Jakarta. The costly merger process between Indonesian mobile operators XL Axiata and Smartfren Telecom is beginning to show results, with the combined entity, XL Smart Telecom Sejahtera (EXCL), reporting stronger revenue growth and easing integration costs in the first quarter of 2026.

According to the company’s financial report, XL Smart’s revenue rose 38% year-on-year to Rp 11.83 trillion ($676.2 million) in the January-March period from Rp 8.60 trillion a year earlier, although revenue slipped 1% quarter-on-quarter.

Despite the improvement, the merged operator still posted a net loss of Rp 716.93 billion in the first quarter, compared with a profit of Rp 384 billion in the same period last year.

The merger and system integration process weighed heavily on the company’s finances throughout 2025, when XL Smart recorded losses of Rp 4.42 trillion ($252.7 million). Integration-related expenses alone reached Rp 2.35 trillion during the year.

However, integration costs fell sharply to Rp 28 billion in the first quarter of 2026. The company estimates total integration spending for 2026 will reach around Rp 1 trillion, as it completes the merger process from a systems and technology standpoint.

XL Smart is projected to return to profitability in 2027, with estimated net profit of around Rp 3 trillion.

According to company data, the merger is expected to generate savings of up to $300 million this year. By the end of March 2026, XL Smart’s 5G services had expanded to 43 cities, offering speeds of up to 250 Mbps, with further expansion planned gradually.

The company also reported that consolidation of telecommunications towers had reached 77% of its target.

As a result, download speeds for customers have improved, while operating expenses declined significantly from Rp 7.78 trillion in the fourth quarter of 2025 to Rp 6.41 trillion in the first quarter of 2026.

Nevertheless, the company’s subscriber base fell 5% quarter-on-quarter to 69.4 million users from 73 million previously, while data traffic declined 3% to 3,867 petabytes.

Mobile average revenue per user, or ARPU, increased 6% to Rp 46,300 in the first quarter of 2026, compared with Rp 44,800 in the previous quarter.

Analysts Daniel Widjaja and Wilbert Arifin of Mirae Asset Sekuritas maintained an overweight recommendation on Indonesia’s telecommunications sector and named XL Smart as their top pick, raising their target price for EXCL shares to Rp 4,300 from Rp 3,030 previously.

EXCL shares closed at Rp 3,100 on Tuesday.

The analysts cited improving mobile-data yields and rising ARPU as key reasons behind their positive outlook.

“We expect significant corporate actions in 2026 to become strong positive catalysts, increasing investor confidence in both the mobile and fixed broadband segments. EXCL remains our top pick due to its most attractive growth prospects compared with competitors,” Daniel and Wilbert wrote in a research note published Tuesday.

Potential risks facing XL Smart this year include slowing ARPU growth and intensifying competition in both the mobile and fixed broadband markets.

Chief Executive Rajeev Sethi said the company’s main focus is now strengthening network quality and expanding the 5G customer experience across Indonesia.

“We want to ensure every customer can enjoy faster, more stable, and seamless connectivity to support growing digital needs. Network integration and 5G expansion are the main foundations for XL Smart in building Indonesia’s next-generation digital experience,” Sethi said in a statement.