Jakarta. XL Axiata, the second-largest telecommunication operator in Indonesia, may sell some of its tower assets to raise funds for lowering debt that is expected to increase after taking out loans to finance its acquisition of Axis Telekom Indonesia.
Jakarta-based XL gained shareholder approval on Wednesday to acquire a 95 percent stake of Axis from Saudi Telecom Company for $865 million.
To finance the acquisition, XL has secured $500 million in loans from parent company Axiata Group of Malaysia, and it will secure the remaining $365 million in loans from banks.
Last year, it secured $300 million in debt from DBS Group Holdings, which it used mostly to finance its operation and partly to fund the acquisition.
Hasnul Suhaimi, president director of XL, told reporters that in the first year or two, the financing cost of the acquisition “will make it hard” on the company’s finances.
By the end of September, the company had Rp 17.54 trillion ($1.4 billion) in debt, according to the company’s report.
Mohamed Adlan, chief financial officer of XL, said that the company’s debt level now is at about 1.9 times its earnings before income tax, depreciation and amortization (Ebitda). The additional loan may increase its debt to three times Ebitda.
Adlan said that XL can sell Axis’s towers if the company needs a faster means to reduce debt.
After the acquisition, Axis will merge into XL, and the combined entity will have about 10,000 telecommunication towers, include about 1,600 that are owned by Axis.
“With the integration of Axis’s asset, we will reduce our capital expenditure and operation expenditure. We will also gain physical assets like telecommunication tower that we can possibly monetize later to lower our debt,” Adlan said.
Axis has been posting losses in the past few years and has $865 million in debt.
Adlan said acquiring Axis would allow it a significant reduction in XL’s capital spending, but he declined to provide figures for expenditure this year. Since 2007, XL spent an average Rp 8 trillion every year to finance expansion. Adlan expects that in less than five years, the positive impact of the capital expense reduction will start to be seen in its finances.
Willem Timmermans, chief operating officer of XL, said that the company acquired Axis to gain access to its 15 megahertz of 2G telecommunication spectrum. Axis now has 15 MHz of 2G spectrum and 20 MHz of 3G spectrum. The 20 MHz spectrum will be returned to the government with the acquisition.
“The risk is bigger if we do nothing. If we do nothing, we won’t have the spectrum to survive going forward,” Timmermans said.
XL had 15 MHz spectrum that served 106 billion minutes of call traffic in 2012. In comparison, Telkomsel, a unit of Telekomunikasi Indonesia, has 30 MHz spectrum with 185 billion minutes of traffic, while Indosat has 30 MHz spectrum that served 67 billion minutes of traffic in 2012.