Credit Suisse: Telkom - Still a beneficiary of a growing market

● We continue to view the competitive environment in Indonesia as relatively benign. Notwithstanding some increased SMS promotional activity, core voice tariffs continue to be on a flat to upward trend. With net addition momentum picking up we now,
expect Telkomsel to deliver 11.0% revenue growth YoY into FY10, ahead of guidance and our previous forecast of 9.3%.

● While the fixed line business remains under structural pressure, Telkom management’s awareness of this has increased and costs and capex associated with the ex-growth Flexi business are finally being slashed. While fixed line capex overall still looks high, it is at least now being directed into value-creating areas (broadband).

● While the resulting upward revisions to our forecasts are relatively modest, at 1.4%, 0.9% and 1.5%, respectively, for FY10 consolidated revenue, EBITDA and net profit, the upward direction contrasts with recent downward moves in consensus forecasts.

● We raised our DCF-based target price by 2.2% from Rp9,200 to Rp9,400. With 22.9% upside, we upgrade our rating to OUTPERFORM (from Neutral).