Axiata Group captures untapped mobile market with its delayering business model

Axiata Group will accelerate value creation through its two Indonesian operating companies, XL Axiata and Link Net as it aims to position XL Axiata as a converged mobile, fixed and content service provider. It also aims to capitalise on market opportunities in Fixed Mobile Convergence (FMC) and Fixed Broadband (FBB).

Link Net on the other hand will be transformed into a fixed broadband infrastructure company (FibreCo), focused on scaling up Fibre-to-the-Home (FTTH) access to eight million home passes within the next five years to capture the wholesale opportunity of an underpenetrated Fixed Broadband (FBB) market.

Providing comprehensive FMC services to all market segments such as individuals, families, MSMEs, government and corporate customers, XL Axiata is positioned as the group’s flagship digital telco. Axiata Group said that XL Axiata is set to unlock the next phase of growth with an 'asset light' business model by deferring its fibre infrastructure assets to Link Net and focusing on its comprehensive FMC service offerings spanning mobile and fixed connectivity, content and digital services.

Meanwhile, as the group’s fibre broadband network specialist in the country, the acquisition of Link Net has allowed XL Axiata to accelerate its FMC service offerings across both fixed and mobile networks, enabling the company to “capture the opportunity of Indonesia's vast fixed broadband market as an infrastructure partner”, according to a statement.

The creation of a specialised FibreCo and a converged ServeCo will allow both OpCos to focus on deriving value from their specialties while realising value from scale and scope synergies across the value chain. The delayering strategy employed by Axiata is aimed at capitalising on growth opportunities while also providing investors with optimised value. The move is also said to be beneficial to customers by providing them with a unified digital experience across a variety of fixed, mobile, and content services. 

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Commenting on the move, Vivek Sood, group chief executive officer and managing director of Axiata, said, “As a long-term investor, Axiata is fully committed to playing our part in advancing Indonesia’s digital economy and supporting the country’s digital transformation agenda. Our delayering strategy of transforming Link Net into a dedicated FibreCo and to articulate XL Axiata as a dynamic ServeCo will realise increased value in both OpCos through accelerated scalability and synergies.”

Delayering is not new to Axiata. A successful carveout of EDOTCO from mobile operations 10 years back has led to greater focus, operational excellence, and value illumination of the tower business. In addition to unlocking value for the Group, this move also supports Axiata’s aspiration to promote digital inclusion, fulfilling our strategic role to meet the needs of an underrepresented market segment in one the fastest growing ASEAN economies,” he added.

Hans Wijayasuriya, group executive director and CEO of telecommunications business of Axiata also noted that, “a delayering approach featuring a FibreCo and converged ServeCo will lead to the optimum configuration for value capture and illumination”, allowing both operation companies to leverage on each other’s capabilities.

This comes after Link Net was acquired by Axiata Group and XL Axiata. Back in 2022, Axiata Group and XL Axiata completed their acquisition of 66.03% of Link Net for 8.72 trillion rupiah. Link Net and XL Axiata will be well-positioned to capitalise on immediate synergies from their combined positions in wireless communication services, sharing of backbone and transmission networks, and extensive relationships with customers in Indonesia as a result of this acquisition. 

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