Earnings Call: Q1 2020

May 11, 2020

Good Good afternoon, ladies and gentlemen. Welcome to Exel Axiara's earnings conference call for the first quarter of 2020. My name is Alisa, and I will be your coordinator today. Answer 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. Indore. Please proceed. Thank you, Alisa. Good afternoon, everyone, and welcome the call, on behalf of the EXHA 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 Yidian, our Chief Executive Officer by Alan, our Chief Financial Officer and by David, our Chief Marketing Officer. Now, by Alan will share the highlights for the first quarter of 2020, will then be followed by the Q And A session. I'll now hand the call over to BioGland. Thank you, Indar and good afternoon, everyone. We are happy to report a good result to 2020, despite the rising competition and what is usually seen at the weak quarter, we manage to deliver a quarter on quarter growth in revenue and EBITDA. Through consistent execution of our data strategy and our focus on operational excellence, we have managed to deliver a good set of Q1 numbers. Our service revenue grew 2% quarter on quarter as customer continued to gravitate towards our captive product proposition for both our brands and improved quality networks across Asia. EBITDA also rose strongly by 22% quarter on quarter as a result of rising revenue and our continued focus on operational excellence and will continue to be in positive net profit position. This is despite increased competition in the market since Q4 2019, where we are seeing most of our competitors launched aggressive unlimited offerings and we used the prices of the entry level Sachi package, which have negatively impacted the overall yield. And pricing in the market. This to a certain extent has impacted our customer acquisition during the quarter which led to a lower customer numbers at the end of our Q1 twenty twenty. However, the environment is getting increasingly more challenging as COVID-nineteen continues to have a major impact to the business and economic landscape, not only in Indonesia but also globally. Well, our Q1 performance has been resilient with data traffic increasing as more people start looking from home the impact of a full city or country lockdown is yet to be seen at this juncture. We are going through an unprecedented period of increased uncertainty and the outlook to remain cloudy as to how long this impact will last. Our priority now is to focus on business continuity and employee well-being. I am pleased to say that most of our organization has started to work from home effective from 10th March 2020. And our crisis management team has ensured all operation runs smoothly and business can continue as normal during this period. So far, there is no delay in our network roll up and upgrade plan as our early planning and procurement process has helped us secure all the materials needed to meet our Liberum plant. We are seeing several key trends emerging across our business as a result of COVID-nineteen. The first is an accelerating shift to digital across our distribution channel. When it comes to purchasing our products and services. But we have seen that more and more customers are purchasing data package and reloading through digital channels. Moving to digital has been one of the key pillars of our transformation program and it seems that COVID-nineteen has helped us accelerate this process. Through digital, we have a greater degree of control on our pricing and products as well as sell in these channels as well as a lower cost structure. We are also seeing rising traffic across our network, driven by most people working and students pulling from home. The traffic increase is also partly attributed to our ESR initiative to support the government by giving customers an allocation of 2 gigabits per day to access government websites, fee learning portals and university websites. As well as Office 365. However, during this period, we are also seeing an accelerated decline of legacy services of both and SMS, which is negatively impacted to revenue. We have also started to see massive movement of people back to their hometown before the border closure implemented by the government in early April. But a lot of traffic has already moved out of Jazakata and Greater Jazakata or Jazakata. To the regional areas as the typical motive of going home ahead of Liberan by many people have happened earlier this year. This is likely going to be prolonged where the people will remain in the regional areas until the border control leases. Finally, our unlimited booster plan that we have launched in early March is seeing strong traction in the market. And is especially helping us to drive acquisition. This plan was designed with our customer needs in the forefront of our mines and we are pleased that is well it's been well received by the market. We continue to invest in our network and we continue to roll out on schedule with our VTS now about 133,000 with 4G presence in 449 cities and areas across Middle this year. With more than 43,000 for GBTS. We also continue to fiberize our network to ensure that we can handle the rising traffic. That we are paying. Our balance sheet is strong with net debt to EBITDA is below 1 and strengthened further with additional proceeds we have received from the completed power field. We have no USD debt and we have also secured committed facilities with the bank that we can set to refinance our debt. It is key in this time to have a strong balance sheet and healthy cash position which is what we have today. Although our results are positive, we are seeing some short term impact from COVID-nineteen. From rising traffic to shift and shift to digital. If the effects are prolonged and last for the next 6 to 9 months, there will be likely a negative impact to the industry revenue, especially if unemployment of the population starts creeping up and continue to be so for a long time. This will impact this cash in respect and the Solula industry will eventually be negatively impacted by Eridah in the spending power of our consumers. We are hopeful that we will be able to weather the storm and return to business as usual as quickly as possible. However, as a result of the uncertainty, we are withdrawing guidance for now until we have better clarity on the situation. Finally, I would like to introduce David on this call who has been with the company for the last 5 years and we'll be taking over from Alan Bonke as our Chief Mastering Officer. I would like to thank to thank Alan for his contribution to XL Growth over the past few years as he pursues the next step of his career at our sister company dot com. I'm sure David will do a great job for us going forward. Thank you. Please kindly but strictly limit your questions to only 2. You. Your first question comes from Piyush Kudari of HSBC. Please ask your question. Yeah. Hi. Good afternoon. Thanks for the presentation. Two questions, please. Firstly, if you could talk about how is the price competition in the market and the outlook for the same? In Pakistan, you mentioned in your opening remarks that shifts to digital would help in improving pricing, what gives you better control on pricing? Can you elaborate on the same? Secondly, could you touch upon the month on month trends for March and April? How you are seeing the impact of COVID going into 2nd quarter? Thank you. Let me take your first question. So regarding price competition, what we have seen in the first quarter has been a tough competition. We show that many of our competitors some of them brought back some unlimited propositions and some of the smaller players have been pushing the prices down. So I would say that the prices in quarter 1 has been under big pressure. This has been like that already for a few months. So I wouldn't say that it increased significantly, but it is true that it's at high pressure. Now to you, the second part of your question of how does the movement to digital health on this? And as you know, when prices, when the products are sold via the traditional channel, usually there are markups and the final price to the customer, it's heavily impacted by the channel. When we have the access to our customers directly via the digital channel, we are able to control those prices much better. We are able to set up the final price for the customer. So that's regarding your first question. For the second one? Yes, appears on the second one, I think Indonesia has started implementing the I would say I wouldn't say a lockdown, right? It's probably some restrictive movement, in the 1st week of April, right? So hence, I think if you look in the month of, for the first quarter, yeah, there's hardly much impact, I would say attributed to COVID, right? Hence you see the book itself, right. However, in April, I think when the restricted moment is implemented, I think you can see a few things happening, right? One is, people, that's a closure of outlets. So far, they have been 10 to 15% closure of outlets are not as significant as yet. Point number 2, you also seen that just before the lockdown and even during the lockdown, there's a huge movement of people out from Jobo Taube, to the other regions or the other areas. In other parts of Java or outside Java, right? So, but in any case, I think this trend, some of the trends that we're seeing that legacy is definitely declining much faster than what we have seen before. However, we've seen that a lot of shifting on the legacy business going to probably what I've called. Point number 2, I think you probably would have seen that there are significant increase in traffic initially, at the beginning. But towards the end of April, it's actually stabilizing, I would say, yeah. And point number 3, I think if you look at the people that are going back to hometown and starting the music which is earlier today are generally the people that have either lost their job or or actually has taken a picker and they cannot afford any more to pay for the higher rentals in the double table area, right? So hence, they go back to the hometown. So generally we are seeing that towards the second half of April, there is some impact, some slowdown in terms of the the demand on the demand side. Yeah, as we see that people, we start losing their jobs and all that. And I think the other trend that you're also seeing that because of that, people are shifting to the lower denomins and the smallest Hashi packets, right? And I think you'll see that reloading and buying smaller packet more frequently instead of buying they're probably resulting to daily or weekly packets. So yes, there has been signs of slowdown as a result of the closure of outlet which impact acquisition but at the same time as people loses their job and go back to their hometown, we also seen a shift to lower denomin and a small Versace packet and hence there would be some impact on ARPU as well as revenue. Your next question comes from Hi, thanks for the opportunity. Of course, you have a few things questions. Can you please help us flush out the impact of IFRS 16? How much of the EBITDA had impacted and how is this booked into D And A and interest, respectively, in the first quarter? Second question I had is with regard to, it's a follow-up question to previous earlier question. I'm wondering what you're seeing into the month of May. We've already seen some normalizations in other emerging at the end markets. Are we seeing any of such happening in Indonesia? Can we take the first question, right? We actually prepared a presentation, a corporate presentation that we actually showed the reconciliation, right? In terms of the impact on EBITDA, the pre and post IFRS for quarter 1, right? So you may look at the presentation slides but essentially, the biggest impact to EBITDA would actually be the impact of IFRS 16 on the leases, right? So now the leases instead of operating lease, are achieving treated as our finance lease, right? So the lesser OPEC and hence you see that the EBITDA margin actually increased, to 49% in quarter 1, yeah, but however, you will probably see that it's a higher D and A, depreciation and amortization as well as financial charges as a result of the impact of IFRS 16. So you can see from the corporate presentation that, we have posted on our website. Morning. Yes. Regarding the second question on the trend that we have seen the 1st few days of May, right? So again, it may still be, it's a very early, very early days, right? So it's only 10 days that have gone on. To be honest, we are seeing more or less the same trend that we saw at the second half of April, right? Bear in mind as well that starting the 24th, we have the Ramadan seasonality that it's exactly now when happening. So that also influences a little bit the behavior of the customers both in data consumption, but also in both an SMS consumption, like we know the seasonality also from previous years. So I think this 1st few days are impacted by that. But I would say that the trend is similar to what we have been seeing in April. So no pickup yet. Okay. All right. Thank you very much. Your next question comes from Colin Macallan of Credit Suisse. Please ask your question. Good afternoon. Thanks everyone. A couple of questions from me. First of all, for Adlan, on your CapEx, I think you're looking at $7,500,000,000,000 was your initial guidance. Will you be able to build everything kind of on schedule there? And are you needing to look at maybe shifting where you're building capacity given as you say are going to be shifted out of the city area, you have to maybe rebalance a little bit to regional areas instead of building out more in Jakarta. In other words, is there any change in either the total amount you'll spend or kind of where you're going to spend it? That's the first question. And then the second question is, We've seen in other markets that fixed broadband tends to do really quite well when everyone's working from home. So that's been a good balance, balancing factor for operators who have fixed broadband. I know you've been experimenting in 6 broadband and you're dabbling in it a little bit. What's your view on that? Do you feel that now is the time to get more heavily involved in that, if this trend of work from home is maybe to some extent here to stay. Those are my questions. Thank you. Thank you, Pauline. So, on CapEx, I think, at this point in time, I think, we are not changing our CapEx plan, right? So just to put in perspective, we do our planning very much earlier, right, towards the end last year quarter 4, we have probably issued most of the purchase order for our CapEx, right? So as a result, the timeline that we are typically chasing is for the BARDA, right? So far, I think given that early planning and all that, we have not been impacted from a logistic perspective and most of the equipment that we have ordered are already on-site, right? So so the plan is actually on on track. But from, of course, I think we also see the impact of COVID and change changing behavior and all that, right? There is some shifting of a CapEx, some minor shifting of CapEx between ST and salvage and between regions to cater for these trendings of behavior that we are what we're seeing, right? Maybe moving some from Jabo Sabay out to the other regional areas given the movement out that we are seeing by our customers and the population overall, right? So but in the scheme of things, I think that changes is not significant. And I think we are still sticking to our earlier plan that we have actually right. So no change to CapEx and to CapEx plan and everything is executed accordingly. To deliver for Amada. Yeah. So that's the first. On your second question on broadband, yes, think we've seen that increase in the pickup for broadband since the work from home. And I think we are still seeing the same. We did 250,000, 260,000 of home parts that we have achieved there, right? To date, I would say that our own pattern increased quite a bit. I mean, in fact, if we see that in the latest month or so, it has acquisition almost doubled. So our numbers as of today is a penetration is close to around 20% already, right? From where we were before. So there is a significant pickup on that, right? So, so on this business, during this point in time, which I think from home could typically be a normal norm as we move forward is something that uh-uh will actually will actually increase or make the business of home broadband a little bit more interesting, right? So This is something that we are looking at and we have actually more experience and knowledge on this. So we probably can see look at this in the scheme of things of COVID-nineteen and all that there's also a limit of uncertainty and how things move forward. But again, this is always in our radar and continue to assess and evaluate this as we go along. Your next question comes from Ryan Charming of JPMorgan. Please ask your question. Hi, good afternoon, and thank you for the presentation. Two related questions from me again on the traffic side. Firstly, how important is, the fiber roll out for you, considering the sharp increase in data traffic. And if you need to see the high, higher deployment of fiber, are you actually able to make it or are there any logistical challenges of rolling out fiber in this environment? The second question is on how are you approaching adding capacity versus improving your network coverage? Because I guess you're saying that you are seeing a moment of people, but there might be, again, logistical challenges of rolling out new sites because of the licensing environment. Thank you. Yes. So fiber is a fiber roll out, which I see an important of our strategy or CapEx strategy moving forward, right, given we are moving heavily to data and eventually to 5G at the stitch moving forward, right? So, as you know, that we are addressing here only now fiber. And as you can see, right, we didn't know, the next one to one to one and a half years, about 50% of our sites will actually be categorized. Yeah. So that's how aggressive that we want to be. And at this point in time, the way that we need, we are using a lot of partners, right, to roll out the fiber for us, where we actually lease core, right, from from this from the partners itself, right? And this call would actually enable us to carry the traffic and take us through for the next five ten than 5, 10 to 15 years, right. So and it's essentially big enough, right. So and that's how we're accelerating our fiber rollout. Yes, no doubt that there will be some challenges during this COVID-nineteen, but given that we are an industry in Indonesia today, there's a lot of leeway and flexibility that's given to the telco industry to continue rolling out our network, right? Or however permits are probably a little bit slow at this point in time given that I think some of the regulators are also or the regional offices are probably also working from home, not all, but some parts of it, right? So there is a little bit of delay probably in the issuing permit. But otherwise, I think we are continuing as aggressive as ever in rolling out our fiber, yeah? In terms of how we look at the capacity and coverage, again, I think it's all driven by business case, right? And in some cases that we see that some of the new areas that we probably want to get into, it requires you to build your distribution and all that, right? And some of these new areas are probably going to some of the 30 year cities or even for Tier cities side. So as a result that given the current situation where probably movement are probably a bit restricted, we have actually shifted some of those CapEx to more on capacity which has actually increased higher than what we actually anticipated in our earlier business plan and in our plan, right. But at the end of the day, I think all this is driven by business case. And returns, right, in line with our policy of trying to drive for the shortest return, right? So So there's been a shift, but I, as I said, it's not significant, a shift, right, at this point in time. Okay. Thank you. Your next question comes from Fong Chung Chen of CDS EINB. Please ask your question. Hi, thanks for the call. Two questions from me. Firstly, on the service revenue growth Q on Q, as you mentioned, Alan, you know, it's pretty strong given the, usual weaker seasonality that we see in the first quarter, right? So Can you sort of provide a bit more color on what's driving that? We also saw indoor side also reporting Q on Q, you know, service revenue growth as well. So is Xcel, shopping market share gains doing better in X Java or is it the whole industry? Still being able to generate some decent revenue growth Q on Q despite current levels of competition. That's question number 1. Number 2, on the limited booster offer that Excel launch in early March. Then I just sort of try and understand if we saw negative net adds in January February, and then that sort of turned around to positive net adds in March. And how is it, developing in April and May And also on the unlimited, unlimited booster, I understand that it's helping Excel to, defend the subs base, but potentially, does it have some dilutive impact on your revenue as well? Do you have those other questions? Yes. Okay. So regarding the first quarter, as you say, our service revenue was positive, right? So we were able to increase it. The main reason, as you can imagine, because we have been able to monetize our customers better. How we have been doing that. We I mean, we have realized a lot in our analytics to do upselling and cross selling to our existing subscribers. So I think that being one of the key factors on why we have been able to monetize better in this first quarter our customer base regarding the service revenue. And that's why the positive trend. Now Looking at your second question regarding the unlimited proposition that was launched in the market at the end of March, Yes, it has had a very positive impact in acquisitions. We've started to see 2nd half of March and in April, very, very especially. So the acquisition impact has been very positive. As you say, any unlimited proposition will have some diluting, diluting effect. Nevertheless, the dilutive effect that it has had in the existing such has been paid off by the stronger acquisition. So we have been able to have a positive effect of the unlimited proposition increasing the customer base more than the dilution that it caused in certain segments of our existing base. Having said that, we also believe that our unlimited proposition because of its mechanics, it's the most sustainable that it's currently in the market. Okay, understood. Thank you very much, David. Your next question comes from Pranjediasingham with inquiry. Maybe if it's not the operator, maybe we can move to the next question. Alright. Thank you. Your next question comes from Krishna Bared is Mandier Securities. Please ask your question. Hi, gentlemen. Thanks for the opportunity. This is Casa from Mandier. Just two questions for me, please. Firstly, on the LCL transaction, I noted that the company saw 2400 plus dollars or TRY 2,400,000,000,000 or while do we put an added value of its assets and prepayments, I suppose, total to about RUB 585,000,000,000. So the implied gain difference is about RUB 2,900,000,000,000 there, but the company only book around RUB 1,500,000,000 transaction gain. So how do you explain the remaining $1,400,000,000 difference between the impact gain versus the account gain on the PLL? That's my first question. On the second question, in terms of amortization, what does it mean in terms of data pricing and competitiveness versus peers? Does fiberizing most sites help you to lower the unit data costs and the capacity to meet your pricing even more competitive in the future? Yes. So, Krishna, I think, if you look at the tower sale, right, we have about 2,400,421 towers, right, of the total,700,000, right? So essentially there's still a balance of 300 which we have not closed yet, which we intend to close this quarter. So So there's some parts of the total power that is still not closed, which will be closed this quarter, right? So from a game perspective, I think 1st, we need to put in perspective that I think the way that is being done This year is slightly different to how we have recognized gains for towers in, than the previous quarter. So because this year we are adopting IFRS 16. So in previous quarter, you probably would see some deferred gain from some of this power recognition that we have. However, under IFRS 16, 16, there is not going to be any deferred gain anymore. Everything will probably be recognized upfront. However, I think you need to calculate, for example, what is the ROU value, right? The liability that you are going to book in a bit on the net asset value of the liability that you foresee in the next 10 years. So I think the method of calculation this year under IFRS 16 versus what we adopted before for our last 2 thousand seats are slightly different, right? So hence that's why the gain that you are seeing has probably a not stable, right? So, secondly, fiberization, when we think about fiberization, right, we think about the long term, right? So because typically a fiber will take you through for the next 10, 15, 20, even 20 years, like fiber will last you for 20 years, right? And that gives you ample capacity for you to cater for the exponential growth in data traffic at the site. So and and what's the alternative to fiber is microwave, right? We've done our business case, right? When we do, we do microwave, versus fiber. So in the short term, probably microwave is actually cheaper. However, in the mid term and long term fiber is definitely more beneficial to the company, right? As essentially as all micros requires it to be upgraded every now and then depending on new technology and all that. And that includes even upgrading the hardware and all that, right. So and every 3, 4 years, you need to continue upgrading your and given that with this microwave as well, you probably have a rental that you need to pay to power providers and all that, right? So So we've looked at the business case, in the longer term, privatization would definitely beneficial especially in a in a scenario where data grow exponentially and I think and in the case of 5G, for example, fiber very crucial and hence it's a no regret and it's also from a business case perspective is also more beneficial to the company. You are right. If you talk, if you look at the mid, if you look at the mid term, even short to mid term, you will probably see in a scenario where data traffic grew exponentially, the unit cost for data with fiber will actually be much lower than if you continue to serve him afterwards. Okay. So if I just thanks for the answers, but if I may press on the counting treatment of the calcium gain. So do you should we this is implied that the remaining 1.43 in difference on the impact gain, is somehow accounted differently in terms of, some impact from the capitalization of the private leases and the leases. From the sale and leaseback transaction? Is that so? Question, I think we can take that offline. It's not simple at taking the proceed minus the power minus the book value of the asset, right? Because you need to take into account all the long term liabilities the deferred interest charges, and all that and the lease liability, right? Maybe you can take that offline because the way that it's calculated is, it's not a we are taking the process minus the book value, but you have to take it towards all the other accounts on the rest and I apologize. Yes, we'll take that offline. Your next question comes from Niko Margaronis of Benarex Securities. Please ask your question. Yeah. Thank you for the opportunity. You mentioned at the beginning of the call about traffic about sales being generated more from digital channels. How much is that, exactly? How much percent is that coming from digital channels versus additional. And, do you expect this to be to be sustained going forward? I mean, post COVID this is where we'll we'll be sticky. That's number 1. And Yeah. And number 2, the CapEx, it it it is, yeah, it is very it is very strong. And, I wanted to check whether it has a it has a a forex effects, yeah, given that, given the volatility in, in in idea. Thank you. Yes. So let me take the first one. Regarding the digital part, currently, our majority of if we take into account the reloads and the packet sales together already a big part, the majority is coming from from digital channels. Now I cannot disclose the exact percentage of how much is going from each channel. But I can say that the increase that we have seen in the usage of our own digital touch points, meaning the applications it's a very strong double digit growth in the last 3 to 4 weeks. Now whether we expect this to stay after COVID? Absolutely, yes, not only to stay, but we expect this to keep increasing at a very, very strong pace. And that's also what we are going to encourage and that's where we are putting a lot of efforts moving forward as well. Sorry. May I have a follow-up on the David's answer? Do you expect any savings on on marketing, any any any any improvement on marketing cost due to this, base. And can you quantify, maybe? Thank you. Yes. Well, I cannot quantify, but yes, we expect that, our marketing and sales and commission expenditure will improve. We are actually seeing some trend in that sense. And we expect this to be the trend. Yes. Thank you. Okay. Your second question on area. So I think over the years, we have actually worked very hard right to shift a lot of our CapEx to local currency. So So today, I would say that majority are already in IDR in Libya. Hence, it's not exposed to Hients is not exposed to USD. If there's still remaining that there's some exposure to USD, I would say that still it's less than 30% today, right, of our CapEx are actually exposed to USD. But in whatever the case may be as much as possible. We will continue to also to continue to negotiate our CapEx the remaining of this to even try to push it to IDR. Would you do, would you overhang your your budget given this maybe 30% exposure to USD? Thank you. So typically when we do our business plan, I think we actually factor some exchange movement already, right? So I think where we are today, the average exchange spend as per the for our BP, it's still within range of what the average movement of ForEx today. We have a follow-up question from Arthur Pineda of Citi. Please ask your question. Hi, thank you. Just two follow ups, please. Firstly, you mentioned the traffic is moving out of, the TCP to the provincial areas. Are you able to hold and retain these consumers when they move to the provincial areas? Or are you meeting them to other operators? I'm just wondering if an effort footprint is insufficient. Second question I had is with regard to the consumption change. When these subscribers do move out of the key cities to, the provincial areas, how does their usage or top up pattern change? Thank you. Okay. So answering the first question, when these customers are moving out of the big cities, we are able to maintain them. The answer is that most of them Nevertheless, it's true that we have seen an increase of churn on those places with high mobility, but not only us. We see that this is an effect that happening to all operators. So I think, all operators are seeing some kind of increase in churn due to this to this effect. So the market is a little bit more lively in, in this sense. Now when they go back to the, to the home cities, the the behavior, is it the same or not? We we could say that the reload behavior and the usage behavior it's being changed, but not only for this particular guys that are moving, but in general, both affected by the COVID scenario and the new economical environment also currently because of the specific seasonality of Ramada. Now, whether we see a different behavior from those that have moved versus the ones that have moved that also have changed the behavior, not really. So we see that it's more or less same behavior. But again, the behavior in general has changed has changed. Has moved to more work from home. Your next question comes from primesharingan with Macquarie. Hi. Can you hear me now? Yes, Brent. Ah, good. Sorry about earlier. Anyway, two questions from me. Following up on Arthur's question around the network, especially in the ex Java areas, do you find that your network is better or worse than your peers And does that give you an advantage, or is it pretty at a disadvantage, given capacity constraints? You know, can could you give us some idea of how loaded the network is in potentially the west of the areas. And secondly, has all of this accelerated or decelerated the potential for consolidation within the market, or have you seen any of your peers, of the smaller peers, torn down the aggression or do you think they will turn down the aggression going forward? Thank you. So okay, interesting question. So from a network perspective, you know that we for the last 3, 4 years, we have been think quite a fair bit in terms of the bring up of our network outside of Java, right? So in the three main islands today, you would say that if you look at our 4 g coverage, we are only at around 90% right of population coverage in those areas. Obviously from a so we are definitely a second behind the incumbent, yeah, from a coverage as well as capacity as well in those areas. So if you look at if you look from a capacity perspective of course, our capacity would not be as much as where the incumbent is today. However, I think it's we have built enough, for example, to cater for the traffic that we carry factoring growth in terms of the traffic that we see at least in the next 2 or 3 years, right. So if you look at our generally network outside Java, our utilization currently is still less than 50%. I would say that probably even, there's an EBITDA 40%, right? So we still have ample capacity that we can cater for with the increase in traffic coming from those areas that are outside of Java, right? So So definitely with this movement out, well, I think we see that some people not using our SIM that's moved out. But generally, I think we see that a majority are keeping our things especially in those areas that we do have coverage, right. So it definitely has given us quite a significant advantage with the network build up that we have done for the last 3 years, especially related to outside Java. On consolidation, I think it depends if this pandemic, we see that it's going to continue for the longest of time. I think the business eventually will be impacted and assuming that people eventually more and more people get laid off. You probably would see that a disposable income and purchasing power of the consumer will probably eventually be impacted and that would certainly have an impact to the telco itself and given that position, for example, even it continues to the longest of time, it may have a significant impact or impact to the industry overall. And I would say that it could also be a catalyst in terms of driving consolidation moving forward. But again, you know, consolidation, there are some challenges around spectrum and all that, that we still need to overcome, right, before we can get to it. Perfect. Thank you. Your next question comes from Piyush Kedari of HSBC. Hi, thanks again. Two more questions. Firstly, is there any talks from the government on next spectrum assignment or auction, which bands could be available and we have seen regulatory intervention to give, free minutes or data due to COVID. Do you see any risk of the same in Indonesia? Currently, the recent update from the document, on the Spectrum auction, and there is still no definite time frame for the next auction. So be it for the 2.3 or 2.6 or any other spectrum that, might be used for 5 g. Still the clarity on when the government will do the option is still not clear to us. 2nd one, for the potential that the government will keep both the free internet mandatory for us. Currently, our operator is actually hacked given a free internet for helping the customer, people in Indonesia to do their work from home or a study from home, which is quite, big in terms of the quota for instance like XL. We already, given 2 gigabytes per day, which is around 60 gigabytes per month. And that is uh-uh already a big amount as in terms of free internet and can be utilized for study from work or work from home. Currently, the number of customers that have enjoyed that free internet is already to 25,000,000 subscriber. So what we see from the government that they have seen that all the operators in Indonesia already given, support for people here, do the COVID. So hence, the possibility that they will enforce a certain, action. To me is quite the goal. On the Spectrum auction, if there is no road map, let's say, even in the next 1 year or so, How does company expect to handle such rising data traffic? What is the the plans to handle the traffic increase? Yes. So currently, what we have in, plan in terms of the technology roadmap is to do a refarming, refarming, both 2 g frequency and 3 g frequency for 4 g technology. What we see from doing that, the capacity that we will get if we use the same spectrum for 4 g, the the improvement in terms of capacity will be very significant. So by reforming this 2 g or 3 g spectrum for our 4 g, services, actually will help us to cater for the projected, traffic increase, up to 2 years down the road. Your next question comes from Sachin Mihal of DBS Bank. Please ask your question. My first question is with regards to, outside the Java region, have COVID-nineteen delayed your targets in terms of achieving weight saving and profitability. And have you seen the impact in terms of because our competitors were moving outside Java. We've seen some impact on the movement outside Java because of COVID nineteen. A couple of the your and are you seeing being are increasingly being seen as a cheaper alternative to telecom sale? Which is very much relevant in this environment. That's question number 1. Question number 2 is just to clarify that when you mentioned the AXA booster plan, are you saying that although they maybe are they may dilute the auto, they will be most likely a revenue accretive, or are you saying that they may they may not be ARPU, just subscriber gains should be enough and, hence, they're likely to be really positive. Just to clarify, is ARPU been that is is ARPU the focus of these plans or no? Thank you. Okay. 2nd, on XJAVA, actually, into the contrary, right? Because when we see people are moving out of Jabota Bay, they are moving to the other regions, including to X Java, right? So we think that revenue in AgJAVA has been strong, right? And I think given that people are also moving out to this area, so So far, I think once we see that there are probably a shift of people buying smaller data factors bi weekly or daily taxes instead of monthly. But given that shift at this point in time, the trends in our endeavor are still relatively strong. So we at this point in time, we don't expect let's say significant impact to returns and all that. However, if this COVID situation will continue, we need the next 6 to 9 months or so when a customer wallet actually impacted, then it's a different story right not only ex Java, but also Java will probably be affected. I'm sorry to the second question. Okay, answering to the second question. So an unlimited proposition, currently how we are positioned in front of the customer for acquisition, the customer get it, let's say, free or included in the packet. That necessarily is going to drive some absolute dilution because when people use their limited, their the time to buy the next packet will be a little bit longer. So we are not saying that there is no ARPU addition in that segment yes, there is, but it is offset by an increase of acquisition. So that we are specific to what segment that is the biggest one. So yes, there is some ARPU dilution, which is offset by the critical mass that it's been increased because of inflow, because of partition. Now there is another segment as well that it's, buying certain unlimited packet to which the price we are able to set the analytics in order to control the ARPU of that 2nd segment of people who are getting the limited. I hope this answers the question. We have a last question from Colin McCallen with Credit Suisse. Please ask your question. Actually, I kind of related to the previous question and David's response there. My question is for Deanna, it's a a question I've asked before kind of my favorite question, which is, okay, the revenue is reasonable, the trajectory into first quarter. But if you look at the normalized net profit and XL is still kind of struggling on profitability, right? And it's been, 7, 8 years since you've had a net profit of over $1,000,000,000,000. So my question is for DeAnne, is there any strategic plan on pricing. Is there anything that can be done on price leadership for overall industry profitability? Do you have any aspirations in that regard? Or have you just kind of had to give up on that David's response is pretty clear earlier, but it all sounds very tactical, right? And in fact, if you think about it, it's it's a it's worst than a view of some game from the industry. If you get lower ARPU per customer and only are able to offset it short term, by taking more customers where elsewhere, presumably they might fight back and if the whole industry actually takes another dive down, right? So Is there any chance to think more strategically and increase profit for shareholders? That's my question. Okay. Colin, thank you for the question. So if you see what happened in last year, actually we managed to hold ourselves to become quite rational in terms of the price war. So last year, several operator already jumped into unlimited and we didn't follow to actually, using the same tactic there. So, actually, it was never out intention to be as like a a price destroyer or to initiate a price war in the market. However, what we see that in quarter 1 and also in the last quarter of 2019. What was happening in the market is actually reducing our ability to, do acquisition. That's why I've mentioned by David, we, we were forced to, follow the same track, which is, launching an unlimited, product. And what we saw is that, by doing that, our acquisition ability is going with, into normal. Golin, I understand that, our goal is always to actually focusing in our profit and increasing our profit for our shareholders. However, we have, a structural issues here in this market, that the market still has too many players So even though, we want to catch up with the, incumbent here in terms of rating of the pricing and so on and so forth, there are still 3 other operators who can play differently in the market. So what we to specifically in this market is that make this uh-uh market healthier improve the market structure and we have tried several times, and also our shareholders tried several times to do that by doing a network sharing, by actually, are opening a discussion in terms of, consolidation and so on and so forth. However, a until now, the action or the, response from the governor the performance, still not as what we expected. So to be the biggest actually strategic action in uh-uh this situation is to, improve the market structure and, make the market healthier because, as you know, if it is not improved, then it will be, quite difficult for all operators to have a healthy result. Got it. Thanks a lot for the thoughts. Okay. Thanks everybody for joining us today. Thank you for your participation. And obviously, if you need more information to get back to us, Please stay safe and stay healthy and we'll speak to you next quarter. Thank you. That concludes today's conference call. All lines may disconnect now.