Telco
Telco Operators’ Tactical Adjustments Amid 3Q24 Weakness, Poised for 4Q24 Rebound
- TSEL stays aggressive with ByU to build a larger presence in the youth segment and lowers prices in Indihome to drive subscriber growth.
- IOH returns to repair mode, campaigning for SIM-card Rp25k/4GB, while XL remains constructive for a second consecutive month.
- We maintain an OW rating for the Telco, expecting 9M24 and FY24 growth in line with our ests, with 3Q24 softness likely to be short-lived.
TSEL Stays Aggressive with Focus on Youth Segments and Indihome
TSEL remains aggressive with ByU during 2Q-3Q24, as noted by peers. ByU, with an estimated 5-6mn subscribers, offers open-ended validity plans, aimed at driving acquisitions with less cannibalization risk, unlike TSEL Lite, which, we think, faces higher risk. We believe this effort is likely part of TSEL's broader youth-focused marketing alongside Super Seru (launched late 2023) and KuWota (launched in 1Q24). Moreover, TSEL aims to drive Indihome subscriptions by lowering prices in Oct24 by 5-21% (incl. free installations).
After Intense Competition for Subscribers, IOH Signals Market Stabilization
According to peers, IOH responded by launching low-priced starter packs, with efforts peaking in Aug24. XL also reduced prices to defend market share. In Sep24, IOH introduced its campaign offering 4GB for Rp25,000 for SIMs and e-SIMs (in the JBDTBK market at least), priced above typical reload packs for this quota. We believe this move may signal IOH's call for market repair.
IOH Builds Defensive Stance; XL Remains Constructive for Second Month
Our price tracker shows that IOH leverages the highly customizable Happy Flex product, cutting prices by ~24% for larger quotas and adjusting some IM3 flagship denominations. We view these efforts (excluding starter packs) as defensive moves aimed at addressing "RT-RW internet" challenges and enhancing its competitiveness in the dual SIM-card market. Meanwhile, XL remains constructive; following an average 6% price hike by Axis in Sep24, we also observe reductions in flagship XTRA Combo quotas, effectively improving implied yields, by ~6% on average. IOH claims to have followed suit with price hikes. We believe these positions are set to capitalize on the high seasonalities in 4Q24 and 1Q25.
3Q24 Revenue Preview: Soft Demand, No Clear Winners
We expect continued softness in 3Q data consumption due to seasonality and weak consumer income, with sector’s 3Q24 cellular revenue likely declining ~2% qoq on average and ARPUs remaining flat at best. ISAT’s Aug24 efforts suggest telcos may have settled into their current subscriber shares, with no clear winners.
Positive Outlook Despite 3Q24 Softness, Maintain Overweight
We expect Telkom/IOH/XL to post 9M24 revenue growth of ~1.7%/11.7%/ 7.2%yoy and believe the soft 3Q24 revenue will be short-lived. The revenue trajectories may well lead to FY24 growth of 2%+, 9-10%, and 7.5%+ yoy respectively, in line with their respective guidances. Stabilizing consumer income in the recent weeks remains a common view in the sector. We maintain an OW rating, as companies stay committed to their growth strategies. The key downside risk lies in rising competition intensity.
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