Despite a large drop in subscribers, XL Axiata’s revenue for FY2015 declined just 2.5 per cent to IDR22.9 trillion ($1.6 billion), with revenue growth of 12 per cent in data and value-added services offset by declines in SMS, interconnection and roaming.

Moody’s said XL’s operating performance showed signs of improvement, although total subscribers have dropped 30 per cent since December 2014 to 42 million, as the company cleaned up its inactive subscriber base and made a strategic shift in focus to higher revenue-generating subscribers.

XL has dropped to number four in the Indonesian market after its market share fell from 18.5 per cent to 12 per cent over the past year.

Its adjusted EBITDA, however, increased 3.4 per cent to IDR12.3 trillion last year, and its adjusted EBITDA margin rose to about 54 per cent from 51 per cent. Despite the improvement, Moody’s expects margins to drop slightly this year due to lower revenues from XL’s higher margin tower leasing operations after the sale of its second tranche of towers, coupled with an increasing proportion of data services revenue.

Revenues from other telecoms services also declined 23 per cent year-on-year to IDR1.1 trillion, mainly due to lower tower lease revenues after the sale and leaseback of 3,500 towers to Solusi Tunas Pratama in December 2014.

Nidhi Dhruv, a Moody’s AVP, said the operator is also likely to continue facing forex pressures on margins.

XL announced on Monday a proposed rights issue, the proceeds of which will be used to fully repay its $500 million shareholder loan to its parent company due in March 2017. Axiata Group said it intends to fully subscribe to the rights entitlement.

“Leverage will decline following the rights issue planned for H1 as part of its strategy to reduce its US dollar debt exposure and reduce its reported debt levels,” Dhruv noted.

Last month XL announced it will sell a second tranche of towers through a tender process that is expected to close in Q1. Moody’s views the pending tower sale as credit positive as it will allow the company to monetise its non-core tower assets, which will improve its liquidity profile.

The proceeds from the tower sale, together with the rights issue, will help fund its pending cash requirements for capex estimated at IDR7 trillion this fiscal year, dividend payments of IDR5 billion and debt maturities of IDR4.3 trillion.