MacQ from Salesdesk

Macquarie Asean conference – PT Telkom

Take-aways that maybe new to the Street:
1. January mobille net adds around 2.0million for Telkomsel, more than 75% of industry net adds. Take up strong outside java.
2. Competition holding back capex spending in a major way. Only two operators issuing purchase orders since the beginning of 2009.
3. After a flat rate bill trial for fixedline service in Manado, the trial has expanded nationwide as of two weeks ago. Fixed line customers have the option to pay flat rate for fixed line calls, around 200 out of 8.6mn has migrated. Effective revenue impact is more than 10% positive for those who migrated.
4. Regulatory approval for mandatory migration to flat rate billing for fixed line has not been obtained, which why the migration is optional at this stage.
5. A toned down message on overseas investments. Management promises not to step further on iran investment until they completely study the political implications. But Iran is the most preferred overseas investment (compared to srilanka, bangladesh, vietnam opportunities) purely on commercial sense, before political considerations.
6. The re-juggling of tower business is mostly a defensive move. PT Telkom must share towers under new regulation.

My take – PT Telkom and PGAS top my list as post-election beneficiaries for Indonesia (potential tariff increases!). Election process should conclude by September 2009. Parliament and president inaugurations are scheduled for 1 and 20 October 2009. TLKM trades on 10.6x P/E 2009. Macquarie rates the stock as Outperform.