Telco: 1H25 OpenSignal Results: Two-Horse Race Intensifies, One Defends, One Advances (OVERWEIGHT)

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Telco

1H25 OpenSignal Results: Two-Horse Race Intensifies, One Defends, One Advances

IM3 narrows the download speed gap at 24.2 Mbps, closing in on XL and TSEL; progressively asserting network leadership in non-core regions.
TLKM’s lower capex reflects network maturity; XL’s network growth moderates amid merger process.
Maintain Overweight; Competitive intensity rising, with ISAT well-positioned through balanced data supply and network capacity.

IOH narrows the gap and strengthens regional expansion

IM3 closes the gap in Download (DL) speed vs. peers, thus improving again in 1H25 and demonstrating that its network is becoming more consistent and reliable. IOH’s capacity improvement appears to be driven by site optimization efforts and prudent management of data quota offerings. As such, we believe IOH should maintain a competitive network as it continues to expand in rural areas / ex-Java. IOH’s improving OpenSignal scores across non-core regions, such as Nusa Tenggara (29.2mbps DL speed), Sumatera (top in DL, video and gaming), and East Java, signal a strategic shift beyond its traditional Java strongholds. While TSEL retains dominance in Greater Jakarta, IOH has begun capturing user experience leadership in underpenetrated provinces, supported by network gains post-merger.

TSEL defends network leadership amid capex optimizations

TSEL DL speed is resilient (-0.4% vs. last period) despite their emphasis on growing data usage in recent quarters. While IOH and XL improved their video experience, TSEL was only marginally better. Despite TLKM's downward revision in capex guidance may imply underinvestment risk, management maintains that the capex can be optimized with more efficient topologies (looping vs. star), reusing existing fiber for FTTH, and better vendor pricing. Additionally, TSEL showed more improvement vs. peers in voice, coverage and gaming network KPIs.

XL’s consolidation mode; Network KPIs held flat

XL Axiata DL speed is also flattish compared to the previous period, but it has opportunistically caught up with peers in Upload and Reliability KPIs. We noted XL’s deliberate capex slowdown ahead of its merger with capex intensity dropping to 18% starting 3Q24 through 1Q25, as it adopted a wait-and-see approach during the integration phase.

Reiterate Overweight: ISAT’s network balance intact

We believe IOH’s well-balanced approach to data demand and network capacity should favorably position the company for continued network performance improvements in upcoming quarters. This contrasts with flattish download speed trends observed in both TSEL and XL, indicating potential capacity saturation or softer investment momentum. We reiterate our Overweight rating on the telco sector amid prospect of industry price repair and attractive valuation of 4.2x EV/EBITDA. ISAT (Buy, TP: Rp2,600) remains our top pick on the back of its potential higher ARPU uplift.

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