From Telco to Techco: A Transformation Journey of Indosat Ooredoo Hutchison in Empowering Indonesia

29 September 2023

Indonesia is the fourth most populous country in the world, with a land mass comparable to Europe. As such, capex intensity is high compared to other parts of the world. However, you must invest to grow the market. For telcos, it’s about being in the right place at the right time; and right now, there is a huge potential for growth in the country. Back in 2020, COVID-19 brought with it a silver lining; remote working, healthcare and education highlighted the importance of telecommunications. It’s up to us how we build on this opportunity.

From telco to techco

Before the merger of Indosat Ooredoo and Hutchison 3 Indonesia last year to create Indosat Ooredoo Hutchison (Indosat or IOH), most people had written us off. Fitch had placed us on negative watch, and Moody’s cited integration and execution risks as well as uncertainties over future financial policies.

Prior to the merger, we had a market cap of US$2.3 billion – today it’s more than US$5 billion. Our share price too has increased fourfold from IDR2,300 to IDR9,700. Following a merger, employee satisfaction usually falls, but for us, it’s actually improved 4pp. This merger is good for Indonesia, for customers, for employees, and for our shareholders.

Now that we’re 20 months on from the merger, we’re moving from integration to transformation, from telco to techco. We’re moving from telecom infrastructure to a technology platform; from being dependent upon a few larger suppliers to developing strong technology capabilities. With this transformation, we move to high growth, with ecosystem revenue rather than simple connectivity revenues.

Our techco journey features five pillars

Pillar one – empowering Indonesia – will see us serve 275 million Indonesians, 64 million MSMEs, and help expand the digital economy from IDR1.408 trillion in 2022 to IDR3.216 trillion in 2027. We are coming up with products which are solving real problems and challenges across the entire ecosystem. Today’s telco industry is growing at 4-5%, but the digital economy is maturing too, and we want to be involved. In the next four years, there will be 22 million new users coming from rural Indonesia.

Pillar two – marvellous experience – involves focusing on employees, partners, digital, users, and brand experience. We’re very focused on delivering a marvellous experience throughout the entire value chain.

Pillar three – innovation engine – explores methods for growth, including data, platform, AI and automation, and product innovation. We have created an innovation experience in Jakarta that is on par with Silicon Valley.

Pillar four – digital leadership – starts with building the next generation of leaders. Our top 100 leaders are working together with a single objective, representing key business priorities, and utilising coaches, captains, and team leaders to improve performance targets. It started with building a culture to break down the silos and create tribes.

Pillar five – ‘gotong royong’ or mutual cooperation – talks about partnering strategically with the best and recognising world-class partnerships. I am a strong believer of the philosophy of Indonesia, where you all come together to solve a problem.

Getting the connectivity right

You have to get the connectivity right. It’s about going back to basics, focusing on the connectivity itself. It’s important to establish exactly how we can help. Rather than focusing on the technology in and of itself, we must contribute to solving the real challenges, sustainably.

Today, Indosat has rolled out close to 750 5G sites. The most important thing in 5G is not speed, but the ecosystem. We are learning from everyone, especially some of the big market rollouts we have seen in India. All the investments we’ve made in the last three years are all software-upgradeable to 5G.

We want to make sure that we learn from 2G, 3G, 4G, and we feel that there is still a lot more ‘juice’ in 4G. When I speak about connecting rural Indonesia, it’s all 4G. We need to provide opportunities to people across rural Indonesia, but we must grow in a manner where our capex intensity can balance it. We started with Nusantara where we have made significant investments to ensure that we can deliver 4G. We are looking at East Indonesia now, assessing ARPU.

Once we’ve provided that connectivity, we don’t just connect and forget. We explore the business case for customers, beyond consumer. We looked at options for SMEs, enterprise, and small ticket lending turns out to be in high demand. Accordingly, we’ve partnered with a bank – we can’t do everything ourselves! – for digital lending.

Equal opportunities are important too, particularly in rural regions. Today we’re helping women in rural Indonesia; we have created a programme to build their business proposal, and they get funding as well, sometimes at 0% interest rates. More than just CSR, providing equal opportunities to women has commercial value as well, benefiting you as a company, as a community, and as a society.

For 5G, meanwhile, our focus will be on creating a private public partnership ecosystem and addressing Industry 4.0. We have learned that if you create a private network, the local community also benefits. The use case is the most important aspect for success. There will be a lot of investment coming in on 5G – and the real questions is, how are we going to monetize that? How do we make sure that all these investments are reaching the end users?

We’ve recently partnered with China Mobile to help us bring the whole ecosystem together, especially on the enterprise side. I’ve been very impressed with their AI capabilities and their home broadband strategy. We’re keen to see how AI can increase revenue, and China Mobile has done this at scale already.

The opportunities in Indonesia are immense – it’s up to us how we capitalise on them.