Share, save, profit

Joseph Waring
17 May 2011
Telecom CEO of the YearHasnul Suhaimi, XL Axiata
Last year's winner:

Jamaludin Ibrahim, Axiata Group

Best Emerging Markets Carrier
XL Axiata
Last year's winner: Tata Docomo
Business segments:Data communication, broadband internet, mobile communication and 3G services over GSM 900 and 1800 networks
Key shareholders: Axiata Group, 66.7%; Etisalat, 33.3%
Key 2010 stats: 40.4m subs, up 28% from 2009; net profit rose 69% to 2.89 trillion rupiah ($320.8m), revenue grew 27% to 17.63 trillion rupiah

As top-line growth slows in the Indonesia market with penetration in cities nearing saturation, XL Axiata has turned its industry-changing price-cutting efforts to trimming the bottom line.

The company's initiatives to lower network costs and improve cost efficiencies are reflected in the increase in its EBITDA margin - rising to 52.9% last year compared to 45% in 2009.

XL now is No. 3 in the market with a 20% market share and just over 40 million subscribers - a fourfold increase in four years. Meanwhile, traffic has expanded 30 times over that period.

Its 69% jump in earnings from 2009 is a huge turnaround from 2008 when it reported a loss of $1.7 million. The appreciation of the rupiah against the US dollar helped boost its bottom line, and it paid off $300 million in debt with funding from shareholders last year.

Being part of the Axiata Group has given XL a number of cost-saving benefits. But XL has contributed over its weight to the group - accounting for 40% of revenue and 42% of EBITDA last year.

XL has targeted capital investment at a similar level as in 2010 - $500 million - down sharply from the $1.2 billion level in 2008 and 2009. Over the past two years the company's focus has turned to tower sharing to reduce its infrastructure investment and creating a new revenue stream from leasing towers to its rivals.

President director Hasnul Suhaimi told Telecom Asiathat that moving to a tower design with three legs instead of the traditional four can cut costs up to 40%. "The towers are still sturdy but are much lighter and less expensive." Those savings add up when building out 800 to 1,000 new towers a year.

He said revenue from leasing towers and active network sharing reached more than $100 million last year, accounting for 6% of total revenue, which helped boost its profit margin.

"We lease to anybody but generally the No. 4, 5, 6 and 7 players are more interested," Suhaimi said.

He noted that originally the idea of leasing your network was very difficult for operators to accept. "Can you imagine giving your competitors a backdoor to your network? But after a while we saw there was really no issue. We are competing on marketing not on towers. If we don't give it to them now, they'll get it from someone else in six months. We don't lose anything out of it."

The point, he insists, is you have to be open to any idea. Suhaimi's experience prepared him to follow that philosophy. He is an engineer by training and spent eight years in engineering departments before moving to sales and marketing. He also switched units every two years, which taught him that going into a new situation he had to learn first.

"You have to learn before making decisions, so my style is participative. If I don't know something, I ask," he said. "If you have an idea, talk to me. Before we decide everyone should talk, but once we decide no one should question the decision until it's sure that it isn't working."

Suhaimi has always encouraged staff at all levels to give their input publicly or privately. The idea for the 2-rupiah pricing started back in 2007 came from a non-management staff who was rewarded with bonuses when the idea was implemented.

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