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XL Axiata CFO: We Are the First to Build Infrastructure for Data

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19 October 2018 21:34 WIB

Mohamed Adlan Bin Ahmad Tajudin, chief financial officer of PT. XL Axiata Tbk. TEMPO/Aditia Noviansyah

The growth of data services within the telecommunications industry is tantalizing. Each day, profits garnered from these services continue to rise. On the other hand, income from text messages and voice calls has gradually begun to drop. 

This has pushed a number of telecommunications operators to vigorously work on their infrastructure for data services, including XL Axiata. 

XL Axiata chief financial officer Mohamed Adlan bin Ahmad Tajudin says the telecommunication industry is dominated by data as consumers have begun to leave behind text messaging and telephone calls. 

Adlan met with Tempo journalists Rachma Tri Widuri and Fery Firmansyah, plus photographer Aditya Noviansyah, for an interview at XL’s office in South Jakarta last month to discuss the telecommunication industry in Indonesia and XL Axiata’s future plans. Excerpts from the interview:

What is Axiata’s strategy for Indonesia?

Axiata works in some nations with different characteristics. Some nations are more developed, such as Malaysia and Singapore. Yet some are still behind, such as Indonesia, India, and Bangladesh. 

Lately, the number of text messages and telephone conversations in Indonesia has dropped. They transferred to data (services). Many have begun to use Kakao Talk, Skype, and Line. We must understand this and make a big investment to build data infrastructure. 

We are the first to prepare and build infrastructure for data. Therefore, we have also prepared for the ecosystem, which entails an adequate handset, adaptation to 3G, and others. On the other hand, the cost 3G mobile phones continue to be cheaper. 

Aside from browsing, what generates the data service market in Indonesia?

I feel that video streaming will grow rapidly. But streaming on a small screen requires a huge bandwidth and we have already predicted this a long time ago. That is why we developed capacity with a large investment. Now 20 percent of the company’s income is still derived from data trafficking and the largest is from browsing. 

What is XL’s growth target?

In 2003, we target 17 percent growth. It is not that high because competition is fierce. But two years ago, the data growth was higher, up to 50 percent. It was still at two digits. The strategy is to offer a data service package at an affordable price. 

XL’s capital expenditure last year reached US$1.2 billion. How about this year?

Currently, the capital expenditure is around Rp8 trillion, 70 percent of which was used to develop 3G infrastructure, invest in fiber optics, and alter the network to an Internet Protocol network in order to make it more efficient because data transfer is faster. 

XL acquired Axis for $865 million. This is the highest record for acquiring a telecommunications company in Indonesia. How does XL Axiata actually view Indonesia and what are the prospects after Axis joined?

That may be true, yet there were acquisitions with a higher value in the world. In one year, XL’s EBITDA was enough to finance the acquisition. It may seem like a large sum, but if we did not acquire, we still would have used the money for capital expenditures. 

Indonesia comes in second after Malaysia. Profits from Indonesia are not large, yet the revenue is quite sufficient, maybe 30 percent. By having Axis join, we will focus on the business plan for the customer. (*)



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