XL Axiata is gaining market share on a data-centric business model.

XL Axiata has re-emerged as a rising star in the Indonesian mobile market over the last year. It grew service revenue 8.5% in H1 2022, compared to 1.0% at Telkomsel and 2.4% at Indosat Ooredoo Hutchison (IOH), and its revenue market share, which had fallen from around 20% in 2014 to below 13% in 2016/17, has recovered to 17% in Q2 2022 and is growing at roughly one percentage point a year.

Data and digital services have been central to this growth. In June 2022 data penetration stood at 94% of XL Axiata’s subscribers, a figure below 75% for the rest of the market, and 4G penetration had reached 90.9% (up from 85.3% in June 2021 and 89.8% in March 2022). Data and digital services accounted for 90% of XL Axiata’s revenue in H1 2022.

Strategy Analytics spoke with XL Axiata’s Chief Technology Officer, I Gede Darmayusa, recently to explore the drivers for the operator’s strong performance. Mr Darmayusa outlined the challenges XL Axiata faces, the refresh in its network strategy, and the gains achieved in network and market performance. He emphasized that customer experience has become an obsession: “We continue to strive to find out what our customers need – for gaming, browsing, social networking, streaming – and correlate these to network parameters.” There has been a complete review of XL Axiata’s network operations over the last two years, reviewing all network architecture, prioritizing projects focused on solving customer pain points, identifying gaps in operational performance, and implementing initiatives across radio, transport, and core that “remove fat” and enable XL to become agile to respond to customer demand.

XL Axiata’s focus on customer experience is paying dividends.

A better network is showing in crowdsourced results for Indonesia and is helping to drive the improved subscriber performance. For the first time, in July 2022 XL Axiata won Opensignal’s Video Experience and Download Speed Experience awards, “the first time any Indonesian operator — apart from Telkomsel — has placed in the top spot for either category.”

As a challenger operator, XL Axiata needs a strong focus on operational excellence.

CAPEX and OPEX decisions are influenced by XL Axiata’s financial power and maximising its resource utilization. Central to this is the challenge of operating an award-winning nationwide network based on a weaker spectrum position. XL holds a total of 2x45 MHz of spectrum across the 900, 1800 and 2100 MHz bands, nearly 30% less spectrum than Telkomsel and nearly 40% less than IOH. Mr Darmayusa explained that XL reviews 4G demand every quarter and avoids spending more than is required to meet demand: “We have to spend CAPEX on the right amount, right time, and right technology. We don’t want to spend if we don’t need to.” This strategy informs the operators’ network investment decisions which take account of considerations or non-negotiables such as:

• Spectral efficiency is mandatory
• Investments must optimize costs per bit across CAPEX and OPEX
• Optimising the balance between CAPEX and OPEX
• Operational efficiency through unified site design, with a significant reduction from 30+ configurations to five
• New sites are costly and considered a last resort for capacity upgrades
• The latest technology is prioritised to future-proof current investments

8T8R is key to XL Axiata’s current MIMO strategy and is delivering a greener, faster, more competitive network.

There are a range of elements to XL Axiata’s network success. One significant change has been its progress on 3G sunsetting. XL Axiata shut down 92% of its 3G BTS between June 2021 and June 2022, significantly in advance of its rivals, with the migration to 4G boosting energy and spectral efficiency. Mr Darmayusa noted that where it has re-farmed the 2x5 MHz of 3G spectrum to 4G XL Axiata has seen a 20-25% improvement in 4G performance.

Accompanying this reallocation of resources to 4G has been XL Axiata’s use of 8T8R technology at a growing number of 4G sites. It has been through an extensive proof of concept testing process with 8T8R, evaluating the capacity gain delivered, whether there is any compromise in coverage over its use of 4T4R antenna, what proportion of handsets on its network are compatible, and what is the impact on power consumption. Following these tests, XL Axiata then tested the commercials for 8T8R equipment. 8T8R passed these tests with flying colors. It has now been deployed at over 750 high-traffic 4G sites (XL had over 88,000 4G sites in total in June) and Mr Darmayusa confirmed positive results from the commercial deployments with network performance and benefits matching PoC test results:

• 8T8R upgrades have delivered strong capacity and experience gains, with upgraded sites delivering a s2x capacity gain and a 2.6x customer experience improvement
• 8T8R upgrades have been at a lower TCO than adding a second 4T4R site, supporting XL Axiata’s dislike for site densification
• 8T8R upgrades have enabled site simplification, reducing assets at towers and reducing site rent
• 8T8R is a greener solution, with power consumption reduced by 26% at 8T8R sites. Energy prices are increasing 25-30% per year and XL Axiata views 8T8R as a critical element in managing energy costs

8T8R represents a clear path forward for XL Axiata on the road to 5G. Indonesia has yet to award new spectrum for 5G and 4G adoption still increasing, with XL Axiata expecting that low 5G handset penetration will see 4G dominate for the next four to five years in the country. It is important that 4G performance continues to evolve to lay the foundation for 5G success, with the 8T8R upgrades offering a boost to network capacity and experience that provides both an important bridge to 5G and a foundation for educating customers about the benefits that 5G will ultimately bring and the value of higher-quality network experiences.

Mr Darmayusa’s core message to other operators was “Efficiency is Key” and for XL Axiata’s own circumstances, 8T8R is a critical technology enabling the operator to deliver on its efficiency objectives. As it notes succinctly in its Q2 2022 results presentation highlights: “Focus on Operational Excellence is bearing fruits: 2Q 22 EBITDA expanded by 12% QoQ”.