Telekomunikasi Indonesia (NYSE: TLK), also known as Telkom Indonesia, the largest telecommunications company in Indonesia, dragged its feet on filing a fourth-quarter report for fiscal year 2018. When it finally appeared on April 30, a first-quarter report followed just three days later. Let’s have a look at both of these earnings reports, one after the other.
The raw numbers: Telkom Indonesia’s fourth-quarter results
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|
Metric |
Q4 2018 |
Q4 2017 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$2.14 billion |
$2.31 billion |
(7.5%) |
|
Net income |
$257 million |
$308 million |
(17%) |
|
GAAP earnings per ADS (diluted) |
$0.26 |
$0.31 |
(17%) |
Telkom’s first-quarter results
|
Metric |
Q1 2019 |
Q1 2018 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$2.47 billion |
$2.38 billion |
3.5% |
|
Net income |
$441 million |
$422 million |
4.3% |
|
GAAP earnings per ADS (diluted) |
$0.44 |
$0.43 |
4.3% |
What happened with Telkom Indonesia in these quarters?
- The company reports its results in Indonesian Rupiah, not U.S. dollars. The Rupiah strengthened by 4.8% against the dollar between the fourth quarters of 2017 and 2018, giving Telkom a currency headwind when it comes to year-over-year comparisons in dollar terms. Measured in Rupiah, revenues rose 1.1% year over year.
- For the first quarter, the currency-exchange trends worked out to a 4.1% stronger Rupiah-per-dollar rate. Measuring the revenue growth rates in Rupiah instead of dollars, Telkom scored a 7.7% year-over-year increase.
- The fourth-quarter report was late due to an unusually complex conversion between Indonesian and international financial reporting standards (IFRS). The company filed a request for a deadline extension with the SEC, explaining that its financial staff and external auditors needed to complete their analyses before compiling a final report. The full report was completed four days later.
- The Telkomsel phone network now serves 168.6 million subscribers. That’s a 5.7 million increase from the end of the fourth quarter, which was a low point in the company’s recent history. In 2018 as a whole, the subscriber count fell 17%, to 163 million accounts.
- As Telkom’s wireless customers latch on to smartphones with high-speed broadband plans, the company’s revenue mix is shifting dramatically. In the first quarter, data service revenues rose 30% year over year to represent 34% of Telkom’s total revenues. A year earlier, the data portion of total revenues stood at 31%.
- Like the rest of the world, Indonesia’s newfound love of data-driven communications has a downside for the network operator. Telkom’s ordinary voice service revenues fell 19% year over year and SMS messages collected 27% lower sales.
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What management had to say
In Telkom’s first-quarter earnings call, CEO Alex Sinaga explained how the mobile network market is evolving in Indonesia, with Telkom playing a leading role in the new sector landscape. Sinaga said:
Looking ahead
This company doesn’t provide detailed financial guidance, but management offered some color commentary on the road ahead.
The Telkom group should grow Rupiah-denominated sales by mid- to high-single-digit percentages in fiscal year 2019. The company is aiming for a growth rate slightly ahead of the Indonesian mobile industry’s. EBITDA and net income margins will continue to decline, continuing a difficult trendline from the past two years. However, the pace of margin shrinkage should slow down a bit as Telkomsel enjoys stronger margins in data services.
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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool recommends Telkom Indonesia. The Motley Fool has a disclosure policy.
