Earnings Call: Q3 2019

Nov 1, 2019

Quarterly report

Good morning, ladies and gentlemen. Welcome to Exel Axiato's earnings conference call for the 1st 9 months of the 2019 financial year. My name is Rishi, and I'll be your coordinator today. During the presentation all participants are in a listen only mode. Instructions will be given on how to register your questions and answer session. And 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, Ishi. Good afternoon, everyone, and welcome to the call. On behalf of the EXHA measurement 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 Pivudian, our Chief Executive Officer, Far Adlan, our Chief Financial Officer, and Far Allen, our Chief Commercial Officer. Now, Ibudian will share the highlights for the 1st 9 months of 2019, which will then be followed by the Q and A session. I'll now hand the call over to Ibudian. Thank you, Indar, and good afternoon, everyone. We are pleased with our continued strong performance this year despite the challenges in the market since July with increased competition. This is now the 5th consecutive quarter we have recorded a sequential increase in service revenue and we are seeing strong growth across our financial metrics as well as consistent profitability. The continued positive performance despite increased competition is a direct result of the consistent execution and implementation of our strategy which aims to position us as the mobile data provider of choice in India. Our strategy continues to be focused on our attractive well brand that elect product proposition enhance with analytics driven customer value management capabilities, continuous investment in building out our 40 network, and focus on growing our active market share. In the 1st 9 months of 2019, Our revenue increased 11% year on year, mainly due to service revenue, which rose 60% year on year And driving this is data revenue which increased 30% year on year. Better growth continues to be driven by increased customer use of data through our product and analytics driven strategies. As a result, the authority new in third quarter now account for 90% of service revenue and continues to be higher than our peers enabling us to weather the effects of declining legacy services better. Profitability growth has also been strong with EBITDA rising faster than revenue at 19% year on year due to our focus on cost efficiencies with margins increasing 3% year on year to 39% in the 1st 9 months of 2019. This strong growth in EBITDA is driving our return to profit this year with 9 minute normalized net profit at RUB505 1,000,000,000. In Uniti's data set customers have continued to respond well to our improved network as we are increasingly being recognized as the brand of choice for fax smartphone users. As the third quarter of 2019, Our smartphone subscribers stand at 47,700,000, a 14% growth compared to same period last year. This makes up 86% of our subscriber base, which is significantly higher than the industry operates, and we also continue to see a vast rate of migration of such to 4g where 4g customer make up 70% of our total subscriber base. Our account number has declined this quarter to 55,500,000 compared to the profit quarter. Although on a year on year basis, it is still up. This is mainly due to more intense competition in the market which is not affecting our longer tenure customers. However, there is an impact to the softer value part of the base. Given that our revenue as well as our ARPU interests you on view, it is clear that the subsidy loss are in the lower value segment. Our customer value management initiatives are the key parts of our efforts in rising higher ARPU and our success in upselling our customers. These are based on analytics through our omni channel platform. We are doing pilots on cross selling non telco products and offers to our customer interactions. In addition to that, we are also doing real time contextual intersection of afterward transaction to upsell our products. We intend to do more in this space with tailored and dynamic pricing. As well as expansion of our In parallel, we continue to ensure high quality data experience to our customers through the ongoing roll out and upgrade of our network. This, our total BTS count is now above 129 BTS with our 4 g LTE certificates covering 4 ten cities across Indonesia. We also continued to invest in fiberizing our network as this will help in handling the increase in data traffic we are seeing. At the same time, we continue to increase the number of our tower sites that are categorized. Our network investment continues not only within Galfa, but with a focus also on X Jafar which has translated to better coverage and network performance in these areas and we are increasingly known as machine wide brands. This has also translated to a stronger revenue performance outside Jaffa which continues to grow at an exponentially faster rate than therefore and increase overall contribution to revenue. We intend to continue to execute on our strategy to finish the year on a strong note in line with our objectives to become the preferred mobile internet operator in Indonesia. However, we continue to monitor competition in the market and hope it doesn't further intensify. This given our strong performance in the 1st 9 months of 2019, Our revenue guidance is raised where we expect revenue to now grow at better than market. Our EBITDA margin guidance is also raised where we expect EBITDA for 2019 at closer to 40%. We maintain our CapEx spend guidance at around 7.5 krillinrupia which we remain focused on data network investment in 4G and continuous network improvements and modernization in and outside the above. Thank you and let us now proceed to the Q And A session. Thank you. Please strictly limit Should you need to ask more questions, you can go back to the a 2:30 jacquard at that time. And the first question we have is from the line of Piyush Chaudhry. Yeah. Hi. Thanks for the call and congratulations for a great set of numbers. Two questions. Firstly, if you could elaborate a little bit more on the competitive environment and what's the outlook for ARPU improvement going forward? Secondly, any plans to monetize, towers? And if yes, what are the timelines of which we're working? Thank you. Yes. Thank you, Peter, for the question. Let me first elaborate a little bit regarding the in the Q3. So what we have seen is that SmartFresh continued with the unlimited market. And they gained some acquisition in the market, meaning that they took a fair share of the acquisition overall. We also saw that starting in Q2 that industry started following SmartFib with the unlimited offering. And so far we know that more than half of the acquisition indocept was also coming on, on the unlimited plan. So price surprisingly, we also saw in Q3 that one of the telecoms still introduced SASI's product meaning it's lower dilutive products to a low price. So they also gained some momentum in acquisition. And that's the reason, as Rudienne said in the introduction that we lost some customers on the low value customer due to this intense competition when it comes to the pricing. Very difficult to predict what's happening right now, but what we have seen in the market that Intersect removed their unlimited product in the market in Q3 sorry, in Q4 here. And we know that there are still some structural unlimited in the market, so there will be gaining some negotiation on the unlimited But otherwise, we see some, maybe some cool down at the moment, especially from Intelsat when it comes to the pricing, but very, very difficult at the moment to predict what happening in the markets? Yes, Piyush, on your second question on towers. I think, we've said this before, so we got close to around 4000 plus hours remaining. And as we move into a more distributed architecture, I think a lot of these towers, from a strategic, it becomes a non strategic, right, and hence that make it possible, to be considered for sale, right? So Is there a plan? I think, yes, but when at this point in time, I think when we are ready, we'll probably come back and make the necessary announcement to the market. We have the next question from the line of Francan Sharma from JP Morgan. You may now ask your question. Hi, good afternoon and thank you for the call. Two questions from my side. Firstly, you've attributed the increased competitive environment to smartphone and Intelsat. But if I look at the price plans, especially for the limited plans, smartphone is offering unlimited data an unlimited plan at 70,000 rupees, which seems to be at a premium ARPU premium to your ARPUs, it doesn't seem to be that, competitive. Is there something else that you're seeing locally, which is leading to disruption in the market? Windows side plans also seem to be at the higher end at 60,000 rupee with a free YouTube in the unlimited plan. The second question is on the loss in customers. Are you seeing this Java in Java or used to seeing this outside of Java as well? Thank you. Yes. Thank you, Sachin, for the question. And this could be a long line, so I'll try to make it short because your spot on when you and your question ask about this is localized. And I would say it's very, very localized intonation at the moment. It's actually into if they need to eat small cluster, you will see different prices and different products. So what you see at the web page of the homepage at the moment doesn't match what you actually see and you could be trust us. And you're also right saying that it's high priced. It's not 70,000, it's 65,000 for the unlimited product in the market. And we see that it has affected on the acquisition on the urban white collars, which we look into that segment. So it is at the higher scale. But Smart Smartphones actually have a full range of products coming from the very low, very low searches, very low validity going up to the unlimited. So it's not only unlimited that takes the acquisition. But again, it depends on which city, which closely you're going to and you have different prices. So we are monitoring each of the classes at the moment and of course, we're doing what is needed to be competitive in these markets. Okay. On your second question, I think the loss of customers, I think if you see that we are still going in, get it out like Java, right? And you know that the intense competition is primarily coming from the areas in Java. So, we could say that, mainly coming from, lot of customers mainly coming from Java. Okay. Thank you. Thank you. We have the next question from the line of Arthur Pineda from Citigroup. You may now ask your question. Hi, thanks for the opportunity. Two questions first. Firstly, on the non Java versus Java growth, are you able to provide color on on how those 2 regions are trending, what's the percentage coming from XJAVA? 2nd question I had is with regard to your other telco revenues, it seems to be declining, if I recall this is linked to the powers, what's driving that down? Thank you. Okay, Arthur, we will not be in space, but I think suffice to say that where we are today, both Java and X Java actually growing, right? I've heard X Java is growing, I would say, double digit, right, very healthy from the timing that we are probably seeing, right? So and today XJAVA actually make up actually more than 20% the total revenue today, right? So definitely, Agsha is actually growing, quite significant and ahead of target, right? So and we really hope that the spread can continue as we continue to invest more outside Tiara. Your second question on other revenues, I think primarily due to the decline in power revenue. I think you probably would know as well, right? The industry landscape has also changed, right? The average tower revenue today has come down quite significantly, from an average, I would say 20,000,000 dollars, $25,000,000 down to the more ten facilities, right? And we also facing the situation. There has been renewal of tower leases as well, over this year, and hence, I think, that has probably, contributed, to the decline in the other telecommunication services. Mainly from the decline in the tower lease revenue that we are probably seeing. And that's in line with the market. I'll come back later for questions. Thank you. Thank you. And the next question we have is from the line of Sachin Mittal from DBS. You may now ask of last year, I think you talked about, you had about 15% market share outside Java, and you want to double it. Over the next few years. So good question is, are you are you close to what you wanted to achieve outside Java? And number 2 is if you could disclose, anything about, in terms of revenue contribution is extra coming close to 30, 40 percent of your revenues or what percentage is coming from extra hour with this shower? And lastly, after a long time, we saw your revenue per R and D, if you end up 2% quarter to quarter, So and and and at the same time, we saw some, subscriber loss. So, has got to do anything with the that you you kind of priced. You repriced your offering and, hence, became less competitive in Java. And this is something you can correct in the near term. Could you comment on that? Thank you. Okay. So, I guess, on your first question, right. I guess, I think we have stated in the past there is aspiration to double up our revenue share outside of Java, right? So and I think if we look at the trending today, we have definitely seen that we've taken market share outside of Java. Whether we've really achieved our objective of doubling out probably not, but I think that's probably our goal in the mid to long term, right? So, but at least we are probably in the right track on the right track to probably achieve that target, right? So that's what I Your second question is with regards to the revenue outside divesting I probably mentioned earlier. That today I think our revenue outside Java is probably contributing more than 20% of the total revenue. Right? To be exact, we are probably closer to 20%, 23%, right? So and it has been growing if, for example, if we are able to keep up with the pace that we are doing today, you would expect that the distribution between X Java and Java, we'll probably get we'll probably get closer, but I think it's probably still going to be majority is still going to be coming from Java. So I think it's something that we'll continue to track as we go along, right? So And the 3rd question is regarding the customer loss and the packets that customers are buying, I think we have many many nights talking about technical moves, what to do and not to do in these markets in Q3. And our final decision was not to follow the moment on unlimited packets are not to go down to both that level below the unlimited and introduced unlimited costs. We would wait to see what happened. And it seems like you paid off for us. 1 of our competitors are now removing on unlimited, but still of course, very aggressive. So you're right. We lost some rotational churner as we call them in the lower end of the markets, which didn't affect our revenue and didn't affect our ARPU in that sense. So right now, again, we are still sitting looking into what technical move we should do depending on the competition heating up or slowing down at the moment. Got it. Thank you. Thank you. And we have the next question from the line of Chung Chen from CIMB. Your line is now open. Hi, thanks for the call. Two questions from me. Firstly, again, back on competition. In terms of the subscriber loss, did that come at the beginning of the quarter or did that largely come towards the end of the quarter? I'm just trying to figure out whether we're progressively seeing a greater impact from competition. And, as you mentioned, most of the sub loss are in the local value segment. Have we started to see any sort of impact on the slightly medium to higher ARPU segment, you know, thus far into the fourth quarter? And if it continues to be just a lower value segment, can we sort of presume that XL will continue to keep to the current pricing strategy? That's the first question. 2nd question regarding the network, you mentioned, I think earlier about the target to reach about 90% 4g coverage in ex Java by the end of the year, where are we in terms of the progress there? And I've noticed that the base station additions in the third offer was actually at its lowest in the last 3 years. Anything to read into this? Those are my two questions. Thank you. Yes, I think in your first question, you added 3 questions within the first question. So let me try. So the first one was this actually all through the quarter. And to be honest, yes, it was. It started mainly because Intelsat and SmartFirm has unlimited and lower price in the beginning of the quarter and continue to full quarter. So talking about this for Chetron's channel that went down with our network, yes, it was through the whole, the whole quarter, right? Secondly, you're asking, will we do any aggressive moves to compete in that space? So far, we are keeping our strategy. We are not changing our strategy regarding our 2 brands with the Access brand and Excel brand. We started this distinguish between these two brands in terms of pricing and social value proposition. So right now, we are not changing, but at the same time, we have a daily monitoring of what happened in each of the 12 months, each of the cities to see if these guys are moving in a irrational way or they're not doing it. So so far, we are still on a tactical move that we're monitoring these guys. So I cannot hear reveal if we are changing the prices of Adults at the moment, but we are following our strategy and we are not doing any rational thing in the market at the moment. Your second question from I think if you look at where we are in terms of what the coverage is. I think we are broadly on track getting the 90% population coverage as we talked about in past calls. So I think if you look at the way that we do our rollout. Of course, every time when we do roll out, we probably want to chase for the peak period, right, to get all the network up and running before the virus. And that's typically what we have done, right? I think if you look at the incremental that you probably see in the first half, in terms of 4 g base station has been quite significant. I think, in the second half, it would probably be a bit, slowing down a bit because the plan is to deliver all before the balance. And I think in the second half, I think we'll probably be thinking about next year's plan already which we already started. And hopefully, I think in terms of issuing out the POs would probably happen, in this quarter, right? And hence, to probably chase the rollout for 2020 plan, to be ready before the balance. So So is there any change in plan? No, it's exactly what has been planned for and the aggressive number that you've probably seen in Q1 in first half was actually to chase for the balance and has slowing down the investments in Q3. I think I forgot to answer one of your sub questions, question number 1, where you ask about, do we see any changes on the high value subs in our network? And here, I must say, we haven't seen that so far, which is mainly due to we are still competitive on the pricing and is due to SIM registration process. So it's still a little bit difficult. It's a little bit of a hassle to change the SIM and then you're still attached to your number. So we haven't seen any big changes for the higher value. Okay, got it. Question from the line of Edward Louthan from Goldman Sachs. You may now ask your question. Hi, thanks for taking my question. So it's a follow-up question on the BTS actually, with your CapEx guidance of $7,500,000,000,000, does it mean that the fourth quarter, 4th quarter CapEx would decline quite a lot? And also, does it mean that you're satisfied with your current, level of network quality, especially since Endocyte is still rolling out this network aggressively? And the second question is, last quarter you mentioned you gave some color on profitability outside of Java. How is it currently and how is the outlook for profitability there? Thank you. Look on the network rollout, yes, we have seen that our competitors have been aggressive in rolling out our network. I also have to remember that for the last 2 years, we have been aggressively rolling out networks and spent a quite amount of CapEx in that sense I can link it to the NPS call in Indonesia at the moment, what it looks like. And we are still a very strong number 2 in the Net Promoter Score. And if a deep dive into a network is very clear that EBR still progressing, we're still having good NPSCo, but also admit that both Intelsat and Smart are gaining when it comes to the NPS score for the network. So you're absolutely right, that they are getting contraction in the network and building out network, but we are still very strong number 2 when it comes to the network in Indonesia. Okay. On profitability, if you look at our share outside Java, it's still relatively more, right? Or if you compare it to the market leader, and we probably need to hit some scale in terms of to recover the investment outside Java. So are we profitable outside Java at the moment? The answer is not, right? And hence, however, we have seen very positive trends coming from outside Java. I think as you've seen that we are growing double digit in terms of revenue outside Java. And it's faster than what we have actually than what we expect and what we've targeted for this year, right? So And definitely, we have taken market share, right? So if the trend continues, I think, as you would expect that within the next 2, 3 years, I think we should be able to turn to turn with some of this investment that we've made outside Java by increasing our market share, from where we are today into probably getting some positive returns from that investment. Okay, got it. All clear. Thank you. We have the next question from the line of Krishna Gutabayat from Mandiri. Hi, good afternoon, everyone. My first question is on the finance lease liabilities pickup in the quarter 'nineteen. Can you just confirm if this is coming mainly from fiber leases or tower leases? And can I also please get your thoughts on how, finance and liabilities balance can add up over the next few quarters, especially in anticipation the full IFRS 16 implementation in 2020? My my second question is on DNA charges. I recall that you previously guided that DNA to grow 6, 7% over the normal C and A run rate in full year 'eighteen. But then in months'nineteen trends have been way lower than that. So do you see the need to revise that guidance? Or should we expect the G And A growth rate to be materially lower in full year 2019? Thank you. I think the finance lease liability actually growing. I think partly driven by the fact that we are building fiber on an IRU basis, I think we are capitalizing it as finance lease, right? So that is the primary driver of our financial lease. And as you would expect, right, in the next 1 or 2 years, we expect to hit the, our fiber size 50% of both sides to be fiberized. So that's probably going to be one of the main driver of our financial lease. What's that going to be the adoption of IFRS 16 for us will take into effect in on for January 2020, and that being said, I think what will the impact would probably be all our operating leases today, especially on towers, only to be recapitalized. And that will probably result in a higher financial leases, a number that you see. But at the same time, it will also drive your EBITDA margin up, quite substantially, right, because quite a big portion of our tower leases today are still on operating lease, right? And hence, it has its classifiable EBITDA, right? So, all in all, I think, full implementation of our still would be in January 2020. D and A, yes, I think, if you look It's slightly trending below what we forecasted. So yes, we did we did forecasted. It will be low single digit growth DLA compared to last year. However, we are slightly, we would expect that probably this year, we'll probably end up at around flattish or flattish compared to 2018 for DME. Thank you. We have the next question from the line of Franshan Sharma from JP Morgan. Your line is now open. Thanks. Just a couple of questions, a couple of follow-up questions from my side. Firstly, again, on your customers, we also see that your smartphone users have declined. I mean, considering the other operators, you do seem to have been investing more aggressively over the last few quarters or the last couple of years. So just wondering where these customers could be going because, I mean, companies sort of have the soft some of your other competitors, have very limited, networks. So can they actually be competitive in gaining customers away from you? If you could share your thoughts. And second thing is on your EBITDA margin guidance being revised upwards. Has does this have any contribution of operating leases being classified as financial leases? Or it's just that you're seeing a scale benefit? Thank you. Yes. Okay. So on smartphone penetration, I think what you probably see, we are quite flattish this quarter as compared to last quarter, right? So I think, but overall, if you were to compare our smartphone penetration and for the penetration over the last four quarters, for example, we have grown quite substantial, right? So it's not that we are probably losing share, but I think over the years, I think, we have grown quite significant If I'm not mistaken, about, if we look at last year, our smartphone penetration, today, we are at about 86%, but I think from for the last year, we are just slightly below 80%, right? So there's been about 600% growth in smart concentration over the last 4 quarters, yes? So secondly on EBITDA margin, I think like I said, the leases are primarily coming from, fiber leases, which we are building new, to connect all our insights. And that's given the aggression. I think that we are fiberizing our site that's probably driving the financial needs However, EBITDA margin growth are probably coming primarily from the growth in revenue. As you expect that our operating leverage are quite high. And given that revenue growth has been very strong this quarter and this year, it has probably driven EBITDA margin up. So that's and on top of that, there's also some efficiency that we are continuously driving that has also helped in terms of driving up the EBITDA margin this year. And we have the next question from Arthur Pineda from Citigroup. Your line is now open. Hi. Just a few follow-up questions please. Can you provide more color on your tower rentals? What percentage of your towers are still on 15 to 20,000,000 per month as compared to and when are these up for renewals? Second question I had again is on the tower side. I'm just wondering about your earlier comment on intention to sell them. Given that IFRS 16 is coming and the liabilities will still be lodged under your books, and you don't really need a cash as well given your balance sheet under leverage. What's the incentive to actually examine selling off the towers? Thank you. Okay. So, I think on power rental, think if you look at most of our power, I see subject to renewal over the last this year, and probably, some next year, right? So within the next 2 years, I think, majority of our towers are for renewal, right? So So I would say that the portion of power that's based on the old rig are not many, right? Majority has actually been renewed as we speak today. Yeah. So, secondly, on, on, on IFRS, Steve and telecom power side, So I think the motivation or selling power is probably driven by not too much of the need of cash, but I think we probably look at two points, right? One is from NPV basis, right, in terms of the cost of running the towers, versus doing a sale leaseback, how would that benefit the overall company in terms of cash, in terms of profits, in terms of returns, for example, and NPV, right. So So that's primarily that means that secondly is also looking at the multiples, right? I mean, if unable to secure by selling off towers, a multiple of 8, 9 or even 10 times for example, right? Compared to what we multiple that still have to deal around 4.5 times. I think we are in a way that we are looking at how do we monetize these assets, right? So, I haven't seen all that uh-uh we have not decided whether we're going to sell towers or not, right? But the thinking if we were to sell towers are probably from expect of monetization given the higher multiple and secondly is comparing between the sale and leaseback transaction as compared to the cost of running the power ourselves, right? Also running the power are probably not easy today given the the cost of land lease, right? The community issues that we are probably facing permits, and all that, right? So taking all that into account, I think when we do the overall assessment, we'll compare that against the proceeds that we'll only get from the sale and leaseback, right? So So I think not so much driven by cash, but so much of how do you monetize that? And last point as well, I think we don't have much more power. So we don't have the skill to operate this as well, right? So in terms of, let's say, operating efficiency from our part is also less as compared to people that's holding quite a significant number of towers, like the mid tower companies, right? Got it. Thank you very much. Thank you. And we have the next question from the line of Colin McCollum from Credit Suisse. Your line is now open. Thanks a lot and congrats on the good numbers. Two questions from me. First one just a housekeeping 1. Adelan, you mentioned 86% smartphone penetration. What would you be at in terms of if we talked about 4G penetration, someone who had a 4G handset and was actually using 4G functionality, what would that be now compared with, say, December last year? That's the first question. Then the second question is, I'll try my luck with, EBITDA on this and the new ICT minister do we have any feel yet for what the attitude might be towards consolidation keeping spectrum post consolidation, those sorts of issues? Do we have any feel for that as yet? Those are my two questions. Okay, Collin. On the first one, I think today, our smartphone, our 4 g penetration is around 70%. And if you compare that a year ago, we are around 53%, right? So there has been a significant growth, in our 4G customers over the last four quarters. So calling on the second question, you know, the new minister has just been appointed So we haven't heard much from him. But we look forward to working with him and we are hopeful that his objective is to support equal growth for the telecommunication sector in Indonesia. And, you know, but he already mentioned that you know, one of his objective will actually increase non tax revenue. We actually hoping that you know, knowing that Indonesia has 1 of the highest spectrum payment rate as a percent of revenue in Asia, we hope that the minister will rather improve the business environment in Indonesia which suffered from intense competition and will lead into improved tax revenues for the government. So we hope that the new minister will actually come out with with policies and also guidelines for improving the industry efficiency C, national consolidation and also, actually, if the minister could input in necessities our position by reducing capital imports of network groups. And we hope that, also the minister would actually come up with the spectrum allocation, for, our to of, make more spectrum available for us. We which is we call hardly even for 4 g the industry will require more spectrum for 40. And on top of that, 5G is coming. So we will require even more frequency for 5G. But, in terms of what will be his strategy objective at this moment, we have not heard much from him. Got it. That's actually very helpful. Thank you. Thank you. And again, please question we have is from the line of Sachin Mitzel from Cbs. Your line is now open. I have, two questions. You talked about unlimited plans, taken off by in this app and other property officer. I'll do the high end plan. So I'm wondering, high end plans, probably with a better network quality as a little quality of credit life in the fact is, you know, is matching in a salary that they're getting a lot of traction for the high end plants. So so this is a question on the network quality. Has the differential, being narrowed and significantly narrowed? And second question is on, what are your thoughts? Give that Huxali box just a job operator now. You are Java Plus at Java Plitter. It's a financial service now. What is the primary benefit for Excel to acquire any other operator or merge with any other operator. Because a hypothetical question, I can't understand. If you're already competing well in the biggest years, what are the key benefits of any consolidation that is it, whatever the consolidation to you. Thank you. I'm not 100% sure I understood on cost of first question correctly. But what I heard that you said this, we have higher value package, higher than our nemoSwitch, which is absolutely correct. We have higher pegs, a bit of higher GB and more voice, etcetera, that's that we have in our portfolio. At the same time, we also ask about the narrow, the been narrowing down the advances we had in the network compared to our competitors. And there's no doubt about the business. Yes, they are building the network and of course, for every year or even 6 months, they are building the network, getting closer to us. The competitive advantage is narrowing down. We don't have that anymore. We still have, but of course, you're absolutely right. It's narrowing down. Sorry, Laura. Was there another question or No, no. I think that was something to interpret on the line. So, yes, you are right. Narrowing down, our competitors are getting closer when it comes to make what I want. But in the future, I think we are looking into smart networks. We do not believe it's only going to be about speed in the future. It's also going to be about experience. So today is people are buying a certain GB package but we also see that the used demand for different OTT players on top of the package. And these OTT players do not only look into the speed of the network, but it's more about the experience. What are you actually getting out of that OTT service that you're getting? So we're looking into that, how to deliver a smart network and not only talking about speed in the future. Okay. And your question, your second question, I mean, if I can see correctly that you are seeing, given that we are now a nationwide player, why do we need to go for acquisitions? Firstly, I think, is that right? I got you now. Are you still there? Yeah. I'm here. Can you hear me? Yes. Did you get your question? The second question, correct? Yes. What are the benefits, if any? Yes. Okay. So the way we look at it, right? I think, uh-uh, we are fully supportive of any M and A, right? I think, I think M and A would probably lead to a better industry overall position, right? I mean, with consolidation in the market, think you probably would see that, competition would probably hopefully would improve and actually will bring the overall industry up. Second is in any consolidation, I think one of the key aspects for us that we'll probably look at is probably from a Spectrum position as well, right? Given that where we are today, given our spectrum position given the geography that we are facing in Indonesia and how data is actually growing, Indonesia spectrum has always been a constraint. I think if you were to compare, spectrum position, of operators in Indonesia, versus in most of the other countries around the region, you are probably in a very good advantage position, right? So consolidation, for example, and the ability to probably acquire more spectrum, that would actually help in terms of providing better network quality, at a lower cost. Certainly, there are definitely synergies that, probably, one will probably look at in any M and A, right? I mean, in this case, I think, not only looking at job by job, but also from segments, right? There are synergies between customer segments, where some of the other operators from, from, in some segments as compared to the other, right? So those are probably some of the areas that we look at. And that from a cost perspective, definitely, I think you'll probably be able to consolidate your cost your network size and all that, that probably drives and gives you a bigger network, and at a lower operating cost, right? So I think there are many, many factors that we would probably look at in terms of M and A and not that primarily driven by whether we do have networked in Java or X Java. Thank you. The next question we have is from the line of Krishna Houda from Mandiri. Your line is now open. Hi, again, but thanks for answering my early questions. I just have a quick question on EMEA regulation. Can you please get your tops on the CapEx that you may have to incur. And also, this is supposed to have that you may have to adjust, you know, to comply with the plan regulation. Thank you. So, thank you for the question. So, the government already mentioned that the immigration will take effect in April 2020 and this regulation will require all new customers to have the handset registered to the EMA database. We don't know actually the impact yet because currently we are still estimating how much we need cost to comply with the new regulation. In terms of setting up the new system. So the government, the regulator has not actually defined the process or the customer journey So then we could not actually now uh-uh calculate what kind of system that we have to put. So we don't know yet the impact to the in terms of cost by this regulation. However, to the basis, I think the impact to Telkomiti will be neutral. Okay, got it. Expecting any sort of impact that we saw, like, in preclinical situation in 2018, I suppose. Got it. Okay. Thanks, Lydia. Thanks. Thank you. The next question we have is from Nico Margarraliance from Lenalexa. Your line is now open. Yeah. Thank you for the opportunity. I'd like to go back to the competition and, and about your product portfolio. So, what is the current contribution between, your main brand Excel and, and access. And, where access is doing that, it's doing that in, in mainland Java or outside the dava? Thank you. So, we don't share the ratio between XL and Axis But I must say that I can say that both of the brands have been growing, significant and especially access has been going very well. The difference between these two brands, we are trying to say that we want to be, 1st of all, access, we want to be more digital brands, meaning that you have to use our digital platform to acquire the service. And secondly, this is more screwed towards the young population of Indonesia. And if we look at the Excel, XL, you can buy all the work. And at the same time, it's true towards the urban, white color and the urban blue color as well in Indonesia. So the contribution we were last year, but both of the brands have a very significant, all through through 2019. Thank you. We have the last question from Piyush Chandra from HSBC. Your line is now open. Yeah. Hi. Thanks. Two questions, please. Firstly, if you look at data usage is, rising latteries, healthy pace, around 56% year on year, 9 months. Just want to check how are we placed on the 4 g capacity utilization in Java areas? Are there any risk of capital intensity rising going into 2020. Secondly, if I can check on the churn rate, what what's the churn rate now and is it still trending down? Thank you. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Okay. So, if you settled, if you look at 4G as as traffic continue to grow, I think we have to continue to build, coverage into all that capacity as well, right? So I think where we are today, utilization is still less than 50%. So we are still in a good shape in terms of serving more data traffic as we go along towards quarter 4 and next year, right? So children, I think where we are today, I think children has come down. I think it's now it's probably at closer to the high single digit to 10%, right, about 10% more. So are we, given the prepaid registration, nothing, we are not We are still, we have seen a slight recovery yet, but definitely the trending is coming down. So I would expect that maybe within the next 12 months or so, you promised the improvement before it stabilizes at some point. Meeting a minute or so. Thank you. There are no more questions at this time. I would like to pass the call back to the host. Okay. Thank you everyone for your participation in today's call. As always, to get back to us, if you need more information and we'll speak to you next quarter. Thank you.