XL Axiata, a unit of Malaysia
JAKARTA: Uber driver Akhmad Andy Riyanto spends about three times more than the average user on his mobile phone service in Jakarta -- and it’s helped PT XL Axiata become Asia’s best-performing telecom stock.
XL Axiata, a unit of Malaysia’s Axiata Group Bhd
., has rallied 42 percent this year, the top stock in the MSCI AC Asia Telecommunication Services Index. Investments in a fourth-generation network that overshadowed rivals’ spending and a reputation for providing the fastest data service in Indonesia is bringing in more users.
“People no longer want to watch YouTube and have buffering,” XL Axiata’s President Director Dian Siswarini said in an interview on March 15. “Customers had just wanted the cheapest price, but right now they are looking for a balance between price and performance. They are more willing to pay.”
While the early years of industry competition were marked by intense price cuts, the focus is now on faster connectivity, said Siswarini, one of three women running a publicly listed company on the MSCI Indonesia Index. Falling revenue from voice calls also means data is the fastest growing business, she said.
Riyanto, 20, spends about 90,000 rupiah ($6.75) a month on data and voice services, compared with an average 35,000 rupiah spent by users at XL Axiata. Similarly priced packages from Telkomsel and Indosat offer less data.
While XL Axiata claims a 15 percent market share -- half the size of its next biggest competitor, Indosat -- its users spend an average 40 percent more, according to data from Indosat and Axiata. Telkomsel covers most of the 17,000 islands in the archipelago but XL Axiata has been aggressively expanding its faster network.
Last year, XL Axiata more than doubled its data-capable transmitters to almost 47,000 units, compared with a 43 percent increase of third- and fourth-generation networks by Telkomsel and a 20 percent expansion by Indosat. Telkomsel has almost 79,000 transmitters at the end of last year, while Indosat has about 32,400 units.
“They have the smallest subscriber base out of the three, so that corresponds to more data capacity per subscriber for XL Axiata,” said Niko Margaronis, a telecommunication analyst at PT Ciptadana Sekuritas in Jakarta. XL Axiata has twice as many transmitters per 1,000 customers than its rivals, allowing its network to be less congested.
The company’s data traffic grew 1.6 times last year, contributing to 38 percent of the company’s total revenue, after the carrier offered discounts when it introduced a 4G network. Data traffic growth at Telkomsel was at 95 percent, while Indosat reported a 1.4 times jump last year.
The aggressive expansion helped boost XL Axiata’s sales per customers, overtaking Indosat. The company’s average revenue per user grew 3 percent last year to 35,000 rupiah a month, while Indosat’s fell 3 percent. Market leader Telkomsel’s average user revenue grew by 5 percent in 2016.
Millennial Spending
XL Axiata is also targeting millennials, which make up a third of Indonesia’s 250 million population, as they constantly check on their Facebook and Twitter feeds. Indonesia ranked second in Asia in terms of number of Facebook users, with almost 78 million accounts as of May 2016, according to Statista Inc.
Increasing spending power of the middle class will continue to drive demand for data, Siswarini said. “We’ve got a number of consumers that will keep growing,” she said. “The question is how we can get more revenue from this increase in traffic.”
XL Axiata is planning to introduce fixed broadband services in the next two years, which may include pay-TV services, Siswarini said. The Indonesian unit was the biggest contributor to Axiata Group’s sales last year.
For Riyanto, the speed and cheaper rates mean he’ll remain a loyal customer for now.
“I haven’t seen any increase in telecom spending even after I became a driver for ride-sharing apps, because the rate is so cheap,” Riyanto said. “All my family members are using XL.”
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