleased with our business performance in this first quarter, which illustrates how we are meeting our commitment to deliver our vision as the leading converged operator in Indonesia. We started 2023 on a strong note, whereby Excel has successfully outperformed the industry, building on the strong momentum powered by both revenue and subscriber growth. Let's move to the next slide that is showing the first few 203 key highlights. Our revenue grew by double digit at 12% year-on-year due to continued product traction supported by our network excellence. Data and digital revenue grew 11% year-on-year, outperforming the industry. Top-line growth in addition to efforts on operational excellence gave positive impact to our EBITDA, which grew even faster at 13% year-on-year with margin recorded at 47%. Excel Asiato also recorded a jump in PAT as it grew 47% year-on-year, showing our ability to be more profitable. We continue to make progress on our conversion vision today, in line with our commitment to deliver complete converged proposition. Excel Satu continues its strong uptrend trajectory with 44% of our FTTS subscriber base are converted to converged subscribers. This represents 7% 7% points increase compared to 37% in Q4 2022. On the digital transformation front, we now recorded more than 26 million monthly active subscribers for our My Excel and AccessNet applications. This represents 45% of our mobile subscriber base. More and more users' transactions and spend are being captured via this channel. in line with efforts to drive this channel to be the major customer's touchpoint. Our focus in providing the best-in-class customer experience powered by personalization and dynamic offering is affirmed further as our subscriber base grew to 57.9 million loyal subscribers. This represents a 400,000 subscriber growth queue-on-queue compared to end of 2022. Now we move to the next slide for First Quarter 2023 Industry Updates In the first quarter 2023, Indonesia's telco industry remains rational, with more opportunities for further price reparation. XL is very supportive for this move, which will benefit the industry as a whole. Riding on the strong market momentum, we have made the decision to increase prices across our XL and XL offerings. Price increase was done across our traditional and digital channels towards the end of the quarter. We also observed that most telco operators have now launched their convergence proposition as their new growth driver. The industry is heading towards more efficiency as telco operators are now transforming themselves into techcos, focusing on execution and better asset utilization. Our investment in network infrastructure, digitalization, and optimization of spectrum have increased our customer experience immensely. Strong network infrastructure has created a foundation for our fixed mobile conference proposition. As I have mentioned previously, the opportunity for digital transformation is rising as most of the population have access to smartphones. We will leverage on this opportunity with our data-focused customers by further enhancing the digital experience via MyExcel and also AccessNet apps. This effort has enabled us to optimize sales and marketing costs. Furthermore, our internal business processes are also being digitalized and automated, which allow Excel to be more agile in responding to market needs. Huge opportunity arises from the low penetration of fixed broadband across households in Indonesia. The low penetration rate will provide growth potential for fixed broadband providers and fixed mobile convergence. On the risk side, potential global economic slowdown due to high interest rate environments remains while risk on competition may move beyond mobile. Now let's move on the performance in first quarter 2023. So this slide elaborates further our financial and operational performance. We delivered a strong set of finance sales in Q1 2023, outperforming the industry as shown in this slide. Double-digit growth in revenue and EBITDA, with subscribers growing to 57.9 million happy customers that supported us, thus enabling Excel to retain the ARPU of 40,000 rupiah. This follows that our strategy focuses on providing best-in-class customer experience for high-value subscribers amidst competition and inflation. Now we will see how those performance was achieved. Smart investment in pockets of growth and the investment on digitalization have increased the number of active users and their usage. Our digital-driven operations through granular data analytics have enabled us to invest our network in high-value areas buildings to meet demand from both residential and non-residential areas. This intelligent data analytics also allow us to evaluate KPIs across customer engagement, campaigns, and customer loyalty, so we can define the right strategies to address the challenges and opportunities at the right time. Our network investment was still focused on 4G deployment, especially in xJava, that increased our Fiji BTS count close to 95,000, with 20 with 12% growth year-on-year. We continue to deliver excellent network experience with higher usage as data traffic grew 19% year-on-year in the first quarter. As mentioned earlier during the presentation, our own apps now have more than 26 million subs on the platform. More and more revenues and transactions are being recorded on the apps. Our fiberized size as of March 2023 is at 55%. An increase of 13 percentage points year-on-year, pairing this with our spectrum reframing and new technology adoption has put Excel Asiata ahead of the curve. Now we move to the next slide. We show the structural transformation that we just announced. So earlier today, we have issued joint press release together with Linknet and Asiata on the structural transformation that is aimed to capture the under-penetrated fixed broadband and FMC market in Indonesia. XL will forge a stronger partnership with Linknet to accelerate rollout and supply of around 8 million new home passes over the next five years. In order to capture market opportunity, speed of execution is key with partnership with Linknet to accelerate rollout and deliver home passes. that will strongly fuel Excel's growth strategy in fixed broadband and also fixed mobile conferences. The exercise has commenced and is expected to ramp up immediately. Next slide. The structural transformation of the layering linknet into FiberCore and Excel as ServeCore for fixed broadband will allow for greater focus to capture market growth by leveraging on Excel's go-to-market capabilities. This will allow accelerated scalability as XL will now access to larger scale of fiber footprint with minimal investments. The creation of two strong assets will drive synergy and help fuel XL Vision to become the leading converged mobile, fixed and content service provider. This exercise will be subject to compliance from the prevailing laws and regulations and applicable shareholders approval with intention to complete by end of the year. I will conclude the speech with our full year guidance. In line with our strong first quarter performance, we continue to reiterate the full year guidance, whereby our revenue will grow in line with the industry at mid to high single digits or even faster. EBITDA margin guidance remains at approximately 49%. and our capex guidance this year will be at 8 trillion rupiah, with 70% of capex to be allocated to strengthen network quality and improve digitalization. With that, I conclude the presentation. Thank you and back to you, Chris.

Thank you, Ibu Dian, for the excellent walkthrough on the XR Axiata performance and strategy. Ladies and gentlemen, we will now proceed to the Q&A session. As a reminder, the Q&A session will be hybrid mode. To ask a question, you can type it in the Q&A box. Please ensure to use your full name and company name or we will not be able to read your question. After your question is answered, if you'd like further clarification, kindly use the raise hand button and we will call your name and you may proceed to unmute your mic. The first question comes from Sachin Mittal. The question is, can you please disclose normalized profit for the quarter excluding forex? And second question, LinkNet has started to make losses despite it being highly profitable in the past. Why so and what is required to change it? For this one, I would like to ask Pak Farus to answer the first question and later on we'll have Pak Abhijan to answer the second one.

Hi Sachin, thank you for the question. If I recall the question was, can you please disclose the normalized profit for the quarter excluding Forex? In the first quarter of this year, we actually recorded a gain of about 25 billion Rupiah related to Forex. So that's the amount that you can actually normalize from our profits. And that number I'm quoting is actually before tax.

Hi Sachin, this is Abhijit. So in response to your second question, so yes, we as 20% shareholders of LinkedIn, we recognize that they have been facing some headwinds. But there are two components to this. And the reasons can be multiple, like increased competition in their footprint and other factors as well. But more importantly, there are two things. One is LinkedIn itself is doing a transformation. at its end to rectify these headwinds. But more importantly, in Ibu Diyan's presentation, you saw the structural transformation. So this is fundamentally going to change the business model where LinkedIn would convert itself into a full-fledged fiber core and Excel will take over the responsibility of being a self-core. Hope that addresses the point you have raised.

Okay, thank you. I would like now to open the mic for Sachin if you have further questions. Go ahead.

Hi, thanks for the clarification. Just to understand that now you're expanding your fixed broadband also. So, and it's still not very, I mean, this is a very significant part of your business. Could you explain, you know, it's not a Capex-based business, right? I think you are incurring OPEX for extension of line. First of all, is there a portion of Capex which is incurred for your fixed broadband business? Number one. Number two? Will first few years we will expect it to have some losses? I don't know because there is there is some I think there's some OPEX component to it. There's no CAPEX to it. Just some some light on that will be very useful.

This is Sachin. Hi Sachin. Okay. Thanks for the follow up question. Yeah, you are right. But fundamentally, if you look at structural separations across markets, There are a number of business models, but on the Serco side for Excel, it is essentially, let's call it a zero capex model because some partner comes in and deploys the fiber network for us. So it will be definitely a zero capex model. What was the second part of your question?

It's more on the, since it's a zero capex and all OPEX model, could we expect, you know, losses for few years and how will it go on? Because I think you have to pay some minimum at least for the OPEX also, right?

Correct. Correct. The short answer to it is no, because typically in this business, if you look at the upfront costs, they are in the range of commissions you pay, so on and so forth. But this is definitely not a model which will incur losses in the beginning or a long period of time.

So you're expecting it will be either very minimal losses or not sizable losses at all when you start this business? Correct. Okay. Got it. Okay. Thank you. Thank you. All right.

Thank you, Satyam. Let's move on to the next question. The second question comes from Foam from CIB. The question is what was the average increase in prices carried out in the end of the first quarter 2023 and now XL is in the 40,000 cloud. For APU, where do you see this heading to considering the affordability factor? For this question, I shall let Pak David to answer the question.

Hi, Hong. So the average price increase that we did the 10th of March was in the high single digit more or less 7.5%. It was in both portfolios, Axis and Excel, but I have to say that in the short values or low prices in Axis, we did even higher than that. So we did even double digit increase in the prices. So I think that's regarding the price increases. To your second question, yes, we are happy to be in the 40K club. These price increases so far have played well for us. So what we have seen in the traffic after the price increases, it's been very positive. So we remain confident in our strategy of optimizing the prices and moving in this direction. And hopefully we'll also see ARPU improvements in the future. I hope that that answers the question.

All right. Thank you, David. Fong, to check with Fong, if there is any question, Fong, we will unmute your line.

Go ahead. Yeah, just a follow-up question on the price increase. After you did that, the traffic, as you mentioned, was still quite good. But on the competitor side, did you see any of your competitors following as well your move to increase prices?

So, unfortunately not. We didn't see our competitors moving, but I have to say, as I was mentioning, still our traffic grew very healthily. So, even if the competition didn't follow, I know that for us the price movement was still very positive. keeps us with the confidence on going in the correct direction and our strategy and our willingness is still to move and do additional price increases in the rest of the year. Of course, we will keep an eye on the competitive environment. Sorry, because you were also mentioning, Fong, about the affordability of the customer, right?

Yes, that's right.

Correct. So from what we see, the share of wallet that we are getting from our customers is still far from other countries in the world, from any other country in the world. So we believe that there is still room to improve. And again, this last price change also supports our thoughts. And yeah, reinstate a little bit in that area.

Okay, but Pak David, I mean, given the tone from the other players, which, you know, all seems to be quite positive, right? And all thinking about further optimizing prices. So the competition, The dynamics still look very positive at this point. And as you said, the spending as a part of wallet is still quite low. But over the next one or two years, do you think this 40,000 ARPU could go to 45,000 or 50,000? I mean, any thoughts there?

yeah so um again we are positive on the outputs gonna increase yes we are positive on that and we are positive phone market is gonna repair further so and we keep with our plan of doing additional price increases during this year correct okay okay noted all right thank you for okay let's move on to the next question

Next question comes from Henry Teja from Manjiri Securitas. There are two questions. The first one is, could you elaborate more on the higher infrastructure expenses related to rental expenses and repair maintenance, what are the higher cost? and will it normalize in the coming quarters? Second question is, what are the key drivers of stronger revenue growth in first quarter 2023? Is it more on the price increase impact or is there any other factors? I think for the first question, I'll select Paverus to answer and then second question will for Pa David. All right, go ahead, Paverus.

Hi, Henry. Thank you for the question. Certainly, if you look on a quarter-to-quarter basis, you will see a lot of movement on the network costs in particular. Allow me to recap back from Excel's disclosure in the fourth quarter. Because of the renegotiation of the operating and maintenance contract with the tower providers, there is actually an impact on the network costs. If you normalize that, you would have to add back about 400 billion to the network costs. And if you look at the first quarter of 2023, we have taken the initiative to actually front load some of the costs to capture the momentum for the barang because we've seen some also have very healthy growth in subscribers and take up in traffic. Couple that with the digitization efforts that we're continuously doing. To the question of moving ahead, I think network cost as a percentage of revenue would be around circa 14 to 15%. I hope that answers the question and allow me to pass the next question to David on what drove stronger revenue in first quarter 2023.

Yeah, so the revenue growth in first quarter hardly came from the price increases because as I was mentioning before, we increase our prices the 10th of March. So by the time it hits the retail outlets and our customers, et cetera, only a small part of that price increase could be already filled in the first quarter. So the drivers are a little bit different. Well, let me say that, of course, the price increases that we did during last year, everything affects, right? But if you remember, it was like during March and during during June, etc. But there are other drivers and mainly these two things, right? So number one, we have more customers than what we do. So if we see our daily active users in our network has increased significantly in the last year and even in quarter on quarter. So I think that's number one reason we have more customers, we have a higher market share. Number two, each of these customers is increasing their usage. So we see that the gigabytes per subscriber usage keeps increasing very healthy, very, very healthy. And the third factor is that the price per gigabyte, because of these price increases that we did in the past, not so much because of the quarter one because it came very late, we have been able to manage. We have been able to manage the price per gigabyte or the yield. Hence, more subscribers. Using more data and the data prices being much more stable, that brought the additional revenue. I didn't mention in the previous question, but not only we increased prices the 10th of March, but we did also something else that we reduced a lot additional bonuses and etc. that we do in the CBM activities. That's another way of increasing prices that is by reducing the benefits that we are giving to our customers, right? So that also helped a little bit in quarter one, but again, that came mainly at the end of quarter one. So the other two factors are the ones that helped more.

All right. Thank you, Padavit, for the explanation. Now, do you have any more questions, Henry? Any follow-up?

yes um okay thank you perhaps uh just one or two follow-up questions on that first uh uh you mentioned that you know that the network costs um in the following quarters will be around like 14 to 15 percent of the total revenue uh but could you elaborate more or share uh what will be the you know the the total amount that you front loaded in the first quarter for the network costs

I think you can work out. On a steady state, it's about 14% to 15%. The uplift rate in the network cost as a percentage of revenue is the amount we front-loaded in the first quarter of 2023.

Okay, sure. Sorry, perhaps one more follow-up question, but it's perhaps not related to network costs, but perhaps on the structural transformation that Budhian also mentioned. Would you mind to elaborate more about this structural transformation between XL and also Lugnet?

Yeah. Okay, thanks, Henry. I think I'll tie it to the next question, which has been sent in by Hosseini as well. Both of you are asking about more details. So the structural transformation entails the following. First of all, LinkedIn will convert itself into what we call as a Fiber Co. They will build home passes. The plan is not only to build home passes for Excel, but eventually for the whole industry. So they will follow a multi-tenant model. Excel will focus on what we call as a Servco, where we actually run the retail business and offer fixed mobile conversions to our customers. So these are the fundamental principles underpinning the structural separation. Hussain is also asked, will Excel pay to Linknet to acquire the OpCo? The answer is no, we are not acquiring any OpCo. But two things are happening. The customer base of Linknet will move into Excel and Excel is also looking at carving out its fiber asset and moving into Linknet. Now, both these things will of course invite some financial consideration to both the parties. The process is still ongoing. Nevertheless, we are doing this at an arm's length and following all the regulations that govern the Indonesian telco market. Hussaini has another question, what will be the wholesale pricing which Excel will pay to LinkedIn? This is a confidential data, so obviously I cannot disclose it. But nevertheless, again, this transaction is at an arm's length and follows the regulation that governs the industry between related parties.

Hi, sorry, can I just, you know, you know ask one more for a final question but you mentioned that there will be some kind of exchange that the customer of LinkNet will go to the XL and you know some assets of XL will also go to the LinkNet so can I reconfirm that there will be you know like cash payment or cash transaction from LinkNet to XL and vice versa for this you know potential transaction so all I can confirm is there will be a transaction

okay but it will be done at an arm's length given that we are related parties and follow uh you know the governance process in indonesia and the telco industry and of course shareholder approvals okay thanks so much thank you henry thank you for for answering the question now let's move on to the next question the next question comes from um phone

On the digitalization initiative, 45% of the stock are on app. Are they also reloading digitally? And second question, how much sales distribution channels has been digitalized versus the target? I believe this question will be better answered by Pak David.

So out of the, yeah, more or less half of our customers are already using our digital applications. Yes, most of them are doing the digital reload, but most importantly, they are generating, I mean, it's a usage that is generating revenue in the application, right? Independent whether you reload directly from the app or in an e-commerce channel or a traditional channel, most of them are already generating their revenue there. So that's one of our main goals, right? To move people from buying in other channels to spending, creating the revenue in our own applications. And I think that's happening. And we are seeing also a very, very healthy growth of the revenue that we get from those applications. And answering your question, yes, in order to buy that or to spend that revenue, a lot of that reload is also coming from digital sources. So I think that's number one. Regarding the digitalization of the traditional channel, I cannot give a number, but I think we are moving in very good trajectory. We already have... A large amount of the retail outlets that are using our digital application, which is allowing us to have a more direct relationship with the customer, it's allowing us to decrease the stock out, etc., and it's also allowing us to have a more direct a distribution channel so i think that's that's going in the in the correct direction and you can see right in the marketing and sales cost i think we are we are also starting to to feel that the cost of the project is going down i guess that the question came from from the last one okay thank you

Now, I'd like to ask if the forum has follow-up questions to Pak David?

Yeah, Pak David, just wanted to ask, right, since 45% of your subs are on the app and you said they are also, you know, reloading digitally, right? So, I guess, you know, for me, the interest really is on the savings on the dealer comms. Are you seeing as much dealer comm savings as for what the percentage of subs on the app is? Or is it going to take time for that dealer commission savings to come through?

So, the dealer commissions... To be honest, the dealer commissions currently are not that much coming from the reload amount, but from other KPIs that they have. The reload was something strong a few years back, but not so much now. Now, having said that, we are seeing an improvement in the dealer commissions due to the digitalization project that we are doing. Not as much of moving the pools, et cetera, getting direct to retail outlet relationship with our digital application. That is what is helping us on reducing the dealer or the intermediation cost of the distribution channel. We have been working on it and preparing it. We already have moved in a few clusters, in a few areas in Indonesia and it's looking good and we'll keep moving during this year and we'll accelerate that.

Okay, thank you so much, Pak David. If I can also just add in a question for Pak Abhijit, since I'm already on the line. With regards to the deal with Linknet, I noted what you mentioned just now about the operating model and all that. But as the anchor tenant on the FibreCo, do you see sort of flexibility being baked in, in terms of the wholesale cost, given that we are seeing some ARPU pressures in the broadband market because of competition now? flexibility being embedded into those agreements so that Excel could yield some earnings accretion from this deal, even in the event of more competition. How did you end your question, Excel could? Whether Excel could have a bit more flexibility or embed in flexibility into the wholesale agreement with LinkNet, such that even if we see broadband competition continue to be fairly intense and there's APU pressure, that this deal would be earnings accretive for Excel?

There's no flexibility. We are approaching this as at an arm's length kind of an arrangement, given that we are related party transactions. You know, this is going to be an outcome of negotiations as Excel would do with any other fiber provider, to be honest.

Right. Okay. I'm just wondering, because as an anchor tenant, do you have to sign a very long term, or at least you envision signing a very long term wholesale agreement and whether there's flexibility to the wholesale rates?

Yeah, got it. Yes, obviously, as an anchor tenant, we will seek to have certain benefits for ourselves. Those benefits could be in the form of, let's say, exclusivity or longer term arrangements. or even pricing as well right so obviously as an anchor tenant we will definitely seek to have those benefits but let me re-emphasize this is approach we take to any other partner right if we are partnering with any other provider these are exactly the kind of benefits we would be seeking as well okay and and just to re-clarify here again it will be net profit accretive from year one you think this deal I think I'm pretty, you know, that's the beauty of these kind of deals, right? Given that there is no capex required from our side, we are fairly confident about profitability. And in the event that, yeah, we are very confident about achieving profitability quickly.

Okay, understood. Thank you so much, Pak Abhijit and Pak David.

Thank you, Pak Abhijit. Let's move on to the next question. It comes from Hussaini Saivi from UBS. The question, I think this is also for Pak Abhijit. Are the 8 million home passes on top of the infrastructure being built by Tawar, which is Sarana Menara?

So I didn't understand the question. So let me, so the question is are the 8 million home passes on top of... Built by a company called Sarana Menara.

No, I still don't understand the question. This is just a clarity that the build will be by LinkNet.

So let me clarify the 8 million that was presented. So these are new home paths that will be built by LinkNet over the next five years.

I hope that answers your question, Hussain.

let me just open the line for him to check if he has any other question go ahead with signing yeah thanks thank everyone uh yeah my question was that sarana minara uh is also building home sponsors for excel so my question was that is the 8 million on top of that

Yes, the $8 million is being built by LinkMed. So these are new home passes that they will build over the next five years.

Yeah, understood. And so going back to my earlier question is that Excel will transfer its infrastructure fixed broadband infrastructure to LinkNet, and LinkNet will transfer its subscribers onto Excel, and there will be a cash transaction linked to that. My question is that including the cash transaction, you think that the deal will be earning security from year one?

So I did not say cash transaction, I said there will be a transaction and we are in the process currently of evaluating what that financial consideration including the impact on both the companies.

I understood and then maybe just one follow-up for Park David. Given the IT transformation in the scale you have achieved, Is there more investments required to continue to expand this or are we done with the peak investments on the IT transformation and digitization?

Well, I guess that we are going the IT transformation as we speak, right? So the BSS system, etc, etc. So I'm not, maybe I'm not the correct person to ask about the investment that is still required there.

Okay, so the biggest part of the IT transformation is just completed, which is offering the BSS part. So this BSS part will actually allow us to do, for instance, like single bill for the convergence offer and not only convergence bill between mobile and fixed, but also mobile, fixed and other digital service that we can put on top of that. So the other part of this transformation also in building our apps into the the latest technology but for this the application evolutions actually the investment will not stop because the technology evolve evolving so much uh in this front so there will be always uh in annual basis investment that we will put for uh enhancing our touch point like my excel and access net but the biggest one is is done for the for the bss part

I hope that I understood thanks. Just if I can have one last question, it's on the mobile side. Now, you noted that on 10th of March, you increased pricing, which to an extent competitors have not followed. So just wanted to understand how had been the momentum revenue momentum in the first two months and then in March and April when you increase pricing, but your competitors didn't follow you.

so when we planned the the price increase for march 10th we were already thinking that harry ryan lebanon was coming that is the moment that it's a very positive moment for for monetization now usually we take a look to a couple of drivers after we do the price increase Might the competition follow or not follow? I mean, in the end, we'll take a look to some internal numbers, right? The main one is traffic. So if we see that the amount of gigabytes goes down, then we need to start calculating elasticities and see whether this is positive or not. So I think that's number one. Number two is number of subscribers. our number of subscribers whether it keeps improving or we see that it will be related right with the traffic but again one is total traffic the other is like number of subscribers and we can talk about market share right so those are like the two plus one things that that we take a look at again this is quarter one results so i don't want to to to give news about the quarter two because this is not the correct forum but just i will Just give a hint. So all the three drivers looked very, very positive to us. So the traffic, despite competition, did not follow when our price increased. Our traffic grew significantly. Grew significantly during end of March, that it's already Ramadan, during the whole month of April, that it's Lebaran. But even post Lebaran, we are seeing very, very good traffic, very good traffic in our network. number two is the the number of subscribers and again same thing right so we are seeing that the number of subscribers who have been in positive trend already more than i mean yeah so the last year for sure and it has continued so we have not lost subscribers we see that our daily active users in the network keeps increasing so this is this is this is looking good right so that's why we even if our competitors did not follow this encourages us to to to affirm or to reassure that we are in the correct strategy and of course we will have to see the competitive dynamics be very granular in in our next steps but we are but we are positive in in moving in the same direction understood this is very clear thanks and congratulations on the good set of results

All right, thank you, bye David, and thank you, Sandy, for the question. Let's move on. Next question comes from Richard Sun from Timurga. Richard has three questions. First question on link net, I think has already been answered by Pak Abhijit. Second question is on the guidance on potential cost rising from Excel to achieve the desired structure. And then third question is on the blended EBITDA. Do you expect Excel blended EBITDA to fall after the structure is completed, given the potential risk back to LinkedIn? For the second question, I'll let Papyrus first answer.

So let me answer the second question. So first I have already answered Richard. Do I address him as Raymond? I think Raymond. First I have already answered. So LinkedIn customer base to move to Excel, Excel Fiber to move to LinkedIn and also LinkedIn to build Fiber footprint for Excel. On the cost side, I think this was part of my response. on the lease cost mentioned before right and the good thing about such kind of business models is there will be minimum cost on the excel side because we do not inject any any capex and the obvious cost arising would be of course sales commissions and marketing costs basically i hope that addresses the question

we'd like to open the line for um richard to answer if there is any follow-up question uh no thank you thank you uh and that's for the good setup result thank you thank you thank you uh and for the emerging uh do you expect uh your beta margin uh should be uh rather than uh declining but moving after the new structure has been completed next year

Yeah, I think if you look at the guidance, right, I think we're still keeping to our guidance at 49%. Certainly, we will look at, you should not look solely at the growth business. I mean, Excel is beyond that as well, right? There's also the mobile and other parts of the business. So we're really treating this as a portfolio. But as a portfolio, the margin guidance still stands, right, at 49%.

Okay. Thank you. Thank you. Thank you, Pak Richard. Let's move on to the next question. It comes from Aurelia Siamudi from BNI Securities. First, can you please elaborate on the strong growth on the infrared sensors? I think this one will be answered by Papyrus. And then the second one is on the Linux subscriber. And the first media will be transferred to Excel. This one, I think, later on I'll have to answer again. And can you please share the output for Excel 1? So I think these are three questions. I'll let Papyrus to answer first.

Thank you, Aurelia, for the question. You're absolutely right if you're looking at the trends of the network costs in the year-on-year and the Q&Q. As I said earlier to the question to some of your other colleagues, I think first quarter there's a front-loading of the network costs simply because we're also anticipating the strong growth for the Lebaran momentum. In the fourth quarter in 2022, there was a one-off of about $400 billion that impacted the fourth quarter 2022 network cost, which appears lower. If you normalize that impact that I've just suggested, as a percentage of revenue, first quarter 2022 would have been 15%, and first quarter 2023 would have been 14% of revenue. So I hope that gives you a color of the underlying performance, queue on queue as well as year on year.

Hi, Aurelio. I'll tackle your second and third question. Will all of LinkedIn subscribers under First Media be transferred to Excel? The answer is yes. as I have elaborated before. Can you please share the ARPU for XLSATU? At this stage, we are not breaking out individual product ARPUs, but let me try and answer your question a little bit differently. As you saw in the presentation given by Budhian, we have managed to reach 44% penetration of our base with our conversion. So this is extremely encouraging. That means the market is accepting it. And the other parameters we look at because of our analytics is, for example, the customer lifetime value. such parameters are also showing a very very healthy trend for us so in a nutshell we remain extremely confident about conversions as a whole and especially the performance of excel saturn to be specific okay now i shall check with people with earlier if there is any questions earlier i need your mic

Yeah, thank you so much. But yeah, I noticed that the my questions were also asked by other analysts before. So thank you so much for clarification. Thank you.

Thank you. Thank you. All right, let's move on to the next question comes from Luis from Citi. Can you get more colors on the lean-in losses, please? Was it driven by revenue or OPEX factors or both? Is there any write-offs during the quarters?

Louis, I don't think we are going to answer that question. This call is more about Excel's performance. So, I think later on, you know, through Chris, we can guide you to the link net management or even Axiata.

Okay, thank you. Let's move on. The next question comes from Endo Takashi from Batavia. This is also going to be on LINET, LINK is going to be Fibre and XL being self-goal. Should we expect any ownership changes on LINK going forward as XL still owns 20%?

At this stage, hi Endo, this is Abhishek. At this stage, we do not envisage any ownership changes in LINKNET. XL continues to hold 20% and Axiata 80%. Nevertheless, Axiata as a company keeps on evaluating its portfolio. But in the specific case of LinkedIn, we don't see any changes right now.

If I may add further to the question, and that certainly doesn't stop us from trying to accelerate our home paths, trying to scale up the business, try to reap synergies from the creation of these two strong assets.

Thank you, Averus. I'd like to check with Endo if there is any follow-up question.

Hi, thanks a lot. Just want to check again on the timeline of this transaction. When do we expect this to be done?

So as presented in the CEO presentation, we envisage the whole process to be done by the end of the year.

Okay, got it. Okay, thanks a lot.

Thank you. Let's move on to the next question. It comes from Niko Margaronis from B&I, the direct sub. Two questions. First one, given the tiering of your customer base, is the price increases applied to all your customer profiles? And second question. Go ahead, I think the first one is for Padebe.

Yes, so it has been applied to both brands and to the product portfolio from short validity, low prices to the high prices thing. Then also, as I was mentioned before, we have touched our digital products and we have even reduce the benefits that we were giving through our CVM initiatives, etc. So it has been quite a 360 price increase. I think, as you mentioned, from what we see regarding the customer base and most importantly the traffic, I think we can conclude that for the time being, customers are willing to pay or see that the value for money of Excel is still good and are still willing to pay for the quality of the services that they are receiving. Yes. Thank you, David.

And also, I think the second question on LinkNet, I think this question is more directed to LinkNet, so I'll direct Nico directly to the LinkNet counterpart. Now, I would like to open the mic for Nico. If you have any questions, go ahead.

Thank you, Chris. Thank you, Pak David. Can I follow up? The take-up of your services, can we say that this is also driven by the improvement in your network? Because in the previous Edmonds call, You emphasized also on the improvements on your network on open signal. And yeah, is your position in terms of network KPI still as good as in the previous quarters? Yeah, thanks. Yeah, hello. up and then Yeah. Hello. Can you hear me? I think that the team has disconnected. Oh, I hear from other participants that you can only hear my voice, but the management has, the business is disconnected. Can you hear us? Yeah, I can hear you now. Is this the team?

Yes, this is the team. Okay, okay.

Yeah, yeah. Yeah, so, yeah, for a second, I think for a minute, None of us could hear you, yeah. So, basically, if I may repeat the question, it's about the improvement in your revenues and the traffic and, yeah, the traffic, is it because of... Can we attribute this to the network positioning, to the good network KPIs that you showed in the last couple of quarters? And if yes, is this leadership in network KPIs is still as it was? I mean, you still have performing well in terms of network? Yeah, that's the question. Thank you. Yeah, correct.

So I think you're correct. So in the end, with these prices, if people respond positively, it's because they have willingness to pay for the value that we are offering. They see that the value for money is still good. Of course, the value for money, that value, part of it comes from the network experience. that they are receiving, right? So we track our customer experience, not only, I mean, we track the customer experience from the network, from the customer journeys, et cetera. We see that we are in a positive trend and in the last few months, our customer experience has improved. That, of course, is like the basic, that you need in order to be able to monetize the customers, right? If the customer experience will have gone down or satisfaction will have gone down, then it will have been more difficult. And yes, that customer satisfaction, customer experience has improved partially because of the investments that we have been doing. And this is much pocket of growth that we are getting and investing on in the last few months together with, of course, many other customer experience initiatives. But yeah.

Okay, thanks, David. My second question earlier about the link net, maybe if I can connect this with some articles, local articles about Excel, Axiata striking some sort of agreement, partnership with IconPlus. So I was wondering whether there is a larger framework you're working with ICOMplus. So maybe also Lignet is part of this framework agreement with ICOMplus slash PPLN. Yeah. And yeah, one other reason why I'm asking this question is, Uh, is it maybe, is it a link that also charged more, uh, currently from, uh, from, uh, from my complex or, or is it less, uh, that sort of update I'm looking for. Thank you.

Okay. Uh, thank you for the question. Yes, you are right. Actually in the past, uh, link that has, uh, uh, engagement with icon blast. So, uh, they are leasing, uh, ladies. PLN poll from ICANN+, but that agreement has terminated. So LinkNet has managed to actually move their FTTH from PLN polls. So the engagement that we are having currently with ICANN+, is not for the polls for the FTTH. So our agreement with ICANN+, is mainly for the backbone. So for backbone. So actually it's not only us using their backbone, but also vice versa. The backbone and also for the fiber to the sides. So it is not related with the FTTH business.

Thank you. Yeah. Can I just follow up with Bejit? Maybe can you give us some color? How how the subscribers of LinkNet will move to Excel? What is the mechanics here? Yeah, thank you.

The question, is it Nico? Nico, right? Yes, yes, thank you. You know, that's a very good question and we are ourselves developing the answer right now as we speak. So as I mentioned before, The two things, one is how do we do the transaction is being evaluated by both parties. We'll follow the approvals. And then how do we actually migrate the customers to Excel? That plan is under development as we speak.

Okay, Abhijit. Thank you.

Okay, let's move on to the next question in the benefit of time. I'll get back to a question from Lonnie about the strategy to bring EBITDA to 49%. I shall let Pak Fairo answer.

Yeah, I think Lonnie, I realized that we got disconnected, right? So allow me to answer the question again. The question is how do we bring up the EBITDA to the 49% level? The answer I gave before I was cut off was we will look at it in a blended basis. Certainly, improvements in price preparation as well as personalization and experience helps the top-line growth. On the cost side of things, we alluded to sales and marketing, particularly distribution costs. They will look into, as well as notwithstanding all the other cost items, they will look to for the end of the year. They will lead the EBITDA margin to the 49% guidance till the end of the year. Thank you.

I shall open the mic for Lonnie to ask any follow-up question.

Yes, thank you. But what if the competition comes back in the second half of the year, then you can't really cut much on the sales and marketing. And have we assumed this guidance including the potential 5G spectrum option because this will bring another expenses? So what are the assumptions for the 49%?

Well, certainly 5G is not baked into the guidance, right? Because there's still uncertainty to the timing of the spectrum being available to our players. To the other question on how competition hits up, certainly there's something that we have to look at from time to time and how we respond to things. But certainly, we have multiple distribution channels that we can also use. move and be agile in terms of how we react to our competitors actually playing in Spain. So at this point in time, and the outlook that we have up to the end of 2023, and the market condition that we see now, we're still confident of 49% EBITDA market. Thank you.

Okay, one last question. So it has included a potential transaction between Linlac, Fiberco, and you guys, right? And what if Linlac remaining losses in the remaining years?

Well, at the moment, Linknet is captured as a share of profit and loss. Certainly, this transaction, as Abhijit has highlighted earlier on, will not have a major impact on EBITDA margins. But certainly, this transaction is supposed to be closed, expected to be closed, subject to approvals by the end of the year. So at this point in time, with the structure and transformation that we're able to share to the market, we envisage that we're able to hold at 49%, simply because we're looking at that as a blended portfolio for Excel. Thank you.

Okay, thank you.

Okay, I think we still have one more question. Okay, one more question. The last one comes from from HSBC. I think the question will be, do you anticipate too much fiber being built and it can lead to software supply industry, which region are you and Lignite targeting to report fiber? And are these regions are covered by PMs? All right, go ahead. I think this question will be addressed by Abhijit.

Hi Abhijit, this is Abhijit. I think you're talking about a market with an overall penetration of 15% with fiber broadband. So, While I recognize an increased interest from many parties in capturing this market growth, I think it's a bit too soon to think about oversupply simply because the headroom for growth and the demand is pretty high. Regions and Excel and Excel and LinkedIn targeted to deploy fiber You know, we have an excellent analytics team in-house. So the way we have approached this business, and I think I mentioned it in our conversations previously in the course, we actually identify places to go with pinpoint precision. Obviously, we do not want to enter into cities or clusters, which competitive intensity is very high. So as we speak, we are in the process of identifying which areas to go. And once we crystallize that, we can share this information.

All right. Thank you, Pak Abhijit. Hope that answered the question. All right. Due to the time constraint, I think that will be the last question for this call. Thank you for everyone for participation in today's call. As always, look back to us if you have any further information, if you need any questions. Please stay safe and healthy, and we will see you again next quarter. Thank you.