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XL Axiata’s Rp 4.5t Expansion Plan Flies in the Face of Stiff Competition
Shirley Christie | December 28, 2010

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XL Axiata, one of Indonesia’s largest cellular operators, plans to spend Rp 4.5 trillion ($500 million) to invest in its growth next year, a top executive said on Tuesday.

That investment is almost the same as the company’s capital expenditure this year, said Hasnul Suhaimi, president director of XL Axiata.

“Most of the funds will be used to improve our network,” he said in a phone interview on Tuesday. XL Axiata’s expansion plan includes building more base transceiver stations, towers and fiber optics and improving the billing system across the nation within the next year.

Hasnul, who claimed the investment would come from XL’s internal funds, said the company should reach its 2010 revenue target. Its aim is a 15 percent increase on its total revenue of Rp 13.9 trillion from 2009.

“The growth mainly came from new subscribers and data subscriptions,” Hasnul said.

Profit in the Jakarta-based company rose to Rp 2.1 trillion in the first nine months this year from Rp 1.2 trillion during the same period last year. Its revenue rose Rp 13 trillion in the first nine months from 9.8 trillion over the same period.

Indonesia has one of the world’s most crowded telecommunications markets, with 11 operators fighting for customers in a population of 237 million. According to data from the Indonesian Cellular Phone Association (ATSI), there are about 180 million cellular service subscribers in the country.

While Telekomunikasi Selular (Telkomsel) leads the market with 94 million subscribers, Hasnul said XL subscriptions had grown to 40 million as of November this year from 32.5 million at the end of 2009.

Raditya Christian Artono, an analyst from Mandiri Sekuritas, said competition would be tough next year as most mobile phone operators will cut prices, squeezing their profit.

“The market is saturated with competition from 11 operators. If the operators start consolidating, they could become more efficient,” he said. “Operators will focus more on data business, although its contribution is still small compared to voice.”