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05 September 2022

TLKM IJ - MNC Sekuritas Equity Report September 5, 2022

Fixed Mobile Convergence is the Future
 
An Effort to Acquire IndiHome
• Telkomsel was reported to plan M&A with IndiHome, continuing TLKM's pathway towards Fixed Mobile Convergence (FMC).
• The management believes that this action will potentially increase its customer's connectivity as Telkomsel will now have access to the largest fixed broadband network in Indonesia.
• The acquisition of IndiHome was planned as selling of business assets, thus if successful, Singtel will not own part of IndiHome.
• This results in the dilution of Singtel's existing shares on Telkomsel, urging Singtel to increase its investment on Telkomsel.
• There are no further disclosures regarding the M&A of Telkomsel and IndiHome from company.
 
Fixed Broadband Performed Better than Mobile Network
• In 2Q22, IndiHome booked a revenue of IDR6.98 tn (+1.9% QoQ/+6.9% YoY), driven from the increase of its total subscribers to 8.89 mn (+7.1% YoY). Meanwhile, EBITDA was booked at IDR3.49 tn (+1.8% QoQ/+7.0% YoY), implying an EBITDA margin of ~50%.
 • Telkomsel booked a revenue of IDR22.32 tn in 2Q22 (+5.0% QoQ/ +1.7% YoY), despite a loss in its total subscribers by -2.8% QoQ. EBITDA was booked to be decreasing to IDR12.61 tn (+2.8% QoQ/-1.9% YoY), implying a margin of 56.5%.
 
Maintain HOLD with TP of IDR4,900
We maintain our HOLD rating on TLKM IJ with a TP of IDR4,900 which implied 5.60x FY22E EV/ EBITDA (close to its 5-years EV/EBITDA mean). Regarding the potential merger between Telkomsel and IndiHome, TLKM has not disclosed any more information. However, this potential M&A will expand Telkomsel business towards the fixed broadband industry. The downside risk include: 1) Rising USD currency; 2) Interest rate hike.
 
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