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L Axiata, the country'€™s second-largest mobile operator, saw its bottom line slip into the red in the first half of this year due to rising costs and currency volatility, as well as its acquisition of the heavily indebted Axis Telekom Indonesia.

XL reported Thursday that it rounded up the first half with a net loss of Rp 482.52 billion (US$41.26 million). It was a steep fall compared with the Rp 670.43 billion net profit the company earned during the same period last year.

However, XL registered a 12.24 percent year-on-year (y-o-y) increase in revenue to Rp 11.55 trillion from the Rp 10.2 trillion the previous year, which was significant growth compared with the 1.68 percent increase it booked in the first half of 2013.

The surge in revenue, however, could not offset the rising costs and currency volatility, which took a large chunk from the company'€™s earnings, XL president director Hasnul Suhaimi explained.

'€œXL'€™s net loss is the result of the rupiah'€™s depreciation against the US dollar during the first half, as well as rising interest costs related to the Axis acquisition,'€ Hasnul added.

Meanwhile, the company'€™s total operating expenses jumped by nearly 19 percent to Rp 7.28 trillion in the first half of the year, up from Rp 6.13 trillion last year. The highest increase came from infrastructure costs, which rose by 42.7 percent y-o-y to Rp 4.01 trillion.

In contrast to its first-quarter financial improvement, during which XL saw its foreign exchange (forex) gains pull up its net income, XL suffered forex losses of Rp 516.1 billion by the end of the second quarter.

The losses in forex grew by more than four times compared with Rp 112.88 billion in the first six months of 2013, the company'€™s published financial statement revealed.

In addition, XL'€™s financial report stated that, as a result of additional loan funds to acquire Axis, the company'€™s net financing costs went up by nearly 80 percent to Rp 727 billion, from Rp 406 billion recorded in the same period last year.

As of June, XL'€™s US dollar-denominated debts stood at $1.57 billion, a sixfold increase from $310 million last year.

Axis officially merged with XL in April through a $865 billion deal, in an attempt to expand XL'€™s network.

XL funded its acquisition of Axis using $500 million from its parent company, Malaysia'€™s Axiata Group Berhad, while the remaining $365 million came from bank loans and tower sales.

In the second quarter, all Axis subscribers were migrated to XL'€™s billing system, while traffic migration has been completed in over 60 percent of Axis'€™ footprint. The integration is expected to be completed by the end of the year.

Despite ending the year'€™s first half in the red, XL had managed to boost its subscribers and data traffic, which Hasnul said had increased the firm'€™s first six-month revenue.

'€œWe cannot predict how the rupiah will perform in the future. As of the first half, however, XL actually made quite a good performance,'€ Hasnul said.

XL subscribers comprise 62.9 million users, a 16 percent increase from last year. Its data subscribers total 32.2 million users or 51 percent of the total base, while
smartphone users contributed 21 percent of the total base, amounting to 13.3 million users as of the first half of this year.

The voice segment remained XL'€™s single biggest contributor to its revenue, making up 34 percent, followed by data and value-added services with 25 percent, short message services with 20 percent, and other services making up the remainder.