Mandiri Sekuritas Telkom: 1Q10 net income in line with ours and consensus (TLKM, Rp7,850, Buy, TP: Rp12,000)

Telkom reported 1Q10 net earnings of Rp2.8tn (+13%yoy) which came in-line with ours and consensus estimates. 1Q10 revenues totaled Rp16.6tn (+6%yoy). Revenue breakdown as follows: 40% cellular, 30% data, internet, IT, 20% fixed lines, 6% interconnection and the remainder for other services. Main revenue driver came from data, internet and IT services which grew by 25%yoy. However what’s noticeable was the slowdown in net cellular ads of only 400k (from 4Q09) to 82mn subscriber as of 1Q10, the lowest among major GSM players. EBITDA margin was about 54.5%, which also slightly declined from 56.7% in 4Q09. Our concern stems on Telkom’s ability to raise subscriber base (though still a runaway market leader with about 50% of the GSM market) despite the healthy growth comings from its content services segment. We currently have a buy on the stock, which trades at about PER10F 14.5x.