PT XLSMART Telecom Sejahtera Tbk

Good morning ladies and gentlemen and welcome to Excel Axiata's second quarter of 2023 earnings conference call. I am Maya, Investor Relations for Excel Axiata and I will be coordinating the call today. Before we begin, allow me to convey the format and structure of the call. The call today will begin with a presentation where all participants will be in a listen-only mode. The presentation will then be followed by a hybrid questions and answer session If you would like to put forward a question, kindly type it in the Q&A box with your full name and the company you are representing. If there is time, we will open your line to circle that brand new follow-up question. As a reminder, this session is being recorded for replay services. On behalf of the management team, we are pleased to have on our earnings call today, Ibu Dian, our Chief Executive Officer, Pak Perus, our Chief Financial Officer, Pat David, our Chief Commercial Officer for Consumer and Pat Bridges, our Chief Commercial Officer for Home and Convergence. Without further ado, I would like to kindly hand over to Ibu Dian to start the session with the key highlights for the second quarter of 2023. Ibu Dian, the time is yours.

Thank you, Maya, and a very good morning to everyone. Thank you for attending today's earning call. I'm pleased to share that from the last call, we have progressed through the second quarter of 2023 with strong financial and operational performance, continuing our strong note and momentum from the first quarter. In line with our proposition to be the leading conference operator in Indonesia, we have seen timely positive traction in capturing the fixed broadband market while strengthening the mobile business, building on our conference organization, which I will elaborate more throughout this presentation. Let's start with the second quarter 2023 key highlights. In the second quarter of 2023, we continued to deliver solid fundamentals. Our revenue grew by 12% year-on-year, followed by a faster growth in EBITDA, outpacing revenue by 14% year-on-year. This supported a strong normalized profit after tax growth by 12% year-on-year. These results show that we are on track to build sustainable revenue streams with improved efficiency. In line with our commitment to deliver the complete conference proposition, our convergence penetration in quarter two of 2023 saw an immense uptick by 12 percentage points, much faster than the previous quarters, with penetration now reaching 56%. Our peak in HomeConnect was also encouraging. Our pickup in HomeConnect was also encouraging, bringing the count to 154,000 XL home users, growing by a fast 50% on a year-on-year basis. Our strategy reminds tackling the under-parented fixed broadband through granular data analytics, which enables us to invest our network in the areas that will be most valuable to XL. A strong performance also continued to be seen from our core business as subscribers climbed to 58 million, followed by an increase of ARPU quarter on quarter by a hefty 5% from 40,000 to 42,000 rupiah, which by no means an easy effort. That was the result of both our ability to expand to more quality subscribers and also maximize the momentum of price reparations. Furthermore, our digital transformation strategy also progressed well, with 27 million customers now using the My Excel and AccessNet apps, which provides a solid base for engagement with our customers. Let's move now to our convergence journey. As I briefly mentioned earlier, we are building our business with the strong support of rigorous data analytics to pinpoint the strongest pocket of growth that will enable us to strive in our convergence play and expand to new potential business lines. Our convergence journey has shown timely progress that began with our establishment of the vision to become the leading convergence operator in Indonesia. With this aim, we planned to fully converge all lines of operations within the company, not only in converged products, but also organization, IT, network, and distribution channels, which we have progressed from the onset of the strategic direction. This will set up with a solid foundation to move forward effectively and efficiently, as speed is key for us to lead the converged movement and grab onto the conditional market. We introduced the first Converge service in Indonesia through the launch of Excel Satu, a product that combines fixed broadband and mobile services with one simplified billing. Along the way, we also built a strong mobile customer base by acquiring quality subscribers with more focus on the family segments so we can build on this base to deeper penetrate our Convergence services going forward. When the focus on growing our fixed broadband product, Excel Home, to quickly seize pockets of growth in the unpenetrated FPP market. Customer acquisition was also portrayed by the creation of parallel product to entice customers into Excel's wide range of service. To expedite the capture of the unpenetrated fixed broadband and fixed mobile conferencing market in Indonesia, we initiated the structural transformation where Excel will forge a stronger partnership with Linknet with the ultimate objective to ramp up home connect. Finally, our expansion of business lines does not stop at fixed broadband and fixed mobile convergence for the home and family segment. With the continuous development of new technologies, we aim to expand our revenue streams toward new integrated services that will cater to various communicator needs going beyond connectivity. Overall, our journey going forward remains solid with strong strategies that will deliver sustainable revenue streams to strengthen shareholder failure for all our investors and stakeholders. Let's move to the next slide. We would like to highlight that we aim to accelerate our convergence strategy in line with our goal to become the leading conference operator in Indonesia. This is being done through creating conference organization, network, as well as IT architecture. In the beginning of 2023, we have already transformed the whole organization towards convergence with customer-facing units to now be able to serve multiple business lines and having faster go-to-market. Secondly, we have also initiated to optimize investment and build the network toward convergence with focus on transformational transfer network, which is the key role that enables a converged network. Finally, we have also this IT architecture for a comfort to digital telco aimed to address our business aspiration for personalized digital experience, segment synergies, and having omni-channel sales and distribution. Let's move to the next slide. On this slide, I would like to elaborate on our progress on the structural transformation that we introduced in the first quarter 2023 announcement. The first step of the transformation is the faster rollout of home buses. They will pave way for faster penetration of fixed broadband. Our partnership with LinkNet progress as planned with the signing of FTTH network development and operation agreement to roll out 1 million new home buses in the next one year to ramp up the distribution of XL-SATU fiber in more than 10 cities and regions across Indonesia. I'm pleased to share that access to fiber can now be accessed in 60 cities with many more to come this year as the structural transformation and focus will lead to Lignet having 8 million home passes and in turn access for us to deliver connectivity to meet the under-penetrated demand. Regarding the second step of our transformation, we are still on track on the creation of Serco and Fiberco Through the delaying of assets, there will allow for greater focus to capture the market and promote synergy to immediately ramp up the penetration of fixed broadband in Indonesia. Next slide, please. So ladies and gentlemen, accelerating from our positive performance in the first quarter, we were able to further strengthening our financial metrics through a solid rise in revenues with improved margins, achieving double-digit growth in total revenue, EBITDA, and also normalized net profit. Next, on the operational indicators. Our strong financial result was accompanied by a continuous uptrend in operational indicators, showing a strong traction for convergence penetration, which has now reached a remarkable 56%. Even during price preparation, our subscribers still grew to 58 million, driven by prepared subscribers, followed by a substantial increase in ARPU to 42,000. Our investment to deliver excellent network experience has proven successful in driving up data usage, as traffic grew 21% year-on-year as of first half 2023. Next slide, on the OPEX. Operating expense growth remained controlled at 11% year-on-year amid the higher revenue growth of 12%. The growth of OPEX as of first half 2023 was driven by network expansion to capture the momentum and ultimately improve customer experience throughout the first half of 2023. On the other hand, we saw lower sales and marketing expenses year-on-year as our digitalization initiatives prove fruitful to promote efficiency in our distribution channels. Next slide on our investment. We continue to carry out smart investment to keep improving our network quality for our subscribers. Our 4G BTS has expanded beyond 97,000 with 59% now already fiberized to ensure stronger connectivity. The 27 million users of our digital application was also the result of our ongoing efforts to deploy investment in digital transformation. Last slide. Finally, I will finish off today's presentation by restating our full year 2023 guidance. Due to the strong revenue growth in the first and second quarter of 2023, we now aim towards a high single digit growth in total revenue with EBITDA margin at around 49% and capex at 8 trillion rupiah, largely allocated to further strengthening network quality and improve digitalization. With that, I conclude the presentation. Thank you very much.

Thank you, Imudia, for the thorough work through of the XLXL performance and strategy. Ladies and gentlemen, we will now proceed to the Q&A session. As a reminder, the Q&A session will be on hybrid mode. So to ask a question, you may type it in the Q&A box. Please ensure that your full name and your company name is stated or we will not be able to read out your question. If you'd like further clarification after your question is answered, kindly use the raised hand button and we will call your name where you may proceed to unmute your mic. Okay, so the first question will be from our manager from CT two questions, the first one is what are your expectations on mobile pricing into the second half 2023. Is there room for further pricing pieces and the second question is what are the margins for the home business, how will the home business impact your total margins over the long term and how will the. Okay, so thank you for the question.

I think we can see that our strategy of increasing the prices during quarter one has paid off. So we have seen an arduous increase. We have seen the revenue increase significantly and our customer base is still growing and strong as well as the traffic. Now, I will be very clear and direct answering the question. So is there room for further price increases? Yes. Are we going to increase prices further in second half? Yes. That is the plan, unless again, I mean, something very weird happens, etc. For us, it has played well. We believe that we have still room to go in that direction, and we have already planned price increases for this period. For the second half, I won't disclose when are we thinking of that, but it's already there because we truly believe that there is still room for it. Of course, we will always, I always say, monitor what's going on in the market and play around with that, but the answer is yes.

Henry, good morning. This is Abhijit. I will take your questions related to the home business. So the model that we have followed, actually, let me take the last question first, and then I'll come to the margins. So typically, when you enter into a leasing kind of a model, when somebody is building for you and you are riding on the network as a tenant, there are multiple models we observe in the industry. First is the traditional FiberCo model, where one provider builds a network and there are multiple tenants. But there are other models as well where Satish Penmetsa, Fiber providers actually go and build where we asked them to build and we are the tenant for a certain period of time. Satish Penmetsa, Typically, there are three variables in these discussions first is what is the least fee that we have to pay to the fiber provider. Satish Penmetsa, Second is what is the minimum commitment of penetration that we commit to them, but the other variable is what is the period of exclusivity that they give us so. In our case, we have deployed both the models in the market. We will continue to do so and evaluate what is the long-term feasibility of these models. Going back to your question about the margins, given that we are not injecting our own CapEx into this business, it's a leasing model, then what you would typically expect is that the margins are slightly lower as opposed to if you are injecting your own fiber and building it. At this stage, we are still evolving the business. So I cannot share a specific number with you, but we will come back to all of you in due course. Thank you.

Okay, the second question will be from Henry Teja from Andrius Curitas. Hi, Julia. This is Henry. Congratulations for the strong results. Would you mind to share some updates on the mobile competition so far and how we should look at the ARPU trend in 2022? I think we have elaborated on the mobile competition. Maybe you would like to add some ARPU trend, David?

Yeah, so as I was saying, right, for us, the price increases that we did in quarter one played very well. Not only, I mean, we did price increases in the market, of course, but we have also done a lot of effort with our personalization, trying to keep increasing the ARPU, taking out a lot of the freebies that we were giving. So it has been a big effort. And as I was saying, we are fully committed in keeping the price increases during this second half because we truly believe that there is further room. Have we seen competition following during quarter one or even quarter two in the price increases? To be honest, we have not seen big movements from anyone. in any direction, which it's not a bad thing. So we have not seen prices going up, but we have not seen either any aggression or prices going down. So we believe that the market is now rational and we believe that there is room for it to keep improving. We are going to move in the correct direction. We are going to increase prices. We hope that the market goes in the same direction because then the the order of magnitude or the impact of what can be achieved will be much higher. So I think that's a little bit. Market is rational. There is room for more improvements in pricing. Our commitment is very clear that we are going to go in that direction during this second half.

Thank you, David. We would like to check with Henry if there's any follow up. Henry, you may unmute your mic.

Hi, this is Henry. Thank you so much for the answer. Perhaps if I might slip another one question regarding the home broadband business, would you mind to share some kind of the guidance? What will be the Excel home subscriber target for this year and also next year?

So Henry, you will recollect that in previous calls, we had indicated an ambition that was north of 400,000 homes connected. Given the current rate of growth, as we elaborated in our presentation, we are fairly confident about that ambition that we had set. So which is around 400,000 homes connected for this year. Next year is a function of You see, this market is a function of supply. We all agree that the demand is pretty strong. So as we move towards Q3 and Q4, as the partnership with Linknet crystallizes and develops, I think we'll be in a position to give a better indication of our ambition for 2024. Okay.

Okay, thank you, Pat. Okay, we will move to... So I will take the first question, so thank you for the question.

So actually. The high growth that we achieved in first quarter is actually supported by several things, as David has mentioned. One of them is the price increase that we did in quarter one. And the other is because the price is actually nicely adjusted when Lebaran is coming. So that's actually why the second quarter, we have a very good growth, which this situation might not happen in the second half. So that's why for the second half, we still have to be cautious with the market movement and also for the microeconomy situation. The other thing that's probably you might see from our FS is that the addition of the growth is also coming from the acquisition of Hypernet that has happened starting second quarter last year. Thank you.

Okay, thank you.

I think the second question from Husseini about the further price increase has been, yes. Answered by David, right?

Yes. Okay. Hosseini, we will open the line for you if you have any further questions. Can you unmute?

Yeah, hi. Thanks for the opportunity and congratulations for the good set of results. Just a few questions. First is on the fixed broadband. Now, Pagabhijit, 400,000 homes connected target. Any number on how many lines you expect to connect or how many customers you expect by the end of this year? And the related question is on the competition, that how do you see your competitors respond to Excel's expansion into fixed broadband? And any color on the ARPUs as well would help. And the second question is on the mobile side. They just wanted to check like why the competition remains rational, but do you see any impact of price increases on consumer spending or some rationalizations on their data spending and things like that with price increases?

So yeah. Any more questions?

That's it from me.

So thank you. I think your first bucket of questions had three questions. The first one was how many lines? So when I say homes connected, these are actual fiber lines into the home. So this means our ambition is to have 400,000 fiber lines into the home. if my understanding of what you asked us is correct.

So sorry, my question was more on the number of customers.

Well, it's a function of how many, well, we consider a home as one customer set. And then depending on the number of individuals living in that family, which we also target through our Excel Satu proposition, then we give SIM cards. So from a customer definition standpoint, one home is actually one customer. Okay, so this is your first question. Second thing is competition. Look, all of us agree Indonesia is one of the most under-penetrated market when it comes to fixed broadband in the region and perhaps globally as well. So it is but natural that there is a significant interest from not only the existing players, the telecom operators, but there are other ISPs as well. And even on the supply side, we talk about fiber cores etc. So there is significant interest on that. So I would assume that any competitor or any player in this value chain who has an interest will expend all energy and effort to get a strong positioning in this market. Sorry what was your third question? It was related to ARKU right? We are in a phase of tremendous growth. So we are observing our ARCO is closer to 300,000. Now let's see how this develops. Typically, when the acquisitions are high and you're in the growth stage and competition intensifies, I think this will naturally subside a bit. But as of now, we are near 300,000.

Understood.

Okay, so let me take the mobile question, right? I think it was regarding like, okay, we have increased prices. What happened to the customer base? Whether we see any type of behavior change, et cetera. So as you can see, our traffic has still increased, right? And our traffic has increased because one thing that we have seen during the second quarter is that consumption per subscriber has increased very healthy. So one thing that we have seen is like, okay, our customers are consuming more. And that's a very good sign. It's true that when we increase prices, there are always movements among different packets. Usually, a couple of effects usually happen when you increase prices. One is people tend to stretch a little bit more the packet that they buy. So we are already very high numbers, right? But the percentage of the quota that they buy, that they use, it's very, very high and keeps increasing whenever we increase prices. That's one thing that we see. Another thing that we see is also people tend to migrate a little bit to lower yield packets. So they can spend maybe a little bit more or buy packets that are a little bit more expensive, sorry, but that they can get a little bit more of gigabytes per rupee, right? So those type of effects we see, but again, those are normal effects that happen when you increase prices, but the good thing is that the traffic increases and the consumer per subscriber has increased. So I think that's number one regarding the consumption. Number two is the number of subscribers. You can see also that our number of subscribers increased, and that's also healthy, which means that even with the price increases, we have been able to attract and our value proposition is still good. Now, and I want to also underline this because for us, it has been a very, very big effort that started already a while ago, but in quarter two, it has been big, and in quarter three, it's even bigger, right? The push that we are doing. we are doing a very big effort in trying to let me use the word kill the negative EBITDA subscribers or the subscribers that we believe are not profitable for us because they are abusing either the packet or I will translate in more the use and throw behavior of the SP when we know that the SP is very expensive. So we are attacking that segment very strongly. We have been able to reduce the amount of let me call it, unprofitable subscribers in big amount. And even with that, we have been able to grow the number of subscribers, which you can see that it's very positive, right? Answering to your question, price increases, have we seen a big change in our behavior of our customers? No. Usual trends, yes, maybe they optimize a little bit more the package, they move here and there, but the consumption per subscriber has increased, the number of subscribers have increased, although we have attacked very strongly, and we are doing so now, what we call unprofitable subscribers, which in a big part of them is like they use and throw a SIM use and throw subscribers. Hope this answers the question.

Yeah, this is very clear Pak David and Pak Abhishek. Maybe just one follow-up Pak David. What portion of your revenues or subscribers this use and throw kind of behavior kind of subscribers are there?

or represent? Yeah, I cannot share a percentage of the of the total revenue is small. I mean, it's relatively small as you can imagine. And by doing that, what we are doing is migrate these guys to vouchers. So what previously was use and throw, now they are becoming like longer tenure subscribers. So it's not a big percentage and it keeps decreasing, right? And we are moving that revenue towards revenue that is much healthier revenue that is longer tenure subscribers. And it's much healthier, not only because the loyalty is there, but mainly because we start to know these subscribers better. And we can improve their ARPU via our personalization engine. You know that if I have data of a subscriber for a few months, I perfectly well know how to increase their ARPU, what they like, how they use, etc. On the other hand, if this subscriber is using and throwing the SIM card, it's very difficult for me to understand the subscriber because it's always like a new SIM card, like a new subscriber, right? So it has many positive effects, this one.

And that's it. This is very clear. Thank you very much.

Thank you, Heng. Okay, the next question will be from Indra Chahir from Macquarie. His question is, can you elaborate on the BTS additions? Are these in new sites or existing sites or for location? And geographically, where do you see better investment return for network expansion? We will start with Papyrus.

Hi, Indra. Thank you for the question. I think with regards to the BTS additions, I think certainly we were looking at more co-location because certainly co-location is faster time to market. I think that's key for us. Secondly, in terms of the areas that we look, certainly we are looking at areas for smart investments through our analytical engine. But there are certain pockets that we see growth, not only in Java, but also XJava. Maybe, David, would you like to add any particular areas that you see as well?

No, as Pafelius was saying, I think it's more collocation, but we look to both. So we know where our coverage... In the end, when we invest, we know where we need additional capacity, we know where we need additional coverage. Additional coverage can be in complete greenfield areas, but it can also be in Quechua Matanz, where we are already there, our coverage is not enough for us to let us compete properly. And we have very clear what is the, let me put it this way, the amount of coverage that we need in order to be competitive. So some of the BTS that we are adding now will not only bring revenue to that new BTS, but it's going to support a lot part of the network that we have created in certain areas that currently because of the scale is still not there. So we are very positive that this new network that we are deploying is going to bring not only the impact of them by themselves, but also the impact on the surrounding BDSs.

Okay, thank you, Pat. So we would like to open the line for Indra if there is any follow-up questions.

Yeah, thank you very much for the opportunity. So I'm just wondering if you can probably give us a bit of a breakdown between non-Java and Java, probably. And I know that you are, I know it's still in July, and it's probably too early to talk about the next year, but right now you're budgeting a capex of 8 trillion. So do you think as ARPU is actually getting stronger and the revenue is now, I think, heading to double growth, do you see that this CAPEX, there's room for, I would say, a CAPEX expansion going to 2024 and 2025? Maybe I'll stop there. Thank you.

Yeah, I think, thank you again for the question. I think from the split of a Java next Java, we don't provide that split. But certainly, as David was alluding, we do see pockets of growth, right? Not only Java, but also XJava. With regards to the CAPEX number, I think we're still guiding at about close to $8 trillion. But I think it's still too premature for us to give an indication for the next two years. Thank you.

Thank you, Pak. We will continue with the next question from Martin Mandiangan from . So LinkNet is currently integrated into XL and being the fiber core, this will impact to significantly higher financial leverage in LinkNet. May you explain what kind of group support will be potentially given to LinkNet? Budian, would you like to respond?

Maybe I'll take that question. Maya, I think thank you, Martin, for the question. It's an interesting question, but certainly this question would be probably best answered by LinkNet themselves, rather than us, as we're clearly focusing much more on the Servco. Secondly, that question could also be addressed to Axiata, right? Because this question is highlighted from a group support perspective. Having said that, we've actually signed the agreement, as I said, for the 1 million home pass, as we've articulated in the first quarter, and it was highlighted in this presentation that's well on track. So that one billion home pass support where we're very confident that they're able to deliver, that will allow us to feel our ambitions to grow the home connect and capture the market opportunity. Thank you.

Okay, thank you. I would like to open the line for Martin if there's any follow-up questions.

No, thank you from me. Thank you, Pak. Thank you, Pak.

Okay, the next question will be from me for my goodness from dinner dinner itself. Congrats on the results, thank you, where's the card I put on the coverage for that second question is, would you provide more info on the delay during process with that. And the third is, what is the type of costs that will continue to grow in the second half of 2023 as you are now at what 8.5% margin already when you are targeting 49. We'll pass this question by the chips.

Yeah. Okay. Thank you, Nico. As I mentioned in my earlier response, what we are observing is that our ARCO is near 300,000. Nevertheless, as we know, as acquisitions grow up in a highly supercharged growth market, these ARCO will likely subside. But let's see what happens. The delineating process, there are two components to it. The first component is the agreement that we signed with LinkedIn on them building 1 million homes pass for us. So that is already done and execution of that agreement is underway. The second part of the de-layering process is for LinkedIn to become a full-fledged fiber core and Excel to take over their existing retail subscribers. This process is still underway between both the parties In a previous call, in the last quarter call, we had indicated that the target completion date is December 2023, subject to regulatory approvals. And I think we are still giving guidance that the target date is still the same. Costs in second half, I will give it to Bhaferoos to take that question.

Yeah, thank you, Nico, for the question. I think in the second half, we'll clearly focus on targeted investment as well, as well as rolling out, right? You can see even from K-Flex guidance, From a first-half perspective, there's more room to go in terms of the second half. That's in a particular area that we will roll out for the targeted sites from the mobile, as well as the home connects, costs related to the home connects, as we pursue the ambitions to roll out more and more, a fixed mobile convergence ambition.

Okay, thank you. Nico, you'll open the line for the clarifications.

Yes, thank you, Maya. Thank you, Maya, for the management, for the time, and congratulations again for the good results. If I may follow up on Abhijit's feedback, so it appears that there will be some sort of swapping, swap between, you know, Linknet subscribers with... home passes, I suppose, network supply from LinkNet. Should we incorporate some costs? Would you have to pay some difference to pay additional for the subscribers of LinkNet? Should we incorporate some amount to fill the gap for this swapping agreement, let's say? Yeah, that's number one. And yeah, I will stop here first. Yeah, thank you.

Thank you, Niko. Your understanding is correct. So the intent is for Linknet to convert into a full-fledged fiber core. By that definition, it means that they will focus on the infrastructure and Excel as a nationwide SERP core will focus on the retail business. And Linknet customers will be moved over to Excel. Now, a second question pertains to the mechanics of the transaction. I think it is very premature right now. We are in discussions on this. So I cannot really say whether you have to allocate some cash or anything. I think it's very premature.

Thank you, Abhijit.

Yeah, you're welcome.

Good enough. About the enterprise, what sort of outlook should we start thinking about Hypernet and about your enterprise segment and they understanding that also has a has a active. It has revenue yeah generating from from enterprise businesses yeah how we should think about the contribution, the revenue contribution from from the space yeah Thank you.

yeah you know that's a good question. Enterprise forms a vital cog in our efforts to generate new revenue sources for Excel. We've been talking about home, but enterprise is the other part. And traditionally, Excel has been focused on core or basic connectivity solutions to our enterprise customers. And we wanted to branch out into a broader array of services, managed services, cloud, et cetera. ICT services. And the way to do it, so Hypernet was one of the mechanisms. So when we acquired Hypernet, they offered us entry into new segments that didn't exist. So we continue to focus on that growth engine as well, with strong ambitions to further solidify our market position in that space as well. We have been talking about conversions, but mind you, convergence is not necessarily only focused at the residential customers, right? There's a huge number of SMEs and medium-sized enterprises. And even if you bring a full array of communications and ICT products and services into our big clients as well, that also is conversion. So while convergence as a theme is focused, you're very right. We are aggressive across all the markets.

Okay. Okay, maybe if one other topic, if I can touch base, the spectrum, do you see spectrum rollout this year, 2023 or postpone to 2024? Thank you. That's my last question, thank you.

Thank you. So for the spectrum auction, I think the coming spectrum that has been announced by the government for spectrum of 700 megahertz and also 3.5 gigahertz. I think in the last call that what I shared within the call at the time is that for at least for 700 to be auctioned this year, but it will be towards at the end of the year. So I think you all are aware that recently there's been quite rapid changing in terms of the ministry of coming for. So actually for the new minister, we have not heard anything about the spectrum auction, but currently our assumptions still that for the 700, it will be auction later this year and for 3.5 in 2024.

I see. I see, but that means if the spectrum does postpone to, let's say, first quarter or second quarter, that means margins, it's better for your margins, I suppose, yeah? Your profit margins.

Yes or no for this year. Of course, that will be better for this year. But still for next year, then we have to carry those expenses in 2024. What we heard is that the government might have like a new mechanism for the auction. So we hope that the government will be able to actually bring down the regulatory charges to the level that our neighboring countries have at the moment.

I see, I see. But by that time, if it moves to 2024, that means you have more time to improve your prices, I suppose, your top line, yeah, should be like that.

Of course, that's what we have, what we hope. But I also want to stress that actually within our current spectrum, because we have managed to complete our 3G shutdown and fully reform the 3G spectrum for 4G, actually we're still in a better situation from the spectrum perspective.

Yeah. Yeah. OK, thank you. Thank you, Budhia. Thank you, everybody. Thank you, Abhijit. Thank you. Thank you.

Thank you, Nicole. Yeah, the next question is from .. I would like to ask about, is there so far the program for rationalizing your subscribers, such as removing the journalists? And how can you maintain your subscribers going forward? I think David wants to answer this question.

So correct, as I was saying before, this is an effort that we have been already doing during this whole year, right? Especially in quarter two and now we are moving into a stronger to make this happen. The rationale is very, very simple, right? So a non-profitable subscriber, we don't want it in our network. Number one, because it's not profitable, but number two, because it's using resources that can be used in order to improve the customer experience of the profitable customers. So I think there is no question on our side that, okay, there is a set of customers, call them abusers, not profitable or whatever, that it's not healthy for us to have. There are two ways to that. One is convert them into profitable subscribers. And that's what we try to do in most of the times, right? So move them from being rotational churners that are consuming a SIM card every time that they buy a packet, and that's very expensive, and that's what makes them unprofitable, convert them into digital users, and that way they convert into profitable. That's the ideal world, but if for some reason they don't want to do that and they want to to go to competition or whatever it is where they can still keep doing that. So be it, right? Again, for us, it's an EBITDA positive exercise. Now, for us, If a rotational churner converts into a digital one, then it's not losing the customer. It's like winning a good customer. If we lose someone that is non-profitable, it's not also a drama in the sense that it's positive for the company, it's positive for the customer experience, it's positive for the business. Now, how do we pretend to keep increasing our customer base? Very simple, as we have been doing until now, right? We believe that our value proposition is strong. We believe that our digital value proposition is also strong. we have a lot of personalization and CVM activities in order to make that happen. And in the numbers that we see, our daily active users, not only in the application, but also in the network, the daily connected active users that you have in our network keeps improving, right? So we see healthy growth of healthy customers. And I think that needs to be... that's going to be our direction, our direction moving forward. Hope that I answered the question.

Okay, so in the interest of time, we will go straight into the next question from Hughes Chaudhary from HSBC. A few questions. Can you talk about the outlook for mobile Apple? The second one is Telkomsel has launched a fancy product. What is likely the impact of this on Excel as an economy industry? And can it lead to churn of high-value subscribers for Excel Axiata? And what is its strategy to defend? The third one is on HomePass rollout. Has target changed in the first quarter of 23? You mentioned 8 million new HomePass. target for five years, but this time you mentioned one million new home classes target for one year. What has changed and also can you suggest which regions are you targeting for the next one billion home class expansion or is it in new cities where any home is not available?

I will start maybe with the first question, the mobile art book. So I think it was like almost a few quarters ago that we were able to enter what we call the club of the 40s, right? And we are very, very happy to remain there. We have been able to improve it to 42. 42 000 and moving forward as as i will say in our direction it's very clear we are going to keep optimizing our our prices increasing up with one of our our main objectives number one by by increasing the prices in the market but also number two we have a very sophisticated doing a lot of personalization in order to increase those ARPUs. So I cannot give numbers, but of course, it's in our top priority, number one, to grow our number of subscribers, but number two, of course, to increase the ARPU of subscribers. One and the other need to come hand by hand, right?

So... Hi, Piyush. This is Abhijit. So let me answer your questions one by one. Your first question is about... Calcomsell entering the FNC space, right? Actually, this is very good. And in fact, for us, this is a validation of our strategy. We had seen that the market and the industry will move there. And so we decided to make a move last year. In terms of the impact on the industry, I think it is good. It will further drive convergence in the industry. Second question is, lead to churn of high value subscribers for Excel. By that I assume you're talking about high value mobile customers, but we are not the number one in the market actually. So we are the challenger. So I think this question is better posed for the ones with the major market share. So this is not a concern for us. Home pass rollout, has the target changed? No. And in Q123, we had mentioned that the ambition is in conjunction with Linknet to deploy 8 million home paths over five years. And yes, we are mentioning that 1 million over one year, but this is only over the next 12 months. So the target is not changed. It is still the same. Regions we are targeting for the next 1 million home paths expansion. As you know, given the CapEx intensity in this business, Selection of the right areas is absolutely key because once you deploy the infrastructure and deploy the CapEx and you find out you made a mistake, there's no coming back. For us, I think David was alluding to our data analytics capabilities in our company. And this is the approach we have been taking for the past two, three years. We actually pinpoint with great precision which areas and not only at a city level, even down to a cluster level where we should deploy. So we continuously keep on evaluating. It could mean going to a particular city where there is less competition, or it could mean going to a particular city with high competition, but with clusters, pockets within those cities where there is less competition, you know. So I cannot give you exactly where we are going, but this is, I believe, a competitive advantage. Your last question is, new cities where IndieHome is not available? Not necessarily. IndieHome is the number one player in the market, right? So most of the places, they are available. But we look at all the variables that I mentioned. I hope I've answered your questions too.

OK. Thank you, . I think we will conclude with one last question from . Which is, what is the percentage of mobile review coming from Java and non-Java? And if you can disclose. If you cannot, then maybe some colors on this. So will answer your question.

Yeah, thank you so highly for the question. We don't usually give the details, but just to give an indication, most of the revenue still comes from Java. About 65% is still from Java, and the balance is ex-Java.

Okay, the last question, so one more question from Kevin Jonathan Majaita. Hi, thanks for the great performance. I would like to ask if we compare the impact in second Q23 with second Q22, the impact experience and decline, could you provide some information on this? And the second question is, do you still expect the creation of Fibre concert hall will be finished this year? Last one, do you mind to share which area has the highest number of Excel sample subscribers? So we will start with Park Begus.

Thanks, Kevin, for the question. For the net profit movements, actually, in the slides, we have actually tried to explain that. You can see from the slides. Net profit actually declined, but that's also due to the one-off in Q2 2022. So on a normalized basis, net profit actually increased on a year-on-year basis from the second quarter of 2023 versus the second quarter of 2022. The one-off that I mentioned is actually there was a gain on tower sale transaction that happened in the second quarter of 2022 to the amount of about $30 billion. Now, on the second question, do we still expect the creation of Fiberco or Servco would be finished this year? As we indicated, we are very much on track. We've done the completion of the first part of the transaction that we've announced with the signing of the 1 million home pass, subject to, obviously, regulatory approvals. We're still on track to complete it by the end of the year. And to the last question, we will hand over to Pak Abhijit in terms of, do we provide any colour in terms of which of the areas has the highest number of XL Satu subscribers?

By area, you mean which city? Actually, no, we cannot provide that, to be honest. What we can provide you with is, actually, we are very excited. You saw in Ibu Diyan's presentation, we have achieved cross 50% penetration of Excel Satu in our base. So this is actually a validation of our belief in our strategy that conversions will drive in this form.

Okay. Thank you, Abhijit. And with that, we will conclude today's call. We would like to thank everyone for the participation. And as always, do get back to us through investor relations if you would like any further information. So thank you so much, everyone. Please stay safe and healthy, and we will see you in the next quarter.