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XL's Axis acquisition to change telcom landscape in Indonesia

The recent acquisition of PT Axis Telekom Indonesia by PT XL Axiata (EXCL) will likely change business competition in the mobile telecommunications industry, with close rival PT Indosat (ISAT) particularly feeling the heat, according to analysts.

Indonesia ICT Institute founder and researcher Heru Sutadi said the takeover would reduce the number of competitors in the industry.

"The industry is crowded with too many operators fighting over a limited market and resources. Some operators have ended up suffering losses," he said.

"A solution to this is to have those suffering losses merge, streamlining the number of players competing," he added.

There are five global system for mobile communication (GSM) operators in the country: PT Telekomunikasi Selular (Telkomsel), PT XL Axiata (EXCL), PT Indosat (ISAT), PT Hutchison 3 Indonesia (Tri) and PT Axis Telekom Indonesia.

On this corner: Jakarta Gives Nod to XL Axiata | Jakarta Telecom News

Certain operators are in the red.

The profits of XL, for example, slumped 54 percent year-on-year to Rp 670 billion (US$58.29 million) in the first quarter of 2013 although gross revenue moved up by 1 percent to Rp 10.3 trillion.

Trust Securities analyst Reza Priambada said operators would be "competing more intensely" now that XL and Axis merged their businesses.

"Operators will have to enhance their range of services to maintain their market positions. XL, for example, will take steps to hold on to Axis' subscribers," he pointed out.

As of the end of the first half of the year, XL had 54.2 million subscriptions or 18 percent more than the same period last year.

MNC Securities analyst Edwin Sebayang added Indosat would be the most affected by the merger of XL and Axis.

"Indosat will feel the most heat as it is closest to XL in terms of market size, and especially considering that XL has usurped the second market position," he noted.

Indosat and XL finished neck and neck in the first half of the year. Although Indosat closed the first half with more subscriptio