XL Axiata and Smartfren ask regulator to greenlight merger

XL Axiata and Smartfren ask regulator to greenlight merger

The parent companies of Indonesian telcos XL Axiata and Smartfren have reportedly asked permission from telecoms regulator KemKominfo to carry out a long-planned merger of the two companies – and seem likely to get it.

In an interview with Reuters published on Wednesday, Minister of Communication and Informatics Budi Arie Setiadi said that Malaysia’s Axiata Group and Indonesia’s Sinar Mas have sought approval of the merger of the two units.

Budi told Reuters that he has had several meetings with executives from XL Axiata and Smartfren to discuss the merger, and that a deal could be reached later this year.

Budi also said he supports the merger “so that Indonesia's telecommunication ecosystem becomes healthier.”

XL Axiata and Smartfren are the two smallest operators in Indonesia. Third-ranked XL Axiata has 58 million customers, while fourth-ranked Smartfren has 32 million. The combined company would be a stronger competitor against the country’s other two major operators: Telkom Indonesia's Telkomsel and Indosat Ooredoo Hutchison.

Budi said it would be “more manageable” to have just three telcos in Indonesia. “After that, we can improve quality of the services," he told Reuters.

Smartfren president director Merza Fachys told Reuters in response to Budi's remarks that "shareholders would have the final say" on any merger deal. XL Axiata spokesperson Henry Wijayanto said the firm was "always open to establish strategic collaborations".

Rumours of a potential merger between XL Axiata and Smartfren have been circulating for almost three years. An earlier Bloomberg report claimed the merger would create a US$3.5 billion company.

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.

XL Axiata credited its fast growing FMC business for driving growth in revenues and normalized net profit in its 9-month results for 2023.

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