Indonesian telcos XL Axiata and Smartfren Telecom announced on Wednesday they have finally agreed to merge their operations in a deal valued at IDR104 trillion (US$6.5 billion) after years of rumours and negotiations.
Under the merger plan, Smartfren and its subsidiary SmartTel will be dissolved into XL Axiata. The resulting new company, XLSmart (full name: PT XLSmart Telecom Sejahtera Tbk), will be jointly controlled by parent companies Axiata Group and Sinar Mas, who will each hold a 34.8% stake.
The stated US$6.5 billion figure represents the combined pre-synergy enterprise value of the transaction.
Once the transaction closes, the shareholding equalisation will result in Axiata receiving up to US$400 million, plus an additional US$75 million at the end of the first year (subject to conditions).
The merger plan has been approved by the boards of XL Axiata, Smartfren, and SmartTel but remains subject to the usual regulatory and shareholder approvals, as well as customary closing conditions. Assuming that all goes smoothly, the merger is expected to be completed within the first half of 2025.
In a joint statement, Axiata Group and Sinar Mas said that XLSmart will create “a new telecommunications powerhouse” in Indonesia that will drive innovation, improve service quality, and enhance digital connectivity.
They also said the new company will be on firm financial ground. With a combined mobile subscriber base of approximately 94.5 million and a market share of 27%, XLSmart is expected to generate pro forma revenues of more than IDR 45.4 trillion and an EBITDA of over IDR 22.4 trillion.
Meanwhile, the merger will enable XLSmart to cut costs by integrating the two networks and optimising resources. Dian Siswarini, president director and CEO of XL Axiata, said XLSmart will be able to realise estimated annual run-rate pre-tax synergies between US$300 million and $400 million post-integration after the merger is completed.
“By combining our resources, expertise, and market positions, we will enhance our competitive edge, drive innovation, and unlock new growth opportunities to build a better future together,” she said.
Axiata Group CEO Vivek Sood said that XLSmart will have the scale, financial strength, and expertise to drive investments in digital infrastructure, expand service coverage, and spur innovation for customers while contributing to a healthier and more competitive market.
“[The merger] will allow us to cater to the unique infrastructure demands of the Indonesian archipelago by providing a scalable platform that will enhance service coverage, product offering and quality of network experience,” he said. “Synergies derived from merger will improve shareholder value and will be partly reinvested in future growth opportunities.”
“Bringing these businesses together will build on our joint, long-term commitment to Indonesia, giving us the strength and scale to contribute to the country’s digital ambitions meaningfully,” said Merza Fachys, president director of Smartfren.
The merger of XL Axiata and Smartfren has been a long time coming, with rumours of a merger going back as far as 2021. Axiata and Sinar Mas returned to the table to discuss a merger in September 2023, and asked telecoms regulator KemKominfo for permission to carry out the merger in May 2024.
Third-ranked XL Axiata and fourth-ranked Smartfren are the two smallest operators in Indonesia. While XLSmart won’t overtake Telkom Indonesia's Telkomsel and Indosat Ooredoo Hutchison in terms of subscriber numbers, it will likely be a stronger competitor.
In December 2023, Axiata Group announced plans to make XL Axiata a stronger player in Indonesia’s growing fixed broadband and fixed mobile convergence (FMC) sectors. Under that plan, Axiata’s fixed broadband subsidiary Link Net agreed to transfer its business to XL Axiata and continue as a wholesale fibre company. The deal will make XL Axiata the second largest fixed broadband operator in Indonesia behind Telkomsel’s IndiHome.
