Indonesian Telcos: 1Q11 Preview - 1Q seasonally weak but Street missing FY11 EBITDA margin upside - JP Morgan

• 1Q is seasonally the weakest quarter: We expect 1% QoQ growth in revenues for ISAT/EXCL while 9% for TLKM due to restatements in 4Q10. We expect 40-93% YoY growth (-12% to 38% QoQ) in 1Q11 recurring profit for Indonesian Telcos. Please see Figure 2 for revenue growth trends. EXCL is reporting 1Q11 results on 29-Apr-2011.

• Expect 8-11% upside to Street’s 2011 net estimates for Indonesian Telcos: We are 5% and 2% below the Street on 2011 revenues for TLKM and ISAT while 1% ahead for EXCL. Margin improvement /stability is our key call vs. the Street. We are 40-360bps ahead of the Street’s 2011 EBITDA margin forecasts. Please see Figure 1 below for EBITDA margin improvement trends.

• Management guidance in line for ISAT, below JPM for EXCL: ISAT’s guidance at 8-10% revenue growth is in line with our estimates. EXCL is guiding for 8-9% revenue growth vs. JPMe at 15%. 2011 capex is guided to remain largely flat as compared to 2010 for TLKM and EXCL.

• Wireless ARPU decline to continue in 1Q11: We expect 7-14% YoY decline in wireless ARPU’s for Indonesian Telcos. OpEx/min is expected to decline by 20% and 11% for Telkomsel and ISAT while the declines for EXCL have stalled out. Fixed line revenues are expected to grow by 4% for TLKM while fixed line EBITDA is expected to increase by 27% YoY on improving margins.