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Telecom - Indonesia and Philippines
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Telecom - Indonesia and Philippines

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  • 1. Country and Industry Assessment (Draft)Philippines and IndonesiaTelecom Report Please do not distribute, for internal use only
  • 2. Economic and Industry Overview Both Indonesia and Philippines have shown strong economic growth with increasing wireless penetration, indicating a point of saturation in telecom industry 4000 Indonesia: Favorable economic and political environment GDP per Capita ($) 3500 CAGR 17% § Indonesia’s economic GDP will pick up to 6.3% in 2013 and will average ~6.5% during 2014-17 3000 § Services industry will see higher growth at around 8% in 2014-17 2500 CAGR 12% § Unemployment rate is seeing a downward trend 2000 Philippines: Higher growth potential and political stabilization 1500 § Philippines economy is poised to grow at ~5% in 2012 with sustained 1000 positive GDP growth at around 6% going forward Indonesia § Services industry will see higher growth at 6%-7% in 2012-13 500 Philippines § GDP per capita is expected to growth at 6% in 2012-13 0 2004 2006 2008 2010 2012 120% Indonesia: 3rd largest wireless market in Asia Wireless Penetration § Wireless penetration has seen significant growth driven by high SIM 100% CAGR 14% penetration and strong inclination towards smart devices CAGR 24% 80% § Internet penetration is driven by mobile internet services (20% penetration of wireless broadband) 60% § Wireless telephony is becoming a commoditized ‘hygiene’ factor 40% Philippines: Near saturation market with growth potential § High wireless penetration contributed by government initiatives in ICT 20% Indonesia and social sectors Philippines § Growth driven by private consumption and investments in the industry 0% 2004 2006 2008 2010 2012Source: Economic Intelligence Unit, Gartner, Frost and SullivanCAGR: Compound Annual Growth Rate (2007-12) -2- Please do not distribute, for internal use only
  • 3. Indonesia’s Telecom Market Please do not distribute, for internal use only
  • 4. Telecom Industry: Indonesia Future growth of revenue will be driven by higher consumption of data services; Excelcomindo is leading the pack in terms of increasing its share of date revenue 80,000 Telkomsel: ARPU above industry average Telkomsel § Postpaid comprise about 2% with ARPU as 6 times Prepaid ARPU 70,000 Satelindo + IM3 § Revenue growth by 4% (2012) while ARPU declined by 7% 60,000 Excelcomindo Satelindo: Despite growth, ARPU lower than industry average ARPU (IDR) 50,000 Indonesia § Revenue growth of 6% while subscriber grew by 13%; ARPU declined by 40,000 7%; marginal growth in Postpaid subscribers in 2012 30,000 Excelcomindo: Decelerating decline in ARPU 20,000 § Revenue growth of 7% (2012); ARPU declined by 1% 10,000 Continuous decline in industry ARPU across the spectrum 2007 2008 2009 2010 2011 2012 40,000 Data ARPU (IDR) 35,000 Telkomsel Telkomsel: Data ARPU highest in the industry Satelindo + IM3 § Data ARPU declined by 0.2%; overall data revenue growth by 11% in 2012 30,000 Excelcomindo Satelindo: Data ARPU lower than industry average 25,000 Indonesia § Data ARPU declined by 5%; due to lower revenue growth of data (8%) in 2012 20,000 Excelcomindo: Highest percentage of data revenue and growth § Data ARPU growth by 5% driven by higher update of data service in 2012 15,000 10,000 Stabilization of Data ARPU indicates future growth potential 2007 2008 2009 2010 2011 2012 80,000 Voice ARPU (IDR) Telkomsel: Steepest decline in Voice ARPU, still highest in industry 70,000 § Voice ARPU continues to slide, voice revenue declined by 11% in 2012 60,000 Telkomsel Satelindo: Similar trends in declining Voice ARPU Satelindo + IM3 50,000 Excelcomindo § Voice ARPU declined by 9% in 2012; due to declining call rates 40,000 Indonesia Excelcomindo: Done better than other operators in terms of %decline 30,000 § Voice ARPU declined by 6%, lowest in the industry 20,000 10,000 Voice APRU has declined significantly, revise investments in data 2007 2008 2009 2010 2011 2012Source: Company Annual Reports -4- Please do not distribute, for internal use only
  • 5. Telecom Industry: Indonesia Margins are stabilizing within the industry while CAPEX continues to rationalize on the lower side 80% Telkomsel: Highest EBITDA as %Rev in Industry EBITDA as %Rev 70% 60% § 4% revenue growth to EBITDA by 2% in 2012, expense increased higher 50% Satelindo: EBITDA as%Rev is lowest in the industry 40% § But, 6% increase in revenue and 7% EBITDA shows better performance 30% Telkomsel Excelcomindo: Healthy trend towards higher EBITDA margin Satelindo + IM3 § Consistent increase in EBITDA margin over 2007 to 2012 20% Excelcomindo 10% Indonesia 0% Competitive pressures rationalizing margins, scope to improve 2007 2008 2009 2010 2011 2012 120% Telkomsel: Lowest CAPEX to Revenue ratio in the industry CAPEX as %Rev 100% Telkomsel § Focus on reducing long term cost of capital; CAPEX reduced by 4% in 2012 Satelindo + IM3 80% Excelcomindo Satelindo: Continued focus on cellular and non-cellular investments 60% Indonesia § Though, CAPEX investments reduced by 11% Excelcomindo: Increasing CAPEX investments 40% § Focused investments in 3G (Data Services), CAPEX increased by 18% 20% 0% Focused CAPEX investments to fuel future growth potential 2007 2008 2009 2010 2011 2012 60% Telkomsel: Higher ratio with stable CAPEX and EBITDA(EBITDA – CAPEX) 40% § Consistent ratio around 37%, due to lowering of CAPEX investments 20% Satelindo: Positive trend indicates renewed focus on cost reduction as %Rev 0% § Increased EBITDA and lowering CAPEX leading a positive trend 2007 2008 2009 2010 2011 2012 Excelcomindo: Trending downward due to focus on CAPEX in Data -20% § Increased CAPEX investment is pulling the ratio downwards -40% Telkomsel Satelindo + IM3 -60% Excelcomindo Higher ratio is an indication of long term business sustainability -80% Indonesia Source: Company Annual Reports -5- Please do not distribute, for internal use only
  • 6. Key takeaways for Telecom industry in Indonesia Industry Trends Recommended Initiatives § Voice revenue growth is tapering as market is getting § Market growth assessment matured; but there is scope of market penetrationRevenue § Operators needs to renew their focus on data § Product pricing assessment services and VAS service (non-voice) § EBITDA margins are stabilizing in the industry § Cost take out initiatives in OpsEBIDTA § Renewed focus on reduction in operation expenses § Business Process Reengineering § Increased CAPEX to be inline with increase in data § Market assessment for data services services in terms of capacity (from 2G to 3G/LTE)CAPEX § Competitor assessment § Initiatives to increase the cellular coverage § Increasing shift towards Prepaid Services § m-Payment growth strategyServicePortfolio § Growing uptake on VAS service (m-Payments) § Supply chain optimization in Prepaid -6- Please do not distribute, for internal use only
  • 7. Philippines’s Telecom Market Please do not distribute, for internal use only
  • 8. Telecom Industry: Philippines Future growth of revenue will be driven by higher consumption of data services; Globe Telecom is leading the pack in terms of increasing its share of date revenue 300 PLDT: ARPU lower than industry average PLDT § Revenue growth has been declining since 2009 ARPU (PHP) 250 Globe Telecom Philippines 200 Globe Telecom: Beginning to show higher industry average 150 § Revenue growth of 4% while subscriber grew by 12% with substantial 100 growth in Postpaid subscribers in around 15% in 2012 50 - Continuous decline in industry ARPU across the spectrum 2007 2008 2009 2010 2011 2012 140 Data ARPU (PHP) PLDT PLDT: Data ARPU lowering at a steady pace 120 Globe Telecom Philippines § Data revenues growth has been flat in 2012, indicating lower uptake of services 100 80 Globe Telecom: Data ARPU highest in the industry average 60 § Data ARPU declined by 5%; due to lower revenue growth of data (8%) in 2012 40 20 - Stabilization of Data ARPU indicates future growth potential 2007 2008 2009 2010 2011 2012 Voice ARPU (PHP) 160 PLDT: Steepest decline in Voice ARPU, still highest in industry 140 PLDT Globe Telecom § Voice ARPU continues to slide, though slightly higher the industry average 120 Philippines 100 Globe Telecom: Similar trends in declining Voice ARPU 80 § Voice revenue on a decline, though recovered slightly in 2011-12 60 40 20 - Both data and voice are contributing to overall decline 2007 2008 2009 2010 2011 2012Source: Company Annual Reports -8- Please do not distribute, for internal use only
  • 9. Telecom Industry: Philippines Margins are stabilizing within the industry while CAPEX continues to rationalize on lower side 68% PLDT EBITDA as %Rev 66% Globe Telecom Philipinnes PLDT: Highest EBITDA as %Revenue in Industry 64% 62% § 4% revenue growth to EBITDA by 2% in 2012, expense increased higher 60% 58% Globe Telecom: EBITDA as %Revenue has been falling steadily 56% § But, 6% increase in revenue with 7% EBITDA shows better performance 54% 52% 50% EBITDA growth is flat in the industry, leaves scope to improvise 2007 2008 2009 2010 2011 2012 30% PLDT CAPEX as %Rev Globe Telecom 25% Philipinnes PLDT: Higher CAPEX to Revenue ratio in the industry since 2010 § Strategic investment decisions to modernize network and emerging technologies 20% 15% Globe Telecom: Decline in CAPEX investments 10% § Though, focus is on network modernization and IT transformation programs 5% 0% CAPEX as%Rev has been fluctuating though investments to rise 2007 2008 2009 2010 2011 2012 50%(EBITDA – CAPEX) 40% PLDT: EBITDA growth offset by increase in CAPEX § Stable EBITDA over 60%, increasing CAPEX over the same period as %Rev 30% Globe Telecom: Falling EBITDA couple with falling CAPEX 20% PLDT § CAPEX as %Rev has been falling at a faster rate than EBITDA as %Rev Globe Telecom 10% Philipinnes 0% Ratio consolidating at around industry average 2007 2008 2009 2010 2011 2012 Source: Company Annual Reports -9- Please do not distribute, for internal use only
  • 10. Key takeaways for Telecom industry in Philippines Industry Trends Recommended Initiatives § Voice revenue growth is declining steadily § Market growth assessmentRevenue § Operators needs to renew their focus on data § Product pricing assessment services and VAS service (non-voice) § EBITDA margins are flat with scope to increase § Cost take out initiatives in Ops operational efficiencyEBIDTA § Business transformation initiatives § Focus on business transformation § Investment in emerging areas of cloud services and § Market assessment for data services multimedia solutionsCAPEX § Due diligence (spectrum acquisition) § Investments to acquire 3G spectrum in 2012 § Increasing shift towards value-added services § Service portfolio assessmentServicePortfolio § Diversification of revenue mix through data service § Competitor assessment - 10 - Please do not distribute, for internal use only
  • 11. Please do not distribute, for internal use only