Indonesia Telkom Q1 net drops on margin squeeze

JAKARTA, Apr 30 (Reuters) Indonesia's largest telecoms firm, PT Telekomunikasi Indonesia Tbk , posted a 12 percent drop in first-quarter net profit as higher costs offset rising subscriber numbers, knocking its shares down 2 percent.

Indonesia's mobile phone sector has grown at a healthy clip in recent years, and experts predict user numbers will top 100 million by 2010. But with among the highest tariffs in the world, analysts say the pace is not as fast as it should be.

Despite strong growth, the penetration rate in Indonesia is still low at around 25 percent compared to 80 percent in Malaysia and 60 percent in Thailand.

Analysts say business will get tougher as new customers are likely to be lower-income users, generating lower average revenue per user (ARPU) for operators.

Telkom, the biggest company on the Jakarta bourse, posted January-March net profit of 3.04 trillion rupiah ($335 million), versus 3.46 trillion rupiah a year ago.

Operating revenue climbed 22.8 percent to 14.5 trillion rupiah, helped by a strong performance from its mobile phone business.

Telkom blamed the quarterly net profit dip on implementation of a new interconnection tariff, which knocked its earnings before interest, tax, depreciation and amortisation (EBITDA) margin down to 60 percent from 67 percent a year earlier.

''This new tariff scheme has resulted in an increase in revenue and, at the same time, an increase in expenses which has impacted the EBITDA margin percentage,'' it said in a statement.

Deutsche Bank analyst Raymond Kosasih said the first-quarter operating results were ahead of forecast. ''We think with better-than-expected results at the operational level there could be room for a valuation upgrade,'' he added.

But UBS said the quarterly EBITDA was disappointing and net profit fell short of their estimates for 3.34 trillion rupiah.

Net profit fell despite a 44.3 percent increase in subscriber numbers, to 38.9 million, at mobile arm PT Telekomunikasi Selular Tbk (Telkomsel).

STRONG SECTOR GROWTH Telkom has a 65 percent stake in Telkomsel, while Singapore Telecommunciations Ltd. holds the rest of the largest mobile operator in the world's fourth most populous nation, home to 220 million people.

Indonesia has around 65 million mobile users.

Telkom, valued at almost $24 billion, has not reported full-year 2006 financial results and will release details of its first-quarter results together with audited 2006 numbers.

Anggito Abimanyu, a commissioner for the company, has said unaudited 2006 net profit should be around 10.9 trillion rupiah, below analysts' forecasts for 12.23 trillion.

Telkom shares were off 2.3 percent at 10,500 rupiah at 0352 GMT on Monday, helping drag the overall market down by 0.4 percent.

($1=9,075 rupiah) REUTERS PV VP1140