Telco - ISAT, EXCL gear up for ex-Java expansion

Indosat Ooredoo Hutchison (ISAT) and XL Axiata (EXCL) are gearing up for expansions in Eastern part of Indonesia and other ex-Java areas. ISAT is plan to earmark IDR13 tn in capex to carry out such plan, while targeting to establish 11,400 new sites covering 7,600 new villages by 2025. The company has had 152,000 4G BTS as of 1Q23. Meanwhile for EXCL, the company has set aside IDR8 tn for capex. (Source : Bisnis Indonesia) Comment : Ex-Java areas have become source of growth for mobile segment due to lower penetration compared to more matured market in Java areas, which is deemed to be a od move. ISAT's better spectrum that resulted from merger with Tri should enhance capabilities to expand into ex-Java market. On the other hand, for EXCL, it may need to carefully consider its expansion strategy to maintain its network quality in Java to retain market share, while managing its balance sheet, since it could take significant capex ing forward. Despite that, we still maintain our positive view on ISAT and EXCL especially on the back of improvement in pricing in the industry.