Indosat Ooredoo Hutchison (ISAT IJ)

Solid Mobile; Potential Div Upside from Fiber Sale

 

  • 4Q25 ARPU reached Rp44k (+10% qoq), with traffic remaining the key driver (+7.5% qoq), supported by AI-driven hyper-personalization.
  • FY26F capex is guided at Rp13tr, excluding spectrum license costs, while management aims to secure both 700MHz and 2.6GHz bands.
  • We maintain Buy rating and TP Rp3,000, supported by solid mobile while net FiberCo proceeds (US$560mn) could provide dividend upside.

 

Mobile momentum expected to remain positive into FY26F

ISAT recorded its highest ARPU at Rp44k in 4Q25, driven by a +7.5% qoq increase in data traffic, while data yield rose modestly by +1.3% qoq. Management attributed this to AI-personalization, lifting usage intensity to 18.5GB/subs/month. We expect this momentum to continue into FY26F, supported by a more rational post-consolidation industry and mgmt’s indication that monthly ARPU has recently reached Rp44-45k. Meanwhile, GPUaaS booked US$28mn of revenue in FY25 (below the US$35-40mn target), while FY26F contracted revenue stands at US$50-60mn.

 

Capex discipline amid 5G rollout; potential spectrum spending

ISAT maintained its FY26F capex guidance at Rp13tr, representing BAU spending that includes 5G rollout, as it enhances its 5G presence across mobile and FWA services currently in 24 cities nationwide. We assume FY26 capex of Rp14tr to allow for structurally higher 5G investment vs. 4G, given the need for denser site deployment. Management indicated interest in the upcoming 700MHz and 2.6GHz spectrum auctions (expected in 2Q26), which could entail additional upfront spectrum payments beyond BAU capex. We estimate upfront fees of ~Rp3.4tr/ MNOs, assuming equal allocation spectrum/ bandwidth (this not yet incorporated in our model).

 

Maintain Buy TP of Rp3,000; Potential special dividend from fiber sale

We slightly raise our FY26-27F forecast by 15-30% to reflect stronger FY25 mobile performance and now project earnings growth of 17.4%/22.1% yoy in FY26/ 27F. We maintain Buy rating and assign Tactical (3M): OW, with unchanged TP of Rp3,000, implying 5.3x EV/EBITDA FY26F. ISAT currently trades at an attractive 4.3x EV/EBITDA FY26F (-1.2SD). Management guides for a gradual increase in dividend payout ratio to 70% by FY28F, with FY25 payout expected to exceed 55% (vs. our assumption of 60% DPR in FY25). Additional upside could come from fiber asset sale proceeds, with management targeting net proceeds of ~US$560mn in 2Q/3Q26. Even after factoring in ~Rp3.4tr spectrum license fees, we estimate a potential ~8.2% special dividend yield. Key risks include subscriber contraction, lower fiber asset sale proceeds, and spectrum auction uncertainty.

 

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