All telecom issuers under our coverage faced pressure in 1Q25. ISAT booked revenue of IDR13.58 trillion (-3.53% QoQ), dragged by a 2.94% QoQ contraction in data revenue. Despite a slight ARPU increase (+0.77% QoQ), ISAT’s subscriber base declined 3.93% YoY and data consumption dropped 4.78% QoQ. EXCL posted the steepest topline drop, down 4.75% QoQ to IDR8.60 trillion, with data and digital services revenue falling 3.83% QoQ. TLKM also saw a 2.94% QoQ revenue dip to IDR36.64 trillion, mainly from the Data, Internet & IT Services segment (-2.44% QoQ).

Operationally, EXCL grew its subscriber base by 2.08% YoY and saw a 4.55% QoQ increase in data traffic, but ARPU slipped 2.44% QoQ. TLKM’s data consumption rose 5.36% QoQ, yet blended ARPU declined 3.64% QoQ. Meanwhile, ISAT suffered both consumption and user base contraction, reflecting weaker engagement.

EBITDA margins remained resilient. ISAT’s margin improved to 47.25% (+196 bps QoQ), driven by leaner employee and marketing costs. TLKM also recorded margin growth to 49.76% (+101 bps QoQ), while EXCL held relatively steady at 50.24%. On the bottom line, ISAT posted a 26.96% QoQ net profit increase to IDR1.31 trillion. TLKM’s net profit slipped 2.75% QoQ to IDR5.81 trillion amid rising opex, and EXCL saw the sharpest decline (-23.44% QoQ) to IDR385 billion due to cost pressures.

Looking into 2Q25F, the operators’ agreement to raise starter-pack prices may aid ARPU and data yield recovery. However, risks remain, particularly user attrition among price-sensitive segments. Current data yield averages IDR8.2k/GB, with XL leading at IDR2.77k/GB, slightly above TSEL (IDR2.71k) and ISAT (IDR2.69k). XL also posted the highest data revenue per subscriber at IDR134.13k (vs ISAT: IDR110.71k; TSEL: IDR98.72k). We expect yields to improve by 3–5% in 2Q25F, potentially lifting industry ARPU and revenue per user to IDR353.87k–IDR360.74k/sub.

A key catalyst lies in the upcoming 1.4 GHz spectrum auction. With 80 MHz available and its use targeted for wireless broadband, we view TLKM as the frontrunner given its infrastructure readiness and strong financials (1Q25 DER: 0.77x; FY25F interest coverage: 7.97x). This spectrum may help Telkom restore IndiHome’s competitive edge, which currently ranks 5th in service quality per OpenSignal, trailing peers like XLHOME (#1) and Indosat HI-FI (#2).

We maintain an Overweight rating on the telco sector. Our top pick is ISAT (BUY, TP: IDR2,200), underpinned by cost efficiencies and strong market presence. OpenSignal highlights Tri as the most consistent performer in user experience. TLKM (BUY, TP: IDR2,950) follows, offering attractive valuation (~22% EV/EBITDA discount vs 5Y avg), potential buyback, dividend payout, and fixed broadband upside. EXCL (BUY, TP: IDR2,900) remains our third choice as it prepares for post-merger synergies with FREN, targeting USD100mn realization this year from a total of USD200–300mn. Downside Risks: 1) Persistent price wars may cap ARPU and compress margins. 2) Macro uncertainty and FX volatility could raise operational costs, especially for firms with foreign currency debt. 3) Auction delays or regulatory setbacks could stall expansion plans.

By PHINTRACO SEKURITAS | Research
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