TLKM - Indihome eyes for ex-Java expansion

Fixed broadband arm of Telekomunikasi Indonesia (TLKM), Indihome is eyeing to improve internet access speed to c. 40Mbps, while also targeting to cover 100% of Indonesia's population. Indihome currently has covered 499 out of 514 regencies/cities across the country, equal to 97% nationwide. For 2023, the company is set to further expand into ex-Java areas, especially Eastern provinces, Sumatra and Kalimantan. Meanwhile, as of 9M22, the number of total Indihome subs stood at c. 9mn. (Source : Katadata) Comment: Indihome's expansion into ex-Java is very much alike with what Telkomsel has been doing in order to seek a new source of growth following stiff competition in Java. Although penetration of fixed broadband remains low amid Indihome’s strong domination of market share c.80%, we opine that expansion to ex-Java provinces will be its one-step-ahead strategy to protect its position in potential areas. While for now Java remains the sweet spot for fixed broadband business, but the emergence of new players in the province will eventually lead to price competition and at this point, pushing the players to expand to new areas. On the other hand, the emergence of challengers may have been impacted to relatively stagnant ARPU in quarters. Despite this, we still believe that TLKM is still on the pole position in telco industry on the back of its plan of infrastructure monetization. It especially is now trading at undemanding valuation of 4.6x EV/EBITDA, making it even more attractive stock to buy.