Earnings call transcript: Excelsmart Q2 2025 sees robust revenue growth

Excelsmart reported its financial results for the second quarter of 2025, showcasing strong revenue growth and strategic advancements following its recent merger. The company recorded a 22% year-over-year increase in quarterly revenue, reaching 10.5 trillion Indonesian rupiah (IDR). Despite a reported loss in profit after tax (PAT), the normalized PAT was a positive 313 billion IDR. According to InvestingPro data, the company maintains a strong free cash flow yield, suggesting efficient cash generation despite merger-related expenses. The stock market reacted with a noticeable decline, with shares dropping 6.76% during open market trading.

Key Takeaways

• Revenue for Q2 2025 grew by 22% year-over-year to 10.5 trillion IDR.
• Normalized profit after tax stood at 313 billion IDR, despite a reported loss.
• The stock price fell by 6.76% following the earnings announcement.
• The company completed nationwide roaming activation and integrated 11,000 sites.
• Excelsmart aims to achieve a 20-30% consolidated revenue growth for 2025.

Company Performance

Excelsmart’s performance in Q2 2025 was marked by substantial revenue growth, driven by the successful integration of its brands and enhanced digital engagement. The company merged its three brands—XL, Axis, and SmartVin—leading to increased efficiency and a broader customer base. The integration of 11,000 sites and a 28% year-over-year increase in BTS sites to nearly 210,000 have strengthened its network capabilities.

Financial Highlights

• Revenue: 10.5 trillion IDR, up 22% year-over-year.
• First half revenue: 19.1 trillion IDR, a 12% increase from the previous year.
• Reported EBITDA: 4.5 trillion IDR, up 4% quarter-over-quarter.
• Normalized EBITDA: 5 trillion IDR, a 15% quarter-over-quarter increase.
• Reported PAT: -1.6 trillion IDR.
• Normalized PAT: 313 billion IDR.
• EBITDA margin: Low to mid 40% range for 2025.

Market Reaction

Following the earnings release, Excelsmart’s stock price experienced a decline of 6.76%, closing at 2,760 IDR. InvestingPro analysis indicates the stock’s RSI suggests overbought territory, which may partly explain the market’s reaction. This movement reflects investor concerns over the reported loss despite strong revenue growth and positive normalized PAT. The stock’s performance also highlights broader market skepticism amid competitive pressures and integration costs. InvestingPro subscribers have access to 12 additional key insights about Excelsmart’s current market position and valuation metrics.

Outlook & Guidance

Excelsmart remains optimistic about its growth prospects, projecting a 20-30% increase in consolidated revenue for 2025. The company anticipates gross synergies of $100-200 million within the year, with full integration expected over the next eight quarters. Post-integration, annual synergies are projected to reach $300-400 million. Capital expenditure for 2025 is estimated between 20-25 trillion IDR, with a target EBITDA margin of approximately 50% in the medium to long term.

Executive Commentary

CEO Parajiv emphasized the strategic nature of the merger, stating, "This merger is not about combining two businesses. It is more about unlocking long-term value." CFO Anthony added, "We expect EBITDA margins can increase, coming back to maybe around 50%," highlighting the company’s focus on achieving operational efficiency and profitability.

Risks and Challenges

• Integration Costs: Expected to impact financials in 2025-2026.
• Market Competition: Although entering a more rational phase, competition remains intense.
• Spectrum Utilization: Efficient use of spectrum is crucial to maintaining network quality.
• Employee Rationalization: Potential workforce adjustments post-merger could pose challenges.
• Data Consumption Trends: Indonesian data usage lags behind neighboring markets, indicating potential growth but also competitive pressure.

Q&A

During the earnings call, analysts inquired about the company’s subscriber definition changes and integration costs. Excelsmart clarified that subscriber activity is now measured on a 75-day basis and acknowledged that integration costs are anticipated in the coming years. The focus on spectrum utilization and potential employee rationalization were also discussed, reflecting the company’s strategic priorities post-merger.

Full transcript - XL Axiata Tbk PT (EXCL) Q2 2025:

Parajiv, CEO/Presenter, Excelsmart: Good morning. Good afternoon. And thank you all of you for joining this call today. Quarter two results we are presenting today, it’s a significant milestone for us. For the first time, we are presenting the consolidated financials for Excelsmart.

This time, which were in April April 16 to be exact. So if I quickly move to the first slide, which is talking about the highlights of the second quarter. Given the merger, this quarter reflects a much larger operational scale. We consolidated two and a half months of SMART’s legacy performance into the financials of XSMART. We believe we started off well with the the ground run of integration, and I’m pleased to report that synergy realization is on track.

Network integration is also progressing according to the plan, and we’re already seeing significant tangible improvement in customer experience. Obviously, I’ll talk about this a bit more data. We are using this integration as I spoke about earlier prior to the integration, not just to combine assets, but to model the network. And you would see that reflected in our CapEx plan. Our goal is to significantly expand both capacity and coverage across Indonesia.

And with the merger now completed, we are entering the next phase position of growth strength, Backed by our three powerful brands, Xcel, Axis, and SmartVin, a much larger, broader distribution network and a much better network. We are now better equipped to serve a wide range of customers segments across the market. That’s the broad highlights for the second quarter. If I move to the next one, which is about how do we plan to unlock the long term value with this merger. I’ll take a step back and share the broader vision behind the foundation of Hexcelsmart.

I think I’ll be repeating when I say this. This merger is not about combining two businesses. It is more about unlocking long term value through three critical dimensions, which will enable us to realize the purpose which we have, which is connecting every Indonesian for a better life. The first one is the scale advantage. And by bringing together the strengths of both excellent smart, we now operate at a significantly large scale.

A combined footprint allows us to optimize spectrum usage, improve network coverage, and improve unit economics. This scale gives us the ability to deploy resources more effectively and respond to the market dynamics with greater agility, which is particularly important in the industrial like us, which is very dynamic, think change at a very rapid pace. The second dimension is about the synergy, and we are focused on capturing the synergy potential of the merger. As you know, the large the largest portion of value will come from structural cost savings, especially on the network side. But it will also come from vendor consolidation, vendor streamlining, and leveraging of these shared platforms.

We’ve made significant progress already in aligning infrastructure and renegotiating key contracts to unlock values. But this is not just about cost saving. It is about building a leaner, more focused organization ready to compete at the next level. The third dimension is about creating a platform for growth. This merger creates a very powerful platform for long long term growth.

We believe that we are now much better positioned to expand into new growth areas, such as fixed broadband at home, enterprise connectivity, and the digital ecosystem. These are strategic growth engines that will define the next chapter of our business. If I have to summarize, while the momentum effects of any integration would be there and those pressures would be there on the financials in the short term, we are confident in our ability to unlock significant value and accelerate growth in the quarters ahead. If I move to the next one, please. As we move forward, I’m pleased to report that XLSmart has made significant strides in capturing early synergies across three areas beyond others, technology, commercial, and people.

On the technology front, we’ve expanded network coverage to national roaming and Moken, improving service reach and efficiency. Our managed service and NOC are now fully integrated, allowing us to operate as one network. We’ve also started consolidating vendors to improve speed of response and reduce costs. On the commercial front, we continue to operate three brands post merger, Xcel, Axis, and Smart. We believe this is a unique position we have where we have three very strong brands, each with more than 20,000,000 customers, which has helped drives monetization across our entire product portfolio.

We’ve also integrated the field forces and the digital platforms to serve both our customers and the trade and thereby strengthen our commercial execution. On the people side, we spent significant amount of time because we realized integrating the two teams would be a key determinant of our future success. As you would know, the shareholders moved very quickly, appointed new BOD team and a new BOC team prior to LD one. We’ve also recently appointed a dedicated director of integration who comes with a strong experience experience on running successful integrations. Employee engagement, as I mentioned, has been a strong focus.

We have been actively involving teams across the country, and we believe these initiatives are just the beginning. We’re building the foundation for long term value by executing fast, aligning teams, and unlocking scale. We are confident that the groundwork laid today will translate into stronger operational and financial performance in the coming quarters. If I may move to the next one. This is some progress on our integration.

I would just give some color on that. And, again, I’m pleased to report that we are off to a very strong and encouraging start. As we told earlier, the target is to finish full integration within eight quarters, and we believe this timeline is both ambitious and achievable. Thanks to a very strong team and a very strong commitment of the entire set of people whom I have the privilege to lead. From day one, we’ve been laser focused on integration, integrating our network, our IT systems, people, commercial operations, all of them.

With one goal in mind, to build a stronger, more unified Excel smart. At the core of this would be the customer experience. Anything and everything we do, the idea is to ensure that the customer experience is much better than previous, and we’re already seeing some initial results of that. We have hit the ground running. We have top tier network integration vendors already on board to help us move faster and smarter.

Commercial rollout is well underway across all regions in the regions where we started with national roaming and subsequently regions where we’ve done localization of sites, ensuring that customers from both legacy networks can enjoy a harmonized and a much improved service. Our people are coming together. We have made strong progress in aligning cultures and building momentum through targeted onboarding and engagement efforts. As I said, we’re already seeing some positive signs. Users are getting a much better experience, especially smartphone subscribers.

They are enjoying a much wider coverage. Traffic is rising in the areas that we have completed integration. This gives us confidence that we are on the right track, delivering real value as we speak while also building a stage for future growth. Of course, there’s much more work to be done, but the energy alignment backed by the results which we are having give us every reason to be optimistic about the future. We are building momentum, but we also realize we’re just getting started.

If I move to the next one, please. This is about the network integration and the improvement in the coverage and the user experience. And these are some initial results which show how the Excelsmart module is already delivering real benefits. I’m proud to say that we’ve completed the fastest nationwide roaming activation. 100% of this was done in less than sixty days.

This enables seamless access for smart phone customers to access excellent work. We now operate with a much larger and more efficient spectrum portfolio, which is helping us deliver better capacity and speed. Today, our wider network footprint covers four seventy five cities across the country. And importantly, one fifty six of these cities are newly accessible to smartphone subscribers where the smartphone presence was close to nothing. And that’s a major leap for those set of customers in terms of availability and the service quality.

And the team has done an incredible job. Over 11,000 sites have already been integrated. You can also see the impact of larger scale in the number of BTSs we have. Our number of BTS account grew 28% year on year, reaching nearly 210,000 sites ’2 with majority now operating on four g. This scale up is just not about infrastructure.

It’s also about impact because that’s what we are really off after. We’re delivering much better connectivity, more consistent user experience, and broader coverage that supports Indonesia’s digital transformation goals. The next slide talks about the future investment or the investment for the future, if I may call it. And this is something I really want to stress upon. We believe that we are executing a bold and strategic CapEx plan, one that positions us not just to integrate, but modernize an infrastructure and deliver a high capacity future ready network across Indonesia.

This is not business as usual. This is not a usual merger CapEx plan. This is more a strategic push to scale up our network performance and unlock long term value. As I said earlier, we have a much better unified vendor ecosystem with two large radio vendors giving us much better cost control, faster rollout, and tighter execution across the board. Through network consolidation, we are eliminating duplication and maximizing utilization of every asset in a portfolio, driving towards smarter, leaner infrastructure.

But as all of you know, who are experts in telecom, this is not just about today’s traffic. It’s about creating opportunities for future. And these investments which you’re doing now lay the foundation for us for future growth, for capturing future growth across digital services, enterprise solutions, and future capabilities which we’ll be developing. We also believe and so do the shareholders that this is the right time to invest. The market is shifting.

We are building scale, and we we are moving decisively to turn that into a long term competitive advantage. So this CapEx, I want to reiterate, it’s not just about today and now. It’s not just about integration. It’s about positioning Excelsmart to be able to capture a long term value. The next slide, I believe, is my last slide, which is about the digital engagement across these three brands.

And this highlights the progress we are making in accelerating this digital engagement, An area where we were already strong, we are seeing even more positive momentum. Across the three apps we have, MyExcel, AccessNet, and MySmartFriend, We now serve more than 41,000,000 monthly active users, which is a 29% increase year on year. More than 50% of our user base now actively transacts through our own apps. It’s a clear sign that customers appreciate simplicity, control, and personalized offer which we deliver through these platforms. Just as importantly, this engagement is translating into results.

Revenue contribution from our own apps has grown at an impressive 18% cumulative over the last two years 18% CAGR over the last two years. And we believe these digital platforms will be a key engine for our future value creation. With three apps now under one roof or one roof, we are well positioned to continue scaling engagement, driving ARPU, and delivering a brilliant seamless digital experiences for all our customers. I’ll take a pause now and hand over to my colleague, Paanthini, our CFO, to run through the financial numbers.

Anthony, CFO, Excelsmart: Okay. Thank you, Parajiv, and good afternoon, everyone. Let me continue the presentation by presenting our financial and operational performance of q two twenty twenty five. Let me start with our operational metrics. As of q two twenty twenty five, our consolidated subscriber base stood at 82,600,000 customer.

This is comprised from postpaid as well as prepaid customers from the three brands that we have, XL, Axis, and SmartRamp. The mobile data traffic grew by 43% year on year, mostly driven because of the com combined subscribers of, XL and SmartFriend and also because of the sustained robust demand for data services. We observed the market competitions is now entering into a more rational phase. So in March 2025, we have adjusted our starter pack price, and we will continue to focus on acquiring and retaining the high quality customers. We are confident that our significantly improved network quality will be one of the key differentiator for Excelsmart to capture the market.

In terms of the ARPU, following to the merger, blended ARPU declined to 36,000 rupiah, reflecting the inclusion of the SmartRun product brand. We anticipate ARPU will increase in the coming quarter because of the market consolidation in progress and also the impact of our price adjustment in startup act price already take into place. We remains committed to drive the long term ARPU sustainability through a deeper digital engagement via our own application through the convergence offerings as well as targeted monetization initiative. Okay. Next slide, Moving on to the financial performance.

Let me start with the revenue numbers. In the quarter two twenty twenty five, our revenue grew by 22% q on q as well as year on year to IDR around 10,500,000,000,000.0 rupiah. This is mostly driven from the post post merger consolidation and supported by a stronger mobile customer base. On the first half basis, our revenue reached to 19,100,000,000,000.0 rupiah, an increase by 12% year on year, reflecting the because of the enlarged subscale as well as a healthy data demand. Moving on to the EBITDA numbers.

Our reported EBITDA increased by 4% q on q. So in to provide a better visibility to everyone on the EBITDA, we are also presenting a normalized EBITDA. What does it mean? It means that it’s exclude the one off expenses, which is the integration related costs. On this basis, our normalized EBITDA is actually increased by 15% q on q, highlighting the underlying strength of our operation despite of the integration expenses, ongoing.

On the profit after tax PAT, as we are in the mid midst of the network vendor consolidation, quarter two twenty twenty five profit after tax was also impacted by one off items, such as integration costs, the asset impairment, and the accelerated depreciation of the potential unused equipment from the old vendors as well as the nine hundred nine hundred megahertz assets that are being phased out, because the government will try to, return will like us to return the 900 megahertz in December 26. If we strip out this, one off items, then we will be able to get normalized PAT at 313,000,000,000 rupiah in the 2025. This normalized PAT will provide a clearer picture of our underlying earnings trajectory. And lastly, on the margins, normalized EBITDA margin came in, 47% for the 2025. If we compare to last year, was 52% as, this is the reason because Smart Trend came in from the lower base.

So as the integration continue and synergy materialize, we remain confident that the margin definitely will improve from time to time. K. Next slide. So in this slide, I think we would like to emphasize or presenting both reported and norm normalized EBITDA and normalized profit after tax to provide a clearer view of underlying performance during the integration period. Normalized figures, again, like I need to emphasize, this is x means that exclude one off items such as integration costs, accelerated, and then accelerated depreciation, as well as the asset impairment related to our investment in LinkNet.

In the 2025, our reported EBITDA was 4,500,000,000,000.0 rupee. In the normalization, if we are adding back the 500,000,000,000 of integration expenses, it will brings to the normalized EBITDA at 5,000,000,000,000 rupiah. The reported PAT stood at a loss at, 1,600,000,000,000.0 rupiah. But after adjusting for integration costs, accelerated depreciation, and asset impairment, then normalized PAT was positive at 313,000,000,000 rupiah. This approach, I believe, will provide a comparable, figures and better to reflects the company core operational performance.

Okay. Move on. So this slide is about, operating expenses. So as you can see from the chart that, our total operating expenses in q two twenty twenty five increased to 6,000,000,000,000 rupiah, an increase of 46% year on year. Of course, this is reflecting the expanded scale of our operations following to the merger of, Excellent Smart Friend.

This increase is expected and aligns with our strategic investment where we have made, to support integration and future growth. On a half year basis, operating expenses increased by 27% compared to the 2024. This step up in in cost increase is largely driven from the three key areas. The first one, of course, interconnection and other direct expenses. Number two is the network infrastructure, and the third one is the regulatory cost.

This is our first quarter post merger. We have quickly leveraged the momentum on integration to ensure the synergy can be delivered according to the plan. So let me try to explain it in briefly on the operating expenses. So the first one on the interconnection and direct cost item, it is increased by 48% year on year. This is primarily due to higher COGS, which associated with the acquisition of fixed broadband subscriber from RingNet and also because of the higher revenue numbers post merger.

Labor cost, it’s more than double, increasing 139% year on year. This is due to integration of the employees from both companies, Excel and Smart Trend, plus also from the fixed broadband business along with what there is a one one off integration cost. And the sales marketing cost decreased by 4% year on year. This is mainly driven because of the lower sales commission reflecting our continued focus on the sales channel optimization as well as the digital initiative. Infrastructure costs increased by 28% year on year as we ramp up our network integration efforts and expanded our site deployments to support our larger footprints.

And the regulatory cost increased 48% year on year because of the additional spectrum fees, post merger, and higher BHP, USO charges resulting from the increase of our revenue base. And then the last one on the supplies and overhead expenses increased by 69% year on year driven by the higher professional fees related to the integration and also increase of the g and a expenses and expanded support functions. However, despite of the higher cost base, we remain focused on extracting the synergies over the medium term. Many of this cost increase, I believe, are transitional, and it’s related to integration and scale up the activities. We we expect that these expenses to normalize over time as we execute our synergy capture our synergy will be captured in the future.

In short, we are laying actually, we are laying a stronger foundation for future growth. We remain confident that this one investment will unlock a meaningful operation and financial benefits over time. Throughout the integration period, we will further continue to drive our ex cost excellent, ensuring that all the expenditures are tightly focused so it will create a long term value and position Excelsmart for sustained success. So that’s the end of my presentation. I shall now hand over back to Parajiv to provide the full year 2025 guidance.

Thank you.

Parajiv, CEO/Presenter, Excelsmart: Thank you, Pantani. So I will just take the last bit, which is about the guidance for ’25. We believe that we’ll be able to maintain a strong momentum in integrating both commercial and network operations with a clear focus on unlock unlocking the merger’s full synergy potential. We anticipate that the consolidated revenue to grow broadly in line with the market. On a reported basis, this will translate to 20 to 30% increase compared to legacy Exelixiata’s premature 2024 full year performance.

This number is, of course, driven by first year consolidation of SmartFront and a full year contribution from the transfer of the fixed broadband customers from LinkedIn in September. We expect EBITDA margins to remain in the low to mid 40% range impacted by the integration cost, which Anthony spoke about. While 2025 will be a transition year in which upfront integration cost will temporarily weigh on profitability, these investments are essential to secure long term value creation. As we focus on integrating and modernizing the network, we expect capital expenditure to be significantly elevated in the range of 20 to 25,000,000,000 IDR. This reflects the dual agenda, sustaining our BAU investment.

And if I may say, more importantly, having the CapEx to modernize the network and looking future ready. Throughout this process, we are firmly committed to maintain financial discipline, ensuring that all investments are rigorously evaluated and that our leverage remains at a prudent and manageable level. Most importantly, we expect to start realizing merger synergies this year with a projected gross synergy of between US dollars 100 to 200,000,000 in 2025, largely from operational expense efficiencies. And post merger completion, post full integration, we are on track to deliver between 300 to 400,000,000 US dollars annual synergy. In closing, we would we recognize that integration was not a single step.

It’s a multistep journey. While we are still at the early stages of this integration process, the initial results have been encouraging. And we are confident in our ability to achieve our synergy targets and create long term value for our shareholders. With this, I conclude my summary of our second year second quarter twenty twenty five results. Thank you, and I hand it back to the moderator, Christopher.

Christopher, Moderator: Thank you, Paragangiv, and Anthony for the presentation. Ladies and gentlemen, we will now proceed to the q and a session. As a reminder, the q and a session will be in hybrid mode. To ask a question, you may type it in the q and a box. Please answer to also target your name and company name.

If you have the verification after your question is answered, I will use the voice mail button, and we will proceed to unmute your mic. Please allow some time for us to remove the questions. Yeah.

David, Executive, Excelsmart: Professor. So I think regarding the the subscribers, you are right. If we take a look to the reported subscribers now, it’s less than the subscribers that were reported by ex Alexi at l four plus the smartphone ones. This is mainly because of how we count the subscribers. As you know, the definition of the subscriber on how to count this, it’s different for each operator in the moment, but we normalize this.

This is the the result. So it’s not really anyone, like, really losing subscribers. It’s a it’s a fact of how we define subscribers. Actually, if you take a look to the reported subscribers, right, all the reports in initial, you will see that the that the number probably doesn’t it’s it’s very high. Right?

So there is a bit of of mobile chips. So I think that’s the main explanation.

Christopher, Moderator: And, can we turn some alerts on the in on the first lesson?

Anthony, CFO, Excelsmart: Okay. Okay. So, Henry, on the integration cost, actually, I think that after the merger is completed in the fifteenth April, our focus today, of course, on the integration. Integration costs are expected by the management, definitely. Integration activities will continue as we explained that it will be within, like, six to eight quarters, yeah, 25 as of ’26.

So we expect there will be integration costs within this year as well as maybe perhaps some of it in the 2026 as well. So these costs, integration costs, are very important, and it’s necessary for us to incur because we want to realize long term synergies across our network commercial as well as the organization structure. So the source of integration ex cost, I think, you know, that is for the network consolidation, dismantling of duplicate towers. We do some commercial alignment and many others employee related costs and so on and so on. So we ask to we let’s yes.

We expect some inter the integration costs in the future. So in terms of the accelerated depreciation, also, this is the same reasons that, I think in the in the in this 2025, our accelerated depreciation was around 739,000,000,000. This is consist of the equipment related to the 900 megahertz spectrum as well

David, Executive, Excelsmart: as oh, cannot hear you,

Anthony, CFO, Excelsmart: Okay. Okay. Sorry. Now I’m changing my mic. Okay.

So in terms of the accelerated depreciation, I think as reported that in q two twenty five, we reported 739,000,000,000 accelerated depreciation. This is because of the equipment related to 900 megahertz spectrum where we want to return it in December 26 next year as well as the 739,000,000,000 extra acquisition work also because of the unused equipment from our old vendors where we want to replace it with the new vendor with the new equipment. So I think as we continue to integrate the network, we expect this accelerated depreciation will be further incurred in this year, mostly happening, hopefully, in this in 2025, and then a small portion in next year, 2026. So that’s to answer the question on the accelerated depreciation as well as the integration costs. Thank you.

Thank you, Anthony.

Christopher, Moderator: Would like to open the line for Henry. Henry, you have any follow-up question?

Henry, Analyst: Hi. Yeah. Thank you, Patrice, and thank you, management. Perhaps two follow-up questions from me, if I may. First on David.

Sorry. I think your voice is kinda breaking up, but, would you mind to clarify what would be the definition difference between the, XL, Axiata, and SmartFront in terms of the subscribers? And what will be our new definition in here for the subscribers? And then the second question, to Pa Anthony, would you mind to share some colors in terms of the failures that we should look for, in terms of this integration cost? I mean, like, I know that this cost will be very important for the XLS, but perhaps some colors on, you know, the integration cost, in your budget, or the acceleration the accelerated depreciation that you have put it in your budget will be very useful for ASPAC?

Thank you.

David, Executive, Excelsmart: Okay. Let me take the first question. And so the definition that has been used in Excel, AXA, for the last few years, it’s the number of subscribers. It’s the subscribers who have had an event with us in the last seventy five days. So that’s the definition that has been adopted also by Excelsmart.

So it has not changed. It’s any subscriber that has had an event with the company in our network in the last seventy five days. That’s, again, the Excelsmart definition, and that’s why the number that you see is different from from the one that was reported before by each of the companies.

Anthony, CFO, Excelsmart: Okay. For the integration cost, I think as you reported, q two was 480 something billion. So we expect there will be a increase not increase. There will be integration cost will keep coming in the quarter three as well q four. Maybe the numbers is around 1,000,000,000,000.

But, of course, we try to make this as efficient as possible, but we do expect that there will be some increase. But I think we need to understand that this integration cost is a one off expenses. Again, I I keep saying to unlock the synergies. The synergies that we are talking about for this year will be around $100,000,000 to $200,000,000. Yeah.

So, of course, this that is only for this year. And then the coming years will be hopefully, once the integration the integration project is completed, then we can enjoy a synergy saving around 300 to $400,000,000 per annum. Yeah. Thank you.

Henry, Analyst: Sorry. Perhaps, Anthony, the 1,000,000,000,000 that you mentioned, is this for per quarter or is it for the total in the second half?

Anthony, CFO, Excelsmart: Is for the second half, Henry.

Henry, Analyst: Okay. Noted.

David, Executive, Excelsmart: I will look at

Henry, Analyst: Okay. Noted. Thank you, Anthony. Thank you, and all the best for the second half.

Christopher, Moderator: Thank you, Henry. Right. We see I’ll move now to the next question from Ngo Takasi. Ngo Takasi, the latest one question. Labor cost doubled as the most the number of employees almost doubled too.

Will there be will current number of employees remain or will there be layoffs? I think I would like to pass to Anthony to have a question.

Anthony, CFO, Excelsmart: I think if I may jump in, Christopher. Understand.

Parajiv, CEO/Presenter, Excelsmart: So what we are doing as of now is deciding our future operating model on how do we want to run this company in the long term. You know, there are debates about different models, different distribution models, the insourcing, outsourcing, all those debates are happening now. And once we are done with that, we’ll be ready with the future organization structure. And that future organization structure will determine the number of resources we need. Obviously, the number of resources we’ll need in future will be lesser than what we have as two entities put together.

How much that delta would be, we we won’t be in a position to disclose now because we really do not know the exact number there. It’s a it’s a consequence of the operating model and therefore the organization structure. But the short answer would be there would be some people who would not be required in the future organization structure. How do we deal with that? When you’ll term that as layoff, it’s something we will will determine as we move forward.

Obviously, as we said, our employees and our customers remain at the forefront of whatever we want to do. So that’s that’s the answer to that. But in case you have any follow-up questions, happy to answer that, Endo.

Anthony, CFO, Excelsmart: Hi. Thanks, No more question for me. Thank you.

Christopher, Moderator: Okay. Thank you. Alright. Now let’s move to the next question. The next question comes from Andre Anvika from.

I don’t know. This close subscriber growth in 2025 by itself only. If there is any increase or decrease, can we discuss on our listening thing I’d like to clarify to help clarify that?

David, Executive, Excelsmart: I don’t think we will disclose the numbers per gram, but since it’s the first time, I will I will ask. Sure. If we take a look to the legacy Excel from quarter one to quarter two, there will be a slight increase in the number of subscribers with the same definition, of course, that that looks of all always have.

Christopher, Moderator: Okay. On the synergies. With the three questions, I would like to interrupt the company to provide the covers.

Anthony, CFO, Excelsmart: Okay. Thank you. The quest first question is about the gross synergies in full year 2025. How much will be realized through the p and l? Okay.

I think, like I mentioned, the I think also provided in the guidance that the gross synergies of OpEx, we will realize hopefully, we were able to realize it in reflected in our p and l. It’s around $100,000,000 to $200,000,000. I think we are still tabulating the numbers. I think in the next quarter of the quarter three, I think we will start sharing with you on the how much actual numbers that we are we are able to generate. So I think for the time being, I think we can just provide you the guidance.

It will be around 100 to $200,000,000. In terms of the CapEx synergies, I believe this one is quite substantial, but I I I actually I I cannot remember the numbers, but it’s quite substantial because we already able to close the the winner of the vendor’s equipment. That what happened in the last quarter. That one at that time, we announced that two vendors of with the winners, and then we already enjoy some, actually, some benefits on the on the vendor awarding because the cost price, the most of the vendors here are contributing also make some investment. So there is a benefit that we enjoy as a company.

But I cannot remember on the how much is the amount, but I will get back to you later on. Yeah? Okay. And number two, I think, like Chris already mentioned, it’s already there. It’s already I already explained to you on the previous question by Pahendri as well.

And number three, what is the NPV of net merger synergy or the the net merger synergies? Okay. So if, let’s say, the expected integration cost is around one to one point five trillion, and then it’s let’s say our target is 100 for synergies, it’s 100,000,000 to 200,000,000 by the end of the year, then, I think we can do our own the the math that if, let’s say, we can enjoy 100 let’s say, the from the the synergies, we can enjoy $200,000,000. So $200,000,000 is around 3,200,000,000,000.0. 3,200,000,000,000.0, and then the while the integration cost is around 1,500,000,000,000.0, so the net synergies will be around 1.7 trillions.

Yeah. So I think that’s the numbers. Thank you. K. Thank you, Anthony.

Christopher, Moderator: Like now to invite Phong to Hi.

Phong, Analyst: Hi. Thanks for the call. A couple of follow-up questions from me. So, Phong, I just wanted to to double confirm on this. Right?

You mentioned that the integration cost for the full year, including what you’ve already incurred in the second quarter is approximately about maybe about INR1.5 trillion. And then you are saying that your gross synergies, which would be around $100,000,000 to $200,000,000, which is about 1.6 to about 3,200,000,000,000.0, which means to say, for this year itself, you are expecting a net positive impact on the p and l from the merger?

Anthony, CFO, Excelsmart: Yes. Definitely, yes. Yeah. And I

Parajiv, CEO/Presenter, Excelsmart: think just to clarify one bit. As we said, significant amount of these savings will come from the network consolidation, which has an impact on the tower lease. Correct? So that bit will come to that ROU reduction, which will come below EBITDA. And, obviously, financial experts can explain it better what will be the exact impact on the profitability of the share of the saving.

But in terms of cash share saving, it will be between, as you were rightly pointing out, between 1,600,000,000,000.0 to $3,200,000,000,000 while the cash cost will be around $1,500,000,000,000 At a cash basis, this will at the lower end of the synergy savings will still be positive.

Phong, Analyst: Okay, understood on that. And then on the CapEx guidance, which is pretty high for this year, noted on your comments on why you’re doing this. But can I try and understand here whether most of the CapEx that you are going to be spending, right, to achieve these objectives, would it be incurred in 2025 itself? Or will some of that still be incurred in 2026 and 2027? I just want to understand when will your CapEx come back to more normal levels?

Parajiv, CEO/Presenter, Excelsmart: I think protection for

Christopher, Moderator: sorry.

Parajiv, CEO/Presenter, Excelsmart: Okay. So at this point of time, we are in a position to provide you what’s there for 2025. I think in the subsequent quarter, we can come and share with you How do we anticipate this CapEx numbers going in ’26 and beyond? But at this point of time, we’re not in a position to share that. We have a robust plan, but I would want to reiterate what we’re trying to do now is not just merging the two networks, but creating a network which is ready for future.

And it’s not only the radio side, but also the other supporting systems, which is also the core, the transmission, and also the IT systems.

Phong, Analyst: Okay. Understood. And just one last quick question from me. What is the leftover net book value for LinkNet after the impairment?

Anthony, CFO, Excelsmart: You mean the carrying amount?

Phong, Analyst: Correct. Yeah. What’s the the carrying amount left over?

Anthony, CFO, Excelsmart: I think it’s around 1,300,000,000,000.0 rupee as of June.

Phong, Analyst: Okay. Got it. Okay. Thank you so much, management team. Thank

Christopher, Moderator: you, Feng. Right. Let’s move on to the next question from Sabrina from Timurga. I think two questions. First question is about what is causing the normalized step to come down q on q.

I think this one can be addressed by Anthony. Yeah. And the second one is about XL subs and ARPU how much in q two? I think this has already been addressed by David earlier, but maybe he can add some more colors. Yeah.

Anthony, CFO, Excelsmart: The normalized PAT come down q on q. I think as we know that q one was only for XL stand alone, while q two, there is the two point five months of because the merger l d one was happened fifteen April, so two point five months including SmartTrend. And I think we know that in the past, SmartTrend was incurred loss. But so that’s the reason why quarter on quarter, our normalized PAT was reduced. But if I look at the figures, the numbers, I click quarter one stand AXA standalone is 388,000,000,000 rupee, yeah, reduced to 313,000,000,000 rupee.

Yeah. So a reduction a small reduction around $6,075,000,000,000 rupee, I think because mostly because of the smartphone PET. Yeah. Okay. Thank you.

David, Executive, Excelsmart: Okay. Regarding the second question, as I was mentioning before, the number of subscribers of Excel, like, Slater legacy would have increased slightly. The ARPU as well was flattish positive. But, again, we won’t be releasing these these numbers in the in the future just for for this time.

Christopher, Moderator: Thank you, Sabrina, do you have any follow-up question to us?

Sabrina, Analyst: Hello, management. Thanks for the answers, but no follow-up questions from me. Thank you.

Christopher, Moderator: Thank you. Alright. Let’s now move to the following question from Indra Jahia from Macquarie. I think we have three questions. One, can you upgrade the optimal number of subscriber that XL Smart can serve in the medium to long term?

Also, what is the considering potential con spectrum return by 02/1926? Second, number of employees almost double post merger. Any plan on a reretirement scheme? I think this has already been addressed earlier. I think that’s all the questions.

I think let’s jump in for maybe able to advise them.

David, Executive, Excelsmart: Yeah. So difficult to estimate the optimal number of subscriber. Right? Of course, you can see that our, let’s say, market share of spectrum after the merger and our network infrastructure will will increase, right, in the in the next few months. So, again, I cannot elaborate on what is the ideal number of subscribers or or market share.

And what I can estimate is, like, if our spectrum share and and infrastructure share is higher, we can believe that the first thing to say will be that our number of subscribers should also be higher than what we have today.

Parajiv, CEO/Presenter, Excelsmart: Yeah. And I think the second part was related to the spectrum return. Correct?

David, Executive, Excelsmart: Oh, second part. This work.

Parajiv, CEO/Presenter, Excelsmart: I’m saying the second part of the was about the spectrum return.

David, Executive, Excelsmart: Considering that one.

Parajiv, CEO/Presenter, Excelsmart: Yeah. Did you did you address that? Okay. So so as you’re saying, 900 would be returned into ’26, but we’d also know that there is spectrum auction happening between now and that time. And, as I said, the way we are building our network is considering the spectrum road map, which the regulators to government have shared.

And I don’t think spectrum would be a limitation to serve the ambitions which David have and team have on the on the subscriber side and the traffic side.

Christopher, Moderator: Okay? Thank you, Rajiv. Let’s move on now to our next question from Norman from CRSA. There are two questions. Based on last year historical number, there appear to be loss of subscriber and revenue after merge.

Can I have more clarity on how would EBITDA margin trend in second half two thousand twenty five? It was 43% in February 2Q two thousand twenty five. Should we expect a bounce back to 47% normalized margin? I believe

Anthony, CFO, Excelsmart: Okay. Of course, we try to increase the EBITDA margin, but I think as per our already explained in the guidance, EBITDA margin will be for the for this year, for 2025, will be low to mid 40%. But I think that’s our guidance. But in terms of internal internally, of course, we try to reach above the four more than 45%. Thank you.

David, Executive, Excelsmart: Regarding the loss of subscribers, I think, as I was explaining before, it’s a change on the definition of of subscriber in that has been adopted. The former XLS, a world of the finance subscriber. If we take a look to our market share of subscribers in the market, we don’t see that we have lost any any market share of of subscribers in that in that sense.

Norman, Analyst: Hello? Can you hear me?

Christopher, Moderator: Hi, Norman. Do you have any follow-up question?

Norman, Analyst: Yeah. Hi, management team. Thank thank you for the opportunity. In terms of the revenue, I I just wanted to get some clarity because in in second quarter, actually, your competitor also see a revenue decline because of the starter pack cleanup. Right?

I I just wanted to get your thought on, you know, how how how much is the impact from that in terms of quarter to quarter revenue drop and, you know, combine that with the merger, it

Christopher, Moderator: it seems a bit confusing.

David, Executive, Excelsmart: So hi, Norman. For us, in if we take a look to a normalized subscribers and revenues, I was saying, it has not been decreasing quarter. So it has been slightly positive slightly positive quarter. Now going back to your point on the starter box, just the situation. If I can define the situation today, it’s better than the situation when you are a few months ago.

Now is it the ideal situation? Not yet. We have seen some movements in the in the last few weeks that are not ideal. But in general, if we have to evaluate, we knew that it’s better now than what it was a few months ago.

Norman, Analyst: I see. Are you seeing your starter pack inventory fully cleaned up already, or there’s still leftovers?

David, Executive, Excelsmart: Sorry. We couldn’t hear. Can you speak a little louder, please? Let me if it’s the problem.

Norman, Analyst: No. As in the ten ten thousand starter packs inventory, is it fully cleaned up already?

David, Executive, Excelsmart: No. No. No. So I think the starter packs, the old starter packs, I think they are still in the in the market. And I think that’s that’s one one thing that is there, and I believe that we will still remain for a while.

But to be honest, not the the biggest. Probably, the sense that of the some additional starter packs have been removed. So, yeah, I think in that sense, it’s that part, it’s a little bit more improved. The bad part is that we have seen new movements in the starter packs in the last few weeks, not from the old stock, but some some new starter packs arriving. But to your point, there are still starter packs.

Yes. There are, but they have been taken out of a lot of vendors, etcetera. So in that sense, that’s all the stock seems to be a little bit better controlled.

Norman, Analyst: Okay. Thanks for answering my question. Thank you, Batavit. Thank you, Pan, Tony.

Christopher, Moderator: Thank you, Norman. Right. Let’s move on to the next question. I think we have the question from Ritvik Agrawal from JPMorgan sorry, from Ranjan Sharma from JPMorgan. How is the CapEx refunded given the significant negative free cash flow?

I’d like to invite Anthony on this.

Anthony, CFO, Excelsmart: So for the CapEx, I know the amount is 20,000,000,000,000. But, actually, from the discussion with actually, from the deal that we have with the vendors, this vendor CapEx equipment, we get, like, a soft payment terms from them. So the what do you call the payment within this year will be not too much. So we are actually quite okay. So meanings that for this year, the CapEx payment will be mostly funded through our operating cash flow.

However, if, let’s say, there is a if we need additional debt, so then, of course, we will talk to the bank. Yeah? And, of course, we’re still trying to maintain our discipline in the capital structure of the in terms of the debt to EBITDA ratio, that one. K. So the answer will be either through operating cash flow as well as from the additional debt from the bank.

But the amount is not gonna be, like, 20,000,000,000,000, but it’s a lot much less than that because there is a soft payment terms from the vendor. Thank you.

Christopher, Moderator: Thank you, Paiyantani. I’d like to open now the line for Ranjan if you have any follow-up question to management.

David, Executive, Excelsmart: Yes. Thank you. I I I have a separate question. On the fixed broadband side, there’s been a decline in customers. Can you help us understand what’s happening there?

Thank you.

Ranjan, Analyst, JPMorgan: Yeah. Thanks, Ranjan, for the question. I think for the fixed broadband side, you’re absolutely right. We saw a decline in customers. I think that’s a combination of probably two factors.

One is competitive dynamics, but also internally, we’re also relooking in terms of the quality of the subscribers. So there’s two parts that we’re doing in. Looking ahead, certainly, we are trying to strengthen, right, further the sales execution. We will be also relooking at the portfolio and also expand, right, in in in certain areas. So having said that in the longer term, does we still see a very long term growth trajectory, right, in this fixed broadband market given the low house household penetration and also rising broadband needs?

Thank you.

David, Executive, Excelsmart: Thank you.

Christopher, Moderator: Okay. Thank you, Ranjan. Now let’s move on to the next question from Jessica. What would be the sustainable long term EBITDA margins target for XL Smart going forward? I think maybe Anthony can give some colors on this one.

Anthony, CFO, Excelsmart: Okay. For this year, I think the EBITDA margin, I as as explained that it will be, low to mid forties, that for this year. Of course, going forward, once the once the integration project is completed, we expect that the EBITDA margins can increase, coming back to maybe around 50%. But, we’ll see that, in the coming years, I think, yeah, for that and for the EBITDA margin.

Parajiv, CEO/Presenter, Excelsmart: And and if I may just add a bit more color to that, Anthony. Yes. Just taking you back, premerger, Excel EBITDA was around 50%, 51%. As we move forward on the mobile side, we’ll want to beat that because that’s where the benefits of synergies start accruing. And, obviously, we should be in a position to generate top line much more efficiently.

So the objective in the mid to

David, Executive, Excelsmart: long term would be

Parajiv, CEO/Presenter, Excelsmart: on the mobile side with that number. Having said that, we also know that we have two other significant lines of businesses which we aim to grow past and future. One is home business. And home business comes with relatively lesser EBITDA, but also comes with a much lesser CapEx. So that’s the second factor you need to consider, that these lines because we are doing three different lines of business, the EBITDA expectations from each line of business would be different.

Similarly for the enterprise side, as we move more and more into solutions, the EBITDA margins may be lower, but they come with very, very low, practically zero CapEx. So the mix of the business will also evolve, but I would believe that the profitability, the return on the investment capital, the right, would definitely keep on improving from where we are moving to the future.

Christopher, Moderator: Thank you, Paragif, for clarifying. Now to open the line for Jessica, if you have any follow-up question to us. No. Thank you, Pat. Okay.

Thank you. There are two more questions. I think let’s move on to the next question from Kasuyuki Soma. Kasuyuki Soma, there are two questions. First one is about the merger synergy guidance of 100 to 200,000,000, and 300 to 400,000,000 is at OpEx level.

And then second one is when ESOP merger, ESOP guided similar synergies in the form of OpEx and CapEx, what makes your synergy so significant? I believe this one can be addressed by Pantry. But, Pantry, do you want do you want to address this?

Anthony, CFO, Excelsmart: So I think simple answer for q one, yes, it is only related to OpEx. The the the the synergy guidance that we are talking about is simply from the OpEx figures. And then for the second question about Indosat merger, the similar synergy in form of OpEx and CapEx. What makes synergy so significant? Well, I think I think we we understand that the from Indosat, the what do you call the process of the synergy, they take, I think, almost, like, three years.

While in our case, we try to do it faster. We try to do it within two years. As a matter of fact, six quarters or eight quarters that we are trying to achieve. And then and then, of course, because of that process, quickly integration quick integrations, I we believe that we’ll generate more synergies values to the company. Yeah.

So I think that’s the explanation. Thank you.

Christopher, Moderator: Thank you, Anthony. Kas, do you have any follow-up question to us?

Kasuyuki, Analyst: Yeah. Thank you. Yeah. So, yeah, just to be clear, right, because it sound sounds like your synergies are a lot larger compared to I s slash hutch merger. Right?

Because they are saying similar synergy numbers, but that’s for both CapEx savings and OpEx savings. Right? But what I hear you’re saying is your OpEx savings is already as big as their guidance was exactly the same as 300,000,000 to 400,000,000 per year. Right? So I just really want to make sure if my understanding is really correct.

Yeah. Because that’s significant.

Anthony, CFO, Excelsmart: Yeah. I think, for that one, maybe we need to clarify that the OpEx synergies was higher than in those up. Maybe for me, it’s because of the one of the biggest synergy save values is coming from the power lease, right, which is the ROU, impact. I believe that the the deal the the deal with the tower providers, work was quite different, the negotiations. While in Indosat, my understanding, it was like, there is still a commitment, that Indosat have to, commit to the tower providers in order to replace the sites that being dismantled.

But in our case is, we have a different deal. We first we learn from this, the deal of Indosat. We try not to follow the deals. We are creating a better deals. So to answer that one, the tower lease is part of the synergies values.

I think similar, like, Indosat. I think I believe that. But in terms of the substance of the deal, I I believe we are better than the Indosat.

Christopher, Moderator: Okay. Understand. Thank you. Very helpful. Thank you, Gus.

Now I’d like to move on to the next question from Aurelia from Indo Premier. There are two questions. Is your EBITDA margin guidance of low to mid 40% is normalized or not? I think let me then after the second one is on the extra rate depreciation is whether this is part of integration cost. I I can help to answer that on behalf of the management.

The my EBITDA margin guidance is basically the reported not normalized. And then on the section, accelerated depreciation is not part of integration cost. Now I’d like to open the line for Aurelia, Burelia, if you have any follow-up question to us.

Sabrina, Analyst: Yes. Thanks, Patrice, and hi, management. I have another questions regarding your subs, subscribers outlook. So, basically, based on your presentation, there are a 156 new areas, open for SmartFriend after the national roaming network integration. So how should we see the potential subscribers growth for SmartFriend from here?

Thank you.

Christopher, Moderator: And I would like now to invite to David to able to advise. I think the question maybe let me rephrase on your growth from the 156 cities here, what is the potential growth for Smartphone subscriber there?

David, Executive, Excelsmart: So so yeah. And as as we have been mentioning, we have opened now the network for Smartphone subscribers to a bunch of new cities. So the population the new population coverage for smartphone, it’s it’s significant. I’m not gonna ask you here the the the numbers, but it’s significant. So so, yes, we expect the smartphone brand to which was named, I think, in different geographies now to have a much more nation nationwide impact.

Thank

Christopher, Moderator: you, David. Alright. Now I think there are two more question. I think this can will be our questions. First one is from Tara from BNI Securitas.

David, Executive, Excelsmart: I think

Christopher, Moderator: there is just one question. What is your target next net gearing in the medium to long term in light of the higher CapEx spend? Maybe Anthony can help to address this.

Anthony, CFO, Excelsmart: Okay. Thank you. So our gearing, which is the gross debt to EBITDA, at this moment, I think first quarter, we reported around 3.6 times. Because why compared to the first quarter was 2.6 times is higher this quarter because of the consolidation of SmartRand debt and lease liabilities. I understand also that in the coming quarter, we anticipate a temporary increase in the gearing ratio as a result of the network integration activities, but I think we remain committed to maintain the leverage below our debt covenant, which is 4.5 times.

Thank you.

Christopher, Moderator: Thank you, Anthony. Butara, do you have any follow-up question to us?

Sabrina, Analyst: No. Thank you. Enough from me. Thank you.

Christopher, Moderator: Sorry, Kent. No question? Okay. Thank you, Bo. Alright.

Let’s move on now to the final question from Andre Santoro. In regards to the optimizing spectrum utilization under the current larger network scale, can you elaborate it how more and on how XL gonna achieve this? Achieve what? Achieve I mean, maybe this is to achieve the spectrum utilization network. You mean the part, Rajiv?

Parajiv, CEO/Presenter, Excelsmart: I think we are in a pretty unique position now with the merger. The spectrum holding which we have is much stronger right from a low band to a mid band. And, obviously, in future, we’ll also acquire the higher frequencies as and when the auctions come in. So we are in a pretty strong position now as far as our spectrum holding is concerned. And as I said, when we are modernizing our network, we are ensuring that we are able to leverage the entire spectrum holding we have in the places where it’s acquired.

So we are not just integrating the network. We are making networks ready to be able to use the current spectrums which we have and also any additional spectrum which we may acquire as per the road map of. This requires significant more efforts on the radio planning side. I think that’s a skill set will become even more important both internally and also with our partners. What we have demonstrated in the initial few sites, few thousand sites where we’ve deployed the entire spectrum that we are able to do that with, we are able to give a much better customer experience utilizing this entire enhanced, spectrum portfolio which we have.

So we see this as a significant opportunity for us to differentiate ourselves in the market, and we are very excited about this. But in case there’s any further follow-up question, we can definitely answer this. Andre?

Christopher, Moderator: Thank you, Barajiv. I think I hope that gives some color about the spectrometerization. Andre, do you have any follow-up question to us?

Anthony, CFO, Excelsmart: Yes. Thank you. Does it mean you need to acquire more subscriber to optimize your spectrum utilization? Does it that means?

Parajiv, CEO/Presenter, Excelsmart: Yeah. See, if you look at, Indonesia, the current consumption of data per subscriber is much lower than the neighboring markets. It’s between sixteen, seventeen, 18 GBPS here. In neighboring markets, it’s gone up to close to 30 GBPS. So for me, more of the utilization or more of the traffic for the spectrum will come from existing customers because of the per customer increase in, consumption.

Add to that five g as in when it is launched in the market, that will also drive traffic. It will not necessarily come from new subscribers, but it will largely come from existing subscribers, increased demand both nationally and as and when five g is launched.

Anthony, CFO, Excelsmart: Got it. Thank you.

Christopher, Moderator: Thank you, Andre. I think there is I think since we are running out of time, and I know that we still have one question, I think I would like to address that offline, Arthur. And I think, ladies and gentlemen, that concludes our today’s conference call. Thank you again for joining us today. If you have further question, please reach out to investor relations.

I wish you stay safe and healthy, and we look forward to speaking with you next quarter. Thank you.

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