Reported Merger: How is the Financial Performance of XL and Smartfren?

Two Indonesian cellular operators, XL Axiata Group and Smartfren, are reportedly considering a merger.

A *Katadata* report states that merger talks emerged following discussions between Axiata Group Bhd, Malaysia's largest wireless operator, and Indonesian company Sinar Mas Group.

According to a *Bloomberg* source on Tuesday, September 5, 2023, discussions regarding the merger of PT XL Axiata Tbk (EXCL) and PT Smartfren Telecom Tbk (FREN) have progressed to the point of involving respective advisors to assess the potential transaction.

Options under consideration include network sharing and partnerships. However, discussions regarding the merger are still in the early stages, and no agreement has been reached.

However, in a recent development, Smartfren Telecom's President Director, Merza Fachys, stated that he is unaware of the ongoing merger discussions, as reported by *Bisnis.com*. Therefore, he cannot confirm the potential merger price.

"We don't know. I also read the news, but haven't received any confirmation [from shareholders]," said Merza when met at the DPR Building, Jakarta, on Thursday, November 9, 2023.

Mergers are closely related to the financial performance of the merging parties. So, how is the financial performance of these two cellular operators?

Based on XL Axiata's financial report, the company's net profit reached Rp650.68 billion in the first half of 2023. This is a 5.81% increase year-on-year (yoy) from Rp614.91 billion in the same period the previous year.

The increased profit is in line with a 12% increase in XL Axiata's revenue, which reached Rp15.76 trillion in the first half of 2023, compared to Rp14.07 trillion in the first half of 2022.

XL Axiata's depreciation expenses were recorded at Rp5.51 trillion in mid-2023. Infrastructure expenses amounted to Rp4.47 trillion; interconnection and other direct expenses, Rp1.53 trillion; and sales and marketing expenses, Rp1.17 trillion.

Total assets reached Rp83.69 trillion in the first half of 2023, a 4.7% yoy decrease from Rp87.27 trillion.

Meanwhile, XL's long-term liabilities were recorded at Rp34.85 trillion, and its equity at Rp25.87 trillion in the first half of 2023.

Meanwhile, Smartfren incurred a loss of Rp543.20 billion in the first half of 2023, compared to a net profit of Rp55.60 billion in the same period the previous year.

Smartfren's revenue amounted to Rp5.56 trillion in the first six months of 2023, a 1.98% yoy increase from Rp5.45 trillion.

Smartfren's operating expenses totaled Rp5.41 trillion, comprising depreciation and amortization expenses of Rp2.31 trillion; operation, maintenance, and telecommunication services of Rp1.86 trillion; and sales and marketing expenses of Rp662.55 billion.

Based on the company's financial statements, the loss is attributed to significant investment losses of Rp389.86 billion in the first half of 2023, compared to a profit of Rp70.97 billion in the same period last year.

Smartfren's assets totaled Rp45.90 trillion in the first half of 2023, a 1.25% yoy decrease from Rp46.49 trillion in the first half of 2022.

These assets consist of liabilities of Rp30.69 trillion and equity of Rp15.21 trillion in the first half of 2023.

(See also: [Escaping Losses, Smartfren Finally Achieves Rp1.06 Trillion Profit at the End of 2022](https://databoks.katadata.co.id/datapublish/2023/04/04/lepas-kutukan-rugi-smartfren-akhirnya-raup-untung-rp106-triliun-pada-akhir-2022))