Smartfren Telecom

Stock Quote Smartfren Telecom - FREN:

Business Summary

Fitch Ratings warned in late-2012 that Smartfren Telecom is at the risk of default. In October 2013, the credit ratings assessor reaffirmed this warning when it stated that “Smartfren does not currently [October 2013] have funds in place to meet its debt, interest and lease obligations in 2013.” Smartfren's EBITDA was negative between 2008 and 2013.

Smartfren Telecom's Financial Highlights:

	2010	2011	2012	2013	2014	2015
Net Revenue	376.5	954.3	1,649.2	2,428.9	2,954.4	3,025.8
EBITDA (loss)	(510.3)	(1,170.6)	(542.7)	(129.5)	222.2	209.3
Net Income (loss)	(1,401.8)	(2,399.9)	(1,562.8)	(2,534.5)	(1,381.8)	(1,558.5)
Income before Tax (loss)	(1,363.8)	(2,649.5)	(1,811.6)	(2,708.1)	(1,409.9)	(2,008.0)
Total Assets	4,483.6	12,296.6	14,339.8	15,850.4	17,743.6	20,705.9
Total Liabilities	4,603.1	9,027.6	9,355.4	12,752.3	13,736.4	13,857.4
Earnings per Share¹² (loss)	(38,9)	(317,7)	(28,7)	(39,98)	(19,51)	(14,06)

^{in billion IDR rupiah unless otherwise stated
¹ in IDR rupiah
² numbers adjusted to 20:1 reverse stock split
Source: Smartfren Telecom, Annual Report 2015}

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.