TLKM - Reinforces 5 Bold move strategy

TLKM - Reinforces 5 Bold move strategy Telekomunikasi Indonesia (TLKM) is to continue to expanding its B2B business following completion of fixed mobile convergence (FMC) in 1H23. This move is part of its grand strategy 5 bold moves which for the next part is carrying out consolidation of data center under DC co for data center and infrastructure assets under InfraCo as well as B2B Digital service and DigiCo. On Infrastructure, Dayamitra Telkomunikasi (MTEL) is aiming at expanding its fiber portfolio amid growing demand of higher data speed and convergence as well as active sharing network in line with expanding 5G connectivity. On tower business, the company strives to improve its tenancy ratio by expanding capacity and coverage in Indonesia, providing bundling services with 69% of its portfolio are ready to use for colocation. Furthermore, MTEL is also planning to further enhance Java presence which is aligned with MNOs strategy. On DC co, in-line with expanding demand stemming from SEA’s digital economy, the company projects APAC DC market to grow at 18.4% in 2021-2025F as demands shifting to emerging economy in SEA, with Indonesia alone is projected to contribute 40% of SEA’s DC by 2025F. For its part, TLKM is planning to forge various partnership to expand data center business and continuously expand intensive capacity. Moreover, as part of strategy of B2B IT service, the company will focus on expanding and transforming business ecosystem, strategic partnership while leveraging inorganic approach including establishing a JV, or acquisition. (Source: Company, KBVS Research team) Comment: Meanwhile, implementation of 5 bold moves is needed to tackle various challenges in telecommunication industry, including inflationary pressure on opex, higher customer expectation and capex as well as intensifying competition. We also believe that expansion in B2B segments is important in order to compensate a more fluctuated consumer segments while building a strong telco ecosystem to create more efficiency stemming from synergy within the group by leveraging its robust assets. Meanwhile, we also appreciate TLKM’s strategy to roll out FMC that is aimed at better customer retention and create more value per customers. We maintain our BUY call with IDR4,420/ share, implying at 5.6x ’23 EV/EBITDA.