The company, which generates the majority of its revenue from the Indonesian and Malaysian markets, will be using the bulk of the money to upgrade its existing infrastructure to support data services.
Approximately half of this sum will be invested in the company’s Indonesian subsidiary, XL, to upgrade its 3G and high speed downlink packet access data network. The company will also allocate funds to the launch of its 4G services, providing it secures the necessary spectrum.
The Indonesian mobile market is considered to be approaching saturation point, with over five different operators competing for a market share, and a mobile penetration rate of 101.5%. XL Axiata stands in third place in the market with an 18.3% market share, behind Indosat (21.7%) and market leader Telkomsel (43.8%).
XL announced plans last November to sell at least 7,000 telecoms towers in an attempt to raise $1.5 billion. The move is seen as an indication that the company intends to focus on its core mobile market.
Rival telecoms group Indosat recently announced that it had completed the sale of 2,500 telecom towers to Tower Bersama Infrastructure for $519 million. Under the terms of the deal the towers are to be leased back to Indosat for at least 10 years. The transaction is likely to be completed by mid 2012 and is expected to see Indosat’s main stakeholder, Qatar Telecom, take a minimum 5% stake in Tower Bersama. The move is said to be driven by the need to ease debts and, like XL, to focus on its core mobile business.
The tower sales follow a decision by the Indonesian government in 2010 to place restrictions on foreign firms owning a stake in the country’s tower companies. This comes at a time when revenue generated by towers is thought to be falling. XL’s tower leasing was responsible for only 4% of its revenue in 2010.
