Expected slight drop in revenue due to lower ARPU of IDR 42.4K (-6.4% YoY). TLKM experienced a decline in revenue to IDR 36.7tn in 1Q25 (-2.9% QoQ, -2.1% YoY), in line with ours (22.8%) and cons (23.8%), mainly due to decreased data revenue to IDR 21.3tn (-5.7% QoQ, -3.7% YoY), as its number of subscribers fell to 158.8mn (-0.4% QoQ, -0.5% YoY) and ARPU slid to IDR 42.4K (-3.6% QoQ, -6.4% YoY), bringing effective data yield to IDR 3,211 (-9.8% QoQ, -21.4% YoY) in 1Q25. Lower ARPU was caused by: 1) seasonality promotional impact during festive season, 2) down-trading to cheaper package on weak purchasing power, and 3) intensifiying competition in cellular landscape, particularly in Ex-Java regions. Furthermore, Indihome reported revenue of IDR 6.7tn (+0.4% QoQ, -2.9% YoY with ARPU continue to dip to IDR 224K (-3.9% QoQ, -7.8% YoY) driven by fierce competition in FBB business, with total subs up to 11 mn (+2.0% QoQ, +7.0% YoY).

Net profit in line with expectations despite higher seasonal opex. From the profitability side, EBITDA slightly softened to IDR 18.2tn (-0.9% QoQ; -6.1% YoY) inline with ours and cons (SSI: 23.2%; cons: 23.8%), bringing lower margin to 49.8% (1Q24: 51.9%) due to seasonality as salaries expense run-rate rose to 6.9% in 1Q25 (1Q24: 6.6%). However, this still resulted in net profit of IDR 5.8tn (-2.7% QoQ, -4.0% YoY), relatively in line with ours (22.8%) and cons (23.8%).

Better performance ahead on starter pack adjustment & product adjustments. Following TLKM’s recent starter pack adjustment and product simplification, aimed at increasing overall ARPU, there are positive signs of rasionalization within the cellular competitive landscape. Previously, TLKM took more aggressive measures in 4Q24 by offering entry-level pricing packages (e.g., by.U priced at IDR 10K, avg. industry: IDR 20-30K). However, recent development reveals higher starter pack prices which have been followed by other players, suggesting market repair is unfolding in Indonesia’s telco landscape. Additionally, as price war eases, we expect a more favorable ARPU trend going forward to benefit the industry.

Maintain BUY with TP of IDR 3,500. A more rational industry approach on the cellular segment, which should support recovery going forward, has us retaining our BUY rating for TLKM with TP of IDR 3,500, implying 2025F EV/EBITDA of 5.2x and 35.1% upside potential. We continue to like TLKM due to: 1) undemanding valuation at 4.1 trailing 12M EV/EBITDA discount of 11.5% relative to its peers; 2) expected further rerating considering TLKM offers compelling 2025F ROAE at 15.6% (average peers:  14.9%); and 3) attractive dividend yield of 6.4%. Key risks include: 1) intensifying competition 2) lower-than-expected number of subscribers, and 3) price war in Fixed Broadband (FBB) segment.