Managing and Sustaining Profitable Growth

Growth Strategy and Value Creation of XL Axiata

Pramita Wardani | 1140003121

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• XL Axiata at glance • Macro Environment Analysis • Industry Granularity Analysis • XL Axiata Internal Environment • XL Axiata Financial Review • Conclusion and Recommendation

CONTENTS

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XL Axiata at Glance

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PT XL Axiata Tbk is one of Indonesia’s leading cellular service provider, offering various types of telecommunications products and services such as :

Voice | SMS | Data | Other value-added mobile products & services 4 Growth Strategy and Value Creation of XL Axiata |

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Macro Environment Analysis

Growth Strategy and Value Creation of XL Axiata |

PESTEL Analysis • There is no political events related to

telecommunications

Good economic growth, and Indonesia is having a raise in GDP.

The social networkers are also expanding as well

The technology changes is rapidly

Go green society

6 Growth Strategy and Value Creation of XL Axiata |

Macro Environment Analysis

The telecommunication law prohibits monopolistic practices and unfair competition

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Industry Granularity Analysis

• Key Industry Players • Porter 5 Forces • Competitive Landscape • Telecommunication Trends

Key Industry Players

8 Growth Strategy and Value Creation of XL Axiata |

Telecommunication Market Share (Indonesia, 2011)

Indonesia local telecommunication shares foreign ownership

Industry Granularity Analysis

Porter 5 Forces

9 Growth Strategy and Value Creation of XL Axiata |

Potential New Entrants |

MODERATE

Buyers Bargaining

Power | HIGH

Substitute Products |

HIGH

Industry Rivalry | HIGH

Alcatel-Lucent is targeting Asia. Now they already have a strong relationship with Indosat and Telkom to expand their business in Indonesia.

Most people are not only price sensitive but also wants a good services and networks

The substitute of mobile phone is fixed line and also internet

connection through laptops using lan cable

Suppliers Bargaining

Power | HIGH

Ranging from the packaging, card production, BTS rental, headphones, IT provides, music label.

Telecommunication Industry in Indonesia Year 2012

Substitute Products | MODERATE

Industry Granularity Analysis

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The competitive landscape of Telecommunication industry in Indonesia year 2010

Competitive Landscape Year 2010

Growth Strategy and Value Creation of XL Axiata |

Industry Granularity Analysis

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• The buyers in the mobile phone market grew by 23,55 and the trend is increasing.

• In the 3G usage are also increasing 25% in year 2011.

• This is the impact of the increasing usage of Blackberry, Iphones, Ipad, and others smartphones or tablets.

Telecommunication Trends

Source : BMI, 2011

Growth Strategy and Value Creation of XL Axiata |

Mobile Phone Trend in 2009-2016

Industry Granularity Analysis

XL Axiata Internal Environment

12 Business Model Break out Strategy through Online Learning for Professionals |

• Growth Decomposition • Staircase • Capability Platforms • Business Model • The 3 Horizon and Growth Map

XL Axiata Internal Environment

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by product category YEAR 2007-2010

Segment Portfolio Momentum

M&A Share Gain

Revenue Growth

Voice

SMS

Data & Vas

Non-Voice

Revenue CAGR

874

4,569

5,615

874 9% 122%

100%

TOTAL

2,849 23%

Growth Strategy and Value Creation of XL Axiata |

GROWTH Decomposition

2007 2008 2009 2010 CAGR

Non Voice

SMS -1% 14% 34% -9% 9%

Data and Vas 142% 106% 84% 156% 122%

Voice 55% -13% 20% 16% 19%

Others 118% 166% 15% 0% 100%

total 45% 14% 27% 7% 23%

Others

13,907

XL Axiata Staircase

14 Growth Strategy and Value Creation of XL Axiata |

1996

Obtained a GSM 900 operating licenses

Capability Platforms:

Develop an integrated microcell network in Jakarta’s SCBD Area

1997 Received a DCS 1800 and fiber optic backbone

2001 Telecom Malaaysia bought 23,1% XL shares

2005 TM Group demerger. Axiata acquired all XL shares

2008 Conducted Limited Public Offering 1 to the Shareholders Pirsiant to Right

2009 Majority shareholders of XL Axiata released 20% their shares to public

2010 Transformation business strategy and focus to affordable price an a new positioning

2011

Well-designed Product offerings

Capitalize on Data Opportunity

Brand Development

• Continued Cost Management • Focused and Selective Capex

• Network Utilization • Develop Non-Traditional

Revenue

Issued its 1st IDR Bonds worth 1,25T

XL go Public offering 20% of its shares

XL go Public offering 20% of its shares

XL Axiata Internal Environment

BRAND DEVELOPMENT

Capability Platform

15 Growth Strategy and Value Creation of XL Axiata |

XL Axiata Internal Environment

The success of XL Axiata is depends on their competencies and technology-know-how and also the commitment of the management.

Business Model

16 Growth Strategy and Value Creation of XL Axiata |

• Personal • Corporate

• Customer Care 24 hours/day

• Website • Branches

• Internet Services

• Customer Services

• Complicated promotions

• Packaging Vendors

• BTS Rentals • IT Providers

• Marketing • Sales • IT Services • Call Center

Services

• High Price with low volume

• Voice-Centric • Data-Centric • Domestic

Backbone • Various of

products category

Voice | SMS | Data | Other value-added mobile products & services |

BTS Rental | Network and infrastructure expand | Maintenance equipment's | promotions

XL Axiata Internal Environment

XL Axiata Business Model before year 2010

17 Growth Strategy and Value Creation of XL Axiata |

Business Model

XL Axiata Internal Environment

• Personal • Corporate

• Customer Care 24 hours/day

• Website • Branches • Mobile

Applications • Dealerships

• Internet Services

• Customer Services

• Simple and attractive promotions

• Packaging Vendors

• BTS Rentals • IT Providers • Music Labels • Collaboration

with 3rd parties : Blackberry, Iphone, Ipad, Samsung

• Marketing • Sales • IT Services • Call Center

Services • Outsourcing

• Low Price-High Volume

• Single product • Voice-Centric • Data-Centric • Domestic

Backbone

Voice | SMS | Data | Other value-added mobile products & services | Ringtones | collaboration with 3rd parties

BTS Rental | Network and infrastructure expand | Maintenance equipment's | promotions

XL Axiata Business Model after year 2010

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Business Model

XL Axiata Internal Environment

Growth Strategy and Value Creation of XL Axiata |

Grand Strategy

Functional Strategy

• Price • Product • Place • Promotion

• High • Many Product Brands • Direct • Complicated

• Low • Single Product • Dealership • Simple & Attractive

High Price – Low Volume

Low Price – High Volume

The 3 Horizon and Growth Map

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XL Axiata Internal Environment

Expanding to communication from machine-to-machine

(M-to-M).

Expansion non-voice data traffic with the help

by Cisco Systems.

Expanding to m-commerce and m-

payment

High Price – Low Volume

Low Price – High Volume

Invest heavily on 3G/data Network

PORTOFOLIO MOMENTUM

MERGER & ACQUSITION (M&A)

SHARE GAIN

HORIZON 1 Extend and defend

core businesses

HORIZON 2 Build emerging

businesses

HORIZON 3 Create viable

option Strong Tailwind

Financial Analysis

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• Industry Financial Highlight • Average Revenue Per Usage

Financial Highlights

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Financial Review

Legend :

Source : Annual Report 2007-2011

6% 13% 2% -1% 5% 10% 2% -13% 23% 22% 29% -2883%

CAGR:

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Legend :

Source : Annual Report 2007-2011

Financial Ratio

Financial Review

No Ratio (%) 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011

1 Margin EBITDA 65 60 61 58 57 51.65 48.52 46.47 48.46 45.74 41.9 42.2 44.7 52.7 49.4

2 Margin EBIT 35 28 30 27 26 12.1 9.78 7.96 3.27 4.06 21 14.4 17.8 29.3 24.7 3 ROA 33 24 24 21 22 4.51 3.63 2.72 1.23 1.6 1.6 -0.1 6.1 10.6 9.7 4 ROE 55 43 45 38 35 12.34 10.79 8.34 3.63 4.55 5.7 -0.3 26.1 28.2 22.3

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No Provider 2009 2010 2011 2012f 2013f 2014f 2015f

1 Telkomsel 48,000 40,000 32,065 28,440 25,672 23,571 22,249

2 Indosat 37,330 34,700 26,692 23,327 20,850 19,144 18,070

3 XL Axiata 38,000 32,000 28,761 26,260 23,704 21,549 20,341

4 Bakrie Telecom 29,000 24,000 17,879 14,925 13,076 11,768 10,888

Market Average 38,083 32,675 26,349 23,238 20,825 19,008 17,887

ARPU

Financial Review

Growth Strategy and Value Creation of XL Axiata |

• The revenue trend is increasing while the ARPU trend is declining.

• Telecommunication industry is a very competitive industry

Conclusion and Recommendation

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XL Axiata Internal Environment

Growth Performance Matrix In period 2007-2011

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Indonesia GDP 5,65%

Revenue Growth : 23% TRS : 116%

IHSG Growth 108%

Growth GIANTS High

High

Low

Low

Revenue Growth : 6% TRS : na

Revenue Growth : 5%

TRS : na

PERFORMERS

Conclusion

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Recommendations

Financial Review

Stars

Cash Cow

Question Marks

Dog

High Low

High Low

Low

H

igh

Voice – centric

• Cloud Computing • E-money

• 4G Technology • HSPA+ , • WIMAX • LTE

Maintain and Building a BTS by the outsource company

Managing and Sustaining Profitable Growth

Growth Strategy and Value Creation of XL Axiata

Pramita Wardani | 1140003121

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