XL Axiata enters the black with US$12.25 mil net profit, revenue declines

• Data service revenue unable to offset declining legacy service revenue
• To focus on strengthening 4G network, gaining more postpaid and data customers

INDONESIA’s third largest mobile telecommunications provider PT XL Axiata Tbk (XL) posted a year-on-year (y-o-y) net profit of Rp160 billion (US$12.25 million) for 9M16 ended Sept 30. In the previous corresponding period it had posted a loss of Rp507 billion (US$38.8 million).

Its earnings before interest, tax, depreciation, and amortisation (Ebitda) also increased 3% to Rp6.24 trillion (US$477.63 million) from Rp6.07 trillion (US$465.12 million) year-on-year.

“The Ebitda increase was mainly due to our customer base reshaping initiative, as well as cost-control efforts,” the company said in a statement.

The telco saw revenue continuing to decline. Revenue was down 5% to Rp16.14 trillion (US$1.24 billion) versus Rp16.99 trillion (US$1.3 billion) in the same period last year, due to declining income from legacy services (voice and SMS). Revenue from data services was not enough to offset the decline.

Local securities firm Indo Premier Securities said that XL’s net profit is supported mainly by gains from tower sales of Rp731 billion (US$56 million), and foreign exchange gains of Rp418 billion (US$36.84 million).

“The result was better than our numbers, but behind consensus. The third quarter and quarter-to-quarter results were also challenging. However after the rights issue and tower sales, we expect XL’s operating numbers will improve in the next two or three quarters,” said its research analyst Chandra Pasaribu.

XL also had to cut its capital expenditure for the period by 20% to Rp3.45 trillion (US$264.4 million) from Rp4.33 trillion (US$331.8 million) in 9M 2015.

Eyeing to lead the mobile Internet era
XL claimed that it has its eye on becoming the leader of mobile Internet in the country, by continuing to expand its fourth-generation (4G) e-Node B base stations all across Indonesia.

XL now has 7,204 4G e-Node B base stations compared to 1,018 units last year. It's 3G Node B base stations saw an 89% increase from 17,918 in 9M15 to 33,939 in 9M16. Taking into account 2G, 3G and 3G, XL currently has 78,725 base stations in total.

“XL’s 4G LTE service is now available in 88 cities in Indonesia, and we will continue to build better infrastructure in areas outside Java. This is part of efforts to establish XL as the top brand for data-heavy customers that wants high-speed and reliable data services,” the statement said.

“We want to lead the mobile internet era. We have implemented our 4.5G services, as well as rolled-out the U900 services across Indonesia, where we utilised the 900MHz frequency for 3G data services. This resulted in a sharp increase in our 3G base stations, which will allow for better 3G data services,” said XL president director Dian Siswarini (pic, above).

The telco claimed that its data customers now accounted for 60% of XL’s total subscriber base, a 21-percentage point rise and 70% increase in numbers compared to the same period last year. XL now has 27.1 million smartphone subscribers from as total of 45 million subscribers in 9M16.

“XL’s data pricing remains very competitive at Rp1,600 (US$0.12) per hundred megabytes, compared to Telkomsel at Rp3,200 (US$0.25) per hundred megabytes. This is an opportunity for XL, that has yet to translate into revenue,” Indo Premier Securities’ Chandra added.

In terms of subscriber base, XL posted an 8% of increase in total subscriber base to 45 million users, from 41.5 million in the same period last year. The number of  postpaid users increased 18% to 511,000 users from 431,000 in 9M15.

The company said that this year, it will focus on establishing more quality branding for XL products rather than value, as it still wants to attract high-quality customers who will pay premium prices for better services.
 

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