CIMB Telekomunikasi Indonesia Quick takes - Fixed-line drag

(TLKM IJ / TLKM.JK, NEUTRAL - Maintained, Rp7,250 - Tgt. Rp7,800, Telecommunications)

We came away from Telkom's post-1Q09 results conference call with an unchanged view on its mobile operations, but more concerned about its fixed wireless and wireline businesses. Consistent with our view, Telkom anticipates gradual growth for its mobile revenue in 2009, aided by stable tariffs, higher usage and subscriber growth. However, we are concerned about Telkom's inability to monetise the strong growth in its fixed wireless subscriber base, and do not sense any changes in its strategy to reverse this.

On the back of its disappointing results and weak fixed wireless business, we reduce our FY09-11 core net profit estimates by 6-18% and DCF-based target from Rp8,500 to Rp7,800. We maintain our NEUTRAL rating on Telkom and would advise investors to switch into higher-beta stocks in the current market rally. However, Telkom remains our top telco pick in Indonesia for its strong franchise and dividend yields of 5%.