XL Axiata

Stock Quote XL Axiata - EXCL:

Business Summary

Axiata is a major player in Asia’s telecommunications industry, having controlling stakes in mobile operators in Malaysia, Indonesia, Cambodia, Sri Lanka, Bangladesh, and Pakistan. It also holds strategic interests in India, Singapore, Iran, and Thailand. The Group, including its subsidiaries and associates is one of the largest mobile telecommunications providers in the Asian region.

Indonesia's telecommunication market has lost some of its glory as the country's mobile phone market has become saturated while competition is rife.

XL Axiata has been focused on cellular telecommunication services since obtaining a GSM operating license in 1996. In addition to its cellular business, it utilizes its network to accommodate other telecommunication services, monetize the value of passive infrastructure, such as leasing space on the tower and transmission capacity in the fiber optic transmission network.

XL Axiata started its business with a focus on Voice and SMS products as these were the basic needs of communication media. Over time, communication technology advanced, the industry landscape evolved and consumer’s behavior in communicating changed, resulting in the need for more advanced telecommunication services. Customer communication behavior has started to shift towards Data, in line with the wider range of data-capable telecommunication platform available in the market. XL Axiata and the other leading Indonesian telecommunication companies thus have had to adapt to these trends.

XL Axiata's Operational Highlights:

	2015	2016	2017	2018
Number of Cellular Subscribers	42.1	46.5
– prepaid	41.5	45.9
– postpaid	0.4	0.5

 

	2009	2010	2011	2012	2013	2014
Number of Cellular Subscribers	31.4	40.4	46.4	45.8	60.5	59.6
– prepaid	31.1	40.1	46.1	45.4	60.2	59.2
– postpaid	0.4	0.3	0.3	0.4	0.4	0.4

^{in millions
Source: XL Axiata, Annual Report 2016}

In September 2013 it was announced that XL Axiata will acquire Axis Telekom Indonesia, a national GSM mobile operator, for the price of USD $865 million. As the Indonesian telecommunication industry is crowded with many operators fighting over limited market and resources, the acquisition of another operator is one of the expansion strategies.

XL Axiata's Financial Highlights:

	2014	2015	2016	2017	2018
Gross Revenue	23,569	22,960	21,341	22,876
Operating Expenses	14,837	14,483	13,283
EBITDA	8,623	8,393	8,058
Income before Tax (loss)	(1,003)	(630)	186	221
Net Profit (loss)	(830)	(25)	376	375
Total Assets	63,706	58,844	54,896	56,321
Total Liabilities	49,583	44,752	33,687	34,691
Earnings per Share (loss)¹	(95)	(3)	38
Dividend per Share¹	0	0	0

 

	2009	2010	2011	2012	2013
Gross Revenue	13,880	17,236	18,468	21,278	21,350
Operating Expenses	7,501	7,771	8,912	11,224	12,606
EBITDA	6,205	9,287	9,348	9,745	8,659
Income before Tax (loss)	2,363	3,868	3,865	3,733	1,375
Net Profit (loss)	1,709	2,891	2,830	2,744	1,056
Total Assets	27,380	27,251	31,171	35,456	40,278
Total Liabilities	18,577	15,536	17,478	20,086	24,977
Earnings per Share (loss)¹	237	340	332	324	121
Dividend per Share¹	-	107	129.88	135	64

^{in billion IDR rupiah, except stated otherwise
¹ in IDR rupiah
Source: XL Axiata, Annual Report 2016}

Future Outlook of the Indonesian Telecommunication Sector

Indonesia is unique in the sense that mobile phones are the primary tool for telecommunication. Not only with regard to telephony but also in terms of internet usage. Mobile phones are used as main tool device to access the internet by Indonesians. Mobile phone penetration has surged from 20 percent in 2005 to - currently - over 80 percent (although about 30 percent of Indonesian subscribers hold more than one SIM card). This indicates that the mobile phone subscription market is heading towards saturation; growth in voice and SMS revenue is stagnating. Internet penetration, however, is relatively low, thus having ample room for growth in the near and middle term future. High-speed broadband services are now the new focus of telecommunication companies. However, profit from call services remains to be the primary source of income for Indonesian mobile operators.

Indonesia is also unique in the sense that the country is predominantly a voice market due to low voice tariffs set by operators. Over 60 percent of total revenue in the mobile service sector is derived from voice services, while the remainder comes from non-voice or data services. The growing popularity of smartphones, however, contributes heavily to the growing data revenues. According to data from Frost & Sullivan, a consulting firm, smartphone penetration in Indonesia will exceed 50 percent in 2015 from only nine percent in 2012. The firm believes that the Indonesian market is in the early to middle stage of data usage increase.

Due to the promising perspectives of the mobile phone sector in the last decade, a number of companies are in fierce competition for market shares. Out a total of 11 telecommunication operators, five companies control a combined market share of around 90 percent. These five are: Telekomunikasi Indonesia - and its subsidiary Telekomunikasi Seluler (Telkomsel) -, Indosat, XL Axiata and Bakrie Telecom. Competition has brought tariffs for mobile phone services down significantly, while a new group of subscribers (from the poorer segments of society) has limited spending capacity. Instead, companies now focus on data services (broadband services) and value added service to attract subscribers, both of which are estimated to grow by 35 percent up to 2014. In 2011, there were around 70 million mobile phone data services users. This is estimated to increase to 160 million by 2015.

Forecast Future Corporate Earnings XL Axiata:

	2018	2019	2020F	2021F
Gross Revenue	22,939.0	25,133.0	25,082.0	28,056.0
EBITDA	8,512.0	9,966.0	9,956.0	12,053.0
Net Profit	(3,297.0)	713.0	1,517.0	1,743.0
P/E Ratio (x)	n.a.	37.5	17.6	15.3
P/BV (x)	1.5	1.4	1.3	1.3

^{in billion IDR rupiah, except stated otherwise
Source: Mirrae Asset Sekuritas (20.06.2020)}