Good day, and welcome to the Telkom's 9 months 2017 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Andi Setiawan. Please go ahead, sir. .

Thank you, Sergei. Ladies and gentlemen, welcome to PT Telkom Indonesia conference call for the 9 months of 2017 results. We released our results on 26 of October 2017, and the reports are available on our website, www.telkom.co.id. .

Today's presentation is available on the webcast, and an audio recording will be provided after the call for the next 7 days. There will be an overview from our CEO. And after that, all participants are given the opportunity to participate in the Q&A session. .

Before we start, let me remind you that today's call and the responses to the questions may contain forward-looking statements within the meaning of safe harbor. Actual results could differ materially from projections, estimations or expectations voiced during today's call.

This may involve risks and uncertainties and may cause actual results to differ substantially from what was discussed in today's call. Telkom Indonesia does not guarantee to any actions which may have been taken in reliance of the discussion held today. .

Mr. Alex Sinaga as President, Director and Chief Executive Officer; Mr. Harry M. Zen as Finance Director; Mr. Zulhelfi Abidin as Network & IT Solutions Director; Mr. Abdus Somad Arief as Wholesale & International Service Director; Mr. Dian Rachmawan as Enterprise & Business Service Director; Mr. Mas'ud Khamid as Consumers Service Director; Mr.

David Bangun as Digital & Strategic Portfolio Director; and Mr. Herdy Harman as Human Capital Management Director. Also present are the Board of Directors of Telkomsel. Mr. Ririek Adriansyah as President Director; Mr. Heri Supriadi as Finance Director; and Mr. Alistair Johnston as Marketing Director. .

I now hand over the call to our CEO, Mr. Alex Sinaga, for his overview. Please follow. .

Thank you, Andi. Good afternoon, ladies and gentlemen. Welcome to our conference call for the year-to-date September 2017 results. We really appreciate your participation in this call.

Ladies and gentlemen, in the 9 months 2017, Telkom continue to deliver strong set of results by posting triple double-digit growth in revenue, EBITDA and net income of 12.5%, 12.8% and 21.7% year-on-year, respectively.

Key profitability ratio improved as EBITDA margin slightly increased to 51.6% from 51.5% in September 2016, and income margin went up to 18.5% from 17.9% last year. Our revenue growth was driven by Data, Internet and IT Service segment, which [indiscernible] grew by 50.5%.

The segment's contribution to total revenue reached 43.8%, significantly increased from 37.7% in the same period last year. On the other hand, we successfully managed our total expense, which increased by 9.8%, lower than revenue growth.

In line with continuous improvement in infrastructure development, both in cellular and fixed businesses, operation and maintenance expense increased by 14.8%, with marketing expense increased by 30%, in line with intensive promotion of 4G service and IndiHome. .

Ladies and gentlemen, in cellular business, despite high competition, Telkomsel improved its profitability as EBITDA margin expanded to 58.8% from 58.3% last year, with net income margin increased to 33.5% from 33.0% last year.

These improvements were the result of excellent expense management, and revenue itself grew by 9.2% with EBITDA and net income grew by 10% and 10.8% year-on-year, respectively. Revenue growth was driven by Digital Business, which increased by 26.9% year-on-year.

Digital Business is getting more important as it contribute to 40.5% of total Telkomsel revenues and increased from 34.8% 1 year ago. Demand for data is very strong as a result of fast-growing smartphone adoption. Our data traffic jumped 125.7%, with smartphone users grew by 27.6% to 70... .

97. .

To 97.5 million or 51.2% of our customer base. On the contrary, legacy businesses have been declining. It decreased by 0.2% year-on-year. That means the presence of various over-the-top services. Voice revenue, however, still grew by 3.4%, despite traffic dropping by 10.8%.

This was due to successful customer migration, the voice packages, implementation of smart cluster based pricing, sharp market segmentation and superior network quality and coverage. .

In the meantime, SMS revenue declined by 15.9%, with traffic fell by 24.2%. Telkomsel's customer base increased by 16.3% to 190.4 million as a result of effective sales and marketing programs.

In order to maintain excellent customer experience, we deployed 23,158 new BTSs during 9 months of 2017, all of which were 3G and 4G BTSs, with around 65% 4G BTSs. We maintain our leadership in 4G coverage, which includes 489 cities across Indonesia.

In total, our BTS on-air reached 152,191 units, of which around 2/3 were 3G and 4G BTSs, which reflected our focus to grow our Digital Business. This is in line with our commitment to always have the leading network supply.

And going forward, our network development focus will be on 4G BTS, as we are committed to maintain excellent customer experience. .

Ladies and gentlemen, Telkomsel has secured additional 30 megahertz spectrum and 2,300 megahertz frequency after winning the auction held by Ministry of Communication and Information. Telkomsel placed its highest bid of IDR 1 trillion to win the spectrum.

We believe the additional spectrum will improve efficiency in both EBITDA and operational expenditures as well as provide bigger business opportunity in the future, which will strengthen our position in the industry. .

On the other hand, our flagship fixed broadband service, IndiHome, saw encouraging progress as we had 2.3 million total subscribers by end of September 2017. This represents an increase of 53.5% year-on-year. Sales and system that enable us to manage our resources more effectively.

In the third quarter, net additional lines reached 323,000 compared to 257,000 in the second quarter and 154,000 in the first quarter. We expect that we will continue this positive trend in the future. Revenue from IndiHome business reached IDR 5.9 trillion, [indiscernible] increased by 49.7% year-on-year.

In enterprise business, we remain focused on providing digital and managed solution service. And nowadays, we see increasing trend for Indonesian corporation to focus on the core business and outsource their ICT needs to reliable third party solution providers. Telkom has been winning several major projects from various industries.

This business model provides a huge opportunity for Telkom to expand its enterprise business in the future. Until 9 months of 2017, enterprise business recorded IDR 15.8 trillion in revenue, significantly grew by 39.5%.

In broadband infrastructure, after the completion of SEA-ME-WE 5 submarine cable system last year, in August 2017, we completed SEA-US submarine fiber cable that stretch around 15,000 kilometers, connecting Manado, Indonesia to California. The SEA-US cable is built, own and operated by a consortium of 7 companies.

In the meantime, the segment of SEA-ME-WE 5, which is operated by Telkom, has been fully utilized. Around 75% of the segment's capacity is used internally by Telkom Group to support growing demand for broadband in domestic market.

While the segment of SEA-US, which is operated by Telkom, has been 70% utilized, of which around 90% leased to external parties.

To connect those 2 submarine cable systems and link them to our domestic network, currently, we are in the process of constructing Indonesia Global Gateway, which spans from Dubai to Manado, which is targeted to be completed by third quarter next year.

The operation of SEA-ME-WE-5, SEA-US and IGG is an important milestone for Telkom to realize its vision to become a global digital hub. .

Now let me wrap up my overview by reiterating our guidance for the full year 2017. We expect both Telkom and Telkomsel revenue to grow better than industry rate. We estimated the industry will be grow at mid- to high single digit in 2017.

EBITDA and net income margins are expected to slightly decline in line with revenue shift toward Digital Business and continue infrastructure development. Capital expenditure for the group is expected around 23% to 25% of revenue, with investment focused on mobile and fixed broadband infrastructure. .

That's ending my remarks. Thank you very much. .

Thank you, Alex. We will now begin the Q&A session. When raising your questions, please speak clearly and state your name and your company.

Operator, may we have the first question, please?.

[Operator Instructions] The first question comes from Arthur Pineda of Citi. .

Several questions from me. Firstly, can you please give us some color on the slowdown in Telkomsel's revenue growth? How is Java versus non-Java trending? Second question I had is with regard to your enterprise revenues that seems to have risen by north of 80% year-on-year.

What is your view on the momentum on this side going forward? And can you sustain such strong levels? Third question I had is with regard to the impact of the spectrum that you've recently won.

How much are you expecting to save from this? Or what new revenue streams are you looking at as a result?.

Okay.

Can you deal with [indiscernible] do the first one?.

So for the first one, and I think it's worth commenting that there's a couple of big drivers of the Telkomsel results. I think the first one is probably around voice traffic. Our voice traffic has declined year-on-year. Our revenues still positive. But clearly, we've reached an inflection point on voice.

I think the second part is that the market is very competitive on data pricing, particularly for the segment of customers who buy a new starter pack and use it like a calling card, which resulted [indiscernible] our traffic growth is very strong, about 125% year-on-year. Revenue growth is less than 30%.

In terms of Java versus non-Java, I don't think it's a straightforward answer to give, really. I think the country as a whole is competitive. I think we're seeing our competitors, particularly Excel and Hutch, attacking us in certain places, but it tends to be particular cities. And we are well aware of what's happening there.

And I think, really, the competition is not really either Java or non-Java, I think it's more general than that. .

[indiscernible] spectrum. .

On the spectrum question, yes, it is a very important spectrum for us. It is giving us a lot of opportunity to increase our service and also, I think, maximize our throughput along the way with the development.

In terms of efficiency, you can see from, I think, the system of FDD currently, I think, carry about 50% of spectrum downlink and 50% of uplink. But with 2300, it is TDD. It can carry 75% of spectrum downlink and 25% of spectrum uplink. It is giving almost twice of the efficiency to our network. .

On the question related to the enterprise business. We expect that the growth momentum in this business would still be strong in the foreseeable future, given that we're still in the early stage of digitalization of Indonesian corporates as of now. So we expect more and more Indonesian corporates are getting more digitalized.

And there's also trending -- there's also an increasing trend of outsourcing various IT services from Indonesian corporates to ICP or telco operators such as Telkom. .

So just to clarify on the earlier comment on spectrum, I understand that there are efficiencies with ED LTE.

But is there any number that you see because, obviously, you will be spending a fair bit for around $80 million per year? Is there any compensating reduction in CapEx or possible additional revenues that you could generate maybe wireless broadband?.

Definitely. Because we also plan to deploy it right away. For example, in the end of this year, we start to, I think, deploy about 500 new network element for this 2300. Along the way, next year, most of our, I think, BTS that going to be deploy is in 4G LTE.

This very much, I think, giving us a lot of opportunity to make a lot of efficiency, especially in the city like Java or Jakarta or other big cities. .

Our next question comes from the line of Colin McCallum of Crédit Suisse. .

A couple of questions from me. First of all, obviously, fixed broadband is growing quite nicely. But what would be the total homes passed now? And what would be your target for IndiHome subscribers at the end of 2017 and the end of 2018? That would be helpful.

And if you could also comment on how good the conversion rate is from dual-play customers up to being triple-play? So should we expect the average ARPU to rise again from 308,000 level from third quarter? Second question is just on that 2,300.

How quickly -- I think you gave us a little indication there, but how quickly can this be rolled out? Do you have plans in place to cover, say, half your network by middle of next year or some sort of a feeling for how quickly you can roll it out? And is it a significant densification project? Do you have to build a lot more towers to support it? Or can it be kind of overlaid with your existing 2,100 megahertz resources and towers and slots as far as you're aware? Any indication on that would be really helpful as well.

Those are my questions. .

Okay. Let me start with the fixed broadband questions. By year-end this year, we expect to get around 2.8 million to 2.9 million customers of fixed broadband. In terms of homes passed, currently, we have about 17.8 million homes passed.

And in terms of ARPU, it really depends on the composition of the 2P and 3P, but what is encouraging is that we see more upgraded customers from 2P to 3P rather than downgraded from 3P to 2P. So the delta is around 1% of the total customers. .

On the 2,300 spectrum, as mentioned by our CFO, that we're going to use it as soon as possible. And we start to deploy 500 BTS -- new BTS next month. And hopefully, it can be completed sometime in late December. Out of this 500, most will be deployed in Jakarta, and it's going to be overlay network in Jakarta.

Next year, we will continue [indiscernible], and it will be especially on the most populated cities. And we believe it's going to be mostly in Java and some other cities outside Java -- some bigger city which require bigger capacity. .

Just to add one more information. Just one more information..

So in terms of the potential increase of new customers next year, it will be in the range of 1.2 million to 1.5 million new customers. .

Got it. And just, if I can circle back a little bit on the 2,300, is it your understanding that in city areas, it mostly goes on existing towers rather -- or existing 2,100 towers? Or do you need to build a lot more smaller cells because it's 2300? Any color on that would be helpful. .

No, it's mostly going to be collocated to the existing towers. .

Mostly collocated. Okay. .

Our next question comes from Roshan Raj of Bank of America Merrill Lynch. .

Three questions. I understand the pricing around data has been pretty competitive, but just wanted to get some color if some of the price plans with the starter packs.

Are you sort of undercutting your competitors in one or more areas? And if so, what is the rationale for this? And how do you expect the overall data pricing to evolve in the next few months or quarters? Second, there was some news report about Telkom looking at M&A opportunities. If you could share some color on that, that will be helpful.

And third, going back to the spectrum win, should we expect the CapEx intensity to drop from the 23% to 25% kind of range we are seeing for the last few years? Those are the 3 questions. .

Okay. On the first one, I think it is correct to say that, in the last quarter, we have had to be more competitive in the starter pack sector of the market. And for background, there is a segment of value-conscious customers who typically look for a good-value package. They buy a SIM card. They use it, and then they buy another SIM card and repeat.

And we still maintain an overall pricing premium in the market, but we took a decision in the last quarter to turn up the competition a bit -- up a couple of notches. I think the most obvious sign of that was probably us entering into the IDR 25,000 starter pack market, which has been a good success for us.

In terms of our pricing philosophy, we still maintain a premium. Sometimes, our packages look cheap. That's a result of, I think, some smart marketing activity, whereby we try and minimize the amount of regular bonus and we increase the value around bonus data, which usually has terms and conditions attached to it.

That's how we manage the overall value. In terms of looking forward, I think the market remains very competitive. There's no getting away from that. I think the upcoming changes to the SIM registration rules, I think, will inevitably have an impact on the starter pack market.

I think it will reduce the size of that market and reduce churn overall and, therefore, will be net positive for us. But obviously, the -- how that new regulation is implemented and how it transpires over the next few months will determine how quickly it has an impact on the competitive scenario. .

Okay. With regard to the 2300 and how it -- that thing going to make efficiency in our CapEx. Basically, the situation right now is, if we see the traffic of data carried by 4G is about 50% of total traffic and the number of 4G subscriber continue to increase along with also the consumption of 3G for each user.

So we also need to increase the coverage of 3G -- 4G. It's mean we still need quite a significant CapEx moving forward, not too much different from the figure that we have right now. Along with that one, also, our CapEx coming to the -- to increase also our capability in IT system and also some digital platform that we need to -- adding to our system.

So basically, what we can inform to you, until the next 2 years, the figures of ratio of CapEx to revenue will be around 15% to 17% to the revenue. Back to 2300 basically, it can bring the efficiency about 20% to CapEx per unit of [indiscernible], as in my previous explanation, how the efficiency will come into the system. .

For the M&A questions, unfortunately, there's nothing much we can share as of this moment given the -- we are still bound by confidentiality with some of the potential targets that we're talking to.

However, rest assured that all the things that we're looking at the potential targets that could help us to realize our objective to become a digital telco in the future.

And we've been also very, very careful in terms of selecting the profitability profile of the targets because we certainly don't want other targets to be so dilutive to our current profitability profile. .

Our next question comes from Miang Chuen Koh of Goldman Sachs. .

Three questions from me. First, back on the data price competition. So I believe that beside these starter packs, the regular price plans also saw some moderate data price cut. So just wondering whether Telkomsel is now comfortable with where your price premium is today versus peers.

And just wondering, like, how would you react as well if competitors cut again? Second question is on marketing costs. I noticed that this was quite high in third quarter. Can you add some color on that? And then thirdly, spectrum payments. Just wondering when the annual fee starts.

Is it this year, the full amount of IDR 1 trillion? And then also for the upfront payment, the amortization, are you going to account for 2 months this year?.

Yes. I think, on the first one, I mean, you're right. There is data price competition. I think most of the price competition really exists in the outlets among the starter packs. I mean, we're always adjusting what we call the renewal packages, the regular packages, but they really haven't been subject to the same pricing intensity.

I think it's worth mentioning a couple of other things that are happening. I mean, increasingly, we are moving our existing customers on to combo packages, selling them packages, which sort of lock in the value for voice, SMS and data. And we do a lot of work with our existing customers on a kind of more-for-more basis.

So we offer them a lot more service for a little bit more revenue. So there is a lot of work, probably, that doesn't get seen. In terms of, are we happy with our premium? I think, by and large, yes. I think it's probably where it needs to be at the moment.

Obviously, I don't know for sure what my competitor yields are until they announce the results in the next couple days. But I know from the previous quarter and from market surveys that I think we are about right.

Yes, I mean, it's a balancing act between ensuring maximizing revenue, but also making sure we're not losing market share, especially in some of our dominant market areas. So we have to strike that balance. .

Okay. On the marketing expenses, yes, it is -- grew around 23% compared to last year. It is because, in the last quarter of last year, we changed the scheme of the -- I think benefited our dealers.

And then along with that also, the competition in the, I think, market body requires us to come to provide small denom of the, I think, package that we're selling. This is also coming to additional, I think, budget needed. But overall, if you see the ratio to the revenue, it is still healthy about 4% overall.

And then on the second, I think spectrum fees, we start to amortize the spectrum fees starting next month, it's mainly about 2 months this year, and full -- I think, full entitlement of next year.

So yearly, we need to amortize about IDR 1.2 trillion of the 2300 spectrum fees comprised of IDR 1 trillion of annual fees and about IDR 200 billion of the annualized upfront payment. .

And this would come in only in the last 2 months of this year, right? The IDR 1.2 trillion would be prorated?.

Yes, yes. There's about IDR 200 billion only will be recognized this year. .

Our next question comes from Piyush Choudhary of HSBC. .

Two questions. Firstly, on this new prepaid registration requirement.

Can you share what's the likely impact on industry and particularly Telkomsel? Can it help to reduce churn meaningfully, and hence, we can start seeing cost savings? And secondly, on the enterprise side, where you have witnessed a sharp revenue growth, is there any one-off revenue in the segment? Or the enterprise revenue is sustainable in the nature? There is no one-off projects, just want to confirm that.

.

Yes. I think, on the prepaid registration, I think the likely impact is overall positive on the industry. I think all the operators have quite a task on their hands over the next 3 or 4 months to register all of our customers. And from February next year, new customers being signed up from the outlets would also be asked to register.

The registration process is now an electronic process, where the customers' electronic ID cards and their family card are both validated with the government database. So it's a significant upgrade on the current level of validation we have today. Likely impact probably is, first of all, customer base numbers will reduce.

All of our customer base numbers include customers who have used up their starter pack and stopped using it. Those customers tend to stay on the base for a month or 2 before their plan [ starts ]. So that would overall reduce. One would expect the amount of sales of starter packs to reduce. Consequently, the amount of churn.

And that will have an impact, not least among the cost that we have to pay for starter packs and the cost that we have to pay on channel commissions, et cetera. So I think our expectation is that overall it should be positive.

And I think with the reduction in activity in the starter packs, one would hope that pricing could become -- data pricing could become somewhat more rational. .

On the enterprise revenue, it comprised mostly of projects, but these projects are long-term projects. So let's say, if we get a mandate from a corporate client, then these mandates can be like 3 or 5 years kind of projects, in which we would be receiving recurring income for the next 3 or 5 years.

And there's been actually some clients who are doing repeat business with us. So after the first contract expires, after 3 or 5 years, then they come back again to us and sign up the -- in terms of the project. So that's pretty much the characteristic of our enterprise business. .

All right.

And can I just confirm one thing on the prepaid registration? Is there a maximum limit on the number of SIM cards which an individual can take under the new requirement?.

Yes. So the regulation states that if a customer registers through an electronic channel, like SMS or through SSD, then the maximum they can have is 3. However, there's an exception to that. If a customer goes to an operator outlet, they can register more than 3, but they have to have a good reason for doing so.

I mean, the exact technicalities of how that works and what those reasons may be, I think we'll be working out with the government over the next number of weeks. But by and large, the answer is 3 for most customers. .

Our next question comes from Giovanni Dustin of Mirae Asset Security. .

Two questions from me. Firstly, are there any one-off items booked in the third quarter? And should we expect any one-off item in the fourth quarter or maybe next year due to Telkom 1 satellite normally? And secondly, I noticed a relatively strong trend of growing number of legacy services users, around like 5% Q-on-Q.

And I saw that it already started to increase in the second quarter of this year. Just wondering if there are any particular reasons behind this. .

Sorry.

Would you mind just repeating your second question for us?.

Sure. So I noticed a relatively strong trend of growing number of legacy services users. Just wondering if there are any particular reasons behind this. .

On the one-off items, I presume you're talking about one-off costs, right?.

Yes. .

Okay. So there was one item on the Telekom cell side, whereby it's about VAP, value-added packs, in which the court ordered Telkomsel to pay kind of penalty for VAP for underpaying for the fiscal year of 2010. So the amount was IDR 300 billion.

And there's also one-off item, which is related to the service recovery of our satellite Telkom 1, which experienced some anomaly by end of August. So given that we have to do some activities with regards to migrating the customers that were using Telkom 1 to our other satellites as well as some other external satellites.

And the amount for that was around IDR 170 billion. .

So is it -- was the second question in relation to the mobile business -- the subscribers?.

Yes, the cellular subscribers, the legacy service. .

I mean, the trend overall on legacy services, voice and SMS, is negative. I mean, we have -- our volume of voice minutes has declined about 10% year-on-year. And on SMS, our traffic is about minus 24% year-on-year. So I'm not exactly sure what data you're looking at for users, but we're having to manage a negative trend in terms of volume. .

Okay. Because what I did was I -- what I did was like the total subscribers minus, like, the 3G/4G devices, then I got the legacy users. .

Okay. So that probably doesn't include the fact that some of our total customer base customers are in the transition phase before they churn. And so that's probably why the numbers look a bit odd. But I think overall trend on legacy is now turned negative for us in terms of volume. .

The next question comes from Wei-Shi Wu of BNP Paribas. .

Most of my questions have been answered, but I just want to clarify one data point.

Based on management's comments earlier, was it mentioned that the CapEx to sales can be expected to fall to 15% to 17% over the next 2 years, that is 2018 and 2019?.

Yes, it is in the cellular side. But overall, of the Telkom Group, my colleague also can explain. .

I think overall -- obviously, we haven't released our guidance for next year, but rough estimate that we could share with you as of now, at least for the next couple of years, we would be seeing still the same kind of range for overall group, which is about 23% to 25% CapEx-to-revenue ratio. .

The next question comes from Choong Chen Foong of CIMB. .

Three questions from me. The first question on the mobile side.

In terms of the competitive intensity, can you give us some color as to the trending there? I mean, have you seen it peak few weeks ago and it's starting to stabilize at current levels? Or is it continuing to intensify? Or have you seen it actually simmer down? That's the first question on mobile.

And also related to that, I see that your net adds in the quarter was very, very strong, but your mobile ARPU was down by quite a bit on a Q-on-Q basis.

Was that because the net adds came in with much lower ARPUs? Or were you adding those subscribers, new subscribers, largely at the end of the third quarter? Yes, that's my first question on the mobile side. And then my second question and third question on the fixed line business.

I noticed that the G&A costs went up by quite a bit on a O-on-Q basis in the third quarter for Telkom, excluding Telkomsel.

Can you provide us a bit more color as to what drove that? And secondly, on IndiHome, the net adds in the third quarter, how much is that coming from Speedy upgraders? Or how much of that is coming from other fixed broadband providers?.

So the first 2 questions, I think, yes, it's difficult to call the competitive intensity. Certainly, for a number of weeks now, it's been pretty extreme. I don't think I can honestly say that this evidence that it's beginning to stabilize. Perhaps, we'll know a bit more when we see competitors' results and their comments on their calls.

My suspicion is that the low prices have stimulated a lot of traffic. And I suspect that if people aren't able to continue to invest in the networks, there's going to be a lot of congestion. So I think that may be something which will eventually temper activity. Obviously, the SIM registrations is the other factor which is going to have an impact.

In terms of net adds, I guess the way the math works on ARPU is total revenue to total customers. But when we acquire -- when we increase our share of the spending customers, effectively they come in, they buy a starter pack, they use it and it takes about 2 months for that starter pack to be disconnected from our network.

During that period, it still classed as a sub. So I think, really, it's because we've been attracting more of these occasional churning and spending customers, especially at the low-denomination level of IDR 25,000. So in fact, that's led to a big jump in our customer base and a corresponding reduction in the ARPU.

I think, if you look at the segments, the customers that are loyal to us, their ARPU hasn't been declining really. .

Okay. On the fixed broadband, on G&A, the increase was mainly due to the increase of provision for bad debt for uncollected account receivables. The amount was IDR 565 billion. And in terms of the source of the new customers for fixed broadband, it's roughly around 50-50.

So 50% was new customers, and the other 50% was our existing fixed line customers who then were upgraded into IndiHome customers using either 2P or 3P. .

But can I just quickly follow-up on the provision for bad debt? You mentioned IDR 565 billion.

Is that in the third quarter itself or for the first 9 months?.

I mean the third quarter. .

[Operator Instructions] Our next question comes from Ranjan Sharma of JPMorgan. .

Two questions from my side.

Can you please provide an update on your dividend policy? Do you see any changes to that? And the second question is on -- are you now anticipating any regulatory changes in the market?.

We normally -- obviously, the dividend policy is decided by the Minister of State-Owned Enterprises being our principal shareholder.

So we normally have discussion with them about dividend policy by Q1 every year before our AGM, which is normally conducted in April, but we don't see any reason why the government would want to reduce from the previously stated 70% payout. .

On the [indiscernible] spectrum is done [indiscernible] is already done. So there's another regulation that is still being proceed, which is the interconnection MDR. We started as of now is that we are still waiting for the restart of the studies being done by the State Auditor. So at this point, we don't know what's the new MDR is going to be. .

So do you have a date of the implementation of new MDR with you?.

No, we expect that it can be finalized ASAP, but we don't know yet whether that's going to be released. .

Okay. Maybe one follow-up question as well.

With Lebaran came earlier this year, has there been -- have your third quarter results been impacted by any kind of seasonality?.

I think, in the third quarter this year, actually, yes, seasonality. Last year, we have Muslim festive in July, but this year, in June. So that's why actually the figure in the second quarter quite strong compared to the third quarter because we have seasonality in second quarter this year. .

And we will now take our final question today from Miang Chuen Koh of Goldman Sachs. .

Can I just follow-up on the bad debts again? So IDR 565 billion for only third quarter.

What was that for second quarter, if I may ask, and the first quarter as well? And I'm just wondering was it kind of accumulation of several quarters, I guess, the defaults and only, hence, recognized this quarter? Could you, I guess, share some color on that, please?.

Yes. Actually, the number for second quarter was a minus number, around minus IDR 145 billion. I guess, the explanation why it seems to be cyclical would really depend on the assessment that we do on the total operation of the bad debt. So there is obviously some procedure that we need to pay before we finally decide on the provision amount. .

Okay.

So in terms of your, I guess, the risk management side, do you see like the quality of customers getting worse off in this quarter or not?.

No. Obviously, not. In fact, in terms of the collectability or the collection profile, we've done some recent benchmarking against other operators globally. We are actually -- we came up to be within the top 4 or top 3 among the best. .

That will conclude today's question-and-answer session. And now I would like to turn the call back to Andi Setiawan for any additional or closing remarks. .

Thank you. Thank you, everyone, for participating in today's call. We apologize for those whose questions could not be addressed yet. If you have any further questions, please don't hesitate to contact us directly. Thank you, everyone. .

Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect..