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Indosat suffers Rp 71 billion Q1 losses

Despite its increasing number of customers, telecommunication networks and services provider PT Indosat (ISAT) suffered a net loss of Rp 71

Mariel Grazella (The Jakarta Post)
Jakarta
Fri, May 10, 2013

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Indosat suffers Rp 71 billion Q1 losses

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espite its increasing number of customers, telecommunication networks and services provider PT Indosat (ISAT) suffered a net loss of Rp 71.1 billion (US$ 7.3 million) in the first quarter of the year.

This Q1 loss is 214.4 percent higher than that suffered in the same period last year. The company attributed the loss to high tower leasing costs as well as '€œcurrency depreciation'€.

Indosat finance director Curt Stefan Carlsson said changes in calculations of its equipment'€™s '€œasset life'€ had cost the operator extra depreciation worth Rp 302 billion.

'€œWe changed the functional life of our equipment from 10 years to 8 years,'€ he said, adding that such re-adjustment was necessary as rapid technology would inevitably make existing equipment obsolete.

Aside from the depreciation issue, Indosat reported that its capital lease obligation soared 253.8 percent year-on-year to Rp 3.36 trillion in Q1 of 2013. Carlsson pointed out if were not for certain accounting factors, the operator'€™s net profits would have been positive.

'€œOur normalized net profit is Rp 363 billion,'€ he said.

However, besides net profits, operating profits and earnings before interest, taxes, depreciation and amortization (EBITDA) were on the downside.

Operating profits slid 7.4 percent year-on-year to Rp 563.3 billion while EBITDA margin slipped 1.5 points to 45.4 percent. Carlsson attributed the lower EBITDA margin to the short message service (SMS) interconnection scheme.

The Information and Communication Technology Ministry (MICT) ruled that as of May 2012, operators would be charged a basic tariff of Rp 23 per SMS for text messages sent to other operating networks.

'€œHowever, our EBITDA increased 13.8 percent year-on-year to Rp 2.62 trillion,'€ Carlsson said, adding that revenues had climbed 17.6 percent annually to Rp 5.78 trillion.

Indosat also reported that cellular subscriptions increased 7.4 percent year-on-year to 55.9 million as of the first quarter of 2013, while average revenue per user (ARPU) rose 5.9 percent to Rp 26,500.

However, quarter-to-quarter wise, the number of cellular subscribers decreased 4.4 percent while ARPU fell 1.1 percent.

Erik Meijer, Indosat'€™s chief commercial officer, attributed the quarterly decrease to '€œseasonality'€.

'€œFestivals such as Ramadhan that fall in the third or fourth quarter of the year translate into more SIM card activations and reloads,'€ he said.

Cellular services remained the operator'€™s revenue engine with an 82 percent contribution while fixed data and fixed voice brought in the remaining 14 percent and 4 percent, respectively.

Indosat CEO Alexander Rusli said that this year, the operator would continue pushing its three brands '€“ IM3, Mentari and Matrix '€“ into the market, with each brand targeting different consumer segments.

'€œThe bulk of IM3 users are the youth,'€ he said, adding that its Matrix post-paid services would carry out '€œnew approaches'€ following its re-launch.

He added that the operator would focus on corporate services as well since this business exhibited '€œthe biggest area of growth'€. '€œWe are positioning this service as a main offering to customers,'€ he said.

Alexander went on to say that this year, the operator would also work with PT Trikomsel Oke (TRIO), a distributor and retailer of cell phones and vouchers, to reach customers.

The strategy would allow Indosat to increase its number of '€œcontact points'€ given that Trikomsel Oke operated roughly 1,200 retail outlets.

He added that the company was considering rebranding strategies since its parent company '€“ Qatar Telecom Pte. Ltd. '€“ now carried the Ooredoo moniker.

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