PT Indosat Ooredoo Hutchison Tbk (ISAT) Earnings Call Transcript & Summary

Thank you all for standing by and welcome. My name is Tara, and I will be the operator looking after your call today. [Operator Instructions] I'd now like to hand over to Indosat to commence the presentation. Thank you. Please go ahead.

Thank you, Tara. Hi, everyone. It's [ Inder ] here. Thank you so much for joining our quarter 1 results earning call. Before we start, I will provide a quick safe harbor disclaimer. Note that the company PT Indosat Tbk will caution investors that certain statements contained in this call are management's intention, hopes, beliefs, expectations or predictions for the future; and are forward-looking statements. We wish to caution the participants that forward-looking statements are not historical facts and are only estimates or predictions. Actual results may differ materially from those projected as a result of risks and other uncertainties. Furthermore, the company undertakes no obligation to update publicly any forward-looking statements whether as a result of future investments or events, new information or otherwise. I would also like to mention that the conference call today is being recorded, and a replay of this call will be available soon after the call is completed. On today's call, I have with me Mr. Vikram Sinha, our CEO; and Mr. Nicky Lee, our CFO, on the line. So without further ado, I will hand over to our CEO, Mr. Vikram, to deliver the opening remarks. The floor is yours, sir.

Thanks, [ Inder ]. [Foreign Language]. Good afternoon, everyone. This is Vikram. Thank you for joining us today. Allow me to start this earning call with a few remarks before handing it over to our CFO, Nicky, for the financial presentation. I am pleased to report a strong start of our journey as a new company, Indosat Ooredoo Hutchison, with our good performance in quarter 1. This is due to our focus on executing our strategy in delivering the best customer experience, products and digital services for our customers; as well as realizing the integration benefit from our combined business, which gives us bigger scale and strength. Before we go into the performance, allow me to just take you through briefly what we have done on the integration front. Our focus have been on the key movers of integration, being mainly network consolidation, but also with focus on other areas, as outlined in our presentation deck. So far, our integration is on track, with 20% of the initiative completed at the end of quarter 1. And we are realizing synergy ahead of our targets. Our first financial quarter in our journey as Indosat Ooredoo Hutchison was a good one. And I am happy to share that both revenue and EBITDA are growing strongly, rising 48% and [ 28% ] year-on-year, respectively. This is, of course, due to the merger but also due to continued good traction we are seeing in the market, with both our brands performing well. We recorded a positive net profit of IDR 129 billion and remain committed to delivering value to all our stakeholders. The growth in our customer base due to our merger, and especially our total number of 4G customers along with our enlarged network presence, demonstrate what we have outlined earlier being our collective trend at Indosat Ooredoo Hutchison with 95 million customers, of which 68 million are 4G users, supported by over 120,000 4G [ BPS ]. We are in a great position to provide the best service, digital experience to our customers. We are seeing the [ results of beat ] demonstrated in the Net Promoter Score and customer satisfaction score for both our brands, which continue to improve and is a testament to the good traction we are seeing in the market. During the quarter, we had also launched several digital initiative, including UCan, Bima Kredit. And we have more exciting digital initiative being planned which we'll share with you over the coming [ years ]. We have also strengthened our partnership with our global partner in the recently concluded mobile world congress to implement the best technology innovation for our future. These initiatives remains a key part of our growth strategy as we continue to deliver the best added value to our customers. Finally, we continue our existing journey as Indosat Ooredoo Hutchison. I would like to thank our loyal customers and shareholders for their ongoing support which has helped us deliver a strong set of number to start the year. We remain committed to provide superior customer experience to our customers so that we can enjoy world-class digital product and services on our network. That concludes my remarks. And I would like to pass on now to our CFO, Nicky Lee, for the financial walk-through. Over to you, Nicky.

Thank you, Vikram. Good morning, good afternoon, everyone. I'm delighted to present our very strong financial performance for Q1 2022. For our Q1 results, if I compare against those of last year, the merger with 3 has significantly uplifted the scale of our business. This is particularly the case for our subscriber base, as mentioned by Vikram earlier. This is best illustrated in the revenue line with a 48% increment, taking the revenue to IDR 10.9 trillion [ on year-on-year basis ]. It should also be noted that the underlying businesses continue to generate solid growth, and I will share more details later on in my presentation. These favorable developments have offset the drop in tower sale rental -- tower rental income following completion of tower sale last year, as well as deconsolidation of IM2 in Q4 of 2021. EBITDA is up by 29.1% to IDR 4.4 trillion from IDR 3.4 trillion in Q1 last year. The incremental EBITDA of circa IDR 1 trillion follows the revenue trajectory. EBITDA margin percent shrank by 5.9% (sic) [ 5.9 percentage points ], reflecting a higher cost base following the merger as well as the lack of our rental income mentioned earlier which has a very high EBITDA margin. This movement is not a surprise to us and in fact is actually ahead of our expectations. Going forward, our integration process will improve our efficiencies continuously and will help us to trim some of the spending. More details on OpEx will follow. I'm also happy to report that our net profit for Q1 '22 amount to IDR 109 billion (sic) [ IDR 129 billion ]. It is IDR 43 billion lower than last year, but again this is expected due to more costs in terms of depreciation, amortization and finance expenses absorbed from merger. We are actually encouraged by the positive net profit achievement in Q1. We continued to maintain a healthy debt level with our net debt-to-EBITDA ratio at 1.13x, exactly at the same level as last year. If I look at our numbers, financial indicators for Q1 2022 against [indiscernible] Q4 '21 on a quarter-on-quarter basis. In terms of revenue, [ revenue ] increased by 30.5% from IDR 8.3 trillion to IDR 10.9 trillion, reflecting largely the impact of the merger with 3 and after [ taking ] up the seasonal revenue movement, as Q4 is the high season and Q1 is a low season for our industry. There is also a cessation of the government education program in Q1. The revenue improvement also helped to drive EBITDA to rise by 25%. Our Q4 net profit benefited -- our Q4 net profit for 2021 benefited from one-off adjustments totaling IDR 739 billion. If you want to look at the details, we have presented it and included them in the presentation material for the last quarter, but just to summarize them for your convenience: The key items in Q4 for making up the 739 billion of one-off adjustments relate to reversal of IM2 provision as well as a brand license cost reversal. And this is the key reason why the net profit dropped from IDR 951 billion to IDR 129 billion on a quarter-on-quarter basis. Now if I dive into a look at the revenue by segment, by our business lines, namely Cellular, [ MIDI, fixed telecom ]. With the exception of MIDI on a quarter-on-quarter basis due to seasonal factors, we have achieved good growth across Cellular, fixed data and fixed voice on both year-on-year and quarter-on-quarter [ basis, the revenue ]. For Cellular, it benefited from merger and provided the highest revenue contribution in terms of incremental revenue of IDR 3.3 trillion or 55% on a year-on-year basis. Comparing against Q4, it rose by 41.9% from IDR 6.6 trillion to IDR 9.4 trillion. MIDI revenue grew 12.2% from Q1 '21 to Q1 '22. This is largely organic, as the 3 brand contribution is relatively more in this segment. Upon completion of the key government projects in Q4, MIDI revenue decreased from IDR 1.6 trillion in Q4 to IDR 1.3 trillion. This is pretty much the same seasonal trend we observe for MIDI every year. Fixed voice revenue -- fixed telecom revenue [indiscernible] was up 39.5% on a year-on-year basis, follow up with 22.8% on a quarter-on-quarter basis. Great to see a strong traction in this business line continuing. If we move on to look at our costs. Our cost base has escalated, again because of the merger. And as I mentioned earlier, we are very confident that the integration process will help us to bring in a lot of efficiencies and keep us agile as we always do. And as we go through the process deeper and deeper, we should see a lot more OpEx savings coming through. I would like to point out that a very large proportion of the incremental OpEx is coming from the cost of services. On a year-on-year basis, it's -- over 80% of the increment is coming from this line. And if we compare to Q4, it amount to 94%. With this, we are going to put a lot of focus on network-related items underpinning the spending in this category. While we work on cost efficiency, it is always at the top of our mind that we wouldn't compromise customer service and growth, so rest assured that revenue and growth is the focus for us. That said, we believe there are huge optimization opportunities for us, and we are going to maximize them in the coming quarters. The other spending we need to look at is in -- is for CapEx. It remained at a fairly similar level of Q4 at IDR 2.4 trillion and is 4 percentage point lower when it is compared against revenue, so in terms of CapEx-to-revenue ratio, we actually dropped by 4 percentage points from 25.8% to 21.8%. The other element I want to highlight is on net debt. It has gone up a little bit from IDR 13.1 trillion to IDR 16.8 trillion from Q4 to Q1 this year. Once again the increase is to do with the merger, but we feel this -- our debt level is at a very manageable level, as the 1.13x of EBITDA is the same -- exact same level as Q1 last year. And this is the last element I have prepared to highlight. Thank you very much. I'll pass the time back to Vikram.

Yes, thank you, Nicky. I think, for everyone following on the webcast, we can see a couple of slides that we have on the strong operational indicators. We can see that in terms of Cellular revenue, customers, 4G data users as well as growth in NPS and CSAT scores are all moving in the right direction. And of course, the company has won several awards this quarter. Finally, on the last slide, we would just like to highlight the guidance again that we've presented, yes, as of Q4. And obviously we expect to do well in 2022. So I think that's it for the presentation. Operator, can we move to the Q&A session?

[Operator Instructions] Our first question comes from Arthur Pineda at Citigroup.

Three questions, please. Firstly, can I clarify on the interest expense line? It seems to have gone up a fair bit, and if you look at effective interest rate, if we annualize it for the year, it's north of 20%. Are there any one-off bookings being placed there? Second question I had is with regard to getting some guidance with regard to the actual growth on a pro forma basis. If you benchmark this on a consolidated basis Q-on-Q, what kind of growth are you actually seeing on the revenue line? And last question I had is with regard to the integration efforts. Are there any one-off integration costs being booked for this period?

Yes, okay, thank you for the questions, Arthur. Nicky, would you like to take the questions?

Certainly. Our interest expense has gone up a little bit following the merger, and so I guess that's the key reason why you're seeing the interest has gone up a bit.

The question is with regard to the effective interest rate that you're booking this quarter. It seems like it's north of 20% versus traditionally which is less than half of that, so that's against the current debt level that you have in 1Q.

Arthur, I'm not sure what numbers you're looking at, but we can check the details and get back to you on the calculation of the effective interest rate and the movement.

Got it. And with regard to momentum on a pro forma basis...

[indiscernible] -- yes. This is Vikram, Arthur. In terms of the guidance on growth, let me put it this way. Last 12 quarter, you have seen that Indosat have been growing 3x, 4x of the market growth. So we always try to be more grounded in terms of expectation, but the good [ news ] is that we are seeing a much better market growth this year. So we are expecting market to grow in the range of 6%, 7%, which is a very good news for the industry. And we are very confident minimum will be in line. And then time will tell whether we will be ahead of that, but for sure, we will be in line. And the market is growing at a much healthier rate. Now getting on to your second piece, on growth. Yes, when we look at year-on-year, the good [ news ] is enterprise business, which is more or less the historical Indosat business where it is continuing to do double-digit growth, but when we look at other 2 brand, we are very happy to see both IM3 and 3 brand. They are seeing a lot of traction, so -- in a normalized manner. There are a lot of normalization. Last year, we have [ tower ] revenue. This year, we don't have [ tower ] revenue, but I -- if I look at in a normalized manner, we see a healthy growth of 4% to 5% there also. So this is a very good start. And the best thing what we see are that customers both -- we see our daily VLR, we see our revenue-generating customer is growing very well for both the brands.

Is it improving if it's on a pro forma basis on a Q-on-Q basis?

I -- when you say pro forma basis Q-and-Q, that, you can get into more detail with [ Inder ]. He will help you understand that on a [ specifically granular ] detail, but what I told you in -- is Y-o-Y basis also. And on Q-on-Q basis, there are a lot of seasonality Q4 versus Q1. Also enterprise business is much heavier seasonality, but yes, on month-on-month, Q-on-Q, all our customers indicate revenue-generating daily VLR is growing.

Understood. And last question, on the integration costs. Are there any such items being booked in...

No. I think, integration, we are very happy, Arthur, to share with you that there is no big one-off, but overall this is one thing which we are doing with a lot of focus on customer. We have seen great support from all our strategic partner Huawei, Nokia, Ericsson. We are in a good shape. We have concluded all our negotiation, and all of them are betting on the growth opportunity which they see at Indosat. And what you see now is just [indiscernible]. We are -- you remember we spoke about 300 million to 400 million of synergy realization over 3 to 4 years. This is our benchmark. And what I can tell you is we are ahead of that. First quarter itself, we have done more than what we have targeted on the synergy realization, but specifically there is no big one-off. It is all in terms of sustainable the way things look like.

Understood.

Thanks, Arthur. We will get back to you after the call on those points, yes.

[Operator Instructions] Our next question comes from Hussaini Saifee at UBS.

A couple of questions from me. First is on the competition side. So just wanted to understand that. What is driving the improvement in growth? Is it because of the -- just the macro economy or post-COVID relaxation in terms of mobility, or is it because of telcos are making any price increases? And just want to understand that has Indosat made any increase in the pricing as well. The second question is on the network-related cost savings. So I just want to understand that. I mean, Pak Vikram, you noted that around 3,000 tower tenancies are coming up for renewal, so I just want to understand. Has those been renewed? And what kind of savings you are seeing on the back of that. And finally, on fixed telecom, the growth has been quite strong, so I just want to understand. What is driving that? And is that growth sustainable going forward?

Okay, let me start with the first question, on the overall competition in industry. I think, this, I have been talking about for last 3, 4 quarters, but the good news is this quarter we see more sustainable and more healthy move from all the top 3 operators. So overall, as I said, the outlook for the industry growth is much healthier this year. And we are seeing a lot of corrections. And we had also implemented from [ 1st April ] in terms of our pricing, but our driving focus still remains a very simple, transparent product approach. So this is one thing I can tell you on growth, but coming on to the integration side, I think we are in a very good position. And all our tower companies, they are working with us to come up with [ a very win-win ] solution. And they are all very supportive of Indosat Ooredoo Hutchison. So a lot of negotiation have been completed. And there are a few ongoing, which we are very confident to conclude it in quarter 2. So specifically what benefit it will bring on to us, you will see that in quarter 2 results, but what I can tell you is we are in a very, very good shape. And I am very encouraged to see how all our partners are supporting us, especially on our growth agenda. And especially [ towercos ] have been also very, very cooperative. Coming over to the third one, on the fixed side. I think what you saw is a year-on-year growth of 12%. Yes, our enterprise business is getting stronger day by day, so there is a growth on -- both on the core connectivity business and also on all the enterprise and adjacent revenue. Some of these adjacent revenue and enterprise comes with a relatively lower margin, but overall our fixed and enterprise portfolio is looking much more [ healthier ]. And we are getting ready specifically for the 5G era, when it comes to enterprise, and that whole ecosystem play.

Understood. [indiscernible]. And just on the pricing [ intervention ] which you made on 1st of April, I just want to check what percentage points on a ballpark range you increased your pricing by.

I think these are all public information. You can get it, but what I'm trying to say is the industry is moving in the right direction, if you look at the data yield for Indonesia. We have been talking about it. It is people are asking for more quality and experience and more value for money, so I think it's a very good move. Also I want to highlight that we see much more improvement on the quality of customers acquisition. And all these things at an industry level is moving very much in the right direction, [ especially ] in last 2, 3 months.

[Operator Instructions] Our next question comes from Piyush Choudhary at HSBC.

A few questions. Firstly, Vikram, we are seeing your peers are, well, moving towards more fixed-mobile convergence strategy. We have seen moves from telecom also. They are talking about, well, like going towards FMC strategy, so what's -- firstly, what's your view on FMC? And any strategic developments which you would like to share?

Piyush, no, I think you have a very valid observation. The industry is also moving towards a bit of a convergence between fixed and mobility. The good news is that with our enlarged scale -- we are more than 100 days in our journey. We have [ the ] scale of getting our fixed play in terms of FTTH [ right ]. So in quarter 2, we will be starting [ with our ] brand. And we see a lot of synergy and a lot of opportunity there. So for a period of time, we will be able to ensure that we have a fair place and we have a fair share in this base also. The good thing for us is now -- that IM2, which was a legacy issue for us, is behind us now. The [indiscernible] and all have been very clear, and we are following those guidelines. So it helps us complete the -- IOH have the right scale and the right support from the shareholders to ensure that we are able to, yes, ensure the right kind of play which is needed. And we are getting ready for that.

So may I clarify, sorry, that IM2 issue? Like you don't have any retail fixed broadband products right now, right?

We have -- historically, Indosat had [indiscernible] IM2 of our subsidiary...

Yes, yes, that was in the past, right? Right now you don't have any product.

Right now we don't have. And we'll be launching under the umbrella of IOH our own fixed broadband. We have a lot of fibers. This [indiscernible] monetize our infrastructure. And we are working with partners. There are a lot of interests from private equity company also. So we are in a good place, Piyush. And the point which you raised is right. There is a lot of opportunity there. Look at the broadband penetration in Indonesia. And also, with our scale of 95 million customer and how we can have that convergence [ in place ], we are getting ready for that. And in quarter 2, we'll be able to start. And then you will see how we are scaling it up.

Got it, got it. And in terms of your CapEx guidance, would it be possible to share some -- like how much of that CapEx is going in -- outside of Java areas? And as of now, on a pro forma, like the consolidated entity, what proportion of revenues is coming from outside of Java?

So 2 things, Piyush, again very happy to share with you. The first concern which I got from analysts first call after IOH was formed was high integration cost. What I can tell you is we have concluded our negotiations with our top 3 radio partners Ericsson, Huawei, Nokia. All of them have supported us with the kind of offers and proposals which have never happened in the world. And then we have been able to conclude that with a [ least-disruption ] model. And it's something which we are very thankful to our partners, that -- how they are trusting on our growth opportunity. So that is one thing which have been a very positive news on the whole CapEx piece. And this in background, Piyush, [ even this time ], Indonesia is not about Java and non Java. I don't know how much you know about kabupaten and kecamatan. There are 7,200 kecamatan. I think this is a legacy way of looking at Java, non Java. We have started looking at the country at -- the way, if you'll -- if you understand Indonesia from a geographical point of view, there are 7,200 kecamatan. And we want to make sure that at a kecamatan level we have a very competitive network and we have the distribution also to serve our customer. So this is how we are moving, but to answer your question: Java contributes to close to 75% or 74% of the industry revenue, so ex Java is around 24%, 25% of the industry revenue. So -- but our strategy have gone beyond Java and ex Java. We are looking at things at a kabupaten and kecamatan level [ now ].

Correct, fair enough. And like probably in a different way, you would have scoped your addressable market size, right, in these 7,200 -- sorry. I hope I'm pronouncing it right, kecamatans. Out of these areas, like which -- what percentage you are not covering at the moment. And what is the road map to cover that, like the time line to cover that?

So we have a very competitive network and specifically with IOH [ and the Tri ] integration plan in place. Let me give you 2 data points. Number one, in your language, if I look at Java which contributes to 74% or 75% of industry revenue, we will be having -- after eliminating the duplicate [ site ], we will be having close to equal number of physical [ BPS ] than Telkomsel. This is unprecedented. Nobody could have thought of doing that. So once we complete our integration, once all these sites will be able to use the full spectrum -- and this is what -- we want to do it fast and first time right. You can understand what kind of customer experience we will have in Java. So this is how I want you to understand the opportunity which we have in front of us. Now coming on to kecamatan level: Out of 7,200, close to 4,800, we have a very competitive network. Now we are focusing on strengthening our distribution. We want to make sure that we are able to get more and more people into the digital [ fold ] from those kecamatan areas; and give them very good experience and service also, our product availability in terms of educating customers. So both there is a network play and there's a distribution play at a kecamatan level where we are focusing on.

Got it, Vikram. this is very helpful. I'll come back in queue.

[Operator Instructions] We have further questions from Piyush of HSBC.

I have some follow-ups. Given the -- like if -- can you throw some light on the -- probably the cost items or CapEx items where you might seen inflationary pressures at the moment? [Technical Difficulty]

It looks like our speakers rejoined.

So my question was on the -- with the recent inflationary pressures, could you highlight like which cost items you are witnessing any inflationary pressures? And anything on the vendor-side disruption or -- which might be seen at the moment?

So Piyush, this is Vikram. I'll request Nicky also to add on, but we are not seeing any inclinatory (sic) [ inflationary ] pressure. It is just that what you see is an outcome of the merger, and I'm sure you will understand that the synergy value takes a little time to kick in. This is where -- what we are showing, that in first quarter itself we have been ahead of the time in terms of what we had planned. So this is the big picture. Only one item which we see a bit of a impact of, if I call it, inflationary pressure is SIM cost, but it is not a very big ticket item. But yes, that have been impacted, but when you look at the overall number, as you understand on this merger, the efficiency kicking over a period of time -- and we are well on track. What we have given the guidance for this year, we feel more confident that we'll be able to deliver more than that.

This is Nicky. I agree with Vikram. SIM cost is really the only thing which kind of worried us a little bit. For other spending, CapEx included, we are not seeing, if you were thinking about, whether there could be chip shortages which could have an impact on the price. We -- generally speaking, I mean we don't want to go into specifics, we don't see inflationary pressure. As Vikram mentioned earlier, we feel we get a fantastic deal with the vendors. So actually we're getting better prices in general. I hope that answered your question.

Yes, that answers. Just one last thing: Could you tell us like what's the churn rate now at the moment and how kind of it has trended over the last couple of quarters?

So in terms of percentage, we are seeing, in fact, a bit of an improvement, Piyush, if you look at quarter-on-quarter also. We have only been seeing a bit of an improvement on [indiscernible]. So specific number, I think [ Inder ] will be able to share it with you, but overall, in fact as I told you, the quality of [ gross add ], not only us, at an industry level, we see improvement on -- this whole washing machine effect which we used to do, [ see it in ] 2019, that has only been improving for a period of time. So overall it is getting -- improving. I -- my team have put the number also. So if I look at January versus March, when we started, the churn have only been improving, Piyush.

Got it, Vikram.

[indiscernible] figure of 5.5%.

5.5%, okay.

Our next question comes from Hussaini Saifee at UBS.

I just have a couple of follow-up questions. So first is on the -- I mean it's following up on Piyush's question on the churn. So I just want to understand. Was there any subscriber cleanup in the first quarter? Because when I see -- I mean I add [indiscernible] number and Indosat's fourth quarter number. I estimate that there was a net subscriber loss of around 7 million, so I just want to check if there was any cleanup exercise. And the second question is on the -- on your convergence strategy. As you look -- as you move into convergence, would it have any implications on the CapEx? Or with the [ 20% to 25% ] CapEx-to-sales ratio, you can make inroads into that segment as well.

Let me answer your first question. This is Vikram. I think first thing was the whole alignment, harmonization of definition. So when we talk about 90-day customer: We made sure, after merger, we harmonize the brand, the way we define 90 day, but the good news is our daily VLR have been growing consistently from the day we were born, our 30-day revenue-generating customers. Again these are [ most ] important indicator to look at and it is all growing. The other thing which you need to keep in mind, which I highlighted, we have put a very -- a process which helps us make sure that our quality of acquisition improve. And that have been working very well for us. If you look at last year also, our net add was even more than [ some of the introduction or ] gross add, but the net adds kept improving. And we saw some very good results. So we -- at an IOH level, we have made sure that we have much more focus on quality of acquisition. And that is working very well for us. So you might see some plus, minus on a 90-day base, but on a 30-day daily VLR, it is all positive for us.

Understood.

In terms of the CapEx. The guidance we have given has already covered the spending required on the fixed line business, the broadband business.

Yes, I think the other question was on the...

Convergence...

Convergence strategy and the CapEx implication. I think, as I highlighted, first, we have a lot of fibers and infrastructure at an IOH level with this merged entity, which mean [ we want to monetize ]. The other good thing is there is a lot of interest from private equity partners and long-term investors on investing on [ Indosat ]. So we have all the options available, and as we go along, we'll look at all those things.

[Operator Instructions] Next question comes from Niko Manronis (sic) [ Niko Margaronis ] from BRI Danareksa.

Congratulations for the numbers, yes. They look good. I just wanted to check on the costs. How do you see those trending? I mean, do you see synergies? Can we factor in more synergies in -- for 2022 in the OpEx and perhaps on the leases of -- on the contracts for towers? Yes, that's my question.

Nicky, you want to start?

Certainly. Let me try. For 2022, we may not see -- there are a number of factors that we need to consider. So number one is we need to physically integrate the network [ side by side ]; and do the detailed work, physical work to get the integration going. While -- we feel we have accelerated process a lot, but still it will take some time to do it. And the other factor is these contracts. So some of the underlying leases of contracts will not be mature even if we have completed the work. Now we could also make different arrangement with the vendors, so -- but there will be a dependency on how long it will take for us to discuss. And what will be the kind of conclusion we get out from the discussions? So looking 2022, I wouldn't be guiding too much cost savings coming into this year, but hopefully, we -- indeed there are a few uncertainties, as you will understand, that we are working on when we try to accelerate the process as much as we can. So we do hope we can get some more saving into 2022, but the way I look at it, it wouldn't be a lot. Vikram, will you want to...

Yes. So Nicky -- just to build on what Nicky said, Niko, let me [indiscernible]. I think in one of our analyst calls we spoke about 300 million to 400 million of recurring synergy over 3 to 4 years. That is our baseline. And we created our baseline on a number of 350 million. What I can tell you is, in quarter 1, we are ahead of that. So for this year, as per that baseline, we had planned around 60 million. I think we are more confident we will do a little more than that, yes. The other important thing I want to highlight, we saw very strong support coming from our RAN partners, and I spoke about it. This was very, very strong; and they are all betting on growth. Same thing, we are seeing from our tower partner, but that is work in progress. And as Nicky said, we -- it will be too early for us to say how it will conclude, but it have been a very constructive discussion which we have been going on with them. So you will have, we will have to wait for a little more [ body growth ]. Maybe on Q2 we will have a clearer picture.

Right, yes, yes, Pak Vikram. My follow-up question, maybe I missed it earlier. Pak Nicky mentioned that you're holding talks with your suppliers, vendors. Would it be one of those related to towers? And given that those stocks are holding longer, is also the CapEx, potentially the 10 trillion, for 2022 may be reduced, may come lower than expected, for 2022?

[ Pak Niko ], we've got 2 things, I think. And Nicky can add to it. We concluded our discussion with all our radio vendor. And this is -- again, it is very important that IOH have the agility to move fast because we have to clearly make sure we take care of our customer on customer experience while we are doing integration. So all negotiation with our radio network vendor is concluded, and the outcome was phenomenal. So what it help us, that -- a lot of question was coming on high integration costs on first year. That is very much under control. Now we want to invest on growth and customer experience. As we said, we want to -- IOH has a mandate to work with a growth mindset, work with [ that mindset ]. So we wanted to minimize our CapEx on integration and focus on growth. On -- that is what we have been able to achieve. And that is a very, very encouraging, positive thing which we have got. Work is happening with the entire companies. We are very confident that we are in a very good place and we'll be able to confirm something which is win-win in quarter 2.

Got it, got it. Yes, okay. Maybe in the dual-brand strategy, maybe you covered it already, but what is your -- what do you intend to do? Is there some gradual integration of those 2 brands, or are you going to keep them separate? And yes. I mean, is marketing cost also -- is it going to be higher? You'd -- because you're holding 2 brands. Or how to look at it.

Niko, I think you've asked a good question. I want to clarify this for everyone. What this merger brought us is 2 things very important for us to understand: very strong, 2 complementary brand. And second is a very good mix of spectrum. So both the brand is here to stay. We are more confident now. These are very complementary brand. If you look at -- 3 [ talks to gamers ]. And they have positioned themselves very strong on [indiscernible] youngsters. And IM3, more of a family brand, very strong legacy. So both are very complementary brands and both are going to stay. And both of them, we are putting all the investment needed to grow them. And other wish list is that both brand have to be the fastest-growing brand in the industry, and that is how we are working. When it comes to marketing costs and all, I think [ the different ways ] we have seen some of the other mergers goes wrong. And I told you we want to work with a very strong cost discipline. We want to make sure every [ $1 we spend give us $5 ], but there are a lot of big ticket item for us to realize our synergy of 400 million or 350 million, what we have said. We don't want to cut corners and get lost on small things. We want to maximize on all these assets which we have got.

Yes, yes, yes. Maybe one last question, to Pak Nicky. I understand that there's a contract for 2,500 towers with one of the tower operators. Are there negotiations still going on? Or the issue has finalized. And maybe you can share us some details on this.

We don't generally comment on specific contracts. And we do talk with tower vendors all the time and I'm not sure which particular contract you're referring to.

Yes. There was -- 10 years ago, there was 2,500 towers you -- a sale and leaseback with one of the tower players, yes, 10 years ago.

[indiscernible] let me add here. First, I agree with Nicky. We generally don't comment on specific contracts and specific company. What I can tell you is that we are in a very good place. You yourself said it. These were very high-value contract. It was done in USD. Now time has come to reap benefit and [ correct ] all those things, so we are in a good place. And we are getting a lot of cooperation from all those tower partner also. So please wait for 1 more quarter. You will see the conclusion of all those things.

In the interest of time, our final question will come from Arthur Pineda at Citigroup.

Sorry. Just a follow-up with regard to the fixed broadband expansion. Are you able to share any thoughts on targets on this, like parts build or subs targets that you are looking to take for 2022? And when you say 6% to 7% growth for the industry, are you referring to just mobile, or does that include the broadband contributions?

Arthur, this is Vikram. I am talking about Cellular revenue and mobile more. That is where you have seen muted growth. Industry last year and all was [indiscernible], while Indosat, we were able to grow at close to 8%, 9% or 10%. So this is what I'm referring. We see a better industry outlook for Cellular revenue and mobile. On your first question, I think you will have to wait for more. I told you we are still planning to wait end of quarter 2 or early quarter 3. And you will have to wait for that to get started.

Okay, I think that was the last question for the day. Thank you very much, everyone, for joining the call. We hope it was very fruitful and helpful discussion for you. As always, do reach out to us if you have any further questions. We're always ready to help. Thank you. Stay safe. And we'll speak to you again next quarter.