P.T. Telekomunikasi Indonesia Tbk. (TLK), the largest telecom operator of Indonesia, declared impressive financial results for the first nine months of fiscal 2010. Net income in the first nine months of 2010 was nearly $1,001 million or $2.00 per ADS (American Depository Shares) compared to a net income of $875 million or $1.78 per ADS in the year-ago period. This was mainly due to higher revenues.

Total revenue for the first nine months of 2010 was a little over $5,840 million, up 3.9% year-over-year. This was mainly due to higher Cellular telephony revenue together with a fabulous increase in Data, Internet & Information technology services revenue.

Total operating expenses in the first nine months of 2010 was $3,913.5 million, up more than 8.4% year over year. Operating income in the same period was $1,912.5 million, down 4.2% year over year. Operating margin in the reported period was 33% compared to 35.8% in the prior-year period.

Telekomunikasi generated $2,295.7 million cash from operations during the first nine months of 2010, down 8% year over year. Free cash flow (cash flow from operation less capital expenditure), during the reported period was $1074.7 million, up 33.1% year over year.

At the end of the first nine months of 2010, Telekomunikasi had $1,073 million of cash & marketable securities on its balance sheet, up 25.3% year over year. Total debt was $1,814.1 million at the end of the same period, up 8.2% year over year. At the end of the first nine months of 2010, debt-to-capitalization ratio was 0.27 compared to 0.29 at the end of the year-ago period.

Segment Revenues

Fixed Lines revenue in the first nine months of 2010 was $1,104.1 million, down 8.8% year over year. Cellular revenue was $2,471.3 million, up 2.6% year over year. Interconnection revenue was $257.2 million, down 4.4% year over year. Data, Internet, & Information Technology Services revenue was $1,775.8 million, up 15% year over year. Network revenue was $101.2 million, up 1% year over year. Other Telecommunication Services revenue was $130.5 million, up 49.5% year over year.

Subscriber Statistics

As on September 30, 2010, Telekomunikasi had 118.2 million of total subscribers. Out of this, 93.1 million were wireless customers. Within the wireless segment, 91 million was prepaid customers and the rest 2.1 million was postpaid customers. Telekomunikasi added 4.8 million net wireless customers during the third quarter of 2010.

Flexi network added 1.617 million net customers during the third quarter of 2010, lifting its total customer base to 16.8 million at the end of the same quarter. Fixed wireline subscriber base was 8.3 million at the end of September 30, 2010, remains almost flat year over year.

Recommendation

We maintain our long-term Neutral recommendation for Telekomunikasi. Currently it is a Zacks #3 Rank (Hold) stock.

 
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