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XL Axiata, Smartfren in talks as Indonesia consolidatesXL Axiata, Smartfren in talks as Indonesia consolidates

Indonesia's crowded cellular market looks to finally be getting the consolidation it needs.

Robert Clark

October 8, 2021

2 Min Read
XL Axiata, Smartfren in talks as Indonesia consolidates

Indonesia's crowded cellular market looks to finally be getting the consolidation it needs.

Malaysia's Axiata Group and Indonesian conglomerate Sinar Mas Group – the parents of XL Axiata and Smartfen Telecom respectively – are "exploring options," Bloomberg reported Friday. The discussions are still in their early stages, with the companies canvassing various outcomes that could include a merger or network sharing, sources told Bloomberg.

Smartfren President Director Merza Fachys said the company was open to consolidation or collaboration with others, but "all parties must get the same benefits."

Come together

In September, Ooredoo and CK Hutchison struck a deal worth $6 billion to merge their Indonesian operations, leaving XL Axiata and Smartfren as the two smallest players in the market. The merged company, Indosat Ooredoo Hutchison, will have approximately 110 million subscribers and $3 billion in annual revenue. The partners said it would deliver $300 to $400 million in pre-tax synergies over the first three to five years.

In 2019 CK Hutchison informally approached Axiata about a possible merger but the discussions went nowhere.

With its island geography Indonesia has always been a difficult market for telecom operators.

Thanks to the fall-off in growth and the over-supply of operators, it's become difficult financially as well. Market leader Telkomsel reported a blended ARPU last year of just 44,000 rupiah ($3.09). From 2016 to 2020, its topline revenue grew less than 1% and EBITDA rose just 2.6%.

XL Axiata recorded zero growth in revenue and EBITDA in the first half of the year, while Smartfren in 2020 posted a 1.5 trillion rupiah ($110 million) loss on 9.4 trillion rupiah in total sales. Combined, the two companies have around 85 million subscribers.

Not so famous five

The market conditions have meant operators have so far only dipped their toes into 5G. For now, they are content to sweat their LTE networks, with Telkomsel and Indosat launching limited 5G services.

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Light Reading.

Even after the merger CK Hutchison is cautious on 5G. Co-managing director Canning Fok said the company "looks forward to expanding innovative 5G services in Indonesia when the time is right."

XL Axiata and Smartfren stocks enjoyed a modest surge on the news in Friday trading. XL Axiata closed 4.53% higher, while Smartfren spiked 8%, before closing up 1%.

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— Robert Clark, contributing editor, special to Light Reading

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About the Author(s)

Robert Clark

Contributing Editor, Special to Light Reading

Robert Clark is an independent technology editor and researcher based in Hong Kong. In addition to contributing to Light Reading, he also has his own blog,  Electric Speech (http://www.electricspeech.com). 

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