TELKOM INDONESIA - TLKM

Industry Analysis

Telecommunication Industry

There are several operators in telecommunication industry; they are Telkom, Indosat, XLaxiata, Esia and Smartfren. Indonesia has good potential factor for its industry, based on BPS it has about 249 millions population in 2013. 50 % of total population is under 30 years old which is in productive age. Other positive facts, indonesia has 22 % internet penetration and 15 % smartphone penetration. In conclusion, within good purchasing power on US$ 4,540 GDP per capita, Telecommunication industry is still promising for investor.

Rapid Technology Change and Price War

Technology is one of key success factor in this industry; the upcoming technology in recent year is 4G LITE for GSM operator.   Once one company implemented newest technology another competitor would enforce the same technology to compete. For prepaid product, subscriber tend to be sensitive to price. Consumer figures out the cheapest price for the same service. That is why the price war occurred and the existing company has to combine strategy in product differentiation and cost leadership in order to meet the consumer demand and win the price war.

In 2012, the SIM penetration is at 100 %, there are many people may possibly not be served yet. According to Merrill Lynch industry revenue grew more than 1.5 times between 2007 – 2012 and Mobile subscriber base advanced about 2.6 times at the same period.

Operator with less economic of scale should give up and they could join with another existing company to win the competition. In 2014 axis was acquired by XL axiata and the recent issue, Bakrie Telecom consider doing merger with smart fren to strengthen its position in the industry.  

According to Frost and Sullivan analysis, 10 levels of the way to communicate in today, twitter is the first, then second is facebook status.

Direct talking is at the bottom of the 10 levels, that means people tend to communicate in social media where people could interact with many people.

Mobile broadband may possibly be next big market in the next several years. The user would rather like to use operating system which provides services in social media, messenger and internet browser.

The situation is happening because the previous technology 3G provide slow connection for video streaming. So people could only interact with their groups through messenger or social media.

With 4G technology, the streaming service will be more preferred with faster connection and people is able to communicate with many people through video communication.

In my opinion, there will be more video streaming application in the future. Microsoft has product of hologram technology, they use it for communicating, gaming and working but for hologram, it may possibly come once operator could provide more sophisticated service.

Broadband subscriber grows sharply

In 2013 the company had expanded to overseas, they established their business in 7 countries; they consist of USA, Taiwan, Malaysia, Myanmar, Australia, Timor Leste and Hongkong. They used name of Telin ( telecommunication Indonesia).

Telkom is owned by government of indonesia with 53.14 % of total share. It is also listed in NYSE index in
USA.

Telkomsel as its subsidiary has 42.4 % of total market share, exceeding indosat and XL axiata, it is a market leader in its market. Telkomsel claimed that they have 131.5 million subscribers.

Mitratel as its subsidiary has more than 71.000 BTS in overall indonesia, its infrastructure is key success factor in enhancing service for subscriber. As a result of this, their service is available in almost all villages in indonesia.

Based on its annual report, the key driver of its revenue is personal segment which is at 71 % of total revenue. The second is corporate segment at 21 % of total revenue.

Revenue in 2013 increase at 7.5 % up than 2012, the gross profit margin slightly declines from about 78 % in to 76 %. The current ratio is stable at 1.12 ether in 2012 or in 2013. It means that it is liquid, it has a lot of cash asset both in 2013 and 2012, its cash to sales ratio is 17.7 %. The biggest portion of current asset is cash.

The company could increase subscriber for flash product at 56 % up in 2013 compared to 2012. For cellular broadband such as kartu halo and simpati, kartu as, it increase only at 5 % compared to last year.

As the market leader in indonesia, Telkom indonesia is promising company in indonesia, government as the shareholder supported it to expand to become larger.

Forecast

I used assumption at 6 % growth, it is above the industry average growth which is 5.9 %. In addition, the average growth of sales in last 5 years is at 5%. The company has allocated its fund for investing in 7 countries and it is predicted allocating more investment at abroad in 2015.