Telkom (TKG) – Still all about Mobile

Telkom’s performance continues to be driven by its Mobile operation, which has seen significantly diminished service revenue growth in FY 21due to a slump in mobile voice and a rotation into data. The reliance on Mobile, together with the risk that margins and ARPU could normalise once, the Covid-19 effect wears off, concerns us. The underlying economics of low margin new generation services substituting high margin legacy services and the cyclicality of BCX remains ongoing concerns. Without additional working capital optimisation, FCF could be negative in FY22.