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Jakarta Post

Telkom looks to capitalize on data, towers as legacy business dwindles

  • Yunindita Prasidya

    The Jakarta Post

Jakarta   /   Thu, October 1, 2020   /   04:13 pm
Telkom looks to capitalize on data, towers as legacy business dwindles PT Telekomunikasi Indonesia Tbk, commonly known as Telkom Indonesia, is a state-owned telecommunications giant. (Shutterstock/Faishalabdula)

State-owned telecommunication giant PT Telekomunikasi Indonesia (Telkom) is bolstering its data center business and plans to strengthen its tower enterprise against the backdrop of dwindling revenue from its legacy businesses.

Telkom vice president of investor relations Andi Setiawan said the company would be capitalizing on the shift in consumer behavior, as more people and enterprises were using data to work, study and do more activities online.

“Within our enterprise segment, we are focusing on businesses with good profitability, including data center, cloud, connectivity and enterprise solutions while limiting businesses with low margin, in this case, device-related businesses,” Andi said in a virtual company update hosted by Samuel Sekuritas on Tuesday. 

Telecommunication firms have benefited from the work-from-home policy and online learning programs implemented nationwide as a result of social restrictions imposed to limit the spread of the coronavirus. A surge in data usage was recorded as companies, schools and government offices are forced to digitize their operations. 

Telkom was building a data center on the outskirts of Jakarta, with the first phase of development to conclude by mid-2021, said Andi. 

Telkom owns three data centers in Indonesia through its subsidiary TelkomSigma, located in Serpong, Sentul and Surabaya. According to the company’s annual report, 74 percent of the total capacity of the three data centers had been utilized by the end of last year. 

TelkomSigma currently holds the biggest share in the data services market at 43 percent, according to company data. The second biggest data center company only owns a 24 percent market share.

Aside from propping up its data center business, Telkom is also strengthening its tower business through its subsidiary PT Dayamitra Telekomunikasi (Mitratel). 

“In time, we will need to unlock Mitratel, either through an initial public offering or strategic partnership,” Andi said. In line with the plan to increase Mitratel’s valuation, around 5,000 to 6,000 of Telkomsel’s towers would be consolidated to Mitratel, the company said.

Mitratel’s market share, in terms of total industry revenue, increased from 28 percent in the first half of last year to 29 percent in the first half of this year, making it the second-biggest player in the industry. 

Mitratel’s business is projected to continue to expand against the backdrop of a growing market driven by the transition to 4G and a strong customer base with predictable revenue streams, as the tower business offers long-term contracts. 

Telkom, whose line of business includes providing mobile voice and SMS services through its subsidiary PT Telekomunikasi Selular (Telkomsel), reported that its revenue decreased by 3.6 percent year-on-year (yoy) to Rp 66.9 trillion in the first half of this year. 

Andi noted that Telkom’s revenue from its SMS, fixed & cellular voice segment decreased by 27.5 percent to Rp 13 trillion. By contrast, revenue from the company’s data, internet and technology services segment and IndiHome grew by 6.8 percent and 19.1 percent to Rp 35.3 trillion and Rp 10.4 trillion, respectively. 

Within Telkomsel alone, its digital business segment grew by 13.4 percent during the first six months of this year. Meanwhile, its legacy segment declined by 29.7 percent. The growth in the former, however, had yet to compensate for the downturn in the latter as Telkomsel’s total revenue contracted by 2.4 percent yoy. 

“Indeed, the trend of increasing connectivity has brought about alternative solutions for SMS and voice; our revenue experienced a slump, but mostly from the legacy business segment,” Doni Andriansyah, Telkomsel’s financial planning and business partner senior vice president said. 

Mirae Asset Sekuritas Indonesia analyst Lee Young Jun wrote in a report published on Aug. 11 that Telkom’s first-half performance was in line with the securities firm’s forecast. 

“In the first half of the year, net profit came in at Rp 11 trillion, achieving 59 percent of our forecast or 54 percent of consensus’. All in all, we think the result was in line with our forecast,” the analyst said.