PTITF (PTITF) Q3 2026 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to PT Indosat Tbk's 9 Month 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's call is being recorded. I would now like to hand the conference over to your first speaker today, Pak Indar. Please go ahead.

Thank you, Desmond. Good afternoon, everyone, and thanks for joining us today. With us on the call today, we have Pak Vikram Sinha, our Chief Executive Officer; Pak Nicky Lee, our Chief Financial Officer; Pak Bilal Kazmi, our Chief Operating Officer; and Pak Apoorva Mehrotra, Chief Growth Officer. I will now hand over the call to Pak Vikram for his opening remarks. Over to you, sir.

Thanks, Indar. Good afternoon, everyone. I'm proud to report a continued strong performance in the 9 months of 2026 with both financial and operational numbers showing improvements. The key highlights are: number one, our core business continued to deliver double-digit organic growth, and we are on track to meet our guidance. Number two, our 5G investment is progressing where we are using data to drive a disciplined 5G investment to maximize revenue growth and return on investment. And number three, the strong growth in core. We are investing into becoming a fully integrated AI player with full stack capabilities to unlock growth across the whole AI ecosystem. If you look at the next slide, we are on track to deliver what we promised on the start of the year, in line with our full year guidance. Across revenue, EBITDA and normalized net profit, we saw an increase of 11% year-on-year, 9% year-on-year and 11% year-on-year, respectively, for the 9 months of 2026. We also delivered USD 50 million on our Indosat AI Cloud revenue as we continue to deliver on our aspiration of becoming an AI-native telco. If you go to the next slide, our strong core business gives us the financial capacity and operational foundation to invest in building an integrated AI ecosystem. The foundation is our connectivity backbone through RAIA Grid with 86,000 kilometers of terrestrial and undersea cable. This is underpinning everything. Move up the stack, energy, Indonesia's rich resource gives us a structural advantage in powering large-scale AI infrastructure sustainably and in a very cost-effective manner. Data center, we are partnering with BDx Indonesia and NexAI to develop the physical data center capacity needed to host AI workload. Compute, through ZanKore, we are building significant AI compute capacity powered by NVIDIA targeting 1 gigawatt by 2029. This is the engine that will power AI model application at scale. Models, we are hosting global AI models while also partnering with best local models such as Sahabat-AI, ensuring we have access to both proprietary and open capabilities tailored to every need in the market. Application, at the top of the stack sits Intelligence Suite, which makes AI usable for every business. This is how we translate infrastructure into real commercial value for enterprise customers. In short, we are not just providing connectivity, we are systematically building an end-to-end AI ecosystem from energy and data center through compute, model, usable applications so that IOH can capture value across the entire AI value chain. If you look at the next slide, Indosat AI Cloud business is on track to deliver on our aspiration of 2026 full year and is set for scale in 2027 to deliver more than USD 3 million in recurring revenue. These are contracted revenue. This will be a big contribution to both top line and growth of IOH in the coming year. From 2027, ZanKore will further scale our ambition with 200 megawatt of capacity targeted to come online in first half of 2027 and will scale up to 1 gigawatt by 2029. We are seeing very strong demand for compute, both from regional global players. And also, we are seeing increase in demand for sovereign workload in Indonesia. We have secured funding for the first 100 megawatts of capacity and will be closing remaining funding in the coming weeks. Next slide, please. Indosat Intelligence Suite is how we are making AI usable and accessible for business across Indonesia and the region, while also opening a new high-margin revenue stream for IOH. At its core, Intelligence Suite brings together more than 300 AI models through our token platform. Customers get one secure connection and the platform automatically selects the best fit model for their needs, deliver results and track usage, so costs stay under control. This is particularly important for regulated industry that need data governance and cost predictability. From the commercial perspective, we expect Intelligence Suite to start contributing revenue in 2027 with a target of USD 100 million in revenue by 2021 (sic) [ 2028 ] at an attractive 70% EBITDA margin. This is a high-quality scalable opportunity that builds on our connectivity and infrastructure strength while creating securing enterprise revenue. As mentioned, we are on track to deliver on our full year guidance, which is to grow revenue and EBITDA close to double-digit and CapEx investment of around IDR 23 trillion to reflect additional spending on CapEx to bring 5G to our customers this year. This excludes the spending we have guided for earlier on GPU CapEx spend. Finally, we want to reiterate IOH is uniquely positioned as an attractive investment proposition. Our core business, which remains our cash cow is growing strongly, and we are one of the fastest organically growing telco in ASEAN. Despite our investment in 5G and AI cloud this year, our balance sheet remains strong and cash flow generation remains healthy. We are also in the unique position where we are one of the only AI cloud companies tapping the immense growth opportunity in Southeast Asia. We are also supported by strong shareholders in Ooredoo Group and CK Hutchison. That ends my overview, and I'll now hand over to Nicky for more detailed financial presentation.

Good afternoon, everyone, and thank you, Pak Vikram. Delighted to report a solid set of results for the 9-month period of 2026. Our first 9 months revenue rose by 11.1% year-on-year to IDR 45.8 billion. The primary driver was cellular revenue, driven by improvement in ARPU from IDR 39,000 last year to IDR 46,000 this year. The prime reason for this change has been our strategy to accelerate growth through AI and enhanced network experience. Revenue momentum was further complemented by our MIDI segment, underpinned by GPU and fixed connectivity revenue. Below the revenue line, we delivered 8.8% year-on-year improvement in EBITDA to IDR 21.1 trillion. This growth was delivered despite our investment made to our business, including spectrum and GPU acquisitions that ahead of revenue as well as FiberCo spin-off that increased our costs in quarter 3 '26. Consequently, our EBITDA margin contracted by 1 percentage point to 46%. Our normalized NPAT rose by 10.6% year-on-year, mainly driven by higher EBITDA partly offset by higher D&A from investments in network experience, GPU, acceleration of customer contract amortization and also some one-off project provisions. Our net debt-to-EBITDA ratio improved by 0.138x to 0.368x, primarily driven by the receipt of IDR 11.7 trillion in proceeds from the FiberCo monetization transaction significantly strengthening our balance sheet and improving our leverage position. If we move on to the next slide, focusing on our quarter-on-quarter results, revenue reduced by 2.2%, mainly due to cellular revenue as a result of SIM consolidation post implementation of biometric SIM registration. ARPU during the quarter remained stable despite a seasonally weaker quarter for customer spend, highlighting the resilience and quality of our subscriber base. EBITDA reduced by 12.4%, mainly related to investments in spectrum, FiberCo spin-off and several one-offs coupled with softer cellular revenue. I shall elaborate further on some of these items. As a result of these EBITDA margin dropped by 5 percentage points to 42.7%. At the bottom line, normalized net profit declined by IDR 1.2 trillion, primarily due to lower EBITDA, FiberCo finance lease charges as well as recognition of FX loss in connection with GPU acquisition financing. Let's take a look at the next slide. As highlighted earlier, several items weighed on our EBITDA and net PAT. To provide a clearer view of the underlying performance of the business, it would be helpful to assess our results, excluding these strategic actions, long-term investment-related costs and one-off items. Our underlying 9 months '26 EBITDA would have been IDR 21.6 trillion, increasing by 12% year-on-year if we were to adjust for additional spectrum costs, higher OpEx from FiberCo and also other one-off of around IDR 230 billion. And these one-off items include timing of bonus reversal and recognition of certain network credits. Our EBITDA margin would have been 47.2% or 0.2 percentage points higher than that of last year. In quarter 3 '26, our underlying EBITDA is IDR 7 trillion, down 5% quarter-on-quarter, mainly due to the revenue movement, as mentioned earlier. The 9-month underlying net PAT is IDR 4.5 trillion, higher by IDR 1 trillion compared to last year after adjusting for the items mentioned earlier. Similarly, for the third quarter, NPAT underlying IDR 1.6 trillion declined by IDR 230 billion quarter-on-quarter, also mainly due to revenue changes. Let's move on to the next slide, focusing on our costs. For 9 months and third quarter, total cost of services and OpEx was higher by 13.2% year-on-year and 7.1% quarter-on-quarter, respectively, driven mainly by cost of services, which rose 11% year-on-year and 6% quarter-on-quarter. This reflects strategic investment in spectrum, 2.6 and 700 megahertz, FiberCo OpEx after our spin-off transaction and one-off credit notes reversals. Personnel costs was another key contributor, increasing 42% year-on-year and 17% Q-on-Q, driven by timing of one-off bonus reversals with the year-on-year increase further impacted by higher variable performance-based compensation during the current year. Marketing expenses up 8% year-on-year in relation to higher activities to support revenue growth, including 5G campaigns. On a Q-on-Q basis, marketing expenses up by 16%, mainly to do with the timing of 5G campaigns and a more subdued level of activities in the second quarter. G&A reduced by 5% year-on-year and 9% Q-on-Q, underscoring our continued efforts to control spending in this area. Depreciation and amortization expenses up by 7% Y-o-Y and 4% quarter-on-quarter, primarily due to network rollout, including 5G, fiber lease -- FiberCo finance lease charges and also customer contract amortization acceleration. In terms of our operating income -- on the net other operating income, pardon, our net operating -- other operating income was IDR 1.5 trillion compared to IDR 378 billion in the previous period. The increase was largely to do with one-off gain from FiberCo monetization. On a Q-on-Q basis, the delta also due to the benefit from the one-off gain arising from this monetization gain. Moving on to the next slide on to CapEx. CapEx increased significantly Y-o-Y to IDR 29 trillion, underscoring our commitment to strategic CapEx investment for medium to long-term growth. The significant increase was driven by an investment of IDR 9.7 trillion in 5G CapEx and IDR 10.3 trillion of Indosat AI Cloud spend. This meant that the spend in Q3 reached IDR 19.5 trillion, an increase of 265%. As a result of this CapEx spend, CapEx to revenue ratio increased to 63.4% in the 9 months '26, while for third quarter '26, it became 28%. Let's take a look at our balance sheet. Importantly, we need to maintain -- we continue to maintain our strong balance sheet despite the additional CapEx spending. Net debt contracted by 19.2% Y-o-Y to IDR 10.3 trillion, reflecting the proceeds of IDR 11.7 trillion received from the FiberCo monetization transaction. The quarter-on-quarter increment by 273% was due to significant investment made in spectrum payment and also AI NeoCloud investment. Following that, our net debt-to-EBITDA ratio improved by 0.13x to 0.36x Y-o-Y despite rising Q-o-Q by 0.26x compared to last quarter. Thank you very much. And I will now hand over to Pak Bilal for operating performance update.

Thanks, Pak Nicky, and good afternoon to everyone. An important milestone during Q3 was the launch of biometric registration. We fully support the government's initiative. We believe it is an important step towards building a healthier, more sustainable telecommunications market by improving customer quality and enhancing trust in the digital ecosystem. To the next slide. As can be seen on the slide, biometric verification has materially reduced low quality and duplicate SIM activation, leading to a healthier underlying customer base. While this creates short-term subscriber pressure, it strengthens the economics of the business over the medium and long term. We reiterate that biometric registration is not a headwind, but a positive structural reform. What is also visible on the slide is that our ARPU grew 16.5% Y-o-Y to IDR 46,000, demonstrating the spending behavior of our core customers remains healthy, also reflected in data traffic, which continues to grow strongly up to 16%, again, indicating robust underlying customer engagement. Home broadband continues to perform well with customer growth of 21% Y-on-Y, providing an additional growth vector beyond the mobile business. The combination of a higher quality mobile base, stronger ARPU trends and continued HPV growth gives us confidence in revenue acceleration as biometric impact normalizes. I will now pass on to my colleague, Pak Apoorva.

Thank you. Thank you, Pak Bilal. Leveraging on our AI capabilities, our network team has done a phenomenal job of rolling out 5G sites in a speedy manner. As of date, our 5G network is live in 75 cities with almost 19,500 sites covering 22% of the population. This enables us to attract high-value customers and drive significant ARPU increase in coming quarters. Next slide. One of the most prominent use cases for 5G is home broadband. Our 5G network provides fiber-like network speeds in 75 cities and coupled with an attractive consumer proposition enables us to tap a large number of households in fiber dark areas, which are not connected to home broadband as well as those who are looking for a premium home experience powered by Indosat 5G network. Thank you.

Thank you. Can we move to the Q&A? Desmond, can we have the first question in the queue, please?

[Operator Instructions] Our first question comes from the line of Ranjan Sharma of JPMorgan.

Three questions from my side, please. Firstly, if I look at specifically your wireless revenues, they seem to be down 4% quarter-on-quarter. If you can help elaborate what happened there because our understanding was that there were adjustments happening on the pricing side. And it's related mainly to the biometric registration, if you can also help us understand like how the trends have been in September and October? The second question is on your presentation of underlying EBITDA margin on Slide 15. You seem to deduct the spectrum and FiberCo cost. But our understanding that these will be recurring costs of the business. So is it not fair to understand that the underlying margin should include these cost items as well? And the third question is that on the procurement side, the payables have seen a big jump. Can you help us understand like what's driving that? The number has gone from IDR 9.8 trillion to IDR 20.46 trillion.

Thank you for your question, Ranjan. My name is Apoorva. Let me take the first question on wireless revenue. As mentioned by Pak Nicky, this is seasonally a weak quarter, and the impact was exacerbated by the reduction in customer intake owing to the biometric KYC regime change. To your second part, we are continuing to look at opportunities to improve monetization. And we've seen a significant amount of price stability. And in terms of trends that we are seeing in September and October, we are cycling out of the impact of low customer acquisitions from July to August, and we should be able to see coming back to normal in the coming months.

Ranjan, thank you for your question. For the second one, the -- because for -- we have these transactions, spectrum allocation and also FiberCo formation in the third quarter, the impact of these coming in the third quarter. So it will generate an impact on our numbers. So as you're probably aware, Slide 15 is not one that we typically present because we don't want to show too many versions of EBITDA, net profit. But because of the impact we want from these transactions, we want to explain to people why the numbers would move from on a quarter-on-quarter or on a year-on-year basis. This is not to suggest that the impact will not continue. Of course, after we change the structure of our business forming FiberCo, we will have to make payments towards IFT and also spectrum after we get additional spectrum. This will be a continuing obligation for us to pay the annual fee every year. Now that said, the spectrum fees, in particular, our investment made for the medium and long term. So in the short term, this will hit us. But in the longer term, we believe that we will be able to make use of it to generate higher revenue.

Procurement payable. Nicky, you want to take this?

Yes, yes. In terms of procurement payable, it's just the timing of payments as we committed to increase our investment into 5G. So the payable amount has gone up.

Our next question comes from Sachin [ Ben ] of DBS Bank.

Two questions. Firstly, on the core business. Should not -- when the subscribers decline a little bit due to -- I think you mentioned due to biometric, should not the ARPU rise a bit mathematically or actually just trying to understand or is it just purely seasonal weakness? And we did see, if you can confirm some price rise or price hike in September, if you can quantify the magnitude of that? That's question number one. And number two, there's a bit of a stress in the market on AI. While the GPU rental price seems to be rising, the AI token revenue is not rising in tandem, which actually is the end revenue secured, right, by -- which is paid by the customers, right? So what is your opinion on that? And if you can give your opinion on what do you think of this current AI cycle? Where are certain areas of caution? And what is your view of this whole disconnect between the AI token and the revenue and the GPU rental model?

Sachin, let me take the first question. While this is a seasonally weak quarter, we have held ARPU at the same level as the previous quarter. So what it essentially means is that the revenue drop and the customer base softness has negated itself. On your second part, in terms of monetization, we are continuing to -- like I mentioned earlier, we are continuing to look at opportunities for monetization, and early trends indicate that it will continue to help us improve ARPUs and realizations in the coming months.

Sachin, this is Vikram. To your point on GPU rental price going up, you are absolutely right. There are credible independent reports that shows that the GPU prices are going up anywhere between 20% to 40%. Even the first generation A100, L450, H100, all prices have gone up by 30% minimum. So this is one part. Second, I think you are absolutely right in terms of not being able to see the total revenue versus GPU revenue. So in our case, if you look at our GPU revenue, you have seen in terms of our NeoCloud, we will be closing this year close to $100 million, and this is what we had guided. And these are long-term contracts so that we don't change the price when the prices go up. That was the call for action for us to launch our Intelligence Suite. So just to give you one data point, when you sell GPU as a service, you sell it on a long term at $6, $7 per hour. But when you are selling token, if you have the ability to generate token and sell token, you sell it. If I put the same parallel of per hour, you can earn up to $15 to $20. And if you are able to convert that into application, if enterprise buys output, it goes as high as $30. So that is why we have launched our Indosat Intelligence Suite, and we are in the process of putting it up. This will be powered by some of the GB300, which will be going live next year, and you will see revenue and high-margin revenue flowing for Indosat. And that is how we have been able to give directionally, while we will have revenue next year on this platform. But by 2028, we are targeting to get to a $100 million of run rate business with 70% EBITDA margin. So it's just a timing thing, one. Second, if you are only operating as a GPU as a service, then if you are on short-term contract, you can get the benefit of price up. But if you are locked on long-term contract, then ups and downs doesn't show up on your revenue. These are committed revenue. So the last learning which we have is when we are looking at Indosat, we are very focused on making sure that we do significant investment on getting our Intelligence Suite up. And that is why we are partnering with some of the best. We are building capability. We will start seeing revenue with very healthy margins starting next year.

Vikram, just to understand, when you say $15 to $20 per hour when you use AI tokens, there should be some revenue sharing given to the model player, right? And that is the question which is raising question. I mean this is for the -- because that model layer seems to be not really making money at all. I'm just trying to get your view around here, right? I mean, is that sustainable? What is the revenue sharing?

See, the good news is, I think there are different models. Who are the user of token. One, the model builder also buy token. So when you sell it back to them, relatively, you get very less margin. But when you start selling it to enterprise, when we launched our token platform, we had signed up enterprise customers, banks. So it's our ability to sell it to enterprise versus only selling it to model builders. So the mix of customer, the ability to sell directly to enterprise customers will be very important if we have to move up the margin and value chain.

Okay, okay. So are we saying there's no revenue sharing on the token revenue? Or is 100% coming to Indosat or some portion of that goes to the model provider who is providing the LLM model, right?

So let me give you an example. We will be in a very unique position where we will be hosting model at Indosat or ZanKore infrastructure where we'll be generating token from that model and what we'll be selling is token. Who do we sell back token? We sell back token to model builder, to enterprise. So model builder, when you sell it back, you get relatively lower margin. But when you sell it to enterprise, you get -- the rate card is $15 today. It is a public information. So that is where -- what I'm trying to tell you. What we have said, at Indosat level, we will have an asset-light model where we will make sure that we will be only booking margin after deducting all the infra cost. We will not be booking the top line. We will be only looking at margin. And that is where our EBITDA margin is very high.

So looks like you will be -- you probably have downloaded or hosting the open source model, right? So there's not much revenue sharing that you have to pay out of that, right? So almost all of that comes to Indosat, right, because it's an open source model, right? Can I say that?

See, we are very uniquely placed. We are not just the marketplace where I'm a reseller. I'm also hosting model in my AI compute infrastructure, which is ZanKore, and then we will be generating model. I think this is our unique advantage. There are not many who have the access to compute to generate token. Yes, we will also be reselling. We will not be hosting all because customers need output. They don't want to look at whether it is open source, closed source. So there are different models for different use. So we have developed a platform which will help our customer identify which is the best model needed for them. Where it is our own generated model, token, we will have higher margin. Where it is -- we are hosting models, global models. So we are hosting more than 300 models for -- help our customers to give them what is best for them. So it is quite detailed. We'll be happy to host you some time and explain you more in detail.

[Operator Instructions] Our next question comes from Piyush Choudhary of HSBC.

A couple of questions. Firstly, on the cost side, within the cost of services, you disclosed maintenance cost, which is up almost 40% quarter-on-quarter to IDR 1.2 trillion. Can I understand what has led to that? And is there any one-off? Or what's the outlook for this segment? That is first. Secondly, on your Slide 15, where you have given that breakup between underlying and reported kind of margin profile, as Nicky earlier mentioned, FiberCo and spectrum costs, those are obviously continuously. But the operational one-off item of IDR 191 billion, which you have flagged in this quarter, is this one-off or this is going to continue also? And the third question on ZanKore, where you have this target of AI compute capacity of 200 megawatts. May I check how much Indosat is committing to take up this compute capacity?

Piyush, let me start with ZanKore. So Indosat is looking at around 15 megawatt. Today, what we have is GB300. And then this we'll be using it for our token platform. We have already got a lot of customers signing up for this when we launched our platform. So that is giving us confidence, and that is how we have given this 2028 ambition target of getting to $100 million of recurring revenue with 70% EBITDA margin.

Piyush, thank you for your question. Nicky here. On the first question, on the cost side, the maintenance cost delta is triggered by the FiberCo formation. So the additional -- and the operational one-offs, there are many items there. We are just wanting to show you the overall impact from those items. So these may or may not continue on a going-forward basis.

Is there a way to...

And it can go both ways.

Like out of this operational one-off, because at the PAT level, you are seeing operational one-off impact is IDR 450 billion -- sorry, IDR 540 billion. Like how much of that is one-off in this quarter?

Yes. For example, employee bonus, right, we made a significant reversal in the second quarter. So depending on how our performance goes, we may increase that or we may reverse the bonus provision further. But given the scale of the adjustment, we feel it would be helpful to show the movement on an aggregate basis for your consumption.

Got it, Nicky. Got it. And Vikram, on ZanKore, so Indosat is taking up that 15-megawatt capacity starting 2027 or that is kind of later?

Starting April 2027, Piyush, this is where our cluster at ZanKore will start being up for ready for services. So the token platform will be up starting this month. We will start getting some margin from our token marketplace, but these are all 10% kind of a margin. But the moment our infrastructure compute is ready, when we are able to generate token from some of the very high demand open source model where we have already signed up for customers, where they'll be buying token from us. And these are all enterprise customers and also some of the model builders.

Got it. And from a data center capacity that has all been kind of prepared. BDx is the one which is supporting you throughout or there are other providers?

So there are 2 data centers, NexAI and BDx. Everything is on track in terms of cluster going ready for services. So we are trending on time for our execution.

[Operator Instructions] At this time, there appears to be no further questions from the line. Allow me to hand the call back to management. Please continue.

Yes, Desmond, let's just wait for another 1 minute, see if we get anything. Otherwise, we can close the call as we still have some time. I think we have a follow-up from Piyush.

The line is now open. Piyush, please go ahead.

Just one on the core business on the mobile side. We know like 3Q is seasonally weak, but if you can share any trends in October. Like are you seeing the data usage kind of picking up, the trends improving?

Piyush, this is Vikram. I think you heard Apoorva and also you heard Bilal. I think Q3 had the whole biometric for full quarter. It led to short-term contraction on gross add for the entire industry. But this is good overall, and we are seeing this starting September, October. So again, in terms of the trends, the trends are looking very positive. We are confident of making sure that our core cellular revenue grows to close to double-digit. And then we are seeing that trend in the last few weeks. If that answers your question.

[Operator Instructions] There are no more questions at this time. Please continue.

Okay. I think we will end the call today as we don't have any more questions in the Q&A queue. Thank you very much, everyone, for joining us. And if you need more details, please reach out to us, and we'll speak to you again next quarter. Thank you.

That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.