What a difference a year makes: Indonesia’s most successful merged telco learns lessons for Industry 4.0 and customer experience | VanillaPlus

Less than 18 months ago financial markets reacted badly to news of the planned merger of Indonesia’s second and third largest mobile network operators (MNOs), with credit rating agency Fitch, for example, placing Indosat on Negative Watch. This year, Vikram Sinha, president director & CEO of Indosat Ooredoo Hutchison had a vastly-improved AA+ story to tell at Mobile World Congress 2023, as editorial director, Jeremy Cowan reports.

Full year results for 2022 have seen an increase of 49% year-on-year to US$3.06 billion and EBITDA profits climbed by 42.3% in the same period. “The numbers speak for themselves. But two or three things I’ll highlight which give me personally a lot of confidence.” They are customers, customer satisfaction and the companies’ integration. “

We have already completed integration with three partners, Ericsson, Huawei, Nokia, and I want to take this opportunity to thank them. It was not about vendor relationship. It was a very different partner-first approach; at the highest level we said how we need to get together to make it successful, how they need to support me in the short term and how I need to reciprocate in the mid-term.” The work with Ericsson in Jakarta is done. Jakarta is like Tokyo, with highrise buildings’ adding complexity. The Huawei and Nokia work will be completed by March. “So, what we said in two years will be completed in 12 months.”

Sinha explains they did this with a clear guiding principle, to put more focus on (customer) experience than on cost. “That doesn’t mean that we will not deliver definitive value, we said $300 million to $400 million in three to five years. I can confirm to you in three years we’ll be delivering recurring synergy value of $400 million and that is where the assets are complementary, with all the spectrum holding. This is very good for the sector (and) good for Indonesia.”

He needed all his employees to galvanise under one purpose as Indosat now has more than 100 million customers. Indosat is a 55 year-old company, with a strong brand, he says. But on the other hand it is a “one-year new company” but the first company connecting Indonesia to the world. Indosat was the first Indonesian company which brought satellite.

Scale and quality are twin goals

One of Indosat’s key goals is to ensure that we give very good customer experience not only in Jakarta, but across Indonesia. He also offers a reminder of the country’s enormous scale. Economists forecast it will have the world’s 4th largest GDP by 2030. “Between now and next school year, there are 21 million new First Time Users, especially coming from rural areas. It is like a new Australia getting born in Indonesia every year. These are the kinds of opportunity, so we have to bring that quality not only in cities like Surabaya, Jakarta, we have to bring it to all the villages.”

VanillaPlus points out that Indosat recently agreed the sale of 1,600 telecom tower sites, 997 to Mitratel and 633 to dhost, plus a 10-year leaseback agreement for 1,500 sites that was to be completed in Q1 this year. So, what was the net value of the sale? And how does Sinha plan to use these funds to improve the digital experience for customers in Indonesia?

“The net value is somewhere around $150 million. We want to be asset-light,” says Sinha directly. “I was trying to solve Jakarta’s indoor coverage issue. I went to New York to understand how they are doing it in high-rise buildings. One of the learning areas, was you need to have subject matter experts like dhost, a company from Japan. They are very specialised on IBS (in-building services), improving what I was seeing in Indonesia. That is the reason why we got somebody who’s the best to call on our strategic intent.”

He has not yet decided how to invest the sale proceeds. “I’ve been getting lots of questions on the dividend policy. At the right time, I will let you know.”

One of the themes underpinning the US$6 billion merger was enhancing the country’s development of Industry 4.0. So, VanillaPlus asked, what steps has Indosat taken since then to benefit local enterprises not just for small or medium-sized enterprises, what else are they planning with their technology partners?

“I will give you a specific example. There’s a place called Nura Bali in Indonesia. They are churning out methane and converting that into steam, and they want all the Industry 4.0 automation, they want private networks with all our partners. We are trying to give it to them, they are ready to pay, but they want reliable, high-quality service.” This, he says, is where the whole orchestration needs to get all the partners, give them the solution and deliver quality services far from Jakarta. “It’s a two and a half hour flight, but when I went there I was impressed with the kind of work that is happening there. These are the things we have started. Also, we have started looking at ports, how we can make sure of all these automations. And there are some learnings we are picking up and we are talking to partners here at MWC, how we can get it going.

Not waiting for 5G spectrum

“We are not waiting for 5G spectrum. We work on a $2 or $3 ARPU (monthly average revenue per user), we want to make sure before I start putting serious money on 5G, at least my ecosystem is ready.  Most of the use cases, while you talk about 5G we’re on 4G when it comes to big enterprise, it’s all coming from Industry 4.0. But still we have a long way to go. You know we only work and collaborate with the right partner to give what our customers need. But the key message is, there are a lot of opportunities here (in Indonesia).

“Obviously, you don’t want to run two of the three networks,” media attending the roundtable asks. “But Indonesia is not a consolidated country in landmasses, geographic coverage, and population. How has the merger put you in a position to fill those gaps?

“I want to clarify that we have finished 3G completely,” says Sinha. “By March we will have dismantled it completely and that is giving us 50% of the 3G band. The other important thing is you are absolutely right. Today, my physical fight and this is the power of the merger, after eliminating all duplicate sites is equal to Telcomcel, around 25,000. Without the merger I would have never been able to do it, that is the power. The other beauty is my spectrum holding is the best in the industry. So this is the beauty of Java for teaching Java I couldn’t be able to deliver a world class customer even with all my partners like Huawei, and the people who are working with me in Java. You must have heard of Bali but there’s a place called Nusa Tenggara where Bali and Nusra come together. After the merger in Nusra I had only 605 (cell sites) whereas the other friends of mine have 1800 or 2000. So, these are the places where I’m building the network. Places like Nusa Tenggara, places like Papua (a province of Indonesia) … we want to make sure our network is ready. People are paying premium I want to give them an option.”

Does Indosat have the most spectrum holdings in Indonesia?

Vikram Sinha takes personal pride here, “I have a total of 65 MHz, but if you look at my revenue market share versus spectrum market per customer I’m in a very good position. This is where Fitch’s report articulated it well, and I am learning from them. I have a total spectrum holding up 65 MHz and I have 100 million customers. So, when you look at customers, my spectrum market share is upward of 20%, my revenue market share is still 27%. I have all the things needed to serve my customers.

Jeremy Cowan

One of the journalists asks, “Where do you stand with 5G? You said you’re not waiting for 5G spectrum.”

“5G we have been getting ready for from 2019 because 5G needs lot of work on transport,” he replies. “Indonesia, in terms of landmass area, is not easy to bring the fibre to site, and so that work has been happening. We have launched close to 400 sites on 5G. The key learning is 5G is much more density, it is not about the speed gain. If you have a good 4G network, you can stream. 5G has to benefit and I’m very happy that India is going to scale on 5G. So, the ecosystem is getting ready. We are waiting for the C-band spectrum to come. And then whenever it comes we’ll be ready.

“The flip side of it and I’ve seen in my own group in Ooredoo in places like Qatar where they had the World Cup they invested first and monetising is still going. I can’t do it with $2 (ARPU). I want to be making sure that we are ready to monetise, we have the ecosystem ready. But 5G, we want to make sure it benefits the country. It is helping us solve real challenges especially on Industry 4.0. And then they have a clear case of low latency. The other opportunity on 5G is Indonesia has 77 million households. The home broadband is under Index, only 10-11% penetration. There’s a lot of debate between fibre to home versus WP (wireless protocol).” Sinha concludes, “We are not waiting for 5G to come, we want to make sure we are ready with all those things. We are in a good place to monetise that and serve some purpose.”

To learn more about Indosat Ooredoo Hutchison, please click here.

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