Good afternoon, ladies and gentlemen. Welcome to XL Axiata's Earnings Conference Call for the First Half of 2020. My name is Raff, and I will be your coordinator today. During the presentation, all participants are in the listen-only mode. Instruction will be given on how to register your questions when we get to the question and answer session. As a reminder, this conference is being recorded for replay purposes. Now, we would like to turn the conference over to our host, Mr. Indar. Please proceed.
Thank you. Good afternoon, everyone, and welcome to the call. On behalf of the XL management team, I would like to thank all of you for taking the time to join us today. With us on the call today, we have Pak Adlan, our Chief Financial Officer, Pak David, our Chief Commercial Officer, and Pak Budi, our Deputy Chief Financial Officer. Ibu Dian sends her apologies, as she is not able to join the call today. Now, Pak Adlan will share the highlights of the first half of 2020, which will then be followed by the Q&A session. I will now hand the call over to Pak Adlan.
Thank you, Indar. Good afternoon, everyone. We are happy to report a good set of first half results, despite tough competition and challenging economic environment due to COVID-19. Our revenue and EBITDA grew for the second consecutive quarter, and we have outperformed the industry in the first half of the year. Service revenue grew double- digits, rising 10% year-on-year in the first half of 2020, driven by strong demand for data, as many Indonesians continue to work and school from home. EBITDA rose 37% year-on-year as a result of revenue increase and cost efficiency, with EBITDA margin now above 50%. We continue to be in a net profit position, reflecting our focus on operational excellence, with an emphasis on profitability and returns. However, competition to get tougher, with all players now having some form of unlimited product in the market.
Aggressive pricing is also seen across the smaller sachet data packets as operators try to win wallet share of customers, driving data yield down. The aggressive competition is expected to continue in the second half of 2020 as demand starts to soften, especially in the mass low-end segment. As a result of COVID-19 impact, with many businesses struggling, job cuts and unemployment rising. As the Indonesian economy expected to contract in the second half of the year, the industry will also be negatively impacted. Distribution is key during this challenging environment, and I am pleased to say that our digital channel and touchpoint have continued to grow double- digits since last quarter. We will continue to accelerate the growth of our digital channel in line with the changes in consumer behavior. This will allow us to have a better control and visibility of movement in the market at cheaper cost.
Nevertheless, traditional distribution channel remains important, and we are ensuring that all our retail outlets have enough physical stock as we continue to support this channel during this tough time. The shift to digital has been one of our key transformation pillars. In line with this, I'm happy to announce that we have recently launched our new digital brand, Live.On. This will be a new area of growth for us in mobile. Live.On aims to give customers a fully digitalized, self-serve experience by aspiring to be the digital brand that gives consumers power back over their digital lifestyle. It seeks to capture the upper tier of the digital-savvy users whose current needs and pain points are left unaddressed by the current offers. Our home business has had a strong start to the year with increased demand for fixed broadband services.
Despite not building any new infrastructure, we have expanded our home passes this year to more than 300,000 through a partnership model to increase our footprint. We are now present in 10 cities across Indonesia, and we will continue expanding as we finalize a long-term plan for this business. For the second quarter of 2020, we have seen record increase for home connect as demand for fiber to the home accelerated during this pandemic. To date, we have more than 50,000 home connect. Focus on business continuity and employee wellbeing remains our top priority. We have reopened our head office, but we have introduced flexibility for our employees of either working from office or continuing working from home, with many are still working from home. We have seen increase in employee productivity as less traveling time has meant higher efficiency and better time management.
Throughout this period, our crisis management team has ensured all operations run smoothly and that our business can continue as normal during this period. Our network rollout and upgrade continues to be on track, as our early planning and procurement process has helped us secure all the materials needed to meet our network rollout plan in 2020. We continue to roll out our network on schedule with our BTS count now 139,000, with 4G presence in 456 cities across Indonesia, with almost 50,000 4G BTS. We also continue to fiberize our network to manage the accelerated growth of data traffic and ensure our customers will continue to enjoy good network experience. We will also continue to expand and strengthen our network outside Java to further accelerate our revenue momentum that we are currently enjoying in this area. Our balance sheet is strong with net debt to EBITDA of below 1.
We have no USD debt, and we have also secured committed facilities with the banks that we can tap at any time if we need additional capital. This is important today, given the uncertainties in the coming quarters as a result of the ongoing pandemic. Although our results are positive so far, the situation in the market remains tough. With the impact from COVID-19 on rising unemployment and lower income for many Indonesians, coupled with the rising competition. This creates an unprecedented situation, and as a result, it is difficult to predict what the second half of the year will look like. Therefore, we are not able to provide you any guidance until we have better clarity on the situation. I'll pass to David to finish off the remaining speech.
Okay. Thank you, Pak Adlan. Finally, as per our announcement on Monday, Pak Adlan is leaving XL Axiata to continue his professional career within the Axiata Group as CEO of EDOTCO. We are currently in the process of identifying his replacement and will make the necessary announcement when it has been finalized. Pak Adlan will be here for the next few months to help with the transition and handover process. We wish him all the best in his future endeavors and thank him for his many contributions to XL Axiata over the past nine years. Thank you, and let us proceed to the Q&A session.
Thank you, Ib u Dian. To ask a question, please press star one. To cancel, please press the hash key. Please kindly but strictly limit your questions to only two and to allow other participants to raise their questions. Should you need to ask more questions, you can go back to the queue by pressing star and one again. We shall end the conference call sharp at 2:00 P.M. Jakarta time. Again, it's star and one if you wish to ask questions. Our first question comes from the line of Arthur Pineda from Citigroup. Arthur, your line is now open.
Hi. Thanks for the opportunity. Two questions, as noted. Firstly, are you seeing any notable changes in the momentum following the unlimited plan launch from Telkomsel? Is this impacting your business outside of what you've seen in the second quarter? I'm just wondering if you need to react there. Second question I had is with regard to the growth trajectory that you're seeing. Are you able to provide any color in terms of how the growth momentum is trending within Java and outside of Java in revenue terms? What the revenue split is now between those two regions? Thank you.
Yeah.
I think that one.
Yeah.
Okay. Regarding the Telkomsel launching the unlimited, right? I have to say that we had already anticipated that Telkomsel will have a movement like this sooner or later. Answering to, I think there were two questions from you. One is whether we have seen a change in our momentum. That's number one. Number two, whether we are thinking on reacting, right? Let me start for the second one. We are not thinking on reacting. We are not thinking on cutting prices or entering in a price war. We are going to try to keep the market stable. Having said that, of course, you know that we have a regional pricing strategy that depending on our competitive dynamics and our network capabilities in each of the regions, we keep adjusting prices. That will keep as a BAU business. That's answering to the second.
Answering to your first one, to be honest, our acquisition and our new subscriber acquisition is still in good momentum. We are seeing still a strong momentum in that area during August.
Also on your second question, I think if you look at year-to-date, I think we are still growing in both island, right? Java and ex-Java, right? Of course, I think the growth that we are seeing in non-Java is still showing very strong momentum. Yeah, I think that will probably continue. And I think we think that we also gaining market share in those areas, right? I think situation in Java, for example, has been quite competitive. We're seeing some growth, but we expect that this is going to be the battlefront, right? In the second half of the year. Whilst I think that we have also seen that as a result of the pandemic as well, that people, especially the mass low-end purchasing power impacted given the rising employment and all that.
We expect that the challenge in the second half will be more in Java. Momentum in ex-Java has been good, and I think we think that it will continue in the second half.
Thanks. Do you split out the revenue split on Java?
Now, I think ex- Java is already accounting close to 25%.
Got it. Thank you. Well, congratulations as well on the new role, Adlan. All the best.
Thank you. Thank you, Arthur.
Thank you so much. Your next question comes from the line of Colin McCallum from Credit Suisse. Your line is now open.
Thanks a lot. Yeah, congratulations, Adlan. Two questions from me. The first is, obviously, the second quarter numbers look pretty decent given the circumstances, but the price per megabyte did obviously decline quite sharply. Strategically speaking, are you worried that you've got decent growth short-term out of that, but it might store up problems for the longer-term growth trajectory, just the pace of that price per megabyte decline? That's the first question. Second question is, noted on your comments on finalizing long-term plans on fixed broadband, are you looking organic or inorganic for that, following your experiments over the last year or two? If inorganic, have you firmed up anything on acquisition plans? Thank you.
Thank you, Colin. Let me take the first question around the yield. Yes, you are right, our yield or the price per megabyte has decreased in this second quarter. There are, I would say, three factors that has affected that, right. The first one is that customers have moved themselves to packet with higher gigabytes, but they, I would say abuse or they use the packet, they sweat the packet more. It's packet with lower yield by definition, higher packet, they sweat them more, right. That's part of the yield decrease. There is a second part, a second factor that is the CSR packet that we offer our customers in such difficult situations. As you know, we offer 2 GB per day for certain applications and certain URLs for people to be able to work from home, study from home, et cetera.
That, I would say, is the second. The third one, as you say, it's also the unlimited product that we have in the market. When we look at our yield or our unlimited product, what we try to do always is try to optimize the share of wallet of our customers. In order to do that, we also take a look to our competitive dynamics and the network capability on where we are playing with this. In this sense, one thing that I think is clear is that our ARPU has increased. Our ARPU has increased, so we are taking a bigger share of wallet from our customers. We believe that this is the correct step, and we are in a sustainable path.
Colin, on your second question, fixed broadband, I think you probably have seen, not only from our side as well, but in the market as well, the demand for fixed broadband has actually increased , with this current pandemic. Yeah. I think looking at the situation and the new norm moving forward, I think, the demand for the fixed broadband would be positive. I think maybe increasing growth expected as well. Of course, I think we are also seeing the same in our numbers. I think from that perspective, I think, we are looking at both. Organic and inorganic. I think there are challenges in both, but definitely we see also a big opportunity coming up with both. To answer your question, yes, we are open to both.
Organic or inorganic in terms of expanding our footprint on the fixed broadband.
Understood. Thank you very much.
Thank you so much. Your next question comes from the line of Foong Choong Chen from CIMB. Your line is now open.
Hi. Thanks for the call. Two questions from me. Firstly, just wanted to reconfirm Adlan, you mentioned that ex- Java is already accounting for 25% of XL revenue for the second quarter. Is that correct? In terms of the profitability for the ex- Java region as a whole, where are we now on that? When do you see the region breaking even for XL? That's the first question. Second question, the EBITDA margin continued to improve very nicely into the second quarter. How do you see costs trending into the second half? Any major upward pressures, or do you see even more savings coming through in the next half? Yep, those are my two questions. Thank you.
Yeah. You're right. Yeah. ex-Java revenue is actually account for about 25% of total revenue to date. Of our service revenue. I think, generally, I think, you see that we have actually started investing in ex-Java starting from second half of 2016 to 2017. I have to say that some of this cluster or some of this early investment have already started breaking even. However, I think our investment in ex-Java have actually continued , throughout this year. As a region on its own, total region, I think we are still not breaking even yet. But I have to say that we are quite happy to announce that some of the cluster that we have invested earlier in ex-Java are already breaking even and showing good progress.
Looking at the momentum that we are seeing today, the progress that we are making in ex-Java is also ahead of plan. I think we expect that this momentum will also continue in the coming quarters. I will pass to Pak Budi to answer the second question.
Yeah. Regarding the EBITDA, you're right. Our EBITDA has awesomely higher compared to the same period last year in the first half, increasing 37%. Please take note, within that increase, that includes our IFRS 16 adjustment accounting almost IDR 1 trillion. If you remove that factor, our EBITDA still increase significantly around 15%. Contributing by two factors. One, the revenue that, as you can see, increased by 7%, and also our ability to manage our cost better and then sweating the assets better. That's why we're able to get lower OpEx and resulting at the higher EBITDA even after remove the IFRS 16 impact.
If I can just quickly follow- up on those two questions as well. Back to the ex-Java side, if I can sort of pin you down on a time frame for breaking even for the whole region. Given the fact that the coverage in ex-Java is already at a pretty high level, I presume the expansion there will not be as much as previously in terms of the coverage. When do you think that we can break even as a whole for the ex-Java region? On the EBITDA margin, just coming back to that into the second half, any sort of key cost items where we expect to see any cost pressures on the upwards or even some savings?
Yeah. Choong, I think if you look at when we do our investment, typically ex-Java and or Java, we are actually looking at payback around three to four years. I think you see that maybe the bulk of the investment on an average, you would say that it's around average that we've invested in ex-Java in around 2019, 2017, 2018, and probably 2019. If the philosophy on the payback three to four years, if you take that into account of what we have invested before as well. Effectively, if the trajectory continues as what it is today with the strong momentum, we could be looking at around another at least 18 to 24 months.
Yeah. Regarding the second half, we cannot give a guidance, but roughly it's going to be the same big-ticket items that we are focusing on. One would be around the tower rental and also fiber cost. Those are a few things that we really closely look at because there are some tower contract that's coming due. As you know, we are always able to bring it down. Those contract that been signed with higher cost per tower, we're going to sign with the new rate. That will help us in terms of cost saving. The rest of costs, we will do the same thing, closely monitor and then spend as needed. We make sure that every single dollar we spend going to optimize in terms of contribution to the revenue.
Okay. Got it. Thank you so much, guys, and congrats, Adlan, on your promotion.
Thank you, Choong.
Thank you so much. Your next question comes from the line of Kresna Hutabarat from Mandiri. Your line's now open.
Hi. Thanks for the opportunity and all the best, Adlan, in your coming new role. I have two questions. My first question is on the revenue contribution from online channels. Can we get some color on the revenue contribution size for online channels today, say, in comparison to the same period last year? How big do you think this revenue contribution can increase to? That's my first question. My second question is on your new product, Live.On. Basically, this is your challenger product, to Telkomsel's by.U or Smartfren's Switch. What's the rationale for XL launching such a fully digital product there? Is it pricing or segmentation? Any color on that would be helpful. Thank you.
Thank you, Kresna. To your first question regarding the revenue from online channels, I cannot give you a number, but I guess that we all know that with all this pandemic, the traffic to certain outlets, even to XL centers, has been reduced. The amount of data that we are selling now in our own online digital channels or digital touch points, it's increasing significantly. It's increasing double- digits and has been like that already since March. I think we are very happy with the result, and it's very promising. That's in the first question. Regarding the second question, you are correct. Live.On, it's our new digital product in partnership with Circles.Life as a managed service. We believe that there is a demand in Indonesia for end-to-end digital products that are more customizable.
There is a segment that we were not tackling as of now, that is the higher-end digital savvy that we expect to attract with this new product proposition.
Okay, thanks.
Thank you so much. Once again, ladies and gentlemen, if you wish to ask a question, it's star and one on your telephone keypad. Again, it's star and one if you wish to ask a question. Your next question comes from the line of Sachin Mittal from DBS. Sachin, your line is now open.
Yeah. A couple of questions. Firstly, We saw almost 15% sequential drop in data pricing. Is there a reason for the sequential data pricing drop to slow down to 15%? In the quarters ahead, any factor or should it further accelerate given that price war we have seen? That's question number one. Question number two is on, Telkomsel lost 2.5 million customers in 2Q, but only 200,000 came to XL, and bulk of them went to the other telcos. This is in the post SIM card registration exercise era, right? I'm trying to understand what's really hampering those customers coming to XL network. Is it network quality? Is it the pricing? What's really the issue there? Lastly, Telkomsel has launched unlimited plans in 65 cities. Could you give an idea of, these 65 cities comprise what percentage of customers for XL? Anything on that will be appreciated. Thank you.
Okay. Thanks for the questions, Sachin. The first one regarding the price per gigabyte. You are right, it has decreased. I think, as I was explaining before, there are mainly three factors that has made this decrease. Factor number one is people have upgraded themselves to packets that are more expensive, bigger, but also lower price per megabyte, and they are sweating them more than they were before. This is a trend that we have been seeing also. People who buy the packet now use it much more, they complete it more than before. I think there is a factor there. A second factor is our social responsibility program that we launched. We were giving 2 GB free for every customer to access certain URLs and certain applications. I think that was another area of this decrease. The third one, yes, it's price adjustments.
Price adjustments specifically, well, in many things, but specifically our unlimited proposition. What we call the Unlimited Turbo. This has also affected. Now, couple of things that I want to clarify around this. When we take a look to the price per gigabyte, we take a look to our network utilization, and we take a look to how to improve our ARPU. We always try to increase the revenue. As you can see in the results as well, our ARPU has increased this quarter. I think the strategy has been positive. Yes, the price per gigabyte has decreased, but the ARPU of the customers have increased. That's number one. Number two, I would also like to explain a little bit, how our, what we call Unlimited Turbo, is different from what you will find in the market.
There are three things that I believe that are worth mentioning. Our unlimited gives unlimited access only to certain applications. For example, Facebook and Instagram. Only to certain applications. It's not a true whole unlimited like our competitors, number one. Number two, this access, this free access only happens after the main quota has been finished. That's also a big difference from our competitors. The third one is like for the high consumption applications like streaming applications, for example, YouTube, you need to proactively activate them in our digital touchpoint. I think these are three factors that make our proposition very sustainable. As I was saying in the beginning, I think for us, the most important is that the ARPU increased. We control that in how we are able to increase the share of wallet of our customers. That's in the first one.
Yeah. The second one, yeah, you asked about Telkomsel losing 2.5 million subs, but what came in. We cannot comment much on that, but one thing that I probably want to draw attention, the definition of customer between operator differs. Obviously, I think we know that how we define our customer, and I think we believe that ours is probably the most conservative in terms of, and reflecting the real situation in the market today. Therefore, whilst we are seeing good momentum in terms of our acquisition, at this point in time, but we really cannot comment where the rest of the other customer that Telkom lost went to. Definitely, I think, from our perspective, since we launched the unlimited in the month of March, I think our acquisition has been seeing good momentum, and I think it has even continued even up to today.
We probably would see better trends for us, I think, moving forward, with the current trends that we're seeing in our acquisition. The last one on unlimited, yes, Telkomsel have actually limited the launch in 65 cities. Obviously, we probably will not disclose what percentage of our customers are in these cities. So far, as David mentioned earlier, we have not seen much impact at this point in time. I think we probably do not have intent to react because we believe that our products are quite competitive in this area, to be able to compete with these type of sale offerings.
Okay. Just a follow-up on that. Now that rules to acquire SIM cards are more stricter than three years back or two years back. Is that helping you? Is that helping the competition being more rational? Have you seen that?
Sorry, can you repeat? You were breaking up.
Yeah. My question is. Can you hear now?
Yeah.
Hello. Can you see me now?
Yes. Go on.
The rules to acquire a new SIM card is more strict than before, right? There's a limited number of SIM cards that you can have. Are you seeing that having some positive impact on the industry? Is that a factor that the competition will not intensify further due to the restrictions on SIM card?
Yeah. We believe that the impact has been positive. The use and throw churners have reduced. The lifetime of our acquisitions have increased, which is positive. I think the impact for sure has been positive, and we hope that this continues like this and that all competitors comply with the given regulation.
Okay. Understand. Thank you.
Thank you so much. The next question comes from the line of Ranjan Sharma of JP Morgan. Your line is now open.
Hello. Can you hear me?
Yep. Go ahead, Ranjan.
Can you hear me?
Yes, Ranjan, go on.
Okay. Good afternoon, and thank you for the presentation. It's Ranjan Sharma from JP Morgan. A question from my side. Firstly, on the news flow that you have seen on Huawei and the restrictions.
Ranjan, we lost you.
The second question is, y eah.
Ranjan, we lost you just now. We didn't hear your first question, actually. We didn't hear. We lost you just now.
Yeah. My question is on the impact of U.S.'s restrictions on Huawei on XL's current and future network build plans. The second question is on the sales and marketing. How much is the reduction sustainable due to the digital channels? Thank you.
On Huawei, I think, if you look at our policy today, in all the layers of our network, we have actually a two-vendor policy. In all these layers, we are not dependent on one vendor, and we always have two or more. That's the first thing. As a group, we've actually made this assessment on the impact of Huawei. I think the impact of this U.S. ban on the chip and all that will actually primarily impact Huawei on their smartphone business. However, in terms of their network product today, I think they do not have much reliance, for example, to the U.S. chips or products and all that. That assurance we actually got from Huawei. Nevertheless, I think you don't know where this battle is going to go. Maybe now it's about chip ban.
Later, if they ban everybody to integrate with Huawei and all that. We are assessing that situation today. I think, of course, in all these cases, for example, we have actually simulated scenarios on how we are going to react. At this point in time, at least from the country perspective, Indonesia, today as an industry, you would say that 60%-70% of the industry rely on Huawei. Yeah. The likelihood of the country banning Huawei at this point in time, I would say, is not significant. Nevertheless, I think we are preparing plans, for example, what would we do, for example, in times when those situations or scenarios emerge. Yeah.
Regarding the second one about, if I understood properly, marketing and sales, the digital transformation. The digital improvement there. Regarding marketing, since the pandemic started, we have moved big part of our budget from more traditional channels to the digital channel. Now most of our efforts are in the digital channel, all the marketing that we are doing. That's number one. Number two, regarding the channel or how we are selling. Again, I cannot disclose the numbers, but what I can disclose is that our digital touchpoints are growing at double- digits. It's a very healthy growth and ahead of expectations as well. We are very happy with that.
Yeah. Ranjan, just to add what David comments about our sales and marketing expense. As you can see, our sales and marketing expense has been decreased year-on-year 11%, Q-on-Q 4%. That mainly depend because of what David just explained, that we're shifting more towards digital. Just to add.
Okay. Thank you.
Thank you so much. Your next question comes from the line of Prem Jearajasingam from Macquarie. Your line's now open.
Hi. Thank you for the opportunity. Prem Jearajasingam from Macquarie here. Two questions from me. First of all, I know a lot of time has been spent talking about data use, in Indonesia. I suppose the bigger question for me really is, we're still comparing Indonesian data traffic to some of the other markets, like Malaysia and Thailand. Data traffic is still half of what we're seeing in these two countries. I suppose the key is, with the current networks that we have, can we handle 15, 16 GB of data, without a substantial increase in CapEx? I think that's where Telkomsel is really going. They've spent the CapEx, and now they're just turning on the pipes. What do you think is happening on this front? Can we afford for data to jump towards 15, 16 GB? That's one. Secondly, consolidation in the market.
I was quite interested in your comments around inorganic and organic growth on the fixed side of things. Have we also watered down our expectations of consolidation within, or our role in consolidation of the wireless market? Are we now focusing more on the fixed side, or is that wireless consolidation still something that we want to partake in? Thank you.
Okay. Thank you, Prem. First thing is on data yield. If you look at today in terms of 4G subs, right? I think average usage for our 4G subs today is probably around 12 GB per month. Essentially, if you compare to other markets, it's probably slightly lower. Definitely, I think if you look at the rate increase, the rate of usage per sub is actually accelerating. Next question is, can our network cope with this data increase? I think two parts here. We have actually continued to build, not just coverage, but also capacity, increasing capacity of our network. If you look at where we are for 4G capacity today, utilization is still between at around 45%.
There's still ample room for us to take on headroom, for example, for us to take on the increase in data traffic moving forward. Secondly as well, not just at the access side. We are also fiberizing all our towers, at least one hop to fiber. I think where we are today, in the next one or two years, you would say that we would actually achieve 100% of our site with one hop to fiber. Typically, that's one of the critical points, or the bottleneck that you see. The transport layer. We are actually investing in both at this point in time. Yeah, no doubt that Telkomsel are building, put in more money, investment in the network side. Bear in mind, they also are carrying more traffic than us today .
Relative to our growth, to the traffic that we have today, we think we should be able to take on more traffic increase based on our forecast, at least in the next one or two years. We are also continuously building as well. As we speak today. Secondly, on consolidation. Yes, I think if you look at the situation today. With the pandemic, with the slowdown in economy, with I think consumer retail demand are also softening as well, especially in the low-end segment. I think you would expect that would probably put pressure on operators to probably accelerate the consolidation process. At least this is our internal assessment. Our view has not changed on this, and I think it's in line with our shareholders as well. We are fully in support of in-country consolidation.
We are willing to play a part on that. Even if we are not, I think we are also fully supportive because any consolidation would probably good for the industry. Having said that, I think whilst you know the challenges in consolidation today. I think that's one of the areas that probably need to be addressed first, especially on the regulation and the retention of spectrum. Yes, I think whilst in-country consolidation on the mobile side, at the same time as well, we also see opportunity and how the fixed fiber to the home is also growing as well. It is becoming a more and interesting proposition. As we can see as well, some of the investment that we have put on fiber to the home are actually showing great progress. I think lately, also we are seeing a record growth as well.
It is interesting, and hence that's why we are pretty open in terms of how we want our plan to move forward, be it organic or inorganic, or be it in mobile or even the fixed side.
Thank you very much, and look forward to seeing you back in KL.
Thank you, Prem.
Thank you. Thank you so much. Your next question comes from the line of [Sebastian Tobing from Omega]. Your line is now open.
Hey. Hi. First of all, congratulations, guys, for the good result in the middle of the pandemic, and congrats, Adlan, for your next position. If you look at the competition, there's always competition dynamics between the big three, but we see how, in Smartfren did pretty good revenue growth in the past few quarters. Is this something that you start worrying about of Smartfren and Tri gaining some revenue market share? Is it maybe just in the fringes? Maybe if you can provide a little bit of color on that. You mentioned earlier about looking at ARPU rather than simply data yield price. If you look ahead more of the next three years, perhaps, given that, I think in terms of the number of subscribers, penetration among the big three telecoms is already quite high, so the revenue growth will be driven more by ARPU.
How much higher could the ARPU be, ideally, you think, in the next three years here? Thirdly, I know XL has been talking about fiberization. Could you share a bit on how the progress of that fiberization, i.e., of all your BTSs, how many or what sort of percentage is already fiberized? Thank you.
Okay. Thank you, Tobing. Regarding your first question, Smartfren and Tri's increase in revenue. Increasing penetration, whether it's worrying. As you can imagine, everything that is taking part of what will be our market share is worrying for us. Of course, we worry about all of our competition and how they are doing. We monitor very closely each of the cities and each of the competitors in each of the cities, and every product of the competitor in each of the cities. Yes, it's something that worries us, and we keep monitoring, and part of our regional pricing comes exactly from there. That's the first question. To the second one, you were asking that, yeah, the yield traditionally, I think historically, always has come down. The ARPUs have increased this time, it's good.
What we meant is that, yeah, yield is something that is important, but the yield that you see, it's an average. It's an average of different yields in different cities. It's an average of different yields in different cities where we have different network capacity, different market share, different competitive dynamics. That is what we try to optimize. Having said that, I'm sure that you have been also following the market for a few years. You can see that there are moments where competition is tighter and yields go accelerate in one direction, then can be some kind of recovery. You know that this is a market where many players are in there and the interactions, it was going to set up how the next few years will look like.
That's why for me, it's difficult to say how I envision an ARPU in three years from now. It will depend pretty much on how the competitive dynamics move forward. Again, I want to make sure that we understand that for us, yes, the yield is important, but it's an average. It's an average of different cities with different market share, with different network capacities, and that's how we try to optimize our [revenue].
On your last question on fiberization. I think our topology architecture on the transport, I think we are looking at to fiberize at least one hop to fiber. That means that 50% of our sites will actually be fiberized essentially. Where we are today, we started this process for the last two and a half years. Where we are today, we are probably at around 60% progress. We think that within the next 12, 24 months, I think we probably would achieve the level that we are aiming for. Yeah. One hop to fiber for all our sites.
Okay, great. Thank you.
Thank you so much. Your next question comes from the line of Niko Margaronis from Danareksa Sekuritas. Your line is now open.
Yes. Thank you for the opportunity. Good afternoon, everyone. This is Niko from Danareksa. I would like to ask a question on the fixed broadband. You mentioned earlier in your opening statement that you have about 300,000 home passes right now. May I ask what is the infrastructure behind it? The last mile, how much percentage is on fiber, and is there any other technology that you use, maybe fixed wireless, or is it cellular? That's my first question. Secondly, you mentioned also that the data yield came down significantly, partly also because of the social responsibility. Is that something that may happen again in the second half? I noticed right now that you are pushing products like conferencing and educational products. Is there a possibility that this might be reversed in the second half? Thank you.
Niko, your first question on fixed. When I talk about the 300,000 home passes, those are all fiber. The technology at the end is fiber. Because that's fiber to the home. On the second question?
Regarding the yield and the social responsibility. As you say, we have already what we believe to be very competitive packages in order to either study from home or work from home. They include some teleconferencing, et cetera. We believe that they are already very good. I don't know whether the prices will change for those packages, but we believe that the way they are today are already competitive enough and are already interesting enough for anyone who has to use them, either at home or for study or for work.
I think on the 2 GB free, we are no longer offering it anymore. I think the offer has actually lasted up to end of June.
Okay. That's what I was asking, basically. Can this be implemented again? Is there such thoughts maybe from the government to push this again because spending power is coming down?
Currently, there is not any idea of going in that direction. As Pak Adlan mentioned, June was the last month with the social responsibility, and currently we have products for study from home and work from home that we believe that are already good enough.
Okay. Thank you. Sorry, Pak Adlan. May I ask, on the 300,000 home passes, what is the penetration currently?
It's slightly below 20%. To be exact, it's 18%.
All right. Thank you so much, Pak. Good luck on your new post, Pak. All the best.
Thank you.
Thank you so much. Your last question comes from the line of Piyush Choudhary from HSBC. Your line is now open.
Yeah. Hi, good afternoon, and thanks for this call. Two questions. Firstly, could you update us if there is any development on spectrum auctions likelihood and any timelines over there? Secondly, on your comment in terms of decrease in spending power in lower end, could you provide some color? Are you seeing that more in Java or it's more ex-Java? Any kind of geographical color could be helpful. Thanks.
I think spectrum auction, I think it's probably still in discussion. Both in terms of [audio distortion]
Sure. Can I follow- up on spectrum auction? Are the bands decided which bands are going to be auctioned and how much quantum?
It's the 2300 that's probably going to this thing.
Okay.
Yeah, it's going to be 30 MHz.
Okay. Thanks a lot, and congratulations, Pak Adlan, on your new role. Good luck.
Thank you, Piyush.
Thank you so much. There are no further questions at this time. I'll give it back to the management for the closing remarks.
Okay. Thank you everyone for your participation in today's call. As always, do get back to us if you need further information. Please stay safe, stay healthy, and we'll see you next quarter. Thank you.
That concludes today's conference call. Our lines may disconnect now.