Axiata Accelerates Delayering Business Model in Indonesia with Creation of FibreCo & Converged ServeCo through Link Net & XL Axiata

KUALA LUMPUR – Axiata Group Berhad (“Axiata” or “the Group”) announced its intention to accelerate value creation through its two Indonesian Operating Companies (“OpCos”), XL Axiata and Link Net, during the former’s earnings call earlier today. The Group intends to position XL Axiata as a converged mobile, fixed and content service provider (ServeCo), to capitalise on the market opportunities in Fixed Mobile Convergence (FMC) and Fixed Broadband (FBB), while Link Net will be transformed into a fixed broadband infrastructure company (FibreCo), focused on scaling up Fibre-to-the-Home (FTTH) access to 8 million home passes within the next five years to capture the wholesale opportunity of an underpenetrated Fixed Broadband (FBB) market.

Axiata is confident that by delayering its Indonesian assets, it will spawn a unique value illumination platform, optimally configured to provide investors with separate and segmented access to Indonesia’s FMC and FBB markets. Indonesia is the largest digital market in the ASEAN region by volume, with enormous growth potential signified by one of the lowest broadband penetration rates of approximately 15%¹. For context, Malaysia, Indonesia’s nearest neighbour in terms of broadband penetration, has approximately 40% penetration rate².

Building on each OpCos’ Strengths

In line with the Group’s overall strategy of delayering its assets, the creation of a FibreCo in Link Net and ServeCo in XL Axiata is set to drive scalability and unlock synergistic value through improved asset utilisation and Go-To-Market (GTM) efficiencies. Link Net is the Group’s fibre broadband network specialist in Indonesia and since its acquisition by Axiata and XL Axiata last year, has allowed XL Axiata to accelerate its FMC service offerings across both fixed and mobile networks. The move to strategically focus Link Net as a specialised wholesale provider of fibre access, enables the company to serve not only XL Axiata, but also capture the opportunity of Indonesia’s vast fixed broadband market by serving other Internet Service Providers (ISP) in the capacity of an infrastructure partner.

In the meantime, XL Axiata is the Group’s flagship digital telco in Indonesia and has been offering comprehensive FMC services to all market segments, including individuals, families, micro, small and medium enterprises (MSMEs), Government, and corporate customers. Well-noted for its aggressive GTM strategies, XL Axiata is an esteemed brand in the digital telco sphere. By delayering its fibre infrastructure assets to Link Net and focusing on its comprehensive FMC service offerings spanning mobile and fixed connectivity, content and digital services, XL Axiata is set to unlock the next phase of growth with an ‘asset light’ business model, paving the way for XL Axiata to realise its vision as Indonesia’s Leading Converged Operator.

Ultimately, this move to create a specialised FibreCo and a converged ServeCo will enable both OpCos to focus on deriving value from their intrinsic strengths, whilst realising value from synergies of scale and scope across the value chain. Axiata’s delayering strategy is designed to capitalise on growth opportunities and to provide investors with optimised value capture opportunities at each layer. Apart from scale and cost efficiencies, the move is expected to benefit customers through a seamless digital experience across a wide range of fixed, mobile and content services. The implementation of this strategic move is subject to the approvals from the relevant authorities as well as shareholders, as required by applicable laws and regulations.

Vivek Sood

Group Chief Executive Officer and Managing Director of Axiata

As a long-term investor, Axiata is fully committed to playing our part in advancing Indonesia’s digital economy and supporting the country’s digital transformation agenda. Our delayering strategy of transforming Link Net into a dedicated FibreCo and to articulate XL Axiata as a dynamic ServeCo will realise increased value in both OpCos through accelerated scalability and synergies. Delayering is not new to Axiata. A successful carveout of EDOTCO from mobile operations 10 years back has led to greater focus, operational excellence, and value illumination of the tower business. In addition to unlocking value for the Group, this move also supports Axiata’s aspiration to promote digital inclusion, fulfilling our strategic role to meet the needs of an underrepresented market segment in one the fastest growing ASEAN economies.

Dr Hans Wijayasuriya

Group Executive Director and CEO of Telecommunications Business of Axiata

Our going forward strategy in Indonesia sets out to capture the twin growth opportunities in the Fixed-Mobile Convergence and Fixed Broadband Access sectors. We believe that a delayering approach featuring a FibreCo and converged ServeCo will lead to the optimum configuration for value capture and illumination. Link Net will leverage its inherent capabilities in Fixed Broadband infrastructure development, to establish a best-in-class fibre access infrastructure which will exploit the growth opportunity in Fixed Broadband, through the provision of wholesale services to XL’s converged ServeCo as well as to other ISPs. Similarly, XL will leverage on its nationwide presence, brand power, sales and service infrastructure and proven strengths in converged services development, to drive a powerful FMC proposition for consumers and businesses across Indonesia, based on a highly efficient, asset-light formulation