XLSmart is officially formed: Indonesia's new telecom giant

Indonesia's telecommunications industry is entering a new chapter after shareholders approved the merger of three industry players, XL Axiata, Smartfren, and Smart Telecom. The new entity, PT XLSmart Telecom Sejahtera Tbk (XLSmart), will change the landscape of telecommunications competition in the country when it officially operates on April 16, 2025.

XLSmart will directly control 25% of Indonesia's telecommunications market share with a base of 94.3 million subscribers. This position makes the company a major player in the national mobile operator competition. The pre-synergy value of the merger is Rp 104 trillion (US$6.5 billion), with projected annual revenue of around Rp 45.8 trillion and EBITDA of Rp 22.5 trillion.

Rajeev Sethi, who previously served as CEO at Robi Axiata Bangladesh, has been appointed as President Director & CEO of XLSmart. With his extensive experience in transforming telecom companies in emerging markets, Rajeev is expected to help XLSmart realize its synergy value.

Multi-brand strategy for market dominance

The main challenge in this merger is managing two brand identities with different segmentations. XL Axiata has been known as a premium operator for the upper-middle segment, while Smartfren has a price-sensitive customer base.

XLSmart plans to maintain all three brands (XL, Smartfren, and Axis) to serve various market segments. This strategy is similar to the post-acquisition management of Axis in 2014, when XL maintained the brand for the youth segment.

Antony Susilo, Director & Chief Financial Officer of XLSmart, explained that currently the company is still focusing on integration. "We are thinking about how to get a good and smooth integration. In addition, we are also focusing on preparing a business plan," he said.

Marketing communication challenges

The combination of XL's premium perception and Smartfren's competitive pricing strategy requires a careful communication approach. XL customers are concerned about a decline in service quality, while Smartfren customers expect to enjoy better infrastructure without significant price increases.

Up until the merger announcement, XLSmart had not revealed its new brand identity and corporate colors. This decision shows the management team's caution in managing consumer perception during the transition period.

Synergy and operational efficiency

The merger is projected to generate annual pre-tax synergies of US$300-400 million once the integration is complete. Chairman of Sinar Mas Telecommunications & Technology, Franky Oesman Widjaja, cited an even larger figure.

"We can actually get synergies of conservatively US$1.5 billion within a few years. So about US$1 million of savings can be obtained," Franky said in a press conference.

These synergies will be derived from network optimization, operational efficiency, and reduced customer acquisition costs. For example, XLSmart will be able to integrate overlapping network infrastructure and optimize capital expenditure.

Leadership and ownership structure

XLSmart's ownership structure will be split equally between Axiata Group and Sinar Mas, each holding a 34.8% stake. The equalization involves a US$475 million cash payment to Axiata, which will be made in two tranches.

The company's leadership reflects a balance of both parties. Arsjad Rasjid, CEO of Indika Energy, was appointed as President Commissioner. The board of commissioners also includes Retno Marsudi, former Minister of Foreign Affairs, and Vivek Sood, CEO of Axiata Group.

Arsjad Rasjid emphasized his commitment in his new role: "The success of XLSmart is not only supported by its financial performance but by its positive impact on society, the environment, and regional development. We are committed to expanding inclusive digital access, upholding transparent, compliant, and ethical governance, and strengthening cybersecurity as the foundation of public trust."

Market opportunities and digital innovation

Axiata Group CEO, Vivek Sood, highlighted the wider impact of this transaction. "This merger marks a pivotal moment in Indonesia's digital landscape. The confidence of our shareholders in approving this transaction affirms our vision to build a stronger and more resilient telecommunications entity that delivers value through scale, efficiency and innovation. Through XLSMART, we are poised to improve customer experience, expand digital services, and contribute to the growth of Indonesia's digital economy."

Vivek also adds: "We believe this business combination can improve the financial condition of the industry, and we are confident that XLSMART will emerge as a formidable player-allowing us to significantly accelerate investments in digital infrastructure and innovation, thereby empowering the community."

As the fourth most populous country in the world, Indonesia is a highly potential telecommunications market. The growth in smartphone penetration and high data consumption creates huge opportunities for new digital services.

XLSmart plans to develop 5G solutions, corporate services, and fintech innovations to face competition in the digital era. With Smartfren's experience in data services and XL's strong infrastructure, the combined company is strategically positioned to lead the digital transformation.

Regional collaboration and government support

The merger also has a regional dimension with the support of the Indonesian and Malaysian governments. On January 28, 2025, Axiata and Sinar Mas signed two Memoranda of Understanding in a ceremony witnessed by Malaysian Prime Minister Dato' Seri Anwar Ibrahim and Indonesian President Prabowo Subianto.

This collaboration reflects a shared vision to drive digital connectivity and economic growth in the ASEAN region. The agreement includes cooperation in the development of 5G solutions, digital infrastructure, and fintech innovation, all of which support the broader goal of accelerating digital transformation across the region.

Commitment to service quality

Although the main focus of the merger is operational synergy, XLSmart is committed to not compromising on service quality. Franky Oesman Widjaja emphasized the importance of this merger in strengthening Indonesia's digital economy.

"We believe that this consolidation is a crucial step towards creating a more resilient telecommunications industry in Indonesia. By combining XL Axiata's robust infrastructure and Smartfren's customer-focused digital services, XLSmart will deliver better connectivity solutions to empower consumers and businesses, while supporting the nation's long-term digitalization aspirations," said Franky.

He also emphasized the importance of digital infrastructure in supporting technological development. "In the era of digitalization, especially with the presence of Artificial Intelligence, it is very important to build a strong digital infrastructure," he said.

Future prospects

With a strong position in Indonesia's telecommunications industry, XLSmart has the potential to be a catalyst for the development of the national digital economy. Axiata's experience in executing mergers and Sinar Mas' local knowledge will be key to the successful integration.

Vivek Sood highlighted the wider impact of this transaction: "This merger marks a pivotal moment in Indonesia's digital landscape. The confidence of our shareholders in approving this transaction confirms our vision to build a stronger and more resilient telecommunications entity that delivers value through scale, efficiency and innovation."

Antony also emphasized the importance of solid integration first: "After synergy can be realized once we achieve solid integration. So, the most important thing right now is to balance integration first," he said.

The combined company not only has the potential to change the national telecommunications landscape, but also contribute to Indonesia's position as a digital powerhouse in the Southeast Asian region.