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Telecom - Indonesia and Philippines

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Telecom - Indonesia and Philippines

  1. 1. Country and Industry Assessment (Draft)Philippines and IndonesiaTelecom Report Please do not distribute, for internal use only
  2. 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. 3. Indonesia’s Telecom Market Please do not distribute, for internal use only
  4. 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. 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. 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. 7. Philippines’s Telecom Market Please do not distribute, for internal use only
  8. 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. 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. 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. 11. Please do not distribute, for internal use only

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