Indosat Ooredoo Hutchison ended 2021 well with revenue growth of 12.4 % (Y-o-Y) to $2.19 billion. The two entities, Indosat Ooredoo and 3 Indonesia, successfully merged on 4^th January 2022, making it the second-largest telco in the country.

Indosat Ooredoo has seen its fortunes fluctuate considerably in the last four years. The telco witnessed its toughest year in 2018. It made a strong comeback in the following years with a dual focus on managing costs and driving growth.

What happened in 2018?

Cellular subscriber numbers declined from 110 million to 53 million. ARPU declined by 7.9% and the telco booked a huge net loss. There were frequent changes in the leadership team, with the talent attrition rate estimated to be around 8%. This series of events was alarming for the stakeholders, the share price declined by 25% (Y-o-Y).

Turnaround story

Its comeback is a great example of a telco’s turnaround story. Ahmad Abdulaziz Al Neama and Vikram Sinha, the new CEO and COO respectively, were appointed in mid-2019 and made some bold moves.

• Formulated a three-year turnaround strategy (2019-2021)
• Strong focus on 4G- planned to spend US$2 billion on capex, building more 4G BTS throughout Indonesia
• Reduced headcount

1. Limited its recruitment and did not give annual bonuses to its employees for the first time.
2. It went through a restructuring in 2020; as a result, 667 employees were let go.

• Addressed 3 key issues in its services

1. Changed value-added service partners that were not transparent to resolve ‘disappearance’ of mobile phone credit
2. Retailers had higher purchasing power since sales and distribution employees did not emphasise end-customers. Hence, the telco prioritised connecting directly to the end-user through digital channels.
3. The so-called ‘unlimited packages’ were not really unlimited, creating many problems with its address of terms and conditions on its services. The telco simplified its product to resolve this issue for a better consumer experience.

Solid comeback in 2021

The dual focus on costs and growth resulted in EBITDA growth two times revenue growth, i.e., 21.4% and 12.4% respectively. The telco focused on delivering high-quality services to acquire new premium users. They added new 2.7 million mobile users in the year totalling 62.9 million users, and an ARPU increase of 7.7%

Indosat Ooredoo continues the growth momentum with 3 Indonesia

Indosat Ooredoo and 3 Indonesia merged on 4th January 2022, creating Indosat Ooredoo Hutchison. The merged entity is now the second-largest telco in the Indonesian market. Its combined revenue total ups to $3.1 billion. With greater financial strength and expertise, the telco has a new corporate vision, “To Become the Most Preferred Digital Telco of Indonesia”.

The focus is on digital transformation and delivering more innovative products to the customers. Indosat Ooredoo Hutchison does not want to limit digital transformation to the company; instead, it aims to contribute further to the digital transformation agenda of the country.

Cost savings through the merger

1. OPEX savings: Costs savings are expected by decommissioning duplicate sites (25-30%) and optimising other infrastructure.
2. CAPEX savings: More efficient use of combined spectrum resources and increased scale to enhance CAPEX efficiency.
3. Non-network savings: Increasing efficiency in sales, marketing & distribution. Creating opportunity for additional savings in spending related to providers & partners

Key partnerships announced post-merger

Indosat Ooredoo Hutchison is focusing on building the right partner ecosystem, especially in the context of 5G and catering to the enterprise segment. They have announced some key partnerships right after the merger.

• Cisco-enhancing connectivity solutions

1. Allow Indosat users to connect and access on-premises or any cloud-based business applications, enhancing connectivity.
2. Deliver innovative Software-Defined Wide Area Networking (SD-WAN) solutions.
3. Control SD-WAN, the one-stop solution connecting data centres, branches and co-location facilities to improve network speed, security and efficiency.

• PT Merah Satu Indonesia – Distribution & Marketing

1. Expanding existing telco products and services to secondary cities
2. Migrating prepaid to post-paid subscribers because it is a huge market opportunity
3. Diversify with non-telco revenue by leveraging their extensive sales channels
4. Conducting the “Telcopreneur” program for Indonesian consumers who intend to earn extra income by selling its products.

• PT Bank QNB Indonesia- Financial services (Ucan)

1. The online loan service UCan, accessed through the myIM3 application which is the Indosat Ooredoo Hutchison ecosystem.
2. UCan is characterized by two main features:
   1. Cash withdrawal ― A cash withdrawing feature that can be transferred to the customer bank account and payment can be made in instalments with various tenure options.
   2. Instalment feature — Used to purchase data package products available exclusively for UCan users with the payment period ranging from 3 to 6 months instalment on the UCan package.

• Inligo Networks- Fibre optic telecommunication submarine cable system

1. Enables new low-latency and high-capacity data network through fiber optic cables
2. Connects and expands Indonesian cities to new regions like Australia, Guam, Singapore, and the United States through Indonesian waters on the 18,000 km system
3. This construction will provide up to a 128 Tbps network throughout the system. This will allow the telco to provide a broader network, especially for eastern Indonesia.

Key focus areas for the merged entity – 5G and enterprise

The management is confident that the enterprise market is a huge opportunity for the telco. Recently, it also partnered with Google to push digitalisation across SMBs and enterprises in Indonesia. With 5G in the picture, the telco is initiating vertical use cases relevant to each industry’s requirement. We can expect the merged entity to focus on developing 5G use cases in healthcare, transportation and manufacturing.

In 2022, Indosat plans to lay the groundwork by building the right platform for the enterprise segment. This is expected to create a wider customer pool and act as a growth engine for the company in the coming years.

The future for Indosat Ooredoo Hutchison

A superior digital experience, network expansion outside of Java, delivering cost savings and growing the enterprise business are at the top of the priority list for the growth of Indosat in the future.

Although CAPEX spending is likely to increase by 40% majorly to push 5G coverage in Indonesia, the revenue growth for the telco is expected to be aligned with the Indonesian market in 2022.

Click here: To listen to insights from Vikram Sinha, CEO, Indosat Ooredoo Hutchison