Telkom's net profit lifted by unit stake sale

Telkom's net profit lifted by unit stake sale

Dow Jones, Jakarta

PT Telekomunikasi Indonesia, or Telkom, Thursday said net profit for the first nine months of the year more than doubled due to capital gains from the sale of a stake in a cellular phone unit.

The country's largest telecommunications company reported a net profit of Rp 7.57 trillion (US$837 million) for the period ended September compared with Rp 3.64 trillion a year earlier.

The results exceeded the Rp 5.5 trillion-Rp 6.5 trillion range forecast by analysts.

The state-owned company reported capital gains of Rp 3.20 trillion from selling a 12.7 percent stake in PT Telekomunikasi Selular Indonesia, or Telkomsel, to Singapore Telecommunications Ltd. earlier this year.

Telkom currently has a 65 percent stake in Telkomsel, while Singtel holds the rest.

"Gains from the Telkomsel stake sale contributed around 42 percent to Telkom's net profit," said Syed Al-Idid, an analyst with ING Barings in Singapore.

He said that without the capital gains, Telkom net would have risen only 20 percent on year, slightly lower than the 21 percent on-year increase in the same period last year.

Telkom's revenue for the first nine months of this year rose 35 percent to Rp 15.62 trillion from Rp 11.6 trillion previously.

Revenue from its core business, fixed line services, contributed 39 percent to total revenue as against 41 percent last year, whilst revenue from cellular services contributed 28 percent compared with 29 percent previously.

Given the fall, Telkom has to work harder to develop its core fixed line services and cellular business or lose out to competitor PT Indonesian Satellite Corp., analysts said.

Indosat entered the fixed line business this year building around 17,000 telephone lines. It plans to build up to 500,000 lines by 2004.

Indosat also wholly owns cellular phone company PT Satelit Palapa Indonesia, or Satelindo, which, as of Sept. 30, had 2.7 million subscribers.

Telkom had 7.6 million telephone lines by that date while Telkomsel had 5.1 million subscribers.

However, Telkom's future outlook remains promising given the growth it expects and the potential in the cellular sector.

Telkomsel expects to add around 2 million subscribers each year.

Only around 3 percent of Indonesia's 220-million strong population have cell phones at present, leaving ample room for expansion in coming years.

Analysts forecast the number of cellular customers to nearly double to around 13 million next year, from about 7 million currently.

"I recommend a buy in these shares," said ING Barings' Al- Idid, adding that he has a target price of Rp 5,600 a share for Telkom shares by year end.

Shares of Telkom were 3.1 percent higher at Rp 3,325 at 0823 GMT.

Meanwhile, Telkom said that the company will make maximum payment for financing the US$ 1.8 billion mega project up to 25 percent.

Telkom spokesman Bambang Eddie Praptono said that the 25 percent consists of internal funding and loan. However, he declined to give details on where the funding and the loan come from.

The rest 75 percent will be paid through Pay As You Grow system where Telkom paid investors according to the marketed capacity to the subscribers.