Telkom Indonesia (TLKM.IJ Rp 2,670; BUY TP Rp 3,680) Well-positioned as LT FMC Play; Defending market share and gearing up for FMC deployments

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Telkom Indonesia (TLKM IJ)

Well-positioned as LT FMC Play; Defending market share and gearing up for FMC deployments

TSEL navigated 4Q24 with stable mobile subs and higher ARPU, showing ability to defend market share with the help of second-tier brands.
TSEL is gearing up for a major push with single billing features that will make users stickier ringfencing mobile/fixed traffic in its networks.
We trimmed FY25-26 est. by -4.0%/-3.8% and arrive at lower TP of Rp3,680; maintain Buy rating on TLKM as the best LT play for FMC.

Best defense is offense for mobile subs base retention

TSEL indicates that it will continue appealing to the mass market with ByU, potentially employing tactical moves in rotation with other brands as it develops second-tier fighting brands to preserve its subscriber base. This strategy has narrowed the gap in data yield vs. peers, allowing TSEL to tailor offerings, retain price-sensitive users (incl. rotational subscribers), and optimize its subscriber mix. This multi-brand approach also sets the stage for FMC expansion, unlocking further upside through cross-selling opportunities.

Gearing for a momentum in fixed BB for the coming quarters

TSEL gears up for momentum in FMC by enriching single billing with family data usage and spending plan modules, as well as introducing more bundling permutations during the 1Q-2Q25. This should further ring fence its subs base and data traffic within its network. Some new products will launch in 1Q25 and require front-loaded marketing costs, which we incorporate in our model.

Telkom remains the best play in Indonesia’s FMC (medium-long term)

We see a significant opportunity for MNOs in fixed BB, as we estimate ~50mn households in Indonesia are up for grabs. With Indonesia gradually becoming a fixed BB-led market, TLKM group will theoretically have leverage over the competition, generating larger margins and cashflows. Unlike its peers, Telkom continues to own the last-mile network homepasses within the group. TSEL will also leverage its branding and customer know-how to influence consumer perception.

We foresee milder 4Q24 earnings; maintain Buy rating with lower TP

We adjust 4Q24 revenue growth to <2.5% qoq and consequently trim FY24-26F earnings by -5.9%/-4.0%/-3.8%. We revise 2025 rev. growth from 4.6% to 3.5%, expecting it to be a transitory year for Telkom’s FMC, with a steady ARPU rise roughly at the rate of inflation. Integrating the EV/EBITDA component in our valuation (set at -1SD of 4.7x) we arrive at lower TP of Rp3,680 (vs. Rp4,250 prev.). We maintain our BUY rating, as TSEL preserves its base with stabilizing ARPU and pathways to FMC. The risks stem from mobile subs cannibalization and fixed BB competition.

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