Axiata Group Berhad announced its intention to position XL Axiata as a converged mobile, fixed and content service provider (ServeCo), to capitalise on the market opportunities in Fixed Mobile Convergence and Fixed Broadband, while Link Net will be transformed into a fixed broadband infrastructure company (FibreCo).
The Malaysian telco giant 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%. For context, Malaysia, Indonesia’s nearest neighbour in terms of broadband penetration, has approximately 40% penetration rate.
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.
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.
Vivek Sood, Group Chief Executive Officer and Managing Director of Axiata said, “Our delayering strategy of transforming Link Net into a dedicated FibreCo and to articulate XL Axiata as a dynamic ServeCo will realise the 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.”
Dr Hans Wijayasuriya, Group Executive Director and CEO of Telecommunications Business of Axiata said, “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.”
