Earnings Call: Q3 2018

Nov 1, 2018

Quarterly report

Good morning, ladies and gentlemen. Welcome to XL Axiara's earnings conference call. For the first time for the 1st 9 months of 2018. My name is Jeff, and I will be your coordinator today. Instructions will be given on how to register your question 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. Inda. Please proceed. Thank you. Good morning, everyone, and welcome to the call. On behalf of the AXA 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, Pia Allahan, our Chief Financial Officer, and Pia Allahan, our Chief Commercial Officer. Now, Ilujan will share the highlights for the 1st 9 months of 2018, which will then be followed by a Q and A session. I'll now hand the call over to Ilujan. Thank you, and good morning, everyone. We are pleased to report that this quarter, we have seen a pickup in revenue growth where our gross revenue managed to increase 6% due on Q and this is a direct result of our successful data monetization effort as part of our overall strategy. Thus, despite the challenges during the fourth half of twenty eighteen with intense data price competition, in structural changes of prepaid SIM registration, we see that market conditions are improving and if this continue, we are confident that we can finish the year on a strong note. The positive performance this quarter is attributed mainly to consistent execution our strategy throughout our transformation journey and this has enabled us to gain traction in the market and particularly in winning data safety customers. Further, as we have executed on our plan to monetize data since mid May, coupled with our strong product strategy, and continued network investment program, we continue to outperform the industry in the 1st 9 months of the year. This quarter, our growth revenue increased 6% year on year and this was mainly due to continued growth in data revenues which remains our main growth driver, innovative data offering and improvement in data service quality has successfully put data revenue growth in the 9 months of the year to 14% year on year. Data revenue contribution Now it makes up the majority of our service revenue at 80% in this current quarter. This percentage is far higher than our peers, which enable us to weather the negative effects of declining legacy services of voice and SMS far better than others. Positively, our EBITDA has also increased by 9% in Q on Q1 this quarter, while margins have also aided 1% to 37%. Our continuous effort in driving cost savings have started to show positive results with total operating costs for 9 months of 2018 remaining flat despite the increase in the number of new network sites as we expand our coverage at JAPA and additional network elements in off to improve network policy during the year. This cost efficiency program will continue and will be a key catalyst to drive higher EBITDA and margins going forward. Data continues to be our main engine of growth. Unlimited data center customers have continued to respond well to our improved network. At our first 91 of 2018, Our market subscriber spend at 42,000,000, a 15% growth compared to the same period last year. This make up approximately 78% of our staff base, which is significantly higher than the ad industry average. We continue to see a fast rate of migration to staff to 4 g. Therefore, the customers now make up more than half of our total staff base. As more of our base move to 4 g, we are seeing lower utilization of 2 gs which will enable us to free up even more spectrum for 4 gs. This puts us in a better position than our peers and will enable us to continue to get position to rate the growth in data on our journey to become a debt centric company. We are pleased to report that our customer numbers posted rebates in registration implementations have continued to rise while ARPU remains stable. This is due to our focus in 2015 on sustainable customer acquisition and thus we have added another 1,000,000 customers taking our offer base of registered customer to 54,000,000 this quarter. In establishing the XL brand as the choice for high value customers, both reliable high speed data and spironet quality are essential. As such, We continue to ensure a high quality data experience to our customers through continued roll out and upgrade of our network. Thus, our total BTS count is now over 116,000 BTS with 30,000 more than 50,000 and our 4 D LTE service is now available in 3 87 Cities and areas across Indonesia with more than 28 or 28,000 for EBITDA. To solidify as well as yet as position as the leader in data innovation, This year saw the 4 outdoor 5g and YD like trials in Potagua De Carta. 5g and YD have the potential to enable a variety of services including enhanced mobile broadband, smart cities, smartphone broadband, and digital transformation for vertical industry. We also continue to impact interactions backhaul and network modernization to support the rising data traffic across our network and deliver stability, expand our network capacity and improve quality of our data services for our customers. Our network investment continues not only within Galpaz, but with a greater focus on Xelba this year following the strong performance last year which has translated to better coverage and network performance in these areas. This has also translated to a stronger revenue performance of the Java which continues to grow at a better rate than Java. Making strong inroads in different segments through innovative offerings in in segments. During the quarter, we launched a higher pack version of our popular stream smartphone called the Xfinity. This offering has done well and is a key part of our strategy to continue to direct smartphone adoption across our base of customers. Axis also continues to do well with the youth segment as we have spending our product offering to to appeal even more to the gamers and the music classes. Our postpaid brands at Priuritas also continues to be extremely well, attracting customers through attractive offerings and smartphone repair programs. Our performance in the 1st 9 months of 2018 was very promising and we are seeing signs of improvement in the market with gradual price increases both by us and our peers, which is positive for the industry. This is evident from our strong performance this quarter as we have undertaken monetization of data. With our positive results, strong fundamentals coupled with our focus on transforming into a data centric company, we are confident of delivering a strong finish to the year. Nevertheless, we will closely monitor how the market unfolds, which will have bearing on our overall performance. Taking all this into account, and recent developments in the market, our guidance for 2018 is maintained with revenues to grow above market. EBITDA margin guidance of high 30s and CapEx spend guidance for 2018 of around RUB 7,000,000,000. Which will remain focused on data network investment in 4G and continuous network improvements in modernization in and also Java. Thank you. To you. You shall end the conference call sharp at 11 o'clock. It's 2 pm recorded time. First question comes from the line of Piyush Chaudhry. Thanks for the call. Congrats on the good set of numbers. Two questions. Firstly, on data tariffs, we saw further decline in data realization, quarter on quarter for Excel. So do you think there is a room for hike in data tariffs by XL or you think current pricing is reasonable to generate required return on invested capital. And secondly, in X Java, could you share your, achievements versus objective and what are your network coverage objectives in XJAVA for 2019 2020? And what it means for network roll out and CapEx? Thanks. Yes. Thank you for the question. Let me take the first one regarding data pricing. If I look at the 1st 9 months, you're right. In the beginning of the year, we were facing the challenge coming from Q3 fall last year. And we saw a decline in the prices, basically both voice and data in Q1. Since then, an year turnaround, April, May, we have basically been increasing the price of the market. And at the same time, you'll see there is room for more, but you have to remember that we are not because it's very different here in Indonesia and the compared to our country. We are not in charge in charge of the end user price. As we are selling a price, the dealers to the distribution and then they can basically do whatever they want. But we see a slight increase in prices in the market regarding data and we basically will come back And you're absolutely right that we see that a room for that going forward. Now that we see there are some fees after the SIM regulation process. So yes, We believe that we will still see some prices increase in data, but it will depend on if it's Java or it's X Jabber. Some of the places we still need to project resin, especially in Xjawa. And then to the network Xjawa, Yes, I think on the second question, I think, we started investing in extra, I think, I would say, 18, 24 months ago, right? I think, the objective of expanding edge Java is, is really to gain market share. I think the situation is very different when you look at Java by next Java. You look at Java, I think from a network perspective, I think you compare the 3 operators, I think we are quite similar in terms of a network size, probably the incumbent has probably slightly bigger network, but I think as of today, I think we are quite equal from a network active. However, the situation and market from a market share perspective, I think we probably have a one to one to each probably now XL and the incumbent will be slightly more given what we are seeing in the market, with one of the other competitors. However, in X Java, you probably would also know that, Taqang South have actually a dominant position right now with 80% market share. And hence, I think, and pricing, outside Delva is also extremely expensive. We saw that as an opportunity. And I think, and we have aggressively rolled out tech Java. And by end of this year, I think you would probably see that our 4 g coverage, would be around 80% population coverage, right? So And that gives us ample ambition, to probably compete with the market leader. Since we've done the out, I think we have probably seen that, ex Java has been actually growing double digit. And I think, the trend is actually continuing we are seeing good traction coming from outside Java. We have also seen that the perception, from our customers on network have also improved significantly with the improved network quality outside Jawa. Sure. But in terms of, so firstly on X Java, you know, follow-up over there, in terms of concrete kind of objectives. Could could you share, like, what's your network objective only in Nextiva? Because 80% pop coverage is probably for pan Indonesia, right, and and what does it mean in terms of CapEx by 2020? And secondly, sorry to follow-up on data pricing, but I just wanted to get a sense on, you know, we we are still seeing the blended pricing decline, right, as again as one of your competitors who has reported an improvement in data evaluation. So I wanted to gather your thoughts. Is there a kind of improvements? Is there a massive case where you can increase price in massively in in Java or or or you would continue with your strategy, current strategy to be in market share. Thanks. So let me take the first one just to elaborate on the pricing. I think the math is a very strong word. I don't think we've seen massive math price increases in the market for sure. But just to make it clear, right? We are so happy with the result right now because we are following the game plan. Gameplay is basically back to 2015, 2016, we're going to be a data center company. So Tulum has a 1st 9 month. We're not only looking quarter by quarter, right? We are looking for the 1st 9 months. You have very, very happy results and we are following the steady growth quarter by quarter, right? But saying that, at the same time, we welcome any price increase. And you're right that we see some price hikes in the markets in some specific areas. And we look at buy spreadsheets for all the hero price in this market, we have seen increases. And yes, we still believe there will be some price increases in the market going forward. Don't think we would call it massive price increases. On the Agfa, when I say 80% population coverage for the patient coverage that is purely referring to X Java, right? So, we have got quite a decent network coverage by the end of this year, to be able to compete with market leader, right? So, from a CapEx perspective, I think you've probably seen that today we have reallocate some of our CapEx, for the investment outside Java. And you would probably expect that going in 2019, that allocation will probably be skewed a lot more to outside Galva. Sure. Thanks a lot. Our next question comes from the line of Sachin Saligon Carr. Your line is now open. Hi. Thank you for the opportunity. My two questions are first one is, you know, Park Hadlan and, you know, given the initial comments where almost half of your customers are already on 4G and you guys are seeing a faster utilization. Is there a plan to shut down CICI completely and use that spectrum up for Fuji. And, you know, sort of a related question is, you know, you talked about investments outside Java. But when we look at an absolute amount of CapEx going into 2019, should that be similar to that of 2018 or, you know, you've seen a bit of a decline out there given the fact that you already have 80% pop coverage. That's question 1. Question 2, sorry, again, to go back on pricing. I mean, let me ask it the other way. What will it take you guys to raise tariffs further because, you know, when we generally talk to your competitors and, you know, you had a call a day back, they continue to indicate that, you know, I mean, they have increased the tariffs and the ball perhaps in your court, wherein perhaps a the premium or the difference between the tariffs is close to around 30, 35%. And it all depends upon, you know, how Excel is looking at tariffs. Generally, they are happy to take it further, but that appears that indication is involved in your code. So just wanted to understand how do you look at tariff increase? And when could we see the utilization rates or data realizations actually are improving for you guys? Okay. I'll take the first question, Sachin. So I think you probably see that, I would say today, more than 75% of our total traffic are probably on 4 g. Our traffic on 2 g is very, very small. Right? And hence, I think, there is a possibility of probably shifting some of the spectrum used for 2G now towards 14. The debate whether we should be in a shutdown 2G or 3G is something that we are probably having at this point in time. Obviously, I think the greatest views on, which are the technology that we should be retaining and which we should be shutting down, right? So we have not come to a landing yet, but obviously, I think this that we are seriously looking at. And at some point in time, I think, looking at maybe later this year or early next year, I think a firmer dilution would probably be made accordingly. On the investment outside Java, I think, yes, I think we'll probably achieve about 80% population coverage this year by end of this year. Nevertheless, I think there's still quite a fair bit to go. I think from an investment, total investment perspective, I think we are still in our business plan. And which I think will probably announce in January when we announce our full year results at 2018. But I think from what we we have, a probably seen, there are a clear indication that I think it would probably skew a little bit more with outside Java. What that number will be, I think, would probably depend on the total overall CapEx. That will probably be approved by our board and shareholders, right? So the nothing to continue to come back, but I think the ratio wise, definitely, SKU will be towards outside our Coming back to the prices again, and sorry, I had to repeat myself again that we have increased the prices for the last 7, 7, 8 months, for sure. And if you guys one day come to the Nissan, I will gladly invite you to the market so we can see how the hero products will work. Now usually I do not comment on our competitors result, but now you have mentioned it, and we've heard about the call, right? And we were also surprised. And we heard that, yes, it comes as the same year increase in the prices and we are waiting for it to do the same, which we have done. But we were surprised seeing that So it comes to have a data traffic increase, around, and at the same time, level revenue coming from data at 18%. Even though the whole market has been increasing 80 to 90% days traffic. So saying that, we are not absolutely sure where that's data traffic is coming from, all the revenue coming from, but it could be that the stock, it could be something about the stock market as far as the stock of the data, etcetera. So we're surprised, but Again, we have increased the price. We are not behind, but we, again, welcome if some of the airlines are increasing the prices. And we will also take the lead some of the errors here in Indonesia when it comes to price hike. Okay, thank you. Next question comes from the line of Wei Shi Wu. Your line is now open. First question relates to the prepaid subscriber base. So I've noticed that your competitors lost prepaid subscribers during the quarter Reyes, Exela has actually gained subscribers. So I just wanted to check whether this was due to a timing issue. Would we see a delayed impact on XL in the coming quarters, and this was like lingering impact from the SIM registration, for instance. And would this, you know, conversely be related to the increase in, the increase in discounts that you were offering during the quarter? So were you incentivizing dealers a lot more aggressively than your competitors. And then second question is with the change in management at Lindelsat, have you seen any increased willingness by the new management around collaboration, slash any progress in talks about partnerships with them on the network side? Yeah. I think, Anshul, I think, on the prepaid stuff, I cannot comment on, what has, what happened to other our competitors, but, what we can say that, in terms of, defining prepaid such for us, we have been super consistent all this while how we define subscribers. And there is no change in the definition, as far as we are concerned. So I think the increase in net add this quarter clearly reflects what's happening in the market. And definitely, we have probably gained have high budget share, and I think there is no change in terms of definition per se, right? On the competitors, I really cannot comment why there's a huge fluctuation in the numbers of the subscribers. Secondly, you talked about a crack from us regarding the interstate new management team. First of all, we will come with these new guys, what we see from them is a very mature and very experienced guy coming in the management of Intelsat. But again, this is very, very early. They have just started. We know they have been going around in industry, sorry, in the regions to see what's going on. We basically do know what happened right now. We do not expect to see any irrational attrition in the market at the moment. We hopefully we hope that they will continue the journey that we have been so far after we had this in rigorously. But again, we welcome the team and we are looking forward to see what they are doing in the market. Hi, so I can just follow-up. Has there been any progress or any improvement in the in terms of the partnership, we've talked about network sharing, which thought for a while. So have you seen progress or improvements in that situation with the new management team. I appreciate that you're selling new, but have you made any contact or you know, given any indication that they may bring that forward? So so far, we have not make any contact with the new management but we just recently appointed. But, we are very welcome if they want to initiate another discussion with us on network sharing on any other form of cooperation. All right. Great. Thank you very much. Next question comes from the line of Rajan Sharma. Your line is now Hi, good morning. Thank you for the presentation. It's Ranjan Sharma from JP Morgan. Are 2, a couple of questions from my side. Firstly, regarding your CapEx plan, so firstly, that you have managed your CapEx the absolute CapEx amount from 2016 to this year, but effectively you've increased the contribution to X Java. Mean, you have been emphasizing your exact strategy, but what I'm concerned about is your Java network. Because effectively, you have cut your Java CapEx by a third while your data usage has doubled, in the last couple of quarters. So are you not concerned that reducing CapEx at a time when data is exploding within Java is going to impair your network within Java that can dis market share losses. I know the network is fine now. I'm looking forward, let's say, 3 quarters or 4 quarters from now. That's the first question. Secondly, you talked a lot about your vehicle equipment and and on what you're investing, but there's also a need for fiber and submarine cables outside of Java. And that tends to be expensive, but can lead to bottlenecks if you don't invest in that part of the network. So if you can share your thoughts on how you might mitigate some of the challenges as you see ex Java data usage increasing? Thank you. Yes. So I think if you look at our investment this year, I think the ratio within Java and Next Java are close to about fifty-fifty, right? So to say that we are not investing in Java is also not to No doubt that. I think, we have reduced slightly the investment within Java, because of the fact, I think from a population coverage within Java, we've probably arrived at close to about 90% or 91% or so, right? So from a coverage perspective, I think we've all covered on most of the Java area. And I think the bulk of the investment that's going into Java this year, is primarily in terms of upgrading capacity as well as investment in the transport, including fiber, right? So So next year, I think that capacity expansion will continue, right? As I said, there absolutely will be something that we will come back to the market when our plan has been approved in January. So, no doubt that there will be some skew towards X Java. But actually, sure, I think, network quality is something that, is absolutely important to us and our to our customers. And we will probably, we will monitor that very closely, right? So and I think as of today, as you said, right, there's no indication that the policy of our network have actually deteriorated in Java. And that's something that we will also ensure and monitor as we move into next year as well. Secondly, I think over the last 12 months or so, I think, we have started investing heavily in terms of fiber. And I think there is a quite number of collaboration as well that we are probably doing on the summary side. So just to give you to give a feel, I think by next year, we are probably looking at piprizing to 10,000 of our sites, right? And I think within the next 3 years, we are probably looking, more than 50% of our sites are probably fiberized. I think we are going to be adopting a model where it probably a lot more innovative in terms of how this hybridization project gets funded. And I think we are adopting the same business model as how we are doing it with ours, right? So it's a modern, long term leasing model. And with that, I think, it enables us to scale up in terms of hybridization, quite quickly and quite extensively within this 1 or 2 years, right? 2nd year summary as well, you probably have seen some announcement as well. There have been quite a number of collaboration that we have probably done. I think in partnership or something that we've probably done with some of the other submarine owners. The one that is up and running, that our collaboration that we probably have, with ASC that connects the, our submarine from Sydney to, to, to Singapore, right? And I think that, and I think with that book today, we are the only provider in Indonesia have an alternative growth going out of Indonesia and not depending Yes. So so and I think we see that this cable, this new cable that we're having are probably getting the money in the market as well, right? So, on top of that, there are other friends that we're having, collaboration that we're having with other partners. Which we cannot share with you at this point in time. But rest assured, submarine and fiber are part of a key planning in terms of coming out with a better network quality for us in the years to come. Okay. Thank you. Next question comes from the line of Colin McAllen. Your line is now open. Hi, there. Thanks for the opportunity. Just one question from me and one comment. A question is just on the from what you were saying, Adeline, just on the fiber side, in terms of extending that out to actually addressing the fixed broadband residential or price market. Can you just explain what you're thinking in that regard if there's a business case worth worth looking at there and what the extent of your plans might be in terms of quantum of CapEx or targets for that sort of area if you do move into it? Secondly, I was going to ask you about data pricing. I won't dwell on it. I think there's been enough questions on it, but I guess, comment for Alan who sounds a bit exasperated by all the questions. I think the issue is that it's always difficult when what's being said in the call is it's just not that much by the numbers, right? So we've had 1 competitor said they've raised prices and the numbers show that they have and the revenue has gone up and you guys are saying you've raised, but your numbers are suggesting that you haven't. That's why there's so much difficulty on this, but I won't dwell. And if I could get the answer to the fixed broadband, that would be fine. Thank you. Yes, Colin, on the fixed broadband, I think it's something that we are closely looking into it. As we said in earlier calls, we are currently doing a pilot And I think we are addressing not only Tier 1 Cities, but also doing pilots in Tier 2 and Tier 3 Cities. Just really to understand the behavior of a consumer and the opportunities that we see, in these, in these cities, right? At this point in time, I think, as we are doing our business plan, we have not come to a conclusion yet, on this. But I think, rest assured, I think early next year when we announce our CapEx numbers and all that, this is something that we we probably will come back to the market. The plan on fiber, I think, as you know, that I think as your traffic growth with the 5G coming into stream and all that fiber is actually a key component of the overall network. For better quality network. And hence, I think we are taking a longer term view in terms of building the fiber upfront. And not because I think we have probably looked at the business case, whether to sell to microwave or to go direct to fiber. Right? And from a business case perspective, from me to longer term, it makes absolutely sense to go direct into fiber, right? And I think with the new business model that we are adopting, similar to what we'll be with ours, I think that will also allow us, to be a little bit more aggressive as it is probably a longer term leasing arrangement as what we have done with our site. So yes, I think we have looked at the business case, with the increasing frequency that we are seeing as well, being charged by the regulators, it makes absolutely sense to go direct to fiber rather than continue to invest in microwave. Got it. Thank you. Next question comes from the line of Arthur Kinetta. Your line is now open. Hi, thanks for the opportunity. I just sorry to belabor the point on pricing, but can we just get some clarity with regards to your pricing strategy outside of Java? What kind of discount do you normally apply when you enter these new markets? And how sustainable are these discounts, presumably the economics are far worse outside of Java. Second question I had is, again, on the pricing side, just can't reconcile your pricing trends. Your RPM B is down 7% quarter on quarter, even though you've mentioned that you've raised prices. You've also mentioned that, it's partly because of the distributor issue, and you cannot control the pricing done on the distributor level. Why aren't you able to control data yield on the distributor level? Is that not dictated by the telco? Thank you. So let me take the first one and I don't think so the price is slightly outside here. You cannot reveal exactly what kind of discount we are taking, where we are doing it, right? But there's no doubt about many of the places outside JAVA is a single player market, meaning that we only have telecoms from there. And now that we are building clients, we are building networks we of course need customer to justify that investment. So to get these customers, we need to be pretty aggressive on the pricing on the product set up. So In these areas, yes, we are pretty aggressive at least to start with that we have to go to market plan where we acquire customer based on a very good price based on an array of flagship products. So yes, we are aggressive outside our Yes. Let me try to point on pricing again, right? So I think if you look at, if you look at, first, is on the pricing to, the dealers, right, to the consumer. If you look at what we can control is the pricing from, dealers selling to the retail outlets, right? That, that we actually detect in terms of pricing that dealers sell to retail outlets. However, you know, in Indonesia, I think, typically, when retailers sell the packet, the data packet to the consumer that's always a markup. And I think what Alan was referring at the initial comment that, that pricing, that markup is something that we are not able to do, to control, right? And I think typically, this retail outlet, sir, we are probably talking more of the mom and pop shops, right, the traditional channel itself. From, if you talk about the modern channels, we talk about the aftermath of the year, the aftermath, the indoor market, or any franchise, for example, or even, let's say, selling at the bank, right, the modern channel itself is something pricing we dictate and we control, right? So So in this in this sense, I think the the part that we, the operators are still not able to control the end pricing to the consumer is mainly, from the traditional channel, right? But on the modern channel, yes, we have absolutely full control of that, right? So So on and obviously, I think as we expand more and more towards modern and we shift more or more towards modern, We probably have a better control of the pricing, going to end consumer. So if you look for a yield perspective, yes, I think you have seen that, 4th quarter on quarter yield have declined, slightly. You'll have to be trying to slightly, right? So, I think, as I think we have actually mentioned before, right? Year in itself, it's not a clear indication of pricing in the market. I think you probably need to see a way of starting position in today as well, right? So for us, I think, obviously, I think from the overall year, we are probably going to be lower than the industry, given that where we are in 4G. And you know that pricing for 4 gs given the throughput, big throughputs and all that. I think, you have a much lower yield, but at the same time as well, cost of 4G is also much lower than, let's say, 2G or even 3G, right? So given the fact that, our smartphone penetration is really around 80%, that probably, has resulted in probably yield, to be much lower than the overall industry. Secondly, as well, I think what we are probably seeing as well, and it's also part of our strategy. We are also pushing our customers to type to a bigger, data package, right? And you know from a yield perspective as people move from associated to a big data quota, the yield is also much lower. And this part of our strategy, we want to push customers up towards a big data package as well. That has also partly contributed, to that, right? And thirdly, as well, I think you probably have seen, especially lately, I think, post prepaid registration, we have achieved seeing that the migration going from 3G to 4G has been quite substantial, right? And it goes back to the argument that, you know, the yield on 4G is going to be much lower than 3G as well, right? So, and I think that's primarily applied to excess which I think in the past used to be, more of a 3 g driven customers. But today, since we started promoting 4 g on access I think we have seen a significant pickup on 4G, 4G traffic, especially on access. Well, I think definitely we have actually raised prices the market, especially in the Java area. But because of the other factors that what I've mentioned, that's probably putting some pressure on the yield. And that's what you're probably seeing in the numbers. Next question comes from the line of Pram Jarajasingan. Your line is now open. Hi. Thank you for the opportunity. Sorry, we're going to go back to data pricing. Could I clarify this, right? So are you saying that the yields are down because you are able to get people to buy bigger and bigger buckets. And those people are potentially consuming more of that bucket, therefore, pushing down the yield even further and to top it all off because of your to market strategy in the X Java areas, then that potentially, although the price points X Java are potentially higher than Java, but because of your go to market strategy, potentially, that's diluting that number more than it should, in the early days. And as you take away those promotional numbers, then we get some form of yield support in there, would that be right read of what you've been saying. And I suppose the second question is, how afraid are you that given the situation in the market where your competitors says you've not raised prices enough, etcetera, etcetera, that we go back to a situation that we sought probably 10 years ago when they suddenly decide you know, if you want to bleed, let's see how much you can bleed and they decide to cut prices by, say, 50, 60% next year, and they become the only party that makes money in the market. How significant a risk is that? So let me take the first one and thank you for the summary. Thank you, Juvekar. So thanks a lot. I don't want to have more comments on that one. Let me, then maybe I don't also want to answer the second one. We have not discussed that risk yet, but of course, that's a risk. If they basically what you think is they want to kill us, they can kill us. But again, we are in the same boat and we want to increase. If we see it in the market, the price increases happening, we attack part of that. And as you said before, when it cooled down, X JAVA, we, again, will be able to increase the prices when they get got our fair share of the market of revenue investing in the network. So, yes, Graham, I think the risk will always be there, right? You know, we gave probably seen earlier this year as well, right? I mean, late last year, right? But, our strategy is, from our perspective, it's pretty clear, right? Java by Java. And I think rest assured, data modernization, I think it's something that we will be we'll continue to push in Java. I think that's where that you've probably seen the battle that have been over the last so many quarters that have drive data pricing down, right? And that's essentially in Java. And I think when we were talking about all these price increases and all that, that is all coming in Java, right, primarily in Java. So I think, generally, as an industry as well, I think we have also seen the industry is also pushing price up, especially in Java, right? It's a different story altogether, right? I mean, you see a very huge scenario where the incumbent has more than 80 share market share, right? I mean, is that a situation that's probably sustainable in the longer term? Probably not. I think, you have at least seen any sort of, this scenario taking place in any other markets around the world, right? So at some point in time, that 80% will probably need to come down Essentially, the only reason why that has been for a long time is because there has been a monthly situation, right? But now given that there is an alternative network that is present in outside Jovan, I think consumer will also have the choice to choose, within the more expensive and incumbent or the alternative provider, right? So So from our perspective, I think, uh-uh, we are in our present outside Deborah to give market share. And I think our pricing strategy will probably reflect that, right? So in any case, I think we are also absolutely clear that, from a price perspective, outside our pricing are still higher than within Java, right? So to say that, we are going to kill the market, by, down price, by reducing price, is also not the Internet, all right? So for earth is more of a portfolio. And I think Java has got its own separate objective. Perfect. Just one one follow-up. Do you think the changes at Intelsat could mean a more aggressive indelsat even in the near term, or do you think that network differential is sufficient to provide you guys with market share gains without needing to play the price game. So first of all, we are not in a situation where we can comment on what we our competitors. The only thing being common was that there was an article saying that they had got X amount of 1,000,000 U. S. Dollar with the expense. Meaning that yes, it could happen that due to the more network from Intuitar as well, we will see increasing competition. So that's the only thing that we can comment on. Alright, thank you very much and good luck. Next question comes from the line of Chung Chen Your line is now open. Hi. Thanks for the call. Two questions from me. Firstly, on the guidance for EBITDA margin of high 30s, which you have maintained. Just wondering whether you think that that could be a bit difficult to achieve, because your margins must go north of 40% for you to get to high 30s for the full year. And, if you do, think that will be the case, which cost lines do you expect to eat off boarded into the fourth quarter, most of that margin expansion come more from revenue improvements. And then on to the second question, regarding your network managed services contract, with Huawei that's coming to an end of that 7 year period this year. I just want to understand what will happen next. And should we expect possibly higher or lower costs going forward on that portion of your local items, yes? Thank you. I think if you look at another guidance, we have maintained the high 30s. And I think, looking at the, I mean, our quarter access that we have actually done, we know that there are certain cost items that, that would probably be realized sometime in quarter 4, right? So are quite optimistic in terms of achieving these numbers. I think where is it going to come? It's a combination, right? I mean, definitely, we are looking at, from the revenue line, moving into Q4. I think if if the trajectory, the momentum of the, what we think in the market, we expect Q4 would continue to be a good quarter as well, right? So So the margin guidance date, that's it. And I think we are expecting, I think, this to be achieved from, inflation revenue as well as some realization on the cost optimization that we've been working on so far. On DMS, it's not expiring this year. It will expire next year, right? So obviously, I think, we are in a intended situation. So I think we we will, so by the impact by end of this year, we'll probably not be there, but I think it's something that we are re tendering. And I think we need to look at how best to make sure that we get an effective overall pricing from the new tender that we are probably doing. So it's still too early to comment on that at this point in time. The margin side, okay, if you look at the next few years, right? Do you think that Excel can keep the overall, or absolute cost rather flattish. I think you've done a really good job last few years, keeping it flat, but next 3 years, do you think that's possible, or do we see quite a fair bit of upward pressure? Think, from the answer, obviously, I think there has been a challenge from our VOC as well of stakeholders, right? Probably keep, OpEx flat, right? So as much as for, and we know that we have, a quite a rigorous cost program that we are running, within Excel to look at every, cost line item to see how we make structural changes to make sure that it's sustainable, in the longer term, right? So I think, at this point in time, what I can say is, yes, I think it's something that we are probably looking at, whether we are able to do that or not, it's something that, we probably need to see. But rest assured, what we can say that, even if there is a pressure on cost and cost increasing, But as a percentage of revenue, of course, as a percentage of revenue, we expect that to improve, in as we move forward into subsequent years. Yeah. But whether we are able to keep OpEx flat is something that we probably is still a challenge, it's something that we are end, but, I cannot tell you at this point in time whether that's really possible or not. But as a percentage of revenue, it's something that we are probably more confident of. Okay, got it. Thank you so much, Adeline. Next question comes from the line of Krishna Your line is now open. 3 questions for me. My first question related to the business question on 3 channels. Can I get a latest check on your latest distribution channel mix, the split between general trade and modern trade? I recall it used to be 60 60 percent GTF solution empty, but as far as your GD portion may have increased now as you expand your 3 channels in Nextiva too, perhaps any on your comparison on your retail touch points in Nextiva? Is it going in line with the network coverage there as well? My second question is on the fast rising bundling cost. I know this is in line with your fast growing bundling revenues to We saw TRY 200,000,000,000 of funding costs in the quarter alone. Should we expect this quarterly funding costs run rate to go higher in the coming quarters? And can we get some, idea on the traction of this bundling program, especially in terms of subscription subscriber addition? I understand if you don't have the bundling subscription data now, I'm happy to take the figure offline too. And my last question is on the internal upselling trends. Now that industry churn rate is somewhat stabilizing do you have an estimate on how much revenue goes potential that Excel can get internally by upselling your internal customers, say, from moving your customers from access subscription to Excel subscription? Do you have any data or evidence that you could share just that internal upsides happening at Excel? That's all. Thank you. Elizabeth, it's difficult to hear your question. Number 1, but as I understand, it was about the channel outside the JavaScript correct, our strategy regarding the channel outside Tiara. Is that correct, understood? That's right. Any year on your comparison? I mean, how fast are you growing your three channels in ex Java? So what we have, we have our projects, we call it go to market project, meaning that every time we put aside where outside the office, we have a very clear KPIs for our go to market team, how many sales people do we need to have, how many mom and pop shop, how many modern space is that, right? I cannot believe how many it is because that's that's very confidential, but at least we are following that plan. And for us, if one of the most important KPI that we have the distribution and the channel outside Jarrow. Not saying it's easy, but we are very very promising. So far, the way we are already delivering on our KPI for the channel, MDA to foreign what we have done here in Europe. So it's working like that. Yes. On the bundling cost, yes, I think we have been pushing for the smart, smartphone device funding quite aggressively starting from Q2 onwards post rebate registration, right? And you probably see this quarter that I think we are probably doing around 200,000,000,000 of bonding device. What we can say that we are seeing very good traction. We are probably doing 2 1000 to 3000 a day of registration And I think we would expect that that trend will continue. So I think this quarter, the bundling cost is around 200. You should type that I think, moving into a subsequent purchase, it will be around that number or probably slightly more, right? So And I think this is a key part of our overall strategy as well as we move to become a more data centric company and pushing our subscribers up towards 4G, right? So First question on internal upselling, right? So I think, we are doing it, quite granular at this moment, right, with our CLM process and all that where today we are selling to all our existing customer where we actually have a platform today that we're unable to communicate with our customer regardless of the various channels that we have, right? Whether it's SMS, whether it's ads, whether it's web and all that, right? So a single channel of communication to the customer that plan to actually upsell all our services to our and this is going to be a key part of our strategy as we move towards more detail in terms of data analytics, and integration. So so far, the engagement has been quite good, right? And I think, as you probably would expect, as well, at this point in time, we are able to give personalized offer to each and every one of our customers, right, depending on their behavior and usage pattern. Alright. Is there any tangible data or any evidence on, like, if you're seeing any ARPU upgrade from drug app selling initiatives so far? I think we definitely seen an uplift, but I think it was probably not something that we probably want to share, to the public. Sure. That's fine. Thanks very helpful. Thank you so much. Next question comes from the line of Gopal Kumar Your line is now open. Yes, hi. Thanks for the opportunity. A few questions. Firstly, there have been a favorable discussion on price increase. Some of the question is on profitability. You continue to report losses because of your higher D and A, CapEx related to D and A and debt related charges. So when do you think, Exeter should see a bit more sustainable profitability? If it's still a few quarters away or or do you have a firmer confidence of this happening a lot sooner? It's still happening to the revenue growth as well. So that's my question, profitability. Second is on the ex Java business. What's your market share now versus, any target that you can share in this market? How many more quarters of this pricing strategy do you think you would have to continue to reach your target? Cost side, which seems to have gone up quite sharply sequentially. Would you expect the cost trend, to continue on the interconnect cost. Last question is on the payable side. I see that the 3rd party payables in the balance sheet gone up and it's now around $8,300,000,000,000. Can you talk a bit on what's driving this and outlook here? Thank you. Yes. So I think on profitability, I think, yes, I think we see a quite a fair bit pressure on the profit this quarter, especially given the fact that I think we are building a lot of new sites And I think post laboratories, I think we've seen that quite a number of new sites have actually come up. And I think you probably see some impact or with the lease rental coming up in quarter 3 per se, right? So I think there's a few drivers that that we are probably looking at in terms of, driving approximately here. No doubt as we continue to invest, I think G And A will increase, right? But one point that, probably want to see that a lot of these sites are probably just being put up. And I think what we are probably monitoring is to good as we build this site, that's actually been built as quickly as possible. I mean, we are monitoring side by side. We are looking at a revenue per tower. We are seeing a profitability per tower. And I think this pricing is done on a very good regular basis, right? And and every one of our field people, they are probably aware of the target that has been set in terms of building up the and put our per se in each of these new crushers. Right? So growing revenue is absolutely key in terms of driving up profitability. Having said that, I think, not just from a revenue line, we are also looking at each and every one of our core items. And I think you probably have seen that as much as possible, we are trying to keep our OpEx plan, which we have been quite successful in doing that this year. I think that that exercise is probably going to continue next year, right? So I think we are probably not far from achieving profitability. I think on a quarter to quarter basis. I think we are probably see as well that I think we are able to continue to grow. I think revenue I think in quarter 4 and looking at some realization of the cost element, we should be able to in quarter 4 in a profit situation, right? Having said that, I think one of the other key unknown factors is probably on ForEx, right? I think, the impact on ForEx, I think, well, I think, the debt are all to maturity. However, I think, one of the bigger impact is probably coming from CapEx. As much as possible, I think we are trying to push CapEx our CapEx from Poland more to IDR. And we are doing a lot of work on that, to see how we can can do that, right? So So to answer your question, going to profitability, revenue is key, looking at all cost element, I think it's something that we are already doing now. I think we are probably not focused on achieving that number, the profit numbers in subsequent quarters, right? At Java, Marginsha and Nextya, right? I'm not too sure because we don't have the exact figures, but as we know that almost 80% is coming from our incumbent meaning that we can say we mainly have a fair share of the remaining 20%. But it's more important as you ask, how long time will it continue? And we right now see at least for the next four quarters, We will continue this with the investment, with the go to market, with hiring people in these malls and with hiring new retailer and new outlet level at least continue for the last sorry, for the next four quarters. And the last question was? Yes, on payables, I think, yes, you've probably seen, payables have gone up this quarter. You've seen that probably PayPay, Texas also is also down this year. I think this is primarily attributed to some, vendor financing that, we have secured, with some of our key vendors. Thanks. Just two follow-up questions. How much of the CapEx is in local currency versus ForEx? And when are you expecting to lower these payables? You talked a bit on the Huawei side earlier. I think these payables, I think, whatever the case may be, the payables is, of course, is interest free, right? So it's more of a longer cycle of a supplies credit, right? So, SN1, we have actually negotiated for a longer credit period. Right? So, and I think, as we go along, for example, of all the new purchases with some of our major vendors, we would probably have a longer credit period. So my question was how much of the package did local currency? At this point in time, I think that we have U. S. E. K. Tax is approximately about 45%. I think, on the overall group tax, it's in USD. I think there's a plan to try and renegotiate this down, right? How successful is going to be something that we need to see, but I think, let's see, sometime next year, whether we are able to drive this USD purchase down, right? Firstly, I think this point on you asked about interconnection as well, right? Yes, I think that interesting, right? I think when we see in quarter 3, I think, you see a sharp reversal of the interconnect I think in quarter 2. So we were in a slightly net in position. We have moved to a net position. I think this is, when we actually analyze the numbers, it's probably coming from the market leader, right? What we have seen is It has increased price, significant increase in price for voice, that has, especially off net, that's probably driving behavior from a consumer active, right? So I think 2 things will happen, right? I mean, we have seen this happening as well in the past, and I think we have gone through that cycle as well, right? So first, you'll probably see a change in consumer behavior. But, what you could expect as well that, given that the price increases quite steep, by substantial, you probably would see some of these customers will probably changing out as well, right? So anyway, we are monitoring distribution we are also seeing some impact on the interconnect, but definitely some positive impact in the market. Okay. Thank you and all the best. To your host. Please Thank you, Jeff. Thank you, everyone. For your participation in today's call. As always, do get back to us if you need further information. We'll see you again next year. Thank you. And that concludes today's conference call. All lines, you may now disconnect.