Chasing the Era of Digitalization
Key Takeaways:
• Telkomsel has completed the spin-off and integration of IndiHome, valued at IDR319.4 tn, on July 1, 2023. This resulted in the dilution of Singtel's stake from 35.0% to 30.1% and increased TLKM's stake from 65.0% to 69.9% through the issuance of 34,581 new shares.
• The integration is expected to raise TLKM's revenue by about 1.3% by FY27F, aligning with the cost-efficiency from the spin-off and avoidable duplicated capex.
• The deal includes a IDR18.8 tn Wholesale Agreement (WSA) for connectivity services, which could potentially expand IndiHome’s customer base ( with market share of 75%) and increase subscribers through cross-selling strategies.
• Telkomsel has released a new FMC plan, Telkomsel One, with prices ranging from IDR120k-1.5 mn/month. The plan justifies its higher price with its superior features and services, such as speed up to 1 Gbps for 6 Telkomsel numbers, indicating a potential boost to company earnings and increased ARPU through subscriber growth.
• The integration of Telkomsel and IndiHome led to a fair valuation of Telkomsel, decreasing its EV/EBITDA to 5.8x, aligning with the domestic average.
• Moreover, TLKM is considering selling its fintech platform, PT Finnet Indonesia (Finpay), for an estimated value of USD100-150 mn while retaining a minority stake. The divestment aims to improve Finnet's financial performance, which accounted for 61.4% of PT Telkom Metra’s revenue in FY21, potentially yielding a one-time gain and bolstering TLKM's net profit and balance sheet.
• We recommend HOLD with TP: IDR4,100 (+5.1% upside), implying FY23E EV/EBITDA of 5.3x. Downside risks: 1) GOTO investment; 2) high interest rate; 3) WSA agreement; 4) higher churn rate.
MNCS Research
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