---
endpoint: analytics
pattern: Telecoms
status: done
latency_ms: 247897
conversation_id: 10fc4821-3163-47e0-9a8f-1dda8aa34d3d
citations: 5
created: 2026-05-31 18:55:19Z
---

# What is the investment thesis for Telkom in the current market environment?

## Telkom — Investment Thesis (Current Market Environment)

**Scope note.** "Telkom" in the org's research universe overwhelmingly refers to **Telkom Indonesia (TLKM IJ / TLK US — PT Telekomunikasi Indonesia (Persero) Tbk)**, not Telkom SA SOC Ltd. CLSA carries active TLKM coverage with multiple notes through June 2025; Telkom SA (TZL1) has no primary RMS coverage. The thesis below is for TLKM. (If you meant Telkom SA, flag it and I will re-scope.)

### Bottom line — CLSA stance

| Item | Value | Source |
|---|---|---|
| Rating | **Outperform (O-PF)** | CLSA SOE note, 2-Jun-2025 [2]; CLSA Indonesia TMT, 19-Jun-2025 [8] |
| Target price | **Rp2,900** (raised from Rp2,770 in the 22-Apr-2025 review) | [2][8] |
| Reference price | Rp2,820 (2-Jun-2025) | [2] |
| Implied upside | **+3%** vs Rp2,900 TP — modest, so the call is anchored on **cash returns, not capital appreciation** | [2] |
| Market cap | ~US$17.2bn | [2] |

The framing in CLSA's note is explicit and headlined "**Returning cash**" — i.e., this is not a re-rating story; it's a free-cash-flow and payout story underpinned by lower capex intensity, governance reform, and a stabilising competitive backdrop. [1]

---

### Thesis Pillar 1 — Capex compression → free cash flow inflection

This is the single most important change in the TLKM story versus the last several years.

- **2025 guidance**: low single-digit revenue growth, 50–52% EBITDA margin range, and — critically — **capex/sales cut to 17–19%** (vs ~23% in 2024 and a multi-year ~21–22% run-rate). [1][9]
- Management has anchored 17–19% as the **medium-term capex intensity target through 2028**, not a one-year underspend. [9]
- The lower number is structural, driven by (a) better technology choices and more efficient network topology, (b) group procurement to extract scale price/unit on consumer premise equipment and network gear, and (c) better medium-term demand visibility to vendors. [9] CFO Heri Supriadi confirmed: "Last year, we did pay a dividend payout ratio around 80%. We do expect to provide… a higher dividend per share this year." [10]
- 2024 actual capex/revenue printed at **16.3%** (Rp24.5tn), partly because data-center spend was deferred to 2025 — but even with that catch-up, 2025 sits comfortably below the historical norm. [13]
- CLSA explicitly flags that management's payout signalling now points to **above the previous 70–80% range**, and an **Rp3tn buyback** is in place. [1] Shareholders approved an **Rp21tn dividend for FY24** at the AGM. [3]

This is the core re-rating lever. With capex normalised lower while EBITDA holds 50–52%, the free-cash conversion improves materially and the dividend math reprices accordingly.

---

### Thesis Pillar 2 — Industry pricing repair stabilising the top line

The 2023–2024 starter-pack price war that punished sector ARPU appears to have run its course:

- Telcos hiked prices across late 2024: **XL +9% (gradual from Sep-24), Indosat +12% (Oct-24), Telkomsel +10% (Nov/Dec-24)**; Smartfren a laggard at +4%. Industry-wide hikes averaged 9–12%. [5]
- However, **no further price hikes have occurred since early 2025** — management cites weak purchasing power as a limiter. [5]
- Starter-pack pricing has now standardised at **Rp35k for 3GB** across all main brands and sub-brands (Telkomsel, byU, XL, Axis, Indosat, Tri). Per-GB pricing for main brands sits at Rp3–4k (Telkomsel highest at Rp4.17k), with sub-brands at <Rp3k. The lingering low-price packs work off by end-2Q25, which should support optical ARPU improvement in 2H25.
- Management framed this in the call as a "**benign**" competitive environment with a "**disciplined approach to market repair**" rather than chasing market share. [11]
- Industry consolidation has narrowed the field — XL Axiata + Smartfren + Smart merged into **XLSmart** (effective 17-Apr-2025), trading under EXCL. After spectrum return, XLSmart holds ~137 MHz vs IOH 135 MHz and **Telkomsel ~165 MHz**, preserving Telkomsel's structural spectrum lead and 3-player market structure. [4]

---

### Thesis Pillar 3 — FMC (Fixed-Mobile Convergence) as the growth engine

The legacy IndiHome integration into Telkomsel is now operationally complete and is shifting the company from a single-product mobile operator to a household-bundle play:

- **Convergence ratio rose from 44% (4Q23) to 57% (4Q24)**, and management is targeting up to **1m FMC net adds in 2025**. [11]
- **One-billing integration was completed end-2024**, enabling streamlined cross-sell and bundling. [11]
- Telkomsel 2024 revenue **+10.7% YoY to Rp113.3tn**; mobile customer base stable at ~160m; **data payload +13.9% YoY**; digital business 90.3% of mobile revenue (up from 88%). [11]
- Consumer FBB: **9.6m subs** (+2.5% QoQ); strategy is **IndiHome as premium tier + EZnet for the value/ex-Java segment**, with blended ARPU expected to moderate but offset by higher revenue per household via bundling. [12]

The "so what": as FMC matures, customer churn drops, ARPU per household rises, and the marketing cost-per-subscriber falls — supporting the EBITDA-margin floor at 50–52% even on low-single-digit revenue growth.

---

### Thesis Pillar 4 — Governance reset and new management

CLSA flagged the post-AGM 2025 governance overhaul as a positive setup for execution risk:

- **Dian Siswarini (former XL Axiata CEO) appointed President Director**, replacing Ririek Adriansyah. She is a telecom industry veteran known for digital transformation at XL — installed alongside Muhammad Awaluddin as VP Director. [3]
- Vice Minister of Communication and Digital **Angga Raka Prabowo became President Commissioner**. [3]
- **Board of Commissioners trimmed from 9 to 8 (-11%)**, in line with a sector-wide SOE governance restructuring under Danantara; portion of independent commissioners rose well above the 30% threshold. [6]
- The new BoD adds genuine industry experience (the CFO came from Digital Realty/BDIA JV, new Enterprise director from AirAsia Indonesia). [3]

This matters because the prior critique of TLKM was political appointees and weak execution accountability. The new line-up is a meaningful upgrade in commercial credibility.

---

### Thesis Pillar 5 — Optionality (data centres + MDI Ventures)

- **Data centre monetisation**: management is in the final stage of strategic partner selection for the data-center business, targeting closure in 2025. This is the most likely near-term value-unlock catalyst beyond the dividend math. [13]
- **MDI Ventures** (Telkom's corporate VC arm) booked ~**US$60m in exits in 2025** after an 18-month lull and contributed **Rp483bn in unrealised gains to TLKM in 2024** (FMV basis). Funds: US$100m + US$500m + Ascent Venture Group with external LPs. [7]
- **Mitratel** (tower subsidiary): 2024 revenue +7.2% to Rp9.3tn; tenancy ratio 1.52x; acquired 8,000km of fibre (51,039km total under management). [11]

---

### Risks to the thesis

| Risk | Watch item |
|---|---|
| ARPU recovery delayed | Mgmt told Goldman the starter-pack pricing recovery "depends on macro and competition through Q2 onwards" — purchasing power is weak [11] |
| Capex creep | The 17–19% range assumes no major spectrum or 5G push; the 1.4 GHz auction is a watch item |
| Legacy revenue decline | Legacy is in a 20–30% YoY structural decline; contribution should fall below 5–6% of total in 12–18 months — drag tapers but is real [12] |
| SOE governance reversal | New BoC includes political appointees alongside professionals; execution depends on Siswarini's autonomy [6] |
| Indonesia macro | Headline inflation 2.3% in 2024, BI rate 6%, minimum-wage growth <5% — purchasing power remains the limiter on price hikes |

---

### Summary view

TLKM is best framed as a **cash-return story with industry-structure tailwinds** rather than a growth story. The investment thesis rests on:

1. A **structural step-down in capex intensity** (17–19% vs 22–23%) creating a free-cash inflection. [1][9]
2. **Higher dividend payout** (>80% directionally) plus an **Rp3tn buyback**, against a backdrop of an **Rp21tn FY24 dividend** already approved. [1][3][10]
3. **Stabilising industry pricing** post 9–12% hikes in late 2024, with the starter-pack price war ending and ARPU optically improving in 2H25. [5]
4. **FMC execution** — 57% convergence, 1m FMC net-add target, IndiHome+EZnet two-tier FBB strategy. [11][12]
5. **Governance and management upgrade** under Dian Siswarini, with a leaner, more independent BoC. [3][6]

The upside to CLSA's Rp2,900 target is modest (+3%) [2], so the return profile is TSR-driven (dividend yield + buyback + modest re-rating), not capital-gains-driven. The call essentially says: "Own the cash flow, not the multiple."

---
**Sources**
[1] CLSA — "Bits & pieces (Where the Wild Things AREN'T)" — Telkom "Returning cash" section, 23 May 2025 — 607960328LinqAlpha.PDF
[2] CLSA — "Indonesian market (First step for better SOE governance)" — TLKM IJ O-PF Rp2,900 TP table, 2 Jun 2025 — 607961011LinqAlpha.PDF
[3] CLSA — "Indonesia TMT (Weekly news and comments)" — Telkom CEO change + Rp21trn dividend, 10 Jun 2025 — 607961627LinqAlpha.PDF
[4] CLSA — "Indonesia TMT (weekly news and comments)" — XLSmart merger and Telkomsel spectrum, 24 Apr 2025 — 607956749LinqAlpha.PDF
[5] CLSA — "Indonesia TMT (Weekly news and comments)" — Telco price-check table, 10 Jun 2025 — 607961627LinqAlpha.PDF
[6] CLSA — "Indonesian market (First step for better SOE governance)" — SOE BoC structure table, 2 Jun 2025 — 607961011LinqAlpha.PDF
[7] CLSA — "Indonesia TMT (Weekly news and comments)" — MDI Ventures exits, 19 Jun 2025 — 607962353LinqAlpha.PDF
[8] CLSA — "Indonesia TMT (Weekly news and comments)" — Companies-mentioned rating/TP list (TLKM IJ Rp2,770 O-PF), 19 Jun 2025 — 607962353LinqAlpha.PDF
[9] PT Telkom Indonesia FY2024 Earnings Call — Budi Wijaya, 2025 capex/EBITDA/revenue guidance
[10] PT Telkom Indonesia FY2024 Earnings Call — Heri Supriadi on FY24 80% payout and higher DPS for FY25
[11] PT Telkom Indonesia FY2024 Earnings Call — FMC convergence ratio 57%, Telkomsel +10.7% revenue, payload +13.9%
[12] PT Telkom Indonesia FY2024 Earnings Call — Derrick Heng on ARPU outlook and IndiHome/EZnet FBB strategy
[13] PT Telkom Indonesia FY2024 Earnings Call — 2024 capex Rp24.5tn / 16.3% of revenue; data-center strategic partner selection

## Citations

- [9] **Q4 2024 Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk** · external
- [10] **Q4 2024 Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk** · external
- [11] **Q4 2024 Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk** · external
- [12] **Q4 2024 Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk** · external
- [13] **Q4 2024 Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk** · external

