XL Axiata taps up Ericsson for dual-mode cloud core

The Indonesian mobile operator has drafted in Ericsson to supply it with dual-mode core technology that will bring XL's 4G and 5G services together into a single, integrated, cloud-based core network. It will simplify XL's architecture and brings with it all the benefits of virtualisation – like rapidly rolling out new features and services as software updates.

The deployment will kick off at greenfield sites in East Java, a province that is home to around 40 million of the country's 270 million residents.

"XL Axiata is set to gain a first-mover advantage by transitioning core solutions to a consolidated dual-mode 5G core network based on cloud native technologies for 4G and 5G," said XL's chief technology officer I Gede Darmayusa. "Through this collaboration with Ericsson, we aim to efficiently manage traffic growth in 2024 and beyond and also anticipate a cost reduction."

This deal isn't on the same scale as a macro rip-out-and-replace, but it's better than nothing in the current climate.

According to Dell'Oro, global telecoms equipment revenues shrank 5% in 2023, as telcos cut down on capex. For the first quarter of 2024, Ericsson reported a 14% decline in organic sales, led by a slide of 19% at its networks unit.

The global capex decline is being driven primarily by the US, where 5G capex has peaked. The situation is completely different in Indonesia though, where 5G deployments are still in the early stages.

Take market leader Telkomsel, for instance, which boasted 197,838 4G base stations at the end of 2023, but just 654 5G sites – there's a lot of headroom, to put it mildly.

Indonesia's smartphone market is also doing well at the moment.

Recent stats from IDC put Q1 shipments at 10 million, up 27.4% year-on-year and 11.5% sequentially.

Mid-range devices are driving the market, with volume soaring 73.4% YoY led by Apple, Samsung, Vivo and Xiaomi. The premium segment is doing well too, with shipments jumping 12.8% thanks to Apple.

The share of 5G smartphone shipments increased during the quarter to 28.2% from 17.6% in Q1 2023, as the average selling price fell 21.3% to $469. Samsung is the biggest 5G phone maker in Indonesia, but Oppo, Vivo and Xiaomi are the fastest growing, according to IDC.

Indonesia's mobile operators are also currently in fine fettle.

At the start of May, number two player Indosat Ooredoo reported a 22% YoY jump in Q1 EBITDA, and a 39% hike in net profit.

In 2023, Telkomsel saw revenue rise by 15%, and net profit increase by more than 19%.

XL's parent Axiata Group has just published its financials, and they are similarly buoyant. XL's revenue jumped 11.8% thanks to a record-breaking 10% increase in ARPU to 44,000 rupiahs ($2.71), and higher contributions from data and digital services. Costs also fell, which helped XL notch up a 65.2% surge in EBIT, and growth of more than 100% in profit after tax and minority interests (PATAMI).

XL also recently confirmed it is in merger talks with smaller rival Smartfren, which has the potential to take efficiencies and economies of scale to a whole new level.

While the mobile network landscape is decidedly muted in large parts of the world, for Indonesia, the party is just getting started.