Indonesia’s mobile landscape has seen a significant shift over the past year.

While market leader Telkomsel has held on to its top position, with its market share steady at 45 per cent, XL Axiata, number 2 just a year ago, has slipped to fourth with its share falling from 20.6 per cent to 14 per cent in Q2. It has lost more than 17 million connections in 12 months, according to GSMA Intelligence.

Close rival Indosat added more than 14 million connections over that time and expanded its share from 18 per cent to 21.6 per cent – pushing it up to second. Fourth ranked 3 Hutchison quietly moved into third in Q2 as its share hit 14.4 per cent, up from 11.5 per cent a year ago. It has had a net gain of 10.6 million connections since Q2 2014.

XL reported a net loss in H1 of IDR851 billion ($61.6 million), almost double from a year ago. Much of that was blamed on the weaker rupiah, but its revenue was down 4 per cent year-on-year as its subscriber base fell 27.6 per cent to 45 million.

Moody’s credited the loss to lower subscriber numbers and falling turnover from its mobile and tower leasing segments. However, it said XL’s subscriber mix is improving and ARPU increased almost 15 per cent to IDR31,000 ($2.24) from Q4.

Meanwhile, Indosat saw H1 revenue expand 8.7 per cent year-on-year to IDR12.6 trillion as its subscriber base grew 25 per cent from a year ago to 68.2 million. The operator attributed the rise to strong revenue growth in data and value-added services, which offset declines in voice and interconnection revenue.

Challenger on defensive
The sharp drop in XL’s subscriber numbers has been a huge change for the one-time market challenger, which took the industry by storm back in 2006-07, when it cut prices sharply to take share from incumbent Telkomsel, which is owned by Telkom Indonesia, as well as Indosat.

In 2006 Hasnul Suhaimi took over as president director and said the industry had been too timid in its pricing. He changed from a ‘high price, low volume’ strategy to a ‘low price, high volume’ strategy and had a three-year plan to move past Indosat into second.

Its share rose from 15 per cent to about 19 per cent in 2010, but it wasn’t able to edge past Indosat until 2014 when it acquired Axis and added 14 million subscribers (taking its share temporarily to 22 per cent in early 2014).

Between 2006 and 2010 subscriber growth in the country was 32 per cent a year. And despite the price cuts, XL posted strong revenue growth during that period (generally outpacing competitors).

But by 2011 the industry’s top-line growth had slowed as penetration in the cities neared saturation. XL’s moves to trim costs kept its EBITDA margin high for a couple more years, but the efforts ran out of steam long before Suhaimi orchestrated the acquisition of Axis in early 2014.

Its market share is now below the level when he took over. He stepped down in April, announcing his retirement.

The fall comes at a time when the country’s top five players are gearing up to invest heavily in 4G networks. Telkomsel, Indosat, XL, 3 Hutchison and Smartfren launched 4G services on 1.8GHz networks in selected cities and regions over the past few months.

XL’s share of the country’s 4G market was just 9.5 per cent in Q2, according to GSMA Intelligence. Moody’s expects its revenue to stabilise and recover over the next one to two years – hopefully before it falls too far behind in the battle for 4G customers.

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.