JAKARTA: Indonesian telecom operator XL Axiata (EXCL.Indonesia) tumbled 6.5% today after reporting disappointing second-quarter earnings.
Second-quarter revenue tumbled 7% from a year ago to 5.2 trillion rupiah, even though its two competitors Telkom and Indosat managed to book around 12% revenue growth. Axiata’s strategy of attracting high-end users is not working, according to Daiwa Securities’ Leonardo Henry Gavaza, who downgraded the stock from Buy to Sell today.
Is Axiata focusing too much on the high-end? The traditional voice and texting businesses still constitute a large part of Axiata’s revenue. Average revenue per user fell 5% quarter-on-quarter to 36,200 rupiahs a month because Axiata’s users are migrating to data too fast. The proportion of smartphone users soared to 53% from 36% just a year ago. As a result, even though profit margins at Axiata have risen, the overall profit was roughly flat.
