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PT Telekomunikasi Indonesia Tbk (TLKM) - Financial and Strategic SWOT Analysis Review
Bandung, Jawa Barat Fax +62 22 440313 Net Profit 11,536,999 (million IDR)
40133 Website www.telkom.co.id Employees 26,847
Indonesia Exchange TLKM [Indonesia Stock Exchange]
Industry Technology and Communications
Company Overview PT Telekomunikasi Indonesia Tbk (TELKOM) is a telecommunication and network services company. It is principally engaged in offering information and telecommunication (InfoComm) service and other related services. In addition, the company provides fixed wire line, fixed wireless, cellular, data & Internet and network & interconnection services either directly or through its subsidiaries. Further, TELKOM deals with the designing, constructing, installing, developing, operating, marketing or selling, leasing and maintaining telecommunications and its information networks.
Key Executives Name Title
Rinaldi Firmansyah Chief Executive Officer
Sudiro Asno Director, Finance
Faisal Syam Director, Human Capital and General Affairs
I Nyoman G Wiryanata Director, Consumer
Ermady Dahlan Director, Network and Solution
Source: Annual Report, Company Website, Primary and Secondary Research, GlobalData
Share Data PT Telekomunikasi Indonesia Tbk
Share Price (IDR) as on 30-Jan-2012
6,900
EPS (IDR) 586.54
Market Cap (million IDR) 136,696,814
Enterprise Value (million IDR) 157,679,943
Shares Outstanding (million) 19,528 Source: Annual Report, Company Website, Primary and Secondary Research, GlobalData
SWOT Analysis PT Telekomunikasi Indonesia Tbk, SWOT Analysis
Strengths Weaknesses
Extensive Services
Strong Operating Margin
Decreasing Fixed Wireline and Wireless Revenues
Limited Liquidity
Opportunities Threats
Growth in Telecommunications Services
Recent Awards
Rapid Technological Changes
Global Economic Slowdown
Source: Annual Report, Company Website, Primary and Secondary Research, GlobalData
Financial Performance
Source: Annual Report, Company Website, Primary and Secondary Research, GlobalData
PT Telekomunikasi Indonesia Tbk (TLKM) - Financial and Strategic SWOT Analysis Review
Table of Contents Table of Contents ............................................................................................................................................................................... 2
List of Tables .................................................................................................................................................................................. 3
List of Figures ................................................................................................................................................................................. 3
Section 1 - About the Company .......................................................................................................................................................... 4
PT Telekomunikasi Indonesia Tbk - Key Facts .................................................................................................................................. 4
PT Telekomunikasi Indonesia Tbk - Key Employees ......................................................................................................................... 5
PT Telekomunikasi Indonesia Tbk - Key Employee Biographies ....................................................................................................... 6
PT Telekomunikasi Indonesia Tbk - Major Products and Services ..................................................................................................... 7
PT Telekomunikasi Indonesia Tbk - History ....................................................................................................................................... 8
PT Telekomunikasi Indonesia Tbk - Company Statement ................................................................................................................ 10
PT Telekomunikasi Indonesia Tbk - Locations And Subsidiaries ..................................................................................................... 13
Head Office ................................................................................................................................................................................... 13
Other Locations & Subsidiaries ..................................................................................................................................................... 13
Section 2 – Company Analysis ......................................................................................................................................................... 15
PT Telekomunikasi Indonesia Tbk - Business Description ............................................................................................................... 15
PT Telekomunikasi Indonesia Tbk - SWOT Analysis ....................................................................................................................... 16
Opportunity - Demand for Mobile Broadband ............................................................................................................................ 17
PT Telekomunikasi Indonesia Tbk - Threats ................................................................................................................................. 17
Ratio Definitions ............................................................................................................................................................................ 26
About GlobalData ......................................................................................................................................................................... 30
PT Telekomunikasi Indonesia Tbk (TLKM) - Financial and Strategic SWOT Analysis Review
Contact Us .................................................................................................................................................................................... 30
PT Telekomunikasi Indonesia Tbk, Key Facts .................................................................................................................................... 4
PT Telekomunikasi Indonesia Tbk, Key Employees ........................................................................................................................... 5
PT Telekomunikasi Indonesia Tbk, Key Employee Biographies ......................................................................................................... 6
PT Telekomunikasi Indonesia Tbk, Major Products and Services ...................................................................................................... 7
PT Telekomunikasi Indonesia Tbk, History ........................................................................................................................................ 8
PT Telekomunikasi Indonesia Tbk, Subsidiaries .............................................................................................................................. 13
PT Telekomunikasi Indonesia Tbk, Key Competitors ....................................................................................................................... 19
PT Telekomunikasi Indonesia Tbk, Ratios based on current share price ......................................................................................... 20
PT Telekomunikasi Indonesia Tbk, Annual Ratios ........................................................................................................................... 20
PT Telekomunikasi Indonesia Tbk, Interim Ratios ........................................................................................................................... 23
PT Telekomunikasi Indonesia Tbk, Recent Deals Summary ............................................................................................................ 25
Capital Market Ratios ....................................................................................................................................................................... 26
PT Telekomunikasi Indonesia Tbk, Ratio Charts .............................................................................................................................. 24
PT Telekomunikasi Indonesia Tbk (TLKM) - Financial and Strategic SWOT Analysis Review
Mr. Firmansyah is the Chief Executive Officer and a Director of the company. Prior to this position, he was the Director of Finance of TELKOM since March 2004. During 2003-04, he also served as the Vice President Commissioner. He was the President Director from 2001 to 2003 and the Director of Investment Banking of PT Bahana Securities from 1997 to 2001.
Source: Annual Report, Company Website, Primary and Secondary Research GlobalData
PT Telekomunikasi Indonesia Tbk (TLKM) - Financial and Strategic SWOT Analysis Review
PT Telekomunikasi Indonesia Tbk - Major Products and Services PT Telekomunikasi Indonesia Tbk (TELKOM) is Indonesia-based company that offers information and telecommunication services and network services. The company's key services and brands include the following:
PT Telekomunikasi Indonesia Tbk, Major Products and Services
Services:
Fixed line
Fixed Wireless
Cellular
Data Services
Internet Services
Information Technology Services
Brands:
kartuHALO
simPATI
kartuAs
Source: Annual Report, Company Website, Primary and Secondary Research GlobalData
PT Telekomunikasi Indonesia Tbk (TLKM) - Financial and Strategic SWOT Analysis Review
2010 Acquisitions/Mergers/Takeovers The company through its subsidiary, Metra signed a Conditional Sales and Purchase Agreement (CSPA) to acquire 75% stake in PT. Administration Medika (Admedika).
2010 Contracts/Agreements The company signed a Memorandum of Understanding (MoU) of IPE (Industry Productivity Enhancement) with SK Telecom (Korea), to incorporate a joint cooperation in providing digital content.
2010 Contracts/Agreements The company through its subsidiary Mojopia, became the official mobile partner of English premier league.
2010 Other TELKOM along with the Local Government of Karo District has installed a Temporary Station for Disaster at Brastag.
2009 Acquisitions/Mergers/Takeovers The company's subsidiary acquired 49% of Infomedia shares.
2009 Contracts/Agreements The company and France Telecom's Orange Business Services partnered to provide advanced network services to Indonesian and Multinational enterprises.
2009 Contracts/Agreements The company and Telekom Malaysia sign cooperation agreement.
2009 Contracts/Agreements The company signed club deal with banks.
2009 New Products/Services The company launched WiMAX service.
2008 Corporate Awards The company recieved top brand service provider award from Marketing magazine.
2007 Contracts/Agreements Telkom and Singapore Telecommunications (Singtel) entered into a partnership agreement to develop a global data communication service.
2004 New Products/Services The company unveiled its international direct dialing service, the TELKOM International Call (TIC) 007.
2003 Acquisitions/Mergers/Takeovers The company acquired PT Ariawest.
1974 Corporate Changes/Expansions PN Telekomunikasi was changed to Perusahaan Umum Telekomunikasi (Perumtel).
1965 Corporate Changes/Expansions Perusahaan Negara Pos dan Telekomunikasi was divided into Perusahaan Negara Pos dan Giro (PN Pos & Giro) and Perusahaan Negara Telekomunikasi (PN Telekomunikasi).
1961 Incorporation/Establishment Perusahaan Negara Pos dan Telekomunikasi (PN Postel) was established as state-owned company.
Source: Annual Report, Company Website, Primary and Secondary Research GlobalData
PT Telekomunikasi Indonesia Tbk (TLKM) - Financial and Strategic SWOT Analysis Review
PT Telekomunikasi Indonesia Tbk - Company Statement The following statement has been taken from PT Telekomunikasi Indonesia Tbk Management’s Discussion and Analysis. The statement has been taken from the company’s Form 6-k 2010 report. OPERATING RESULTS OVERVIEW We are the principal provider of local, domestic and international telecommunications services in Indonesia, as well as the leading provider of mobile cellular services through our majority-owned subsidiary, Telkomsel. Our objective is to become a leading TIME player in the region through the provision of a wide range of communication services. As of December 31, 2010, we had approximately 120.5 million lines in service comprising 8.3 million lines on our fixed wireline network, 18.2 million lines on our fixed wireless network and Telkomsel had approximately 94.0 million cellular subscribers. We also provide a wide range of other communication services, including telephone network interconnection services, multimedia, data and internet communication-related services, satellite transponder leasing, leased line, intelligent network and related services, cable television and VoIP services. Our operating results for the three-year period from 2008 through 2010 reflected growth in operating revenues. From 2008 to 2010, the growth in operating revenues was driven by data, internet and information technology services revenues and cellular revenues. The growth of revenues in the cellular business primarily reflected growth in the number of Telkomsel's cellular subscribers. Our operating results from 2008 to 2010 also reflected growth in operating expenses. The growth in operating expenses was driven by operations, maintenance and telecommunications services and depreciation and amortization expenses. The growth of depreciation and amortization expenses and operation, maintenance and telecommunications services expenses was primarily as a result of the addition of Telkomsel's BTS and TRX, and the increase in overall network capacity to support the increases in its subscribers. Increase in Cellular Revenues and Subscribers with Declining ARPU Our cellular telephone revenues experienced a 2.1% growth from 2009 to 2010 and 7.6% from 2008 to 2009. Our cellular subscribers increased by 15.1% from 2009 to 2010 and 25% from 2008 to 2009. Telkomsel's revenues from cellular phone services (usage charges, monthly subscription charges, connection fee charges and features) accounted for approximately 42.4% of our consolidated operating revenues for the year ended December 31, 2010, compared to 42.1% for the year ended December 31, 2009 and 41.4% for the year ended December 31, 2008. This revenue and subscriber growth has been driven by continued growth in demand for mobile cellular services in Indonesia, coupledwith our efforts to attract new subscribers and the expansion of our cellular network and capacity. Although the usage behavior of new cellular subscribers may vary depending in part on the pricing packages we offer during a particular period and those offered by our competitors, our operating revenues from cellular services have grown at a slower rate than our cellular subscriber numbers primarily due to a combination of lower average tariffs due to intense competition and increased penetration among lower-income subscribers. These factors have contributed to declining ARPU, with blended monthly ARPU decreasing from approximately Rp59,000 in 2008 to Rp48,000 in 2009 and Rp42,000 in 2010. Due to the growth in the cellular market, competition remained intense among cellular operators, particularly in the prepaid market. These cellular operators also compete to a lesser extent with fixed wireless operators, with a growing number of fixed wireless lines in service. See “Risk Factors — Risks Relating to TELKOM and its Subsidiaries — Competition From Industry Incumbents And New Market Entrants May Adversely Affect Our Cellular Services Business”. Decrease in Fixed Wireline Telephone Revenues Our fixed wireline telephone revenues decreased by 14.5%, from Rp16,708.6 billion in 2008 to Rp14,286.3 billion in 2009 and by 9.4% from 2009 to Rp12,940.0 billion in 2010. We believe that fixed wireline telephone revenues have been declining due to the increased usage and declining tariffs of mobile cellular services and fixed wireless services and increased penetration of cellular subscribers in Indonesia. Cellular and fixed wireless services provide increased convenience, and in certain cases where subscribers call other subscribers using the same provider’s network, tariffs can be lower than fixed wireline calls that are made to subscribers of another provider. Although we expect that our fixed line, including fixed wireline services will continue to contribute significantly to our operating revenues in the near term, we expect such trend of declining fixed wireline telephone revenues will continue. As part of our corporate strategy, we are seeking to optimize our fixed-wireline business through various means, including increasing cost competitiveness, developing IDD fixed wireline business and increasing value added services for fixed wireline services. We also seek to increase our fixed wireline penetration rate more quickly and reduce our capital expenditure per line
PT Telekomunikasi Indonesia Tbk (TLKM) - Financial and Strategic SWOT Analysis Review
through the use of fixed wireless technology and by upgrading our fixed wireline access network and legacy infrastructure to NGN infrastructure with broadband capability. From 2009, we also launched a fixed business improvement program, which promotes various monthly fixed fee packages to existing fixed wireline subscribers for local and domestic long-distance calls, up to a certain call volume. The fixed fee package offered by us to each subscriber is based on historical usage volumes for that particular subscriber. Decrease in Fixed Wireless Telephone Revenues Our fixed wireless revenues decreased by 1.5% from Rp3,696.6 billion in 2008 to Rp3,639.6 billion in 2009 and by 14.1% from 2009 to Rp3,125.6 billion in 2010. This decline has occurred despite a significant increase in subscribers during such period, primarily due to lower average tariffs due to intense competition and a decline in fixed wireless voice revenues. Our fixed wireless telephone business is facing competition from an increasing number of operators, including PT Indosat and PT Bakrie Telecom, as well as mobile cellular services, SMS, VoIP services and e-mail. Competition in the fixed wireless markets has remained intense, with each operator launching increasingly attractive and creative marketing programs. In addition, our fixed wireless operations face frequency bandwidth constraints as there is currently no new frequency available from the government for expansion, and in densely populated areas, our current fixed wireless operations use substantially all of the available bandwidth that we have been allocated. As a result, we face capacity issues for fixed wireless voice and data and internet services in densely populated areas, which restricts our ability to compete in such areas. However, we believe there are still opportunities in the market and, in particular, we seek to further grow our fixed wireless data and internet revenues and extend our network to cover new areas. We plan to continue to expand, though selectively, our CDMA-based fixed wireless networks. Compared to fixed wireline networks, CDMA-based networks are generally faster and easier to construct and provide customers with greater flexibility and mobility. Decrease in Interconnection Revenues Our interconnection revenues accounted for approximately 5.4% of our consolidated operating revenues for the year ended December 31, 2010, compared to 5.7% for the year ended December 31, 2009 and 6.8% for the year ended December 31, 2008. Revenues from interconnection services decreased by 3.4% from Rp 3,866.7 billion in 2009 to Rp 3,735.4 billion in 2010 and decreased by 11.4% from Rp 4,362.5 billion in 2008 to Rp 3,866.7 billion in 2009 This declining trend in interconnection revenues is primarily due to the implementation of a new interconnection regime. Starting on January 1, 2007, the Government adopted a new cost-based interconnection regime for all telecommunications network and service operators. Under the new scheme, the operator of the network on which calls terminate will determine the interconnection charge to be received by it based on a formula to be mandated by the Government, which will require the operators to charge for calls based on the costs of carrying such calls. Such interconnection charges must be calculated and submitted to the DGPT annually for approval in the form of a Reference Interconnection Offer. As a result, we, including Telkomsel, have made tariff adjustments downwards. We expect that tariffs will likely continue to trend downwards. The new cost-based interconnection regime also provides transparency in interconnection charges, which allows operators to route calls through the most cost-efficient route through software, thereby reducing interconnection fees. In addition, many mobile cellular operators have in recent years offered aggressive promotions with very low tariffs for calls made to other subscribers of the same operator. As these calls do not transit through our network, we do not receive interconnection revenues for such calls. Such factors have resulted in a decline of interconnection revenues generally for the telecommunications industry in Indonesia. Increase in Data, Internet and Information Technology Services Revenues Data, internet and information technology services revenues accounted for approximately 28.9% of our consolidated operating revenues for the year ended December 31, 2010, compared to 27.4% for the year ended December 31, 2009 and 23.0% for the year ended December 31, 2008. Our revenues from our data, internet and information technology services increased by 7.0% from 2009 to 2010 and increased by 25.3% from 2008 to 2009. The increase in data, internet and information technology services revenues in 2010 was primarily due to a 7.5% increase in revenues generated from SMS services and a 6.5% increase in revenues from internet, data communication and information technology services. As part of our transformation into a TIME provider, and our corporate objective of growing our new wave businesses, we seek to continue to increase such revenues. Operations, Maintenance and Telecommunication Services Expenses Our operations, maintenance and telecommunications services expenses have increased by Rp1,497.0 billion, or 10,3%, from Rp14,549.4 billion in 2009 to Rp16,046.4 billion in 2010, and increased by Rp2,248.1 billion, or 18.3%, from Rp12,301.3 billion in
PT Telekomunikasi Indonesia Tbk (TLKM) - Financial and Strategic SWOT Analysis Review
2008 to Rp14,549.4 billion in 2009. These increases are in line with the Telkomsel's expansion of its network capacity due to the growth in its subscriber base and increase in our fixed assets due to deployment of fixed wireless. Telkomsel's subscriber base has increased from 65.3 million subscribers as of December 31, 2008 to 81.6 million subscribers as of December 31, 2009 to 94.0 million subscribers as of December 31, 2010. Our fixed wireless service grew substantially from 12.7 million lines in service as of December 31, 2008 to 15.1 million lines in service as of December 31, 2009 and 18.2 million lines in service as of December 31, 2010.
PT Telekomunikasi Indonesia Tbk (TLKM) - Financial and Strategic SWOT Analysis Review
PT Telekomunikasi Indonesia Tbk - Locations And Subsidiaries
Head Office
PT Telekomunikasi Indonesia Tbk Japati Road No. 1 Bandung Jawa Barat 40133 Indonesia Tel: +62 22 4521510 Fax: +62 22 440313
Other Locations & Subsidiaries
PT Telekomunikasi Indonesia Tbk, Subsidiaries
PT Telekomunikasi Selular
Wisma Mulia, Jl. Jend. Gatot Subroto Kav. 42
Jakarta
12710
Indonesia
Tel: +62 21 5240811
Fax: +62 21 52906123
PT Infomedia Nusantara Jl. R.S. Fatmawati No. 77-81 Jakarta Selatan Jakarta 12510 Indonesia Tel: +62 21 720 1221 Fax: +62 21 720 1226
PT Indonusa Telemedia Gedung Pusyantel, 3rd Floor Jl. Prof. Dr. Supomo No. 139, Tebet Jakarta Indonesia Tel: +62 21 829 8800 Fax: +62 21 831 0100
PT Graha Sarana Duta Jl. Kebon Sirih No. 10-12 Jakarta Pusat Jakarta 10110 Indonesia Tel: +62 21 3800900 Fax: +62 21 34830655
PT Telekomunikasi Indonesia International Kuningan Plaza, North Tower, 3rd fl oor Suite 310 & 316, Jl. H.R. Rasuna Said Kav. C11-C14 Jakarta 12940 Indonesia Tel: +62 21 526 4413 Fax: +62 21 520 5167
PT Multimedia Nusantara Century Tower 11th Floor Jl. H.R. Rasuna Said Kav. X-2 No. 4, Jakarta Selatan Jakarta 12950 Indonesia Tel: +62 21 521 0123 Fax: +62 21 521 0124
PT Dayamitra Telekomunikasi Gedung Graha Pratama 9th Floor Jl. M.T. Haryono Kav.15 Jakarta Indonesia Tel: +62 21 8370959 Fax: +62 21 83709591
PT Pramindo Ikat Nusantara Menara Supra Lt. G Jl. Letjen S Supratman Kav 76 Jakarta 11410 Indonesia Tel: +62 21 53679213 Fax: +62 21 53679213
PT Telekomunikasi Indonesia Tbk (TLKM) - Financial and Strategic SWOT Analysis Review
PT Telekomunikasi Indonesia Tbk - Business Description PT Telekomunikasi Indonesia Tbk (TELKOM) is an Indonesia-based company that offers information and telecommunication services and related network services. It maintains strategic relationships with the leading companies such as PT, Siemens Indonesia, PT; NEC Indonesia, PT; Indonesia Telecommunications Industry, PT; Compact Microwave Indonesia, PT; Alcatel Indonesia, Tomen Corporation, Llyod's Register Assurance Limited and SingTel and so on. The company has classified its business operations through four reportable segments namely, Fixed Wireline, Fixed Wireless, Cellular and Others. Under the Fixed Wireline segment, it offers local, domestic long-distance and international telephone services, and other related telecommunications services including ancillary services. It serves residential, corporate and institutional customers. It provides local and domestic long-distance telephony services as well as international direct dialing via TELKOM IDD 007 service. The company has formed a strong domestic fiber optic network, which includes other telecommunications operators located in Malaysia, Singapore and Thailand. For the fiscal year 2010, the segment’s revenue increased 6.31% from IDR24,446.9 billion in 2009 to IDR27,053 billion in 2010. The segment accounted for 35.17% of the total revenues in 2010. TELKOM’s Fixed Wireless segment offers local and domestic long-distance, code division multiple access-based telephone services including the other telecommunication services. This set of services, which supports fixed wireline that is provided through TELKOMFlexi service, which includes both the post-paid customers and prepaid customers. It offers products such as FLEXIHome and FLEXICombo. TELKOMFlexi service covers and serves in all major cities across the Indonesia. For the fiscal year 2010, the segment’s revenue decreased 14.12% from IDR3,639.6 billion in 2009 to IDR3,126 billion in 2010. The segment accounted for 4.06% of the total revenues in 2010. The Cellular segment offers a range of basic telecommunication services such as actively mobile cellular telecommunication services. These services cover over 650 cities in Indonesia. The company serves over 81 million domestic cellular customers in Indonesia. The customer base has drastically raised over 25% compared to the previous year. TELKOM holds 49% of full-mobility cellular market of Indonesia. Telkomsel offers its subscribers with two prepaid services under the brand names “simPATI” and “Kartu As” and a postpaid service under the brand name “kartuHALO”. Telkomsel provides a post-paid subscriber service kartuHALO and two prepaid card services such as simPATI and kartuAs. It also offers worldwide roaming operations in various locations with the help of partnerships with 244 international roaming partners in 148 countries. The company also delivers the short-message- service (SMS) feature through its fixed wireless and cellular services. Additionally, it also offers dial up and broadband internet access, data network services, VoIP services for international calls, ISDN lines and other related multimedia services. For the fiscal year 2010, the segment’s revenue increased 2.54% from IDR44,397.1 billion in 2009 to IDR45,522.7 billion in 2010. The segment accounted for 59.19% of the total revenues in 2010. The company offers a wide spectrum of other services, such as telephone directory services, through its majority-owned subsidiary, Infomedia and cable and pay television and related services through its majority-owned subsidiary, Indonusa. TELKOM generates revenues through various business activities such as satellite transponder leasing, satellite broadcasting, VSAT, audio distribution, satellite-based leased lines and terrestrial-based leased line services. It also concentrates on other licensed telecommunications operators though the provision of fixed-line and cellular interconnection services to TELKOM’s and Telkomsel’s network. For the fiscal year 2010, the segment’s revenue increased 66.25% from IDR728.9 billion in 2009 to IDR1,211.8 billion in 2010. The segment accounted for 1.58% of the total revenues in 2010. The company operates along with its various subsidiaries including PT Pramindo Ikat Nusantara, PT Telekomunikasi Indonesia International, PT Multimedia Nusantara, and PT Graha Sarana Duta. Other subsidiaries include PT Dayamitra Telekomunikasi, PT Indonusa Telemedia, PT Telekomunikasi Selular, PT Napsindo Primatel Internasional and PT Indomedia Nusantara. Recently, the company partnered with PT Angkasa Pura II (AP II) for cooperating and developing information systems and telecommunications services. In March 2011, the company in collaboration with Zamrud Khatulistiwa Technology introduced "The Future of Radio for Today Generation". In February 2011, the company announced the launch of Interactive Television IPTV. In the same month, the company’s two major brands Flexi and Speedy, won "Top Brand Award 2011" organized by Frontier Consulting Group and Marketing Magazine. In January 2011, TELKOM through the launch of "Delima" or Delivery Money Access enters the remittance business. In December 2010, TELKOM and France Telecom SA jointly announced their interests to acquire stake in CamGSM’s subsidiary, Cambodian telecoms operator Mobitel. In October 2010, PT Bakrie Telecom Tbk announced its plans to purchase the CDMA unit of PT Telekomunikasi Indonesia Tbk.
PT Telekomunikasi Indonesia Tbk (TLKM) - Financial and Strategic SWOT Analysis Review
PT Telekomunikasi Indonesia Tbk (TELKOM) is a telecommunication and network services company. The wide network and increasing cellular revenues and subscribers strengthen the company's market position. Though the company has a risk associated with technological changes and competition, its recent awards, and growing demand for telecommunications services and broadband services ensure its top line growth.
PT Telekomunikasi Indonesia Tbk - Strengths
Strength - Extensive Services
TELKOM's wide service offerings provides broad range of telecommunication services to its customers Indonesia and it grants the company with a superior customer base. The company has an extensive network of local, domestic and international telecommunications services in Indonesia. TELKOM alsong with its subsidiary, Telkomsel operates as one of the leading mobile cellular services providers. The company operates more than 120.5 million lines in service including, 8.3 million fixed wireline network lines, 18.2 million fixed wireless network lines. In addition, Telkomsel provides a wide range of other communication services, including telephone network interconnection services, multimedia, data and internet communication-related services, satellite transponder leasing, leased line, intelligent network and related services, cable television and VoIP services to had approximately 94.0 million cellular subscribers. Furthermore, the company offers other telecommunications services including, leased lines, telex, satellite, transponder, very small aperture terminal (VSAT)) and ancillary services. In January 2011, TELKOM launched Delima (Delivery Money Access), an application of remittance via Plasa Telkom, or other places that serve application of Delima (Mitra Cash Point).
Strength - Strong Operating Margin
The company's operating margin was 32.77% for the fiscal year 2010. This was above the Integrated Telecommunications Services sector average* of 8.8%. A higher than sector average* operating margin may indicate efficient cost management or a strong pricing strategy by the company. However, the company's operating margin has declined 90 basis points (bps) over 2009 which may indicate that the company's cost management and pricing strategy is weakening. In addition, the company's return on equity (ROE) was 26.0% for fiscal year 2010. This was above the Integrated Telecommunications Services sector average* of 11.2%. A higher than sector average* ROE may indicate that the company is efficiently using the shareholders' money and that it is generating high returns for its shareholders compared to other companies in the sector.
Strength - Increasing Cellular Revenues and Subscribers
The company has reported increasing cellular business revenues along with its subscribers year on year. In 2010, its cellular telephone revenues accounted an increase of 2.1% over 2009, similarly 7.6% increase from 2008 to 2009. On the other hand, TELKOM's cellular subscriber base increased by 15.1% from 2009 to 2010 and 25% from 2008 to 2009. The revenue and subscriber growth is derived from the continuous growth in demand for mobile cellular services in Indonesia, and the expansion of our cellular network and capacity. In addition, Telkomsel's revenues from cellular phone services accounted for approximately 42.4% of its consolidated operating revenues in 2010. Furthermore, these factors contributed to declining ARPU, with blended monthly ARPU decreasing from approximately IDR48,000 in 2009 to IDR42,000 in 2010. Hence, the positive increase in cellular revenues and subscribers leads to the company's overall growth.
PT Telekomunikasi Indonesia Tbk - Weaknesses
Weakness - Decreasing Fixed Wireline and Wireless Revenues
TELKOM has reported a decline in fixed wireline and wireless revenues in the fiscal year 2010. The company's fixed wireline telephone revenues accounted IDR12,940 billion of the company's total revenues in 2010, a decrease of 9.4% over IDR14,286.3 billion in 2009. The decline is due to the increased usage and declining tariffs of mobile cellular services and fixed wireless services and increased penetration of cellular subscribers in Indonesia. Similarly, the company's fixed wireless revenues decreased by 14.1% from IDR3,639.6 billion in 2009 to IDR3,125.6 billion in 2010. The decline is due to lower average tariffs due to intense competition and a decline in fixed wireless voice revenues. The drastic decrease in the major segments of the company may hamper its profitability over its peers.
PT Telekomunikasi Indonesia Tbk (TLKM) - Financial and Strategic SWOT Analysis Review
The company's current ratio was 0.91 at the end of fiscal year 2010. This was below the Integrated Telecommunications Services sector average* of 1.17. A lower than sector average* current ratio indicates that the company is in a weaker financial position than other companies in the sector. In addition, the company's compounded annual growth rate (CAGR) for revenue was 7.55% during 2006-2010. This was below the Integrated Telecommunications Services sector average* of 13.12%. A lower than sector average* revenue CAGR may indicate that the company has underperformed the average sector growth and lost market share over the last four years. The company's under-performance could be attributed to a weak competitive position or inferior products and services offering or lack of innovative products and services.
PT Telekomunikasi Indonesia Tbk - Opportunities
Opportunity - Growth in Telecommunications Services
The company, being a provider of electronic components and network solutions to telecommunications market, could augment its operational revenue with rapid growth in the global telecommunications services market. According to Telecommunications Industry Association (TIA), steady growth is projected in the US and global telecom market in the future. This growth could generate an estimated $4.9 trillion in revenue by the end of 2013. The global telecom market is expected to grow at a compound annual growth rate (CAGR) of 6.3% between 2009 and 2013, while the US telecom market is expected to grow at 3.7% CAGR during the same period. Also, China would lead the ranking of TIA’s top ten countries in telecommunications-based revenue, with $335 billion revenue in 2009, followed by Japan with $200 billion, Germany with $192 billion, the UK with $172 billion, Italy with $122 billion, France with $113 billion, India with $107 billion, Mexico with $80 billion, and Spain with $77 billion.
Opportunity - Recent Awards
The company has received various awards for its extensive services and operations in Indonesian telecommunication industry. In April 2011, the company's Flexi received a Forsel Award 2011 for the category of ”The Most Favourite CDMA Operator”. In February 2011, TELKOM's two brands, TELKOM Flexi and Speedy received Top Brand Award 2011 by Frontier Consulting Group and Marketing Magazine. In December 2010, The Indonesian Institute for Corporate Governance (IIGC) cooperating with SWA Magazine awarded TELKOM, as The Most Trusted Company 2010 Based On Corporate Governance Perception Index and Indonesian Most Trusted Company 2010. TELKOM Group received Indigo Award, an annual event directed as an appreciation to Indonesia’s digital music industry able to give benefit to the community and environment. The recognition provides various opportunities to the company's further growth.
Opportunity - Demand for Mobile Broadband
The company could benefit from the rising demand for mobile broadband services. The markets for broadband reported a shift in subscriber preference from dial-up connections to broadband, which helped the broadband market to report strong growth in subscribers in the past four years of operations. The global subscriber base of broadband markets grew from 181.67 million subscribers in 2003 to 414.68 million subscribers in 2010, recording an increase of 128.26% over the period. According to the estimates of TIA, the market for broadband could exceed 586.13 million subscribers by 2013. Analysts predict that fixed broadband would grow at a CAGR of 9% from 2008 through 2014, while mobile broadband computing would witness three times as much growth, totaling $69 billion by the end of 2014. It is expected that mobile broadband market will reach about $1,100 billion by 2012, growing at a compound annual growth rate (CAGR) of approximately 6.4%. The rapidly growing subscriber base led to growth in revenue for the mobile industry.
PT Telekomunikasi Indonesia Tbk - Threats
Threat - Rapid Technological Changes
The company's offerings are characterized by rapid technological changes, which may affect its business operations. To compete effectively with its peers, the company should continually introduce new products that meet and exceed the customers’ requirements. The introduction of products using new technologies or the adoption of new industry standards could make existing products, or products under development, obsolete or unmarketable. Inability to study the evolving technological landscape may impact the company’s competitive position.
Threat - Global Economic Slowdown
The global economic slowdown, which began in 2008, could impact the business operations of the company. Though economic recovery continued in the first half of 2010, it was affected by the turmoil in sovereign debt markets during the second quarter of
PT Telekomunikasi Indonesia Tbk (TLKM) - Financial and Strategic SWOT Analysis Review
2010. The world economy expanded at an annual rate of approximately 5.25% during the first half of 2010. The world economy is expected grow 4.2% in 2011. However, the Euro region is expected to grow at 1.5% and the US is expected to grow at 2.3% in 2011. In early 2010, fears of a sovereign debt crisis surfaced in some European countries, including Portugal, Ireland, Italy, Greece, Spain and Belgium. Such crises could lead to increasing deficit, followed by an increase in debt and economic downturn, ultimately leading to high defaults. In November 2010, the IMF warned about a possible, full-blown sovereign debt crisis in rich nations. Continuation of the adverse economic conditions for long period affects premiums on corporate bonds and prices on many stock exchanges fell 10 to 15%. Such conditions could affect corporate IT expansion plans as well as investment and business growth of the company.
Threat - Intense Competition
The company is operating in the highly competitive telecommunications services market, which could adversely affect the financial position of the company. The company is competing with both existing and new market players. Although the company has strong market presence in enterprise data services, voice and data transmission and wholesale voice services, there are numerous other companies, which offer similar services. This could increase competitive pressures, including tariff pricing. Its key competitors include Telekom Malaysia Berhad, Itron, Inc., Datacraft Asia Limited, and Singapore Telecommunications Limited. Some of these competitors have more financial resources in comparison to the company, which exerts pricing pressure on the company's offerings, which may impact the demand for its offerings. NOTE: * Sector average represents top companies within the specified sector The above strategic analysis is based on in-house research and reflects the publishers opinion only
PT Telekomunikasi Indonesia Tbk (TLKM) - Financial and Strategic SWOT Analysis Review
PT Telekomunikasi Indonesia Tbk, Performance Chart (2006 - 2010)
Source: Annual Report, Company Website, Primary and Secondary Research GlobalData
Financial Performance The company reported revenues of (Rupiah) IDR 68,629,181.00 million during the fiscal year ended December 2010, an increase of 1.41% over 2009. The operating profit of the company was IDR 22,491,120.00 million during the fiscal year 2010, a decrease of 1.30% from 2009. The net profit of the company was IDR 11,536,999.00 million during the fiscal year 2010, an increase of 1.21% over 2009.
PT Telekomunikasi Indonesia Tbk (TLKM) - Financial and Strategic SWOT Analysis Review
Section 4 – Appendix The data and analysis within this report is driven by GlobalData. GlobalData gives you key information to drive sales, investment and deal making activity in your business. Our coverage includes 165,000 + reports on 150,000+ companies (including 100,000+ private) across 200+ countries and 29 industries. The key industries include Alternative Energy, Oil & Gas, Clean Technology, Technology and Telecommunication, Pharmaceutical and Healthcare, Power, Financial Services, Chemical and Metal & Mining.
Methodology
GlobalData company reports are based on a core set of research techniques which ensure the best possible level of quality and accuracy of data. The key sources used include: • Company Websites • Company Annual Reports • SEC Filings • Press Releases • Proprietary Databases Currency Codes
Currency Code Currency
IDR Rupiah GlobalData
Ratio Definitions
Capital Market Ratios
Capital Market Ratios measure investor response to owning a company's stock and also the cost of issuing stock.
Price/Earnings Ratio (P/E)
Price/Earnings (P/E) ratio is a measure of the price paid for a share relative to the annual income earned per share. It is a financial ratio used for valuation: a higher P/E ratio means that investors are paying more for each unit of income, so the stock is more expensive compared to one with lower P/E ratio. A high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. Price per share is as of previous business close, and EPS is from latest annual report. Calculation: Price per Share / Earnings per Share
Enterprise Value/Earnings before Interest, Tax, Depreciation & Amortization (EV/EBITDA)
Enterprise Value/EBITDA (EV/EBITDA) is a valuation multiple that is often used in parallel with, or as an alternative to, the P/E ratio. The main advantage of EV/EBITDA over the PE ratio is that it is unaffected by a company's capital structure. It compares the value of a business, free of debt, to earnings before interest. Price per share is as of previous business close, and shares outstanding last reported. Other items are from latest annual report. Calculation: (Market Cap + Debt + Preferred Stock - Cash & Cash Equivalents) / (Net Income + Interest + Tax + Depreciation + Amortization)
Enterprise Value/Sales
Enterprise Value/Sales (EV/Sales) is a ratio that provides an idea of how much it costs to buy the company's sales. EV/Sales is seen as more accurate than Price/Sales because market capitalization does not take into account the amount of debt a company has, which needs to be paid back at some point. Price per share is as of previous business close, and shares outstanding last reported. Other items are from latest annual report. Calculation: (Market Cap + Debt + Preferred Stock - Cash & Cash Equivalents) / Sales
Enterprise Value/Operating Profit
Enterprise Value/Operating Profit measures the company's enterprise value to the operating profit. Price per share is as of previous business close, and shares outstanding last reported. Other items are from latest annual report. Calculation: (Market Cap + Debt + Preferred Stock - Cash & Cash Equivalents) / Operating
PT Telekomunikasi Indonesia Tbk (TLKM) - Financial and Strategic SWOT Analysis Review
Enterprise Value/Total Assets measures the company's enterprise value to the total assets. Price per share is as of previous business close, and shares outstanding last reported. Other items are from latest annual report. Calculation: (Market Cap + Debt + Preferred Stock - Cash & Cash Equivalents) / Total Assets
Dividend Yield
Dividend Yield shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock. Calculation: Annual Dividend per Share / Price per Share
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Equity Ratios
These ratios are based on per share value.
Earnings per Share (EPS)
Earnings per share (EPS) is the portion of a company's profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company's profitability. Calculation: Net Income / Weighted Average Shares
Dividend per Share
Dividend is the distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
Dividend Cover
Dividend cover is the ratio of company's earnings (net income) over the dividend paid to shareholders. Calculation: Earnings per share / Dividend per share
Book Value per Share
Book Value per Share measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly. Calculation: (Shareholders Equity - Preferred Equity) / Outstanding Shares
Cash Value per Share
Cash Value per Share is a measure of a company's cash (cash & equivalents on the balance sheet) that is determined by dividing cash & equivalents by the total shares outstanding. Calculation: Cash & equivalents / Outstanding Shares
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Profitability Ratios
Profitability Ratios are used to assess a company's ability to generate earnings, based on revenues generated or resources used. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well.
Gross Margin
Gross margin is the amount of contribution to the business enterprise, after paying for direct-fixed and direct-variable unit costs. Calculation: {(Revenue-Cost of revenue) / Revenue}*100
Operating Margin
Operating Margin is a ratio used to measure a company's pricing strategy and operating efficiency. Calculation: (Operating Income / Revenues) *100
Net Profit Margin
Net Profit Margin is the ratio of net profits to revenues for a company or business segment - that shows how much of each dollar earned by the company is translated into profits. Calculation: (Net Profit / Revenues) *100
Profit Markup
Profit Markup measures the company's gross profitability, as compared to the cost of revenue. Calculation: Gross Income / Cost of Revenue
PBIT Margin (Profit Before Interest & Tax)
Profit Before Interest & Tax Margin shows the profitability of the company before interest expense & taxation. Calculation: {(Net Profit+Interest+Tax) / Revenue} *100
PBT Margin (Profit Profit Before Tax Margin measures the pre-tax income over revenues.
PT Telekomunikasi Indonesia Tbk (TLKM) - Financial and Strategic SWOT Analysis Review
Return on Equity Return on Equity measures the rate of return on the ownership interest (shareholders' equity) of the common stock owners. Calculation: (Net Income / Shareholders Equity)*100
Return on Capital Employed
Return on Capital Employed is a ratio that indicates the efficiency and profitability of a company's capital investments. ROCE should always be higher than the rate at which the company borrows; otherwise any increase in borrowing will reduce shareholders' earnings. Calculation: EBIT / (Total Assets – Current Liabilities)*100
Return on Assets
Return on Assets is an indicator of how profitable a company is relative to its total assets, the ratio measures how efficient management is at using its assets to generate earnings. Calculation: (Net Income / Total Assets)*100
Return on Fixed Assets
Return on Fixed Assets measures the company's profitability to its fixed assets (property, plant & equipment). Calculation: (Net Income / Fixed Assets) *100
Return on Working Capital
Return on Working Capital measures the company's profitability to its working capital. Calculation: (Net Income / Working Capital) *100
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Cost Ratios
Cost ratios help to understand the costs the company is incurring as a percentage of sales.
Operating costs (% of Sales)
Operating costs as percentage of total revenues measures the operating costs that a company incurs compared to the revenues. Calculation: (Operating Expenses / Revenues) *100
Administration costs (% of Sales)
Administration costs as percentage of total revenue measures the selling, general and administrative expenses that a company incurs compared to the revenues. Calculation: (Administrative Expenses / Revenues) *100
Interest costs (% of Sales)
Interest costs as percentage of total revenues measures the interest expense that a company incurs compared to the revenues. Calculation: (Interest Expenses / Revenues) *100
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Liquidity Ratios
Liquidity ratios are used to determine a company's ability to pay off its short-terms debts obligations. Generally, the higher the value of the ratio, the larger the margin of safety that the company possesses to cover short-term debts. A company's ability to turn short-term assets into cash to cover debts is of the utmost importance when creditors are seeking payment. Bankruptcy analysts and mortgage originators frequently use the liquidity ratios to determine whether a company will be able to continue as a going concern.
Current Ratio
Current Ratio measures a company's ability to pay its short-term obligations. The ratio gives an idea of the company's ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. Calculation: Current Assets / Current Liabilities
Quick Ratio
Quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. Calculation: (Current Assets - Inventories) / Current Liabilities
Cash Ratio Cash ratio is the most stringent and conservative of the three short-term liquidity ratio. It only
PT Telekomunikasi Indonesia Tbk (TLKM) - Financial and Strategic SWOT Analysis Review
looks at the most liquid short-term assets of the company, which are those that can be most easily used to pay off current obligations. It also ignores inventory and receivables, as there are no assurances that these two accounts can be converted to cash in a timely matter to meet current liabilities. Calculation: {(Cash & Bank Balance + Marketable Securities) / Current Liabilities)}
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Leverage Ratios
Leverage ratios are used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to measure its ability to meet financial obligations. There are several different ratios, but the main factors looked at include debt, equity, assets and interest expenses.
Debt to Equity Ratio
Debt to Equity Ratio is a measure of a company's financial leverage. The debt/equity ratio also depends on the industry in which the company operates. For example, capital-intensive industries tend to have a higher debt-equity ratio. Calculation: Total Liabilities / Shareholders Equity
Debt to Capital Ratio
Debt to capital ratio gives an idea of a company's financial structure, or how it is financing its operations, along with some insight into its financial strength. The higher the debt-to-capital ratio, the more debt the company has compared to its equity. This indicates to investors whether a company is more prone to using debt financing or equity financing. A company with high debt-to-capital ratios, compared to a general or industry average, may show weak financial strength because the cost of these debts may weigh on the company and increase its default risk. Calculation: {Total Debt / (Total assets - Current Liabilities)}
Interest Coverage Ratio
Interest Coverage Ratio is used to determine how easily a company can pay interest on outstanding debt, calculated as earnings before interest & tax by interest expense. Calculation: EBIT / Interest Expense
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Efficiency Ratios
Efficiency ratios measure a company's effectiveness in various areas of its operations, essentially looking at maximizing its use of resources.
Fixed Asset Turnover
Fixed Asset Turnover ratio indicates how well the business is using its fixed assets to generate sales. A higher ratio indicates the business has less money tied up in fixed assets for each currency unit of sales revenue. A declining ratio may indicate that the business is over-invested in plant, equipment, or other fixed assets. Calculation: Net Sales / Fixed Assets
Asset Turnover
Asset turnover ratio measures the efficiency of a company's use of its assets in generating sales revenue to the company. A higher asset turnover ratio shows that the company has been more effective in using its assets to generate revenues. Calculation: Net Sales / Total Assets
Current Asset Turnover
Current Asset Turnover indicates how efficiently the business uses its current assets to generate sales. Calculation: Net Sales / Current Assets
Inventory Turnover
Inventory Turnover ratio shows how many times a company's inventory is sold and replaced over a period. A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying. Calculation: Cost of Goods Sold / Inventory
Working Capital Turnover
Working Capital Turnover is a measurement to compare the depletion of working capital to the generation of sales. This provides some useful information as to how effectively a company is using its working capital to generate sales. Calculation: Net Sales / Working Capital
PT Telekomunikasi Indonesia Tbk (TLKM) - Financial and Strategic SWOT Analysis Review
Capital employed turnover ratio measures the efficiency of a company's use of its equity in generating sales revenue to the company. Calculation: Net Sales / Shareholders Equity
Capex to sales
Capex to Sales ratio measures the company's expenditure (investments) on fixed and related assets' effectiveness when compared to the sales generated. Calculation: (Capital Expenditure / Sales) *100
Net income per Employee
Net income per Employee looks at a company's net income in relation to the number of employees they have. Ideally, a company wants a higher profit per employee possible, as it denotes higher productivity. Calculation: Net Income / No. of Employees
Revenue per Employee
Revenue per Employee measures the average revenue generated per employee of a company. This ratio is most useful when compared against other companies in the same industry. Generally, a company seeks the highest revenue per employee. Calculation: Revenue / No. of Employees
Efficiency Ratio
Efficiency Ratio is used to calculate a bank's efficiency. An increase means the company is losing a larger percentage of its income to expenses. If the efficiency ratio is getting lower, it is good for the bank and its shareholders. Calculation: Non-interest expense / Total Interest Income
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Notes • Financial information of the company is taken from the most recently published annual reports or SEC filings • The financial and operational data reported for the company is as per the industry defined standards • Revenue converted to USD at average annual conversion rate as of fiscal year end
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