P.T. Telekomunikasi Indonesia Tbk. ADRTLK

Telkom has been aggressively pursuing the international long-distance market since its entry in 2005. The company now controls about half the market, displacing Indosat's leading position in the international long-distance market.

Telkom's extensive fixed-line network generates revenue not only from its existing fixed-line customers, but also from most competitors because they must interconnect with Telkom's network to offer service.

Telkom is partnering with seven other telecommunications carriers to expand its Internet access service. This strategic move will help generate stronger subscriber growth in Telkom's Internet business.

Telkom and its subsidiaries maintain Indonesia's largest fixed-line and wireless networks, giving them considerable economies of scale compared with the competition. Read more 

Penetration rates could increase more slowly than expected because of Indonesia's low income per capita, which would hurt Telkom's long-term profitability.

Competition from foreign competitors might be tougher than expected, causing Telkom to come under increasing pressure in its dominant markets. Hutchison recently launched its services in Indonesia and is offering various discounts and promotions to attract customers. The need for Telkom to retaliate through similar discounts could hurt its average revenue per user.

The company has been slashing its tariffs aggressively in an effort to attract subscribers. Ongoing need to cut prices to fend off competition will hurt the firm's top and bottom line.

Steady declines in wireless service prices could cannibalize Telkom's fixed-wireless business, which has helped offset losses in its traditional fixed-line service in the past couple of years.

The Indonesian government has discussed an initial public offering for Telkomsel. This could hurt Telkom's stock price if investors move into the faster-growing mobile operator's shares. Read more