PT XLSMART Telecom Sejahtera Tbk

Sure. Thank you, Christopher. And good afternoon, everyone. And thank you all of you for joining in today. Today is an important day. It's the first full quarter of Excel smart journey. Just to remind you, our merger happened 15th of April, 16th of April. So the last quarter was two and a half months of command operations. This time is the first full quarter. And the numbers which we are reporting are a result of that. And I'm pleased to share that the momentum continues to build across our businesses. We've delivered a strong performance. Revenue, reported revenue is up 38% year on year, 9% quarter on quarter. Underpinned by very strong subscriber quality, improving ARPU and good progress which you're making on the integration. Network integration specifically is progressing well. As you would know, national roaming for smartphone customers was completed in record time. The Moken rollout continues to expand, improving both coverage and quality for all our customers. Financially, we are seeing a very healthy growth, underlying growth. Normalized EBITDA and PAT reflect the strength of our core businesses. Though the reported results still include temporary one-offs, which are normal for a merger, and they are related to integration and asset optimization. Synergies are taking shape. We'll speak a bit more about that in the next few slides. And we are accelerating value creation across operations, procurement and infrastructure. These initiatives are moving steadily towards our ambition to become the industry's most efficient and agile service provider. Overall, I believe this quarter demonstrates resilience and strong execution as ExelSmart continues to unlock long-term value from the merger. If I move to the next slide, post-merger, our integration engine is running at full speed. One example of that is our customer experience and service operation center, Seesaw, which was launched in July. a major milestone that allows us to centralize network monitoring, service quality and field operations across all the three brands we have. On the network side, we've started and progressed significantly towards consolidating overlapping sites, streamlining our vendor ecosystem and optimizing the tower utilization. All these efforts are resulting in tangible cost savings. and happy to report that we are on track to deliver between 150 to $200 million synergies for this financial year 2025 largely coming from operational efficiencies and vendor rationalization. Full benefits, what we spoke about earlier, 300 to 400 million run rate, pre-tax, that will come from after the integration is complete. But good solid start towards that direction. Obviously, the next in pipeline would be the IT system unification, which again would be a significant value generator. Office integration and expanding our partnerships on the RoMEX side. And we'll also further align the organization to operate as one unified Excel smart. If I move to the next slide, please, which is talking about the customer experience. As we said earlier, customers and employees will remain at the forefront of whatever we do. Both quality and coverage of our network would be super important in this regard. And through Moken integration, all three brand users, Excel, Access and SmartFriend are experiencing much better download speed. They have gone up by as much as 70%. And the population coverage specifically for SmartFriend has gone up by 38%. These network improvements translate directly to a better quality of service, which is a very key differentiator in today's competitive network telecom operations. We also celebrated our National Customer Day in September with nationwide campaigns through ExcelPoint and SmartPoint, reinforcing our commitment to customer loyalty and engagement. We received significant positive feedback and which is a clear sign that our investments are making a real impact on the ground. If I move to the next, which is on the network update. We have now integrated over 15,000 sites, which is just one third of the number of sites which we have to integrate. An extended network access for smartphone users to 192 cities through national roaming. A total BTS count reached more than 209,000 sites, up 27% year on year with majority being on 4G. MoCon integration is on track to complete by the first of 2026, which is within the four quarters of the start of this project. And the results are already visible, as I spoke about earlier, better coverage, higher speeds, and more consistent services across geographies. If I have to cite an example, this was the 2025 MotoGP event in Mandalika, where our network handled massive traffic volumes very easily, proving our readiness to deliver world-class connectivity across the country. If I move to the next slide, which talks about the three growth pillars, and this is something we've been talking about and we are very excited about. The three growth pillars, mobile, enterprise and home. And each pillar by itself represents a focused growth engine. And it has a distinct strategic focus. But collectively, all of these will contribute to company's mission of connecting every Indonesian to a better life. If I talk about the first pillar which is mobile, it is represented by three brands, Excel, Axis and Smartfin. I strongly believe that the multi-brand approach enables us to effectively target different customer segments and it's a unique strength we have as compared to other operators in the market. And post-integration we've seen encouraging momentum driven by a simplified starter pack strategy and optimized product offerings. which is supporting a stronger market recovery. And I'm sure will help sustain future output growth also. We're also driving digital engagement through all the apps we have on Excel smart, my Excel, access net, my smartphone, which is now reaching more than 39 million active users on a monthly basis, which is up 21% year on year. This of course helps in improving customer stickiness and monetization. The second pillar is enterprise which we work under the brand Excel smart for business. Here our focus is to become a trusted partner for Indonesia's digital transformation for both private sector and also the government clients. A key milestone in this journey was the launch of ESTA, Enterprise Smart Technology and Automation, which was launched in July 25. ESTA provides a full suite of industry solutions across connectivity, IoT, cloud, cybersecurity and automation. This will help position XSmart not just as a telco, but as a strategic ecosystem partner, enabling digital transformation beyond connectivity. The third pillar is home anchored by our brand ExcelSatu, which continues to gain strong traction in Indonesia's fixed broadband market. We are reinforcing our position as one of the leading fixed broadband providers by focusing on user experience, flexibility and family oriented solutions with the help with the effort to stabilize the ARPU. ExcelSatu continues to drive deeper household penetration and strengthen customer loyalty. which is a key differentiator in this competitive market. So if I have to summarize, Excel smart growth is fueled by these three complementary pillars, mobile, enterprise and home. Each targeting a unique opportunity while collectively driving sustainable long-term growth for the company. If I move to the next slide, slide number nine, it's talking a bit more about the enterprise business. And as I said, this is expanding rapidly, powered by the launch of HESTA. And it's a comprehensive digital suite as I spoke about earlier. We also hosted Bravo 500 Summit in collaboration with Ministry of Digital and Information, bringing together 500 of Indonesia's leading corporations. Our enterprise solutions now reach key verticals such as financial services, manufacturing, logistics, healthcare and natural resources. Combining ICT services and big data analytics to deliver smarter and more integrated outcomes. We believe momentum is strong and we see continued opportunities and more industries accelerate digital adoption. I'll take a pause now and And over to my colleague, Pa Anthony, to walk us through the financial designs.

Okay. Thank you, Parajeev. I think the next topic will be the financial and operational highlights. Let me start with the operational performance first. So at the end of the quarter three, our consolidated subscriber base already around 79.6 million customer base. reflecting normalization following to our starter pack price adjustment, which is I think the latest one that we did for a smart trend brand in the month of July or August. So all the three product brands, starter pack, already now, already adjusted. That's the situation on the starter pack price. Then on the On the data traffic, I think despite of the decline in the subscriber count, the data traffic continue to grow, reaching to 3.9 exabyte or 3,900 petabytes, up to 53% year on year and 2% quarter on quarter. The ARPU improved to become 38.9 blended ARPU, this one. from 35,500 last quarter. This is a double digit growth, which is around 10% Q on Q, highlighting our focus on the, focusing on the quality growth as well as the customer value. Okay, moving to the next slide, to the financial. The revenue grew by 38% year on year and 9% quarter on quarter to IDR 11.5 trillion rupiah. Driven by the full quarter consolidation of smart trend and higher mobile ARPU. The normalized EBITDA reached to 5.4 trillion rupiah, up to increased 9% Q on Q and 24% year on year. This is reflecting the underlying strength despite of the ongoing integration costs. The reported PAP improved to a loss of 1.38 trillion rupiah. While if you look at the normalized PAP, the normalized PAP already turned positive at 1.15 trillion rupiah. This is of course after the adjustment of the one-off expenses, which is the accelerated depreciation, non-cash item, and also the one-off integration costs The margins are stable with the normalized EBITDA margin at around 47%. This trend actually confirms that the integration is progressing smoothly and the synergy is already starting to flow through our financials numbers. Okay, move on. Now, this is maybe to give another explanation how do we calculate the normalized PAT, normalized profit after tax. In here, we are presenting both reported as well as the normalized EBITDA and PAT to provide a clear picture of the underlying performance during the integration period. The normalized figure already exclude one of items such as integration costs. number two is the accelerated depreciation which is related of course to network consolidation and then in Q3 2025 you can see that the reported EBITDA was 4.9 trillion rupiah with the normalization adding from rupiah 554 billion in integration expenses so it brings to the normalized EBITDA to around 5.4 trillion rupiah the reported PAT stood at the loss of rupiah 1.38 trillion, but after adjusting all these integration costs, accelerated depreciation and asset impairment, the normalized PAT become positive at 1.15 trillion rupiah. This approach basically to ensure if we want to compare with the previous year, So this is to show a better comparability and better to reflect the company operational performance. Okay, move on to the next slide. So let me now walk through on the cost structure, our operating expenses. So OPEX increased by 10% quarter on quarter and 66% year on year, reaching to 6.6 trillion rupiah in the third quarter 2025. This increase reflects the enlarged scale of our business because it's a consolidation of smart trend and Excel. So this is already including a higher infrastructures as well as the regulatory costs, as well as all the integration related activities. Of course, we remain disciplined on the cost management, ensuring that all the expenditures are tightly linked to the synergy realization and also creating long-term values. So that's the end of my presentation. I shall now hand over back to Parajit to provide the full year 2025 guidance as well as the closing remarks.

Sure, and thank you, Panthony. As Panthony mentioned, I'll talk about what's our guidance for 2025 whole year. Revenue is expected to grow broadly in line with the market. On a reported basis, growth is expected to be between 20 to 25% year on year. EBITDA margin will remain between low to mid 40s range, mid to 40% range. On CAPEX, the capitalized CAPEX is projected to be around 10 trillion rupees and I think it requires a bit of a clarification. This is not a reduction in the investment. If you remember, when we spoke last time, we spoke about a number close to 20 trillion. The orders which will be releasing to our vendors would be still close to that number. But what we'll be able to capitalize, which is put on air and start using and therefore capitalize would be a number which is close to 10 trillion rupee and that's the number which we are stating here the capitalized capex would be around 10 trillion rupee for this year synergy guidance last time when we spoke we gave a guidance of between 100 to 200 million dollars for this year this year we are revising it to the upward part of that guidance between 150 to 200 million us dollars it's driven by stronger than expected network and vendor efficiencies We also remain on track to achieve our full synergy potential of $300 to $400 million annually pre-tax once the integration is fully completed. And with this, our summary for the third quarter, 25 ends, and I hand it back to Chris to take it further.

Thank you, Farajiv and Far-Anthony for the presentations. Ladies and gentlemen, we will now proceed to the Q&A session. As a reminder, the Q&A session will be in hybrid mode. To ask a question, you may type it in the Q&A box. Please ensure to also type in your full name and company name. If you'd like further clarification after your question is answered, kindly use the raise hand button and we will proceed to unmute your mic. Please give us several minutes to tabulate the questions first. The first question comes from the line of Piyush Chowdhury from HSBC. There are two questions. The first one is, sorry, there are three questions. The first one is what is the like-for-like, like-to-like mobile service revenue growth Q1Q in third quarter 2025 as Q2Q does not have the full impact of merger. Then second question. What is the breakdown of revenue? Intrigue into your three segments, mobile, enterprise and home. And the third one is normalized EBITDA margin is 47%. Where do you expect normalized margin to be post-merger integration? For these questions, I would like to invite David to answer the first question.

Okay, I'll take the first one. So the like-to-like mobile service revenue growth quarter-on-quarter will be a 5%. Like-to-like will be a 5%. To the second part of your question about the initiatives taken to increase the mobile ARPU, I can share that, as you can see, we had a double-digit ARPU growth quarter-on-quarter. this has been done by many things but we have taken out a lot of freebies we have increased prices by taking discounts out we have also increased minimum prices especially in our personalized offers so we have done a bunch of things in our very clear strategy to focus on quality subscribers now you can see i think you can calculate as well that the yield the revenue per gigabyte has increased high single digit well around the six percent quarter on quarter so the yield increased six percent quarter on quarter this means that the revenue that we are getting for each of the real gigabytes is increasing that our prices per gigabyte have increased so out of the ARPU double digit growth from ten percent we can say that more than half it's due to the price increases the other comes from more usage per subscriber. And again, how did we increase the prices? As I was saying, taking freebies out, increasing prices literally, nominally, taking some discounts out, increasing minimum prices in personalized offers, etc, etc. For the second question, I will pass it to our CFO.

Okay, thank you. The second question is about the breakdown of the revenues into three segments, mobile, enterprise, and home. I think just to give rough figures on the mobile segments, it contributes around 80% to 82% contribution of revenue, and then enterprise is around 10%, and home is the smallest one. It's around, I think, around 6%. So I think that's the breakdown of the revenues. And that number three in the question is about the normalized EBITDA margin, which is 47%. Where do you expect normalized margin after post-merger integration? Okay. So I think we know that this normalized EBITDA margin is already taking out the integration costs. which is, I think, what contributes a significant amount. I think post-integration, which is after the next two years, 2028, I believe, because our plan to do the integration, everything to be completed within eight quarters. So we are hoping that, of course, this EBITDA margin, 47%, will even further improve because the company management always trying to do the cost efficiencies program, trying to make sure that We are aligned with the plan that we have, which is, of course, is a cost efficiencies program. So we are expecting a higher EBITDA margin similar to the other Telco players.

Thank you. Anthony? Yes.

yeah hi thanks a lot uh thanks for these responses um could you also be able to share what's the breakup of your ebitda margin among the three segments uh mobile enterprise and home at the moment and um this is one more like david Are there any kind of incremental initiatives being taken in fourth quarter to further kind of enhance the mobile ARPU? And how are the kind of economic trends at the moment? If you can throw some light, you know, on October trends. Thank you.

On the breakdown of the EBITDA per business segments, I think unfortunately we don't really make that kind of specific analysis because most of the cost is a common cost. So I think we only measure the direct EBITDA, the direct gross profit. But I think from EBITDA point of view, I think we prefer to do it as a total basis rather than doing it for three segments. Thank you.

Okay, so regarding this fourth quarter, yes, we have additional initiatives planned in order to increase the ARPU, one of them being price increases. So we are going to have, I would say, significant price increases in the different portfolios of our three brands in the coming weeks. As I was mentioning in our strategy of focusing on value customers so far, it's looking good. So we are happy with the results. So we are going to continue in that direction. And the next step will be to increment prices of our value propositions, specifically in certain in certain specific products. There was any other question?

Thanks, David. So, have these price initiatives already been done in October or it's something which is planned for future?

So, we are on it. So, some small things have been done, some will be done almost as we speak, but relatively soon.

Okay. Thanks a lot. Thank you and all the best.

Thank you. Thank you, Pius. Let's move on to the next question from Erwin Wijaya from Padana. Two questions. First one is, are you going to distribute 100% of the proceeds from treasury share as dividend? And then second one is, how much restructuring cost do you have left? Or when will things normalize? I think for both questions, we can invite Pak Anthony to answer.

Okay. Thank you, Pak Erwin. I think in terms of dividend, I think I forgot to mention it earlier on that one. So, like this. I think there is no such relation on terms of the treasury shares that we sold, I think, last month. with the dividends amount that we want to distribute. Yes indeed that the company was like to do dividend distribution which is I think we would like to seek approval from the shareholders where the EGMS will be done next week on Friday. So why the company was like to give the dividend distribution I think as you can see in our Q3 performance results that It shows that actually we can reach to a normalized PAP positive around 1.8 trillion rupiah. So this is a healthy indicator actually for the company because we can see that some of the performance, the cost as well as the revenues is improving. So with that reason, then the company would like to distribute the dividends. In terms of cash flow, I think the cash, how to fund this dividends, it's going to be done through our internal cash, cash from the operations. Today, the company is sitting at the cash balance around more than 4 trillion rupiah. So with that one, I think we are able to do dividend distributions. So all in all, I think the dividends will be approved by the shareholders next week, waiting for the news for this to everybody on the subject. And then on the second question about the restructuring cost, actually this is not a restructuring cost. I think if you are referring to integration cost, because we are not doing any restructuring. It's only integrations. In terms of integration costs, I think you saw it from the slides that in total integration cost that we have incurred this year until September 2025 is one trillion rupiah. The target our budget for integration cost for this year is around 1.5 trillion, so the remaining is around 500 billion rupiah that maybe This one will be materializing in the next quarter in the Q4. and when the things will be normalized i think like i mentioned that the integration period will happen in the next uh eight quarters yeah so i think this is the first the fourth quarters the three quarters already yeah q2 q3 actually second two quarters actually and then q4 three quarters hopefully everything will be normalized starting 2027 yeah okay so that's the answer by erwin

Thank you, Pa Anthony. Pa Erwin, do you have any follow-up questions?

No, thank you. Everything is clear. Thank you, Pa.

Okay, thank you. All right, let's move on now to the next question. This comes from the line of Ranjan Sharma from JP Morgan. There is one question. What is the difference between CAPEX guidance in 3Q to the one given in 2Q? And what is the ACAS CAPEX for this year? For this question, I would like to invite Pa Anthony again to address the question.

Okay. Yes, indeed that the CAPEX guidance for second quarter and third quarter, if you look at the figures, was different. I think the difference was because that initially in the second quarter, when we give the guidance around 20 to 25 trillion, that one was on the early post merger indication where at that time we use a PO amount PO issuance amount at around 20 to 25 trillion that we want to spend for integration however I think we understand that we may want to use a capitalized capex instead of PO issuance so in terms of capitalized capex if we make some estimation this year This year approximately around 10 trillion. So we are not changing or making a revision on the CAPEX amount. The amount is still the same. In terms of PO issuance around that, 20 to 25 trillion. However, capitalized CAPEX is around 10 trillion. I think for Q3, I think we already booked capitalized CAPEX around 4 to 5 trillion rupiah. So the remaining 5 trillion maybe comes in the Q4 2025 year. That's the answer for Sachin.

Thank you, Anthony. Sachin, sorry. Ranjan, do you have any follow-up question?

Hi, thank you. Thank you for the clarification. Can I just check one more thing? Did you say you're looking to pay a dividend? Because in the last quarter, you were saying you will not pay dividend for two years.

Yes, indeed. I think I remember last quarter, we think that we will not be able to pay dividends next year, actually, because the company, if you look at the PAT numbers, is negative, right? So we will not be able to give dividends next year. However, we see that there is an opportunity for us to give dividend distribution this year. because our basically dividend normally following the previous year profit right so I think if you look at the also following the OJK regulations that we are allowed to give a dividend within this year so with that considerations from the OJK regulations from the company performance, the cash situations. So we decided to give dividend distribution to the shareholders. But of course, this is subject to approval from the shareholders next week.

So you're not looking to pay a dividend next year, but you want to pay a dividend for this year?

Next year, unfortunately, looking at the numbers, we are not allowed to. Yeah, because it's a negative retail earnings. At this moment, Q3, I think we see that PAT is negative, right? So we will do it this year. So it's like maybe we can say it's an acceleration.

Okay, thank you. It's interesting because if I look at your balance sheet and your cash flows, they don't seem in the best of position, right? So I'm just surprised to hear you're looking to pay a dividend.

Well, from our point of view, when we look at our balance sheet cash flow also, I think we are still in the safe position. Like, for example, the gearing ratio, I think we are still below four. So I think there is – I mean, by giving this dividend distribution, we are not impacting to any – to the ratios of the company. So with that one, I think we can – we are able. We have some – we have the capability to pay dividend.

Okay. Thank you.

Yeah.

Thank you, Ranjan. The next question comes from Sachin, Sachin Mittal from DBS. So does revised lower CAPEX include integration CAPEX? I think this has, yeah, I think by Anthony has already addressed on CAPEX, but he might want to clarify whether this includes integration CAPEX.

This CAPEX, yes, includes integration CAPEX. But again, like I mentioned, we don't make any revision. on the capex amount, it's only that now we are using capitalized capex instead of the PO issuance. I hope that one can answer, Sachin.

Thank you, Pak Anthony. Sachin, do you have any follow-up question to the management?

Can you hear me now? Yes. Okay. So I understand that you're taking now longer time to, you know, basically to incur the capex. Again, I want to understand a little bit of what is the normalized level of capex, you know, because there is some integration capex involved, right? So how much is You know, how do we think of the normalized CAPEX? Because it seems like you're talking of now 10 and 10, right? Each year, FY25 and FY26. Is that the right way to think about it?

For the integration, CAPEX, yes, we can say that. Although actually the 20 trillion, 25 trillion over there, it also consists of BAU CAPEX. Some of them.

If I may just jump in here, I would not want to classify this as integration CapEx because the, as I think we spoke about last time also, it's just not about combining the two networks together where we are spending most of the money. It's rating the network for future, i.e. 5G for example. So whatever network we are rating is rating for future. So it's very difficult to classify and say this is because of integration or this is for modernizing the network. The outcome would be a brand new network ready for future. So that's one point. The second part is there is no change in the CAPEX plan. It's just the way we were stating it earlier. when we spoke about CAPEX earlier 2025 trillion in 2025, it was largely the ordering amount and that quantum of orders will go out during the course of this year. What we will be able to put on air and capitalize, you know there is a process of getting the material in house, putting it on our side, doing those acceptance tests, that will be around 10 trillion, which again is as per the plan. It is only that earlier when we spoke about We did not clarify that this is the ordering amount. The capitalization amount would be lower. So that's the second part. And I think one more part of your question was how much will this normalize into? I think after the integration phase is over, after the entire modernization is over, which would be done by largely by 2026, I think it will go back to a regular mid-teens level. That's the number which we anticipate in the long term.

Okay, that's very helpful. Thank you.

All right. Thank you, Parajit. Let's move on to the next question. Sorry, Sachin, do you have any follow-up question before we move on? I think you have one question follow-up on our pool.

I mean, how are you seeing your subscriber decline was noteworthy while other your peers did not see the subscriber decline? Was it too much sharp hike? And what does it mean for you in the current quarter? Thank you.

Yeah, correct. So if you take a look to the subscriber changes, yes, with competitors and also ARPU changes, I think our ARPU growth is significantly higher than our competitors. Also, our subs decreased. As I was mentioning before, our ARPU increased. comes mostly more than 50 from the yield increase so we are able to monetize better the the gigabytes and part also from from the usage increase is it too much no it is not actually again you can see in the results that it's going in the correct direction so those subscribers that we lost are I don't want to call them abusers because they were using the portfolio that we have given to them, right? But our subscribers that were very low ARPU and or very low yield. So those are subscribers that in our new strategy don't have a fit in our company. Probably they found somewhere better where they can add those subscribers. Those low yields, etc., they can fulfill their needs, but I think our strategy is very clear, go for value subscribers. Having said that, again, in quarter four, we expect, we hope that the ARPU will keep increasing and that our strategy will keep moving in the same direction. As I was mentioning before, we already have aligned many price changes, increases that we are going to implement in the coming days and that some of which we have already been doing also in the personalized areas, etc.

Okay, very clear. Thank you.

Thank you, Parivit, for the clarification. Any follow-up questions? No, thank you, thank you. All right, good. Now let's move on to the next question from Henry Teja from Mandiri Securitas. There are two questions. The first one, what are the three drivers of purchase of bundle device and the software increase under the interconnection and other direct expenses? I think this is under the COGS. And second question is, could you share more details regarding the accelerated depreciation expenses increase? What kind of assets that drive the increase? I would like to invite Pa Anthony to address the questions. Thank you.

I think on the first question about what are the key drivers for the increase on the COGS of specific to the device. I think as we explained, I think Parajit already explained that the company now focusing to the enterprise segment. So like again, as I explained, enterprise segment contributes around 10% of the total Excel smart revenues. So because of this focus expanding the business segment, so we are sort of like have to purchase this device as well as the software into this to one of our enterprise clients. So of course, this of course is stuck along with the increase of the revenue from the enterprise as well. So I think that's on the explanation for number one. And number two, regarding the accelerated depreciation expense. Yes, I think this accelerated depreciation expense was resulted from the one of the example is the 900 megahertz spectrums. Because as we know that the company have to return the 900 megahertz spectrum to the government by end of 2026. So with that one, all the assets of the any equipments which is associated to 900 megahertz, we have to sort of like making an accelerated depreciation. And also, another example also, we know that the company already choose the vendors to do the integration as well as the modernize the network. So, which is the vendor is ZTE as well as Huawei. So, the vendors that currently, the existing equipment, which is not this ZTE or Huawei vendor, we have to do some dismantling. So we will not use this asset anymore. So with that one, we also have to do some accelerated depreciation. So I hope that one can explain to you the nature of accelerated depreciation. Why is it increased? Because we have to do it earlier, faster than the rate. Let's say it's supposed to be another six years, but now we have to do it within by end of 2026. Is that answering the question, Henry? Yes.

Yes, thank you. Perhaps if I can add two or more, three questions. The first one, I guess, regarding the integration costs, I think you mentioned earlier that this year the budget or the target will be $1.5 trillion. So I'm just curious, how about next year? what will be the target for the integration cost next year, and also for the accelerated technology and expenses. And then the second question, I think regarding the CapEx, just to want to clarify, so does that mean, you know, out of 20 to 25 trillion that was guided like previous quarter, 10 trillion will be capitalized and the rest will be expensed for this year. So that will be, you know, will be booked under the cash profits. And then perhaps the third one to David, I think, And earlier, Fuse has asked about the latest economic trend. So I'm just curious, how do we see the purchasing power in the last few weeks or in the last few months? So I think those are my three questions. Thank you.

Okay, let me answer first on the question on the integration cost for the next year. I think, like I mentioned, that I think the integration still continue until end of 2026 or maybe first quarter of 2027. So the amount of the integration cost, I would say that we don't have the numbers at this moment because we are still calculating the BP for 2026. But I think let's assume the same similar number what we project. If let's say this year is 1.5 trillion, maybe approximately the same numbers integration cost for next year. So that's on the integration cost. And then the second question is about

The second question regarding the CAPEX, you mentioned that some of the capitalized, so just want to clarify on that.

So the PO amount is around 20 to 25, but the capitalized CAPEX is 10. But the remaining actually will not be, we will not expense this, or we call it as cash OPEX, no. But the remaining I think will happen, will be materialized next year. So next year will be this sort of like will be carry over to next year, the remaining instead of OPEX, still capitalized OPEX. Okay. So the next question.

Regarding the economic situation on the consumer side, To be honest, I mean, you can see the results. So for us, the last few months have been positive. I think we see a little bit more of confidence in the consumers, a little bit of reparation in that sense.

Thank you, Pak David. Pak Henry, any follow-up questions?

No, thank you, Pak. I think everything is good. All the best for the management.

Alright, thank you. Now let's move on to the next question. I think we have the question from Arthur Pineda from Citi. There is one question. Can you please remind us about your dividend policy and do you pay this out of reported earnings or reported earnings? I think maybe Arthur you can clarify this later on. In addition, what are the considerations for paying for the dividend? even that the company is targeting 20 to 25 trillion, which is above the operating cash flow. Pak, Anthony, maybe you would like to address this question.

Okay. I think we know that our long-term goal is to deliver sustainable shareholders' returns. So I think looking as I already explained that the company show a negative PAT, not normalized PAT, the negative bottom line. So with that one, we expect that I think next year there will be no dividend. So we think that we want to give the dividend within this year, but we still can, still following the regulations. So I think with that one, with that consideration, and also, of course, looking at our free cash flow and everything's balance sheet, I think it's doable from our side. I think when you mentioned about the 20 to 25 trillion is above OPCF, I think, again, like I mentioned, this 20 to 25 trillion is a PO amount that we issued. but again capitalized capex is only like a half of it that we book to our capex this year will be around 10 trillion. And then from that one, actually, what I would like to say that we get soft payment terms from the vendors itself. So the 10 trillion rupiah, although we capitalized it this year, we may not need to pay 10 trillion rupiah to the vendors. So I think there are some agreement already from the vendor on the payment terms. So I think with that one, I think we are hoping that all of the shareholders agree for us to give a dividend distribution this year.

Thank you. Thank you, Pak Anthony. Arthur, any follow-up question?

Yes, thanks for the opportunity. I just wanted to clarify with regard to the cash flow implications on CapEx. I know you mentioned 10 trillion will be booked for this year and the PEO is 20 to 25. I'm just trying to figure out from a cash flow standpoint, how do we view this? The balance of around 15 trillion, is that paid 26, 27? I'm just trying to figure out what it looks like from a cash flow standpoint.

Yeah, I think more or less the payment will be done next year. But I think from the next year point of view, if I look at the cash capability from our side, let's say we can generate like 20 trillion rupiah cash flow from operation next year. So I think we are able to pay this CapEx PO. So I think, well, maybe we may need to do some of the borrowings from the banks, but the amount may be not as big as like this CapEx because the plan to fund this PO from this CapEx will be funded majorly coming from the banks. from our internal cash operations because we are able to generate like 20 trillion per year.

Understood. I'm just wondering in terms of the decision to pay the dividend now, given that there will be spectrum auctions coming up as well, how do you balance the deleveraging of the company and having the cash available for items like spectrum versus paying dividends upfront? I'm just wondering what the philosophy is and why pay now, given that there's still auctions coming?

It's now or never. I think, like I mentioned, next year it will be difficult for us to give dividends. So the chance, the window of opportunity to give dividend only this year. And looking at the, again, for me, I reemphasize that looking at our balance sheet, our PML, our cash flow, it's doable. We can do it this year. Because like I mentioned also maybe the cash balance at this moment today, we are sitting like around 4 point, almost 5 trillion. This is our cash balance. So we are able to distribute the dividend. And the gearing ratio, I think, yes, we are still in the reasonable amount. Of course, we still monitor this, make sure it is not going to be beyond four times the gearing ratio. So with that consideration, that's why our intention, I think we can give dividend to the shareholders.

Understood. Thank you.

Thank you, Arthur. Thank you, Pa Anthony. Now let's move on to the next question from Bob from CGS. Can you discuss about the accelerated depreciation? Are we going to see depreciation run rate in third Q for the next six quarters? Yeah, Pa Anthony.

Yes, I think, Bob, the accelerated depreciation, as I explained earlier, that this is related to the asset that we have to, we will not use in the next, after the integration. which is maybe one of the example, the 900 megahertz and also the other vendors which is not being chosen one. So we have to do this accelerated depreciation because we will not use it. So are we going to see the depreciation rate in the third quarter, in the next six quarters? The answer is yes. By the end, I think until the integration period is over, hopefully I will say by end of December 26th, next year, it's over. Then starting 2027, everything will be normal, back to normal.

Okay. Bob, any follow-up question to us? All right. No question. I think we can continue. Thank you. Thank you, Pa Anthony. All right. Next question comes from Andy Gurniawan. So there are two questions. The first one is, can you share about the ARPU increase in average from your three brands respectively? Was SmartFriend increasing more ARPU compared to your other brand in third quarter?

and second one is your subscriber decline q on q youtube's focus on quality subs can you share which brand that gave the contribution to the subscriber decline maybe david i'd like to invite you guys yeah so it's gonna sound like normalized answer but to be honest uh no so smart frame was not the one increasing more the arpu and all the three brands have been in the same direction both in the ARPU increase as well as in the subscriber rationalization. So we have one of the brands with more or much higher percentage of the subscribers that left or the low value subscribers. So it's been quite, let me put it this way, democratic, both the ARPU increase as well the ARPA increase, the yield increase, as well as the subscriber rationalization.

Thank you. Andy, do you have any more questions? No, no, thank you. Thank you. Question from Norman from CLSA. Yeah, congrats on strong R2 uplift. First one on accelerated depreciation and impairment. Will we see more being booked in 4Q 2025? Second one is on OPEX. 10% Q on Q increase is quite significant. Is this a normalized for three-run rate or we should expect some increase? For these two questions, I'd like to invite Anthony again to address.

Okay, thank you. So, Norman, I think on the first question on the accelerated depreciation, a similar question with the Bob Setiadi question. I already explained that, yes, I think in the next quarter, Q4 2025, the accelerated depreciation still continue even further until next year. Because again, integration period is eight quarters. That's why please expect that there is accelerated depreciation until the end of the integration exercise is completed. And then on the second question on the OPEX, I think, yes, but the increase of the OPEX is mainly because of that. Number one, that... In the last quarter was only like half months of smart friend expenses was not there. And the second one, of course, this quarter on quarter because of mainly because of the integration costs that we have to book in the Q3 2025. But of course once this integration cost is over, which is I think we can see that the integration cost in the previous slides that it was around 800 billion rupiah already booked by September 2025. So by the time that this integration cost is already over, then our OPEX amount will become stable and our EBITDA margin hopefully can increase from time to time. So I think that's the explanation, Norman.

Yeah, thank you, Anthony. I think on the first question, where I'm coming from is mainly because I saw the accelerated depreciation, where it was like 700 billion last quarter, now it's 1.8 trillion third quarter. I'm just wondering The first is why don't you just put everything in the short term or is it not doable because you're still removing asset. Second thing is I'm just trying to figure out when you say there's more coming, will we get a sense of like roughly how much or you know profit is really not a priority during the integration period.

Yeah, I think yes, it was quite a surprise maybe to look at the first quarter 739 and the second quarter 1.8. But I think my estimation that if you look at the numbers, I think more or less this 1.8 trillion already represent the numbers for a quarter. But I don't want to say that this 1.8 trillion can go up further. But actually, as a matter of fact, these numbers will go down. Because if there is an equipment where we dismantle faster, then we actually have to write off the assets immediately. I mean, we have to stop the depreciation. So that's the reason I think in Q3 was quite high. Because actually some of the equipment already dismantled, already turned off. and we cannot make depreciation so we have what so from the six years immediately only like one only six months for example that's the acceleration depreciation So what I'm saying that in the next quarter, I'm hoping that these numbers, of course, maybe next quarter still remain the same, but I think the following quarter, hopefully, because the equipment already, most of them already dismantled, so it will be tapering down to a smaller amount. So that will give you a rough figures. Maybe this year, maybe we will end up like 4 trillion rupiah, plus minus one. Okay.

Thank you so much, Man.

Thank you, management team. And I think just to give you an emphasize that this accelerated depreciation is a non-cash item. Yeah.

Okay. All right. Thank you. Thank you, Norman. Thank you. Bye, Anthony. I think we still have time for one more question. I think one last question we'll just address from John. John Tse from UBS. That will be the final question. John, do you want to have your question to the management?

Yes. Hi. Good afternoon. I have two questions, if you don't mind. First is I just want to understand maybe where we are in terms of site dismantling. So you mentioned 15,000 already done, and that's one-third of the base. Firstly, what is that base? Is the 45,000, give or take, an end figure of the combined sites that you have, or is this pertaining to another number? Second question is, perhaps we can clarify the $500 billion gap. in terms of integration costs, how much of that would be for personnel and how much of that would be for site dismantling? Because I understand these two are the largest cost drivers for integration charges. The third one being personal costs, I think the run rate has stayed at 1 trillion unchanged from the second quarter despite, you know, I guess some integration. Any comments on how you think of personnel costs as a percentage of sales or maybe the absolute number itself? Thank you.

Thank you, John. I'd like to invite Rajiv to address the first question. Sure.

Just to refresh the memory, when we started this journey, Excel Exeata legacy had around 43,000 sites and smart sites were around 22,000 put together around 65,000 sites 6566. as we said between 15 to 20,000 of those sites will not be required which will feed into us energy savings which will mean that the end number of sites based on this part of integration would be closer to 50,000 sites and against that we are talking about 15,000 sites which is just short of one-third of that number so that's that's the number of 15,000 ending number would be around 50,000 for this phase. The second question was about the integration cost of 1 trillion rupees which has been incurred so far and I think Anthony mentioned we expect another half a trillion for remaining part of the year and this is a number which we shared earlier 1.5 trillion would be the integration cost for 2025. You are right most of this is people and the network integration. unfortunately I don't have the details to share further but as you would know that the people integration project would be over hopefully by the first half of next year we are running that process now and then this will be a regular run rate we do not try and drive the people cost as a percentage of revenue as a big driver I think as management we believe that people are Good people are really important in our line of business, in our consumer business. And we'll have an appropriate cost as we move forward. We really not want to benchmark that with other players. But we'll pay the right amount of money for the best quality talent which you can acquire. This was the second part. What was the third one, please? John, was it a third question?

Oh, yeah. Well, that was related to the one trillion in personal costs quarterly run rate, but I think you managed to answer that in the previous question. If you don't mind me clarifying, just one point that someone raised earlier, it's mid-teens capex as a target after the integration. By mid-teens, is this mid-teens capex to sales or mid-teens in absolute trillion rupiah?

No, I think mid-teens absolute repair would be a bit too high. It will be mid-teens as a percentage to the revenue.

Okay, perfect. Thank you. Thank you very much.

All right. Thank you. Thank you, John. Thank you, Farajiv. And ladies and gentlemen, that concludes our today's conference call. Thank you once again for joining us today. If you have any further questions, please reach out to our investor relations. Stay safe and healthy. And we look forward to speaking with you next quarter. Thank you.

Thank you.