Indosat Ooredoo

Stock Quote Indosat Ooredoo - ISAT:

Business Summary

Together with its subsidiaries Indosat Mega Media (IM2) and Aplikanusa Lintasarta, Indosat provides fixed data services or Multimedia, Internet and Data Communication (such as IP-VPN), leased line and internet services. For a long time, Indosat had been a dual-listed company on both the New York Stock Exchange (NYSE) and Indonesia Stock Exchange (IDX). However, on 16 May 2013, it was delisted from the NYSE on request of the company for reasons of cost efficiency.

In recent years, the company has lost a couple of percentage points in terms of market share on the mobile phone market in Indonesia. Currently, the company holds a market share of around 21 percent.

Indosat - originally established in Indonesia as a Foreign Investment Company (PMA) in 1967 - was bought and thus fully owned by the Indonesian government in 1980. In 1994, the government listed the company on both the New York Stock Exchange (NYSE) and the Indonesia Stock Exchange (IDX) but kept 65 percent of the company's shares. In 2001, the company established PT Indosat Multimedia Mobile (IM3) that pioneered with its mobile operator GPRS network and multimedia services in Indonesia, followed in 2006 by acquiring the license for 3G networks and introduced 3.5G to Jakarta and Surabaya.

Indosat gains most of its revenues from its cellular phone business segment (83 percent), followed by fixed data; MIDI-Multimedia, communication data & internet (13 percent), and fixed telecommunication (4 percent).

Operational Highlights Indosat Ooredoo:

	2009	2010	2011	2012	2013	2014	2015	2016
Cellular Subscribers¹	33.0	44.3	51.7	58.5	59.6	63.2	69.7	85.7
– Prepaid¹	31.3	43.2	50.5	57.8	58.8	62.4	69.0	84.8
– Postpaid¹	1.8	1.1	1.2	0.6	0.8	0.8	0.7	0.9

^{¹ in millions}

Indosat's Financial Highlights:

	2009	2010	2011	2012	2013	2014	2015	2016
Operating Revenues	18.82	19.74	20.53	22.42	23.86	24.09	26.77	29.18
Operating Income	3.18	3.41	3.16	3.19	1.51	0.67	2.36	3.94
Net Income (loss)	1.50	0.66	0.97	0.38	(2.78)	(2.01)	(1.31)	1.11
EBITDA	8.75	9.64	9.66	10.54	10.37	10.03	11.47	12.86
Total Assets	55.04	53.32	53.23	55.23	54.57	53.27	55.39	50.84
Total Liabilities	36.75	35.07	34.26	35.83	37.79	38.97	42.12	36.66
Basic Earnings per Share¹	275,7	122,6	178,3	69,0	(513,11)	(369,60)	(241,08)	203,4
Dividend per Share¹	172,85	137,86	59,55	76,84	34,52	0	0

^{in trillion IDR (rupiah), unless stated otherwise
¹ in IDR (rupiah)
Source: Indosat, Annual Report 2016}

Future Outlook of the Indonesian Telecommunication Sector

Indonesia is unique in the sense that mobile phones are the primary tool for telecommunication. Not only with regard to telephony but also in terms of internet usage. Mobile phones are used as main tool device to access the internet by Indonesians. Mobile phone penetration has surged from 20 percent in 2005 to - currently - over 80 percent (although about 30 percent of Indonesian subscribers hold more than one SIM card). This indicates that the mobile phone subscription market is heading towards saturation; growth in voice and SMS revenue is stagnating. Internet penetration, however, is relatively low, thus having ample room for growth in the near and middle term future. High-speed broadband services are now the new focus of telecommunication companies. However, profit from call services remains to be the primary source of income for Indonesian mobile operators.

Indonesia is also unique in the sense that the country is predominantly a voice market due to low voice tariffs set by operators. Over 60 percent of total revenue in the mobile service sector is derived from voice services, while the remainder comes from non-voice or data services. The growing popularity of smartphones, however, contributes heavily to the growing data revenues. According to data from Frost & Sullivan, a consulting firm, smartphone penetration in Indonesia will exceed 50 percent in 2015 from only nine percent in 2012. The firm believes that the Indonesian market is in the early to middle stage of data usage increase.

Due to the promising perspectives of the mobile phone sector in the last decade, a number of companies are in fierce competition for market shares. Out a total of 11 telecommunication operators, five companies control a combined market share of around 90 percent. These five are: Telekomunikasi Indonesia - and its subsidiary Telekomunikasi Seluler (Telkomsel) -, Indosat, XL Axiata and Bakrie Telecom. Competition has brought tariffs for mobile phone services down significantly, while a new group of subscribers (from the poorer segments of society) has limited spending capacity. Instead, companies now focus on data services (broadband services) and value added service to attract subscribers, both of which are estimated to grow by 35 percent up to 2014. In 2011, there were around 70 million mobile phone data services users. This is estimated to increase to 160 million by 2015.

Projection Indosat Ooredoo's Future Corporate Earnings:

	2017	2018	2019	2020F	2021F	2022F
Net Revenue	29,926.0	23,140.0	26,118.0	27,825.0	29,734.0	31,428.0
EBITDA	12,763.0	6,500.0	9,856.0	10,746.0	11,679.0	12,416.0
Net Profit	1,136.0	(2,404.0)	1,569.0	(1,328.0)	(850.0)	(543.0)
P/E Ratio (x)	15.6		9.4
ROE (%)		-17.8	12.1	-10.2	-7.1	-4.8

^{in billion IDR, unless otherwise stated
Source: Trimegah Sekuritas (27.02.2020)}