Telekomunikasi Indonesia Earnings Surge Thanks to Higher Data Sales

Telekomunikasi Indonesia (TLK +0.00%) recently reported results for the first quarter of fiscal year 2017. Here's what you need to know about Telkom Indonesia's report.

Telkom Indonesia's first-quarter results: The raw numbers

Data source: Morningstar, using historical currency conversion data from OFX.com.

What happened with Telkom Indonesia this quarter?

• Data, internet, and IT services revenues rose 25% year over year. This segment accounted for 42% of Telkom's total sales, up from 37% in the year-ago quarter.
• The Telkomsel mobile network reached 169 million subscribers by the end of March 2017, a 10.3% annualized increase but a retreat from the 174 million subscribers the network reported three months ago. The year-over-year subscriber growth rate stood at 13.7% last quarter.
• Management pointed out that the Indonesian mobile phone market is highly saturated these days, turning any growth into a valuable success story.
• Broadband internet services, on the other hand, have become a serious growth driver. The IndiHome fiber-based internet service saw 32% subscriber growth, landing at 1.8 million accounts while service prices increased by 5.6% compared to the fourth quarter of 2016.

Image source: Getty Images.

What management had to say

Telkom Indonesia's leadership is not panicking over the loss of 5 million Telkomsel subscribers during the first quarter.

"The higher number in the last quarter of 2016 was mainly because we have quite strong seasonality at year-end," said Telkomsel CEO Heri Supriadi on a conference call with analysts. "So we sell a lot of packages that have a short period of maturity. So that number was expiring during the first quarter of 2017. But overall, despite this quite short lifetime, that number still gives us quite good value."

In other words, the company was happy to sell short-term mobile contracts expiring near the end of 2016 even if those customers chose not to renew their subscriptions to longer-term deals.

Looking ahead

Management reiterated its existing guidance for the full year, expecting Telkom to increase sales faster than the local industry's projected 9% growth rate. Profits should decline slightly as marketing budgets and capital expenses increase to drive the company deeper into digital services.

The company is also pulling various levers to extract value from its legacy voice lines and other aging business operations. Landline telephone sales increased 11% year over year thanks to higher service prices.