SingTel - Maybank Research 2024-04-22: A Firm Telkomsel 1Q24 Delivery ~ Positive Read-Through For Singtel

• Telkomsel's 1Q24 core net income increased 17.9% y-o-y/5.5% q-o-q. Mobile revenues improved 2.0% y-o-y but declined 2.7% q-o-q owing to seasonality.
• We note that the y-o-y mobile momentum of +2.0% is a bit of improvement compared to flattish growth in 2023. Mobile subscribers run-rate remained positive (328k) while q-o-q ARPUs came off owing to seasonality (stable y-o-y).
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Indihome integration results visible

• While Telkomsel went through a relatively tough patch in the past 1-2 years, we see improvement on the horizon as reflected in improving mobile momentum and visible Indihome integration synergies on the cost side.
• While 1Q24 revenues declined 2.2% q-o-q (owing to seasonality), costs declined 3.7% q-o-q, resulting in relatively stable EBITDA.
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Telkomsel’s tactical pricing intervention

• Telkomsel lost 6ppt in revenue market share in the past 5 years owing to its bigger legacy revenue exposure and as smaller telcos grew presence in its previously dominated ex-Java region. However, we now see it recalibrating to arrest the market share slippages.
• Based on our compilation of starter packs (as of Mar 2024), Telkomsel starter packs are >25% below that of XL Axiata and Indosat whereas in the past, Telkomsel, used to command 20-30% premium. This, in our view, allows it to arrest market share losses in the more volatile lower end of the market.
• Telkomsel data traffic improved 14.4% y-o-y/3.8% q-o-q in 1Q24 vs 9% y-o-y growth in 2023, suggesting the pricing intervention is working.

Reiterate BUY on Singtel

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Hussaini Saifee Maybank Research | Etta Rusdiana Putra Maybank Research | https://www.maybank-ke.com.sg/ 2024-04-22 SGinvestors.io

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