NEXT PICK · Market Insights
A single-day plunge of 13.69%—did Telecom Indonesia make a mistake or is it eliminated?
Monday, October 19, 2026
MSCI plans to push Indonesia out of emerging markets, while TLK's passive selling pressure remains unresolved. However, net profit in the first half of the year still rose by 1.4%, with valuations and capital in a tug-of-war.
An MSCI announcement smashed a 141-year-old store for nine times the volume
On October 16, TLK closed at $11.03 on the NYSE, plunging 13.69% in a single day, with trading volume surging to 9.1 times the three-month daily average—this isn't a company in trouble, but an issue in the entire Indonesian market.
The day before, MSCI launched a consultation to directly downgrade Indonesia from an "emerging market" to an "independent market," ranking it alongside Jamaica and Panama. The Jakarta Composite Index plunged about 11% that day, marking the largest single-day drop in 28 years, while TLK's local stock TLKM fell nearly 15% in early trading.
Its market value is only $10.87 billion, with a price-to-earnings ratio (P/E) of just 10.71 times, yet the company's net profit in the first half of the year actually grew 1.4% year-on-year—fundamentals didn't collapse, but prices crashed. Is this a blue-chip that was misplaced, or a target 'eliminated' by funding rules?
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Latest price
$11.03
▼ -13.69%
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Quantity ratio
9.1 times
▲ Compared to the daily average for nearly three months
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Price-to-earnings ratio
10.71 times
— EPS $1.03
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From the telegraph office in 1884 to the digital foundation of 270 million people
Telkom Indonesia is headquartered in Bandung, with a history dating back to 1884. It is Indonesia's oldest and largest telecommunications operator, listed on the New York Stock Exchange in 2009, and is now controlled by Indonesia's sovereign wealth platform Danantara. Born with the foundation of a national team.
Its business is divided into five parts
Mobile (voice, SMS, mobile broadband), home consumption (landline, pay TV, broadband), government and enterprise ICT solutions, wholesale and international business, as well as digital content, big data, financial services, and other "other" businesses, as well as tower leasing, data center, and property development.
The real cash cow is its subsidiary Telkomsel: in the first half of the year, the group's revenue was 75.9 trillion Indonesian rupiah, with Telkomsel alone contributing 55.6 trillion, and its EBITDA margin rose 230 basis points year-on-year to 46.9%. Calling it a "mobile company with fixed-line and towers" is no exaggeration.
The report gave it a score of 7 for irreplaceability, citing three major barriers: a century-old brand and network, the spectrum and government project advantages brought by its state-owned status, and a nationwide fiber backbone and base station. Can you imagine a private rival starting from scratch and rebuilding such a network across more than ten thousand islands?
10x P/E: Is it cheap or "national discount"?
When writing the research report, due to missing data sources, the valuation conclusion was labeled as "undeniable," but public data has already added this piece of the puzzle: at the latest price, TLK has a P/E ratio of about 10.71 times, earnings per share of $1.03, and a market capitalization of $10.87 billion.
It's quite interesting to compare them
In the first half of the year, EBITDA was 37.5 trillion rupiah, with a profit margin of 49.4%. Operating cash flow grew 7% year-on-year to 34.9 trillion rupiah. This is a stable money-spending machine, yet it is priced at just over 10 times.
The research report's concern about "unknown self-sustaining ability" does not hold, at least in the first half of the year's data; The full-year capital expenditure as a percentage of revenue is guided at 17% to 19%, and 5G investment has not eaten up cash flow; management has maintained a normalized revenue growth target of 1% to 3%.
So why isn't the market buying in? The answer isn't in Telkom's profit statement, but in Indonesia's capital market structure—if the MSCI downgrade is implemented, passive funds tracking emerging market indices will be forced to sell, and the final decision will not be announced until June 30, 2027.
So today's crash only fulfilled the level of 'emotional panic'; the real passive selling hasn't started yet; The negative news is in the price, but it's far from being cleared. As for the low, medium, and high scenario ranges in the research report, specific buy and sell levels and real-time signals can be found on the official account.
A mature market leader is treated by the market as a "risk asset"
The report classifies Telkom as a mature period: a century of history, five major sectors already established, no new business in the proof-of-concept stage, 5G is merely a technological iteration in a mature market, and the national background has long been internalized as an operational foundation rather than a catalyst for new development.
But moving averages tell a different story
The 50-day moving average is at $14.12, the 200-day moving average is even higher, and the stock price has fallen well below two lines, with a 12-month return of about -33.8%. Mature stocks should be defensive positions, but now capital is selling them as high-volatility national risk exposures, and the market clearly does not recognize their "safe haven" status for now.
A game of many large and small cards is turning into a showdown between two strong players
The strongest challenger is Indosat Ooredoo Hutchison (IOH), formed in 2022 by merging Indosat Ooredoo and Hutchison 3. Research estimates its mobile market share at 30% to 35%, backed by Ooredoo and Changhuo's parent companies, with aggressive pricing and aggressive 5G promotion.
XL Axiata's research report estimates its market share at 15% to 20%. In recent years, it has bet on data centers and cloud services, directly competing with Telkom in the government and enterprise markets; Meanwhile, small operator Smartfren has merged with XL, and Link Net has long been acquired by XL. The market is converging from "one large, many small" to "two giants and one dominant".
On the fixed-line and home broadband sides, Link Net focuses on high-end urban fiber to the home, while First Media uses cable TV and broadband bundles to capture home users. Each is deeply cultivating niche fields, with pressure spread but sustainable.
The weight of the moat also varies
Once government and enterprise clients are embedded in Telkom's network and cloud, migration costs are extremely high; Home users rely on bundling to maintain stickiness; Mobile devices have almost no lock-in power after number portability and network transfer. The deepest trench is actually regulation and national credit—this gap cannot be dug out by competitors, but it could be filled if policies change.
A cake worth hundreds of billions of dollars, and a somewhat optimistic estimate
The report estimates from top to bottom that Indonesia's telecom services market will be in the $80 to $100 billion range from 2024 to 2025, with mobile from $50 billion to $60 billion and government and enterprise ICT from $15 to $20 billion. Assuming a 35% share, Telkom's accessible market is estimated to be about $28 billion, with an annual growth rate assuming 5% to 8%.
But comparing with the real report, Telkom's first-half revenue was 75.9 trillion rupiah, and the full-year scale is far from the $28 billion, indicating this estimate is clearly optimistic. A more credible growth boundary is the research report forecasting 15% to 20% for digital services and 8% to 12% for Tower, combined with the company's own conservative guidance of 1% to 3%.
The bulls are betting on a divergence between fundamentals and price
Bulls believe that selling today is a rule, not a business, and several logic points have data anchors:
| ▲ Bull Case |
| ① | The price-to-earnings ratio was only 10.71 times, while net profit for the first half of the year increased by 1.4% year-on-year, showing no deterioration in profitability |
| ② | EBITDA margin for the first half of the year was 49.4%, with Telkomsel margin rising 230 basis points to 46.9%. |
| ③ | Operating cash flow increased 7% year-on-year, capital expenditure as a percentage of revenue guidance was 17% to 19%, and 5G investment was manageable |
| ④ | On September 30, the fiber optic spin-off was completed, with over 90% of network infrastructure injected into InfraNexia, and asset value expected to be revalued |
| ⑤ | Out of 50 subsidiaries, 24 were streamlined in the first half of the year, and state-owned enterprises are being streamlined |
| ⑥ | On October 10, Zacks upgraded its rating from "Strong Sell" to "Hold," indicating improvement in marginal sentiment |
The bear eyeing the boot that hasn't fallen yet is the one that has been left on the market
Bearish investors warn that passive capital sell-offs never consider valuations, and this round is just beginning:
| ▼ Bear Case |
| ① | MSCI's downgrade decision is scheduled to be announced before June 30, 2027, and passive selling pressure may persist for several months |
| ② | This year, foreign capital has seen a net outflow of $4.9 billion from the Indonesian stock market, possibly the worst year in history |
| ③ | The rupiah has depreciated about 8% this year, and USD-denominated ADR earnings have been swallowed by exchange rates |
| ④ | TLKM has fallen about 36% this year, with its stock price well below the 50-day moving average of $14.12 |
| ⑤ | After IOH scaling up, price wars continued, and the cost of switching mobile devices after number portability became nearly zero |
| ⑥ | The direction of state-owned enterprise governance and Danantara's capital allocation remains unclear, with redundant staff and non-commercial goals dragging down efficiency |
Financial reports, spin-offs, and downgrades—these three milestones determine the direction
In the coming months, TLK's stock price will likely be priced in rotation by these factors:
| • | Third quarter earnings report around October 29: If profits continue to show resilience in the first half, it will help fix the "misselling" narrative, which is positive |
| • | Follow-up valuation and capital raising progress for InfraNexia spin-off: If fiber assets receive external pricing, the outlook is positive |
| • | MSCI's consultation period runs until April 30, 2027. If Indonesian regulators implement substantial reforms, downgrades may be reversed, with the direction yet to be determined |
| • | Danantara disclosed capital allocation or restructuring plans for Telkom: timing undetermined, moderate impact |
| • | Indonesia's 5G spectrum allocation implementation: industry expectations are moderate, with moderate impact |
From defensive blue-chip to a three-stage decline that was halved within the year
Over the past 12 months, TLK has returned about -33.8%, and over the past 30 days, it has dropped about -25.7%, with the decline accelerating significantly. In the local market, TLKM has fallen about 36% from October 15 this year, with the entire Indonesian telecom sector collectively pulling back amid weak consumer spending, data price wars, and macroeconomic pressures.
The report listed five possible pricing factors during the review
Double losses in market share and profit margins, 5G capital spending exceeding expectations, rupiah depreciation, regulatory changes, and performance below expectations. Now more than half the answer has been revealed—the main factors weighing it down are exchange rates and the capital market itself, not company reports. Today's ninefold surge in a surge in volume has pushed this downward path to its steepest point.
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⚠️ Risk Notice
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🟡 Neutral Business is steady, but capital rules are headwinding, and negative factors have yet to be cleared, making it hard to bet heavily on either side |
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💬 Discussion Now is not the time to heavily buy the dip; For its real-time buy and sell positions, post TLK on the official account to check. |
Data source
| • | Source: NextPick real-time snapshot + company earnings and exchange announcements + MSCI official announcements + mainstream financial media and local Indonesian financial coverage. |