Thank you all for standing by, and welcome. My name is Tara, and I will be the operator looking after your call today. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question at that time, you'll need to press star one on your telephone. I'd now like to hand over to Indosat to commence the presentation. Thank you. Please go ahead.
Thank you, Tara. Hi, everyone. It's Indar here. Thank you so much for joining our Quarter One Results Earnings Call. Before we start, I will provide a quick safe harbor disclaimer. Note that the company, PT Indosat Tbk, will caution investors that certain statements contained in this call are management's intention, hope, beliefs, expectations or predictions for the future and are forward-looking statements. We wish to caution the participants that forward-looking statements are not historical facts and are only estimates or predictions. Actual results may differ materially from those projected as a result of risks and other uncertainties. Furthermore, the company undertakes no obligation to update publicly any forward-looking statements, whether as a result of future investments or events, new information or otherwise.
I would also like to mention that the conference call today is being recorded and a replay of this call will be available soon after the call is completed. On today's call, I have with me Mr. Vikram Sinha, our CEO and Mr. Nicky Lee, our CFO, on the line. Without further ado, I will hand over to our CEO, Mr. Vikram, to deliver the opening remarks. The floor is yours, sir.
Thanks, Indar. Assalamu alaikum wa rahmatullahi wa barakatuh. Good afternoon, everyone. This is Vikram. Thank you for joining us today. Allow me to start this earnings call with a few remarks before handing it over to our CFO, Nicky, for the financial presentation. I am pleased to report a strong start of our journey as a new company, Indosat Ooredoo Hutchison, with our good performance in quarter one. This is due to our focus on executing our strategy in delivering the best customer experience, products and digital services for our customers, as well as realizing the integration benefit from our combined business which gives us bigger scale and strength. Before we go into the performance, allow me to just take you through briefly what we have done on the integration front.
Our focus has been on the key movers of integration, being mainly network consolidation but also with focus on other areas as outlined in our presentation deck. So far, our integration is on track with 20% of the initiative completed at the end of quarter one and we are realizing synergy ahead of our targets. Our first financial quarter in our journey as Indosat Ooredoo Hutchison was a good one. I am happy to share that both revenue and EBITDA are growing strongly, rising 48% and 28% year-on-year, respectively. This is, of course, due to the merger but also due to continued good traction we are seeing in the market with both our brands performing well. We recorded a positive net profit of IDR 129 billion and remain committed to delivering value to all our stakeholders.
The growth in our customer base due to our merger and especially our total number of 4G customers, along with our enlarged network presence, demonstrate what we have outlined earlier, being our collective strength as Indosat Ooredoo Hutchison. With 95 million customers, of which 68 million are 4G users, supported by over 120,000 4G BTS, we are in a great position to provide the best service digital experience to our customers. We are seeing the results demonstrated in the Net Promoter Score and customer satisfaction score for both our brands, which continue to improve and is a testament to the good traction we are seeing in the market. During the quarter, we had also launched several digital initiatives, including UCan, Bima Kredit and we have more exciting digital initiative being planned, which we will share with you over the coming years.
We have also strengthened our partnership with our global partner in the recently concluded Mobile World Congress to implement the best technology innovation for our future. These initiatives remains a key part of our growth strategy as we continue to deliver the best added value to our customers. Finally, we continue our existing journey as Indosat Ooredoo Hutchison. I would like to thank our loyal customers and shareholders for their ongoing support which has helped us deliver a strong set of numbers to start the year. We remain committed to provide superior customer experience to our customers so that we can enjoy world-class digital product and services on our network. That concludes my remarks, and I would like to pass on now to our CFO, Nicky Lee, for the financial walk through. Over to you, Nicky.
Thank you, Vikram. Good morning. Good afternoon, everyone. I'm delighted to present our very strong financial performance for Q1 2022. For our Q1 results, if I compare against those of last year, the merger with Tri has significantly uplifted the scale of our business. This is particularly the case for our subscriber base, as mentioned by Vikram earlier. This is best illustrated in the revenue line with a 48% increment, taking the revenue to IDR 10.9 trillion year-on-year basis. It should also be noted that the underlying businesses continue to generate solid growth, and I will share more details later on in my presentation. These favorable developments have offset the drop in tower rental income following completion of tower sale last year, as well as the consolidation of IM2 in Q4 of 2021.
EBITDA is up by 29.1% to IDR 4.4 trillion, from IDR 3.4 trillion in Q1 last year. The incremental EBITDA of circa 1 trillion follows the revenue trajectory. EBITDA margin shrinks by 5.9%, reflecting a higher cost base following the merger, as well as the lack of our rental income mentioned earlier which has a very high EBITDA margin. This movement is not a surprise to us, and in fact, is actually ahead of our expectations. Going forward, our integration process will improve our efficiency continuously and will help us to trim some of the spending. More details on OpEx will follow. I'm also happy to report that our net profit for Q1 2022 amounts to IDR 109 billion.
It is IDR 43 billion lower than last year, but again, this is expected due to more cost in terms of depreciation, amortization and finance expenses absorbed from merger. We are actually encouraged by the positive net profit achievement in Q1. We continue to maintain a healthy debt level with our net debt to EBITDA ratio at 1.13 times, exactly at the same level as last year. If I look at our numbers, financial indicators for Q1 2022 against Q4 2021 on a quarter-on-quarter basis. In terms of revenue increased by 30.5%, from IDR 8.3 trillion to IDR 10.9 trillion, reflecting largely the impact of the merger with Tri and after taking up the seasonal revenue movement, as Q4 is the high season and Q1 is a low season for our industry.
There is also a cessation of the government education program in Q1. The revenue improvement also helped to drive EBITDA to rise by 25%. Our Q4 net profit for 2021 benefited from one-off adjustment totaling IDR 739 billion. If you want to look at the details, we have presented it and included them in the presentation material for the last quarter. Just to summarize them for your convenience, the key items in Q4 for making up the IDR 739 billion of one-off adjustment relate to reversal of IM2 provision, as well as a brand license cost reversal. This is the key reason why the net profit dropped from IDR 951 billion to IDR 129 billion on a quarter-on-quarter basis.
Now, if I dive into, look at the revenue by segment by our business lines, namely Cellular, Media, and Fixed Telecom. With the exception of Media on a quarter-on-quarter basis due to seasonal factors. We have achieved good growth across cellular, fixed data and fixed voice on both year-on-year and quarter-on-quarter basis. The revenue for cellular, it benefited from merger and provided the highest revenue contribution in terms of incremental revenue of IDR 3.3 trillion, or 55% on a year-on-year basis. Comparing against Q4, it rose by 41.9% from IDR 6.6 trillion to IDR 9.4 trillion. Media revenue grew 12.2% from Q1 2021 to Q1 2022. This is largely organic as the Tri brand contribution is relatively more in this segment.
Upon completion of the key government project in Q4, media revenue decreased from IDR 1.6 trillion in Q4 to IDR 1.3 trillion. This is pretty much the same seasonal trend we observe for media every year. Fixed telecom revenue, beg your pardon was up 39.5% on a year-on-year basis, followed up with 22.8% on a quarter-on-quarter basis. We expect to see strong traction in this business line continuing. If we move on to look at our cost, our cost base has escalated again because of the merger. As I mentioned earlier, we are very confident that the integration process will help us to bring in a lot of efficiencies and keep us agile as we always do.
As we go through the process deeper and deeper, we should see a lot more OpEx savings coming through. I would like to point out that a very large proportion of the incremental OpEx is coming from the cost of services. On a year-on-year basis is over 80% of the increment is coming from this line. If we compare to Q4, it amounts to 94%. With this, we are going to put a lot of focus on network related items underpinning the spending in this category. While we work on cost efficiency, it is always at the top of our mind that we wouldn't compromise customer service and growth. Rest assured that revenue and growth is the focus for us.
That said, we believe there are huge optimization opportunities for us and we are going to maximize them in the coming quarters. The other spending we need to look at is for CapEx. It remained at a fairly similar level of Q4 at IDR 2.4 trillion and is four percentage point lower when it is compared against revenue. In terms of CapEx to revenue ratio, it actually dropped by four percentage points from 25.8% to 21.8%. The other element I want to highlight is on net debt. It has gone up a little bit from IDR 13.1 trillion to IDR 16.8 trillion from Q4 to Q1 this year.
Once again, the increase is to do with the merger but we feel this, our debt level is at a very manageable level as the 1.13 times of EBITDA is at the same, exact same level as Q1 last year. This is the last element I have prepared to highlight. Thank you very much. I'll pass the time back to Vikram.
Yep. Thank you, Nicky. I think, for everyone following on the webcast, we can see, you know, a couple of slides that we have on the strong operational indicators. We can see that, you know, in terms of cellular revenue, customers, 4G data users, as well as growth in NPS and CSAT scores are all moving in the right direction. Of course, the company has won, you know, several awards, this quarter. Finally, on the last slide, we would just like to highlight the guidance again, that we've presented, as of Q4. And obviously, we, you know, we expect to do well, in 2022. I think, that's it for the presentation. Operator, can we move to the Q&A session?
Certainly. We will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you need to cancel your request, please press the pound or hash key. Our first question comes from Arthur Pineda at Citigroup. Please go ahead.
Hi. Good afternoon. Thanks for the opportunity. Three questions, please. Firstly, can I clarify on the interest expense line? It seems to have gone up a fair bit. If you look at effective interest rate, if we annualize it for the year, it's north of 20%. Are there any one-off bookings being placed there? Second question I had is with regard to getting some guidance with regard to the actual growth on a pro forma basis. If you benchmark this on a consolidated basis Q-on- Q. What kind of growth are you actually seeing on the revenue line? Last question I had is with regard to the integration efforts. Are there any one-off integration costs being booked for this period? Thank you.
Okay, thank you for the questions, Arthur. Nicky, would you like to take the questions?
Certainly. Our interest expense has gone up a little bit following the merger. I guess that's the key reason why you're seeing the interest has gone up a bit.
Well, the question is with regard to the effective interest rate that you're booking with this quarter. It seems like it's north of 20% versus traditionally, which is less than half of that. That's against the current debt level that you have in 1Q.
Also, I'm not sure what numbers you're looking at but we can check the details and get back to you on the calculation of the effective interest rate and the movement.
Got it. With regard to momentum on a pro forma basis.
Yes. This is Vikram, Arthur. You know, in terms of the guidance on growth, let me put it this way. Last twelve quarters, you have seen that, you know, Indosat has been growing 3x-4x of the market growth. We always try to be more grounded in terms of expectation. The good news is that we are seeing a much better market growth this year. We are expecting market to grow in the range of 6%-7%, which is a very good news for the industry and we are very confident minimum we'll be in line and then time will tell whether we'll be ahead or back. For sure we'll be in line and the market is growing at a much higher, healthier rate, you know.
Now, getting on to your second piece on growth. Yes, you know, when we look at year-on-year, the good news is, enterprise business, which is more or less, you know, the historical Indosat business where it is continued to do double digit growth. When we look at other two brand, you know, we are very happy to see both IM3 and Tri brand, you know, they are seeing lot of traction. You know, in a normalized manner, there are a lot of normalization. Last year we have STAR revenue. This year we don't have STAR revenue. If I look at in a normalized manner, we see a healthy growth, you know, of 4%-5% there also. This is a very good start.
The best thing, what we see, Arthur, that customers, you know, both, we see our daily VLR, we see our revenue generating customer is growing very well for both the brand.
Is it improving if it's on a pro forma basis on a Q- on- Q basis?
When you said pro forma basis Q-on-Q, that you can get into more detail with Indar. He will help you understand that. On a specific, you can send your detail. What I told you in YOY basis also, and on Q-on-Q basis, you know, there are a lot of seasonality, Q4 versus Q1. Also enterprise business is much heavier seasonality. Yes, on month-on-month, Q-on-Q, all our customers indicate their revenue generating daily VLR is growing.
Understood. Last question on the integration costs. Are there any such items being booked in?
No, I think integration, we are very happy, Arthur, to share with you that there is no big one-off. Overall, you know, this is one thing which we are doing with lot of focus on customer. We have seen great support from all our strategic partners, you know, Huawei, Nokia, Ericsson. We are in a good shape, you know. We have concluded all our negotiation and all of them are betting on the growth opportunity which they see at Indosat. What you see now is just a beginning. You remember we spoke about IDR 300 million-IDR 400 million of synergy realization over 3-4 years. This is our benchmark, you know. Then what I can tell you is we are ahead of that first quarter itself.
You know, we have done more than what we have targeted on the synergy realization. Specifically, there is no big one-off. You know, it is all, you know, in terms of sustainable the way things look like.
Understood. Thank you very much.
Thanks, Arthur. We'll get back to you after the call on those points, yeah.
Thank you.
Once again, if you wish to ask a question, please press star one on your telephone. Our next question comes from Hussaini Saifee at UBS. Please go ahead.
Yeah, hi. Thanks for the opportunity. Good afternoon. Couple of questions from me. First is on the competition side. Just want to understand that, what is driving the improvement in growth? Is it because of the, you know, just the macro economy or, you know, post-COVID, you know, relaxation in terms of mobility? Or is it because of, you know, telcos are making any, you know, price increases? Just want to understand that, has Indosat made any increase in the pricing as well? The second question is on the network related cost savings. Just want to understand that, I mean, so Vikram, you noted that around 3,000 tower tenancies are coming up for renewal.
Just want to understand, has those been renewed and what kind of savings you are seeing on the back of that? Finally on the fixed telecom, the growth has been quite strong. I just want to understand what is driving that and is that growth sustainable going forward? Thank you.
Okay. Let me start with the first question on the overall competition and industry. I think you know this. I have been talking about for last three, four quarters. The good news is this quarter we see more sustainable and more healthy move from all the top three operators. Overall, as I said, the outlook for the industry growth is much healthier this year. We are seeing a lot of corrections and we had also implemented you know from first April in terms of, you know, our pricing. Our pricing focus still remains a very simple, transparent product approach. This is one thing I can tell you on growth. Coming on to, you know, the integration side.
I think we are in a very good position. All our tower companies, you know, they are working with us to come up with a very win-win solution. They are all very supportive of Indosat Ooredoo acquisition. A lot of negotiation has been completed and there are few ongoing which we are very confident to conclude it in quarter two. Specifically, you know, what benefit it will bring on to us, you will see that in quarter two result. What I can tell you is we are in a very, very good shape and then I'm very encouraged to see how, you know, all our partners are supporting us, especially on our growth agenda. Especially TowerCo have been also very, very cooperative.
Coming on to the third one on the fixed side, you know, I think what you saw is a year-on-year growth of 12%. Yes, you know, our enterprise business is getting stronger day by day. There is a growth on both, you know, on the core connectivity business, you know, and also on all the enterprise and adjacent revenue. You know, some of these adjacent revenue and enterprise comes with a relatively lower margin. Overall our fixed and enterprise portfolio is looking much more healthier. Then we are getting ready, you know, specifically for the 5G era when it comes to enterprise and that whole ecosystem build.
Understood. Thanks, Vikram. This is very helpful. Just on the pricing intervention which you made on first of April, just want to check what percentage points on the ballpark range you increased your pricing by?
I think these are all public information, you know, you can get it. What I'm trying to say is the industry is moving in the right direction, you know. If you look at the data yield for Indonesia, you know, we have been talking about it. It is. People are asking for more quality and experience and a more value for money. I think it's a very good move. Also, I want to highlight that, you know, we see much more improvements on the quality of customers acquisition and all these things at an industry level is moving very much in the right direction, especially in last two, three months.
Understood. This is very helpful. Thank you very much.
Once again, if you wish to ask a question, please press star one on your telephone. Our next question comes from Piyush Choudhary at HSBC. Please go ahead.
Yeah. Hi. Good afternoon. Thanks for the opportunity. Thanks for this call. Few questions. Firstly, Vikram, we are seeing your peers are moving towards more fixed mobile convergence strategy. You know, we have seen moves from Telkom also they're talking about like, you know, going towards FMC strategy. What's firstly, what's your view on FMC and any strategic developments, which you would like to share? Thank you.
Hi, Piyush. No, I think you have a very valid observation. You know, the industry, you know, is also moving towards a bit of a convergence between fixed and mobility. The good news is that with our enlarged scale, you know, now we are, you know, more than 100 days in our journey. We have the scale of getting our, you know, fixed play in terms of FTTH, right? In quarter two, we'll be starting with our brand. We see a lot of synergy and a lot of opportunities there. Over a period of time, you know, we'll be able to ensure that we have a fair play and we have a fair share in this space also.
The good thing for us is now that IM2, you know, which was a legacy issue for us, is behind us now. The court decisions and all have been very clear and we are following those guidelines. It helps us, you know, the IOH has the right scale and the right support from the shareholder to ensure that, you know, we are able to ensure the right kind of play which is needed, and we are getting ready for that.
May I clarify? Sorry, that IM2 issue. Like, you don't have any retail fixed broadband products right now, right?
Historically, Indosat had fixed biz. IM2 was our subsidiary.
Yeah. That was in the past, right? Right now you don't have any product.
Right now we don't have and we'll be launching under the umbrella of IOH, our own fixed broadband. We have lot of fibers. You know, this is our.
Oh, okay.
Monetize our infrastructure, and we are working with partners. There is a lot of interest from private equity companies also. We are in a good place, Piyush. The point which you raised is right. There is a lot of opportunity there. Look at the broadband penetration in Indonesia and also with our scale of 95 million customers and how we can have that convergence in place. We are getting ready, you know, for that. In quarter two we'll be able to start and then you will see how we are scaling it up.
Got it. In terms of your CapEx guidance, would it be possible to share some like how much of that CapEx is going in outside of Java areas? As of now, on a pro forma like the consolidated entity, what proportion of revenues is coming from outside of Java?
Two things, Piyush. Again, very happy to share with you. The first concern which I got from analyst, first call after IOH was formed was, you know, high integration cost. What I can tell you is, you know, we have concluded our negotiation with our top three radio partners, Ericsson, Huawei, Nokia. All of them have supported us with the kind of offers and proposals which has never happened in the world. Then we have been able to conclude that with a least disruption model and with something which we are very thankful to our partners that how they are trusting on our growth opportunity. That is one thing, you know, which has been a very positive news on the whole CapEx piece. This in background, Piyush, please understand Indonesia is not about Java and non-Java.
I don't know how much you know about Kabupaten and Kecamatan. There are 7,200 Kecamatan. I think this is a legacy way of looking at Java, non-Java. We have started looking at the country at a, you know, the way if you understand Indonesia from a geographical point of view. There are 7,200 Kecamatan, and we wanna make sure that at a Kecamatan level, we have a very competitive network and we have the distribution also to serve our customer. This is how we are moving. To answer your question, you know Java contributes to close to 75% or 74% of the industry revenue. Ex-Java is around 23, 24, 25% of the industry revenue. Our strategy has gone beyond Java and ex-Java.
We are looking at things at a Kabupaten and Kecamatan level.
Got it. Fair enough. Like, probably in a different way, you know, you would have scoped your addressable market size, right, in these 7,200 Kecamatans. Sorry, I hope I'm pronouncing it right, out of these areas.
Mm-hmm.
Like, which what percentage you are not covering at the moment? What is the roadmap to cover that? Like, the timeline to cover that?
You know, we have a very competitive network and especially with IOH and with our integration plan in place. Let me give you two data point. Number one, in your language, if I look at Java, which contributes to 74% or 75% of industry revenue, we will be having, after eliminating the duplicate site, we will be having close to equal number of physical BTS than Telkomsel. This is unprecedented. You know, nobody could have thought of doing that. Once we complete our integration, once all these sites will be able to use the full spectrum and this is what we want to do it fast and first time, right, you can understand what kind of customer experience we will have in Java.
This is how I want you to understand the opportunity which we have in front of it. Now, coming on to Kecamatan level, you know, out of 7,200, close to 4,800, we have a very competitive network. Now we are focusing on strengthening our distribution. We want to make sure that we are able to get more and more people into the digital fold from those Kecamatan areas and give them very good experience and service also, you know, our product availability in terms of educating customer. Both there is a network play and there's a distribution play at a
Kecamatan level where we are focusing on.
Got it, Vikram. This is very helpful. I'll come back in queue.
Once again, if you wish to ask a question, please press star one on your telephone. We have further questions from Piyush at HSBC. Please continue.
Thanks again. I have some follow-up. Can you throw some light on probably the cost items or CapEx items where you might see inflationary pressures at the moment?
Sorry, Piyush. Looks like our speaker line has just dropped from the conference. We'll just stand by while they dial back in. Just bear with us one moment.
Sure.
Thank you. It looks like our speaker has rejoined. Sorry, Piyush, if you'd like to continue with your question.
Yeah. Thank you. My question was on the, you know, the recent inflationary pressures. Could you highlight, like, which cost items you are witnessing any inflationary pressures and anything on the vendor side disruption or, you know, which might be seen at the moment?
Piyush, this is Vikram. I'll request Nicky also to add on. We are not seeing any inflationary pressure. You know, it is just that what you see is an outcome of the merger. I'm sure you will understand that, you know, the synergy value takes little time to kick in. This is where what we are showing that, you know, in first quarter itself, you know, we have been ahead of time in terms of, you know, what we had planned. This is the big picture. Only one item which we see a bit of an impact of, if I call it inflationary pressure, is SIM cost but it is not a very big hit item. Yes, that has been impacted.
When you look at the overall number, you know, as you understand, on this merger, the efficiency kicking in over a period of time and then we are well on track what we had given, the guidance for this year. We feel more confident that we'll be able to deliver more than that.
Hi, this is Nicky. I agree with Vikram Sinha. SIM cost is really the only thing which kind of worry us a little bit. For other spending, CapEx included, you know, we are not seeing. If you're thinking about whether there could be chip shortages, which could have an impact on the price, we generally speaking, I mean, we don't wanna go into specifics. We don't see inflationary pressure as Vikram mentioned earlier. We feel we get a fantastic deal with the vendors. Actually we're getting better prices in general. Hope that answers your question.
Yeah, that answers. Thanks a lot. Just one last thing. Could you tell us, like, what's the churn rate now at the moment and how kind of it has trended over the last couple of quarters?
In terms of percentage, you know, we are seeing, in fact a bit of an improvement, Piyush. If you look at quarter-on-quarter also, you know, we have only been seeing a bit of an improvement on the churn. Specific number, I think Indar will be able to share it with you b ut overall, in fact, as I told you, the quality of loss add, not only us at an industry level, we see improvement on, you know, this whole washing machine effect, which we used to do see it, in 2019. That has only been improving, you know, for a period of time. Overall, it is, you know, getting improving. You know, I, my team has put the number also.
If I look at January versus March when we started, you know, the churn has only been improving, Piyush.
Got it, Vikram. Thanks a lot and all the best for the integration.
One point figure of five, 5 .5 %, you know.
5.5. Okay. Thank you.
Our next question comes from Hussaini Saifee at UBS. Please go ahead.
Hi. Thanks again. Just have a couple of follow-up questions. First is on the following up on Piyush's question on the churn. Just want to understand, was there any subscriber cleanup in the first quarter? Because when I see, I mean, I add free cash flow number and Indosat's fourth quarter number. I estimate that there was a net subscriber loss of around 7 million. Just want to check if there was any cleanup exercise. The second question is on your convergence strategy. As you move into convergence, will that have any implications on the CapEx? Or with the 20%-25% CapEx to sales ratio, you can make inroads into that segment as well.
Let me answer your first question, Mr. Vikram. I think first thing was, you know, the whole alignment harmonization of definition, you know. When we talk about 90-day customers, we made sure after merger, you know, we harmonize all three brands the way we define 90-day. The good news is, you know, our daily VLR has been growing consistently from the day we were born. Our 30-day revenue generating customers, again, these are more important indicator to look at and it is all growing. The other thing which you need to keep in mind, which I highlighted, we have put a very, you know, a process which helps us make sure that our quality of acquisition improves. That has been working very well for us.
If you look at last year also, our net add was even more than, you know, some of the introduction on gross add but the net add kept improving and we saw some very good results. We at an IOH level, we have made sure that we have much more focus on quality of acquisition and that is working very well for us. You might see some plus minus on a 90-day base, but on a 30-day daily VLR, it is all positive for us.
Understood. Thank you.
In terms of the CapEx, the guidance we have given has already covered the spending required on the fixed line business. The broadband business.
Okay.
Yes. I think the other question was on the convergence strategy and the CapEx implication. I think as I highlighted, you know, first we have lot of fibers and infrastructure at an IOH level with this merged entity, which we now want to monetize. The other good thing is there is a lot of interest from private equity partners and long-term investors in investing in infra. We have all the options available. As we go along, we'll look at all those things.
Understood. Very clear. Thank you very much.
Once again, if you wish to ask a question, please press star one on your telephone. Our next question comes from Niko Margaronis from BRI Danareksa. Please go ahead.
Thank you for the opportunity. Good afternoon, Vikram, the team. Congratulations for the numbers. They look good. I just wanted to check on the costs. How do you see those trending? I mean, do you see synergies? Can we factor in more synergies in for 2022 in the OpEx and perhaps on the leases, on the contracts for towers? That's my question. Thank you.
Nicky, you want to start?
Certainly. Let me try. For 2022, we may not see. There are a number of factors that we need to consider. Number one is, we need to physically integrate the network side by side and do the detail work, physical work to get the integration going. While we feel we have accelerated process a lot but still it would take some time to do it. The other factor is, lease contracts. So some of the underlying leases, contracts will not be mature even if we have completed the work. Now we could also make different arrangement with the vendors. So
There would be a dependency on how long it would take for us to discuss and what would be the kind of conclusion we get out from the discussions. Looking 2022, I wouldn't be guiding too much cost savings coming into this year. Hopefully we will. There are a few uncertainties as you would understand that we are working on and we try to accelerate the process as much as we can. We do hope we can get some more savings into 2022. The way I look at it wouldn't be a lot. Vikram, do you want to?
Yeah.
Comment by me?
Just to build on what Nicky said. Let me put a reference to it. I think in one of our analyst calls, we spoke about IDR 300-400 million of synergies over 3-4 years. That is our baseline, you know. We created our baseline on a number of IDR 350 million. What I can tell you is in quarter one we are ahead of that. And for this year, as per that baseline, we had planned around IDR 60 million. I think we are more confident we'll do little more than that. Yeah. The other important thing I want to highlight, you know, we saw very strong support coming from our RAN partners, and I spoke about it, you know. This was very, very strong and we are all betting on growth.
Same thing we are seeing from our tower partners, but that is work in progress. As Nicky said, it will be too early for us to say how it will conclude, but it has been a very constructive discussion which we have been going on with them. We will have to wait for a little more, Nicky. Maybe on Q2.
Right.
We'll have a clearer picture.
Yeah, Vikram. Many thanks for this. Thank you, Nicky. My follow-up question, maybe I missed it earlier. Nicky mentioned that you holding talks with your suppliers, vendors. Would it be one of those related to towers? Given that those talks are holding longer, is also the CapEx potentially the IDR 10 trillion for 2022 may be reduced, may come lower than expected for 2022? Thank you.
Nico, W e've got two things. I think, and then Nicky can add to it. We concluded our discussion with all our radio vendors, you know. This is again, it is very important that, you know, IOH has the agility to move fast, because we have to really make sure we take care of our customer- on- customer experience while we are doing integration. All negotiation with our radio network vendor is concluded and the outcome was phenomenal. What it help us, that lot of question was coming on high integration cost on first year. That is very much under control. Now we want to invest on growth and customer experience. You know, as we said, we want to IOH had a mandate to work with a growth mindset to work with maximize mindset.
We wanted to minimize our CapEx on integration and focus on growth. That is what we have been able to achieve. That is a very encouraging, positive, you know, thing which we have got. Work is happening with the tower companies. We are very confident that we are in a very good place and we'll be able to conclude something which is win-win in quarter two.
Got it. Thank you, Vikram. Maybe in the dual brand strategy, maybe you covered it already. What do you intend to do? Is there some gradual integration of those two brands or are you gonna keep them separate? Yeah, I mean, is marketing cost also? Is it gonna be higher due because we're holding two brands or how to look at it?
Nico , I think you have asked a good question. I want to clarify this for everyone. You know, what this merger brought us is two thing very important for us to understand. A very strong two complementary brand and second is a very good mix of spectrum. Both the brand is here to stay. We are more confident now. These are very complementary brand. You know, if you look at Tri, Talk2, you know, gamers and they have positioned themselves very strong on steadily youngsters, you know, and IM3 is more of a family brand, very strong legacy. Both are very complementary brand and both of them, we are putting all the investment needed to grow them.
Our wish list is that both brand has to be the fastest growing brand in the industry and that is how we are working. When it comes to marketing cost and all, you know, I think this is where we have seen some of the other merger goes wrong. As I told you, we want to work with a very strong cost discipline. We want to make sure every dollar we spend give us five dollar. You know, there are lot of built-in item for us to realize our synergy of $400 million or $350 what we have said. We don't want to cut corners and get lost on small things. We want to maximize on all the asset which we have got.
Thanks. Thank you for sharing your thoughts, Vikram. Maybe one last question to Nicky. I understand there's a contract for 2,500 towers with one of the tower operators. Are the negotiations still going on or the issue has finalized and maybe you can share us some details on this? Thank you.
We don't generally comment on specific contracts and we do talk with tower vendors all the time. I'm not sure which particular contract you're referring to.
Yeah. Ten years ago, there was a 2,500 towers you sell and lease back with one of the tower players. Yeah, ten years ago.
Let me ask here, you know. First, I agree with Nicky. We generally don't comment on specific contracts and specific company. What I can tell you that we are in a very good place. You yourself said it. These were very high value contract. It was done in USD. Now time has come to reap benefit and correct all those things. We are in a good place and we are getting a lot of cooperation from all those tower partner also. Please wait for one more quarter, you will see the conclusion of all those things.
Great. Great. Many thanks for sharing your thoughts.
In the interest of time, our final question will come from Arthur Pineda at Citigroup. Please go ahead.
Hi. Thank you. Sorry. Just to follow up with regard to the fixed broadband expansion. Are you able to share any thoughts on targets on this, like ports build or subs targets that you're looking to take for 2022? When you say 6%-7% growth for the industry, are you referring to just mobile or does that include the broadband contributions?
Arthur, this is Vikram. I'm talking about cellular revenue and mobile more. You know, that is where you had seen muted growth, you know, industry last year and all was 1%, while Indosat, we were able to grow at, you know, close to eight, nine or 10%. This is what I'm referring. We see a better industry outlook for cellular revenue mobile. On your first question, I think you will have to wait for more. What I told you, we are planning to do it end of quarter two or early quarter three and then you'll have to wait for that, you know, to get started.
Okay. Understood. Thank you.
Okay. I think, you know, that was the last question for the day. Thank you very much everyone for joining the call. We hope it was a very fruitful and helpful discussion for you. As always, do reach out to us if you have any further questions. We're always ready to help. Thank you. Stay safe and we'll speak to you again next quarter.