Telekomunikasi Indonesia: A Tale of Two Quarters

MarketsMotley Fool

Telekomunikasi Indonesia (NYSE: TLK), also known as Telkom Indonesia, the largest telecommunications company in Indonesia, dragged its feet on filing a fourth-quarter report for fiscal year 2018. When it finally appeared on April 30, a first-quarter report followed just three days later. Let's have a look at both of these earnings reports, one after the other.

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

Continue Reading Below

Metric

Q4 2018

Q4 2017

Year-Over-Year Change

Revenue

$2.14 billion

$2.31 billion

(7.5%)

Net income

$257 million

$308 million

(17%)

GAAP earnings per ADS (diluted)

$0.26

$0.31

(17%)

Telkom's first-quarter results

Metric

Q1 2019

Q1 2018

Year-Over-Year Change

Revenue

$2.47 billion

$2.38 billion

3.5%

Net income

$441 million

$422 million

4.3%

GAAP earnings per ADS (diluted)

$0.44

$0.43

4.3%

What happened with Telkom Indonesia in these quarters?

  • The company reports its results in Indonesian Rupiah, not U.S. dollars. The Rupiah strengthened by 4.8% against the dollar between the fourth quarters of 2017 and 2018, giving Telkom a currency headwind when it comes to year-over-year comparisons in dollar terms. Measured in Rupiah, revenues rose 1.1% year over year.
  • For the first quarter, the currency-exchange trends worked out to a 4.1% stronger Rupiah-per-dollar rate. Measuring the revenue growth rates in Rupiah instead of dollars, Telkom scored a 7.7% year-over-year increase.
  • The fourth-quarter report was late due to an unusually complex conversion between Indonesian and international financial reporting standards (IFRS). The company filed a request for a deadline extension with the SEC, explaining that its financial staff and external auditors needed to complete their analyses before compiling a final report. The full report was completed four days later.
  • The Telkomsel phone network now serves 168.6 million subscribers. That's a 5.7 million increase from the end of the fourth quarter, which was a low point in the company's recent history. In 2018 as a whole, the subscriber count fell 17%, to 163 million accounts.
  • As Telkom's wireless customers latch on to smartphones with high-speed broadband plans, the company's revenue mix is shifting dramatically. In the first quarter, data service revenues rose 30% year over year to represent 34% of Telkom's total revenues. A year earlier, the data portion of total revenues stood at 31%.
  • Like the rest of the world, Indonesia's newfound love of data-driven communications has a downside for the network operator. Telkom's ordinary voice service revenues fell 19% year over year and SMS messages collected 27% lower sales.

What management had to say

In Telkom's first-quarter earnings call, CEO Alex Sinaga explained how the mobile network market is evolving in Indonesia, with Telkom playing a leading role in the new sector landscape. Sinaga said:

Looking ahead

This company doesn't provide detailed financial guidance, but management offered some color commentary on the road ahead.

The Telkom group should grow Rupiah-denominated sales by mid- to high-single-digit percentages in fiscal year 2019. The company is aiming for a growth rate slightly ahead of the Indonesian mobile industry's. EBITDA and net income margins will continue to decline, continuing a difficult trendline from the past two years. However, the pace of margin shrinkage should slow down a bit as Telkomsel enjoys stronger margins in data services.

10 stocks we like better than Telkom IndonesiaWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Telkom Indonesia wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of March 1, 2019

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool recommends Telkom Indonesia. The Motley Fool has a disclosure policy.