XL Axiata allocates Rp 6 trillion for expansion

PT XL Axiata Tbk, the country’s third-largest telephone company, has allocated Rp 6 trillion (US$666 million) for capital spending in 2012 to meet the growing demand for data networks, to attract up to 5 million new subscribers, and boost revenues, an executive says.

 XL CEO Hasnul Suhaimi said the company expected subscribers to reach 49 or 50 million this year from 45 to 46 million in 2011. That will help increase revenue by 6 to 8 percent to about Rp 20 trillion in 2012, compared with the previous year.

 “By the turn of the new year, the market had become worn out as there were 250 million SIM cards circulating in the market. We cannot afford non-growing demand. If we lower prices, revenues will decrease. It’s no longer the time to cut prices. It’s time to add data services and decrease telephone or voice services,” he said in Jakarta on Wednesday.

 Indonesia is the world’s fourth-most populous nation, with its almost 240 million population, which has experienced rapid growth among mobile phone subscribers in recent years with many people owning at least two cell phones, even in small cities thanks to the many deals and low tariffs offered by mobile phone operators.

 Of the total Rp 6 trillion capital expenditure for 2012, two-thirds or 67 percent of it would be spent on financing data network developments, Hasnul said. The remainder will be used for the procurement of a base transceiver station (BTS) and tower, as well as to develop XL’s fiber optic and 3G networks.

 “Our cash flow is still sufficient [to fund the spending]. The business is good, so we will pursue [the data-network business],” Hasnul said, adding that XL might seek other loans or refinance its debts to ensure sufficient funds for the expansion plans.

 XL’s earnings before interest, taxes, depreciation and amortization (EBITDA) stood at between Rp 9 and Rp 10 trillion as of the end of 2011. The company is also selling 7,000 telecommunication towers to raise Rp 14 trillion so that it can focus on its core business of being a telecommunications operator.

 Data networks contribute 20 percent to XL’s total revenue, while voice and text messages (SMS) dominate with a respective share of 26 and 53 percent. Between January and September 2011, XL posted Rp 13.96 trillion in revenue, up 8 percent from the same period in 2010.

XL is 66.6 percent owned by Axiata Investments (Indonesia) Sdn. Bhd., a unit of Malaysia’s Axiata Group, and 13.3 percent owned by Emirates Telecommunications Corporation (“Etisalat”) International Indonesia Ltd. The public holds the remaining 20.1-percent stake in XL.

XL’s share price remained unchanged on Wednesday, trading at Rp 4,975 apiece. XL, which has a market value of almost Rp 43 trillion, has seen its stocks lose 7.5 percent in the past one year, while the broader Jakarta Composite Index (JCI) gained 15.6 percent.