Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Eiro-group Review –The power of trading education - 4th Dec 20
Early Investors set to win big as FDA fast-tracks this ancient medicine - 3rd Dec 20
New PC System Switch On, Where's Windows 10 Licence Key? Overclockers UK OEM Review (5) - 3rd Dec 20
Poundland Budget Christmas Decorations Shopping 2020 to Beat the Corona Economic Depression - 3rd Dec 20
What is the right type of insurance for you, and how do you find it? - 3rd Dec 20
What Are the 3 Stocks That Will Benefit from Covid-19? - 3rd Dec 20
Gold & the USDX: Correlations - 2nd Dec 20
How An Ancient Medicine Is Taking On The $16 Trillion Pharmaceutical Industry - 2nd Dec 20
Amazon Black Friday vs Prime Day vs Cyber Monday, Which are Real or Fake Sales - 1st Dec 20
The No.1 Biotech Stock for 2021 - 1st Dec 20
Stocks Bears Last Chance Before Market Rally To SPX 4200 In 2021 - 1st Dec 20
Globalists Poised for a “Great Reset” – Any Role for Gold? - 1st Dec 20
How to Get FREE REAL Christmas Tree 2020! Easy DIY Money Saving - 1st Dec 20
The Truth About “6G” - 30th Nov 20
Ancient Aztec Secret Could Lead To A $6.9 Billion Biotech Breakthrough - 30th Nov 20
AMD Ryzen Zen 3 NO UK MSRP Stock - 5600x, 5800x, 5900x 5950x Selling at DOUBLE FAKE MSRP Prices - 29th Nov 20
Stock Market Short-term Decision Time - 29th Nov 20
Look at These 2 Big Warning Signs for the U.S. Economy - 29th Nov 20
Dow Stock Market Short-term and Long-term Trend Analysis - 28th Nov 20
How To Spot The End Of An Excess Market Trend Phase – Part II - 28th Nov 20
BLOCKCHAIN INVESTMENT PRIMER - 28th Nov 20
The Gold Stocks Correction is Maturing - 28th Nov 20
Biden and Yellen Pushed Gold Price Down to $1,800 - 28th Nov 20
Sheffield Christmas Lights 2020 - Peace Gardens vs 2019 and 2018 - 28th Nov 20
MUST WATCH Before You Waste Money on Buying A New PC Computer System - 27th Nov 20
Gold: Insurance for Prudent Investors, Precious Metals Reduce Risk & Preserve Wealth - 27th Nov 20
How To Spot The End Of An Excess Market Trend Phase - 27th Nov 20
Snow Falling Effect Christmas Lights Outdoor Projector Amazon Review - 27th Nov 20
4 Reasons Why You Shouldn't Put off Your Roof Repairs - 27th Nov 20
Further Clues Reveal Gold’s Weakness - 26th Nov 20
Fun Things to Do this Christmas - 26th Nov 20
Industries that Require Secure Messaging Apps - 26th Nov 20
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Telkom Indonesia (NYSE: TLK): Going for Growth in Market with Fourth-Largest Population in the World

Companies / Telecoms Apr 17, 2012 - 12:31 PM GMT

By: Yiannis_G_Mostrous

Companies Best Financial Markets Analysis ArticleThe Asian telecommunications sector is a top performer in terms of dividend yield, earnings per share growth and return on equity ratios. Asian telecoms offer solid growth and sustainable dividends, providing investors refuge from economic worries and market volatility.

PT Telekomunikasi Indonesia, or Telkom Indonesia (NYSE: TLK) is one of my favorites in this emerging market, for long-term growth.


At 237.6 million people, Indonesia has the fourth-largest population in the world of any country. Indonesia is a global growth leader and should remain so throughout 2012, because of its political stability, high consumer base and a thriving economy driven by manufacturing, construction and tourism.

According to the iGR consultancy, the total number of global mobile subscribers will reach approximately 7 billion by 2015, with Asia accounting for 65 percent of the total, representing the biggest region among world mobile markets.

It’s the perfect environment for a well-positioned company such as Telkom Indonesia.

The telecom industry in Indonesia historically was a duopoly dominated by Telkom Indonesia and Indosat (NYSE: IIT), with Telkom Indonesia controlling the domestic market and Indosat international calling.

Around the turn of this century, telecom deregulation in this sprawling archipelago nation sparked a period of high growth. Every year between 2005-2010, mobile cellular telephone subscriptions increased by 36 percent and fixed lines grew by 18 percent. Last year, cellular subscribers reached the 250 million mark.

Telkom Indonesia’s subsidiary Telkomsel is the market leader in cellular, with more than 104 million customers. Together with Indosat and XL Axiata Tbk PT (EXCL: Indonesia), it controls 70 percent of the industry. More than 90 percent of Indonesian cellular subscribers are prepaid customers. Indonesia still doesn’t have number portability, which makes “free minutes” and other marketing offers major ways for telecoms to retain customers.

According to the Indonesia Cellular Telecommunications Association (ATSI), the average revenue per user for 2011 was IDR20,000 (USD2.18), bringing total industry revenue to USD6.5 billion. Estimated revenue from the industry’s fixed-line segment reached USD1.1 billion.

Fixed line penetration in Indonesia had been low for years but started reviving in 2007. Since then, it has been growing by about 20 percent. Telkom Indonesia still enjoys a near monopoly in the fixed line segment, because of its extensive coverage across the country.

The expansion of fixed lines has boosted broadband services growth; it now stands at around 1 per 100 people. Although a low per capita number by developed country standards, it represents a growth rate of more than 30 percent per year. Indonesia is now home to more than 50 million Internet users and the world’s third-largest market for Facebook (see chart, below).

Source: ATSI

Telkom Indonesia in March reported that fourth-quarter net profit rose 2.3 percent. Revenue in 2011 was up nearly 4 percent, as the company added 13 million cell subscribers to surpass 104 million. New subscribers are the main source of the company’s revenue growth.

About 60 percent of Telkom Indonesia’s capital expenditures last year went to Telkomsel. The parent company will maintain the same level of commitment this year, with about USD1 billion slated for investment in its cell unit, mainly for 3G data and network infrastructure.

A significant portion of Telkomsel’s growth derives from the country’s Sulawesi province. Located between the islands of Borneo and Maluku, Sulawesi is the world’s 11th largest island with a population of 17 million, equal to 7 percent of Indonesia’s population.

Sulawesi is one of Indonesia’s fastest-growing provinces, but its mobile phone penetration rate remains relatively low, providing plenty of growth opportunities for Telkomsel. Indeed, Sulawesi has emerged as one of the country’s growth centers, surpassing the saturated market of Java.

Telkomsel controls 87 percent of the North Sulawesi market, while also commanding an 89 percent share of the Eastern Indonesia market that includes Sulawesi, Maluku and Papua. The region accounts for around 13 percent of Telkomsel’s total mobile subscriber base.

On the operating side, Telkom Indonesia has been cutting costs by forcing the early retirement of employees, bringing the total workforce below 20,000 from above 25,000 in 2007. This trend will enhance margins and mitigate the company’s perennial problem of wage inflation.

Management also is proposing an increase in the stock’s dividend payout ratio from 50 percent to 65 percent for 2011, and a steady increase from 2012 onward. The company’s solid cash flows and low debt levels will help the company’s case when regulators review the proposal. The government still owns close to 53 percent of Telkom Indonesia and has a say in major management decisions.

The rapid growth of Asia’s telecom industry during the past decade has attracted investments from foreign telecoms. Notably, Singapore Telecommunications Limited (SGX: T48, ASX: SGT, OTCBB: SGAPY) owns about 35 percent of Telkomsel, while Qatar Telecommunication Company (DSM: QTEL) owns 65 percent of Indosat.

Telkom Indonesia’s stock trades at a reasonable valuation of 11.7 times expected earnings. The shares offer a 5 percent dividend yield, with a 3 percent share buyback program. Check out my free investment advisory report for more top Asian stock market picks.

By Yiannis G. Mostrous

Editor: Silk Road Investor, Growth Engines

http://www.growthengines.com

Yiannis G. Mostrous is an associate editor of Personal Finance . He's editor of The Silk Road Investor , a financial advisory devoted to explaining the most profitable facets of emerging global economies, and Growth Engines , a free e-zine that provides regular updates on global markets. He's also an author of The Silk Road To Riches: How You Can Profit By Investing In Asia's Newfound Prosperity .


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Robin H
21 Apr 12, 00:46
Telkom Indonesia

Hi, I am from Indonesia and glad when there is a write up of a company from my country. I think you are right about Broadband services growing very fast in this country, and Telkom is positioned well for this growth in broadband. That area is growing well definitely, but it's only a small part of their revenue. As you said most of revenue is from cellular users, and they are facing big competition from companies like EXCL. EXCL is more prominent than TLKM here when it comes to cellular prepaid. TLKM and ISAT has been flat for the last 3 years, whereas EXCL has gone up 5x. As a user of TLKM broadband service, it's good but really expensive. The growth in subscribers is mostly for entry level users for 384kbps type speed which is priced at US$25/month. There are other providers providing mobile broadband service for less than TLKM, but their service is very unstable. TLKM has been able to have near monopoly of broadband market because of their coverage across the country and people already using it's landline service. However when it comes to higher speed broadband, the price get kind of ridiculous say 1mbps is charged at $75/month. A competitor (FirstMedia) is now providing 1.5mbps at $30/month. However, FirstMedia is only available at certain spots in the country right now. TLKM is playing it right keeping broadband prices extremely high because of their monopoly over coverage. In cellular area, they are doing okay but there are lots of competition from other providers like EXCL ISAT and also BTEL, and recently 3 Three. I believe the industry competition will be really tough and there are much more strong blue chips that are growing faster such as ASII and GGRM which have near monopoly in automobile and tobacco industry in Indonesia.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules