EXCL Revenue Grew 38% This Quarter - So Why Did Profit Turn Negative?

A Merger's First Clean Comparable Quarter Still Shows a Net Loss

PT XLSmart Telecom Sejahtera Tbk (EXCL) - formerly PT XL Axiata Tbk, renamed after its April 2025 merger with PT Smartfren Telecom Tbk and PT Smart Telecom - reported Q1 2026 (the three months ended March 31, 2026) revenue of Rp11,819 billion, up 37.4% from the Rp8,601 billion XL Axiata reported a year earlier. On the same headline, net income swung the other way: a Rp717 billion loss attributable to owners, against a Rp385 billion profit in the year-ago quarter. Both numbers are real, and both are almost entirely a function of one thing: Q1 2025's Rp8,601 billion base is the pre-merger, standalone XL Axiata business, while Q1 2026 consolidates XL Axiata, Smartfren, and Smart Telecom together for the first time in a year-over-year comparison. A bigger combined company reporting more revenue and more combined cost isn't a growth story or a profitability collapse in the way the raw percentages suggest - it's arithmetic from stitching two income statements together that didn't exist as one a year ago.

The fairer read is sequential: Q4 2025 (October-December 2025) was already the fully merged entity, so comparing Q1 2026 against it is the first genuinely like-for-like quarter this company has had. On that basis, revenue was essentially flat (-0.7%, Rp11,911 billion to Rp11,835 billion per the company's own quarterly figures), and normalized profit after tax - the company's own non-GAAP measure stripping out integration costs and accelerated depreciation - grew 19% from Rp1,155 billion to Rp1,375 billion (see Key Financial Metrics). The reported net loss this quarter traces almost entirely to Rp2,069 billion of accelerated depreciation tied to the merger integration, not to the underlying mobile business deteriorating. The quarter also fell during Ramadan (mid-February to mid-March 2026), a seasonally strong period for Indonesian telecom usage - management cites a 21% surge in data traffic during the period - which flatters some of the operational metrics below relative to a non-festive quarter.

The Prescription

XLSmart should keep pushing the ARPU^»-over-subscriber-count strategy that's actually working: blended mobile ARPU rose 6% quarter-over-quarter to Rp47,300 even as the subscriber base fell 5% to 69.4 million, and management should finish converting the targeted US$250-300 million of gross merger synergies into hard interest and opex savings rather than counting them as done. Finance costs rose 27.2% year-over-year to Rp987 billion this quarter on a debt load (including lease liabilities) of over Rp61 trillion - roughly 2.84x gross EBITDA including finance leases, per the company's own disclosed gearing ratio^», up from 2.59x a year ago. That's the real leakage between a healthy operating business and a net loss, and it's squarely inside management's control to fix through actual deleveraging, not just EBITDA growth.

What it should stop doing: letting capitalized capex outrun the deleveraging story. Capitalized capex jumped 78% year-over-year to Rp2,253 billion this quarter, and the company already carries a further USD1.74 billion (~Rp29,547 billion) in committed network-expansion purchases on its books (see Beyond the Usual) - more than two and a half times this single quarter's entire revenue. FY26 guidance targets EBITDA growth at roughly 2x revenue growth, but says nothing about the leverage ratio, which has been rising, not falling, since the merger closed. A credible guidance framework for a newly-merged, still-integrating telecom needs a deleveraging target alongside the growth target, not just the latter.

Key Financial Metrics

Q1 2026 (three months ended Mar 31, 2026) vs Q1 2025 - see comparability note below

FX: Rp16,993 = US$1 (Mar 31, 2026), the period-end rate disclosed in the company's own interim financial statements, used only to convert the USD columns.

*Every YoY column compares the fully-merged Q1 2026 entity against Q1 2025's pre-merger, standalone XL Axiata results - the merger with Smartfren and Smart Telecom only became legally effective on April 16, 2025. None of these YoY changes are like-for-like; see the sequential (QoQ) figures in the prose below and in Target Valuation Range for a fairer comparison.

Why each moved: Revenue grew because the consolidated base now includes Smartfren and Smart Telecom's subscriber and data revenue that Q1 2025 never had - data and digital services revenue alone rose from Rp7,887 billion to Rp10,864 billion. Operating income collapsed 92% because total operating expenses grew even faster than revenue (+61.7% YoY, Rp7,242 billion to Rp11,711 billion) as the combined cost base - including Rp2,069 billion of merger-related accelerated depreciation this quarter alone, per the company's own normalized-PAT reconciliation - landed against a revenue base that only grew 37%. EBITDA held up far better than operating income because it adds back that same depreciation, which is exactly why the company centers its own guidance and investor messaging around EBITDA rather than operating income or net income this year. Free cash flow, computed here as operating cash flow minus capital expenditure (Rp6,732 billion minus Rp2,242 billion), is materially higher than the Rp3,150 billion "Free Cash Flow" the company's own investor presentation reports - see Beyond the Usual for why. Total cash rose largely because the combined entity now holds Smartfren and Smart Telecom's cash balances too, not from one quarter of strong cash generation.

Key Operational Metrics

• Mobile subscribers: 69.4 million, down 5% quarter-over-quarter from 73.0 million in Q4 2025 as the combined subscriber base continues "market repair" (removing low-value/inactive SIMs) following the merger; up 18% from XL Axiata's pre-merger 58.8 million, not a comparable figure.
• Blended mobile ARPU^»: Rp47,300, up 6% quarter-over-quarter from Rp44,800 - the clearest evidence the quality-over-quantity subscriber strategy is working, continuing a trend from Rp39,500 pre-merger.
• Mobile data traffic: 3,867 petabytes, down 3% quarter-over-quarter from Q4 2025's 3,998 petabytes, still up sharply from the pre-merger base as the combined network absorbs both carriers' traffic; management attributes a 21% Ramadan-period traffic surge within the quarter to network resilience rather than underlying growth deceleration.
• Fixed broadband subscribers: 0.94 million, flat quarter-over-quarter but down from the pre-merger 1.02 million - the one operational line that hasn't shown a post-merger recovery.
• Network integration: approximately 40,300 towers/sites integrated onto XLSmart's combined network, with 77% of the towers targeted for consolidation already dismantled; total BTS count reached 253,750, up 12% quarter-over-quarter (54% above the pre-merger base). 5G footprint expanded to 43 cities as of end-March.
• Seasonality: Q1 spans Ramadan (mid-February to mid-March 2026 this year) and Lebaran preparation, a structurally strong period for Indonesian mobile data and top-up activity - a reader comparing this quarter's traffic/ARPU strength to a non-festive quarter (like Q3) should expect some of that gap to be seasonal, not a step-change in demand.

Segment Comparison

XLSmart reports two segments: GSM mobile and telecommunications network services (99% of revenue) and managed service and information technology services (1% of revenue, serving enterprise customers). The Group operates in a single geographic market, so no geographic segmentation is reported.

The core mobile business carries essentially the entire reported net loss - the tiny managed-service segment lost only Rp2 billion - confirming this quarter's loss is a mobile-network integration story, not a problem in the small enterprise IT-services line. That smaller segment's own revenue actually declined slightly (Rp125,830 million a year ago to Rp118,962 million this quarter, largely on lower information-technology-service revenue), a trend not obviously tied to the merger and worth watching for whether it's a one-off client loss or a genuinely shrinking line, though at 1% of revenue it doesn't move the consolidated picture either way.

Beyond the Usual

Goodwill From the Merger Was Finalized This Quarter, Lower Than First Estimated

In March 2026 - within this reported quarter - XLSmart completed its purchase-price-allocation measurement period for the Smartfren/Smart Telecom merger, reassessing the fair value of net assets acquired at the original April 2025 acquisition date. The reassessment increased the fair value of net assets acquired by Rp359,810 million (with a related deferred tax impact of Rp79,158 million), which reduced the previously provisional goodwill from Rp6,713,131 million to a final Rp6,432,479 million. None of this goodwill is expected to be deductible for income tax purposes. This is routine purchase-accounting housekeeping, not a red flag, but it's the kind of detail that only shows up by reading the actual notes rather than the summary presentation.

A USD1.74 Billion Network-Expansion Commitment Sits Ahead

As at March 31, 2026, the Group had outstanding purchase commitments for network expansion totaling USD1,738,794,197 (equivalent to Rp29,547,330 million) - more than two and a half times this single quarter's entire revenue. This is a real, contractually committed forward obligation layered on top of a debt load (including lease liabilities) already running at roughly 2.84x gross EBITDA, up from 2.59x a year earlier (see The Prescription). The company's FY26 guidance of ~Rp15 trillion in capitalized capex is consistent with working through this commitment over time rather than all at once, but a reader should know the total forward obligation is materially larger than any single year's guided spend.

The Merger Brought In the Sinarmas Conglomerate as a Major Related-Party Universe

Following the merger, three Sinarmas-linked entities - Bali Media Telekomunikasi, Wahana Inti Nusantara, and Gerbangmas Tunggal Sejahtera - together hold roughly 30.1% of XLSmart's shares, alongside Axiata Investments (Indonesia)'s 34.7%. That ownership stake pulled a wide swath of the Sinarmas group into XLSmart's related-party disclosures for the first time: palm-oil companies (PT Ivo Mas Tunggal, PT Tapian Nadenggan, PT Sinar Kencana Inti Perkasa), insurers (PT Asuransi Sinarmas, PT Asuransi Simas Jiwa), a securities firm (PT Sinarmas Sekuritas), a hospital operator, and PT Bank Sinarmas Tbk itself - where XLSmart held Rp246,694 million in cash deposits at quarter-end (0.22% of total assets, down from Rp1,037,903 million, or 0.90% of assets, at December 2025). None of these relationships are disclosed as anything other than ordinary-course telecommunications-service and technology-product sales, but the sheer number of newly-related entities is a direct, quantifiable footprint of what the merger actually changed about who XLSmart transacts with.

The Balance Sheet's Own Share-Count Footnote Contradicts Itself

The face of the interim balance sheet describes issued and fully paid capital as "18,199,862,451 (2025: 13,128,430,665) ordinary shares" - but the adjacent numeric columns, and the company's own share-capital note, both show 18,199,862,451 shares outstanding at both March 31, 2026 and December 31, 2025 (the share-capital note's composition table for the two largest shareholders, minority directors, and the public sums to exactly 18,199,862,451 as of both dates). The "13,128,430,665" figure appears to be a stale reference to the pre-merger share count, left in the balance sheet's descriptive text without being updated after the reviewed financial statements were finalized. It doesn't change any reported total (the par-value amount, Rp1,819,986 million, is identical in both columns), but it's a genuine internal inconsistency inside a PwC-reviewed financial statement that a careful reader comparing the face statements to the notes would catch.

The Rupiah Weakened Enough After Quarter-End to Matter

As a subsequent event, the company discloses that the IDR/USD rate moved from Rp16,993 (March 31, 2026) to Rp17,375 by May 11, 2026 (the date the interim financial statements were signed). Restating the Group's foreign-currency-denominated monetary position - dominated by roughly USD70.5 billion (in original-currency-equivalent millions) of US-dollar trade payables against about USD22.0 billion of US-dollar monetary assets - at the later rate would increase the unrealized foreign exchange loss by Rp18,570 million. XLSmart's revenue is almost entirely Rupiah-denominated while its capital expenditure and network-equipment payables are mostly US-dollar-denominated, so further Rupiah weakness is a real, ongoing cost pressure rather than a one-off translation footnote.

The Company's Own "Free Cash Flow" Metric Is Narrower Than It Sounds

The investor presentation reports Q1 2026 "Free Cash Flow" of Rp3,150 billion, explicitly defined in a footnote as EBITDA minus capitalized capex - not the conventional operating-cash-flow-minus-capex definition used elsewhere in this project's coverage (and in Key Financial Metrics above, which computes Rp4,491 billion on that conventional basis). The company's own measure understates actual cash generation this quarter rather than flattering it, so this isn't a case of a company dressing up a weak number - but a reader comparing XLSmart's headlined "Free Cash Flow" figure against another company's conventionally-defined FCF would be comparing two different things without knowing it.

The Company Bought Back Dissenting Shareholders' Stock, Then Resold It to New Buyers Six Months Later

In April 2025, XLSmart repurchased 1,038,188,987 shares from shareholders who voted against the Smartfren/Smart Telecom merger and exercised their right to sell at an agreed price of Rp2,350 per share. In October 2025 - with the stock trading well above that level following the post-merger rally (see Target Valuation Range) - the company sold 1,094,676,787 treasury shares (the buyback plus shares from an earlier program) to two named buyers, Winsley International Engineering Limited and Fitzgerald & Wilkinson Investment Ltd., at Rp2,500 per share. The company ended the process with zero treasury shares outstanding at both March 31, 2026 and December 31, 2025 - a clean resolution, and a specific, named answer to "who bought into this merger after the dissenters left" that a reader following ownership changes wouldn't otherwise have.

Target Valuation Range

Bottom line: EV/EBITDA scenario math implies a roughly Rp1,530-Rp5,092 fair-value range (bear-to-bull) against a Rp2,950 actual close - sitting closer to the base case than either extreme, which reads as fair-to-slightly-cheap for a company whose normalized profitability has now held for two straight quarters, but only if the USD1.74 billion capex commitment and rising lease-adjusted leverage flagged above don't force a renewed slide toward the bear case.

A full multi-year DCF isn't attempted here: this is only the second quarter (following Q4 2025) with a fully post-merger, normalized profitability base, too short a track record to project multi-year cash flows with any real confidence. What follows is a labeled EV/EBITDA sanity check instead.

Market-cap and enterprise-value buildup (18.20 billion shares outstanding at both dates, per the company's own share-capital note):

Peer-multiple comparison (revenue and EBITDA annualized ×4 from the quarter, since only one post-merger quarter's trailing history exists so far):

The multiple actually compressed quarter-over-quarter even as normalized EBITDA held essentially flat - the share price fell faster (Rp3,750 to Rp2,950, -21.3%) than debt grew, so this reads as the market de-rating the stock rather than the business deteriorating. P/E isn't a usable multiple this quarter since the company reported a net loss.

Peer check against Indosat: on the lease-inclusive basis used above, XLSmart's 5.17x normalized EV/EBITDA looks like roughly double Indosat's own Q1 2026 multiple of ~2.62x (annualized). Some of that gap is a methodology mismatch rather than a real valuation gap: Indosat's own post computed its multiple with lease liabilities excluded from debt, while the buildup above includes XLSmart's Rp40,169 billion of lease liabilities (mostly tower rentals) as debt. Recomputing XLSmart's enterprise value the same way Indosat's post did - using only interest-bearing debt excluding leases (Rp21,118 billion) - brings enterprise value down to roughly Rp72,105 billion and the normalized EV/EBITDA multiple down to about 3.3x. That's still a premium to Indosat's 2.62x, but a far smaller one than the headline 5.17x-vs-2.62x comparison suggests, and a reasonable part of the remaining gap likely reflects XLSmart's currently higher leverage and its still-unresolved integration costs, rather than the market simply pricing XLSmart more richly for no reason.

DCF-lite scenarios (a single EV/EBITDA multiple applied to annualized reported EBITDA, not a full discounted cash flow):

Reading the table: the Rp2,950 actual close sits almost exactly between the bear and base cases, closer to base - roughly consistent with a market that has priced in the reported-versus-normalized noise this post spends most of its length explaining, without yet giving XLSmart credit for two consecutive quarters of stable ~46% normalized EBITDA margin. The USD1.74 billion capex commitment and the rising lease-adjusted leverage ratio flagged in Beyond the Usual are the most likely catalysts that could push this toward either end of the range over the next few quarters.