Indonesia telcos set for ARPU rebound as pricing discipline strengthens

On ESG metrics, XL Axiata led the pack in 2023, followed closely by TLKM and then ISAT. 

Indonesia’s telecom sector is entering a phase of pricing repair after years of aggressive discounting, with recent changes to starter pack availability and data recharge pricing pointing to improved average revenue per user (ARPU) heading into the fourth quarter.

According to a new note from CGS International, the most notable move came from Indosat Ooredoo Hutchison (ISAT), which restricted its IM3 starter packs from 1 October to a single RP35,000 Freedom Internet 3GB/30-day top-up.

This ends the availability of lower-priced “empty” starter packs that had previously driven volumes. CGSI channel checks suggested Telkomsel (TSEL) and XL Axiata (EXCL) had already cleared sub-RP35k inventory by September, setting the stage for price discipline across the board.

Whilst some churn among low-end users is expected, starter packs only contribute mid- to high-single-digit percentages of revenue, and the structural clean-up is seen as ARPU-positive.

Recharge pricing trends in September further reinforced this discipline. TSEL lifted main data yields by 8–24% MoM by reducing bonus data in selected Simpati 5G plans.

EXCL kept most average selling prices flat but raised prices on its “Bebas Puas” packages by around 10%. ISAT held pricing steady. These moves suggested a sector-wide focus on monetisation over subscriber acquisition, a shift CGSI views as credit-positive.

CGS International maintains its Overweight rating on the sector, citing stronger pricing discipline and simplified product offerings as drivers for potential valuation re-rating.

The sector trades at approximately 4.6× forward EV/EBITDA—still below its five-year average of around 5.4× seen during the 2022–23 ARPU upcycle. TLKM remains CGSI’s top pick, followed by ISAT and EXCL.

Risks to the outlook include macroeconomic headwinds, the potential for spectrum-related capital expenditures to run higher than expected, and a breakdown in pricing discipline. On the upside, consolidation and stronger-than-expected revenue growth from the starter pack clean-up could accelerate re-rating potential.

On ESG metrics, XL Axiata led the pack in 2023 according to LSEG scores, followed closely by TLKM and then ISAT. However, both TLKM and ISAT scored poorly on environmental transparency, which CGSI noted could limit broader investor interest unless disclosures improve.