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© 2024. Proprietary & Confidential. All Rights Reserved. XL – Smartfren Merger: Creating a Digital Champion in Indonesia December 11, 2024 Vivek Sood / Nik Rizal Kamil GCEO & Managing Director / GCFO Analyst & Investor Conference Call
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© 2024. Proprietary & Confidential. All Rights Reserved. Today, we announce our intention to create a leading Indonesian telco with regional telco experience and local expertise PT XLSmart Telecom Sejahtera Tbk ("XLSmart")
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© 2024. Proprietary & Confidential. All Rights Reserved. Transaction overview: Merger of XL Axiata with Smartfren & Smart Telecom, with XL Axiata as the surviving entity Current shareholding structure Post-merger shareholding structure Minority shareholders 77.5%2 22.5% 66.5%1 33.5% 34.8% 30.4% Minority shareholders5 34.8%4 XLSmart • Merger ratio of 72:28 equity value split between XL Axiata and Smartfren respectively • XL Axiata will be the surviving entity and remain listed in IDX while issuing new shares to Smartfren shareholders as per merger ratio • As part of merger, Sinar Mas will receive 21.7% stake in XLSmart while Axiata stake will be 47.9% • Concurrent to merger, Sinar Mas would acquire an additional 13.1% stake in XLSmart from Axiata at a cash consideration of: – USD 400m at completion of the Proposed Merger – USD 75m on the first anniversary of the Proposed Merger subject to satisfaction of certain conditions • Axiata and Sinar Mas will each own 34.8% stake in XLSmart and will remain joint controlling shareholders with equal influence over XLSmart’s strategic direction Minority shareholders • XL Axiata as surviving entity • Smartfren and Smart Telecom to be dissolved 1. Axiata Group Berhad owns a 100% stake in Axiata Investments (Labuan) Limited which in turn owns a 100% stake in Axiata Investments (Indonesia) Sdn Bhd; 2. Sinar Mas’s 77.5% stake is held through four corporate entities, namely PT Bali Media Telekomunikasi (41.2%), PT Global Nusa Data (16.7%), PT Wahana Inti Nusantara (10.2%), PT Gerbangmas Tunggal Sejahtera (9.4%); 3. PT Industri Telekomunikasi Indonesia (Persero) ("PTT INTI") holds a minority stake of 0.003% in Smart Telecom; 4. Post merger, Sinar Mas’s 35% stake in the XLSmart will be held through four corporate entities, namely PT Bali Media Telekomunikasi (24.6%), PT Global Nusa Data (4.7%), PT Wahana Inti Nusantara (2.8%), PT Gerbangmas Tunggal Sejahtera (2.6%); 5. Includes stake held by PT INTI; Note: Numbers excludes treasury shares; Shareholding may not sum to 100% due to rounding 99.997%3
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© 2024. Proprietary & Confidential. All Rights Reserved. XL–Smartfren merger marks a significant progress in executing Axiata Strategy Business StrategyCorporate Strategy Operational Excellence Reinventing Operating Model Winning Culture Journey to Telco-Techco Portfolio Optimisation & Value Illumination
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© 2024. Proprietary & Confidential. All Rights Reserved. Structural transformation in Indonesia expected to drive long- term value creation for Axiata ✓ ✓ ✓ ✓ ✓ XL – Smartfren Merger Link Net Delayering • Carve-out ServeCo to XL • Transform Link Net into FibreCo • Build-to-suit FTTH deployment by Link Net for XL Organic Initiatives • ARPU increase • Direct distribution ✓
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© 2024. Proprietary & Confidential. All Rights Reserved. Rationale i) XLSmart has greater scale and is commercially stronger Merger results in a stronger Mobile operator and transforms the Indonesian Mobile sector into a 3-player market Standalone (LTM Q3 '24) Pro-forma (LTM Q3 '24) XLSmart Mobile subscribers ~58.6m ~35.9m ~94.5m Pre XL-FREN merger (%) Post XL-FREN merger (%) Customer Market share (LTM Q3 '24) Telco ATelco B XL Smartfren 45% 28% 17% 10% Telco A Telco B XLSmart 45% 28% 27% Note: Numbers may not add up to 100% due to rounding. All financials as of LTM September 2024; Assumed FX (USD / IDR) of 16,000; Financials presented are pre-synergies; EBITDA values denote revenue less operating expenses plus depreciation / amortization Source: Omdia; Company disclosure; Company quarterly report; Team analysis Revenue (IDR tr) 33.8 11.6 45.4 (USD 2.8b) EBITDA (IDR tr) 51.5% 17.4 5.0 43.1% 49.4% 22.4 Margin (%) (USD 1.4b)
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© 2024. Proprietary & Confidential. All Rights Reserved. Rationale i) XLSmart has greater scale and is commercially stronger XLSmart has comparable spectrum holding to compete Telco spectrum holdings (MHz): Opportunities for XLSmart: • XLSmart gains sufficient scale in Spectrum to compete against other Telcos in Indonesia • Larger spectrum holdings provides greater capacity for XLSmart to improve network experience for enlarged customer base15 22 22 30 25 45 40 15 45 60 30 45 40 50 30 5040 XL Axiata Smartfren MergeCo Telco A Telco B 90 62 152 165 135 850MHz 900MHz 1800MHz 2100MHz 2300MHz MergeCo has #2 overall spectrum, but #1 in low band
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© 2024. Proprietary & Confidential. All Rights Reserved. Network and IT Network footprint optimization : decommission 20-30% of sites from overlapped footprint Procurement Vendor negotiation : leverage volume and price book matching to attain best prices Commercial Targeted network expansion : selectively invest in targeted cities with a focus on profitability Channel optimization : optimize acquisition spends by going direct to retailers and optimizing incentive structure Digital channel acceleration : deliver superior digital experience to increase spending/cross- selling and optimize commission Rationale ii) Synergistic value and operational efficiencies XLSmart to realize annual run-rate pre-tax synergies of US$300 – 400M post completion of integration Function Key initiatives Opex Capex Lease
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© 2024. Proprietary & Confidential. All Rights Reserved. Rationale iii) Local partnership and strong ecosystem support from shareholders Axiata and Sinar Mas provide in-depth Regional telco experience and Local market expertise to XLSmart Top Indonesian diversified group with businesses across key sectors, bringing in deep market knowledge and local synergy Leading telecommunication and digital group with presence over 9 countries across Asia, bringing in operational expertise Further synergy with wider ecosystem of companies of joint-controlling shareholders: • Linknet + Moratel: Drive convergence across mobile base leveraging combined homepass footprint • ADA: Boost A2P and analytics services by tapping ID fast-growing ecommerce sector (~IDR 2 tr GMV by '27) • SM+ Data Center: Leverage upcoming DC capabilities to provide end-to-end enterprise solutions and position XLSmart as the preferred Indonesian Enterprise service provider • DANA Digital Wallet: Drive adoption across combined sub-base of >90m and cross-sell telco and financial offerings Source: Press Search; Twimbit; Team analysis Axiata ecosystem Sinar Mas ecosystem
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© 2024. Proprietary & Confidential. All Rights Reserved. Rationale iv) Financial resilience and improved returns Indonesia ARPU is below regional peers, merger expected to lift ARPU as experienced in past consolidations 2013 2014 2015 2016 30 30 32 33 +4.3% 2021 2022 2023 H1 ’24 36 39 41 42 +6.9% 2013 2018 2023 30 32 41 +3.2% Market blended ARPU (IDR k): … supported by local market consolidation Market blended ARPU (IDR k): Overall, Indonesia ARPU trend increasing… Indonesia ARPU as a % of GDP/capita remains behind regional peers ARPU1 as % of GDP per capita, 2023 (%): 1. Blended ARPU across all telcos in the market; Source: Omdia; Worldbank; Team analysis Indonesia Sri Lanka Bangladesh Malaysia Philippines India Thailand Vietnam Cambodia 0.6% 0.4% 0.6% 0.8% 0.8% 0.9% 1.1% 1.2% 1.9% 2013-14 2021-22
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© 2024. Proprietary & Confidential. All Rights Reserved. Rationale iv) Financial resilience and improved returns XLSmart will be more competitive to capture growth opportunities in Home and Enterprise ID KH PH MY TH 21% 15% 30% 52% 52% Fixed broadband household penetration (%): Home: Opportunity to grow household broadband penetration to meet peers Key trends in the Indonesia ICT market: • Large-scale digitalization: Accelerated transformation of Indonesia's MSMEs (11% to 36% digitalized from 2020-23) • Accelerating IoT Adoption: Growth in smart manufacturing boosting IOT adoption • Increase in SaaS Workloads: shift to SaaS for cost efficiency, scalability, and ease of access • Shift to Public Cloud: Leveraging advanced analytics and platform capabilities for flexibility and cost-efficiency • Growing demand for DC Capacity: driven by traditional and AI investments • Shift to localization/data sovereignty: esp. public sector and financial sector data Enterprise ICT: Digital transformation acceleration across enterprises in Indonesia driving opportunities for enterprise solutions Telco-addressable Enterprise ICT revenue projection (IDR Tr): '23-'28 CAGR 16%Cybersecurity 8%Data center 5%Mgd NW & services 22%SaaS 16%IOT 42%IaaS Source: ITU; World Bank; Omdia; MOCD; Gartner; Twimbit; Team analysis 2.3 13.16.6 13.8 0.7 2.0 1.9 1.5 0.40.2 2023 0.50.5 2028F 11.7 31.7
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© 2024. Proprietary & Confidential. All Rights Reserved. Effects of Proposed Merger on Axiata
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© 2024. Proprietary & Confidential. All Rights Reserved. Transaction leads to value accretion of ~USD0.2b (~RM0.8b) to Axiata, with future upside once synergies are realized • Value of Axiata stake in XL pre-merger: USD1.2b • Post-merger & equalization: • Value of Axiata stake in XLSmart: USD0.9b • Equalization payment: • USD 400m at completion of the Proposed Merger • USD 75m on the first anniversary of the Proposed Merger subject to consideration conditions • Total value to Axiata: USD1.4b • ~USD0.2b (~RM0.8b) value accretion for Axiata from the transaction Valuation (USD b): Note: Totals may not add up due to rounding; 3-month volume-weighted moving average price (VWMAP) as of 9th December 2024 used to determine XL Axiata standalone market capitalization; Exchange rate at 16000 IDR:USD1 and USD1:RM4.42; XL shares: 13.1b; Smartfren shares: 476.7b; Axiata s/h in XL: 66.5%; Sinar Mas s/h in Smartfren: 77.5%; Source: Bloomberg 1.2 1.3 0.9 0.6 0.90.6 0.8 0.8 XL Axiata standalone, 90-day avg market cap XLSmart (pre-equalization) XLSmart (post-equalization) 1.8 2.7 2.7 Axiata stake Sinar Mas stake Other shareholders + USD475m (RM2.1b) equalization payment
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© 2024. Proprietary & Confidential. All Rights Reserved. Impact to Axiata unaudited 9M results as at 30 Sept 2024: PATAMI, Gearing and ND/E Illustrative impact of deconsolidation of XL and Axiata receiving cash consideration of USD 475m from Sinar Mas Unaudited 9M results as at 30 Sept 2024 Unaudited 9M results as at 30 Sept 2024 (after Proposed Merger) 1,172 1,217 PATAMI (RM m): 1.21 0.77 Unaudited 9M results as at 30 Sept 2024 Unaudited 9M results as at 30 Sept 2024 (after Proposed Merger) Gearing (x): 2.59 2.48 Unaudited 9M results as at 30 Sept 2024 Unaudited 9M results as at 30 Sept 2024 (after Proposed Merger) Net Debt / EBITDA (x): Q3 2024 information is based on unaudited financials and is presented for illustrative purposes only, to highlight the impact of the proposed merger
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© 2024. Proprietary & Confidential. All Rights Reserved. Governance
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© 2024. Proprietary & Confidential. All Rights Reserved. XLSmart to be jointly controlled by Axiata and Sinar Mas, with equal representation in BOC and BOD Committee # members Nomination rights Board of Commissioners 9 Axiata: 3 Non-Independent + 1 Independent Commissioner Sinar Mas: 3 Non-Independent + 1 Independent Commissioner Joint: 1 Independent Commissioner Board of Directors 10 Axiata: four (4) directors (incl. CEO) Sinar Mas: four (4) directors (incl. CFO) Joint: two (2) directors
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© 2024. Proprietary & Confidential. All Rights Reserved. Additional BOC sub-committees created to support XLSmart operations Committee Objective Board Audit Committee (BAC) Oversees audit processes, financial reporting, and compliance with regulations Board Nomination and Remuneration Committee (BNRC) Oversees nomination and remuneration policies for key roles Board Risk & Compliance Committee (BRCC) Advises on risk management, compliance, and governance-related matters Merger Integration Committee (MIC) Provides advisory recommendations for the integration of merger activities Board Investment Committee (BIC) Oversees financial decisions on investments below certain thresholds Technology Advisory Committee (TAC) Advises on technology strategies and innovations for XLSmart Procurement Committee (PrC) Oversees procurement processes and ensures vendor selection aligns with financial thresholds and policies Statutory committees
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© 2024. Proprietary & Confidential. All Rights Reserved. Summary and Timeline
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© 2024. Proprietary & Confidential. All Rights Reserved. Summary of benefits from XL - Smartfren merger to Axiata Proceeds of USD 475m (RM 2.1b) from shareholding equalization from Sinar Mas to pare down debt Increased scale to drive innovation and future growth (e.g., improve network experience, 5G, Home, Enterprise) Gain a strong local partner in Indonesia Drive market consolidation to enable better ability to compete Retain joint-control of a larger Mobile Operator. Share of upside from synergies
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© 2024. Proprietary & Confidential. All Rights Reserved. Transaction expected to close by first half of 2025 10 Dec 2024 Definitive agreement Signing 11 Dec 2024 OJK & MOCD submission By 1H 2025 Merger Day 1 OJK approval & Bursa submission Bursa approval Axiata EGM XL Axiata & Smartfren EGMs ~ 1.5 – 2 months MOCD approval process Shareholder approval process OJK approval process ~3 months MOCD approval
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© 2024. Proprietary & Confidential. All Rights Reserved. Thank You