Indosat net profit down on Satelindo stake buy
Indosat net profit down on Satelindo stake buy
Edhi Pranasidhi, Dow Jones, Jakarta
PT Indonesia Satellite Corp., or Indosat, Wednesday said net profit for the first nine months of the year fell 64 percent due to depreciation costs and amortization of goodwill following a stake purchase in a cellular phone company.
The country's second largest telecommunications company reported a nine-month net profit of Rp 435.5 billion (US$48 million) compared with Rp 1.20 trillion a year earlier.
Indosat said the fall was mostly due to costs arising from the depreciation of its assets and amortization of goodwill from its acquisition of a 25 percent stake in cellular phone company PT Satelit Palapa Indonesia, or Satelindo, from Deutsche Telekom AG (DT).
Indosat now wholly owns Satelindo, the second largest cellular phone services company in Indonesia.
Analysts said Indosat's net profit was lower than their forecast range of Rp 550 and Rp 650 billion.
"The fall (in net profit) is quite surprising and disappointing," said Zaki Maulani, an analyst with Samuel Securities.
Indosat's shares were down 3 percent at Rp 7,750 soon after the company reported its nine-month earnings, reflecting investors' disappointment, Zaki said.
Indosat said revenue rose 22 percent to Rp 4.91 trillion from Rp 4.02 trillion.
But the increase was offset by the cost of depreciation, which rose 76 percent on year to Rp 1.26 trillion from Rp 717.8 billion. This caused Indosat's operating profit to fall 17 percent to Rp 1.33 trillion from Rp 1.61 trillion last year.
The company also booked losses from amortization of Rp 514.3 billion after acquiring Satelindo, compared with losses of Rp 183.5 billion last year.
Indosat said its revenue from international call services, its core business, fell 5.2 percent to Rp 1.62 trillion from Rp 1.71 trillion last year. It didn't offer an explanation for the drop.
It said revenue from cellular phone services rose 70 percent to Rp 2.34 trillion from Rp 1.38 trillion, contributing around 48 percent to its total revenue.
Indosat expects that with the refocusing of its resources toward its cellular phone business, contribution from this sector will become the key driver for its growth in the future.
As of Sept. 30, Indosat's cellular phone subscribers through Satelindo and Indosat Mobile Multimedia, or IM3, were at 2.78 million, up 85 percent from a year earlier.
Analysts expect Indosat to have around 3 million subscribers this year.
Muhammad Reza, head of research at Kuo Capital Securities, said its is high time for Indosat to further develop its cellular phone business given the falling trend of international call services growth.
He said the growth of international call services will continue falling in the coming years due to the rapid development of multimedia technology which will make people prefer using the Internet rather than conventional international call services.
"This means that Indosat has to focus more on its cellular business," he added.