Earnings Call: Q4 2018

Feb 15, 2019

Quarterly report

Good morning. Thank you for this moment. Welcome to Exelixietta's earnings conference call for the 2018 financial year. My name is Alisa, and I will be your coordinator today. During the presentation, all participants are in a listen only mode. 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. Good afternoon, everyone, and welcome to the call. On behalf of the Excel 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 Iguhdean, our Chief Executive Officer and our Chief Financial Officer, and our Chief Commercial Officer. Now, Ibudian will share the highlights of 2018, which will then be followed by the Q And A session. I will now hand the call over to Ibudian. Thank you, Indag, and good afternoon, everyone. 2018 was a very tough year for the industry as can be seen from the industrial revenue. This is here which experienced a decline. This was mainly due to the implementation of prepaid stream registration, which had a short term effect of increased and aggressive price competition in the first half of twenty eighteen. However, we came out of the synchronization as the operator with the highest number of registration as a percentage of our base in the industry. We manage through this true proactive effort in communication, providing its operating station via multiple channels, engaging our customers via fully direct and promotional incentives to get them to register and our focus from the past few years on sustainable customer The implementation of preferred sim registrations is a necessary change for the stronger and healthier long term future for the mobile industry and we'll benefit all operators if properly enforced. We have already started seeing the positive impact from the of customers, which is like churn, less buying of starter packs and instead more of focus on vouchers and reloads. Which is more sustainable in the long run. We are very happy with our performance in 2018 as despite this tough market environment, We continue to execute and implement our data led strategy and we managed to outperform the industry with both our revenue and EBITDA pricing year on year compared to the decline since by our peers in the industry. This has solidified our position as a strong number to operate in the unit here by a few market share, a position we aim to build in 2019. This quarter, our revenue rose another 3 percent year on year, which makes it the 3rd consecutive quarter of revenue increase. Writing this was growth in data revenue, which increased 9% to all of you due to a combination of data monetization and our success in upselling our data customers to the bigger packages. Our ARPU which rose 3% year on Q in the quarter is evidence of our success in these two areas. Data revenue, which now accounts for 80% of our service revenue in 2018, is much higher than our peers and enable us to weather the negative effects of the employment legacy voice and SMS services. And SMSer Business Revenue Better Net Additives. Costs continue to be well contained with our EBITDA rising 8% Q on Q and margins increasing to 38.8 percent this quarter. Our continued efforts in driving cost savings has continued to show positive results with total operating cost in 2018 remaining flat despite the increase in the number of you of new network sites as we expand our coverage example and additional network elements installed to improve network quality during the year. This cost efficiency program will continue and will be a key catalyst to drive higher EBITDA and margins in 90 in 2019 and beyond. Data continues to be our main engine of growth. Indonesia data set customers has continued to respond well to our improved network. As of full year 8 2018, our smartphone subscribers stand at 4 3,900,000, a 15% growth compared to same period last year. This make up approximately 80% of our subscriber base, which is significantly higher than the industry average. We continue to see a fast rate of migration of SAPS to 4 g, where for the customers now make up more than half of our total subscriber base. This is partially due to success of our active smartphone offering which have seen strong traction in the market and being key in migrating our customers from 2 g to 4 g as well as helping us gain new monthly subscribers. As more of our base move to 4G, we are seeing lower utilization of 2G where traffic is now below 5% and as a result, We have started switching off the 2 g network in certain areas while continuously reducing the capacity in other areas where 2 digit state has come down. This has allowed us to refund most of the spectrum that was previously used for 2 g to to now be allocated for 4 gs. This initiative is in line with our business strategy of continuous network modernization and service quality improvement to ensure the best experience and service to our 40 customers. Thus, in this quarter, we have taken a one off acceleration of depreciation of the portion of 2 g assets that have been switched off this mental and absolute are no longer being used. However, going forward, our depreciation will be more tip of our underlying business and furthermore, the cost savings from lower electricity and rental as well as the reduction in depreciation cost will improve our future net profit. We are pleased to report that our customer numbers continue to increase post prepared in registration implementation and a healthy and a sustainable member. This is due to our purpose since 2015, on sustainable customer acquisition and thus we have added another 1,000,000 customers taking our overall base of registered customers to 55,000,000 this quarter, while our ARPU have tightened this quarter. The success in acquiring customers is mainly to our global strategy, which has led to us making soft endorsement in different segments, through innovative offerings in each segment this year. As a result of this, both brands achieved their highest ever net promoter score or NPS during 2018 and resonated particularly particularly well within target market segments. Our extreme smartphone offering was a big reason for the success of the XL brand in 2018, while attractive data led promo products continue to attract customers. Active brand also continues to do well with the youth segment as we have expanded our product offering to appeal to this segmented social media focus, while we continue to do more for the gamers and music lovers. Our cost per brand, Absa, Toyota, also continues to do extremely well, attracting customers through athletic offerings and smartphone rebate program We also continue to ensure a high quality data experience to our customers through continued rollouts and upgrade of our network. This, our total BPS count is now above 118,000 with 3 gs totaling more than 51,000, and our 4 gs LPS office owns 400 Cities. And ARRIA across Indonesia with more than 29,040. Our network investment continues not only within Dapa, but with a greater focus on X Dapa this year. Following the strong performance last year, which has translated to the recovery and network performance in this area. This has also translated to a stronger revenue performance of the Java, which continues to grow at a better rate than Java. In particular, awareness of our brands, improved methodology and coverage as well as product and value of failure appeared have significantly increased also. And we are now increasingly known as a nationwide operator. Despite the challenges we faced in the industry in 2018, we are seeing signs of improvement in the mark with gradual price increases both by by us and our peers, which is positive for the industry. This is evident from our strong performance in the second half of twenty eighteen that we have undertaken monetization of data. With our positive results from fundamentals coupled with our focus on transforming into a data centric company We are confident of delivering a better year in 2019. Nevertheless, we will closely monitor how the market unfolds which will have bearing on our overall performance. 2nd, all this into account, our guidance for 2018 is for revenue to grow in line or better than market, EBITDA margin guidance of high 30 and CapEx spend guidance for 2019 of around 2.53 rupeea, which will remain focused on data net investment in 4G and continuous network improvements and modernizations in and outside Java. Thank you and let us now proceed to the Q and A session. Thank you Please kindly you. Your first question comes from the line of Arthur Tanada from Citigroup Singapore. Please ask your question. Hi, good afternoon. Just for my two questions. Firstly, can you talk about the pricing environment for 2019? Do you see a room for pricing to improve, or will this be highly competitive? Second question I had is with regard to costs staff cost declined by 23% even though employee count was only down by around 12. Why is this trending as such? Given that you normally see wage escalation for the retained headcount. Thank you. Okay. Let me let me start on the first one, which was regarding the price when we expect in 2019. I think as a follow-up on the Eberdian introduction here that, yes, we saw already in 2018, some improvement. It was a very competitive, very tough year. We saw some slightly improvement in the prices when it came through 2018. But at the same time, we also seen kind of a 4th operator coming into markets with a Smartprint and we have seen some very aggressive pricing from Smarshland especially when it comes to unlimited products. So we believe strongly there are some improvement for increase in monetization 2019, we have already seen that in January and coming into February as well. So this is going to be on a granular basis, and it's still distancing on the market condition overall. But right now, it seems healthy. We do not see the same aggressiveness as we saw in the first half of twenty eighteen. Yes, sir, on your second question, I think if you look at the on the surface, we look at the salary and employee staff cost, it's actually coming down because if you recall, there is a one off adjustment in 20 17 with regards to our severance payment, right? So typically, if you actually take that out, you eliminate that staff cost actually 17 going to 18 actually increased by approximately 9%. And I think that's contributed by probably some salary increase that we did in 2018 as well as some of the new hires that I actually came in into 2018. Okay. So it's just that one off adjustment? Yes. Okay. I'll come back in the queue for more questions later. Thank you. Your next question comes from Colin McCollum from Credit Suisse. Please ask your question. Thanks for the opportunity. First question is for Adlan actually. Just on those 2G assets you wrote off Adlan, What was the depreciation charge or run rate, if you like, in 2018, attached to those particular assets? The run rate for 2018, for depreciation for those assets, that's first question. 2nd question is, I noticed you guys did the test on 5G I'm interested to know what your assessment would be or what 5G would cost for a kind of fixed wireless cost per home? And would you think there's a good strategy there? And is any of your pecs in your $7,500,000,000,000 budget. Are you spending anything on wireless, to the home? Other strategy? That's the second question. Thank you. Your first question on the 2G write down, right? So essentially, I think if you look at our traffic in 2G, to date, I think, is probably less than 5%, right, as a percentage of the total traffic. And if you take as a percentage of data traffic, it's actually less than 1 about approximately 1%, right? So we've done this exercise where we actually reviewed all our 2G assets line by line And I think towards the second half as well, we have started switching off some of our 2G assets. So if you look at, we have based on that, I think we've taken an accelerated depreciation of approximately RMB4.1 trillion. And I think I would answer your question in a slightly different manner, right? So if you look at the yearly depreciation is around increase from year to year is approximately between 6% to 7%, yes? So and I think with this write down, yeah, you would expect that this year in 2019, the depreciation would actually remain pretty flat as compared to the normalized number in 2018. Or slightly lower. So I think you probably can do the math, what is probably the run rate for 2018 depreciation. The second question for 5G, yes, last year, we have done, our 5G site may lead to actually to right from functionality perspective, not from the commercial perspective, our, 5 gs app. And are the certificates that we, use, at the time is for the, B2B use case, not for the consumer use case. Whether it will be used for home, yes, there is a, actually, an ideal that 5 g will be used for a wireless to the home. It will be actually a good to FTTH for uh-uh 5 gs fiber to the phone. But currently, we cannot set any for the flight in 5G because in terms of spectrum, the the government has not actually, allows any license, of the spectrum that can be used for flight implementation. That's very clear. Question comes from Ranjan Sharma from JP Morgan. Just two questions from my side. Firstly, on your ROICs, I think that peaked somewhere in 2011 or 12. And since then it's been coming down every year, now you have been emphasizing that 4 g is a more efficient technology and your cost of data is lower. So based on your experience with, other emerging market, telcos, this moving from 3G to 4G traffic, would you should we expect improvements in ROICs, especially at the current, price levels? Or does something have to change in Indonesia? Secondly, on your network within Java, is there any impact on network quality or customers that you're seeing? So, taking on your first question on ROIC. I think our peak ROIC was sometime in 2012 or so, when we actually hit a mid teens, right? So if you look at where we are today, our ROIC is probably a low single digit, right? And I think as we move in time, I think there is a few things that's probably driving this, right? One is probably the aggressive pricing in the market, what you're seeing today and probably at this current level actually the price operator to probably generate sufficient return, right, to grow your ROIC. So Secondly, as well, I think what you've probably seen that, as we continue, I will build, especially in areas outside Java, there would be a time period that we would be able to get return in our on our investment outside Java. Hence, I think when we look at both our portfolio, Java and outside Java, we'll Well, Java, we are generating by high IOR ROIC. However, that investment in outside Java is probably compensating for that high ROIC, right? So in essence, the more that we move into 4G, yes, I think it's going to be a key driver in terms of driving ROIC up. However, we are also putting some new investment outside Java for future growth. At the same time, I think that would probably come over the next 2 to 3 years. The aim is, I think, for us, is to still go back to our peak ROIC at around mid teens. I think, ideally, we probably be able to realize that when our investment outside Java starts to bear fruits, which we're already starting today. And I think once we actually get a lot more volume and scale outside Java, right? So I think where we are today, it it's the plan is definitely to grow ROIC, but I think it's probably going to take a bit more time before we actually eventually get to our pick ROIC of PTs. Okay. Let me take number 2. So regarding the network in Java, yes, you're absolutely right. And a very good that we have been doing some fine tuning on our network technology wise, meaning that we have been dealing with a bit of price legislation, both between brands and different package that we have. But the best feedback we are getting when we're looking at our NPS scope. So as Eudian said, an introduction that we have the highest ever NPS score, meaning that how many customers are actually promoting us we are closing the gap to the big guys here and VA to increase up to 20. Now looking into details about our NPS score, asking the customer, why are you actually promoting us? And that has changed a lot when we look at the last 12 to 18 months. So previously was basically that the network was bad and the prices were good. And that has changed significantly over the last 3, 4 months, where now the promoters are saying really like your network today and it attracts us more than guys, you are too expensive with the market at the moment. So yes, definitely our network has improved a lot. If I may add to that, thank you for your time. It is the quality of data network because we do aggressive fibrillation for our site, in Jafar. So currently, we are replacing the micro that link the BTS and change it to fiber. And that fiber makes the capacity to decide much higher and give the quality improvements to our data customers. Okay. Thank you. Can I just check, like, who, can you provide the organization providing the NPS score so I can get more details? Sorry. Could you just repeat the question again? Yeah. Sorry. Can you provide the name of the organization providing the NPS course? I can dig into more details on the methodology? Yes, we can come back to you, Madeline Rajan. We can do that. Okay. Okay. Thank you. Your next question comes from the line of Chung Ting Phong from CIMB. Please ask your question. Hi, thanks for the call. Two questions from me. Firstly, just some clarification on the guidance. What are you looking at in terms of the market revenue growth for this year? And also, in terms of the margins, EBITDA margin guidance, you seem to be, guiding for about the same margins as FY18. So are you expecting some margin improvements? And do you see potential for margins to be better than guidance in 2019 or only in later years? And and why would that be the case? And then second question, I just want to circle back to, the competition side, where Alan mentioned about, smart friend being very aggressive. I just wanted to understand whether with the stricter enforcement on the pre pre registration, since late last year, early this year, have we started to see any positive effects on market competition from that so far? And, also wanted to understand based on smart friends, network coverage and distribution, to what extent do they, sort of overlap and again, XL? Thank you. So on the guidance, I think we are probably looking at a market revenue growth next this year at around a mid single digit I think, if you look at the situation of where we are today, from an industry perspective and if you look at the incumbent is still quite a big chunk of our legacy revenue, that the industry is at least still carried, right? And we have seen this previously in past years as well. That the legacy revenue declined by a double digit, right? But maybe in the range of even 20% to 25%, right? So because of that, I think our guidance actually is also reflective of that Secondly, also, I think from the guidance perspective, we also are a little bit more cautious on this year's guidance given some of the competition session that we are probably seeing from SmartFresh. However, I think, we may need to monitor the situation and probably see how these things are probably going to impact the industry moving forward. On EBITDA margin, I think, yes, we are keeping the guidance at around high-30s. I think just to give a little bit of perspective, this high 30s margin in 2019 is probably would include of device as well, right? So yes, I think if you were to exclude device, you probably would see, the number would probably be growing, quite a tad bit, right? So given the fact that we are going to be quite aggressive, in our 2G to 4G migration of smartphone. I think we're probably going to be quite aggressive in promoting, 4G device in 2019. And hence, the guidance of a high 30s would probably be reflective of that. Okay. Regarding the market situation and country class SmartTrane. So what we have seen for the last 5, 6 months is SmartTrane being a project crisis, we are basically mainly talking about the 6 cities here in Indonesia. I can give you one example of this sort of buyer. So they are going out to this big city and they are extreme regular on the pricing and acquisition. And the minute they do that, we see that Telkom sales immediately react on that and also change the prices and change the distribution. Meaning that hit the tree above meaning in the tree and also hit every time smartphone being aggressive in mind. But we also see that what happened in 2, 3 months ago is actually ease down a little bit, meaning that we don't see that actually the same level off now. We don't see the same amount of high equity comes smartphone. So we believe that the regulator has somehow talked to them saying that they need to be as compliant as anybody else in the market, which we have seen now we do not see the same acquisition at the moment. So I do not believe this will continue for our long term. I think this is a short term exercise coming from SmartSpring And immediately, when I do that, in some of the big cities, we of course react with retailer, Canada program, retail program, looking into the regional pricing, etcetera. So we also have a defense system starting at the point to see that. So they were very aggressive, but they had to use down a little bit the last 1 month. Okay got it. Thank you so much. Your next question comes from The line is from Jairaj Singh Young from Macquarie. Please ask your question. Hi, thank you. Two questions from me. Maybe for Alan, could you provide us some detail maybe on what successes you've had in upselling the product just because that extra combo plan seems to be a very dominant plan within your mix. At the very least, we'd like to you know, understand whether you've been able to how successful you've been in being able to upsell and therefore generate these the revenues that will eventually support profitability. And secondly, if you could help us get some color with regards to the network and the traffic growth because, again, your traffic growth is much stronger than the revenue growth. At which point do we need is our price point way lower than the competition so much so that it's loading your network without a sufficient return? If you could help us feed through those things, that would be very helpful. Thank you. Detail, Christian regarding regarding the pricing, but let me try to give you 2 sum, right? The good thing about the timber constraint is that we can see the tenure of our customers are actually significant increasing. So from before being around 7% to 60% lower than 3 months. We are now opposite. Now we have 67% with a 10 year more than 3 months. Minute you have a customer with high tenure, you can actually work with the customer. So meaning that our marketing system with ProMCCM kicks in we are able to attack and be able to reply to our custom mini obsolescence. So we have created program called next best offer. When people do something, we always create a offer that is better one to have today, meaning that we are trying to get the option up. And the customer are very happy with that. So that's one thing. Number 2, you're absolutely right that extra comb is one of our hero products in the market. So right now, we are going to do something called pre math meaning that for 10,000 more, you can actually get IFlex VIP and you can get full data rollover for the next month. So we are trying to upsell our the customer who makes the combo to extra combo Prima, which works pretty significant. And you'll see that on our rate case soon coming up. So that's just two examples of upselling and that's one of the main reasons why we see an ARPU increase as well. So the good part here is that going forward, if this continue, that actually people stay in our network, we are able to work more granular with all the customer that we have and increase our view going forward. Yes, Alex, your second question, Fred. I think if you look at our network, network utilization today, it's still probably 50%, right? So while I think, as we continue to build, I think, and we attract more and more smartphone customer, towards our base, you would probably see that, you would probably also drive traffic up, right? So So essentially, if you were to look, the composition of smartphone users for these smartphone users in our base, we are definitely, have much higher smartphone users, as compared to the industry and competition per se. And I think what we probably have seen as well, smartphone users in our base today are doing north of 6 6 gig per month, right? So and that has what we have actually seen in a quite extreme growth in terms of the smart own data usage in our network. Yes. So today, I think if you look at, from, but that does not indicate, meaning that our prices are, we are actually selling through that competition. I think we've probably done some bench a comparison, whether the smooth Fashi products or even the bigger data you packet, for example, our prices are comparable. If not, I think, in the smallest, Rashi, based on our latest comparison in lately, I think we have probably seen that probably our prices are actually higher than our competition, right? So yes, I think probably overall, I would say that, the overall industry prices are still relatively low. And hence, that's why I think you'll be that's why you are not able to see the increase in traffic is fully translated into data revenue growth. Having said that, I think the industry overall has moved quite significantly from price point perspective. Post prepaid registration. And definitely, we have done, so as well. And I think even in January, we have done some, some more price tweaking to optimize further increase our pricing of our product. Okay. Thank you very much. Your next question comes from Sachin Middell from DBS. Yes. So a couple of questions. Firstly, the guidance is for growth to be in line or above industry. And your industry growth is pretty low, expectation, 5%. Trying to understand, since you have so much less legacy revenue, Why is the guidance not clearly above, you know, industry? And it's smartphone is a factor. Then what needs to happen? Do they need to increase? Do you need to further decrease pricing? Or what needs to happen for you to actually, the fridge battery life, because the current pipeline, as you said, has no cost smart smart friends. Number 2, You have been using Huawei, for your managed services contract. I'm trying to understand, is there an expiry date to that contract? And there was some significant cost savings in the last 2 years from there. And, when will we see expiry of this contract and any impact from thereon? And lastly, we have already seen stabilization of, data pricing in this water family. So, I mean, trying to learn trying to understand from you, are you besides smartphones? Is among the 3 operators, where do you find yourself in a wheel? What's your sweet spot now? Thank you. Okay. So I will take, your first question, right? So I think, as I mentioned, right? I mean, the industry guidance is around single digit, right? I think, as I said, right? We are probably a little bit more cautious on the, providing the industry guidance given the industry is still carrying above of the legacy revenue. So in our case, our legacy are probably a lot less than what he just is carrying. And hence, I think that's why we think that we should be able to grow in line with better than the industry, right? On the question on SmartFresh, I think for now, which I think we are looking at the situation, monitoring the situation, whether this aggression is going to continue for the longest of time or whether it's going to be a temporary, temporary, period because we have seen in the as well that a smartphone has been super aggressive in one period. And subsequently, within 6 to 9 months, increasing price again, right? So once the network start loading up, so I think we are just probably a little bit cautious in providing the overall industry guidance But having said that, I think, that position might probably change as we go along in 2019 as we have a clearer picture of what level of competition that we are probably going to be seeing from Smart Fran to say. Your second question on Huawei managed service, yes, it's going to expire sometime this year. And I think we have already done some, we already started the process of a discussion and tendering these services the project out. I think we should be finalizing that project tender very good. Yes, I think to on your question that whether we have actually enjoyed some significant benefit from the managed service. The question is whether we are able to realize the same savings or not at the same level as our previous contract. I think that's something that we are still working on at this point in time. And I think we are negotiating very hard. And I think we are probably going to see whether eventually we'll end up at the same level or not. Even if we are not, we are probably we are probably going to optimize, the scope of work, and improve, in terms of certain deliverables and TPI to ensure that whatever that we are probably getting from the maximized. Yes. So I we cannot answer your question at this point in time because at this point in time, the time is still ongoing. So just to follow-up on yes, sorry for the follow-up on Smart Friends. How long you are seeing Smartfront is aggressive for. And, I mean, is is this something this is already factored in your results. Right? I mean, the aggressiveness and of the smartphone. So if it continues, then that's what you're saying. Just to reiterate that, that's your main worry that this kind of addition is, it's quite, quite bad for industry growth. Or, is that what you're saying? So So a little bit to try. There are two questions now. The first one was the speed spot, speed spot regarding the pricing. And then on the the smartphone. Let me try to answer the first one. So the beauty about having a dual branch strategy is that you can play with that. And we do not have a exact sweet spot for these two parts. So what we are doing for the access is mainly targeting the young people of Indonesia, meaning that there's a low fidelity at the low price. It's around 2 GB maximum up to 30,000 rupee maximum, where the XL brand is facing that the urban white color and the urban blue car. And there's a high latency and high LGB, more than 2 GB and priced around 30,000 upwards. And so the beauty about this is what is that we were one of the first to have the voucher and the scratch card in the market. So even though today in the shops, you'd like to see some of our competitors come back 4 GBs with our 1 GB product, even though there's the same price. But people have now kind of changed the behavior. They would like to borrow a voucher instead of a SIM because they do not want the hassle to do the registration. So even though we are higher priced in the market, we still see exactly the same traction as we have evolved. Now smartphone and this only be a personal view about what they're doing. I do not think that smartphone is sustainable for what they're doing at the moment. So that's actually not my biggest, but very I have a much higher worry about watchful. Telkoms that are doing because they're losing momentum outside Java, meaning X Java, they're going to be aggressively aggressive to compensate for the loss in Java. So that's a higher variable than what I have for the Smartfront line because we have already seen Smartfront is down at the moment. So do not believe that we continue at the end of the day. Now we have a free network, but at the end of the day, it will continue with unlimited and value proposition. They will, of course, fill out the network with data and that will slow down and the customer will not be happy going forward. Okay, very clear. Thank you. Your next question comes from Arthur Veneta from Citigroup, Singapore. Please ask your question. Hi, sorry. Just two follow-up questions for me, please. Firstly, can we get your thoughts on dividends if you actually see earnings improve and given that your balance sheet is in decent shape. Can you see dividends come back this year? 2nd question I had is with regard to your CapEx. Obviously, you've been diverting more CapEx outside of Java, but north of 80% of your revenue still come from Java. Are you not concerned that you may see network congestion in your core revenue Yes, I think, dividend, I think, that highlightlihood that, looking at our numbers this year, that we should be able to pay out some dividend this year. So I think, and given some savings that we are probably gonna get from the accelerator depreciation as well. I think you should be expecting that we should be in a profitable position in 2019. Secondly, on CapEx, I think Alan have actually alluded to this as well earlier, right? Yes, we are seeking some investment, more towards outside Java to build our coverage there. But at the same time, we also have actually continued, to expand our capacity within Java. And I think as Alan mentioned, that actually totally reflected in the NPS call today that the customers are not only happy with the price today, but also the network quality especially in Java have actually improved quite substantially, right? So we are, what we are investing outside Java, we are not ignoring the fact of the capacity and network quality within Java. So just to clarify on the dividend, are you going back to your 30% payout issue in the past? Yes, that's the policy. I think if we are in a normalized net profit position, we'll definitely apply that policy that we have actually guided the market. The next question comes from Alex Guo from Ambank. Please ask your question. Yes, thank you very much. I'm just trying to understand the direction of your Alexander situation, that, you know, we've seen just bumped up in this for water. I'm just wondering, if I could you give some guidance, going into this year? How much more left should we be looking at for financial year 2019? That's the first question. And the second one is, regarding your CapEx of 7,500,000,000, could you give us a sense of how much proportion of that is going to ex Java. And the other third question I'm looking at is, Your revenue guidance is a mid single digit, but, looking at our CapEx against what you have capitalized for 2018, it looks at growth of 10 cents. I'm just wondering, as your CapEx growth seems to be higher than your revenue growth, I'm just I'm just wondering, your new customer acquisitions, will it be enough to offset the increase in your costs overall cost in terms of acquisition costs in terms of your, depreciation charges as well. Thank you. Yes. Just going back on the accelerated depreciation, I think what you probably see that that's a one off charge, right? We do not expect any more accelerated depreciation coming from the DG assets. On the saving side, I think, I've answered this question earlier. I think if you look at the, the the yearly depreciation, typically year on year, it will increase approximately 6% to 7%. So with the 1 off accelerated depreciation, we should expect in 2019, the depreciation charge to be at similar level of the normalizer 2018 or slightly better, right? So I think you probably could do the math what is the run rate and what is the savings that you could expect from the depreciation charge in 2019. On the on the 7,500,000,000,000 CapEx that we are probably going to spend in 2019, I think, yes, we are probably going to skew more to, outside Dawa. I think, today by end of 2018, population coverage, our 4 g population coverage outside Java is really reaching close to 80%. And by end of next year, I think with the investment that we are putting in, it will probably go close to 4 g, publish recovery should be close to, 90%. Yeah. So so so I think I would say that it's probably a skewed more towards outside Java and it's probably going to be just slightly more than 50% as we're probably going to ex Java. The third question, right? The guidance that we given is that in the free guidance, right, of mid single digit, right? And our XL guidance is to be in line or better than industry. Obviously, I think looking at where we are today, and our position in terms of where our legacy and momentum in the market today, we should be able to grow above the industry, the industry, the industry growth, right? So if you look at, a mid single digit, today, it seems probably a little bit, quite conservative. However, I think as I explained, that's probably taking the industry position where legacy, revenues are still, a big, within the industry, not necessary Excel. Which I think will probably have an impact on the overall industry growth, right? So yes, I think industries probably mitigate, but we we actually have a a on Excel perspective, I think we we should be able to beat the industry. Hello. Regarding your CapEx that is higher, would that be moving higher than your revenue growth. How would you, you know, offset the the expected increase in your acquisition costs coming in for your customers as well as your your depreciation charge? I think I would suspect it's around the same level as where we are last year, I mean, there's no growth in terms of our capabilities around at the same level as where we were in 2018. We have a follow-up question from Cheng Phong from CIMB. Please ask your question. Hi, thanks. I just want to follow-up question regarding the on the regulation part. I saw some news on drafts on the new tariff formula regulation. Just wanted to find out your thoughts on when this will go live any thoughts on implementation here, this would have any positive impact on overall market competition. Thank you. So, Feng, yes, I think Dave issued some proper public commentary at this point in time, right? So, yes, I think the overall industry is having a discussion on that. A draft is currently being issued. I think they are seeking public comment on this, right? So I think it's probably going to take some time because the next process having gotten the comment from the public feedback from public and all that. I think they'll probably go back to the drawing board to take into feedback that they have gotten. And then probably we'll discuss with the industry players and then probably we'll probably issue another draft later on, right? So I would think if I look at the regulation, it probably going to be quite positive for the industry. But I think it's probably going to take some time before it's going to be implemented if it's really going to be implemented. Okay. And I just want to ask because this one is based, the tariff formula is based on cost. And obviously, the cost inputs are gonna come from the respective telco. So I'm just wondering whether, you know, does that sort of, you know, provide too much room for for the individual players to sort of put in their own cost inputs, right? And then, you know, sort of, go around this whole formula in pricing especially for the smaller players like smart friend and all that. So yes, any thoughts on that? Yes, I think that's always the challenge, right? When you have this pricing regime, right? How do you monitor and how do you track this process element, to implement a cross operator, right? And that's something that, and practically, how does that get executed? And I think when we talk about this price point, for example, there's something that we focus our passion on. And there's always there's always a challenge in terms of how that thing gets practically implemented now, right? So yes, the the issues that you raised are all the points that are probably being restarted in the field level. How that's going to be tackled or address something that we are probably still at the drawing board. That is the last question. I would now like to pass back the call to your host. Okay. No more questions. Thank you everybody for your participation in today's call. Please get back to us. Thank you for the information and we will speak to you next quarter. Thank you. That concludes today's conference call. All lines may disconnect now.