Amidst the benign competition, XL Axiata is looking to raise prices to lift ARPU, but analysts are cautious on this move as this could dampen subs growth. — AFP photo
KUCHING (Nov 10): Axiata Group Bhd’s (Axiata) Indonesian based XL Axiata has continued to gain subscribers from the easing competition and popularity of its XL Satu Fiber convergence services.
Amidst the benign competition, XL Axiata is looking to raise prices to lift average revenue per unit (ARPU), but analysts are cautious on this move as this could dampen subs growth.
In a report, the research team at Kenanga Investment Bank Bhd (Kenanga Research) noted that since Telkom’s easing of its aggressive pricing strategy earlier in the year, the price competition in the market has eased.
To lift data yields, in October, XL Axiata began to raise prices and reduced benefits of its products.
“While we think this could help lift ARPU in the near term, it may dampen subs growth, as subs have been leaning towards cheaper packages with higher data quotas,” it opined.
Nevertheless, the research team noted that currently, XL Axiata is still in discussions with LinkNet on the proposed acquisition, which would help it strengthen their convergence proposition.
“XL Axiata’s convergence product – XL Satu Fiber – is the first of its kind in a market new to the concept. This proposition – which is predominantly targeted towards families – should help XL Axiata to differentiate itself from peers and lift postpaid ARPU.
“XL Axiata’s management has also indicated that they are in discussions with other operators for a 5G network sharing arrangement. We suspect XL Axiata may be in discussions with SmartFren (as hinted from earlier rumors) as the Indosat Tri merger leaves XL Axiata and SmartFren in the third and fourth place in the market (based on subs base), respectively,” it explained.
On the company’s performance, Kenanga Research noted that XL Axiata’s first nine months of the financial year 2021 (9MFY21) core net profit (CNP) of 835 rupiah (up 63 per cent y-o-y) came within consensus’ expectations.
On a y-o-y basis, 9MFY21 revenue inched up one per cent on a four per cent increase in prepaid subs and 11 per cent increase in postpaid subs. While postpaid ARPU fell five per cent, the impact was insignificant compared to the three per cent rise in prepaid ARPU.
On a q-o-q basis, XL Axiata’s revenue rose 1.5 per cent on three per cent growth in postpaid subs, which negated the three per cent drop in ARPU, and twp per cent growth in prepaid subs, on the back of stable ARPU. EBITDA rose in tandem by 1.5 per cent.
Higher operating expenses and tax expense weighed heavily, dragging CNP by 18 per cent, it noted.
For the upcoming Axiata Group results, barring any non-recurring items, Kenanga Research expect q-o-q growth, lifted by continued subs and ARPU recovery regionally.