Percentage of Free-float to Total Shares

  The Journal

12 November 2018

  IDX to implement free-float methodology starting Feb-19. Last Research Team

  week, the IDX gathered several domestic asset managements and

• 62 21 392 5550 ext. 611

  published slides regarding its plan to replace the weighting

  research@sinarmassekuritas.co.id

  methodology for IDX30 and LQ45 from market cap weighted to free- float adjusted. Meanwhile, JII’s and JCI’s weighting will not be changed. At the interim, here are our view regarding the changes and implications:

  Changes:

   Currently IDX30, LQ45, JII, and JCI are weighted using the market cap mechanism. Starting from Feb-19, the IDX plans to switch the weighting method for IDX30 and LQ45 to free-float adjusted weight. The rationales behind that are: 1) better representative of market condition as it opts out the majority shareholder’s portion, 2) increases portfolio efficiency as it reduces the weight of companies with relatively lower free-float portion, 3) incentivizes companies to increase the free-float portion, and 4) it is commonly used in other equity indices. To note, at the time of evaluation, the

  maximum weight limit of a single equity is set at 15%; this only affects BBCA which accounts for 17.5% in IDX30 and 16.7% in LQ45. We await for further confirmation regarding the weight limit and how it translates to other constituents’ weighting.

  × ) ( =1

  

× 100

=

   As of 25 Oct 2018, the free-float portions of IDX30 and LQ45 stood at ~40%, while JII’s and JCI’s portion are well below 30%. This implies that equities outside the IDX30 and LQ45 are much less liquid compared to the IDX30 and LQ45 constituents.

  Percentage of Free-float to Total Shares 41.0% 39.7%

  27.5% 27.0% JCI

ISSI LQ45

  IDX30 Source: IDX, Sinarmas Investment Research

  IDX 30 Weighting Changes Per Sector

  1Q18 2017

Revenue Share(%) Revenue Share(%)

  Agriculture 4.5%

  Mining 3.4% 17% 20%

  7.1% Basic Industry & Chemicals 5.9%

  Telkomsel Telkomsel 10.8%

  XL Axiata

  XL Axiata Miscellaneous Industry

  17% 8.4%

  16% Indosat Ooredoo Indosat Ooredoo

  64% 66%

  13.9% Consumer Goods Industry

28.8%

  1.7% Property, RE & Bld. Construction 1.3%

  16.2% Infras., Utilities % Transportation 11.9%

  Renewal package over starterpack.

  We believe the new competition

  41.2% Finance 36.8% landscape would be focusing more on

  renewal package/reload package as

  4.6% Trade, Services & Investment 3.6%

  operators would likely to focus more on expansion and quality improvement since the focus would not be in

IDX30FF

  IDX30

  acquisition anymore. Based on the information from investor relation of

  Source: IDX, Sinarmas Investment Research

  TLKM, currently government is working on a new regulation to set guidance on tariff gap between starterpacks and

  LQ45 Weighting Changes Per Sector

  reload packages with price of reload packages must be lower than starter

  0.324%

  packs to encourage sustainable cus-

  Agriculture 0.286%

  tomer shift to reload/renewal packag-

  6.1%

  es. Doing so would help prevent the

  Mining 5.4%

  industry from returning to starterpack-

  8.5%

  heavy sales model lead to a lower

  Basic Industry & Chemicals 8.2% 9.1% objectives as set by the existing pre-

  Miscellaneous Industry 7.1%

  paid SIM card registration policy.

  13.0% Consumer Goods Industry

27.2%

  Potential surge in data pricing on welcoming festive season. After the

  2.5% Property, RE & Bld. Construction 2.0%

  recent price wars caused by the SIM card regulation, we expect there will

  14.8% Infras., Utilities % Transportation 11.1%

  be an increase in data pricing considering that the price wars is

  39.6% Finance 34.2%

  beginning to subside and the implementation of SIM regulation

  6.0% Trade, Services & Investment 4.6%

  would reduce the potential price war in the

  LQ45FF LQ45 _{TLKM EXCL}

BTS on air

_ISAT

  Source: IDX, Sinarmas Investment Research _{160,724 167,617} Implications: _129,044

  While we believe the changes will be good to the market as it leads to _105,792 lower index volatility, there are few things that we believe the market 103,294 _101,094 needs to be aware of. _{69,830 85,398 84,484}  Companies with big market capitalization but small free-float 64,375 _{52,012 58,879 56,483 61,357} portion will be put at a disadvantage (HMSP, UNVR, ICBP, GGRM) _{44,946 40,304 50,687} as we expect continuous capital outflow from active-managed fund until the evaluation date. At the time of the adjustment, indexing _24,280 fund will flee from these stocks until they reach the corresponding weight while active-managed fund may enter these stocks in the interim as their position in these stocks will be minimal at this

  2013 2014 2015 2016 2017

  1Q18

  point. Hence, we advise investors to be cautious until the transition completes.

  Source:

  future. Furthermore, based on our  While for conventional or active-managed funds stock picking is meeting with Telkomsel Investor open-end, many mutual funds tend to maintain the stock weighting

  Relation, there is an indication that

  Renewal package over starterpack.

  IDX 30 Weighting Adjustment Per Sector Source: Bloomberg, KSEI, Sinarmas Investment Research

  Ownership as a % of Free-float Adjustment

  INTP IJ 63.7 1.6% 31.2 2.2% 0.6% 14.0% 6.4% 2.7% 15.3%

BMRI IJ 319.7 8.2% 127.8 9.1% 0.9% 37.6% 16.3% 7.7% 17.5%

BBRI IJ 388.5 9.9% 166.5 11.8% 1.9% 34.5% 15.5% 7.7% 18.2%

BBCA IJ 583.1 14.9% 251.1 17.9% 3.0% 36.6% 12.4% 5.7% 22.3%

ASII IJ 319.8 8.2% 159.4 11.3% 3.2% 35.4% 19.5% 9.3% 18.1%

TLKM IJ 381.4 9.7% 182.7 13.0% 3.3% 27.4% 16.4% 10.6% 16.7%

  INKP IJ 69.6 1.8% 32.9 2.3% 0.6% 14.4% 5.5% 13.4% 23.0%

  INDF IJ 52.5 1.3% 26.2 1.9% 0.5% 18.7% 17.9% 16.5% 19.4%

  56.2 4.0% 0.5% 28.7% 18.7% 11.3% 18.7%

  14.2 0.4% 11.9 0.8% 0.5% 33.2% 9.0% 4.4% 16.5% SMGR IJ 53.4 1.4% 26.2 1.9% 0.5% 32.1% 20.5% 9.1% 17.4% BBNI IJ 136.6 3.5%

  SRIL IJ 7.4 0.2% 3.0 0.2% 0.0% 3.0% 1.4% 1.2% 30.2% WSBP IJ 8.4 0.2% 3.4 0.2% 0.0% 10.8% 10.0% 9.5% 57.2% BSDE IJ 21.2 0.5% 8.4 0.6% 0.1% 8.0% 8.6% 4.7% 18.2% BBTN IJ 22.5 0.6% 9.0 0.6% 0.1% 27.5% 17.9% 13.8% 25.3% PTPP IJ 8.2 0.2% 4.0 0.3% 0.1% 25.1% 8.0% 8.3% 21.2% PGAS IJ 53.8 1.4% 23.2 1.6% 0.3% 22.2% 14.1% 13.8% 27.3% ADRO IJ 52.8 1.3% 23.0 1.6% 0.3% 9.2% 5.7% 4.1% 33.7% KLBF IJ 64.2 1.6% 27.6 2.0% 0.3% 13.0% 6.3% 3.1% 20.4% UNTR IJ 125.0 3.2% 50.6 3.6% 0.4% 30.1% 16.8% 11.2% 18.0% LPPF IJ

  17.1% 22.9% 10.2% 36.9% ANTM IJ 16.3 0.4% 5.7 0.4% 0.0% 23.2% 10.4% 23.9% 43.2%

  ICBP IJ 104.1 2.7% 20.3 1.4% -1.2% 23.6% 21.3% 16.8% 16.1% GGRM IJ 139.1 3.6% 33.1 2.4% -1.2% 41.7% 9.2% 15.8% 17.3% BRPT IJ 33.4 0.9% 7.1 0.5% -0.3% 7.1% 1.0% 6.8% 60.9% JSMR IJ 30.1 0.8% 7.4 0.5% -0.2% 20.2% 29.9% 19.5% 23.8% PTBA IJ 49.0 1.3% 15.7 1.1% -0.1% 22.2% 14.1% 13.8% 27.3% MEDC IJ 14.6 0.4% 3.9 0.3% -0.1% 6.9% 1.8% 2.8% 21.9%

  Mutual Fund Pension Fund Insurance Others HMSP IJ 433.9 11.1% 32.5 2.3% -8.8% 38.1% 8.4% 23.3% 30.3% UNVR IJ 329.8 8.4% 49.5 3.5% -4.9% 29.5% 19.6% 19.2% 17.3%

   Lastly, we view big market capitalization companies with high free- float portion will be mandatory to both conventional and indexing funds as fund managers try to minimize alpha and keep it close to the index. Hence, the free-float adjustment will be phenomenal for stocks with free-float adjusted weight of above 10%

  We believe the new competition landscape would be focusing more on renewal package/reload package as operators would likely to focus more on expansion and quality improvement since the focus would not be in

   We view that indexes with free-float adjusted weight tend to be less volatile compared to indexes with market cap weight. For instance, post evaluation, HMSP’s weight in IDX30 will be around ~2.3% while weight in JCI will be ~6.9%. Given the 7.5% free-float, dictation towards JCI will be bigger than IDX30.

  relatively close to the index. Given that some stocks will weigh above 10%, a maximum limit for a single stock for conventional funds, there will be a greater return divergence between index funds and conventional funds.

  Source:

  1Q18

BTS on air

_{TLKM EXCL ISAT}

  2013 2014 2015 2016 2017

  XL Axiata Indosat Ooredoo 69,830 ^{85,398 103,294 129,044 160,724 167,617} _{44,946 52,012 58,879} ^{84,484 101,094 105,792} _{24,280 40,304 50,687 56,483 61,357 64,375}

  1Q18 Revenue Share(%) Telkomsel

  17%

  XL Axiata Indosat Ooredoo 66% 17%

  2017 Revenue Share(%) Telkomsel

  64% 16% 20%

  IDX 30 Mkt Cap Full (in IDR Tn) Weight Full FF Mkt Cap (in IDR Tn) FF Weight

  64% 16% 20%

  INDY IJ 11.7 0.3% 3.5 0.2% 0.0% 4.5% 1.3% 0.8% 32.2% EXCL IJ 28.0 0.7% 9.4 0.6% 0.0% 34.2% 7.5% 11.2% 18.1%

  INTP IJ 63.7 1.5% 31.2 2.1% 0.6% 14.0% 6.4% 2.7% 15.3%

BMRI IJ 319.7 7.6% 127.8 8.6% 1.0% 37.6% 16.3% 7.7% 17.5%

BBRI IJ 388.5 9.2% 166.5 11.3% 2.0% 34.5% 15.5% 7.7% 18.2%

BBCA IJ 583.1 13.9% 251.1 17.0% 3.1% 36.6% 12.4% 5.7% 22.3%

ASII IJ 319.8 7.6% 159.4 10.8% 3.2% 35.4% 19.5% 9.3% 18.1%

TLKM IJ 381.4 9.1% 182.7 12.4% 3.3% 27.4% 16.4% 10.6% 16.7%

  INKP IJ 69.6 1.7% 32.9 2.2% 0.6% 14.4% 5.5% 13.4% 23.0%

  INDF IJ 52.5 1.2% 26.2 1.8% 0.5% 18.7% 17.9% 16.5% 19.4% BBNI IJ 136.6 3.2% 56.2 3.8% 0.6% 28.7% 18.7% 11.3% 18.7%

  50.6 3.4% 0.4% 30.1% 16.8% 11.2% 18.0% LPPF IJ 14.2 0.3% 11.9 0.8% 0.5% 33.2% 9.0% 4.4% 16.5% SMGR IJ 53.4 1.3% 26.2 1.8% 0.5% 32.1% 20.5% 9.1% 17.4%

  8.2 0.2% 4.0 0.3% 0.1% 25.1% 8.0% 8.3% 21.2% PGAS IJ 53.8 1.3% 23.2 1.6% 0.3% 22.2% 14.1% 13.8% 27.3% ADRO IJ 52.8 1.3% 23.0 1.6% 0.3% 9.2% 5.7% 4.1% 33.7% KLBF IJ 64.2 1.5% 27.6 1.9% 0.3% 13.0% 6.3% 3.1% 20.4% UNTR IJ 125.0 3.0%

  13.9 0.3% 5.7 0.4% 0.1% 40.7% 6.3% 3.6% 24.2% SCMA IJ 23.0 0.5% 9.0 0.6% 0.1% 26.3% 21.2% 7.0% 33.1% BSDE IJ 21.2 0.5% 8.4 0.6% 0.1% 8.0% 8.6% 4.7% 18.2% BBTN IJ 22.5 0.5% 9.0 0.6% 0.1% 27.5% 17.9% 13.8% 25.3% PTPP IJ

  11.1 0.3% 4.3 0.3% 0.0% 11.4% 2.8% 1.0% 16.7% ADHI IJ 4.0 0.1% 2.0 0.1% 0.0% 37.4% 8.0% 12.1% 43.4% AKRA IJ

  16.3 0.4% 5.7 0.4% 0.0% 23.2% 10.4% 23.9% 43.2% WIKA IJ 9.9 0.2% 3.4 0.2% 0.0% 16.5% 17.6% 19.9% 45.0% ELSA IJ 2.7 0.1% 1.2 0.1% 0.0% 14.0% 32.1% 7.7% 45.5% SRIL IJ 7.4 0.2% 3.0 0.2% 0.0% 3.0% 1.4% 1.2% 30.2% MNCN IJ

  5.2 0.1% 1.6 0.1% 0.0% 10.8% 0.6% 2.6% 65.9% LPKR IJ 6.5 0.2% 2.2 0.2% 0.0% 4.6% 1.4% 5.5% 20.6% ANTM IJ

  ITMG IJ 28.1 0.7% 9.5 0.6% 0.0% 33.2% 11.4% 8.4% 22.7% WSKT IJ 19.5 0.5% 6.6 0.4% 0.0% 17.1% 22.9% 10.2% 36.9% BKSL IJ

  INCO IJ 29.0 0.7% 5.9 0.4% -0.3% 22.7% 15.1% 22.4% 30.2% JSMR IJ 30.1 0.7% 7.4 0.5% -0.2% 20.2% 29.9% 19.5% 23.8% BJBR IJ 17.4 0.4% 4.3 0.3% -0.1% 9.3% 0.7% 24.5% 29.3% PTBA IJ 49.0 1.2% 15.7 1.1% -0.1% 22.2% 14.1% 13.8% 27.3% MEDC IJ 14.6 0.3% 3.9 0.3% -0.1% 6.9% 1.8% 2.8% 21.9% SSMS IJ 12.0 0.3% 3.5 0.2% 0.0% 4.2% 1.0% 1.2% 21.5%

  2017 Revenue Share(%) Telkomsel

  33.4 0.8% 7.1 0.5% -0.3% 7.1% 1.0% 6.8% 60.9%

  ICBP IJ 104.1 2.5% 20.3 1.4% -1.1% 23.6% 21.3% 16.8% 16.1% GGRM IJ 139.1 3.3% 33.1 2.2% -1.1% 41.7% 9.2% 15.8% 17.3% BRPT IJ

  85.8 2.0% 7.1 0.5% -1.6% 0.7% 0.1% 1.3% 21.6%

  HMSP IJ 433.9 10.3% 32.5 2.2% -8.1% 38.1% 8.4% 23.3% 30.3% UNVR IJ 329.8 7.8% 49.5 3.3% -4.5% 29.5% 19.6% 19.2% 17.3% TPIA IJ

  Source: Mutual Fund Pension Fund Insurance Others

  1Q18

BTS on air

_{TLKM EXCL ISAT}

  2013 2014 2015 2016 2017

  XL Axiata Indosat Ooredoo 69,830 ^{85,398 103,294 129,044 160,724 167,617} _{44,946 52,012 58,879} ^{84,484 101,094 105,792} _{24,280 40,304 50,687 56,483 61,357 64,375}

  1Q18 Revenue Share(%) Telkomsel

  17%

  XL Axiata Indosat Ooredoo 66% 17%

  Adjustment Ownership as a % of Free-float LQ 45 Mkt Cap Full (in IDR Tn) Weight Full FF Mkt Cap (in IDR Tn) FF Weight LQ45 Weighting Adjustment Per Sector Source: Bloomberg, KSEI, Sinarmas Investment Research

  Source: Bank Indonesia, Sinarmas Investment Research

  Expecting a correction in Indonesian bonds. For the past two

  3Q18 Current Account Deficit (USD Bn) CAD to GDP Widening CAD in 3Q18

  2Q18

  1Q18

  4Q17

  3Q17

  2Q17

  1Q17

  4Q16

  3Q16

  2Q16

  1Q16

  0.00

  weeks, Indonesia’s bond market has rallied. Yield on the nation’s 10- year bonds dropped to the lowest level at 7.99% on 8 November 2018 (-70 bps from its 26 October 2018 high). The rally was mainly driven by the Rupiah strengthening (+3.5% in the past 2-weeks), limited Q4 bonds supply, and attractive real yield compared to other EM peers. This results in a net buy of IDR 15.6tn since 26 October 2018 from foreign investors, which led to a total of IDR 878.7tn foreign outstanding ownership in ID Government bonds (second highest compared to position of IDR 880tn in Jan-18). From the supply-side, the government only needs to issue new bonds amounting to ~IDR 15tn to achieve this year’s target as it has already completed 91% of target issuance (IDR 368tn of IDR 383tn target). Therefore, the market expects 1-2 bond auctions left until end of year 2018. However, going forward we expect a short-term correction in the domestic bond market as the spread between US Treasury-yield and ID Government bonds- yield has moved below its 8-years average (503 bps), which has lessened the attractiveness of our bonds. In addition to that, we view

  2Q18. High CAD figures normally lift up risk level, which means more capital outflow. However, recent strong money flow to bonds could strengthen Rupiah and minimize currency volatility. Furthermore, we expect CAD to improve on the back of better trade balance and lower oil price. The import tax adjustment implemented in early Sept’18 should better reflect in moderate import growth in the upcoming quarters, while the recently gradual oil price decline should also pull down the deficit in oil and gas section.

  (BI) released Indonesia’s 3Q18 CAD which reached US$ 8.8bn or 3.37% to GDP, widened from 3.02% in the previous quarter. Cumulatively, this brings Indonesia’s 9M18 CAD to 2.86%, which is slightly below of 3% borderline. Rising current account deficit was mainly due to lower performances of current account for both goods and services. In 3Q18, Indonesia saw a deficit of US$ 0.4bn in the goods side, from a surplus of US$ 0.3bn in 2Q18. This was mainly on higher deficit in oil and gas (migas) section, as oil import reached US$ 7.3bn, up by 12.1% QoQ deriving from higher volume and oil price (US$ 76.6/barrel vs US$ 73.2/barrel in 2Q18). Meanwhile, current account deficit from services was posted at US$ 2.2bn vs US$ 1.9bn in

• 10.00
• 9.00
• 8.00
• 7.00
• 6.00
• 5.00
• 3.00
• 2.00
• 1.00

  Source: Widening current account deficit (CAD) in 3Q18. Bank Indonesia

  1Q18

BTS on air

_{TLKM EXCL ISAT}

  2013 2014 2015 2016 2017

  XL Axiata Indosat Ooredoo 69,830 ^{85,398 103,294 129,044 160,724 167,617} _{44,946 52,012 58,879} ^{84,484 101,094 105,792} _{24,280 40,304 50,687 56,483 61,357 64,375}

  1Q18 Revenue Share(%) Telkomsel

  17%

  XL Axiata Indosat Ooredoo 66% 17%

  2017 Revenue Share(%) Telkomsel

  64% 16% 20%

  recent price wars caused by the SIM card regulation, we expect there will be an increase in data pricing considering that the price wars is beginning to subside and the implementation of SIM regulation would reduce the potential price war in the future. Furthermore, based on our meeting with Telkomsel Investor Relation, there is an indication that

  Potential surge in data pricing on welcoming festive season. After the

  We believe the new competition landscape would be focusing more on renewal package/reload package as operators would likely to focus more on expansion and quality improvement since the focus would not be in acquisition anymore. Based on the information from investor relation of TLKM, currently government is working on a new regulation to set guidance on tariff gap between starterpacks and reload packages with price of reload packages must be lower than starter packs to encourage sustainable cus- tomer shift to reload/renewal packag- es. Doing so would help prevent the industry from returning to starterpack- heavy sales model lead to a lower objectives as set by the existing pre- paid SIM card registration policy.

  Renewal package over starterpack.

• 5.00%
• 4.50%
• 4.00%
• 3.50%
• 3.00%
• 2.50%
• 1.50%
• 1.00%
• 0.50% 0.00%
that the forecasted FFR hike in December will attribute to stronger DXY and higher US Treasury-yield, thus leading to more pressure towards

  1Q18 2017

Revenue Share(%) Revenue Share(%)

our currency .

  ID 10Y vs US 10Y 17% 20%

  900 Telkomsel Telkomsel

  800

  XL Axiata

  XL Axiata 17% 16%

  Indosat Ooredoo Indosat Ooredoo 700 64%

  66% 600 500 400 300 200 100

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• 1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 r-1 l- r-1 l- r-1 l- r-1 l- r-1 l- r-1 l- r-1 l- r-1 l- r-1 l- n n n n n n n n n ct ct ct ct ct ct ct ct ct p p p p p p p p p Ju Ju Ju Ju Ju Ju Ju Ju Ju Ja A O Ja A O Ja A O Ja A O Ja A O Ja A O Ja A O Ja A O Ja A O

  Yield Spread Average -1Std +1Std Source: Bloomberg, Sinarmas Investment Research Foreign Ownership in Indonesia Bonds Market _{TLKM EXCL}

BTS on air

_ISAT

  Source: Bloomberg, Sinarmas Investment Research _{160,724 167,617} Midterm election conclusion. As the midterm election came to a _129,044

  close, Democrats took control of the House of Representative (HoR) and Republicans kept the Senate. This outcome translates to _{103,294 101,094 105,792} Democrats being able to block proposed legislation before it can reach the Senate and exposes Trump to the possibility of an impeachment, 85,398 _84,484 despite the unlikelihood of the Republican-controlled Senate voting for _{69,830 58,879 61,357 64,375} it. _{44,946 52,012 40,304 50,687} ^56,483

  What’s in store for the Rupiah? The Democrat-ruled HoR sets the _24,280

  stage for potentially no new tax cuts, which in turn will lower growth expectation. This leads to potentially lesser than previously forecasted rate hikes by the Fed, which was previously stated at 1 more in 2018, 3

  2013 2014 2015 2016 2017

  1Q18

  in 2019, and 1 in 2020. Thus, a certain degree of pressure on Rupiah has been alleviated in the near term as the dollar weakens.

  Source: Renewal package over starterpack.

  We believe the new competition landscape would be focusing more on

7 A

  7 Oct

  6 Oct

  6 No v

  6 De c

  6 Jan

  7 Feb

  7 M ar-17 A p r-1

  7 M ay

  7 Ju n

  7 Ju l-1

  7 A u g

  7 S e p

  7 No v

  6 A u g

  7 De c

  7 Jan

  8 Feb

  8 M

ar-18

A p r-1

  8 M ay

  8 Ju n

  8 Ju l-1

  8 A u g

  8 S e p

  8 Oct

  8 BI 7DRRR Fed Rate BI 7DRRR vs Fed Rate

  Source: Bloomberg, Sinarmas Investment Research

  6 S e p

  6 Ju l-1

  Renewal package over starterpack.

  Source: Bloomberg, Sinarmas Investment Research

  17%

  XL Axiata Indosat Ooredoo 66% 17%

  2017 Revenue Share(%) Telkomsel

  out of the way, the focus now shifts to the Fed’s future rate hike decision and U.S. – China trade relations. Trump’s loss of control of the House might result in the President dialing up the pressure on China even further. It remains to be seen as to how the standstill will progress during the G20 meeting where President Trump is scheduled to meet with President Xi Jinping, which might be the tipping stone for U.S. growth outlook that affects the Fed’s rate hike decision, which ultimately either removes or add pressure to the Rupiah.

  64% 16% 20%

  6 Ju n

  14678 12000 12500 13000 13500 14000 14500 15000 15500

  Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 USDIDR USDIDR Exchange Rate

  5.75

  1Q18 Revenue Share(%) Telkomsel

  2.25

  1

  2

  3

  4

  5

  6

  We believe the new competition landscape would be focusing more on renewal package/reload package as operators would likely to focus more on expansion and quality improvement since the focus would not be in acquisition anymore. Based on the information from investor relation of TLKM, currently government is working on a new regulation to set guidance on tariff gap between starterpacks and reload packages with price of reload packages must be lower than starter packs to encourage sustainable cus- tomer shift to reload/renewal packag- es. Doing so would help prevent the industry from returning to starterpack- heavy sales model lead to a lower churn rates and achieve the efficiency objectives as set by the existing pre- paid SIM card registration policy.

  XL Axiata Indosat Ooredoo 69,830 ^{85,398 103,294 129,044 160,724 167,617} _{44,946 52,012 58,879} ^{84,484 101,094 105,792} _{24,280 40,304 50,687 56,483 61,357 64,375}

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  2013 2014 2015 2016 2017

  1Q18

BTS on air

_{TLKM EXCL ISAT}

  Source: All eyes on the Fed and trade war. With one source of uncertainty

  Crude oil plunge into bear market. In the past 2 weeks, crude oil

  Potential surge in data pricing on welcoming festive season. After the

  pr-16 M ay amounts of oil for at least another six months. This gave downward pressure for oil prices. In response to US waivers, local news stated

  has plunged by more than 10.5%, trading at just below the USD 60 per barrel mark, the lowest level since March 2018 as global supply increased and worry on fuel demand from lower economic growth and trade wars impact. Oil price peaked in October on concerns that US sanction on Iran will lead to supply shortage. However, big producers such as Saudi Arabia, Russia and U.S. have increased output steadily, more than enough to compensate the lost of Iranian barrels. The big 3 nations are currently pumping oil at a record high with combined total output of 33.5 million barrels per day. In addition, U.S. has also granted a waiver to Iran’s biggest buyer, allowing them to buy limited

  1Q18 2017

  that OPEC and its allies are considering to cut oil production by up to 1 Revenue Share(%) Revenue Share(%) million barrel per day to prevent further oil price slide. Despite no official statement has been given, this could potentially give upward pressure to oil price. We view oil price volatility will persist in the next

  17% 20%

  few trading days given the lack of clarity on demand supply direction in

  Telkomsel Telkomsel

  the near term.

  XL Axiata

  XL Axiata 17% 16%

  Rising oil production lead to lower price Indosat Ooredoo Indosat Ooredoo 64%

  66%

  12.0

  80

  11.5

  75

  11.0

  70

  10.5

  65

  10.0

  60 Renewal package over starterpack.

  We believe the new competition

  9.5

  55

  landscape would be focusing more on renewal package/reload package as

  9.0

  50

  operators would likely to focus more on expansion and quality improvement

  8.5

  45

  since the focus would not be in acquisition anymore. Based on the

  8.0

  40

  information from investor relation of

  Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18

  TLKM, currently government is working

  US Arab Saudi Russia Oil price

  on a new regulation to set guidance on

  Source: IEA, Bloomberg, Sinarmas Investment Research

  tariff gap between starterpacks and reload packages with price of reload packages must be lower than starter packs to encourage sustainable cus- tomer shift to reload/renewal packag- es. Doing so would help prevent the industry from returning to starterpack- heavy sales model lead to a lower churn rates and achieve the efficiency objectives as set by the existing pre- paid SIM card registration policy.

  Potential surge in data pricing on welcoming festive season. After the _{TLKM EXCL}

BTS on air

_{ISAT 160,724 167,617 69,830 85,398 103,294} 129,044 _{84,484 101,094 105,792 44,946 24,280 52,012 40,304 58,879 50,687 56,483 61,357} 64,375

  2013 2014 2015 2016 2017

  1Q18

  recent price wars caused by the SIM

  Source:

  card regulation, we expect there will be an increase in data pricing considering that the price wars is

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