(IDR) (IDR) 2016F 2017F 2016F 2017F 2016F 2017F 2016F 2017F 2016F 2017F 2016F 2017F

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1 Equity Research Telecommunication Sector Sector Initiation Telco Sector Data Boom Data consumption to support the industry We expect growth in the telco industry to be driven by a sizeable increase in data usage in the near future. With younger Indonesians (below 35) accounting for 61% of the population, we see that being online has become a basic need. With more practical and efficient chat services, complemented by free data calls, we expect legacy business would continue on its declining trend. Other than chat, we also see that social media has become one of Indonesia s data growth sources, with apps like Facebook managing to grab some 79mn active users. Another app that would encourage data consumption is video streaming, which continues its popularity; thus there are many promotions, including a free quota bonus for streaming. Price war to repeat, but expected not to stay Currently, ISAT and EXCL are in the midst of a price war, providing promotions as low as IDR59/min to all operators for their exjava subscribers to foray in areas where they have minimal exposure, while on the data side, every operator is giving away bonus quotas to stimulate 4G utilization. Out of the three, TSEL has the highest data yield, compared to its peers, at IDR6/MB vs. IDR4/MB. Looking to 2017, we expect competition to rationalize since data subscribers will be dependent on high volume quotas. We also expect that operators will either increase their data package prices or lower their quotas. Regulation changes could alter competitiveness in the industry Based on current conditions, we see the government s plan to lower interconnection rates by 26% is already being finalized, awaiting the President s approval. We expect to obtain clarity on this matter by the end of the year. Once this regulation has been implemented, we see a minimal impact, as trends for interconnection revenue and costs both go down. Meanwhile, on the network sharing side, we see that there will be obstacles from TLKM, as they are frankly reluctant to share their network. If this regulation is executed, we expect a positive outcome for ISAT and EXCL, since they could minimize their expansion cost outside Java by sharing with TLKM. On the flipside, TLKM will be negatively impacted, having to expose its market share to competitors. Sector Overweight with TLKM and ISAT as the top pick We rate the sector OVERWEIGHT on the back of stronger longterm outlook, as currently Indonesia is at a beginning stage of 4G. Our top picks in the sector includes TLKM (market share leader, ability to maintain pricing and the broadest network in Indonesia) and ISAT (ability to increase subscribers with promotions and attractive valuations). We remain cautiously optimistic about EXCL: despite a positive outlook over the long term, the company is experiencing minor hiccups in terms of subscribers in However, we see attractive valuation due to recent share price underperformance, and is hence a BUY. OVERWEIGHT 07 November 2016 Aditya Eka Prakasa aditya.prakasa@bcasekuritas.co.id ext 182 PRICE PERFORMANCE 27,000 25,000 23,000 21,000 Nov15 Feb16 May16 Aug16 Nov16, BCA Sekuritas MARKET DATA.BCASTELC JCI Rebase as of 7Nov16 YTD 1M 3M 12M Absolute 1.7% 2.9% 9.2% 4.7% JCI Return 17.3% 0.2% 1.3% 19.7% Relative 18.9% 3.1% 7.8% 15.0%, BCA Sekuritas Exhibit 1. Stock comparisons 2016F 2017F Ticker Rating TP, BCA Sekuritas CP NP (IDRbn) EPS growth (%) PER (x) EV/EBITDA ROE (x) Div Yield (%) (IDR) (IDR) 2016F 2017F 2016F 2017F 2016F 2017F 2016F 2017F 2016F 2017F 2016F 2017F TLKM BUY 4,700 4,150 19,551 22, ISAT BUY 7,400 6, ,807 na EXCL BUY 2,800 2, na ERAA BUY TELE BUY TOWR BUY 5,150 3,800 3,277 3, Sector OVERWEIGHT 25,042 29,

2 Rising apps user = higher data consumption As the 4 th most populated country in the world, Indonesia naturally has a very high penetration of mobile subscribers. Against this, internet penetration has historically been very low, with only 93.4mn people (Exhibit 2), accounting for only around 36% of total population. Since the launch of 4G in 2013, Indonesia has seen an increase of internet connections through mobile devices. As of 2014, a large number of people connect to the internet through mobile devices (50%), laptops/computers (46%), and tablets (4%). In 2015, connection through mobile devices jumped to 70%, while laptops/computers and tablets declined to 27% and 3%, respectively (Exhibit 3). Exhibit 2. Indonesia s internet and mobile phone users, Mn people Despite high mobile phone penetration, internet usage is still low Internet users Mobile subs Source: Statcounter, Wearesocialsg Exhibit 3. Indonesia s internet usage by device, % 3% Declining usage of laptops, as people are moving to more affordable and practical mobile phones 46% 27% 50% 70% Laptop Mobile Tablet Source: Statcounter, Wearesocialsg Previously, social media and chat apps were the main drivers in mobile data growth. Nowadays, mobile phone usage has expanded with chat apps leading (27% of total population), followed by video, maps, mobile banking and games (Exhibit 4). With the increasing numbers of startup companies from both outside and inside Indonesia, we expect mobile device usage to continue to strive. Going forward, we expect more apps to contribute to the usage of smartphones, backed by the communications ministry plan to boost startups in Indonesia by using USO fund to help establish tech companies. 2

3 Exhibit 4. Mobile activities as a percentage of smartphone users, 2015 Messengers 27% Chat apps still dominate in terms of usage among Indonesian subscribers Video 22% Maps 22% Mobile banking 20% Games 19% Source: wearesocialsg 0% 5% 10% 15% 20% 25% 30% On the social media front, compared to other websites and apps, Facebook has become the most active app, with around 79mn registered. A relatively young demographic composition (61% of the population under 35, 36.3% under 20) (Exhibit 5) means social media will contribute more to the growth of mobile data, as most social media apps are set up for smartphones. Exhibit 5. Indonesian population pyramid (mn people), Indonesia has a relatively young population Female Male Source:BPS Another driver for data expansion is online video streaming. With the presence of streaming services such as YouTube and Netflix, we see that young people, especially those living in big cities, are starting to shift their preference from conventional television broadcasts. These apps are thirsty, consuming great amounts of data, and have become a basic need for urban people. Additionally, with the banking sector s more advanced payment system, we also see data usage pushed upward by online payments as well as banking transactions. 3

4 Exhibit 6. Most active social platform, 2015 Others 7% Instagram 10% BBM and Facebook remain the backbone of chats and social media in Indonesia Twitter Line 11% 12% FB Messenger 13% Whatsapp 14% Facebook 15% BBM 19% Source: Wearesocialsg 0% 5% 10% 15% 20% Ecommerce + benign interest = higher handheld device sales Other than traditional and modern markets, we have seen an increased portion of handheld device sales through ecommerce channels. Even modern retailers under our coverage, such as ERAA, have set up online businesses. With the likes of marketplace websites/apps such as Tokopedia and Blibli, traditional retailers can expand their market for a relatively small fee, while transactions are supported by online payments backed by the banking and telco sectors. Many modern retailers and marketplaces are currently offering promotions to spur sales. As we are expecting subdued interest rates going forward, we see handheld sale continuing upward, backed by consumers switching from 3G devices to 4G. We note that the largest chunk of handheld sales will come from lowmiddle 4G devices, in a price range of IDR1.53mn, which we suspect have a shorter life span, thus a higher turnover. Price war came, but not expected to last Recently, ISAT launched its campaign to boost 4G usage by allowing extra data, voice and SMS bonuses while offering IDR1 per second voice calls for exjava subscribers. This step has proven effective in snagging subscribers, as ISAT gained an additional 12mn subscribers in 1H16. Next, EXCL and TSEL were forced to hand out bonus data as well as voice and SMS (Exhibit 7). In terms of data pricing, TSEL leads the race with IDR6/MB, followed by ISAT and EXCL with IDR4/MB and IDR3/MB, respectively. Going forward, as data consumption picks up and 4G networks continue to expand, we see data pricing settling down while SMS and voice pricing continue to decline, as they are replaced by data. Data is currently a basic need for the crowd ; we thus expect the price war to end in the short term. Going forward, operators might dare to increase their data pricing or shrink quotas with current level pricing. Once all settles, we should see ARPU climb from its current level as operators monetize their data revenue. 4

5 Exhibit 7. Telco operators promotion program Telkomsel Simpati Gigamax Basic Price (IDR) 49,000 Voice 49,000 SMS 49,000 Data 100MB Bonus 1GB 4G + 1GB Apps Gigamax Lite 89,000 89,000 89,000 1GB 5GB 4G + 7GB Apps Gigamax Pro 119, , ,000 2GB 8GB 4G + 10GB Apps Gigamax Platinum 169, , ,000 4GB 10GB 4G + 16GB Apps Gigamax Ultimate 299, , ,000 8GB 20GB 4G + 22GB Apps Halo HaloFit 60 60, min 100 SMS 2.5GB HaloFit , min 300 SMS 4GB HaloFit , min 150 SMS 5GB XL Axiata Xtra S 39,000 1 GB 800MB + 30 min voice Xtra M 59,000 2GB 10GB + 50 min voice Xtra L 89,000 4GB 15GB + 75 min voice Xtra XL 129,000 6GB 26GB min voice Xtra 2XL 179,000 10GB 40GB min voice Xtra 3XL 239,000 16GB 56GB min voice Indosat Prepaid Paket M 59,000 2GB 10GB 4G + 500MB streaming Paket L 99,000 4GB 20GB 4G + 1GB streaming Paket XL 149,000 8GB 30GB 4G + 2GB streaming Paket XXL 199,000 12GB Unlimited 4G+ 5GB streaming Freedom Postpaid Paket L 49,000 Unlimited onnet Unlimited onnet 6GB 20GB 4G + 1GB streaming Paket XL 74,000 Unlimited onnet Unlimited onnet 10GB 30 min voice + 30sms + 30GB 4G + 2GB streaming Paket XXL 99,000 Unlimited onnet Unlimited onnet 16GB 60 min voice + 60sms + Unlimited 4G + 5GB streaming Paket XXXL 149,000 Unlimited onnet Unlimited onnet 30GB 120 min voice + 120sms + Unlimited 4G + 10GB streaming Source: Companies Data threat arising from Smartfren As competition in data heats up, we see that one on of the biggest threats emerges from Smartfren (FREN IJ). As a dedicated data player, FREN has managed to secure 10MHz of spectrum in 850MHz and 30MHz in 2,300MHz. Note that the 2,300MHz spectrum is reserved specific for data, with TSEL and ISAT only having 15MHz each; thus FREN has higher a 4G capacity. Exhibit 8. Spectrum allocation (Mhz) Smartfren dominates the 2,300MHz with its 30Mhz, thus becoming the greatest threat to operators TSEL ISAT EXCL Hutch FREN Source: Government of Indonesia 5

6 Additionally, they pursue an aggressive promotion strategy, bundling smartphones with their SIM card, while giving away an initial 100gb of data all starting at a price as low as IDR800k (Exhibit 9). We testcompared this product, and found that FREN s connection speed could reach 30mbps, while TSEL, EXCL and ISAT could only provide us a considerably lower speed at 10 15mbps. We suspect that since its capacity is still underused, unlike its big operators, high connection speeds can be maintained. However, given their limited network, this phone only works in selected areas. Once FREN s network manages to expand, especially exjava, it will pose a major threat. Exhibit 9. Smartfren Andromax promotion One of the cheapest handset with a very large data package Source: Company Risk imposed by government regulations Recently, the government has proposed implementing changes, in terms of cheaper interconnection charges and broader network sharing. Interconnection tariffs would be cut by 26%. However, this has been postponed following TSEL s strong objections (they counter with a proposed IDR284 interconnection tariff); other operators expect the government to lower the tariff more than 50% from its current level. The latest update is that TLKM has brought this matter to the Public Advocate (Ombudsman) to further push implementation of the proposed regulation. Another issue within the regulators domain is network sharing. The government is currently coaxing operators into this efficiency move. The revision of PP 52/2000 would require telco operators to share their networks, particularly their backbone, in certain areas under certain conditions. Other sources state that the government may allow spectrumsharing along with shared networks. If this were to be realized, ISAT and EXCL would most likely be the ones to benefit, since both companies have a considerably smaller presence exjava compared to TSEL, which already controls an 85% market share. We managed through our channel to ascertain that the interconnection issue will most likely be settled in the near future, awaiting President Jokowi s approval. This will however have a limited impact, as interconnection business trends are declining. We expect interconnection revenues and costs will continue to go down (Exhibit 10 & 11) as subscribers shift from legacy business to free data calls and chat going forward. 6

7 Exhibit 10. Interconnection revenues, F (IDRmn) 6,000 Interconnection revenues to gradually go down 5,000 4,000 3,000 2,000 4,843 4,708 3,033 3,007 2,431 2,213 4,290 2,392 1,925 3,992 4,045 2,133 2,019 1,434 1,497 1, F 2017F TLKM ISAT EXCL Source: Companies, BCA Sekuritas Exhibit 11. Interconnection expense, F (IDRmn) 6,000 4,927 4,893 5,000 followed by lower interconnection costs 4,000 3,000 2,000 2,947 3,726 2,555 3,356 3,586 2,376 2,321 3,193 3,236 2,138 1,925 2,027 1,980 1, F 2017F TLKM ISAT EXCL Source: Companies, BCA Sekuritas While we see further headwinds persisting on the finalization of the network sharing issue: TLKM will resist sharing their network infrastructure as they have spent a huge amount of capex establishing networks in remote, lowtraffic areas. However, if this issue were to be settled in the near future, we see only a minimal threat in the short term to TLKM, since network sharing might in fact not be so easy to implement. However, in the medium and long terms, network sharing poses a big risk to TLKM, as ISAT and EXCL could nibble away market share exjava, where they could increase exposure without having to spend much capex. Towers: Steady with looming pricing risk As the industry trends toward an assetlight strategy, independent tower companies will continue to thrive, catering to expansion needs of telco operators. Within the past years, Indonesia s three largest telco operators have been focusing on the expansion of 3G and 4G, adding around 99.3k thousand BTSs within the archipelago (Exhibit 12). Going forward, to further improve data networks, operators will continue to expand their 3G networks, while adding more 4G to increase data quality. In line with our view that operators are currently switching over their legacy business revenue to data, BTS leases will continue to grow in line with data rollout. 7

8 Exhibit 12. Telco companies BTSs, 20131H16 3G and 4G BTSs additions will be the focus of telco operators Source: Companies However, competition from smaller tower operators is heating up, as many are aggressively lowering lease prices to pull away customers. This can be seen as current telco companies annual lease rates are between IDR10mn12mn per tower, down compared to 3 years ago, when the figure could reach IDR15mn. Our view remains positive for the tower sector as contracts for most leases are binding for 10 years; thus we see no contract price reduction risk in the near future. Valuation & pick: Prefer TLKM and ISAT Looking to 2017F and 2018F, we expect telco companies margins will gradually improve, to an average EBITDA margin of 49.9% and 50.6%, respectively. Higher data consumption is the catalyst which will replace a declining trend in legacy business. Thus, we are looking at higher ARPU as an aftereffect, as telco companies manage to normalize their data pricing once price wars have become history. On the cost side, following the resolution of the dispute between the government and TLKM over interconnection, we should see interconnection costs tone down, pumping margins, even at the risk of lowering interconnection revenue. As we look at regional markets, Indonesia s EBITDA margin is relatively higher than that of regional countries, standing at 50.6% vs. 36.0% of regional average in 2017F (Exhibit 13). Additionally, Indonesia is in the best quadrant in the valuation matrix, given its cheap high EPS growth (19.4%) and EBITDA margin, which justifies a premium valuation against regional peers (Exhibit 14). Exhibit 13. Regional EBITDA margin comparison, 2016F2017F (%) 60.0 Indonesia has the highest EBITDA margin compare to regional peers Indonesia Hongkong India Malaysia Singapore S. Korea Taiwan Thailand 2016F 2017F Source: BCA Sekuritas, Bloomberg 8

9 EBITDA Margin Exhibit 14. Regional EBITDA margin comparison, 2016F2017F 60.0 also in terms of EPS growth 50.0 Indonesia 40.0 Thailand Malaysia India Hongkong 30.0 Singapore Taiwan South Korea 20.0 (15.0) (10.0) (5.0) EPS Growth Source: BCA Sekuritas, Bloomberg In terms of top picks, we select TLKM, due to its capability of maintaining premium pricing, even in the midst of a price war, and its ability to monetize their data. Additionally, its balance sheet, healthier than that of peers, means TLKM is betterpositioned to execute their expansion plans; we see their dominance in Indonesia will continue, going forward. We also like ISAT given their initiative to increase subscriber numbers and attractive valuation. We initiate EXCL, TOWR, ERAA and TELE with a BUY, considering their recent weak share performance, making valuation more attractive. Risks to our call include, but are not limited to: Lower purchasing power, as this would impact the sale of vouchers. Weakness in IDR, since a major portion of telco equipment is USDindexed, while all operators under our coverage are exposed to USDdenominated debt. Prolonged competition, with continued price suppression, thus resulting in weaker revenues. Uncertainties in regulation, particularly in spectrum tenders, since operators are complaining about capacity constraints. 9

10 Exhibit 15. Regional peers comparisons, F Ticker TLKM EXCL ISAT Indonesia 941 HK 215 HK 762 HK Hongkong IDEA IN BHARTI IN India DIGI AXIATA Malaysia STH SP Singtel Singapore DTAC TBADVANC TBThailand Rating Mkt cap (USD mn) 31,945 1,853 2,645 36, ,703 1,559 28, ,327 3,949 18,304 22,253 9,224 10,187 19,411 3,997 44,297 48,294 2,130 12,823 14, A 21.7 (0.2) (10.0) ROE (%) 2016F F F A 10.1 (0.0) (2.4) ROA (%) 2016F F F A P/BV (x) 2016F F F A 27.0 na na P/E (x) 2016F F F A EV/EBITDA (x) 2016F F F A 6.0 na na (14.8) (4.7) (8.0) (6.4) (42.4) 4.7 (2.0) EPS Growth (%) 2016F 26.2 na na 23.0 (5.6) (9.5) (60.6) (11.5) (2.2) (7.7) (6.7) (10.3) (13.9) (12.2) (3.3) (56.6) (18.2) (23.6) 2017F (67.7) (1.6) (13.3) (2.9) (5.1) (1.1) (1.7) 2018F (35.8) 7.2 (0.4) (4.0) A F EBITDA margin (%) 2017F F A EBIT margin (%) 2016F F F A 15.1 (0.1) (4.9) Net margin (%) 2016F F F , BCA Sekuritas estimate, *pricing as of 7 November 2016 closing price 10

11 Equity Research TELEKOMUNIKASI INDONESIA TLKM IJ / TLKM.JK Company Initiation Telco Sector Reigning champ Still strong on voice Telekomunikasi Indonesia continues to dominate the telco sector, holding 55% of Indonesia s total market share, with 85% domination of exjava. While the industry is shifting from voice and SMS to data, we see that TLKM s voice segment will continue to grow, since subscribers exjava still cling to older handsets, coupled with their ability to maintain pricing due to their zonebased scheme. This pricing method results in higher revenues from remote areas that has limited network coverage by other operators. Thus, expect voice revenue to continue as the largest top line contributor in , before data takes over. On the data side, with current massive promotions, we continue to expect strong growth going forward, helping to increase ARPU to IDR46k and IDR49k in 2017F18F, resulting in margin expansion. Indihome: an effort to revive fixedlines As of 2015, TLKM is trying to revive its fixedline business with Indihome, a triple play package for home owners, consisting of cable TV, internet and fixedline telephone. While fixed broadband is still low in Indonesia (around 8%), Indihome will have broad room for growth. As of 9M16, Indihome has managed to gain 1.5mn customers, becoming one of the largest mobile broadband + TV cable outfits. However we see more competition from more established companies such as First Media (LINK IJ), Nexmedia and Biznet. Hence, we expect subdued subscriber growth of 500k and 300k customers in 2016 and 2017, respectively. Healthy balance sheet to support data expansion Going on 2017, we see that the industry is shifting from legacy to data, as operators actively expand networks, particularly for 3G and 4G. With subdued net gearing, TLKM has the ability to execute network expansion without taking on any new debt, thus maintaining interest expense at a manageable level. Additionally, we see high likelihood of TLKM obtaining additional spectrum once the government decides to conduct a spectrum auction, considering their balance sheet ability and need for additional spectrum. Initiate with a BUY, TP of 4,700 We initiate coverage on TLKM with a BUY call and TP of IDR4,700, based on +2SD 5year average EV/EBITDA of 6.8x. We see that TLKM deserves a premium given their strong balance sheet, massive network and our view that longterm data growth will remain intact, despite TLKM s ytd 16% outperformance. Risk to our call: IDR depreciation, prolonged price competition and unforeseen regulations. Exhibit 1. Financial Summary Description (IDRbn) 2014A 2015A 2016F 2017F 2018F Revenue 89, , , , ,889 EBITDA 45,673 51,415 59,861 67,089 74,804 Net Profit 14,471 15,489 19,551 22,711 25,829 EPS (IDR) EPS Growth (%) DPS (IDR) PER (x) PB (x) EV/EBITDA (x) Dividend yield (%) Payout ratio (%) ROE (%) Net Gearing (%) , *pricing as of 7 November 2017 closing price BUY Previous: 07 November 2016 Aditya Eka Prakasa aditya.prakasa@bcasekuritas.co.id ext 182 Target Price: IDR4,700/share Current Price: IDR4,150/share Upside potential: 13.3% PRICE PERFORMANCE 4,500 4,000 3,500 3,000 2,500 Nov15 Feb16 May16 Aug16 Nov16 TLKM IJ JCI Rebase as of 07Nov16, BCA Sekuritas STOCK PERFORMANCE 52week price range (IDR) : 2,648 4,570 Market cap (IDRbn)/(USDmn) :18,320.0 / 31,967.0 Avg Daily Turnover (IDRbn/USDmn) : / 27.5 MARKET DATA YTD 1M 3M 12M Absolute 33.7% 1.2% 4.6% 51.7% JCI Return 17.3% 0.2% 0.6% 17.9% Relative 16.4% 1.4% 4.0% 33.8% SHAREHOLDERS Government of Indonesia : 52.1% The Bank of New York Mellon Corp : 7.7% Public (each below 5%) : 40.2%

12 Exhibit 2. Telekomunikasi Indonesia Financial Summary Income Statement Year end 31 Dec (IDRbn) 2014A 2015A 2016F 2017F 2018F Revenue 89, , , , ,889 Costs of revenue Gross profit Operating profit 28,542 32,881 39,394 44,774 50,395 Interest income 1,238 1,407 1,588 1,428 1,465 Interest expense (1,814) (2,481) (3,027) (2,857) (2,446) Forex gain/(losses) (14) (46) Other income/(expense) 661 (419) (461) EBITDA 45,673 51,415 59,861 67,089 74,804 Income before tax 28,613 31,342 37,599 43,674 49,672 Tax expenses (7,339) (8,025) (9,400) (10,919) (12,418) Minority interests (6,803) (7,828) (8,648) (10,045) (11,425) Net income 14,471 15,489 19,551 22,711 25,829 EPS (IDR) Balance sheet Year end 31 Dec (IDRbn) 2014A 2015A 2016F 2017F 2018F Cash and equivalents 17,672 28,117 35,289 31,743 29,295 Account receivables 6,997 7,517 9,749 10,873 12,074 Inventories LT Invest & receivables 1,767 1,807 1,989 2,218 2,898 Fixed assets 94, , , , ,223 Other assets 20,103 24,504 24,547 27,378 32,251 Total assets 141, , , , ,528 ST liabilities 7,709 4,444 10,684 10,084 9,784 Other ST liabilities 24,609 30,969 30,242 33,027 36,208 LT liabilities 15,743 30,168 24,928 23,528 22,828 Other LT liabilities 7,769 7,164 8,721 9,727 11,191 Total liabilities 55,830 72,745 74,576 76,365 80,011 Equity 85,992 93, , , ,517 Total liabilities & equity 141, , , , ,528 Cash Flows Statement Year end 31 Dec (IDRbn) 2014A 2015A 2016F 2017F 2018F Net Income 14,471 15,489 19,551 22,711 25,829 Depreciation 1,238 1,407 1,588 1,428 1,465 Change in working capital 15,401 16,883 16,394 19,731 20,520 Operating cash flow 31,110 33,779 37,533 43,871 47,814 Capital expenditure (24,667) (26,401) (24,000) (34,742) (36,204) Others 2, ,421 2,033 1,704 Investing cash flow (22,187) (26,225) (22,579) (32,709) (34,500) Dividend paid (9,943) (8,782) (8,781) (12,708) (14,762) Net change in debt 3,196 11,160 1,000 (2,000) (1,000) Others Financing cash flow (5,947) 2,891 (7,781) (14,708) (15,762) Change in cash 2,976 10,445 7,172 (3,547) (2,448) Beginning cash flow 14,696 17,672 28,117 35,289 31,743 Ending cash flow 17,672 28,117 35,289 31,743 29,295 Key Ratios 2014A 2015A 2016F 2017F 2018F Gross margin (%) EBITDA margin (%) EBIT margin (%) Pretax margin (%) Net margin (%) ROAE (%) ROAA (%) Current ratio (x) Acid ratio (x) Gearing (%) Net gearing (%) AR turnover (days) Inventory turnover (days) AP turnover (days) Subscribers (mn) ARPU Strong revenue growth in 2017F is backed by data growth Interest bearing maintained manageable level debts at EBITDA margins to continue expanding on the back of data growth 12

13 Legacy Business will still dominate With strong presence across Indonesia, TLKM remains the largest telco operator, with expected 173mn subscribers in 2017F and 181mn in 2018F. As the most dominant provider ex Java (85% market share), while only around 30% of TLKM subscribers have 4G devices, we expect voice and SMS will continue to dominate top line, backed by clusterbased pricing and a lack of promotions. While data segment continues to grow, we are seeing it contribute more to TLKM s own growth, bringing revenues to top IDR130.5mn in 2017F, up around 11% YoY. Exhibit 3. TLKM revenue, F (IDRtn) Voice remain stable going forward, while growth to stem from data F 2017F 2018F Voicecell Voicefixed SMS Data Others As data will be the growth driver for TLKM going forward, we expect EBITDA margins to expand as data price war to ease entering Thus 2017F EBITDA margin will rise slightly to 51.4% before increasing to 51.6% in 2018F. In line with margin expansion, we see that blended ARPU should continue to go up, to IDR49k in 2017F as TLKM monetizes its data. Exhibit 4. TLKM margins, F (%) Margin expansions in 2016F18F on the back of data F 2017F 2018F EBITDA EBIT Net Profit 15.0 Healthy balance sheet to support expansion With current expansion mode, we expect TLKM will continue its aggressive expansion outside Java, adding more 3G and 4G BTS. To cater to need for expansion, TLKM has the healthiest balance sheet compared to its peers. Supported by subdued net gearing in 2017F and 2018F, we expect capex will be fulfilled without having to raise debt. Additionally, as the government is planning to auction two blocks in the 2,100Mhz spectrum, we find it likely that Telkomsel will secure at least one of these, given their healthy balance sheet and number of subscribers (higher than peers). In addition to a healthy balance sheet, TLKM also has around 1.7bn treasury stocks (worth around IDR7.1tn at current price) in their pocket to expand future capex spending. 13

14 Exhibit 5. TLKM net gearing, F (%) Net gearing remained low to support expansions F 2017F 2018F Regulatory changes: negative in the long run Government s plan to reduce interconnection rate by 26% was disputed by TLKM. While we expect more clarity to be happening in the 4Q16, lower interconnection rate might have minimal impact to TLKM s top line as they contribute only around 3% of 2017F revenue. However, on the network sharing side, telco companies are required to share their network with its peers. If this were to happen, we expect TLKM s dominance in outer Java will deteriorate since competitors might enter the market with smaller capex and vast existing networks. Initiate with a BUY and TP of IDR4,700 We initiate our coverage on TLKM with a BUY recommendation and target price of IDR4,700. Our TP implies 2017F EV/EBITDA of 6.9x, a +2SD from TLKM s mean EV/EBITDA of 5.3x. We think that a premium is warranted given their ability to deliver strong revenue growth ahead, while providing a thicker net margin compared to their peers. Despite YTD outperformance of the market, we still see a 12% upside to our target price. Risks to our call would be: IDR depreciation: since TLKM has exposure in USDdenominated debt, any IDR depreciation would risk of fx losses. Additionally, since all relevant telco hardware is paid for in USD, this would impact capex spending. Prolonged tariff competition: Price war may impede revenue growth, resulting in lower ARPU. Regulations such as network sharing might erode TLKM s market share, particularly ex Java. Exhibit 6. TLKM EV/EBITDA band (x) 8.0 Our TP is based on Std+2 of 6.9x Std +2 = 6.9 x Std +1 = 6.1 x Avg = 5.3 x Std 1 = 4.6 x Std 2 = 3.8 x 3.0 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16, BCA Sekuritas 14

15 Equity Research INDOSAT ISAT IJ / ISAT.JK Company Initiation Telco Sector Better with time Still clinging to voice As the secondlargest telco operator in Indonesia in terms of subscribers (25% market share), Indosat has a solid presence in Indonesia, particularly in Java. Early 2016 ISAT launched a marketing promo for their Sumatran subscribers: IDR1/second protocol for all operators, to increase penetration exjava. This promotion proved successful as ISAT managed to increase 12mn subscribers YoY in 1H16. Going to 2017F2018F, we see that ISAT will manage to maintain its legacy business revenue, maintaining it as a majority contributor to total revenue, 41.4% and 40.4% respectively. Additionally, we expect data to continue to grow as a result of their aggressive marketing campaign, pushing higher ARPU, translating to 2017F2018F revenue of IDR33tn and IDR36tn, respectively. Network infrastructure sharing to ease capex Despite industry regulation uncertainty concerning network sharing, ISAT has joined forces with XL Axiata (EXCL IJ) with infrastructure sharing for this campaign. Currently, both parties team up in 4 cities, sharing their BTS. We see this as a positive initiative, since the management claims that with such network sharing, capex could be lowered 2030%. We expect a more positive surprise: once the government has finalized regulations on spectrum sharing, capex will dive another 50%. Revamping debt structure In 2016, management is planning to reduce exposure in USDdenominated debt, bringing it down to 10% from 70% of With this initiative, we see ISAT could reduce fx losses, which we see have plagued them for the last few years. Management has also prepared around IDR3tn for debt repayment in 2016; thus we are seeing improving profit and loss going forward. We expect ISAT s net profit to reach IDR1.8tn in 2017F (+85% YoY) before reaching IDR2.5tn in 2018F (+36% YoY). Separately, with better performance ahead, we expect ISAT to begin distributing dividends. Initiate with a BUY, TP of IDR7,400 With 4% 3M market under performance, ISAT is currently trading at an 2017 EV/EBITDA of 3.5x, which we see very attractive, given the company s early stage of data monetization and underutilized handheld 4Gs. Thus, we initiate coverage on ISAT with a BUY with a TP of IDR7,400, based on 0.5SD 5 year average EV/EBITDA of 3.9x. Risk to our call would include IDR weakness to burden capex, lower than expected GDP that could result slower adoption of 4G and uncertainty in telco regulations. Exhibit 1. Financial Summary Description (IDRbn) 2014A 2015A 2016F 2017F 2018F Revenue (IDRbn) 24,085 26,769 30,411 33,488 36,191 EBITDA (IDRbn) 10,033 11,473 13,173 14,615 15,801 Net profit (IDRbn) (2,008) (1,310) 979 1,807 2,464 EPS (IDR) (370) (241) EPS Growth (%) na na na DPS (IDR) PER (x) na na PB (x) EV/EBITDA (x) Dividend yield (%) Payout ratio (%) ROE (%) (13.5) (10.0) Net Gearing (x) Source: Company, BCAS estimate, *pricing as of 20 September 2016 closing price BUY Previous: 07 November 2016 Aditya Eka Prakasa aditya.prakasa@bcasekuritas.co.id ext 182 Target Price: IDR7,400/share Current Price: IDR6,375/share Upside potential: 16.1% PRICE PERFORMANCE 7,500 7,000 6,500 6,000 5,500 5,000 4,500 4,000 Nov15 Feb16 May16 Aug16 Nov16 ISAT IJ JCI Rebase as of 07Nov16, BCA Sekuritas STOCK PERFORMANCE 52week price range (IDR) : 4,340 7,125 Market cap (IDRbn)/(USDmn) : 34,641.3 / 2,647.2 Avg Daily Turnover (IDRbn/USDmn) : 3.7 / 0.3 MARKET DATA YTD 1M 3M 12M Absolute 15.9% 0.4% 1.9% 46.7% JCI Return 17.3% 0.2% 0.6% 17.9% Relative 1.4% 0.2% 1.3% 28.8% SHAREHOLDERS Ooredoo Asia Ltd : 65.0% Government : 14.3% Public (each below 5%) : 20.7%

16 Exhibit 2. ISAT Financial Summary Income Statement Year end 31 Dec (IDRbn) 2014A 2015A 2016F 2017F 2018F Revenue 24,085 26,769 30,411 33,488 36,191 Cost of revenue Gross profit Operating profit 1,807 2,704 3,933 4,872 5,518 Interest income Interest expense (2,407) (2,829) (2,481) (2,356) (2,239) Forex gain/(losses) (243) (1,293) Other income/(expense) (1,262) (587) (503) (215) (215) EBITDA 10,033 11,473 13,173 14,615 15,801 Income before tax (1,962) (1,786) 1,432 2,488 3,328 Tax expenses (286) (498) (666) Minority interests (130) (147) (166) (183) (198) Net income (2,008) (1,310) 979 1,807 2,464 EPS (IDR) (370) (241) Balance sheet Year end 31 Dec (IDRbn) 2014A 2015A 2016F 2017F 2018F Cash and equivalents 3,486 3,701 2,085 2,513 4,089 Account receivables 2,101 2,741 2,967 3,525 3,810 Inventories LT Invest & receivables 1,364 1,351 1,535 1,691 1,827 Fixed assets 6,858 7,085 7,968 9,368 11,488 Other assets 39,412 40,470 37,822 35,161 32,467 Total assets 53,270 55,389 52,425 52,310 53,736 ST liabilities 881 1, ,965 1,913 Other ST liabilities 20,267 18,313 13,270 11,809 11,083 LT liabilities 14,981 20,057 21,427 20,089 18,882 Other LT liabilities 2,842 2,015 2,289 1,387 1,499 Total liabilities 38,971 42,125 37,797 35,250 33,377 Equity 14,299 13,264 14,628 17,060 20,359 Total liabilities & equity 53,270 55,389 52,425 52,310 53,736 Cash Flows Statement Year end 31 Dec (IDRbn) 2014A 2015A 2016F 2017F 2018F Net Income (2,008) (1,310) 979 1,807 2,464 Depreciation 8,226 8,769 9,240 9,743 10,283 Change in working capital 3,095 1,766 (2,444) (3,509) (2,934) Operating cash flow 9,313 9,225 7,775 8,041 9,814 Capital expenditure (7,033) (10,048) (7,000) (7,461) (7,949) Others (243) Investing cash flow (7,276) (9,548) (6,685) (7,136) (7,616) Dividend paid (294) (524) (726) Net change in debt (785) 530 (3,000) (1,000) (1,348) Others 7,276 9,548 7,272 8,184 9,067 Financing cash flow (785) 530 (2,706) (476) (622) Change in cash 1, (1,616) 429 1,576 Beginning cash flow 2,234 3,486 3,701 2,085 2,513 Ending cash flow 3,486 3,693 2,085 2,513 4,089 Key Ratios 2014A 2015A 2016F 2017F 2018F Gross margin (%) EBITDA margin (%) EBIT margin (%) Pretax margin (%) (8.1) (6.7) Net margin (%) (8.3) (4.9) ROAE (%) (13.5) (10.0) ROAA (%) (3.7) (2.4) Current ratio (x) Acid ratio (x) Gearing (%) Net gearing (%) AR turnover (days) Inventory turnover (days) AP turnover (days) Subscribers ('000) 63,200 69,800 70,498 71,203 71,915 Net adds ('000) 3,600 6, ARPU (IDR 000/month) Source: Company, BCAS estimates Data will be the main revenue growth driver in F Initiatives to cut down debts resulting in ISAT declining net gearing position 16

17 Legacy business to remain strong As the secondlargest telco operator with 79.7mn subscriber as of 1H16, ISAT s presence in Java is quite strong. To expand more exjava, the company recently launched a promotion for customers by giving an IDR60/minute rate for all operators. With this move, we expect that ISAT will strengthen its presence in areas with low penetration. Going on 2017, while data will continue to be ISAT s growth driver, we see that voice and SMS will also dominate ISAT s top line, representing around 40% with data accounting for 35% in 2017F and 2018F, respectively. Exhibit 3. ISAT revenue & revenue growth, F (IDRbn) 50, % 45, % 40, % 8.1% (%) 20.0% 10.0% Top line growth to be supported by data despite legacy business remain strong 35,000 30,000 25,000 20,000 15,000 10,000 5, % 3,629 3,566 3,983 3,376 3,243 3,905 1,537 3,829 1,495 2,888 3,753 1,384 3,509 1,925 13,948 11,549 2,213 7,031 9,356 4,530 4,481 4,986 4,777 4,668 4,558 7,282 7,604 7,690 8,306 8, F 2017F 2018F Voice SMS Data Interconnection & Inroaming MIDI Others Growth 0.0% 10.0% 20.0% 30.0% Exhibit 4. ISAT data revenue & ARPU, F (IDRbn) 18,000 15, ,948 (IDRk) Higher data revenue brings ARPU to reach IDR30k in 2018F 12,000 11, ,356 9, ,000 4,530 7, , F 2017F 2018F Data revenue (5) From the data side, ISAT has also launched its promotion providing subscribers with 3G data plans and handing out bonus quotas in 4G as cheap as IDR59k, which we see is already higher than the company s ARPU of IDR26k. Going on 2017, we should see ISAT start monetizing their data packages by raising price plans or reducing bonus quotas. Thus we see ARPU to continue to climb to IDR28k in 2017F before reaching IDR31k in 2018F. In line with ARPU hike, we expect EBITDA margins to continue to expand to 43.7% and 44.1% in 2017F and 2018F, respectively. 17

18 Exhibit 5. ISAT EBITDA & EBITDA margins, F (IDRbn) 24, (%) , , , ,000 10,033 11,473 13,173 14,615 15, , F 2017F 2018F 40.5 EBITDA EBITDA margins Network sharing to reduce capex Prior to the implementation of the government s networksharing regulation, ISAT has already built a JV with EXCL for this purpose. Management claims that with current infrasharing scheme, the company will manage to save 20% in capex costs. However, this sharing scheme is currently limited to 4 cities across Java. Going forward, this JV will be aimed at opening new networks ex Java. However, once finalized, we expect that the networksharing regulation might also open up access to backbone and spectrum. This means capex savings of 50% while increasing presence in lowpenetrated areas, thus resulting in higher market share for ISAT. Another regulation waiting to be approved by the regulator is the lower interconnection rate. By reducing 26% from current level, we see that it will minimally impact ISAT, since interconnection business is already declining. We expect this regulation to be approved by the President within 4Q16. Exhibit 5. ISAT Capex & Net gearing, F (IDRbn) 20, (%) Lower net gearing to support future expansions 15, ,000 10, ,033 7,000 7,461 7, , F 2017F 2018F (30.0) Capex Net gearing While continued expansion plans are in the pipeline, ISAT will preferably lease towers rather than building their own, in line with the company s strategy to become asset light. Currently, ISAT has around 6,000 towers spread across the archipelago, thus giving them leverage if they ever needed additional capital. Of these 6,000, 2,000 are reserved as ISAT core towers, while the remainder are available for sale. 18

19 Debt: switching from USD to IDR In previous years, ISAT s bottom line was always hurt by the presence of forex losses, given their high exposure to USDdenominated debt. Based on 1H16 figures, ISAT s USDdenominated debts reached around USD376mn, translating to some 70% of total interestbearing debt. To lower exposure, ISAT management s plans to cut down USDdenominated debt to around 10% of the total, switching to IDR loans. Management has also prepared up to IDR3tn to offload some of the company s debt. With this initiative, we expect to see 2017F net gearing go down to 107% before further going down to 76% in 2018F. Initiate with a BUY and TP of IDR7,400 ISAT is currently trading at an EV/EBITDA of 3.5x 2017F EV/EBITDA, the cheapest of the 3 telco operators in our coverage. We initiate our coverage on ISAT with a target price of IDR7,400, reflecting 0.5SD 5 year mean EV/EBITDA of 3.9x. As we expect the utilization of 4G is still at an early stage, we expect growth from the sector to be robust. With a 16% upside, we put a BUY call on ISAT. Exhibit 5. ISAT EV/EBITDA band (x) Std +2 = 5.8 x Std +1 = 5.0 x Avg = 4.2 x Std 1 = 3.5 x Std 2 = 2.7 x Our TP is based on 0.5SD 5 year average EV/EBITDA average of 3.9x 2.0 Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Source: Company, BCAS 19

20 Equity Research XL Axiata EXCL IJ / EXCL.JK Company Update Telco Sector Laggards but not last Holding on to subscribers XL Axiata s strategy to maintain higher value customer has seemed to backfire, reflected in a decline in number of subscribers. To stop the loss, EXCL launched its IDR59/min to all operators promotion as well as lowering its data package rates by around IDR10k. We see that this initiative has indeed checked the outflow of subscribers, despite similar promotional challenges from its peers. We expect the number of EXCL subscribers to hit 43mn in 2017F before increasing to 45mn in 2018F. We also see EBITDA margins expanding to 38.6% on higher data usage; top line growth should be supported by data monetization by On the flip side, legacy business revenue should gradually go down to IDR10.8tn and IDR10.4tn in 2017F18F as EXCL focuses more on data, resulting in higher ARPU. The most modern network, compared to peers EXCL is in the lead with the recent launch of their 4.5G technology and the company has also set up around 5k BTS, considerably more than its peers. Going forward, EXCL will continue to grow their network, especially expanding outside of Java into selected areas where the company has less penetration, spending around IDR7tn in 2017F and 2018F. Note that going forward EXCL does not plan to add any 2G BTS, instead focusing on 3G and 4G. Additionally, with recent tower sales to Protelindo and the company s plan to lease instead of building more towers, we expect depreciation costs will be contained, going forward. Another initiative to reduce capex is EXCL s infrastructure sharing with ISAT, which the management claims could reduce infrastructure costs by 20%. Interconnection regulation to have minimal impact With government s plan to reduce interconnection rates by 26%, we expect EXCL will be only minimally impacted, as interconnection accounts for just 9% of its revenue. On the flip side, spectrum sharing regulation might benefit EXCL by cutting capex needed for less covered areas, while carving away market share from the incumbent. Attractive valuation; Initiate with a BUY EXCL s valuation has become attractive, following recent underperformance, and it is currently trading at a 2017 EV/EBITDA of 4.5x. Thus, we initiate coverage on EXCL with a BUY and TP of IDR2,800, based on STD1.5 of EXCL s 5year mean EV/EBITDA of 5.1x. However, we remain only cautiously optimistic, given its 2016F operational performance (weaker than that of its peers). Risks to our call would include fewerthanexpected new subscriber, slack GDP growth and IDR weakness. Exhibit 1. Financial Summary Description (IDRbn) 2014A 2015A 2016F 2017F 2018F Revenue (IDRbn) 23,460 22,876 22,780 24,063 25,632 EBITDA (IDRbn) 8,623 8,393 8,735 9,286 10,045 Net profit (IDRbn) (775) (25) ,087 EPS (IDR) (72) (2) EPS Growth (%) na (96.7) na DPS (IDR) (0) PER (x) na na PB (x) EV/EBITDA (x) Dividend yield (%) Payout ratio (%) ROE (%) (5.3) (0.2) Net Gearing (x) Source: Company, BCAS estimate, *pricing as of 20 September 2016 closing price BUY Previous: 07 November 2016 Aditya Eka Prakasa aditya.prakasa@bcasekuritas.co.id ext 182 Target Price: IDR2,800/share Current Price: IDR2,270/share Upside potential: 23.3% PRICE PERFORMANCE 4,500 4,000 3,500 3,000 2,500 2,000 Nov15 Feb16 May16 Aug16 Nov16 EXCL IJ JCI Rebase as of 07Nov16, BCA Sekuritas STOCK PERFORMANCE 52week price range (IDR) : 2,150 4,217 Market cap (IDRbn)/(USDmn) : 24,261.7 / 1,854.0 Avg Daily Turnover (IDRbn/USDmn) : 45.5 / 3.5 MARKET DATA YTD 1M 3M 12M Absolute 36.9% 14.0% 37.8% 26.9% JCI Return 17.3% 0.2% 0.6% 17.9% Relative 54.2% 14.2% 37.2% 44.9% SHAREHOLDERS Axiata Investments Ltd : 66.4% Public (each below 5%) : 33.6%

21 Exhibit 5. EXCL Financial Summary Income Statement Year end 31 Dec (IDRbn) 2014A 2015A 2016F 2017F 2018F Revenue 23,460 22,876 22,780 24,063 25,632 Cost of revenue Gross profit Operating profit 1,782 1,258 1,301 1,537 2,218 Interest income Interest expense (1,598) (1,808) (1,931) (1,796) (1,661) Forex gain/(losses) (1,295) (2,521) Other income/(expense) (44) 1, EBITDA 8,623 8,393 8,735 9,286 10,045 Income before tax (953) (631) ,449 Tax expenses (170) (235) (362) Minority interests Net income (775) (25) ,087 EPS (IDR) (72) (2) Balance sheet Year end 31 Dec (IDRbn) 2014A 2015A 2016F 2017F 2018F Cash and equivalents 6,951 3,312 3,114 2,720 1,923 Account receivables 1, ,025 Inventories LT Invest & receivables Fixed assets 35,207 33,427 32,089 31,146 30,471 Other assets 19,818 20,746 20,292 20,568 21,242 Total assets 63,631 58,844 56,939 55,960 55,260 ST liabilities 3,922 3,922 3,218 2,993 2,768 Other ST liabilities 11,477 11,826 14,939 14,867 14,783 LT liabilities 25,707 23,031 18,235 16,960 15,685 Other LT liabilities 8,478 5,973 5,883 5,983 6,106 Total liabilities 49,583 44,753 42,275 40,803 39,343 Equity 14,048 14,092 14,664 15,157 15,917 Total liabilities & equity 63,631 58,844 56,939 55,960 55,260 Cash Flows Statement Year end 31 Dec (IDRbn) 2014A 2015A 2016F 2017F 2018F Net Income (775) (25) ,087 Depreciation 6,222 6,889 7,188 7,503 7,582 Change in working capital (2,951) (1,773) 3,791 (328) (733) Operating cash flow 2,496 5,091 11,490 7,879 7,936 Capital expenditure (8,192) (6,125) (6,250) (6,561) (6,907) Others Investing cash flow (8,074) (6,089) (6,035) (6,561) (6,907) Dividend paid (540) 4 (153) (211) (326) Net change in debt 11,807 (2,675) (5,500) (1,500) (1,500) Others (55) Financing cash flow 11,212 (2,642) (5,653) (1,711) (1,826) Change in cash 5,633 (3,639) (198) (393) (797) Beginning cash flow 1,318 6,951 3,312 3,114 2,720 Ending cash flow 6,951 3,312 3,114 2,720 1,923 Key Ratios 2014A 2015A 2016F 2017F 2018F Gross margin (%) EBITDA margin (%) EBIT margin (%) Pretax margin (%) (4.1) (2.8) Net margin (%) (3.3) (0.1) ROAE (%) (5.3) (0.2) ROAA (%) (1.5) (0.0) Current ratio (x) Acid ratio (x) Gearing (%) Net gearing (%) AR turnover (days) Inventory turnover (days) AP turnover (days) Subscribers ('000) 59,623 42,037 43,037 45,037 47,537 Net adds ('000) (954) (17,586) 1,000 2,000 2,500 ARPU ('000) F revenue growth of 22.3% CAGR will be supported by data 2016F19F capex to remain on the IDR7tn level to expand its 4G network Data to expand EBITDA margin around 39% for 2017F18F 21

22 Higher value subs pose risks EXCL s strategy to hang onto highervalue customers has impacted negatively on the number of its subscribers, which have since 2014 fallen to 42mn (in 2015) from 60.5mn in However, going on 2016, we expect an infusion of subscribers, following ISAT s move to provide a promotional voice package of IDR59/min, specifically for ex Java. Thus, we expect 2017F numbers to pick up, hitting 45mn (43mn in 2016F). Exhibit 3. EXCL revenue breakdown & growth, F (idrtn) (%) Data continues to grow while legacy business gradually coming down (0.4) (2.5) (3.0) (6.0) 10.0 (9.0) F 2017F 2018F Voice + SMS Data Interconnection Others Revenue growth (12.0) (15.0) Source: Company, BCAS Exhibit 4. EXCL s Data promo XL Axiata Price (IDR) Voice SMS Data Bonus Xtra S 39,000 1 GB 800MB + 30 min voice Xtra M 59,000 2GB 10GB + 50 min voice Xtra L 89,000 4GB 15GB + 75 min voice Xtra XL 129,000 6GB 26GB min voice Xtra 2XL 179,000 10GB 40GB min voice Xtra 3XL 239,000 16GB 56GB min voice Source: Company Meanwhile, EXCL has launched its promotional data package (Combo Xtra) whereby subscribers can receive a total of 1.5GB with 30 minutes of voice, for just IDR39k. This is in line with industry strategy to employ promotional data packages to stimulate the currentlyunderutilized 4G network. In line with such an increase, ARPU will also rise to IDR40k and IDR41k in 2017F18F. However, we expect EXCL will monetize its data next year, either by raising prices or cutting down on data. Thus, 2017F2018F revenue should grow to IDR24.3tn and IDR25.9tn, translating to EBITDA margin expansion to 38.7% in 2017F. Exhibit 5. EXCL s EBITDA & margins, F (IDRbn) (%) 12, ,045 10,000 9, ,623 8,393 8, , , , EBITDA margins continues to expand on the back of data 2, F 2017F 2018F 35.0 EBITDA EBITDA margin 22

23 The most modern network, compared those of peers While EXCL has been actively modernizing its network, the company recently announced the launch of their 4.5G network. We note that EXCL is the first provider to offer 4.5G technology in Indonesia. As for BTS, as of 1H16 EXCL has the most 4G BTS, with around 5k. As they focus more on data, we expect 3G and 4G BTS will continue to expand going forward while they will halt the construction of any more 2G BTS. To fulfill such ambitious expansion, we expect that EXCL will spend around IDR6.5tn for 2017 capex. Exhibit 6. EXCL s BTSs, 3M149M16 (Units) 40,000 32,000 EXCL to boost their 3G and 4G expansions while holding back on 2G 24,000 16,000 8,000 3M14 6M14 9M M15 6M15 9M M16 6M16 9M16 2G 3G 4G Following its tower sales to Protelindo, EXCL currently owns around 2,000 units. Going forward, rather than building their own towers, EXCL will only lease from independent tower companies or other telco operators. Thus we are expecting depreciation costs to be subdued. Additionally, despite the yettobeenforced networksharing regulations, EXCL has set up a JV with ISAT to share network infrastructure. With this JV, management claims to able to reduce network capex by 20%. Currently, the infrasharing is operational in 4 cities across Indonesia, while both parties are currently striving to broaden their JV to other cities. Interconnection regulation to have minimal impact As we expect clarification of interconnection tariffs to be released by the end of this year, we see that this will minimally impact EXCL. Interconnection revenues have been on the decline for the past few years; thus we see a more positive impact rather than a negative one, since this could stimulate more voice usage (it's cheaper). On the networksharing side, we do not expect to hear any firm decision any time soon. However, once approved and implemented, we would see EXCL gaining from this regulation, as they would increase their penetration with less capex than needed today. Exhibit 7. EXCL s interconnection revenue & costs, F (IDRbn) 4,000 3,500 3,356 3,007 3,000 2,392 2,500 2,321 2,075 1,971 1,964 2,000 1,807 1,500 1, ,862 1,694 Lower interconnection tariff will minimally impact EXCL as revenue and cost are in the declining trend F 2017F 2018F Interconnection revenue Interconnection expense 23

24 Initiate with a BUY on IDR2,800 TP While we expect EXCL to book further growth ahead, we see that risks still loom within its subscriber expansion. Going forward, EXCL performance should improve as data continues to support its growth. In terms of valuation, currently EXCL is trading at 2017F EV/EBITDA of 4.5x. Due to its 3M underperformance, valuation has become attractive. Thus we initiate EXCL with IDR2,800, based on 2017F EV/EBITDA of 5.1x, reflecting EXCL s 5 year SD1.5 mean. With 23.4% upside potential, EXCL is a BUY. Risk to our call would include: USD appreciation, lowering purchasing power and unforeseen regulations. Exhibit 8. EXCL s EV/EBITDA band (x) Std +2 = 8.8 x Std +1 = 7.8 x Avg = 6.7 x Std 1 = 5.7 x Std 2 = 4.6 x Our TP of IDR2,800 is based on EXCL s 5 year average SD1.5 of 5.1x 3.0 January11 January12 January13 January14 January15 January16 24

25 Equity Research Erajaya Swasembada ERAA IJ / ERAA.JK Company Update Telco Sector Standing strong BUY Previous: 07 November 2016 Aditya Eka Prakasa aditya.prakasa@bcasekuritas.co.id ext 182 Benefit from TRIO s fall With the recent fall of Trikomsel (TRIO IJ), Erajaya Swasembada has benefited by acquiring brands previously owned by TRIO. As the largest handset distributor (42% market share), ERAA carries 14 wellknown brands, including Xiaomi and Huawei, which they took over from TRIO. As of 1H16, ERAA has 603 distribution outlets, owning 78 retail stores spread across the Indonesian archipelago, while recently establishing a presence in Singapore and Malaysia. With addition in their brand lineup, we expect the largest revenue contribution will still come from Samsung, while Chinese brands (such as Huawei and Xiaomi) will support growth, as they provide entrylevel 4G devices. Thus we foresee revenue touching IDR24tn in 2017F (+22% YoY) and 25.9tn (+15% YoY) in 2018F. Against this, we predict headwinds for sales of fullyimported handhelds, since regulators require electronics to have 30% local software or hardware content. PRICE PERFORMANCE Target Price: IDR720/share Current Price: IDR610/share Upside potential: 18.0% Foraying into new business arenas To support its business, ERAA has tied up with ISAT and EXCL to launch retail stores. This partnership will allow customers to purchase mobile phones with a subsidy from operators, in the form of cash discounts or bonus quotas. Additionally, ERAA has also launched TecProtect, a JV with Amtrust to provide customers insurance for their newlypurchased mobile phones. To increase their retail sales, ERAA has partnered with 3 financing companies: Aeon, Spektra and Home Credit, to provide financing for potential customers (particularly those without credit cards). Aside from more exposure, these financing companies will provide ERAA with an additional commission. Higher margins on increased retail contribution Looking to 2017, we expect the contribution from ERAA s higher margin retail business to increase to 40% from 30% in 2015, translating to an 8.8% gross margin, while on the balance sheet side, as fastselling cheap entrylevel handhelds continue to dominate sales, we see inventory turnover days to improve slightly to 49. Initiating with a TP of IDR720 We initiate our coverage on ERAA with a TP of IDR720, based on ERAA s SD 1.5 PER of 6.2x. As macro conditions improve next year, coupled with low penetration of 4G handhelds, we expect ERAA s sales to continue to grow. With a 26% upside, ERAA is a BUY. Risk to our call will be lower purchasing power, unforeseen regulations and higher rentals. Exhibit 1. Financial Summary Description (IDRbn) 2014A 2015A 2016F 2017F 2018F Revenue (IDRbn) 14,451 20,008 24,496 28,185 30,848 EBITDA (IDRbn) Net profit (IDRbn) EPS (IDR) EPS Growth (%) (39.3) DPS (IDR) PER (x) PB (x) EV/EBITDA (x) Dividend yield (%) Payout ratio (%) ROE (%) Net Gearing (x) , *pricing as of 7 November 2016 closing price Nov15 Feb16 May16 Aug16 Nov16 ERAA IJ JCI Rebase as of 07Nov16, BCA Sekuritas STOCK PERFORMANCE 52week price range (IDR) : Market cap (IDRbn)/(USDmn) : 1,769.0 / Avg Daily Turnover (IDRbn/USDmn) : 7.7 / 0.6 MARKET DATA YTD 1M 3M 12M Absolute 11.9% 14.1% 31.1% 0.0% JCI Return 17.3% 0.2% 0.6% 17.9% Relative 5.3% 14.3% 30.4% 17.9% SHAREHOLDERS Eralink International : 60.0% Public (each below 5%) : 40.0%

26 Exhibit 2. ERAA Financial Summary Income Statement Year end 31 Dec (IDRbn) 2014A 2015A 2016F 2017F 2018F Revenue 14,451 20,008 24,496 28,185 30,848 Cost of revenue 13,162 18,502 22,401 25,740 28,135 Gross profit 1,289 1,506 2,095 2,445 2,713 Operating profit Interest income Interest expense (182) (155) (171) (195) (139) Forex gain/(losses) (1) (5) Other income/(expense) EBITDA Income before tax Tax expenses (82) (91) (113) (133) (158) Minority interests (3) (4) (3) (3) (3) Net income EPS (IDR) Balance sheet Year end 31 Dec (IDRbn) 2014A 2015A 2016F 2017F 2018F Cash and equivalents Account receivables 2,396 2,568 2,702 2,844 2,996 Inventories 2,000 2,553 3,034 3,410 3,656 LT Invest & receivables Fixed assets Other assets 1,158 2,117 2,193 2,303 2,315 Total assets 6,126 7,800 8,552 9,198 9,643 ST liabilities 1,440 1,454 1,400 1,250 1,000 Other ST liabilities 1,474 2,945 3,525 4,047 4,423 LT liabilities Other LT liabilities Total liabilities 3,112 4,595 5,121 5,507 5,642 Equity 3,014 3,205 3,431 3,691 4,001 Total liabilities & equity 6,126 7,800 8,552 9,198 9,643 Cash Flows Statement Year end 31 Dec (IDRbn) 2014A 2015A 2016F 2017F 2018F Net Income Depreciation Change in working capital (444) (231) (112) (106) (35) Operating cash flow (193) Capital expenditure (168) (75) (78) (80) (82) Others (22) Investing cash flow (190) (62) (78) (80) (82) Dividend paid (58) (68) (86) (102) Net change in debt (83) (144) (250) Others 82 (14) Financing cash flow 472 (23) (115) (214) (335) Change in cash 89 (43) 30 (10) 7 Beginning cash flow Ending cash flow Key Ratios 2014A 2015A 2016F 2017F 2018F Gross margin (%) EBITDA margin (%) EBIT margin (%) Pretax margin (%) Net margin (%) ROAE (%) ROAA (%) Current ratio (x) Acid ratio (x) Gearing (%) Net gearing (%) AR turnover (days) Inventory turnover (days) AP turnover (days) F revenue growth of 21% CAGR will be helped by entry level 4G handheld High short term debts to be used for working capital Steady capex for retail expansions Expanding gross margin on the back of higher retail sales 26

27 Exhibit 3. ERAA PER band SD+2=12.8x SD+1=10.1X Average=7.6x SD1=4.9x SD2=2.2x Our TP is based on SD1.5 PER of 6.2x 02Jan15 02May15 02Sep15 02Jan16 02May16 02Sep16, BCA Sekuritas Exhibit 4. ERAA s retailer & distribution channel, 20131H16 (Units) Despite smaller having a smaller amount, retail center contributes 40% of revenue H16 Distribution outlets Retail Center Exhibit 5. ERAA s revenue breakdown, F 35,000 30,000 25,000 1,173 1,887 20,000 1,173 1,728 1,363 2,063 1,554 2, F Revenue CAGR of 17.6% will still be contributed by mobile phone sales 15,000 10,000 5, ,519 12,299 17,107 21,437 24,759 27, F 2017F 2018F Celullar phones Vouchers Others 27

28 Exhibit 6. ERAA s revenue breakdown, F (%) F18F margins to expand as retail stores to contribute more to top line F 2017F 2018F Gross Profit EBIT Net Profit Source: Company, BCAS 28

29 Equity Research Tiphone Mobile Indonesia TELE IJ / TELE.JK Company Update Telco Sector In line with Telkomsel BUY Previous: 07 November 2016 Aditya Eka Prakasa aditya.prakasa@bcasekuritas.co.id ext 182 No 1 TSEL voucher distributor Tiphone Mobile Indonesia is currently still Telkomsel s largest voucher distributor. With 25% of TLKM ownership through PINS Indonesia, we see less risk of quota reduction for TELE in the future. Currently, TELE owns 28 clusters spread across the archipelago, with its strongest presence in Java and Sumatra. TELE distributes its vouchers through 3 channels, traditional distributors, and modern channel through mini marts and banking; the largest still comes from the traditional, accounting for 50% of TELE s business. In line with TSEL s growth, we expect its revenue to rise 16.6% to IDR30.5tn in 2017F, before reaching IDR34.8tn in 2018F, as higher ARPU stems from data usage. PRICE PERFORMANCE 900 Target Price: IDR895/share Current Price: IDR690/share Upside potential: 29.7% Banking channel to play more prominent role As of end2015, TSEL had appointed TELE as its sole distributor to provide private banks with electronic vouchers, while SOE will be provided through PINS. Revenue contribution from banks should be positive, since subscribers through banks usually purchase higher nominal voucher (the smallest amount sold is IDR20k) compared to traditional channels, which sell for as little as IDR5k. However, higher nominal vouchers carry smaller margins (around 2.8%) compared to traditional (6%). We thus expect gross margin to contract in 2017F and 2018F, to 5.1% and 4.9%, respectively as banks and modern channel contribute more (15% and 35%) to TELE s top line. Supported by wellknown brands TELE carries 6 major brands of mobile phone, including Samsung, LG, HTC, Huawei, Sony and BlackBerry, aside from TiPhone, their inhouse brand. In 2017, we expect Huawei to provide a higher contribution to top line as the brand has a lot of line up on entry level 4G handheld while Samsung remains the largest contributor. Against this, we expect Sony s sales to slump, the result of an import ban from the government, as their mobile phones contain no domestic content (TKDN). TELE has recently acquired a license from BlackBerry to use their software in its new BB Merah Putih. However, we expect this product to contribute only a little to top line as production numbers will be minimal in 2017F. Initiate coverage with BUY, TP of IDR895 We initiate coverage on TELE with a BUY and TP of IDR895, based on 4year mean PER of 12.6x. We remain positive on the company s longterm growth, given their ability to expand their distributional channels. Risk to our call: weak purchasing power. Exhibit 1. Financial Summary Description (IDRbn) 2014A 2015A 2016F 2017F 2018F Revenue (IDRbn) 14,590 22,040 26,156 30,491 34,824 EBITDA (IDRbn) Net profit (IDRbn) EPS (IDR) EPS Growth (%) DPS (IDR) PER (x) PB (x) EV/EBITDA (x) Dividend yield (%) Payout ratio (%) ROE (%) Net Gearing (x) Source: Company, BCAS estimate, *pricing as of 7 November 2016 closing price Nov15 Feb16 May16 Aug16 Nov16 TELE IJ JCI Rebase as of 07Nov16, BCA Sekuritas STOCK PERFORMANCE 52week price range (IDR) : Market cap (IDRbn)/(USDmn) : 4,915.5 / Avg Daily Turnover (IDRbn/USDmn) : 4.5 / 0.3 MARKET DATA YTD 1M 3M 12M Absolute 10.4% 8.7% 0.7% 4.8% JCI Return 17.3% 0.2% 0.6% 17.9% Relative 27.7% 8.5% 0.1% 22.8% SHAREHOLDERS Upaya Cipta Sejahtera PT : 38.3% PINS Indonesia : 24.6% Esa Utama Inti Persada PT : 14.0% Public (each below 5%) : 23.0%

30 Exhibit 2. TELE Financial Summary Income Statement Year end 31 Dec (IDRbn) 2014A 2015A 2016F 2017F 2018F Revenue 14,590 22,040 26,156 30,491 34,824 Cost of revenue 13,771 20,832 24,743 28,930 33,118 Gross profit 819 1,208 1,412 1,561 1,706 Operating profit Interest income Interest expense (145) (289) (329) (319) (327) Forex gain/(losses) Other income/(expense) EBITDA Income before tax Tax expenses (109) (130) (146) (164) (177) Minority interests 0 (0) (0) (0) (0) Net income EPS (IDR) Balance sheet Year end 31 Dec (IDRbn) 2014A 2015A 2016F 2017F 2018F Cash and equivalents 638 1, Account receivables 1,642 2,274 2,566 2,851 3,111 Inventories 949 1,894 2,249 2,411 2,548 LT Invest & receivables Fixed assets Other assets 1,642 1,623 1,725 1,771 1,829 Total assets 5,018 7,129 7,496 8,023 8,606 ST liabilities 1, Other ST liabilities ,132 1,171 1,289 LT liabilities 17 3,018 2,678 2,763 2,805 Other LT liabilities Total liabilities 2,518 4,313 4,334 4,478 4,652 Equity 2,499 2,815 3,162 3,546 3,954 Total liabilities & equity 5,018 7,129 7,496 8,023 8,606 Cash Flows Statement Year end 31 Dec (IDRbn) 2014A 2015A 2016F 2017F 2018F Net Income Depreciation Change in working capital (1,263) (1,480) (437) (454) (336) Operating cash flow (932) (1,083) Capital expenditure (15) (33) (35) (37) (38) Others (2) Investing cash flow (17) (33) (35) (37) (38) Dividend paid (71) (93) (109) (123) Net change in debt 277 1,703 (300) Others Financing cash flow 1,093 1,651 (384) (4) (67) Change in cash (389) Beginning cash flow , Ending cash flow 638 1, Key Ratios 2014A 2015A 2016F 2017F 2018F Gross margin (%) EBITDA margin (%) EBIT margin (%) Pretax margin (%) Net margin (%) ROAE (%) ROAA (%) Current ratio (x) Acid ratio (x) Gearing (%) Net gearing (%) AR turnover (days) Inventory turnover (days) AP turnover (days) Revenue growth in F with CAGR of 24% contributed from increase in voucher sales Capex to remain subdued Gross margin to deteriorate on the back of higher contribution from banks and modern channel 30

31 Exhibit 3. TELE PE band, F (x) Std +2 = 24.0 x Our TP of IDR895 is based on 4 year average PER of 12.6x 20.0 Std +1 = 18.3 x Avg = 12.6 x Std 1 = 6.9 x Std 2 = 1.2 x 20Jan12 20Jan13 20Jan14 20Jan15 20Jan16, BCA Sekuritas Exhibit 4. TELE s network coverage As the largest TSEL distributor, TELE covers across the archipelago Source: Company Exhibit 5. TELE s revenue breakdown, F (IDRbn) 40, F revenue CAGR of 24.3% will be stemming from voucher business 30,000 8,271 7,458 20,000 7,432 6,742 10,000 5,426 8,799 14,605 19,411 23,030 26, F 2017F 2018F Vouchers Cellphones Other 31

32 Exhibit 6. TELE s margins, F (%) Declining margins going forward as we expect more contribution from modern channel and banks F 2017F 2018F Gross profit EBIT Net income Source: Company, BCAS 32

33 Equity Research Sarana Menara Nusantara TOWR IJ / TOWR.JK Company Update Telco Sector BUY Previous: 07 November 2016 Steady sailing Catering the data growth As Indonesia s largest tower provider, Sarana Menara Nusantara, is wellpositioned to serve the needs for network rollout and 4G conversion. Currently, TOWR s tower portfolio is spread across the archipelago, with around 80% located in Java, while the remaining is in Sumatra, Bali, Kalimantan and Sulawesi. Following the completion of its acquisition of 2,500 EXCL towers, TOWR s assets counted 14,515 in 1H16. Coincidentally with the acquisition, TOWR tenants also increased, to 24,178. By 2017 we expect TOWR asset base to grow organically by 1,000, reaching 16,157 towers, translating to revenue of IDR5.4tn for 2017F with capex of around IDR1.7tn in 2017F for tower expansion. Assetlight strategy to benefit TOWR Given telco companies plan to implement a light asset strategy, independent tower companies will benefit from the current massive 4G BTS rollout. Currently, Hutch, EXCL and TSEL are TOWR s main customers, contributing around 82% to TOWR revenue. Going forward, we are expecting a higher contribution from EXCL as their management has revealed that it does not intend to build any more towers. Worth noting is that the recent acquisition, the rental rate for EXCL leaseback was IDR10mn / tower, with a contract of 10 years. Healthy balance sheet to support expansion With the tower industry s high debt orientation, we see that TOWR s balance sheet is healthy enough to support expansion going forward. In 2017F, we expect TOWR s net debt/ebitda ratio to reach 1.8x before lowering to 1.5x in 2018F. 2017F net gearing also remains manageable, at 57.9%, compared to its peers. Given the above, we believe TOWR will have more flexibility for organic growth or for further acquisitions going forward. Attractive valuation; Initiate with a BUY We continue to like the longterm prospects of the tower industry, its growth in line with that of the telco industry. With TOWR s healthy balance sheet, we expect future acquisitions and organic growth to be secured. Currently the company is trading on 2017F EV/EBITDA 10.0x. We initiate TOWR with a TP of IDR5,150, based on SD+1 EV/EBITDA mean of 12.9x. With a 36% upside, TOWR is a BUY. Risk to our call would be pressures on tower rentals, delays or default in payments of customer, and regulation changes. Exhibit 1. Financial Summary Description (IDRbn) 2014A 2015A 2016F 2017F 2018F Revenue (IDRbn) 4,106 4,470 5,110 5,569 6,163 EBITDA (IDRbn) 3,418 3,776 4,321 4,737 5,242 Net profit (IDRbn) 1,100 2,958 3,277 3,560 3,753 EPS (IDR) EPS Growth (%) DPS (IDR) na na na na na PER (x) PB (x) EV/EBITDA (x) Dividend yield (%) na na na na na Payout ratio (%) ROE (%) Net Gearing (x) , *pricing as of 7 November 2016 closing price Aditya Eka Prakasa aditya.prakasa@bcasekuritas.co.id ext 182 Target Price: IDR5,150/share Current Price: IDR3,800/share Upside potential: 35.5% PRICE PERFORMANCE 5,500 5,000 4,500 4,000 3,500 Nov15 Feb16 May16 Aug16 Nov16 TOWR IJ JCI Rebase as of 07Nov16, BCA Sekuritas STOCK PERFORMANCE 52week price range (IDR) : 3,700 4,850 Market cap (IDRbn)/(USDmn) : 38,771.1 / 2,962.8 Avg Daily Turnover (IDRbn/USDmn) : 0.7 / 0.1 MARKET DATA YTD 1M 3M 12M Absolute 20.0% 1.6% 4.0% 10.6% JCI Return 17.3% 0.2% 0.6% 17.9% Relative 37.3% 1.4% 3.4% 28.5% SHAREHOLDERS Sapta Adhikari Investama : 32.7% T Rowe Price Group Inc : 7.5% Public (each below 5%) : 59.8%

34 Exhibit 2. TOWR Financial Summary Income Statement Year end 31 Dec (IDRbn) 2014A 2015A 2016F 2017F 2018F Revenue 4,106 4,470 5,110 5,569 6,163 Cost of revenue Gross profit 3,530 3,898 4,459 4,798 5,306 Operating profit 3,080 3,386 3,849 4,162 4,602 Interest income Interest expense (856) (563) (852) (787) (754) Forex gain/(losses) (5) (428) Other income/(expense) (669) 1,550 1,368 1,272 1,139 EBITDA 3,418 3,776 4,321 4,737 5,242 Income before tax 1,557 3,958 4,561 4,757 5,014 Tax expenses (458) (993) (1,277) (1,189) (1,254) Minority interests 1 (6) (7) (8) (8) Net income 1,100 2,958 3,277 3,560 3,753 EPS (IDR) Balance sheet Year end 31 Dec (IDRbn) 2014A 2015A 2016F 2017F 2018F Cash and equivalents 2,010 2,987 3,880 3,703 4,223 Account receivables Inventories LT Invest & receivables 1,268 1,298 1,330 1,463 1,756 Fixed assets 12,368 14,683 19,215 21,446 23,477 Other assets 1,064 1,967 2,331 2,661 3,216 Total assets 17,282 21,417 27,466 29,948 33,420 ST liabilities Other ST liabilities 1,836 1,531 1,603 1,397 1,477 LT liabilities 9,151 9,456 12,289 11,351 10,882 Other LT liabilities 1,376 2,304 1,805 1,932 2,070 Total liabilities 12,566 13,738 16,511 15,431 15,150 Equity 4,716 7,679 10,956 14,516 18,270 Total liabilities & equity 17,282 21,417 27,466 29,948 33,420 Cash Flows Statement Year end 31 Dec (IDRbn) 2014A 2015A 2016F 2017F 2018F Net Income 1,100 2,958 3,277 3,560 3,753 Depreciation Change in working capital 991 (1,903) (872) (505) (701) Operating cash flow 2,115 1,081 2,431 3,084 3,081 Capital expenditure (1,730) (475) (4,000) (1,700) (1,500) Others (16) (318) (561) (561) (561) Investing cash flow (1,745) (792) (4,561) (2,261) (2,061) Dividend paid Net change in debt ,023 (1,000) (500) Others Financing cash flow ,023 (1,000) (500) Change in cash (178) 520 Beginning cash flow 1,506 2,010 2,987 3,880 3,703 Ending cash flow 2,010 2,987 3,880 3,703 4,223 Key Ratios 2014A 2015A 2016F 2017F 2018F Gross margin (%) EBITDA margin (%) EBIT margin (%) Pretax margin (%) Net margin (%) ROAE (%) ROAA (%) Current ratio (x) Acid ratio (x) Gearing (%) Net gearing (%) AR turnover (days) Inventory turnover (days) na AP turnover (days) Source: Company, BCAS estimates We expect revenue growth of 11% will stem from organic growth Net debt/ebitda contained at 1.8x for 2017F Net gearing to remain manageable in 2017F and 2018F 34

35 Exhibit 3. TOWR s EV/EBITDA band (x) Std +2 = 14.5 x Std +1 = 12.9 x Avg = 11.4 x Std 1 = 9.8 x Std 2 = 8.2 x TOWR TP of IDR5,150 is based on SD+1 EV/EBITDA of 12.9x Jan11 07Jan12 07Jan13 07Jan14 07Jan15 07Jan16, BCAS Exhibit 4. TELE s network coverage TOWR s towers are mostly concentrated in Java Source: Company Exhibit 5. 1H151H16 customer breakdown 1H15 1H16 Following EXCL s tower acquisition, going forward EXCL will be TOWR s main customer 19% 40% 22% 39% 21% 19% 20% 20% Hutch TSEL EXCL Others Source: Company 35