Indonesia's Urbanization And Digital Shift Will Expand Mobile Connectivity

Key Takeaways

• AI-driven strategies and first-mover advantage in cloud could drive faster and more substantial growth in revenue and margins than analysts expect.
  
• Strong positioning in data demand, expanding digital services, and merger synergies support premium pricing, recurring revenue, and long-term earnings improvement.
  
• Disruptive technologies, competitive OTT platforms, heavy capital needs, merger-related risks, and market saturation all threaten Indosat's revenue growth, margins, and long-term profitability.

Catalysts

Provides digital telecommunication services in Indonesia.

• While analyst consensus expects Indosat's AI-driven hyper-personalization and smart CapEx to drive moderate ARPU and margin improvement, this may understate the uplift: with rapid digital adoption across Indonesia's rising middle class, AI-powered segmentation and upselling could catalyze a much sharper, sustained ARPU inflection, materially boosting top-line growth and ultimately net profit margins over several years.
  
• Whereas analysts broadly anticipate the AI TechCo to deliver USD 35 million in net new revenue at 55% to 60% EBITDA margins, initial customer traction, annual contract structures, and a first-mover advantage in sovereign AI cloud suggest this segment could scale far faster, potentially doubling revenue and contributing an outsized share of group EBITDA by 2026, leading to rapid earnings accretion.
  
• Indosat is uniquely positioned to capture the surge in data demand driven by Indonesia's accelerating e-commerce, fintech, and remote work trends, as its expanding 4G and early 5G network leadership enables premium pricing, upselling of value-added services and digital literacy offerings, and ongoing ARPU expansion.
  
• Fiber-to-the-home (FTTH) and fixed broadband initiatives are coming online just as mass market digital consumption takes off-as urbanization and device affordability rise, this business could unlock substantial new recurring revenue at industry-leading margins, particularly as integration and operational streamlining are now complete.
  
• With ongoing industry consolidation and regulatory support reducing pricing irrationality, Indosat's enhanced scale post-merger and disciplined cost optimization efforts could deliver structurally higher EBITDA margins and free cash flow, paving the way for significant long-term return on capital improvement and robust earnings growth.

Indosat Ooredoo Hutchison Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Indosat Ooredoo Hutchison compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Indosat Ooredoo Hutchison's revenue will grow by 8.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 8.2% today to 12.7% in 3 years time.
• The bullish analysts expect earnings to reach IDR 9038.9 billion (and earnings per share of IDR 280.96) by about August 2028, up from IDR 4511.4 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 16.7x on those 2028 earnings, up from 16.4x today. This future PE is lower than the current PE for the ID Wireless Telecom industry at 22.0x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.44%, as per the Simply Wall St company report.

Indosat Ooredoo Hutchison Future Earnings Per Share Growth

Risks

• The proliferation of global low-orbit satellite internet services threatens to bypass Indosat's traditional wireless infrastructure, putting long-term pressure on its subscriber base and core top-line revenue.
  
• Intensifying competition from over-the-top (OTT) voice and messaging platforms like WhatsApp and Telegram undermines Indosat's ARPU by eroding demand for traditional SMS and voice services, making sustainable revenue growth challenging.
  
• Indosat faces persistently high capital expenditure requirements for 5G and fiber infrastructure upgrades, which is suppressing free cash flow and increasing depreciation and amortization costs, thereby constraining net earnings.
  
• Integration risks persist following the Ooredoo and Hutchison merger, including the possibility of cultural misalignment and customer churn, threatening gains in operating efficiency and putting downward pressure on net margins.
  
• Market saturation and pricing pressures in Indonesia's mature wireless sector, together with spectrum scarcity and rising spectrum costs, create an environment where operating expenses and capital intensity can outpace revenue growth, reducing overall profitability.

Valuation

• The assumed bullish price target for Indosat Ooredoo Hutchison is IDR3300.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Indosat Ooredoo Hutchison's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of IDR3300.0, and the most bearish reporting a price target of just IDR1600.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be IDR70921.4 billion, earnings will come to IDR9038.9 billion, and it would be trading on a PE ratio of 16.7x, assuming you use a discount rate of 12.4%.
  
• Given the current share price of IDR2290.0, the bullish analyst price target of IDR3300.0 is 30.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.