Credit Suisse PT Telkom Rural survey confirms that Telkomsel is still dominant in some areas

● It is clear from our user survey that Telkomsel still retains dominance outside of Java. A full 63.3% of our respondents in the Lampung area of South Sumatra used Telkomsel, fairly evenly split between the two prepaid brands (Simpati and Kartu As).
● Furthermore, Telkomsel’s on-net community creates a very strong barrier to entry versus new entrants; new entrants’ off-net tariffs are effectively competing with Telkomsel’s (much lower) on-net tariffs since they lack an existing community of users.
● Facing coverage and scale disadvantages, we conclude that new entrants are unlikely to create value. A three-player market is set to emerge, and importantly third-player and market-shareaggressor Excelcom is already shifting strategy towards customer retention, and away from acquisition.
● While we are maintaining our forecasts for both Telkom’s fixedline division and Telkomsel, we have lowered our WACC from 12.41% to 12.08%, and this drives a 6.4% increase in our target price from Rp7,800 to Rp8,300. OUTPERFORM maintained.