Telco: Progressing Toward Price Repair; Re-initiate Coverage with Overweight Rating (OVERWEIGHT)

Stock Code	Last Price	Change	Change %
DSSA	60,200	1,700	2.91%
CTBN	5,875	525	9.81%
PACK	4,520	410	9.98%
MBSS	1,830	365	24.91%
GMTD	2,730	240	9.64%
FILM	2,700	200	8.00%
RDTX	12,975	200	1.57%
INDF	8,400	175	2.13%

Telco

Progressing Toward Price Repair; Re-initiate Coverage with Overweight Rating

We expect gradual ARPU recovery to start in 2H25, supported by implementation of starter pack price floor and product simplification.
We believe ISAT is best positioned to lead ARPU growth on network gains and pricing upside; TLKM may continue to see drag from legacy.
Despite our modest 3.7% FY25F EPS growth forecast, we see that price improvement prospect is underappreciated. Reinitiate with OW.

Momentum for price repair from industry consolidation

The sector’s revenue contraction of -3.0% y-y in 1Q25 reflects the impact of weak consumer purchasing power, further exacerbated by industry-wide price competition. We believe the industry’s aggressive pricing practice should gradually subside as MNOs shift toward a more rational strategy aimed at restoring revenue growth and improving profitability. The momentum for price repair in 2H25 should also be supported by ongoing industry consolidation, which should ease competitive pressure and enhance pricing discipline.

Potential ARPU recovery from starter pack pricing and simplification

We believe the industry is moving toward price repair in 2H25 which should lead to a gradual recovery in ARPU. First, the industry-wide starter pack rationalization to Rp35k for 3GB (implemented starting in Mar25) should reduce churn by making SIM card switching less economical. In parallel, operators have also begun product simplification through reduction in the number of SKUs, aiming to minimize internal price cannibalization and support better monetization. In Jun25, Telkomsel streamlined its prepaid portfolio by retaining only Simpati and By.U and discontinuing Telkomsel Lite and Telkomsel Prabayar. As legacy starter packs are phased out and the new pricing structure becomes the standard, Telkomsel also aims to simplify its reload product lineup by phasing out high-volume data packages that have significantly compressed data yields.

A modest but improving earnings outlook; ISAT to lead organic growth

We forecast FY25 earnings for the telco sector to grow by 3.2% (see Exhibits 15 & 16), supported by fixed broadband and ongoing cost optimization, despite still muted revenue growth (-3.1%) in the mobile segment. We expect earnings growth to improve to 6.7% in FY26, driven by improving ARPU mobile. We project ISAT to lead organic revenue growth in FY25 at 6% yoy, driven by ARPU uplift potential. EXCL’s 7.7% yoy growth is largely attributed to the contribution from Linknet subscribers, consolidated starting in 4Q24. Meanwhile, we expect TLKM to post a modest +1% yoy earnings growth, following a weak 1Q25 marked by -6.4% yoy ARPU decline and continued drag from legacy revenue streams.

Reinitiate sector with Overweight as better outlook is yet to be priced in

We believe the prospect for gradual improvement in pricing and revenue growth is underappreciated, as the sector trades at 4.3x EV/ EBITDA (-1.3x to 5-year mean) with light positioning by domestic funds. We retain our Buy ratings across the three operators with pecking order of: ISAT (TP Rp2,600) > TLKM (TP Rp3,500) > EXCL (TP Rp2,800).

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