BNP Paribas Indosat: 2Q10 - Additional points from infomemo. (FOONG Choong Chen) ISAT IJ; CP: IDR4,650, TP: IDR6,750; BUY

Indosat has released its infomemo for 2Q10. Key highlights:
· The big q-q decline in 2Q10's net profit was largely due to i) loss on change in fair value of derivatives of IDR165b (1Q10: IDR97.6b), ii) much lower forex gains of IDR10.5b (1Q10: +IDR359b) and iii) additional tax expenses from BV companies, which raised the effective tax rate to 58.9% (1Q10: 30.4%).
· Stripping off the exceptionals, pretax profit for 2Q10 came in at IDR231b, up 45.6% q-q.

· For cellular, prepaid subscribers grew 0.8% q-q to 36.0m in 2Q10, while postpaid subscribers fell 14.3% q-q to 1.8m. YTD (1H10), prepaid ARPU was at IDR31.5k. As this is higher than IDR30.6k in 1Q10, it implies that prepaid ARPU improved +6% q-q in 2Q10 to approx IDR32.5k.

· YTD MOU/sub was at 112.5 minutes/month. As this is higher vs 105.8 minutes/month in 1Q10, it implies MOU/sub has risen +13% q-q to an estimated 120 minutes/month in 2Q10.

· YTD RPM was at IDR164. In 1Q10, it was IDR169. Anyhow you look at it, RPM has dropped considerably from IDR220 in 2009. This was due to the more aggressive promos initiated by Indosat in late-09/early-10.

· The drop in non-cellular revenues (-9.0% q-q) was due to i) decreased tariffs on more intense competition, ii) lower IDD revenues on stronger IDR & lower traffic, and iii) lower Fixed Wireless revenue.