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.