XL Axiata to use proceeds from tower sale to pay off debt

8 Jan 2015

Publicly listed Indonesian mobile network operator PT XL Axiata (previously known as Excelcomindo) intends to pay off part of its debt in 1Q15 by using a portion of the IDR5.6 trillion (USD441.1 million) it raised through the sale of 3,500 towers to PT Solusi Tunas Pratama last year. According to the Jakarta Post, XL Axiata’s head of investor relations, Feiruz Ikhwan, said that XL would use ‘more than half of the proceeds to pay our debts’ due this year, which amount to ‘almost IDR5 trillion’, of which IDR400 billion matures in the first quarter of this year. According to Feiruz, the cellco’s total debts peaked at IDR30.4 trillion as of 30 September 2014, with the net debt to earnings before interest, taxes, depreciation and amortisation (EBITDA) ratio hitting 3.2. ‘We want to improve our net debt to EBITDA ratio to 2.5,’ Feiruz said, adding that achieving this goal is highly dependent on the firm’s performance in a competitive environment. Like its rivals, XL Axiata is susceptible to currency volatility, while an ongoing price war over mobile internet services has increased the operator’s surging operational costs.

XL Axiata’s net losses for the nine months to 30 September 2014 climbed to IDR901.2 billion, compared to a net profit of IDR917 billion in 9M13, as rising costs and the continuing fall in the local currency (rupiah) bit into its bottom line. Further, the company’s financial report confirmed that its January-September net loss climbed sharply from the losses of IDR482.5 billion reported in the first six months of this year, with CEO Hasnul Suhaimi noting: ‘Our profits were very much affected by currency volatility, which was out of our control.’ The rupiah continued to decline against the US dollar in the third quarter, exacerbating XL Axiata’s foreign exchange losses to IDR935.5 billion from IDR419.4 billion. Meanwhile, EBITDA declined by 1% year-on-year to IDR6.3 trillion while EBITDA margin stood at 36%, down four percentage points from 9M13, largely due to the full impact from negative EBITDA that XL has incurred since it completed the acquisition of PT Axis Telekom on 19 March 2014. In order to mitigate the decline, XL says it has continued its effort to turn round Axis’ negative performance.

Although XL managed to pay off IDR1 trillion of its total debt in the fourth quarter of 2014, it is still working to integrate Axis, and this is also eating into the bottom line. Dian Siswarini, XL’s incoming deputy CEO, is on record as saying that in order to improve performance the company is looking to reduce costs as much as possible, rather than considering any increase in data fees. ‘We can do a number of things to become more efficient; for example, sharing infrastructure and increasing data traffic,’ she said. Around 51% of XL’s 62.9 million mobile subscribers are data users. XL is also boosting its digital services platforms, including e-commerce, digital payment and internet of things (IoT) businesses. The carrier’s e-commerce platform, known as Elevenia, had signed up 750,000 subscribers as of 31 December 2014, with the firm anticipating a 400% increase in transactions and a five-fold rise in revenue in 2015. Elevenia, which is run via the group’s XL Planet unit, generated IDR2.6 billion in revenues as of Q3 2014, according to XL’s financial report.

Indonesia, XL Axiata