Jakarta. Mobile network operator XL Axiata announced on Friday (02/02) it has set aside $500 million to invest in a new triple play service — pay TV, broadband and fixed line — in an effort to diversify its mobile network business.
The $500 million will be spent in stages in five years. The company has yet to decide if it will try to get external funding by issuing bonds or other alternative financing.
"We're looking at several options for our new pay TV business, partnering with other pay TV companies or acquiring them," XL Axiata president director Dian Siswarini told reporters on Friday.
The investment will also be used to build new broadband infrastructures in the near future.
XL Axiata has also set aside Rp 7 trillion ($520 million) for its capital expenditure this year, around 90 percent of which will go to strengthen its infrastructure and IT division.
The rest will be allocated to kickstart the new pay TV business in the second quarter of 2018.
"We'll use a small percentage of our capex to launch our new pay TV. We will gradually expand it in the next five years," Dian said.
The company will fund the capex using internal cash.
XL Axiata is also open to the option of a merger or acquiring smaller telcos to strengthen its mobile network business amid a fierce price war among mobile phone operators.
The price war began in 2010 and has since only intensified.
In the beginning, Indosat and XL Axiata started lowering prices for data, SMS and voice calls to rock bottom to challenge the domination of Indonesia's largest mobile network operator Telkomsel.
Indosat is now the second largest mobile phone operator in terms of subscribers in Indonesia. XL Axiata is the third largest.
The three operators control about 85 percent of the Indonesian telco market in terms of subscribers.
Other operators, Smartfren Telecom, Hutchison 3 Indonesia, Sampoerna Telekomunikasi Indonesia and Bakrie Telecom fight out the rest, each holding a tiny segment of the market.
Consolidation between a big telco player and smaller-size companies or a merger between minor telcos are greatly encouraged by analysts to minimize competition risks among mobile operators.
XL Axiata operated 101,094 base transceiver stations (BTS) in Indonesia last year, 20 percent more than in 2016. Around 16,000 of them are new BTS, and 60 percent of those are located outside Java, Indonesia's most populous island.