Telkom readies Rp 3t to buy back shares this year

JAKARTA. PT Telekomunikasi Indonesia (TLKM), the nation’s largest telephone company, has allocated Rp 3 trillion (US$327 million) to buy back shares this year in a move that will lift the company’s stock prices amid an expansion that is expected to up its value.

The shares repurchase is part of a larger plan to buy back shares worth Rp 5 trillion, of which Rp 2 trillion has been executed last year and Rp 1 trillion this year, said Sudiro Asno, finance director of the company that is more commonly known as Telkom.

“We have time until this December to finalize the share buyback. But it’s not mandatory. If the market is not conducive, we can’t do it,” he told reporters at the Indonesia Stock Exchange (IDX) on Thursday.

Telkom’s stock has risen 21.01 percent so far this year to Rp 8,350 a share at Thursday’s trading close, outperforming the broader Jakarta Composite Index’s (JCI) 10.44 percent gain.

Shares in Telkom have been hovering around Rp 6,700 to Rp 8,500 since the company began repurchasing its shares last year.

Telkom has been buying back shares at an average price of Rp 7,200 apiece, according to Sudiro.

Companies buy back shares when they feel that their stock is undervalued on the open market, analysts say.

“Other than booking an increase in revenue, we also have a cost optimization initiative to minimize expenses”

“Telkom probably thinks that with the capacity that it has, its share price should be at, for instance, about Rp 9,000 apiece,” said Reza Priambada, a research manager at PT Indosurya Asset Management, estimating Telkom’s stock price to touch a high of between Rp 8,600 and Rp 8,000 apiece this year.

“Telkom has upped the company’s value. The next step is to boost share value,” he added, in reference to Telkom’s first quarter financial performance this year.

Telkom booked a 17.5 percent year-on-year increase in net income in the first quarter of this year to Rp 3.3 trillion amid profit slumps suffered by rivals PT Indosat (ISAT) and PT XL Axiata (EXCL).

“Other than booking an increase in revenue, we also have a cost optimization initiative to minimize expenses,” Telkom’s Sudiro said.

The company’s revenue increased 6.5 percent in the January-March period this year to Rp 17.8 trillion compared with the same quarter in 2011, supported by an 85 percent jump in revenue for cellular subsidiary PT Telekomunikasi Selular (Telkomsel) on strong demand for Internet and data services amid the smartphone boom in Indonesia.

Telecommunication companies have shifted focus to broadband and data services as cellular business has reached saturation point with 107 percent of Indonesia’s over 237 million population owning a mobile phone.

Broadband penetration promises high growth with only 5 percent penetration of population, with Telkom gearing up for a big drive in the business line, having allocated 50 percent of its Rp 16 trillion planned capital expenditure this year for broadband.

“Principally, our focus is on broadband services,” Sudiro said.

“Broadband will be our revenue generator,” he added, targeting a 5 to 7 percent increase in group-wide revenue this year, mainly contributed by Telkomsel.

Telkom’s broadband users grew 35.9 percent year-on-year in the first three months of this year to 10.4 million, allowing the company to control 61 percent of the industry-wide market share for broadband services.

About 34 percent of Telkom’s revenue is derived from data, Internet and information technology (IT), compared with 40 percent of the company’s income from its cellular line. (Esther Samboh/The Jakarta Post)