JPM EXCL 2Q10 net income 36% ahead of street, 7.5% ahead of our street high estimates - ALERT

• We expect to see upgrades to FY10 EPS of 25%-35%: the street is straight lining 1H10 revenues while Figure1 shows that 2H traditionally has a higher contribution to revenues for Excelcom. Full year street EBITDA margin at 47.8% looks quite low compared to the 52.9% in 1H10. 1H10 reported profit is already 60% of street's full year estimates. We are currently 46% ahead of consensus FY10 EPS.

• Monthly net adds up 147% QoQ as Excelcom added 2.7mn subs in 2Q10. This is in line with the high net adds at Telkomsel (6.4mn) and strengthens our view that subscriber growth will continue on the back of a strong macro environment and overreported penetration statistics due to the prevalence of dual SIMs.

• Monthly net adds up 147% QoQ as Excelcom added 2.7mn subs in 2Q10. This is in line with the high net adds at Telkomsel (6.4mn) and strengthens our view that subscriber growth will continue on the back of a strong macro environment and overreported penetration statistics due to the prevalence of dual SIMs.

• Voice tariffs increased: Excelcom raised voice tariffs by 31% QoQ to Rp117/min, MOU’s declined 27% QoQ. Total voice ARPU at Rp21k was down 4.5% QoQ and came 12% below our estimates. Data ARPU at Rp14k was up 9.4% YoY. Total ARPU at Rp42k declined 5.7% YoY and was 8% below our estimates. Higher net adds drove total
revenue to Rp4,261 bn (+29% YoY) but missed our estimates by 5.8%.

• Excellent performance on EBITDA margin: Excelcom's 2Q10 EBITDA margin at 53.7% was 3.8pps above our estimates. Major savings occurred in cost of good sold (20% below our estimates) and overhead expenses (40% below our estimates). Total EBITDA at
Rp2,288 bn was up 57.4% YoY, beating our estimates by 1.4%. Lower than expected interest expense drove net income to Rp725 bn, 7.5% ahead of our street high estimates. Recurring income at Rp754 bn was 11.8% ahead of our estimates.