PT XLSMART Telecom Sejahtera Tbk (EXCL) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and welcome to XL Axiata's Third Quarter of 2024 Earnings Call. I'm Chris, Investor Relations, and who will be coordinating today's call. Allow me to remind you that this call will begin with a presentation from the management, followed by a hybrid question-and-answer session. [Operator Instructions] As a reminder, this session is being recorded. I would like to introduce the esteemed members of the management team who will be joining us today for the call, Pak Feiruz, Director and Chief Financial Officer; Pak David, Director and Chief Commercial Officer for Consumer; and Pak Abhijit, Director and Chief Commercial Officer for Home and Convergence. I would now like to hand over to Pak Feiruz to present the management highlights. Pak Feiruz, you may kindly proceed.

Yes. Thank you, Chris. Thank you, everyone, for your time to join our call today. Allow us to begin the key highlights of our results for the third quarter of 2024. Now if you look at the slide, in the first slide, we are very much pleased to present that during 9 months of 2024, we have demonstrated strong profitability focus with double-digit growth despite challenges which we saw in consumer spending. We're also excited to announce the successful completion of our planned structural transformation with fixed broadband customer migration from Link Net, thus positioning XL as the second largest ISP and paving the way for new opportunities for our convergence ambitions going forward. Our financial performance remained robust with EBITDA growing by 13% year-on-year, outpacing top line growth. This was driven by our ongoing constant focus on operational efficiency, achieving an EBITDA margin that stands at 52.4% for the 9 months 2024. Our PAT saw an increase of 32% year-on-year, reinforcing our commitment to profitability. Subscriber growth continues with mobile subscribers reaching 58.6 million, reflecting a solid 2% growth year-on-year. XL Fixed broadband also surged with XL Home subscribers growing by a notable 40% year-on-year. Our commitment to cost excellence is paying off, even more so required in a challenging macroeconomic climate. We managed to reduce our OpEx by a sizable 3% quarter-on-quarter and by about 0.4% year-on-year, driven by efficiencies in overall costs, namely sales and marketing costs, direct expenses and infrastructure costs. Finally, we are proud to announce that our structural transformation to ServeCo is complete, bringing over 1 million fixed broadband subscribers under XL Axiata. Next slide. Now our transformation journey to ServeCo has positioned XL as the Indonesian fixed, as one of the leaders in Indonesian fixed broadband market. As of 27th of September 2024, around 750,000 First Media subscribers have now officially joined the XL Axiata family. Along with the 289,000 XL Home customers, XL Axiata now serves over 1 million fixed broadband subscribers. This monumental development catapults XL Axiata to become the second largest ISP in Indonesia, now access to more than 6 million homes passed and extensive presence in more than 127 cities across the country. With First Media now on board, we have actually gained a fresh new engine to power our convergence ambitions with opportunities to further penetrate converged services to a larger customer base. Our product suite now includes a broader content selection, making our proposition even more compelling than before. Now on the digitalization front, we have actually accelerated our efforts, fueling both revenue growth and product innovations centered around personalization. We have seen remarkable traction with our digital initiatives. Our app users have grown by nearly 20% year-on-year, reaching 32.2 million. This means that the penetration of our digital application is the highest in the industry at 55%. We have also seen a substantial increase in revenues generated from own app channels now at 33% of our mobile revenue. This leaves room for further optimization, especially at the time when consumer spending begins to recover. To further drive revenue uplift, we've launched Bebas Puas, a flexible, customizable daily package designed to give the flexibility to our customers to select daily packages tailored to their needs and budget. This aligns with our commitment to provide more personalized solutions, ensuring that we meet the diverse demands of our clientele and encourage more frequent usage. AI continues to be an important aspect of XL's identity, driving both revenue and cost excellence. We have succeeded in leveraging AI to provide enhanced customer experience, drive operational excellence and foster innovations. AI has supported our revenue uplift through intelligent network planning, hyper personalization in our digital apps and also supports our fixed connectivity business growth as well as monetization strategies, as we explore AI as a service. On the cost side, AI has optimized network operations and enhanced sales operations efficiency as well as created Gen AI-powered back-end operations automation. Our dedication to embedding AI continues across operations, as it strengthens XL's competitive edge and paves the way for sustainable growth. Now let's dive deeper into our financial and operational highlights. Despite seasonal challenges and economic headwinds, we maintained a resilient performance with solid profitability. Our revenue grew by 6% year-on-year, while EBITDA grew faster at 13%, reflecting our efficiency gains. PAT surged 32% year-on-year with an impressive EBITDA margin of 52.4%, surpassing our guidance. Even in a seasonally weaker quarter, we actually achieved steady growth in both mobile and fixed broadband subscribers. Mobile subscribers reached 58.6 million, marking a 2% increase from the same period in 2023, while ARPU was resilient despite softer spending and moderating growth of traffic. XL Home and XL SATU showed positive development with a substantial growth in the quarter. Convergence penetration has also increased to now 83% of XL Home subscribers are also subscribed to mobile services. Our commitment to profitability has been exemplified by our disciplined cost management. Focus on operational excellence is imperative even more so during times of weaker consumer purchasing environment due to the economic conditions. Operating expenses in quarter 3 saw reductions across several categories, notably in sales and marketing, infrastructure and direct expenses. We will indeed continue this disciplined approach to cost management to maintain the most efficient cost to revenue ratio and reinforcing our focus on profitability. Our commitment to smart, impactful investments remain stronger than ever. We are strategically expanding our BTS presence across key regions, ensuring that each investment maximizes both reach and XL productivity. Every step that we take is carefully designed to sustain the strength and efficiency of our network operations while positioning us for future growth. We are pleased to inform that we've now fiberized 63% of our sites. This achievement not only amplifies our connectivity quality, but also sets a strong foundation for future innovation, allowing us to deliver faster, more reliable service to our valued consumers in Indonesia. Looking ahead, while we anticipate tightening competitive environment and consumer spending challenges, therefore, our full year guidance, we are targeting mid- to high single-digit revenue growth. Amidst macroeconomic challenges, which will require even further attention on operational excellence, we expect EBITDA margins to improve to above 50% alongside a very disciplined approach to CapEx, which will aim to be below IDR 8 trillion for 2024. This concludes the summary for the quarter. Thank you, and I'll hand over back to Chris.

Thank you Pak Feiruz. [Operator Instructions] The first question comes from Piyush from the line of from HSBC. "In mobile, how is the competitive dynamics? When did you and how do you see the increase in tariff? And has there been a response from the other peers? Can you comment on the outlook for mobile ARPU? And in home broadband, how is the competitive dynamics? What is your current ARPU in fiber broadband and outlook for ARPU?" I think this one, we will pass to David and later on to Abhijit to address on the home ARPU.

Yes. So thanks, Piyush, for the question. I will start with the first one. The competitive dynamics and the tariff increase. Well, the easy answer, the price increases, we started to do price increases during the first week of September. So yes, first week of September, I think it was the 4th or the 7th of September is when we started increasing. You know that when you increase prices in certain channels, the impact comes almost immediately in other channels like the traditional channel, it needs to flow to the market. So it takes a little bit more of time. Now regarding the competitive dynamics, I'm not going to lie. It's tough. So I think the competitive dynamics during quarter 3 were tight. I think a couple of things happened. So there were many very cheap SIM cards in the market. So we saw an increase of dual SIM that affected our ARPU. That's number one. Number 2, we see the incumbent being quite aggressive, to be honest, not only in the SIM card, but in general. So we saw that they launched the Telkomsel Lite back in February but from that point on also, what we see is that they keep being quite aggressive with their portfolio in the traditional channel, but also in their application and in their CBM strategy. So I think that's what we can see. The response to our price increase, to be honest, we have not seen any significant response. As I'm seeing, we see the incumbent still being aggressive. So that's the result to increased prices. But to be honest, the market, we see very not response in any case, even Telkomsel being a little bit more aggressive. To the second question, answering about the outlook for mobile ARPU, again, we expect to keep growing the ARPU. So this quarter was very bad thing. We believe that based on 3 different things, our ARPU decreased even more than what we were expecting. One is the economic situation. So we see that the buying power of the customer has been affected and in quarter 3 was lower. Number 2, we keep saying this, but we see the local Wi-Fi players being a threat and still being part of our traffic. And number 3 is the competition, as I was mentioning, a couple of things, very cheap SIM cards in the market, which pushed quite a lot of dual SIM and the incumbent also going quite aggressive. So I think those 3 factors made that the ARPU decrease. We were able, as you can see, to hold our customer base. So we didn't lose subscribers, but we saw that part of these subscribers moved their traffic somewhere else or stopped some of the traffic. And again, because of economic reasons, because of the Wi-Fi usage and because of competition. I will now let Abhijit answer the third question.

Hi everyone. So I'll take your second question. In home broadband, how is the competitive dynamics? Again, the same as what David was mentioning on the mobile side, the competitive intensity is increasing. David was alluding to local Wi-Fi players stealing the mobile traffic, but the same players also impact the fixed broadband as well because they go in at price points, which are considerably more aggressive than the national players. Unfortunately, now the basis of competition in the fixed broadband is moving towards price. I think all of you must be aware that even national ISPs are now becoming more aggressive in terms of pricing for new acquisitions. From that angle, the outlook for ARPU; so we've held our ARPU, I think in the last call, I had mentioned we were closer to 300. We are now between 250 to 300, but the Link Net business has just come over. So we will crystallize our view as the next months go by. But outlook for ARPU, I can tell you, is going to be challenging for the whole market because it's not just the local players. Now the national ISPs are also becoming super aggressive in terms of the pricing strategy.

Thank you, Abhijit. Now I would like to invite to Piyush if you have further questions. We have opened your line.

Just a follow-up on the mobile side. Can I confirm that you have increased prices in first week of September across both the brands? Or it has been selective kind of increases? And second is, what needs to change for mobile tariffs to increase broad-based across the industry? And third question is on the home broadband side. With the challenging outlook for ARPU, which you have highlighted, how does the economics change, the payback period change? And does it change your rollout strategy?

Yes. So let me take the first question. Yes, I can confirm that we did increase for both brands and in different channels, both for XL and Axiata prices in the first week of September. Now what needs to happen for this? Well, I guess that what we will have loved to see is that the market, not only us, but other players also started increasing prices, which I think it didn't happen, right? So I think we came from I think it was 2023, right, where almost everyone was increasing prices. So I think in that environment, I think it's a healthier environment where the prices can go up. In these types of environment, it's tough. It's tougher, especially if the incumbent is taking an aggressive stance, it's tough to increase prices, right? So I think that's what I can comment on that.

So your second question, Piyush, about growth prospects, right? Given that the Link Net business has transferred over, we already have 6 million-ish homes passed already. So in terms of prospects for us to drive penetration in that base, yes, it is still there. But overall, in terms of the rollout strategy, look, the market growth prospects haven't changed. There is still a lot of potential in the market. It's just that players have to be a bit smarter. So on our side, given that we are a ServeCo, we take care of the retail side, we have to be a bit more agile, a bit more disciplined, a bit more efficient in our costs so that we try and protect our margins. But I think the same rule will apply on the supply side as well, right? The wholesale people who are deploying the fiber for us, how do they efficiently kind of manage the CapEx per home passed, so that all in all, the model progresses, and this economics is true regardless whether you're a ServeCo or a pure FiberCo or an IntegratedCo, right? Whoever is deploying infrastructure in the ground has to be mindful of the end prices in the market, and they have to drive efficiencies. And whoever is managing the retail interface also have to do the same.

Got it. Just Yes. Just given that you have mentioned you have 6 million home pass and only 1 million customers, like we have seen in other markets, penetration level can reach 30% to 35% of the home pass. Is that something which can be driven or there is some kind of bottleneck to drive that?

No. So is your question then is the same kind of growth applicable to us?

Yes.

So -- this is what I was mentioning when I started my answer that we have that. So there is scope for us to increase our penetration in this footprint as well. In the existing footprint.

Now let's move on to the next question from Kevin Jonathan from Bahana Securities. "The first question is on postpaid ARPU in Q3 2024 declined on a quarterly, yearly basis. What caused this? And what ARPU trends do you expect going forward for XL?"

So regarding the postpaid, as you may know, in the beginning, we were in the Tier 1 cities, and we have been expanding to Tier 2, Tier 3 and these type of cities. So we see that when we expand to other cities, usually, the ARPU keeps decreasing. In any case, we see that the ARPU difference with prepaid is still big and healthy. The ARPU trend that we expect, we expect the ARPU to increase, honestly, I mean, this quarter 3 was bad, clearly, but we expect the ARPU of XL to keep increasing. Part of it naturally, right? But part of it also because we -- one of our top strategies that we have been mentioning is the digitalization and moving the customers from a traditional channel to our own applications, AXISnet and MyXL. So that will bring also the ARPU.

Then there is another question, which is actually on the P&L. There is a significant increase of others account. Could you explain what drove that? Thanks, Kevin. Yes, you're absolutely right. There's an increase in others account on a quarter-on-quarter. That's partly due to a one-off, right, that's related to the completed transaction from Link Net, which we concluded on the 27th of September 2024. Okay. Now we shall open the line for Kevin. Kevin, do you have any further questions?

I have no further questions. So best of luck.

Meanwhile, let me also go to the chat. There is a question that comes from Sukriti Bansal from Bank of America. Let me just read the question. The first question is on Telkomsel that were supposed to be Java products. Are you seeing the impact of them in ex Java as well? Second question is on the other competitors that mentioned on SIM consolidation, but you were saying that there were cheaper SIMs available in the market? I think this is more on the SIM consolidation.

So let me answer that. Telkomsel Lite and Bayou are products that are nationwide, although they are more aggressive in Java. That doesn't mean that in NexJava, they are not competitive. As you know, Telkomsel in NexJava has much lesser competition. So I guess that they try to give less benefit in NexJava not to cannibalize themselves too much. But to be honest, these products are also there, and we have seen quite aggressive Telkomsel Lite and Bayou in the traditional channel in West Java, Sumatra, Kalimantan, and Sulawesi, right? So that's there. To your second question, to be honest, yes, I fully agree with you. I don't know what our competitors are saying, but we have not seen consolidation at all. What we have seen is that there were like the market was flooded with cheap SIM cards during quarter 3, but literally flooded, right? So I don't know, maybe someone else is seeing SIM consolidation. What we have seen is just the opposite. We have seen a lot of SIM cards in the market during quarter 3.

Okay. I would like now to open the line for Sukriti, if you have any follow-up questions to the management. Sukriti, you may ask your question now. Seems like there isn't. Okay. Let's move on to the next question then. I think the next question, we'll move on to the next analyst. The question comes from Niko Margaronis from PT. BRI Danareksa Sekuritas, Research. The question is with the incorporation of Link Net stubs, what is the outlook for EBITDA margin going forward? Okay. I'll shall let answer to be answered by Pak Feiruz.

Thank you for the question. The outlook for the EBITDA margin, I think for 2024, we'll stick to the guidance, which is above 50%. I think for the following year, I think once we have a full quarter of the Link Net's impact, then we will probably give you a better guidance, right, for 2025.

Okay. Now I would like to open the line for Niko if you have any follow-up questions.

In addition to my earlier question, Abhijit mentioned that you have plans to roll out maybe new marketing effort to maybe try to monetize better, the new Link Net subscribers. Can you give us some insight what kind of plans you have in mind, yes?

Yes, Niko, thank you. No, I was responding to Piyush's question, right, given the competitive dynamics, what is the rollout plan, et cetera. So in that context, I had answered that given that the Link Net customers have come over, we now have access to around 6 million home pass, combining what has come from them and from us as well. So the Link Net customers came over on 27th of September. So for now, for us, it is steady as she goes. We have to make sure that these customers, the value proposition we are giving them, is continued and the ARPU levels are maintained. So my answer to was in that context of Piyush's question. But perhaps you can just elaborate a little bit on your question, if I have understood it correctly.

Yes, yes, Pak Abhijit. So basically, I'm assuming that you're going to start now rolling out this double play, correct? And I mean now -- and additionally, I want to ask because I have asked before, and you mentioned that this content provision is still being managed by Link Net. So it's like a pass-through by XL this content provision. How do you think about it?

Yes. Okay. Let me tackle your questions one by one. In terms of double play, we already have it, right? Because if you look at the Link Net business, they offer connectivity and content. And when it comes to the Legacy XL Home, we offer fixed connectivity as well as mobile, which is a convergence play with some content as well. So yes, this will continue. Your second question was the content coming from Link Net. So Link Net holds the relationship with the content providers, and you need to bear in mind, they also have the broadcast license. So when it comes to serving those customers coming from them, specifically related to Pay TV, yes, we have to rely on them and then the content is provided to our customers. But obviously, the reason we are doing this is because we have a strategy of conversions, which is a global phenomenon, and everybody is trying to enter into it. So what that means is we'll be leveraging Link Net's content further and seeing how efficiently we can deploy it across our entire footprint and vice versa, now that the Link Net customers have come on board into our portfolio, how do we drive mobile penetration into that base. So it's cross conversions, if I can use that phrase. I hope that answers your question.

Maybe just a last one to follow up Pak Abhijit, if I may. I mean, what kind of growth -- previous mentioned that -- and you confirm that there is a possibility that the penetration may reach like 30% to the 6 million home passes. What is the time frame for this to happen? And how, can you be resilient with this ARPU, 250,000 to 300,000 -- 250,000, 300,000. This is we're talking only for the fixed broadband, yes, it's not the double play yet, right?

So there are multiple questions in your one question. So let me tackle them one by one. Actually, it was Piyush, who mentioned that he has seen 30% to 35% penetration in other markets. So I concurred with him. I said, yes, this is typically what we see, and this is our aspiration as well. So obviously, now that we have a significant number of home passes, our entire endeavor will be to drive penetration into these home passes. So that is our ambition. Sorry, what was your second question? Can you repeat it?

Yes. The time frame for this, for a stronger penetration. And you see the ARPU for double play to be and for a single play.

Whenever you deploy a certain home pass, there is a time lag, right? So for example, if I deploy 100,000, just making it up, 100,000 home passes today. So for that cluster, penetration to reach 30% to 35% is going to take some time. It's not, it doesn't happen overnight or 6 months or 1 year. Typically, we see this trajectory over 2, 2.5, 3 years and that depends on the location of the cluster, the other variables that come into play as well. So in terms of time frame, obviously, we want it as fast as possible, but this is typically a year-on-year kind of a development and growth. So I cannot tell you exactly if it's going to happen on 1st of December or 1st of March. In terms of ARPU, yes, as I was answering the first question from someone, the competitive dynamics has changed and the basis of competition in the market has moved to price. There is a lot of fragmentation on the supply side and now the national ISPs are also dropping prices. So in this context, it is going to be difficult to sustain ARPU for any player, not only XL, right? So that is what we see.

Now we shall move to the next question from Etta Putra from Maybank. "This is related to the SIM card and what is the penetration for the eSIM?" I think this one, I think we will ask David to answer. "And also, what is your view on the churn rate and also what's the current churn rate? And is there any expected new regulation related to the SIM card activation in relation to the biometrics?"

Yes. So the eSIM penetration is still small. It's still small. I won't say an anecdote, but almost, so it's still starting. Our view on it is that it's one less barrier to entry for the customer, which is a positive thing. So currently, if you want to change the operator, you need to go physically somewhere, you need to -- to, a lot of times you need a traditional channel, so it's not an easy journey. This will make the journey much easier. So for us, being the third player in the market, that is good. Again, will it increase the churn rate? Well, I mean, it's one less barrier to entry. So it will facilitate those people that are not satisfied with their service to find a better service or to try a better service. So I think we need to focus more on ensuring that our customers are satisfied with the service that we are providing, and we attend their necessities. I think that's the key. But for us, it's good news that eSIM is here. Our current churn rate is in the low single digits. So you know that we usually measure churn in 2 different ways. One is the infancy churn rate because you know that a lot of the SIM cards that are sold, by the third month, many of them are already not there. And then we also follow the churn rate on those customers that are already like more than 90 days or 3 months, right? And again, it's in the low single digits, so it's healthy. Now, we fully support the use of biometric. We believe that this is protecting the customer and their information. So we are 100% supportive of that. We will still focus on the quality subscribers. And anything that brings more safety and helps the customer, we will fully support. So we hope that the regulation with the biometric comes as soon as possible.

Thank you David. And I would like to open the line of Etta. Putra. Etta, please go ahead if you have any follow-up questions.

Maybe last questions related to the Link Net. Is it the network is exclusive for XL or it's also open for other ISP?

Sorry, sorry, it wasn't very clear. Can you please repeat?

Sorry. Related to the InfraCo from Link Net, is the network -- is exclusive for XL or it also can be used by other ISP? So I think you already have 6 million home pass that is also provided by Link Net, right?

No. The 6 million home passes are not provided by Link Net. So when we transferred the Link Net business over, the home passes that came through were around 3 million, 3.3 million. So those are the home passes coming from them. So -- Link Net has aspirations to be a FiberCo. And by definition, they would want to open it up for other tenants in the future. So just to clarify for the benefit of all, the 6 million I mentioned is 3.3 million roughly from Link Net and the remaining that XL has kind of built over the past 2, 3 -- 4, 5 years.

Okay. I hope that answered your question, Etta. All right. Let's move on to the next question. Next question from Jundianto Alim from Schroders. "How much of your sites do you target to be fiberized? And what is your strategy with Link Net and XL Home in terms of the brands and pricing? And how much synergy can you expect from the revenue and costs?" I will let Pak Feiruz to answer on the first question.

Hi June, with regards to the sites that we target to be fiberized, currently, we stand at about 62% -- 63%, right? We don't have a specific target, but one could expect -- it really depends also in the terms of the traffic growth that we see. So one could expect it will move along the same trajectory that what we've seen in year-on-year.

Let me take the second question, strategy with Link Net. So as I was mentioning while responding to Niko's question, obviously, if I can use the phrase cross conversions, right? The strategy is to start penetrating the Link Net base with XL Mobile products and services. And then on the other side, try and see how we leverage the Link Net content to drive content penetration into the traditional XL home base. Specifically in terms of brands, for now, we are not disturbing anything. First Media is an established content brand. So we are continuing with it. And we are also not tinkering with the pricing as well. One thing to bear in mind is the customers came over on the 27th of September. It's just been about a month. There's a lot of technical work which is happening in the background in terms of systems, billing systems, customer-facing systems, payments channels, et cetera. So this will be completed over the next few months. And once we progress with this work, I think then we can start crystallizing our views on synergies on both revenues and cost side.

Okay. I would like to open the line for June, if you have any follow-up question? Thank you. No follow-up question. Let's move on to the next question from Ranjan Sharma. The question is, how do you define a home pass? I think this one, I will let Abhijit to clarify on the definition of home pass.

Yes. Typically, what operators do, and the fiber companies is it's determined by the number of ports. So I can launch into a detailed technical description, Ranjan, but basically, it is the number of ports available on a FAT and then how many homes can be connected by those FATs -- by those ports and then what are the extensions you can incorporate into that. So that is a definition of home pass. And then Home Connect is actually when a customer decides to avail off your service and then you take a cable from that port and actually physically connect the customer into your network. So that will be the Home Connect.

Okay. Let's move on to the next question from Indra Cahya from Macquarie. "There are 3 questions. The first question is related to the SIM card. Is the SIM card flooding in Q3 getting worse or better in Q4? And can you elaborate how cheap these SIM cards are? Second question is just on financials. Do you see this 52% EBITDA margin sustainable into 2025, taking aside the merger? And third question is, what is the estimated percentage of revenue from broadband in '26 and '25 and '26? So the first question, I think will be answered by David.

Yes. So regarding the SIM cards during quarter 3, quarter 4, it's getting better. It's getting better. I think since end of August, starting already in September, it has started to get a little bit better. How cheap this seems were or are, I think, again, you can check in the retail outlets, but they can go from prices around IDR 10,000, IDR 15,000 for many gigabytes.

Yes. Thanks, Indra, for the second question on EBITDA margin. I think it's a bit too early, right, for us to give any indication for EBITDA margin in 2025. More than happy to provide the guidance at the end of the year, once we close 2024. But certainly, as we've crossed the 50% EBITDA margin, I think the aim is to stay that way. Certainly, EBITDA margin is not just a function of cost excellence, which we continuously focus on, but also how the industry moves, right, in terms of the top-line growth. And on the third question on the percentage of revenue for broadband 2025, 2026. likewise, it's a bit too early to give any indication for '25, '26 at this juncture. Thank you.

Thank you. Now I'd like to open the line of Indra here if you have any follow-up questions to management.

Maybe if I don't mind, allow me one question. I was just wondering what is the average speed tier that the broadband customers typically take from XL ie.inket? I mean is it below 30? Or is it 100 megabyte per second? Maybe just some color on that.

I'm sorry, it wasn't very clear, Indra. Can you repeat your...

Okay. Yes. The average speed tier that your fixed broadband customers are taking, I mean is it the 20 Mbps, 30 Mbps or is it higher than that?

Speed, you mean in terms of the customers, right?

Yes.

So... fixed broadband. I know you're talking about fixed broadband. I was trying to understand your question. You can consider above 50 because we have very high-speed products. that is what fiber lends itself to, right? 2 customers we have on 1 gig products as well.

Let's move on. We go to the question from Henry Tedja. Henry Tedja from Mandiri Sekuritas. Housekeeping questions for Pak Feiruz. Can you elaborate on the cost decline? And what is the driver of expenses decline despite having more subs and data traffic?

Yes. Thank you, Henry, for the question. If you look at year-on-year, I think a majority of our cost line items have either remained flat or declined, right, if you take as a percentage of revenue. What we have actually done is basically relooked, right, literally did also a housekeeping, right, to your housekeeping question in looking at line-by-line items. So certainly for items like cost of goods sold or direct cost, we've taken a look at our unit costs, right? And infrastructure, in particular, we've really looked in terms of how we can sweat the assets. So earlier identification of sites, we've talked about prioritization and also maximizing and sweating the capacity. That's what we've done to optimize the available capacity as well as if you look at, in particular, sales marketing and sales expense, that has come down considerably. Again, this is to our efforts that we've been focusing on for the couple of quarters is looking across our distribution channel, moving more and more towards our own channel. And last but not least, obviously, overheads as well, right? So all particular items have enabled us to deliver a lower cost structure, almost flat. year-on-year, and that has enabled us to improve our margins. I hope that answers your question.

Right now I'd like to open the line for Henry Tedja if you have any follow-up questions, please.

Perhaps one follow-up question to Pak David. You mentioned about how the incumbent basically being aggressive in the past few quarters. Can you elaborate more on that? And how do you see the trend going into fourth quarter?

Yes. I mean, not much to elaborate, right? So if you go to the traditional channel, you can see that the products that they have there, they prices are not going up, but probably in the opposite direction and the benefits probably keep increasing, right? So we see either because they are maybe with marketing programs or whatever, we see that the prices of the products are aggressive, and the benefits are high. They are also pushing quite a lot Bayou, that's another brand that I think they are trying to make it more available, right? So we see quite a lot of push on that brand as well with aggressive prices. But again, we believe that Bayou is still small, but in Telkomsel, even Telkomsel Lite and other products, they are aggressive.

Let's move on to the next question. The question comes from Piyush from HSBC. "So the first one, I think on the industry flooded by SIM. Do you see the industry flooded by SIM from Telkomsel, which I think later on Pak Abhijit can address? In home broadband, there has been discussion about with regulators. Has there been any discussion with regulators to take any action against illegal players? I think this is related to the later address that. And any update you can share on the MAU signed between Axiata and Sinar Mas to explore merger between XL Axiata and Smartfren? 3 questions from Piyush.

So regarding who flooded the market, again, so there are many operators. So if it's flooded, usually, it's all. Probably there are some that are flooding more than the others, probably not for me to respond in here, right? I will let Abhi to answer the second one.

Yes, Piyush. So yes, the short answer to your question in home broadband, there has been an ongoing discussion with the regulatory bodies over the past many, many months through APG and through independently and in conjunction with the other players as well. And you must have seen in the press that the government has started taking some actions, deeming it illegal and encouraging people to apply for licenses, blah, blah, blah. But is this enough? Obviously not. There is a lot of work more to be done, and we are continuously discussing with them on how to enforce the policy framework and the regulations to make it a more sustainable and a healthy kind of business environment.

Yes. With regards to the third question, I think the question was, if I'm not mistaken, any update that we can share with regards to the intended merger. What we can probably say is the due diligence phase is probably towards the end. I think once that has been concluded, then certainly both parties will further discuss and as any normal process, then you come into a definitive agreement, of course, then subject to relevant approvals, right, from the authorities and stakeholders. Thank you.

Thank you, Let's move on to the next question from Bob Setiadi from CGS International. "Can you explain the Q-on-Q decline in data traffic while your peers show an increase in Q-on-Q? What is the outlook in Q4? And also second is on the quantification of one-off costs in Q3?

Yes. So as I was saying before, our ARPU decrease was because we saw that the traffic per subscriber decreased. So we lost traffic, as you are mentioning. As I was saying, we saw 3 potential reasons. One is the economic situation. The second one is the Wi-Fi offloading, the Wi-Fi players. And the third one is competition. The first and the second, of course, apply to everyone, right? Everyone is in the same economic situation and everyone is in the affected by the Wi-Fi players. So I will tend to believe that if we go down in traffic, someone must be taking our traffic. And the reason why you will move probably, there are many, but if you were with XL, it's what we were mentioning before, right? One thing that we saw with dual Sim increasing. So well, I think we can assume that they found cheaper options somewhere and they move part of their traffic there. Yes, we hope that, that traffic will come back, right? So we are working in that direction.

I would like to open the line of question from Bob.

Yes. Probably you haven't answered my second question regarding the one-off costs from Link Net in third quarter. I just want to know how big is the one-off and whether it will continue in the fourth quarter.

Sorry, Bob, your voice is a bit soft.

Can you hear me?

Yes, yes, better.

Yes. I just want to know how much is the one-off cost from Link Net transaction in third quarter and whether we will see further in fourth quarter?

Yes. Thank you, Bob. I think with regards to the Link Net transaction was concluded at 27th of September. I think the one-off impact for the transfer obviously had some impact from the adjustment of the cost of investment. That's probably to the tune of about 100 billion that is impacted in the third quarter.

Sorry, IDR 100 billion in third quarter only or there will be more coming in the fourth quarter?

No, I think in the fourth quarter, obviously, that will depend on the migration efforts. But this is your question is to the Link Net transaction, right, specifically, that's the ballpark number, right, that we can share that has impacted the one-off costs.

Okay. Thank you, Bob. I think with that, we conclude today's conference call. We'd like to thank everyone for your participation. And as always, do get back to us through Investor Relations should you need further information. Please stay safe and healthy, and we will see you next quarter. Thank you.