JAKARTA. PT XL Axiata Tbk (EXCL) began to finalize next year's business plan. EXCL prepared a capital expenditure or capital expenditure (capex) of Rp 7 trillion for 2017.

President Director of EXCL Dian Siswarini said that the amount of capex is relatively similar with this year's allocation. In 2017, EXCL will focus on allocating the capital expenditure in developing 4G network. “4G network is more efficient. With the same amount of budget, we can have a larger capacity,” Dian said in the side lines of the event of Kompas 100 CEO Forum, Thursday (24/11).

Dian added that EXCL will be more aggressive in developing this high-speed network in the next year. As an information, EXCL allocated approximately 40% and 60% of its capes for the development of 4G LTE and 3G, respectively. Next year, EXCL will use 80% of its expenditure for the development of 4G LTE. In other words, the share of spending will change to 80:20. "This is from the internal cash," Dian added.

EXCL sees a 5%-6% revenue growth in 2017. During the nine months of 2016, EXCL revenue fell by 5% to Rp 16.08 trillion compared to the same period last year.

The revenue from data have increased by 27% to Rp 5.69 trillion. However, this cannot cover the decrease in the revenues of other sectors. The non-data sector has marked the deepest decrease in revenue during the nine months of 2016. During the period, the revenues of non-data sector have dropped by 16% from Rp 9.91 trillion to Rp 8.26 trillion.

Meanwhile, interconnection service revenues also decreased by 26% from Rp 1.83 trillion to Rp 1.35 trillion. The revenues of tower and lines rentals also fell respectively by 1.2% and 2.7% to Rp 393 billion and Rp 244 billion.

Dian said that the projection of the increase in the next year’s revenues will be driven by the value of EXCL products, not by the increase in the number of subscribers. Recently, all operators have penetrated to all segments of subscribers. “So, now we have to find a strategy to provide more add value, mainly for consumers,” said Dian

Despite of the decrease in the revenues, EXCL has actually booked the better net profits. As of the end of September 2016, EXCL booked Rp 160 billion of net profits. During the same period in 2016, EXCL suffered Rp 507 billion losses.

The performance improvement of EXCL was driven by a stronger rupiah against the US dollar. EXCL also gained profits by selling its tower to Protelindo. Dian was still reluctant to specify the target of net profits in 2017. “The last year was the year for consolidating, improving the balance sheet, and others. Now, they are all settled, so we are optimistic that next year will be better,” she said.

Analyst at JP Morgan Securities Indra Cahya and Ranjan Sharma said that the potential for changes in the rules of operation of telecommunications, particularly the obligations of issuers to do network sharing will benefit EXCL.

"This will reduce network costs of EXCL, especially outside Java," said the analyst in the research on 22 November. However, JP Morgan lowered its recommendation EXCL from overweight with a target price of Rp 3,920 to neutral with a target price of Rp 2,550.

(Muhammad Farid/Translator)

Editor: Barratut Taqiyyah Rafie