Indosat Ooredoo Hutchison (ISAT IJ)

1Q26 Earnings: In-line; Monetization Continues to Improve Beyond Pricing

• ARPU reached a record Rp45.2k (+2.7% qoq) in 1Q26, driven by traffic growth, customer mix upgrade, and AI-led monetization.
• 1Q26 capex reflected rising consumption, front-loaded network deployment; The next spectrum may offer more favorable pricing.
• Maintain Buy with a TP of Rp3,000, supported by attractive valuation; The fiber asset sale targeted for completion in 3Q26.

1Q26 In-line: Traffic growth and customer mix drive ARPU expansion

ISAT booked net profit of Rp1,456 (-26.9% qoq, +26.2% yoy, forming 23%/24% of our/ cons. est.), broadly in-line. It recorded the highest ARPU at Rp45.2 (+2.7% qoq, +15.3% yoy) supported by +0.7% qoq traffic growth and stable yield, implying +1.4% qoq data revenue. We see this was driven by customer mix upgrade and AI-led service bundling and monetization, rather than broad-based pricing actions. Management also highlighted that exit ARPU reached Rp48.6k in 1Q26, suggesting continued momentum ahead. ISAT’s GPUaaS revenue delivered US$16mn in 1Q26 (26.7% of FY26 guidance), while securing US$170mn in contracted revenue over 3 years. We maintain our FY26F revenue forecasts at +5.2% yoy, as both mobile and AI monetization continue to track broadly in line with our expectations.

Higher traffic supports investment needs; Spectrum pricing may ease

ISAT maintained its FY26F capex guidance at Rp13tr, while we retain our conservative forecast at Rp14tr, reflecting our view that the company’s traffic-led growth strategy may require sustained network investments. This is partly reflected in 1Q26 of Rp4.1tr (30% of our forecast), which is attributed to both rising data usage and front-loaded network deployment. A potential capex may arise from the upcoming 700MHz and 2.6GHz spectrum auctions this year, where ISAT’s preliminary assessment suggests reserve prices could be 60-70% below historical spectrum benchmarks.

Maintain Buy with an unchanged TP of Rp3,000

We maintain our TP at Rp3,000 with 26F EBITDA growth at 5.6% (company guidance at mid-to-high single digit) and 17.4% EPS growth. Meanwhile, fiber asset sales remain on track with scheduled completion in 3Q26, targeting net proceeds of ~US$560mn. ISAT trades at an attractive 4.0x EV/EBITDA 26F (-1.3 5-yr SD). Key risks include higher spectrum costs, elevated capex intensity from traffic-led expansion, and sustained personnel cost inflation. Thus, our Tactical (3M) view: N

… Read More 20260504 ISAT