JAKARTA (Thomson Financial) - Indonesia's second-biggest telecom company PT
Indosat is expected to report next Wednesday a 28-49 percent growth in 2007 net
profit largely due to a robust increase in the number of its subscribers,
analysts polled by Thomson Financial said.
Indosat's net profit in 2006 dropped to 1.41 trillion rupiah from 1.62
trillion the year before. Sales rose slightly to 12.24 trillion rupiah against
11.59 trillion in 2005.
For 2007, analysts are expecting a net profit of between 1.8 trillion and
2.1 trillion rupiah, on sales of 15.7-16.5 trillion rupiah.
In the first nine months of last year, Indosat reported a 56 percent rise in
net profit to 1.45 trillion rupiah. Over the same period sales grew 34 percent
to 11.88 trillion rupiah.
Its cellular business contributed 9.15 trillion rupiah to nine-month sales,
up 38 percent from a year before.
The increase in its subscriber base would have pushed up traffic volume and
revenue in 2007, but the average revenue per user (ARPU) may have fallen
compared to the year before, said Farash Farich, an analyst at Mandiri
Securities.
"I think subscriber growth was the key to earnings growth (last year).
Indosat was quite aggressive in marketing and promotion activities in 2007," he
said.
Farich is projecting a net profit of 1.8 trillion rupiah on sales of 16
trilion rupiah.
"ARPU is falling but that's okay," said Ong Boon Leon, an analyst at DBS
Vickers based in Kuala Lumpur. He said when operators see their subscriber
numbers expand, they are aware that revenue per user usually falls as a
consequence.
In the first nine months of last year, Indosat's ARPU fell 10.6 percent to
53,400 rupiah.
Indosat's cellular subscriber base rose 46 percent in 2007 to 24.5 million,
from 16.7 million a year before.
By comparison, the country's largest cellular operator, PT Telekomunikasi
Selular, or Telkomsel, had 47.9 million subscribers at the end of 2007, almost
double that of Indosat. Telkomsel is a unit of PT Telekomunikasi Indonesia, the
country's largest telecommunications company.
Singapore Technologies Telemedia, through its 75 percent-owned subsidiary
Asia Mobile Holdings (AMH), owns about 41 percent of Indosat, while Singapore
Telecom holds a 35 percent stake in Telkomsel.
Price war heats up
For Indosat, the question going forward is how it can win more subscribers
and boost earnings this year as the price war among cellular operators heats up.
DBS' Leon believes that big operators will see a relatively stable
subscriber share despite competition from new entrants.
"Those new guys are not expected to take a big chunk of existing operators'
(market share)," he said.
Indosat's closest rival is PT Excelcomindo, a unit of Telekom Malaysia,
which had 15.5 million subscribers at the end of 2007.
"The market is still big so I think Indosat could (still) grow its
subscribers at the same pace as last year," said Mandiri's Farich.
A price war among cellular operators could further squeeze ARPU, but volume
growth may help to compensate for any revenue fall, said Chandra Pasaribu, an
analyst at state brokerage Danareksa.
"We are still in the early stages of a price war. I think the industry is
still price sensitive, so volume could rise if price falls," he said.
An average Indonesian mobile caller uses around 50 minutes per month
compared to nearly 300 minutes per month by a Thai mobile caller, and 500
minutes per month by Chinese mobile caller, according to BNP Paribas.
BNP said while the average Indonesian mobile user is unlikely to match the
Chinese user any time soon, it is safe to assume that Indonesian mobile usage
will significantly improve on the back of falling tariffs stemming from the
currently intense competitive landscape.
What could add pressure to incumbents' competitive advantage of coverage is
the recent tower sharing deals between Excelcomindo and smaller operators, it
said. The tower-sharing deals would enable new entrants to roll out their
networks faster than if they built their own towers.
BNI Securities analyst Akhmad Nurcahyadi said Indosat should try to expand
its non-cellular business -- known as multimedia, data communication and
Internet (MIDI) -- to boost its earnings growth this year. MIDI accounted for
13 percent of Indosat's first-half revenue last year.
Below is the summary of the 2007 net profit and revenue forecasts for
Indosat:
1. Mandiri Securities: 1.8 trillion rupiah; 16 trillion rupiah
2. BNI Securities: 1.9 trillion rupiah; 16.3 trillion rupiah
3. BNP Paribas: 1.96 trillion rupiah; 16.03 trillion rupiah
4. DBS: 1.99 trillion rupiah; 16.3 trillion rupiah
5. UBS: 2.0 trillion rupiah; 16.5 trillion rupiah
6. CIMB-GK: 2.0 trillion rupiah; 16.4 trillion rupiah
7. Danareksa: 2.1 trillion rupiah; 15.7 trillion rupiah
aloysius.bhui@thomson.com
alo/zr
-- by Aloysius Bhui --
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