Two of Indonesia’s largest telecom operators, PT Indosat Tbk (ISAT) and PT XL Axiata Tbk (EXCL), have set their capital expenditure target at Rp 7 trillion ($516 million) each for the next year. About 70 per cent of Indosat’s capex will be used to expand data services, while the majority of XL’s will be allocated to amplify the company’s 4G network coverage and e-commerce business.
Indosat’s allocated capex for next year is slightly lower than this year’s budget, which was predicted to reach Rp7.5 trillion. But president director and CEO Alexander Rusli said that the cut does not necessarily mean slower expansion.
“The trend in the telco sector now is no longer about whose capex is the largest,” he told reporters in Jakarta earlier this week.
“It’s about how to build maximum capacity with spending as efficiently as possible. In 2017, expansion of 4G network and strengthening the base of 3G services will still be our priority,” Rusli added.
Other than expansion, Indosat is also planning to reduce dollar-denominated debts to maintain profit. Indosat had successfully brought down its debt level to $186.4 million in September 2016, from $505.6 million in the same period last year. Currently, Indosat’s foreign debts are representing 12 per cent of the operator’s total financial obligation.
Indosat reported a net profit of Rp845 billion ($64 million) for the first nine months of the year, reversing a loss of Rp1.12 trillion in the same period a year ago. It recorded an operating revenue of Rp21.5 trillion, which was up 9.9 per cent from September 2015.
The company attributed its rise to improvements on the operational level, combined with a stable currency and lower dollar debt. Indosat had 54,000 base stations at the end of Q3, up 17 per cent from a year ago. It has more than 4,000 4G sites and 26,000 3G sites, with 4G coverage reaching 94 cities.
XL president director Dian Siswarini revealed that the company is planning to expand its 4G LTE network to 45 new cities next year. She believes that 4G penetration will grow faster than previously thought, mainly due to affordable 4G hardwares.
“In the future, we are optimistic that 4G will take up to 80 per cent of our total number of users,” said Siswarini.
Up until the third quarter 2016, XL smartphone users rose 21 per cent compared to the same period last year. Meanwhile, average number of 4G users has doubled, pushing XL’s traffic by 146 per cent compared to 2015’s third quarter.
XL claimed that it has its eye on becoming the leader of mobile Internet in the country, by continuing to expand its fourth-generation (4G) e-Node B base stations all across Indonesia. Currently, 4G users are only amounted to 40 per cent of XL’s data network, supported by 7.204 base transceiver station (BTS) in 88 cities. It’s 3G Node B base stations saw an 89% increase from 17,918 in 9M15 to 33,939 in 9M16. Taking into account 2G, 3G and 3G, XL currently has 78,725 base stations in total.