XL Axiata reports 54% drop in first-half profit on rising costs

2 Aug 2013

Indonesia’s third largest telecommunications company by subscribers XL Axiata has reported a 54% slump in net income to IDR670 billion (USD65 million) for the first half of this year, due to a sharp rise in its operating costs. The cellco said revenue for January-June climbed by 1% to IDR10.34 trillion, aided by a 45% increase in turnover from mobile interconnections (to IDR1.52 trillion) and a rise in data revenue to IDR20.4 trillion, but said that sales from voice call services and SMS fell.

XL Axiata’s operating costs for 1H13 surged 18% year-on-year to IDR6.12 trillion, as it upgraded nearly 4,000 cell sites across the country to handle improved 2G and 3G data services. Its president Hasnul Suhaimi says the company will continue to shift its operational focus to data throughout the rest of the year. ‘XL continues to focus on data as the fastest-growing segment, with increased contribution to revenue,’ he said. ‘We remain optimistic with the huge opportunity in data in which XL is well positioned to capture future growth.’

The cellco noted that data now contributes 22% of the company’s total revenue, compared to 19% in the first half of 2012. It reported 32 million data subscribers on its network at the end of June 2013, but warns it may face a challenge increasing that customer base going forward, due to near saturation levels in the mobile market. XL Axiata had a total of 49 million customers on its books at mid-2013, but jostles for position with no fewer than nine other operators in Indonesia’s crowded mobile market.

Last month, TeleGeography’s CommsUpdate reported that the Ministry of Communications and Information Technology (MoCI) had given the thumbs up to XL Axiata’s plan to take control of fellow operator Axis Indonesia. At the time, Hasnul confirmed that his company had received ‘a letter of approval’ from the ministry concerning the takeover, although he conceded that the process has a ‘long way to go’ before it is completed. XL Axiata is 66.5% owned by Malaysia’s Axiata Group. Axis Indonesia meanwhile, is 80.1% owned by Saudi Telecom Company and has around 17 million users. According to Hasnul both sides are still in the negotiation phase, but are confident that they will be able to secure a deal before signing the conditional sale and purchase agreement. Axis’ shares (including its debt) have been valued at around USD1 billion, with XL keen to acquire all of Axis’ assets, including its employees, brand, subscribers and frequencies. If successful, the combined Axiata-Axis entity would leapfrog the country’s current number two player – PT Indosat – which has around 59 million mobile customers.

Indonesia, XL Axiata