Earnings call transcript: XL Axiata's Q3 2025 revenue surges, stock dips

XL Axiata reported a robust 38% year-on-year revenue growth for Q3 2025, reaching IDR 11.5 trillion. Despite strong financial performance, the stock dipped 1.09% following the earnings announcement, closing at IDR 2,750. The company's earnings call highlighted significant operational achievements and strategic initiatives, yet the immediate market reaction suggests investor concerns over future challenges.

Key Takeaways

• Revenue grew 38% year-on-year, reaching IDR 11.5 trillion.
• Normalized EBITDA increased by 24% year-on-year to IDR 5.4 trillion.
• Stock price dropped 1.09% post-earnings announcement.
• Launched new Enterprise Smart Technology and Automation (ESTA) in July 2025.
• Extended network access to 192 cities with national roaming.

Company Performance

XL Axiata demonstrated strong performance in Q3 2025, with significant revenue growth and improved profitability. The company capitalized on its multi-brand strategy and technological innovations to enhance customer experience and operational efficiency. Despite these achievements, the stock's decline suggests market apprehension regarding competitive pressures and the sustainability of growth.

Financial Highlights

• Revenue: IDR 11.5 trillion, up 38% year-on-year and 9% quarter-on-quarter.
• Normalized EBITDA: IDR 5.4 trillion, up 24% year-on-year and 9% quarter-on-quarter.
• Normalized PAT: IDR 1.15 trillion, turning positive.
• EBITDA margin: Stable at 47%.
• Blended ARPU: Improved to IDR 38.9, a 10% quarter-on-quarter growth.

Market Reaction

Following the earnings release, XL Axiata's stock experienced a 1.09% decline, closing at IDR 2,750. This movement contrasts with the company's strong financial results, suggesting investor caution. The stock remains within its 52-week range, reflecting broader market trends and sector-specific challenges.

Outlook & Guidance

XL Axiata projects a 20-25% revenue growth for 2025, with an EBITDA margin expected in the low-to-mid 40% range. The company aims to capitalize IDR 10 trillion in CapEx and achieve $150-$200 million in synergies. Long-term CapEx is anticipated to normalize to a mid-teens percentage of revenue, supporting sustainable growth.

Executive Commentary

"Our strategy is very clear, go for value subscribers," stated David Arcelus Oses, Chief Commercial Officer, emphasizing the focus on high-value customer segments. CEO Rajeev Sethi highlighted, "We are accelerating value creation across operations, procurement, and infrastructure," underscoring the company's commitment to operational efficiency. CFO Anthony Susilo noted, "Normalized figures exclude one-off items such as integration costs," providing clarity on financial metrics.

Risks and Challenges

• Competitive pressures from other telecom operators.
• Potential supply chain disruptions affecting network expansion.
• Macroeconomic factors impacting consumer spending.
• Regulatory changes in the telecommunications sector.
• Technological advancements requiring continuous investment.

Q&A

During the earnings call, analysts queried the company's dividend distribution plans for 2025 and its accelerated depreciation strategy. XL Axiata clarified its approach to CapEx capitalization and reiterated its focus on attracting high-value subscribers, addressing key investor concerns about financial strategy and growth prospects.

Full transcript - XL Axiata Tbk PT (EXCL) Q3 2025:

Christopher, Head of Investor Relations, XL Smart: Ladies and gentlemen, good afternoon and welcome to XL Smart's third quarter 2025 earnings call. My name is Christopher, Head of Investor Relations, and I'll be coordinating today's call. Our presentation on financial results was released this morning and is available on our Investor Relations website. Today's call will begin with prepared remarks from our management team, followed by a hybrid Q&A session. To ask a question, please type it in your Q&A box along with your full name and company. We will read your question for management to address. If time permits, we may open your line for live follow-up questions. As a reminder, the session is being recorded.

I'd like to introduce our speakers for today's call: Rajeev Sethi, President, Director, and CEO; Anthony Susilo, Director and Chief Financial Officer; David Arcelus Oses, Director and Chief Commercial Officer for Consumer; Feiruz Ikhwan, Director and Chief Strategy and Home Business Officer. With that, I would like to hand over to Rajeev to begin with the management highlights. Rajeev, you may kindly proceed.

Rajeev Sethi, President, Director, and CEO, XL Smart: Sure. Thank you, Christopher, and good afternoon, everyone. Thank you, all of you, for joining in today. Today is an important day. It's the first full quarter of XL Smart's journey. Just to remind you, our merger happened on the 15th of April, 16th of April, so the last quarter was two and a half months of combined operations. This time, it's the first full quarter, and the numbers which we are reporting are a result of that. I'm pleased to share that the momentum continues to build across our businesses. We've delivered a strong performance. Revenue, reported revenue, is up 38% year on year, 9% quarter on quarter, underpinned by very strong subscriber quality, improving ARPU, and good progress which we're making on the integration. Network integration specifically is progressing well. As you would know, national roaming for Smartfren customers was completed in record time.

The MOCON rollout continues to expand, improving both coverage and quality for all our customers. Financially, we are seeing a very healthy growth, underlying growth. Normalized EBITDA and PAT reflect the strength of our core businesses, though the reported results still include temporary one-offs, which are normal for a merger, and they are related to integration and asset optimization. Synergies are taking shape. We will speak a bit more about that in the next few slides. We are accelerating value creation across operations, procurement, and infrastructure. These initiatives are moving us steadily towards our ambition to become the industry's most efficient and agile service provider. Overall, I believe this quarter demonstrates resilience and strong execution as XL Axiata continues to unlock long-term value from the merger. If I move to the next slide, post-merger, our integration engine is running at full speed.

One example of that is our Customer Experience and Service Operations Center, CSOC, which was launched in July, a major milestone that allows us to centralize network monitoring, service quality, and field operations across all the three brands we have. On the network side, we've started and progressed significantly towards consolidating overlapping sites, streamlining our vendor ecosystem, and optimizing the tower utilization. All these efforts are resulting in tangible cost savings. I am happy to report that we are on track to deliver between $150-$200 million synergies for this financial year, 2025, largely coming from operational efficiencies and vendor rationalization. Full benefits, what we spoke about earlier, $300-$400 million run rate, pre-tax, that will come after the integration is complete. Good solid start towards that direction.

Obviously, the next in pipeline would be the IT system unification, which again would be a significant value generator, office integration, and expanding our partnerships on the roaming side. We'll also further align the organization to operate as one unified XL Smart. If I move to the next slide, please, which is talking about the customer experience. As we said earlier, customers and employees will remain at the forefront of whatever we do. Both quality and coverage of our network would be super important in this regard. Through MOCON integration, all three brand users, XL, Axis, and Smartfren, are experiencing much better download speed. They have gone up by as much as 70%. The population coverage specifically for Smartfren has gone up by 38%. These network improvements translate directly to a better quality of service, which is a very key differentiator in today's competitive network telecom operations.

We also celebrated our National Customer Day in September with nationwide campaigns through XL Point and Smart Point, reinforcing our commitment to customer loyalty and engagement. We received significant positive feedback, which is a clear sign that our investments are making a real impact on the ground. If I move to the next, which is on the network update, we have now integrated over 15,000 sites, which is close to one-third of the number of sites which we have to integrate, and extended network access for Smartfren users to 192 cities through national roaming. Our total BTS count reached more than 209,000 sites, up 27% year on year, with majority being on 4G. MOCON integration is on track to complete by the first half of 2026, which is within the four quarters of the start of this project.

The results are already visible, as I spoke about earlier, better coverage, higher speeds, and more consistent services across geographies. If I have to cite an example, this was the 2025 MotoGP event in Mandalika, where our network handled massive traffic volumes very easily, proving our readiness to deliver world-class connectivity across the country. If I move to the next slide, which talks about the three growth pillars, this is something we've been talking about and we are very excited about, the three growth pillars: mobile, enterprise, and home. Each pillar by itself represents a focused growth engine, and it has a distinct strategic focus. Collectively, all of these will contribute to the company's mission of connecting every Indonesian to a better life. If I talk about the first pillar, which is mobile, it is represented by our three brands: XL, Axis, and Smartfren.

I strongly believe that the multi-brand approach enables us to effectively target different customer segments, and it's a unique strength we have as compared to other operators in the market. Post-integration, we've seen encouraging momentum driven by a simplified starter pack strategy and optimized product offerings, which is supporting a stronger market recovery and I'm sure will help sustain future ARPU growth also. We're also driving digital engagement through all the apps we have on XL Smart: MyXL, AxisNet, MySmartfren, which is now reaching more than 39 million active users on a monthly basis, which is up 21% year on year. This, of course, helps in improving customer stickiness and monetization. The second pillar is enterprise, which we work under the brand XL Smart for Business. Here, our focus is to become a trusted partner for Indonesia's digital transformation for both the private sector and also the government clients.

A key milestone in this journey was the launch of ESTA, Enterprise Smart Technology and Automation, which was launched in July 2025. ESTA provides a full suite of industry solutions across connectivity, IoT, cloud, cybersecurity, and automation. This will help position XL Smart not just as a telco, but as a strategic ecosystem partner, enabling digital transformation beyond connectivity. The third pillar is home, anchored by our brand XL Satu, which continues to gain strong traction in Indonesia's fixed broadband market. We are reinforcing our position as one of the leading fixed broadband providers by focusing on user experience, flexibility, and family-oriented solutions, with the effort to stabilize the ARPU. XL Satu continues to drive deeper household penetration and strengthen customer loyalty, which is a key differentiator in this competitive market.

If I have to summarize, XL Smart's growth is fueled by these three complementary pillars: mobile, enterprise, and home, each targeting a unique opportunity while collectively driving sustainable long-term growth for the company. If I move to the next slide, slide number nine, it is talking a bit more about the enterprise business. As I said, this is expanding rapidly, powered by the launch of ESTA. It is a comprehensive digital suite, as I spoke about earlier. We also hosted Bravo 500 Summit in collaboration with the Ministry of Digital and Information, bringing together 500 of Indonesia's leading corporations. Our enterprise solutions now reach key verticals such as financial services, manufacturing, logistics, healthcare, and natural resources, combining ICT services and big data analytics to deliver smarter and more integrated outcomes. We believe momentum is strong, and we see continued opportunities as more industries accelerate digital adoption.

I'll take a pause now and hand over to my colleague, Pa Anthony, to walk us through the financial results.

Anthony Susilo, Director and Chief Financial Officer, XL Smart: Okay. Thank you, Pa Rajeev. I think the next topic will be the financial and operational highlights. Let me start with the operational performance first. At the end of quarter three, our consolidated subscriber base is already around 79.6 million customer base, reflecting a normalization following our starter pack price adjustment, which is, I think, the latest one that we did for a Smartfren brand in the month of July or August. All the three product brands' starter packs are already now adjusted. That is the situation on the starter pack price. On the, what do you call, on the data traffic, I think despite the decline in the subscriber count, the data traffic continued to grow, reaching 3.9 exabytes or 3,900 petabytes, up 53% year on year and 2% quarter on quarter.

The ARPU improved to become 38.9 blended ARPU, this one from 35,500 last quarter. This is a double-digit growth, which is around 10% Q on Q, highlighting our focus on the focusing on the quality growth as well as the customer value. Okay, moving to the next slide, to the financial. The revenue grew by 38% year on year and 9% quarter on quarter to IDR 11.5 trillion, driven by the full quarter consolidation of Smartfren and higher mobile ARPU. The normalized EBITDA reached to 5.4 trillion, up to increased to 9% Q on Q and 24% year on year. This is reflecting the underlying strength despite the ongoing integration costs. The reported PAT improved to a loss of 1.38 trillion, while if you look at the normalized PAT, the normalized PAT already turned positive at 1.15 trillion.

This is, of course, after the adjustment of the one-off expenses, which is the accelerated depreciation, non-cash item, and also the one-off integration cost. The margins are stable with the normalized EBITDA margin at around 47%. This trend actually confirms that the integration is progressing smoothly and the synergy already captured is already starting to flow through our financial numbers. Okay, move on. This is maybe to give another explanation how do we calculate the normalized PAT, normalized profit after tax. In here, we are presenting both reported as well as the normalized EBITDA and PAT to provide a clear picture of the underlying performance during the integration period. The normalized figure already excludes one-off items such as integration costs. Number two is the accelerated depreciation, which is related, of course, to network consolidation.

Then in Q3 2025, you can see that the reported EBITDA was IDR 4.9 trillion, with the normalization adding from IDR 554 billion in integration expenses. It brings the normalized EBITDA to around IDR 5.4 trillion. The reported PAT stood at the loss of IDR 1.38 trillion, but after adjusting all these integration costs, accelerated depreciation, and asset impairment, the normalized PAT became positive at IDR 1.15 trillion. This approach basically ensures we want to, if we want to compare with the previous year. This is to show a better comparability and better to reflect the company operational performance. Okay, move on to the next slide. Let me now walk through on the cost structure, our operating expenses. OPEX increased by 10% quarter on quarter and 66% year on year, reaching to IDR 6.6 trillion in the third quarter 2025.

This increase reflects the enlarged scale of our business because it's a consolidation of Smartfren and XL. This is already including the, including a higher infrastructure as well as the regulatory costs, as well as all the integration-related activities. Of course, we remain disciplined on the cost management, ensuring that all the expenditures are tightly linked to the synergy realization and also creating long-term values. That's the end of my presentation. I shall now hand over back to Pa Rajeev to provide the full year 2025 guidance as well as the closing remarks.

Rajeev Sethi, President, Director, and CEO, XL Smart: Sure, and thank you, Pa Anthony. As Pa Anthony mentioned, I'll talk about what's our guidance for 2025 full year. Revenue is expected to grow broadly in line with the market. On a reported basis, growth is expected to be between 20%-25% year on year. EBITDA margin will remain between low to mid 40% range, mid to 40% range. On Capex, the capitalized Capex is projected to be around IDR 10 trillion, and I think it requires a bit of a clarification. This is not a reduction in the investment. If you remember, when we spoke last time, we spoke about a number close to IDR 20 trillion.

The orders which we'll be releasing to our vendors would be still close to that number, but what we'll be able to capitalize, which is put on air and start using, and therefore capitalize, would be a number which is close to IDR 10 trillion. And that's the number which we are stating here. The capitalized Capex would be around IDR 10 trillion for this year. Synergy guidance, last time when we spoke, we gave a guidance of between $100 million and $200 million for this year. This year, we are revising it to the upward part of that guidance, between $150 million-$200 million. It's driven by stronger than expected network and vendor efficiencies. We also remain on track to achieve our full synergy potential of $300 million-$400 million annually pre-tax once the integration is fully completed.

With this, a summary for the third quarter 2025 ends, and I hand it back to Chris to take it further.

Christopher, Head of Investor Relations, XL Smart: Thank you, Pa Rajeev and Pa Anthony, for the presentations. Ladies and gentlemen, we will now proceed to the Q&A session. As a reminder, the Q&A session will be in hybrid mode. To ask a question, you may type it in the Q&A box. Please ensure to also type in your full name and company name. If you'd like further clarification after your question, please answer, kindly use the raise hand button, and we will proceed to unmute your mic. Please give us several minutes to tabulate the questions first. Right, the first question comes from the line of Piyush Chowdhury from HSBC. There are two questions. The first one is, sorry, there are three questions. The first one is, what is the like-for-like, like-to-like mobile service revenue growth Q on Q in third quarter 2025 as 2Q does not have the full impact of merger?

Second question, what is the breakdown of revenue in 3Q into your three segments, mobile, enterprise, and home? The third one is, normalized EBITDA margin is 47%. Where do you expect normalized margin to be post-merger integration? I think for these questions, I would like to invite Pa David to answer the first question.

David Arcelus Oses, Director and Chief Commercial Officer for Consumer, XL Smart: Okay, I'll take the first one, Piyush. The like-to-like mobile service revenue growth quarter on quarter will be at 5%. Like-to-like will be at 5%. To the second part of your question about the initiatives taken to increase the mobile ARPU, I can share that, as you can see, we had a double-digit ARPU growth quarter on quarter. This has been done by many things, but we have taken out a lot of freebies. We have increased prices by taking discounts out. We have also increased minimum prices, especially in our personalized offers. We have done a bunch of things in our very clear strategy to focus on quality subscribers. You can see, I think you can calculate as well that the yield, the revenue per gigabyte, has increased high single digit, well, around 6% quarter on quarter. The yield increased 6% quarter on quarter.

This means that the revenue that we are getting for each of the gigabytes, it's increasing, that our prices per gigabyte have increased. Out of the ARPU double-digit growth from 10%, we can say that more than half is due to the price increases. The other comes from more usage per subscriber. Again, how did we increase the prices? As I was saying, taking freebies out, increasing prices literally, nominally, taking some discounts out, increasing minimum prices in personalized offers, et cetera, et cetera. For the second question, I will pass it to our CFO.

Anthony Susilo, Director and Chief Financial Officer, XL Smart: Okay, thank you. The second question is about the breakdown of the revenues into three segments, mobile, enterprise, and home. I think just to give rough figures on the mobile segments, it contributes around 80%-82% contribution of revenue. Then enterprise is around 10%, and home is the smallest one. It's around, I think, around 5%-6%. Yeah, I think that's the breakdown of the revenues. Number three in the question is about the normalized EBITDA margin, which is 47%. Where do you expect normalized margin after post-merger integration? Okay, I think we know that this normalized EBITDA margin is already taking out the integration costs, which is, I think, what contributes a significant amount.

I think post-integration, which is after the next two years, 2028, I believe, yeah, because our plan to do the integration, everything to be completed within eight quarters. We are hoping that, of course, this EBITDA margin 47% will even further improve because the company management always did trying to do the cost efficiencies program, trying to make sure that we are aligned with the, what do you call, with the plan that we have, which is, of course, is a cost efficiencies program. We are expecting a higher EBITDA margin similar to the other telco players.

Christopher, Head of Investor Relations, XL Smart: Thank you, Pa Anthony. Now, can you open the line for Piyush? Hi, Piyush.

Anthony Susilo, Director and Chief Financial Officer, XL Smart: Yeah, hi. Thanks a lot. Thanks for these responses. Could you also be able to share what's the breakup of your EBITDA margin among the three segments, mobile, enterprise, and home at the moment? This is one more, like David, are there any kind of incremental initiatives being taken in fourth quarter to further kind of enhance the mobile ARPU? How are the kind of economic trends at the moment? If you can throw some light on October trends. Thank you.

Rajeev Sethi, President, Director, and CEO, XL Smart: Okay, on the breakdown of the EBITDA per business segments, I think unfortunately we don't really make that kind of specific analysis because most of the cost is a common cost. I think we only measure the, what do you call, the direct EBITDA, the direct gross profit. I think from an EBITDA point of view, I think we prefer to do it as a total basis rather than doing it per three segments. Yeah, thank you.

David Arcelus Oses, Director and Chief Commercial Officer for Consumer, XL Smart: Okay, so regarding this fourth quarter, yes, we have additional initiatives planned in order to increase the ARPU, one of them being price increases. We are going to have, I would say, significant price increases in the different portfolios of our three brands in the coming weeks. As I was mentioning in our strategy of focusing on value customers, so far it's looking good. We are happy with the results. We are going to continue in that direction. The next step will be to increment prices of our value propositions, specifically in certain specific products. There was any other question?

Anthony Susilo, Director and Chief Financial Officer, XL Smart: Oh, thanks, David. So have these price initiatives already been done in October, or it's something which is planned for future?

David Arcelus Oses, Director and Chief Commercial Officer for Consumer, XL Smart: We are on it. Some small things have been done. Some will be done almost, I will not say as we speak, but relatively soon.

Anthony Susilo, Director and Chief Financial Officer, XL Smart: Okay, thanks a lot. Thank you and all the best.

Christopher, Head of Investor Relations, XL Smart: Thank you. Thank you, Piyush. Let's move on to the next question from Erwin Wijaya from Bharata. Two questions. The first one is, are you going to distribute 100% of the proceeds from Treasury share as dividend? The second one is, how much restructuring cost do you have left? Or when will things normalize? I think for both questions, we can invite Pa Anthony to answer.

Rajeev Sethi, President, Director, and CEO, XL Smart: Okay, thank you, Pa Erwin. I think this, yes, I think in terms of dividend, I think I forgot to mention it earlier on that one. Like this, I think there is no such relation on tops of the Treasury shares that we sold, I think last month with the dividends amount that we want to distribute. Yes, indeed, that the company wants to do a dividend distribution, which is, I think we would like to seek approval from the shareholders where the EGMS will be done next week on Friday. The company would like to give the dividend distribution, I think as you can see in our Q3 performance results that it shows that actually we can reach to a normalized PAT positive around IDR 1.8 trillion.

This is a healthy indicator actually for the company because we can see that some of the performance, the costs as well as the revenues, is improving. With that reason, the company would like to distribute the dividends. In terms of cash flow, I think the cash, how to fund this dividends, is going to be done through our internal cash flow from the operations. Today, the company is sitting at the cash balance around more than IDR 4 trillion. With that one, I think we are able to do this dividend distribution. All in all, I think the dividends will be approved by the shareholders next week, waiting for the news for this to everybody on the subject. On the second question about the restructuring cost, actually this is not a restructuring cost.

I think if you are referring to integration cost, because we are not doing any restructuring, it's only integrations. In terms of integration costs, I think you saw it from the slides that in total integration cost that we have incurred this year until September 2025 is IDR 1 trillion. The target, our budget for integration cost for this year is around IDR 1.5 trillion. The remaining is around IDR 500 billion that maybe this one will be materializing in the next quarter in the Q4. When the things will be normalized, I think like I mentioned that the integration period will happen in the next eight quarters. Yeah, I think this is the fourth quarter, three quarters already, Q2, Q3, actually second two quarters actually. Q4, three quarters, hopefully everything will be normalized starting 2027. Yeah, okay, that's the answer, Pa Erwin.

Christopher, Head of Investor Relations, XL Smart: Thank you, Pa Anthony. Pa Erwin, do you have any follow-up questions?

Anthony Susilo, Director and Chief Financial Officer, XL Smart: No, thank you. Everything is clear. Thank you, Pa.

Christopher, Head of Investor Relations, XL Smart: Okay, thank you. All right, let's move on now to the next question. This comes from the line of Ranjan Sharma from JP Morgan. There is one question. What is the difference between CapEx guidance in 3Q to that the one given in 2Q? And what is the ACAS CapEx for this year? For this question, I'd like to invite Pa Anthony again to address the question.

Rajeev Sethi, President, Director, and CEO, XL Smart: Okay, yes, indeed that the CapEx guidance for second quarter and third quarter, if you look at the figures, was different. I think the difference was because that initially in the second quarter, when we give the guidance around IDR 20 trillion to IDR 25 trillion, that one was on the early post-merger indication where at that time we use a PO amount, PO issuance amount at around IDR 20 trillion to IDR 25 trillion that we want to spend for integration. However, I think we understand that we may want to use capitalized CapEx instead of PO issuance. In terms of capitalized CapEx, if we make some estimation this year, this year approximately around IDR 10 trillion. We are not changing or making a revision on the CapEx amount. The amount is still the same, in terms of PO issuance around that IDR 20 trillion to IDR 25 trillion. However, capitalized CapEx is around IDR 10 trillion.

I think for Q3, I think we already booked capitalized Capex around IDR 4 trillion-IDR 5 trillion. The remaining IDR 5 trillion maybe comes in the Q4 2025. That's the answer, Pa Sajin.

Christopher, Head of Investor Relations, XL Smart: Thank you, Pa Anthony. Sajin, sorry, yeah, Sajin, sorry. Ranjan, do you have any follow-up question?

David Arcelus Oses, Director and Chief Commercial Officer for Consumer, XL Smart: Hi, thank you. Thank you for the clarification. Can I just check one more thing? Did you say you're looking to pay a dividend? Because in the last quarter, you were saying you will not pay dividend for two years.

Rajeev Sethi, President, Director, and CEO, XL Smart: Yes, indeed, indeed. I think correct. I mean, I think I remember last quarter, we think that we will not be able to pay dividend next year actually because the company, if you look at the PAT numbers, is negative, right? We will not be able to give a dividend next year. However, we see that there is an opportunity for us to give dividend distribution this year because our basically dividend normally following the previous year profit, right? I think if you look at the also following the OJK regulations that we are allowed to give a dividend within this year. With that considerations from the OJK regulations, from the company performance, you know, the cash situations, we decided that to give dividend distribution to the shareholders. Of course, this is subject to approval from the shareholders next week.

David Arcelus Oses, Director and Chief Commercial Officer for Consumer, XL Smart: Sorry, so you're not looking to pay a dividend next year, but you want to pay a dividend for this year?

Rajeev Sethi, President, Director, and CEO, XL Smart: Next year, unfortunately, looking at the numbers, we are not allowed to, yeah, because it's a negative retained earnings. At this moment, Q3, I think we see that PAT is negative, right? We will do it this year. It's like maybe we can say it's an acceleration.

David Arcelus Oses, Director and Chief Commercial Officer for Consumer, XL Smart: Okay, thank you. It's interesting because if I look at your balance sheet and your cash flows, they don't seem in the best position, right? I'm just surprised to hear you're looking to pay a dividend.

Rajeev Sethi, President, Director, and CEO, XL Smart: From our point of view, when we look at our balance sheet cash flow also, I think we are still in the safe position. Like for example, the gearing ratio, I think we are still below 4. I think there is, I mean, by giving this dividend distribution will not impact to the ratios of the company. With that one, I think we are able, we have some capability to pay dividend.

David Arcelus Oses, Director and Chief Commercial Officer for Consumer, XL Smart: Okay, thank you.

Rajeev Sethi, President, Director, and CEO, XL Smart: Yeah.

Christopher, Head of Investor Relations, XL Smart: Thank you, Ranjan. The next question comes from Sajin, Sajin Mittal from DBS. Does revised lower CapEx include integration CapEx? I think this has, yeah, I think Pa Anthony has already addressed on CapEx, but we might want to clarify whether this includes integration CapEx.

Rajeev Sethi, President, Director, and CEO, XL Smart: This Capex, yes, includes integration Capex. Again, like I mentioned, we do not make any revision on the Capex amount. It is only that now we are using capitalized Capex instead of the PO issuance. I hope that one can answer, Sajin.

Christopher, Head of Investor Relations, XL Smart: Thank you, Pa Anthony. Sajin, do you have any follow-up question to the management?

David Arcelus Oses, Director and Chief Commercial Officer for Consumer, XL Smart: Can you hear me now?

Christopher, Head of Investor Relations, XL Smart: Yes.

David Arcelus Oses, Director and Chief Commercial Officer for Consumer, XL Smart: Okay. So I understand that you're taking now longer time to basically to incur the CapEx. Again, I want to understand a little bit of what is the normalized level of CapEx, you know, because there is some integration CapEx involved, right? So how much is, how do we think of the normalized CapEx? Because it seems like you're talking of now 10 and 10, right, each year, FY2025 and FY2026. Is that the right way to think about it?

Rajeev Sethi, President, Director, and CEO, XL Smart: For the integration Capex, yes, we can say that. Although actually the IDR 20 trillion-IDR 25 trillion over there, it also consists of BAU Capex, some of them.

David Arcelus Oses, Director and Chief Commercial Officer for Consumer, XL Smart: If I may just jump in here, Pa Anthony, I would not want to classify this as integration CapEx because as I think we spoke about last time also, it's just not about combining the two networks together where we are spending most of the money. It's rating the network for future, i.e., 5G, for example. So whatever network we are rating is rating for future. It's very difficult to classify and say this is because of integration or this is for modernizing the network. The outcome would be a brand new network ready for future. That's one point. The second part is there is no change in the CapEx plan. It's just the way we were stating it earlier. When we spoke about CapEx earlier, IDR 20 trillion-IDR 25 trillion in 2025, it was largely the ordering amount.

That quantum of orders will go out during the course of this year. What we'll be able to put on air and capitalize, you know, there's a process of getting the material in-house, putting it on our side, doing those acceptance tests, that will be around IDR 10 trillion, which again is as per the plan. It's only that earlier when we spoke about it, we did not clarify that this is the ordering amount, the capitalization amount would be lower. That's the second part. I think one more part of your question was how much will this normalize into? I think after the integration phase is over, after the entire modernization is over, which should be done by largely by 2026, I think it'll go back to a regular mid-teens level. That's the number which we anticipate in the long term. Okay, okay, that's very helpful. Thank you.

Christopher, Head of Investor Relations, XL Smart: All right, thank you, Pa Rajeev. Let's move on to the next question. Sorry, Sajin, do you have any follow-up question before we move on? I think you have one question follow-up on ARPU. Do you like that?

David Arcelus Oses, Director and Chief Commercial Officer for Consumer, XL Smart: I mean, how are you seeing your subscriber decline was noteworthy while your peers did not see the subscriber decline? Was it too much sharp hike? What does it mean for you in the current quarter? Yeah, thank you.

Yeah, correct. If you take a look to the subscriber changes, yes, with competitors and also ARPU changes, I think our ARPU growth is significantly higher than our competitors. Also, our SAPs decrease. As I was mentioning before, our ARPU increase comes mostly, more than 50%, from the yield increase. We are able to monetize better the gigabytes and part also from the usage increase. Is it too much? No, it is not. Actually, again, you can see in the results that it is going in the correct direction. Those subscribers that we lost are, I do not want to call them abusers because they were using the portfolio that we have given to them, right? They are subscribers that were very low ARPU and/or very low yield. Those are subscribers that in our new strategy do not have a fit in our company.

Probably they found somewhere better where they can at those low yields, etc., they can fulfill their needs. I think our strategy is very clear, go for value subscribers. Having said that, again, in quarter four, we expect, we hope that the ARPU will keep increasing and that our strategy will keep moving in the same direction. As I was mentioning before, we already have aligned many price changes, increases that we are going to implement in the coming days and that some of which we have already been doing also in the personalized areas, etc.

Okay, very clear. Thank you.

Christopher, Head of Investor Relations, XL Smart: Thank you, Pa David, for the clarification. Okay, any follow-up questions?

David Arcelus Oses, Director and Chief Commercial Officer for Consumer, XL Smart: No, thank you. Thank you.

Christopher, Head of Investor Relations, XL Smart: All right, good. Now let's move on to the next question from Henry Tejer from Mandiri Sekuritas. There are two questions. The first one, what are the three drivers of purchase of bundled device and the software increase under the interconnection and other direct expenses? I think this is under the COGS, yeah. The second question is, could you share more details regarding the accelerated depreciation expenses increase? What kind of assets that drive the increase? I would like to invite Pa Anthony to address the questions. Thank you.

Rajeev Sethi, President, Director, and CEO, XL Smart: Okay, Pa Henry, I think on the first question about what are the key drivers for the increase on the COGS specific to the bundled device? I think as we explained, I think Pa Rajeev already explained that the company now focusing to the enterprise segment. Again, like I explained, enterprise segment contributes around 10% of the total XL Smart revenues. Because of this focus, expanding this business segment, we are sort of like have to purchase this device as well as the software increase to one of our enterprise clients. Of course, this is tagged along with the increase of the revenue from the enterprise as well. I think that's on the explanation for number one.

Number two regarding the accelerated depreciation expense, yes, I think this accelerated depreciation expense was resulted from one of the examples is the 900 megahertz spectrums because as we know that the company have to return the 900 megahertz spectrum to the government by end of 2026. With that one, all the assets or any equipment which is associated to 900 megahertz, we have to sort of like making an accelerated depreciation. Another example, also we know that the company already chose the vendors to do the integration as well as modernize the network, which is the vendor is ZTE as well as Huawei. The vendors that currently the existing equipment, which is not this ZTE or Huawei vendor, we have to do some dismantling. We will not use this asset anymore.

With that one, we also have to do some accelerated depreciation. I hope that one can explain to you the nature of accelerated depreciation, yeah? Why is it increased? Because, yeah, we have to do it earlier, faster than the rate. Let's say it is supposed to be another six years, but now we have to do it by end of 2026. Is that answering the question, Pa Henry?

David Arcelus Oses, Director and Chief Commercial Officer for Consumer, XL Smart: Yes, Pa Anthony, thank you. Perhaps if I can add two or maybe three questions. The first one, I guess regarding the integration cost, I think you mentioned earlier that this year the budget or the target will be IDR 1.5 trillion. I'm just curious, how about next year? What will be the target for the integration cost next year and also for the accelerated expenses? The second question, Pa, I think regarding the Capex, just to clarify, does that mean out of IDR 20-25 trillion that was guided like previous quarter, IDR 10 trillion will be capitalized and the rest will be expensed for this year? That will be booked under the CASPAL PACS. Perhaps the third one to David, I think earlier Piyush has asked about the latest economic trends.

I'm just curious, Pa, how do we see the purchasing power in the last few weeks, Pa, or in the last few months? I think those are my three questions. Thank you.

Rajeev Sethi, President, Director, and CEO, XL Smart: Okay, let me answer first on the question on the integration cost for the next year, yeah. I think like I mentioned that I think the integration still continues until end of 2026 or maybe first quarter 2027. So the amount of the integration cost, I will say that we do not have the numbers at this moment because we are still calculating the BP for 2026. I think let's assume the same similar number what we project. If let's say this year is IDR 1.5 trillion, maybe approximately the same numbers integration cost for next year. Yeah, so that's on the integration cost. The second question is about, what was it?

David Arcelus Oses, Director and Chief Commercial Officer for Consumer, XL Smart: What is the second question, Pa Henry?

Rajeev Sethi, President, Director, and CEO, XL Smart: Yeah, the second question regarding the Capex, Pa, you mentioned that some of the.

David Arcelus Oses, Director and Chief Commercial Officer for Consumer, XL Smart: All capitalized.

Rajeev Sethi, President, Director, and CEO, XL Smart: All will be capitalized. Just want to clarify on that. Yeah. Yeah, so the PO amount, yes, it's around IDR 30-35, but the capitalized CapEx is IDR 10. The remaining actually will not be, we will not expense this or we call it as CapEx, no. The remaining I think will happen, will be materialized next year. Next year will be this sort of like will be carry over to next year, the remaining instead of OpEx, still capitalized CapEx. Okay, the next question.

David Arcelus Oses, Director and Chief Commercial Officer for Consumer, XL Smart: Yeah, regarding the economic situation on the consumer side, to be honest, I mean, you can see the results. For us, the last few months have been positive. I think we see a little bit more of confidence in the consumers, a little bit of recuperation in that sense.

Christopher, Head of Investor Relations, XL Smart: Thank you, Pa David. Pa Henry, any follow-up questions?

Rajeev Sethi, President, Director, and CEO, XL Smart: No, thank you, Pa Chris. I think everything is clear. All the best for the management.

Christopher, Head of Investor Relations, XL Smart: All right, thank you. Now let's move on to the next question. I think we have the question from Arthur Pineda from CT. There is one question. Can you please remind us about your dividend policy and do you pay this out of reported earnings or reported earnings? I think maybe Arthur, you can clarify this later on. In addition, what are the considerations for paying for the dividend given that the company is targeting IDR 20 trillion-IDR 25 trillion, which is above the operating cash flow? Pa Anthony, maybe you would like to address this question.

Rajeev Sethi, President, Director, and CEO, XL Smart: Okay, I think we know that our long-term goal is to deliver sustainable shareholders' returns, yeah. I think looking, as I already explained, that the company shows a negative PAT, yeah, not normalized PAT, yeah, the negative bottom line. With that one, we expect that I think next year there will be no dividend. We think that we want to give the dividend within this year whilst we still can, still following the regulations. I think with that one, with that consideration and also, of course, looking at our free cash flow, yeah, and everything, balance sheet, you know, I think it's doable from our side. I think when you mentioned about the IDR 20 trillion-IDR 25 trillion is above OPCF, I think again, like I mentioned, this IDR 20 trillion-IDR 25 trillion is a PO amount that we issued.

Again, capitalized Capex is only like half of it that we booked to our Capex. This year will be around IDR 10 trillion. From that one, actually, what I would like to say is that we get soft payment terms from the vendors itself. The IDR 10 trillion, although we capitalize it this year, we may not need to pay IDR 10 trillion to the vendors. I think there is some agreement already from the vendor on the payment terms. With that one, I think we are hoping that all of the shareholders agree for us to give the dividend distribution this year.

Christopher, Head of Investor Relations, XL Smart: Right, thank you. Thank you, Pa Anthony. Arthur, any follow-up question?

Yes, thanks for the opportunity. I just wanted to clarify with regard to the cash flow implications on Capex. I know you mentioned IDR 10 trillion will be booked for this year and the Capex is IDR 20-25 trillion. I'm just trying to figure out from a cash flow standpoint, how do we view this? The balance of around IDR 15 trillion, is that paid 2026, 2027? I'm just trying to figure out what it looks like from a cash flow standpoint.

Rajeev Sethi, President, Director, and CEO, XL Smart: Yeah, I think more or less the payment will be done next year. I think from the next year point of view, if I look at the capability from our side, let's say we can generate like IDR 20 trillion cash flow from operation next year. I think we are able to pay this, what do you call, this Capex PO. I think maybe we may need to do some of the borrowings from the banks, yeah, but the amount may be not as big as like this Capex because the plan to fund this PO from this Capex will be funded majorly coming from our internal cash operations, yeah, because we are able to generate like IDR 20 trillion per year.

Understood. I'm just wondering in terms of the decision to pay the dividend now, given that I think there will be spectrum auctions coming up as well. How do you balance the deleveraging of the company and having the cash available for items like spectrum versus paying dividends upfront? I'm just wondering what the philosophy is and why pay now, given that there are still auctions coming.

It's now or never. No, I think like I mentioned, you know, next year it will be difficult for us to give dividends. The chance, the window of opportunity to give dividend only this year. Looking at the, again, for me, I reemphasize that looking at our balance sheet, our P&L, our cash flow, it's doable. We can do it this year because like I mentioned also maybe the cash balance at this moment today, we are sitting like around IDR 4 trillion, almost IDR 5 trillion. This is our cash balance. We are able to distribute the dividend. The gearing ratio, I think yes, we are still in the reasonable amount. We, of course, we still monitor this, make sure it is not going to be beyond IDR 4 trillion, the gearing ratio. With that consideration, that's why our intention, I think we can give dividend to the shareholders.

Understood. Thank you.

Christopher, Head of Investor Relations, XL Smart: Thank you, Arthur. Thank you, Pa Anthony. Now let's move on to the next question from Bob Setiadi from CGS. Can you discuss about the accelerated depreciations? Are we going to see depreciation run rate in third Q for the next six quarters? Yeah, Pa Anthony.

Rajeev Sethi, President, Director, and CEO, XL Smart: Yes, I think Bob, the accelerated depreciation, as I explained earlier, that this is related to the asset that we have to, we will not use in the next after the integration, which is maybe one of the examples, the 900 megahertz and also the other vendors, which is not being chosen one. We have to do this accelerated depreciation because we will not use it. Are we going to see the depreciation run rate in the third quarter, in the next six quarters? The answer is yes. By the end, I think until the integration period is over, expect hopefully by, hopefully I will say by the end of December 2026, yeah, next year it's over, then starting 2027, everything will be normal, back to normal.

Christopher, Head of Investor Relations, XL Smart: Okay, Bob, any follow-up question to us? All right. No question. I think we can continue. Thank you. Thank you, Pa Anthony. All right, next question comes from Andy Kurniawan. So there are two questions. The first one is, can you share about the ARPU increase in average from your three brands respectively? Was Smartfren increasing more high ARPU compared to your other brand in third quarter? And second one is your subscriber decline Q1Q due to focus on quality subs. Can you share which brand that gave the contribution to the subscriber decline? Maybe Pa David would like to invite to address.

David Arcelus Oses, Director and Chief Commercial Officer for Consumer, XL Smart: Yeah, so it's going to sound like normalized answer, but to be honest, no. Smartfren was not the one increasing more the ARPU, and all the three brands have been in the same direction, both in the ARPU increase as well as in the subscriber rationalization. We didn't have one of the brands with more or much higher percentage of the subscribers that left or the low value subscribers. It's been quite, let me put it this way, democratic, both the ARPU increase, the yield increase as well as the subscriber rationalization.

Christopher, Head of Investor Relations, XL Smart: Thank you, Pa David. Andy, do you have any follow-up question?

Rajeev Sethi, President, Director, and CEO, XL Smart: No, no, thank you.

Christopher, Head of Investor Relations, XL Smart: Okay, thank you.

Anthony Susilo, Director and Chief Financial Officer, XL Smart: Moving over to the question from Norman from CLSA. Yeah, congrats on strong ARPU uplift. First one on accelerated depreciation and impairment. Will we see more being booked in Q4 2025? Second one is on OPEX, 10% Q1Q increase is quite significant. Is this a normalized quarterly run rate or we should expect some increase? I think, yeah, for these two questions, I'd like to invite Pa Anthony again to address.

Rajeev Sethi, President, Director, and CEO, XL Smart: Okay, thank you. Norman, I think on the first question on the accelerated depreciation, similar question with the Bob Setiadi question. I already explained that yes, I think in the next quarter, Q4 2025, the accelerated depreciation still continues even further until next year. Yeah, because again, integration period is eight quarters. That's why please expect that there is an accelerated depreciation until the end of the integration exercise is completed. Yeah, and then on the second question on the OPEX, I think yes, but the increase of the OPEX is mainly because of that. Number one, what do you call, in the last quarter was only like not half months of Smartfren expenses was not there. The second one, of course, this quarter on quarter mainly because of the integration costs that we have to book in Q3 2025.

Of course, once this integration cost is over, which is I think we can see that the integration cost in the previous slides was around IDR 800 billion already booked by September 2025. By the time that this integration cost is no more, is already over, then our, what do you call, our OPEX amount will become stable and our EBITDA margin hopefully can increase from time to time. Yeah, I think that's the explanation, Pa Norman.

Anthony Susilo, Director and Chief Financial Officer, XL Smart: Yeah, thank you, Pa Anthony. I think on the first question, where I'm coming from is mainly because I saw the accelerated depreciation run rate was like IDR 700 million last quarter, now it's IDR 1.8 trillion third quarter, right? I'm just wondering, the first is why don't you just book everything within the short term or is it not doable because you are still removing asset? Second thing is I'm just trying to figure out when you say there's more coming, will we get a sense of like roughly how much or profit is really not a priority during the integration period?

Rajeev Sethi, President, Director, and CEO, XL Smart: Yeah, yeah, I think yes, it was quite a surprise maybe to look at the first quarter IDR 739 billion and then second quarter IDR 1.8 trillion, yeah, I think, yeah. I think my estimation that if you look at the numbers, I think more or less this IDR 1.8 trillion already represents the, what do you call, represents the numbers for a quarter. I do not want to say that this IDR 1.8 trillion can go up further, but actually as a matter of fact, these numbers will go down because if there is a site, there is equipment where we dismantle faster, then we actually have to write off the assets immediately. I mean, we have to stop the depreciation. That is the reason I think in Q3 it was quite high because actually some of the sites, some of the equipment already dismantled, already turned off, and we cannot make depreciation.

We have what, from the six years, immediately only like one, only six months, for example, that's the acceleration depreciation. What I'm saying is that in the next quarter, I'm hoping that these numbers, of course, at least maybe next quarter still remain the same, but I think the following quarter, hopefully because the equipment already, most of them already dismantled, it will be tapering down to a smaller amount. Yeah, to give you rough figures, maybe this year maybe we will end up like IDR 4 trillion plus minus.

Anthony Susilo, Director and Chief Financial Officer, XL Smart: Okay, thank you so much, Pa Anthony. Thank you, management team.

Rajeev Sethi, President, Director, and CEO, XL Smart: I think just to give you an emphasize that this accelerated depreciation is non-cash item, yeah?

Anthony Susilo, Director and Chief Financial Officer, XL Smart: Yeah, okay.

Rajeev Sethi, President, Director, and CEO, XL Smart: Okay.

Christopher, Head of Investor Relations, XL Smart: All right, thank you. Thank you, Norman. Thank you, Pa Anthony. I think we still have time for one more question. I think one last question we'll just address from John, John Tay from UBS. That will be the final question. John, do you want to have your question to the management?

Yes. Hi, good afternoon. I have two questions if you don't mind. First is I just want to understand maybe where we are in terms of site dismantling. So you mentioned 15,000 already done and that's one third of a base. Firstly, what is that base? Is the 45,000, give or take, an end figure of the combined sites that you have or is this pertaining to another number? Second question is perhaps we can clarify the IDR 500 billion in terms of integration costs, how much of that would be for personnel and how much of that would be for site dismantling because I understand these two are the largest cost drivers for integration charges. The third one being personnel costs, I think the run rate has stayed at IDR 1 trillion unchanged from the second quarter despite, you know, I guess some integration.

Any comments on how you think of personal costs as a percentage of sales or maybe the absolute number itself? Thank you.

Thank you, John. I think I would like to invite Pa Rajeev to address the first question on site dismantling.

Rajeev Sethi, President, Director, and CEO, XL Smart: Sure. Just to refresh the memory, when we started this journey, XL Axiata legacy had around 43,000 sites and Smartfren sites were around 22,000, put together around 65,000 sites, 65, 66. As we said, between 15,000-20,000 of those sites will not be required, which will feed into our synergy savings, which will mean that the end number of sites based on this part of integration would be closer to 50,000 sites. Against that, we are talking about 15,000 sites, which is just short of one third of that number. That is the number of 15,000. Ending number would be around 50,000 for this phase. The second question was about the integration cost of IDR 1 trillion, which has been incurred so far. I think Pa Anthony mentioned we expect another half a trillion for the remaining part of the year.

This is a number which we shared earlier. IDR 1.5 trillion would be the integration cost for 2025. You're right. Most of this is people and the network integration. Unfortunately, I don't have the details to share further. As you would know, the people integration project would be over hopefully by the first half of next year. We are running that process now, and then this will be a regular run rate. We do not try and drive the people cost as a percentage of revenue as a big driver. I think as management, we believe that people are, good people are really important for in our line of business, in our consumer business. We'll have an appropriate cost as we move forward.

We'll really not want to benchmark that with other players, but we'll pay the right amount of money for the best quality talent which we can acquire. This was the second part. What was the third one, please? John, was there a third question also?

Oh, yeah. That was related to the IDR 1 trillion in personnel costs quarterly run rate, but I think you managed to answer that in the previous question. If you do not mind me clarifying just one point that someone raised earlier, it is mid-teens CapEx as a target after the integration. By mid-teens, is this mid-teens CapEx to sales or mid-teens in absolute trillion rupiah?

No, I think mid-teens absolute rupiah would be a bit too high. It will be mid-teens as a percentage to the revenue.

Okay, perfect. Thank you. Thank you very much.

Christopher, Head of Investor Relations, XL Smart: All right. Thank you. Thank you, John. Thank you, Pa Rajeev. Ladies and gentlemen, that concludes our today's conference call. Thank you once again for joining us today. If you have any follow-up question, please reach out to our investor relations. Stay safe and healthy, and we look forward to speaking with you next quarter. Thank you.

Rajeev Sethi, President, Director, and CEO, XL Smart: Thank you.

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