CLSA Indosat 9m09 result dissapointing

Indosat 9m09 result is dissapointing with no pick up in operating profit despite the peak season Moslem holiday in September , comment from Wilianto

- Net profit come in at Rp1.45tn which is 75% of our full year forecast. However, operating profit remain weak with no pick up in Ebitda and falling Ebit in 3Q09 despite it is a peak season Moslem holiday.
- Consolidated revenues were up slightly (+1.5%), largely driven by 5% qoq increase in cellular revenues during peak season Moslem holiday in Sep09.
- Ebitda down slightly (-6.3% qoq) and Ebitda margin down from 48.7% in 2Q09 to 44.9% in 3Q09 as operating expenses pick up. There is no breakdown available yet, but we expect the increase in operating expenses to come from network maintenance and operating costs.
- Ebit decline sharply (-22% qoq) due to higher depreciation charges as the additional/incremental capex invested is not generating return.
- The net profit line seems to be boosted by FX gain (again, no details available yet) as Indosat has around US$1bn FX debt and only hedged half of it.
- The poor operating result of Indosat further strengthen our view that mobile operators can no longer afford price war and tariff/revenues per minutes will gradually move up. Telkom, with its strong balance sheet, positive FCF, and strong brand equity will continue to benefit from the weakening competition.