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Business

Market expects Indonesian mobile carrier to make recovery

JAKARTA -- XL Axiata, the Indonesian subsidiary of Malaysia-based mobile phone operator Axiata Group, posted its first full-year loss in six years as interest payments ballooned after buying smaller rival Axis Telekom Indonesia.

     XL Axiata is Indonesia's second largest mobile phone operator by subscriber base. In a stock exchange filing on Friday, XL announced a net loss of 891 billion rupiah ($70.4 million) in 2014 compared to a 1.03 trillion rupiah profit the previous year. Its revenue increased 10% to 23.46 trillion rupiah driven by 42% revenue growth in its data services division. Data traffic more than doubled even though subscribers fell 1% to 59.6 million, as XL focused on consolidating overlapping users. Indonesia is one of Asia's fastest growing markets for smartphones.

     The main reason for the loss was the increase in interest payments and foreign exchange losses stemming from the $865 million acquisition and merger of Axis, which was completed in April. XL bought the loss-making business to boost its network coverage after launching its 4G LTE service late last year at the same time as rival services from Telekomunikasi Indonesia and Indosat.

     "The focus on managing costs in integrating the network has resulted in careful deployment of base stations to minimize redundancy and focus on network reuse," the company said in a note to investors. "As such, the slower network rollout has had some impact to the overall operations."

     Markets cheered on the results, sending shares up 4% by Friday's close. The company managed to churn out a 10 billion rupiah profit in the fourth quarter, signaling a profit recovery ahead. XL sold 3,500 telecommunication towers for 5.6 trillion rupiah in December to pay off debt and analysts expect more sales to come. Some analysts warn that pricing competition will remain tight as major telecoms look to lure customers in with their 4G data packages.

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