INDOSAT - ISAT

Investment sector is still promising

Despite there was a slowdown in economic growth in first quarter of 2015, the investment segment has still been growing gradually in the last 4 years. In 2014 the total investment was 463.1 trillion rupiah and it was higher than total investment in 2012 which was 313.2 trillion rupiah. It increased 48 % up than total investment in 2012 (source: kompas newspaper). In first quarter of 2015 the investment was 124.6 trillion rupiah and it is expected keep growing.

The investment is dominated by investor from oversea; the bottle neck in investment is the complicated procedure in administrative procedure of each investment. There are too many institutions which were involved in the process of investment.

Generally indonesia is still promising for investment because the country has good natural resource and a surplus in demographic side. Hence, the total investment has been growing as the previous explanation.

Consumption dropped in ramadhan

The consumption sector is falling down due to higher inflation rate. Wage rate did not meet to the cost of living. Export rate is not performing as expectation due to many factors such as low price of commodities. The gradual increase of inflation rate since the early of 2014 might be the key reason to the slowdown in consumption. The biggest part of GDP is contributed by consumption and that is why the dramatic change has already been happening when new government decided to focus in investment for infrastructure project.

According to economic data of central bank in May of 2015, the segment of trading, mining and manufacture are experienced decline in its growth. The weak demand in these segments may cause the rise of nonperforming loan rate despite the credit distribution in mining and quarrying has raised 7.12 percent up compared to May of 2014. 

 Industry Analysis

The telecommunication industry may not be affected by the slowdown of economic growth. In fact people still need to communicate despite the cost of living is more expensive. The subscriber is still using various social media such as facebook and twitter to communicate to each other.

According to GFK 2013, the penetration of smart phone user is still promising, there is a sharply increase in its number since 2009. Its number increased from 1870 thousand user in 2009 in to 20,981 thousand unit in 2012. It was almost 1025 % up. And its number seems continue to grow at the future.

Market leader in this segment is still expanding their business, building new IT infrastructure and establishing new subsidiary to capture new opportunity. Telkomsel as the market leader in cellular segment is building Telkom indigo, subsidiary which focus in investing fund for Startup Company. It has also been establishing fiber optic cable at under the sea in order to connect Indonesia to Silicon Valley at USA.

Company analysis

Case of IMM : company has been sued for about 1.3 trillion payoff

The case of IM2 may hamper the performance of the company during 2015. The government sued to indosat for illegal use of 3G frequency for IM2. IM2 is subsidiary which operates in internet broadband connection. The government has sued the company for 1.3 trillion payoffs due to illegal use of 3G frequency in its internet broadband service. Indosat put that amount as legal provision in its income statement. Hence, the provision cost reduced the net profit of 2014. The provision is 5.7 % of revenue in 2014.

Despite the company has been supported by communication and information ministry and such association, the case has not been resulting final verdict. There is no execution yet from the jurisdiction.

IM3 was the key driver 

The key driver of sales was still from cellular segment which had more than 63 million users in across Indonesia. The subscriber’s growth was 6.1 % in 2014 compared to the number of subscriber in 2013. The cellular’s contribution to sales was 80.9 percent of total. The second was MIDI segment. For cellular segment there is a negative trend in last three years, there is a slightly decrease. Meanwhile for MIDI, there is a positive trend in the same period.

Despite the sales growth in 2015 was dropped 0.9 % compared to sales growth in 2014 which was about 6.4 % the company is still maintaining its position as the second largest cellular company in Indonesia.  IM3 was the most famous brand for cellular segment; its contribution was more than 80 % of total cellular segment. 

In spite of a slowdown in sales growth, the company has still developed its EBITDA margin. The EBITDA margin in 2014 was higher than EBITDA margin in 2013.

The company has more than 40 thousand BTS and 29.000 data connectivity service user.  

I think the company should focus to IM3 user which was dominated in generating sales growth. IM3 was successful brand in serving GPRS technology in the past. The user was attracted to GPRS technology because of its faster internet broadband connection.

Indosat is owned by ooredo asia as the biggest shareholder which has 65 %, a part of world telecommunication company from Qatar. The second biggest owner is Indonesian government which owns more than 14 % of total shareholder.