PARTNER INTERVIEW: Indosat Ooredoo Hutchison laid out ambitious plans to connect a huge untapped segment of users and aid Indonesia’s Industry 4.0 programme by working with enterprises of all sizes to improve productivity and bring quality connectivity across the entire archipelago.
The major force behind its growth blueprint is the merger of Ooredoo Group and CK Hutchison’s respective units in a $6 billion merger after receiving regulatory clearance for the transaction in January 2022.
The merger created the second-largest provider in the market, and in December Indosat surpassed the 100 million mobile subscribers milestone. It closed 2022 with 102.2 million subscribers, behind market leader Telkomsel with 173.3 million. LTE users now account for nearly 75 per of its total.
Following the tie-up with Hutchison Tri, the operator doubled its LTE base station count to 137,000, with about 25,000 sites across the island of Java putting it on par with market leader Telkomsel, said Indosat president director and CEO Vikram Sinha (pictured).
The operator estimates over the next two years 21 million new first-time users will move from Google, which its research shows are so eager to adopt mobile service they are willing to pay a premium.
During a media briefing at MWC Barcelona, Sinha said: “This is a big opportunity. We have to bring quality not only to major urban areas such as Jakarta, but to all villages.”
Indonesia has the fourth largest population in the world with around 273 million people. Over the next five years, internet penetration is forecast to increase from 77 per cent to 86 per cent, with data users rising from 161 million to 190 million.
Cellular spend as a percentage of GDP lags many countries in Southeast Asia, behind both Thailand and the Philippines by a significant margin.
Sinha underscored the importance of giving every citizen access to data services. “For people to earn their livelihood, they need to be connected. The moment they get connected they get into the digital ecosystem.”
Over his two decades working in the industry, he doesn’t think the sector has done a very good job of building trust with customers. “You have to build simple, transparent services.”
Indosat, for example, offers 3GB for INR35,000 (about $2.30), with no added charges or conditions.
Singha noted the mobile market in Indonesia was mostly flat for the past five years, but started growing again in 2022, with Fitch Ratings forecasting 8 per cent 9 per cent revenue growth, up from 6 per cent.
The operator predicts consolidated revenue will grow at above the overall market.
When the merger was completed, the company outlined a two-year plan for full integration of the two networks, with equipment from Ericsson, Nokia and Huawei. The integration work with Ericsson was concluded. By March, it expects to complete the work with the other two vendors.
“We are off to good start but still have a lot of work to do.”
He noted cultural integration was a major focus, adding it’s important to “integrate your culture fast. If you don’t do it within one year, there is risk it will never happen”.
In terms of corporate structure, he argued giving both partners joint control is its biggest advantage because one party doesn’t have absolute control. “That means management has to do what is right for the business and build credibility to ensure you can move fast. To execute, I need all my employees to galvanise under one purpose.”
Waiting for spectrum
Sinha explained with the government yet to reveal when it will release C-Band spectrum it is not waiting to move ahead with 5G.
“The ecosystem needs to be ready. We started in 2019 and now have close to 400 5G sites in six cities. We’re experimenting with 5G services until more dedicated spectrum comes,” arguing the next-generation networks are not just about speeds.
He explained the company wants to be ready to monetise the technology, allowing “us to solve real challenges”.
With home broadband penetration at just about 10 per cent, the CEO sees an opportunity for 5G as a substitute for fibre.
When people move to 5G, he noted they consume more data, while the cost of delivering a megabyte is lower than 4G. “This is good news for me.”
In mid-February the company reported 2022 financial results, with profit and revenue both jumping sharply, impacted by the tie-up. Mobile revenue was up 58.4 per cent year-on-year to IDR40.2 trillion.
It shut down its 3G network at end-2022, freeing up spectrum in the 1800MHz and 2100MHz bands. It turned off 19,000 3G sites last year, with the last 3,000 to be decommissioned soon.
To fund is continued network expansion, the operator is looking to sell more tower assets after closing a deal in March 2021 to offload some 4,200 towers to Digital Colony subsidiary EdgePoint Indonesia for $750 million.
The operator’s total capex increased 74 per cent in 2022 to IDR12 trillion, raising the capex to revenue ratio to 25.7 per cent from 22 per cent in 2021. Sinha said the operator aims to reduce the capex-to-revenue ratio to below 20 per cent in 2023, even as the full-year outlay rises to IDR13 trillion.
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