Good day, and thank you for standing by. Welcome to the PT Indosat Tbk nine-month 2023 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Indar Dhaliwal, Head of Investor Relations. Please go ahead, Indar.
Thank you, Amber. Good afternoon, everyone, and welcome to the call today. With us on the call, we have Pak Vikram Sinha, our CEO, Pak Nicky Lee, our CFO, and Pak Ritesh Singh, our CCO. I will now hand the call over to Pak Vikram. Over to you, sir.
Thanks, Indar. Good afternoon, everyone, and thanks for joining the call today. We kept up our strong performance in the first nine months of 2023, where we saw revenue increase by 8.5% year-on-year to IDR 37.5 trillion. And most importantly, our normalized EBITDA is growing more than of the revenue increase, close to 22% to IDR 17.5 trillion. We have also managed to deliver a consistent net profit of IDR 942 billion this quarter, bringing the nine-month normalized net profit to IDR 2.2 trillion. This is our eleventh consecutive quarter of generating a strong normalized net profit.
Some of the other highlights for the first nine months of 2023 is our EBITDA margin, which increased by 5.1 percentage points to 46.7%, while we added close to 1 million subscribers to last year, and our ARPU is also growing 2.5% compared to the previous year. Our own app is also seeing good traction, as we have seen the number of monthly active users increase by 9 million so far this year. We are on track to reach $400 million annualized synergy by year three post-merger, as we have completed most of our big-ticket integration initiative, which is mainly around network integration. As of nine months, 2023, we have reached a synergy run rate of just above half or around $2.5 million in recurring synergies.
We continue to focus on several initiatives, which is completing the phase dismantling, which we would be done by year-end, as well as core integration, as well as ICT system and business process improvement. With this, I will now hand over to Nicky for more detail on financial presentation.
Thank you, Vikram, and good day, everybody. I'm delighted to present our strong financial performance for Q3 2023. As mentioned by Vikram, our overall revenue for the nine months grew 8.5%, from IDR 34.5 trillion last year to IDR 37.5 trillion this year. This growth was underpinned by the enlarged customer base, as well as strong uptake of data services in cellular revenue. On top of that, MIDI and Fixed Telecom also contributed good growth. More details to be shared later. On the back of strong revenue momentum, realization of synergies and optimal cost management, EBITDA after normalization is up by either 21.7% from IDR 14.4 trillion to IDR 17.5 trillion this year. EBITDA margin escalated by 5.1% from last year, achieving 46.7% this year.
At the bottom line level, normalized net profit after stripping out tower sale gain and other one-offs jumped 2.5 times from last year to IDR 2.2 trillion. This massive improvement was driven both, by both our top-line growth and cost synergies realization from merger. In the balance sheet, our net debt to EBITDA ratio had dropped sharply from 0.75 times to just 0.36 times, reflecting strong cash flows generated from operations as well as from disposal of towers. Going to the next slide, I have highlighted our year-to-date results and will focus more on our quarter-to-quarter performance. We were able to continue top-line growth of 0.5%, despite Q3 is generally a lower season than Q2. EBITDA improved to 0.9% on a quarter-on-quarter basis as extra revenue trickled down to the EBITDA line.
Continuing with our EBITDA improvement journey, EBITDA margin edged up further by 0.2 percentage points to 47.8%. Normalized net profit dropped from IDR 986 billion to IDR 942 billion, reflecting mostly additional depreciation expense from capitalization of new fixed assets and some other one-off adjustments. Going to the next slide. All of our three business segments did well in Q3. Despite media revenue fell by 4.1% quarter-on-quarter, it has still generated double-digit growth in the three quarters year-on-year. The quarter-on-quarter results are somewhat distorted by the timing of revenue booking and projects. We had a very strong growth for media in Q2, and there were also some government projects completion that got delayed.
Fixed telecom revenue continue its traction and deliver 20% quarter-on-quarter improvement, lifting the year-on-year uplift to 26.8%. Moving on to cost. OpEx reduced 2.2% year-on-year and up by 0.4% quarter-on-quarter. In Q3, apart from cost control and synergy effect, we also benefited from some staff cost and bonus provision reversal, which to a large extent, offsetting the additional marketing spending for the festive season, mostly on Indonesia's Independence Day. In terms of other operating income, expense, we booked a one-off profit for data center sale last year, of around IDR 3.5 trillion, whereas the one-off gain for this year, for tower sale is much smaller of 0.7 trillion. Next slide.
We are catching up on CapEx booking as capitalizations stood at IDR 7.7 trillion year to date, which is 11% more than the same period last year. Our CapEx booking tends to be back-end loaded, so expect to see larger CapEx in Q3 and Q4. Same pattern is observed in 2022. Our net debt has been trending down. This is reflected in the reduction from IDR 13.8 trillion to IDR 8.2 trillion. In fact, if you look at how our net debt has come down from beginning of the merger, it has come down by more than half. So, the amount of net debt we have at the end of Q3 is less than half of what we had at the beginning of the journey after merger.
So we are definitely doing the right thing to deleverage our balance sheet, and that helps to lower our interest cost. So that is a quick summary of our finance section. I'll pass the time to Ritesh.
Hi. Good morning and good afternoon, everyone. I'm Ritesh Kumar Singh. I'm handling commercial division here. Going to slide number 1, commercial. For first nine months, we have been able to add around 1 million customer over last year. The next big opportunity for us was to how do we make sure that we are giving power in the hand of consumer by increasing self-care application penetration, and also making it a lifestyle app for customers. So not only they can do some telco things there, they can also download some movies and also can get connected to e-commerce platform through our app. So making it a lifestyle app, wherein we have seen around 32% increase. And as we speak today, we are sitting at 36.4 million app users onto our own network.
We have seen a growth of around 16% on our traffic. As a result of this app download and more people using our app, we have seen the higher ARPU on the people who are using the applications, our own app. And hence, our ARPU has also increased 2.5% year-on-year. So we are adding, not only adding subscriber, we are also improving our ARPU per subscriber through network usage. Next slide, please. This month... This quarter has been good for us. So in first nine months, the major development is happening. We are going to the areas where we had lesser presence, and we have launched our services in Eastern part of Indonesia, and we see lots of opportunity there. And we have added around 44,000 4G BTS overall.
The highlight is the launch of Eastern Indonesia, where we are having lesser presence. We keep the learning from here and keep on launching some new areas like Nusra, to make sure we are not only monetizing the untapped potential of Indonesia, and also we are actually giving a message to customer in Java area that wherever you go, our network will follow.
Okay. Thanks, everyone. I think that the next few slides is on our achievements and also the guidance. We'll now go into the Q&A session. Operator, can we have the first question, please?
Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Once again, that's star one one for questions. Our first question comes from the line of Piyush Choudhary from HSBC. Please ask your question, Piyush.
... Yeah, hi. Good afternoon. Thanks for the call, and congrats on the results. A couple of questions, maybe I go one by one. Firstly, if you can share, what has led to drop in the subscriber base quarter-on-quarter? And also, we observe prepaid ARPU has fallen 1.3% sequentially. So any kind of insights over there, what is leading to the same?
Yeah. So I'll take. Thanks a lot for the question, Piyush. So if you see, we have seen the industry-wise things moving towards drop in ARPU in quarter three. Quarter three is always a leaner month, riding on the hike in quarter two, because quarter two is Ramadan month, wherein people get one month additional salary, and hence, the disposable income is quite high during Ramadan, and the people tend to spend a lot. That is why quarter three always is lower than quarter two across industry. So that's the reason why quarter-over-quarter revenue ARPUs are dropping. In the month of July, people generally go for holidays, and in the month of August, school really starts, and people spend more money towards their holidays and school restart.
That's how this is all about seasonality impact. The subscriber drop is primarily because of seasonality and also because of people are actually... We can see lots of people are actually making SIM card uses as in one SIM card. So main SIM card is becoming one. So that's the phenomenon which you have seen in last three to five months. But we'll observe another one quarter, maybe we'll come back to you how things are on subscriber addition. And second thing, Piyush, is one more thing. Now, as is, I think if you remember our last call, we always talked about that our subscriber acquisition will cost will be higher than the rebuy.
So we are also trying to vacate a place wherein people were using the SIM card as a washing machine, in fact, and people were rebuying the SIM card in place of buying the recharge. And that phenomenon has been, I think we have been taking a conscious call, and that's where we have seen some impact on gross add. However, our 30-days base and 90-days, more than 90-days base continues to improve, Piyush. Yeah.
Got it, Ritesh. So may I just confirm that ARPU drop has nothing to do with any increase in competitive intensity or drop in tariff plans? Because my observation was you have increased rather tariffs during the quarter. So can you shed some light? And what is the exit ARPU in Q3 ?
So Q3 , we have increased the ARPU. I think September month was, we have recovered. As I said, July, August are the month wherein, we see a drop. But September, it, it was, better than, even March. So we have seen, ARPUs bouncing back towards the end of this quarter. And it has got nothing to do with, it is purely because of seasonality, Piyush. Yeah.
Yeah. So, Piyush, just to confirm, this is Vikram. You are absolutely right, you know, it is everything to do with seasonality, and we are seeing things coming back very strong. And market also continues to improve in the right direction.
Got it. Thanks, Vikram and Ritesh. And second question, can you share some light on what is leading to 65% increase in marketing costs quarter-on-quarter? And is there a kind of any one-off seasonality spends again over here, which should kind of drop going forward?
Yes, yes. So, of course, there is some seasonality. We have launched our Ramadan campaign and also this Merdeka campaign, and also some accounting shipment. But let me tell you one more thing. This marketing expenditure, we are actually investing lots of money on building rural distribution. And if you look at our distribution strength, it's going to be 5-6 times more distributors we are going to have in coming quarters. And we are investing lots of money in building the distribution area where we are not present before, and also building a service retail point. For example, a customer had to walk around 100 kilometers or maybe 50-100 kilometers to replace their SIM card.
So we're building a service point in the rural area wherein we are going to follow our philosophy of being closer to the customer, so customer will not have to travel more than 3-5 km to get his SIM card replaced. So we are building a distribution infrastructure rigorously across Indonesia, riding on the back of network investment. That's where we have seen some cost. And also, we have FTTH business getting launched, and we are investing some money in building distribution and the marketing into FTTH business. So that explains the increase in cost, but it is well within the limit. Yeah.
So can you kind of split, like, what is one-off seasonality-driven cost increase and what is going to be more structural? Because there was a massive increase, right, this quarter. Is it possible to know what is the one-off element?
Hi, Piyush, this is Nicky. I think I've indicated in the last call that we are going to ramp up. First of all, the Q2 spending is below the index. So, coming into Q3, we do need to spend more marketing costs for activities like Independence Day. So when you compare the two, that's why the variance would stand out. So you're definitely asking the right question. There is some one-off element included in the increase, but that is a small proportion compared to the overall increase. Most of it is because of timing and also incremental spending in ramping up our channel program, and the rest is, I think it's like IDR 1 million or IDR 2 million on the channel.
And the rest, most of it is to do with seasonality promotion program.
Thank you, Nicky. I'll come back in the queue again.
Thank you, Piyush. Our next question comes from the line of Sachin Mittal from DBS. Please ask your question, Sachin.
Yeah, thank you. Yeah, thanks. Congrats on a good set of numbers. Just two questions. Firstly, we have seen some news about infra sale, infrastructure sale by Indosat. Could you update us, what is the rationale behind such kind of sale? What kind of assets are these which could be potentially sold in the future? That's number one. And number two, yes, very impressive cost savings so far. So, could you give us some more details on which are the programs which are completed so far, and what else do we have, you know, over the next few months in terms of cost-saving initiatives? Thank you.
Hi, Sachin, this is Vikram. On this infra sale, I think we continue to stay focused on what we have been talking about, our asset-light strategy. So, you know, you must have seen in last three years, it was tar. We did some strategic move on data center, and now we are also looking at fiber. You know, we have our own fiber, which is close to 90,000 kilometers. So we are looking at some of these things, and we are trying to do and create a platform where we also have a strategic say on those assets. So this is work in progress. Nothing has been finalized, but yes, we were in the process of appointing the financial advisor.
The whole focus is, you know, when we talk about fiber, how we can create a platform where we have the strategic say, because, you know, at an IOH level, we might have equity. If you look at BDx, we kept 25%. Here, we will look at all the options. Our shareholder, which is OG, Ooredoo Group and CK Hutchison, you know, they are also very keen and looking at, you know, some of these opportunities. But, we are still in the process and evaluating all the option of this fiber asset.
Got it.
This is first. The second on cost saving, you know, let me start and I'll ask Nicky to build on that. You know, I spoke about our synergy value, recurring synergy. When we started the merger, we said $300 million-$400 million in three to four years. Again, happy to share with you and everyone that we are heading towards the higher end, $400 million, and we will get there in three years, not even four years. So the big-ticket item on network, which contributes to 80%, we have seen very good results. There are some long tail item there. I spoke about dismantling and all. Once we are done with that, we'll see little more. And there are a lot of other things around, you know, IT platform.
We have a lot of such things which still have two platforms. So we are not only looking at it from a saving and, you know, getting the integration done. We are taking this opportunity to use it as a transformation. How do we get to best in class? So, you know, you will see some more benefit and results coming in the coming quarter. But I'll request Nicky to build on this.
Hi, Sachin. Sachin, thank you for your question on the cost. Yes, we have been able to strip out a lot of costs, and most of it is to do with realization of synergy effect, as mentioned by Vikram. If you recall, we gave you a quantitative analysis on our synergy realization in Q2 with our announcement. Just to re-refresh it, we mentioned $180 million of synergy realization, $60 million, which is one-off, and $120 million is recurring. So for Q3, we have managed to build on that and bring the total to over $270 million. But what's different is a larger split is going into recurring, so about $200 million is recurring and $70-odd million is one-off.
So we're having more proportion of it going into recurring. So the next steps for us, we are working on other areas. IT is one of the key areas where we're integrating duplicate systems, and there will be more synergies from having dispensed some of the systems from our ecosystem.
So Nicky, thanks, thanks, Nicky. So question is, now that we have seen more than $200 million out of the $400 million, so are we talking of long tail items being longer than 12 months from here on? Or bulk of that could be realized, actually, you know, over the next 12, 12, 15 months. So is there a chance of being earlier than our projections in terms of timeline?
Yes.
I might-
Already we are. Yes. If we compare the number I'm highlighting to what we have in the numbers supporting the $400 million, $300 million-$400 million, you know, we are. We have already, even for the nine months, we are very close to the lower range, right? Lower end of the range of $300 million. So taking Q4 into account, we will be, you know, getting close to the $400 million. So definitely we are already quite, quite a bit ahead of our original plan. And we'll be getting more synergy into book. Some of the other synergies, the effect will require a bit of time to be realized. So, as I mentioned earlier, the one-off synergy is also going up in Q3.
So we are getting additional synergy savings continuously into the book. There's no doubt about that.
Got it.
So, Sachin, just to add to what Nicky said, at least in next 12 months, you know, 12-15 months, we are more confident of hitting that $400 million number.
Okay. Okay, that's very clear. Thanks, Vikram.
Thank you. Our next question comes from the line of Arthur Pineda from Citi. Please ask your question, Arthur.
Hi, hi. Thanks for the opportunity. Several questions, please. Firstly, can you provide us with any update on the 5G licensing process, where you have two months left to go for the year? Is this still scheduled for the Q4 of this year? Second question I had is with regard to the synergies. You've mentioned that most of the $400 million target has been realized. So are these also being reflected already on the P&L? Or this is pertain mainly to the contracts that you've signed, which is yet to show up on the P&L? So I'm basically, I'm just trying to figure out, do we still see margins improving into the next year? Last question I had is with regard to the question on marketing spend.
I know that you've mentioned there's some seasonality today with the National Day and all, but a lot of this is not really seasonal, right? Because up 50% on a year-on-year basis, when a lot of the same factors have been present in the same year. I'm just trying to figure out what would be the benchmark going forward. Is this now the recurring level that we should expect? Thank you.
Hi, this is Vikram. Let me start with 5G spectrum. I think we don't expect 5G auction to be this year, you know. I think we see this more after election, and then, you know, end of or next year or early 2025. Yes, 700 might come, and that too, will be next year, early next year. So this is how we look at 5G on the spectrum side. 700, we are looking more from a 4G. For 5G, it will be more of 3.5, which we expect end of next year or early 2025. And we see this as a good thing for the industry and for Indonesia, because we have seen learning from other markets, you know, the ecosystem need to be ready.
And then this time we want to make sure that, you know, we are also ready before we start investing serious money on 5G. Coming on to synergy, let me start and then I'll request Nicky to build on that. So, for sure, you will see margin improving. We, you know, on overall basis, while we have crossed 300, and then next 12-15 months, we will get to 400. And, in terms of P&L impact, directionally, for sure, you will see margin improvement, but I'll request Nicky to build on that.
Yes, for sure, synergy will continue to improve, maybe not to the extent of like 5%-6% a year, kind of, EBITDA margin improvement on a yearly basis, but it will continue to improve. On the P&L booking, yes, all the numbers I mentioned already reflected in the P&L.
Yeah. On marketing spend, let me. You know, there are two parts to it. One, between quarter-over-quarter, when you see 65% increase, it's a bit of a booking and seasonality, but the fundamental change which we are doing is, one, investing on rural infrastructure. Now, I think, you know, a lot of our CapEx are going into rural area. We want to make sure we are able to monetize that by having the right infrastructure. You know, when I talk about infrastructure, service and distribution point, which Ritesh spoke about, which will help us do basic things like SIM swap and all, because in rural, it really matters. Second, you know, also, having the right model to extract value from every BTS.
You know, we have this program called Site Equal to Factory, and we want to make sure that every investment we do in rural in terms of putting up the site or getting the advantage because of integration, we will be covering. Just to give you one perspective, one of our brands, Tri brand, will have close to 40 million incremental coverage, and that is all coming mainly in rural. So we want to make sure we have the infra ready to monetize those, and that is where you see that year-on-year increase. But overall, if you look at our marketing spend as percentage of revenue, we are below 2.5-2.6%, which is in terms of benchmarking and all, it looks good.
But the real learning is we need to ensure whatever investment goes on CapEx, you see a lot of CapEx on network, we are able to monetize that, and that is where you see that.
When we look at the marketing spend, I think it would be more appropriate to look at it on a nine-month basis. So on a nine-month basis, it has gone up by 8%, which is to do with what Vikram just explained.
Understood.
Despite that, it is not-
Sorry, just one second.
Yeah.
Understood. So, so if I can just clarify one other thing. In terms of the growth that you're seeing, you mentioned, of course, there's a big emphasis on the, provincial rollouts. Are you able to characterize what the growth differential is for your cities versus provincial momentum?
I think this 80% is going into BTS villages and all, you know, building rural infrastructure.
I'm sorry, I was pertaining to revenue growth.
Yeah. So revenue growth in rural areas, to elaborate what just Vikram said, is higher than the city areas and quota areas. Quota means main town areas. So we have seen at least 2.5 times growth coming from the rural areas than the city areas after.
Understood. Thank you very much.
Thank you. Our next question comes from the line of Henry Tedros from Mandiri Sekuritas. Please ask your question, Henry.
Hi, this is Henry from Mandiri Sekuritas. Thank you for taking my call. So, two questions from my end, please. First, you would like to check about the competition landscape, the current competition landscape. How do you see the smaller telco operators, you know, move in the past few months? And then, related to that question, how do you see the consumers' purchasing power trend as well, in the last few months, and how do you expect, you know, this metric, in the next few months, you know, when we welcome the election as well?
Hi, this is Vikram. Let me start, and I'll request Ritesh to build on that. Overall competition, as I said earlier, is moving in the right direction. You know, we see everyone focusing more on value and experience. We see less and less of price, which had not worked for anyone. We were very happy to see smaller, you know, telcos also moving in that direction. They also made a move. They were a little late, but I think there is more value, which everyone has realized, that customers are looking for more experience than price. So that has been the shift. Talking about consumers, you know, in spite of all the challenges and, you know, high cost of capital, inflation, we are the least impacted.
Telco as an industry, we are the least impacted. And I've said this earlier also, you know, data has become more primary. It is not consumption, you know. And data, in a friction of cost, is helping our customer do a lot of productive work. So I think overall, we see generally what we have seen before election; there is more consumption-driven activity which is happening in the market. And we see that Indosat will also have the benefit of that. So we are quite optimistic getting into election from an overall consumer and looking at how we can see ARPU going up.
Thanks, Vikram. Perhaps if I can, you know, add one more question. Would you mind to, you know, provide us some updates on the fixed broadband business? How do you see this business, and what will be your, you know, kind of, plan or grand plan to develop the fixed broadband business going forward? Thank you, Vikram.
So Henry, this is a very important space for us. We have spoken about it earlier also. We started our journey into FTTH with HiFi brand, and we saw very good response. You know, we were one of the fastest to get to first 20,000-25,000 customers. But now we are looking at some of the inorganic move in the market, and we want to do it with our asset-light strategy. So we are very close to closing one of the deal with the MNC Play, where we are looking at acquiring the customers, you know. And this is a very unique model, where we will be acquiring the customer, and the infra will stay with our partner.
While the infra stays with our partner, we will have a strategic say at infra, wherein, you know, the strategic interest of making sure that when we acquire customer and, and the infra is with our partner, we, we don't make it like a wholesale deal. This is a very unique model, which we are on the process of, closing it, you know. So you will have to wait for a little more time, but we are very excited about it, and this will give us scale, you know. Very strongly we believe that, we want to get to 10% market share in the home broadband space, especially on FTTH side, in next, three years' time. And we are getting ready, and then you will see some good move in coming days or months.
Okay, thanks, Pak. That's very clear. Thank you, Pak.
Thank you. Our next question comes from the line of Ranjan Sharma from JP Morgan. Please ask your question, Ranjan.
Hi, good afternoon, and thank you for the call. Two questions from my side. Firstly, if I can revisit competition. So, is management indicating that, like, all players have been revising up, sorry, excuse me, tariffs? Or you have seen some changes which might be going the other way. Secondly, if you can just explain the broadband business that you're evaluating. How is this arrangement different from the infra co, service co model that some of your competitors have taken? Thank you.
Hi, Ranjan, this is Vikram. Yes, you are right. You know, what we are seeing is that everyone, including the small operator, they are all looking more towards a more sustainable industry. And also, the whole consumer itself is looking for more value, you know, than just the price. So this is all heading in the right direction. On your second question, you know, I've just now I spoke about it. We are still in the process. You know, you will have to wait for a little more time for everything to get closed, and then we'll be able to give you more detail on this. But overall, I can tell you, it is in line with our overall objective of getting to 10% market.
Because we believe FTTH is a scale business, and we are looking at some of these options which will help us get there.
Okay, thank you.
Thank you. Our next question comes from the line of Aurelia Setiabudi from BNI Securities. Please ask your question, Aurelia.
Hi, good afternoon. Thank you for taking my questions. Just one question, please. I kind of, like, missed the explanation from Pak Ritesh regarding the drop in subscribers. You mentioned something to do also with, about the, SIM card. If you can explain it again, I will be grateful. Thank you.
Yes, Aurelia. So thanks a lot for the question. So earlier, what used to happen, the industry was, there are some customer who are actually buying SIM card again and again, rather than buying recharges. It was good for the entire industry. If you look at the growth side, what used to happen. What as a company we have taken a strategy, and we are the first to start, we set rebuy. For example, for existing base, if you want to buy a 10 gigabyte pack, the SIM card was available earlier was, let's say, IDR 40,000. And but the rebuy, recharge, was available for IDR 50,000. Because of lots of competition into acquiring more and more subscribers, so customers were using that an opportunity of buying a cheaper data pack in form of SIM card.
Because number is not important for people. They, they only want WhatsApp or want to download some movies. What we have done as a strategy, we said if you want to buy SIM card, it will be more expensive than buying a recharge. For example, we are trying to avoid rotational churn. So if you want to use my SIM card, you will continue to use my SIM card, and for that, rebuy will be cheaper than buying a new SIM card. So we made our SIM card entry tougher, and that is why we have seen some of the drop in growth rate. However, our 30-day base, as a result of that strategy, our 30-day base and our VLR, which is like a 72-hour base, and 90-day base, more than 90-day base, kept on growing.
That is why our revenues and ARPU are going up, so that explains, Aurelia.
Okay, Pak Ritesh, thank you so much. And, going forward, do we expect this subscriber number to kind of like grow more, gradually go in, into 2024 and even beyond?
Yes. So, we, we expect our rotational channel to go down, or churn go down, and hence the cost of acquisition will also go down. And we'll use that money in building capabilities, in providing better services to rural areas, Aurelia. But I think, the market will be more sensible going forward, as Vikram said. Entire industry, I think we are the first one to start, and we have seen positive moments happening, not only from, all, all of the operators, even the marginal operators are actually. We have seen around 15, 20 days back, moving into the same direction which we have started the journey 6 months, six to eight months back, Aurelia. Yeah.
Do you have any sort of, like, timeline when you see this kind of, like, to normalize completely?
It will continue to do. It's a, it's a journey, it's not a destination, I would say.
Mm.
I think, customers and retailers and distributors channel, they keep on looking for an opportunity to find out new ways and means of doing participating into that area, which we are trying to avoid, and will continue to do so going forward. But if you look at Aurelia, if overall, industry used to do around 20-25 million gross add, and total Indonesian population is 270 million. That means that every 10 months-
Mm.
Every customer is buying SIM card, which is not the truth, which is, which may not be, like, a reality. So it means that people are buying 2-3 SIM card, the same set of people, which we are trying to avoid and want to stay away from that market, Aurelia. Yeah.
That's very clear. Thank you so much, Ritesh, for the explanation.
Thank you. As a reminder, to ask a question, please press star one one on your telephone keypad. Our next follow-up question comes from the line of Piyush Choudhary from HSBC. Please go ahead, Piyush.
Yeah, hi. Thank you. A few questions. So firstly, as we are coming to an end of 2023, could you provide us an updated target for your mobile ARPU for 2024? That is first one. Secondly, on your capital allocation, incrementally, how much capital we can expect you to allocate to fixed broadband business, as you're targeting 10% market share over the next three years? Thank you.
Hi, Piyush, this is Vikram. We still hold to our IDR 40,000 number on ARPU 2024. And you know, we see also the industry, the way things are moving, we still hold it that if not quarter one, quarter two, we will get to IDR 40,000 in terms of 2024. And all the investment which we have done in network and our data user, and how we are seeing our customer being engaged, we are very confident. Coming on to capital allocation, again, I want to remind you and everyone that we want to do this on a CapEx light model. So having said that, you know, you will have to wait for one more quarter for us to give you a little more color to this.
We are in the process of closing something, subject to all approvals in the next 2-3 weeks. And then in the next quarter, we'll be able to give you. But whatever we are doing on the FTTH side also, you know, one of our focus, and you must have seen from Nicky, you know, with interest costs going up and all, we are also very mindful. From the time of merger, we have halved our debt, and we want to make sure we have a strong balance sheet. And we are seeing some great interest from the fund and all to partner with us. And then we want to make sure we, we leverage the low cost of capital coming from all of them on, on building some of this business.
Got it, Vikram. This is very clear. And if I may ask one more question: There is one-off cost related to right sizing of employees during this quarter. So can you share how much of cost savings we can expect from Q4 onwards, due to this right sizing exercise?
Hi, Piyush. Yes, it's a very small scale, not involving too many employees. So it's basically a follow-up of what we did in September last year. So there's... Any cost savings will not be significant from this exercise going forward.
Got it. Thanks a lot.
Thank you. I am showing no further questions. I'll now turn the conference back to the company for any additional closing comments.
Okay. Thanks, everyone, for joining us on the call today. If you have any questions, please feel free to reach out to the IR team, and we will help you. Otherwise, we'll speak to you next quarter. Thanks, everyone.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.