Performance summary

Indosat Ooredoo rolled out a three-year internal transformation plan in 2019 to reposition itself as a growth leader in Indonesia. For year-end December 2020, the operator’s revenues reached USD 1,955 million, growing above the market average at 6.9% Y-o-Y. The company continues to establish itself as a solid second contender in the country’s mobile market, focusing on scaling the 4G subscriber base and infrastructure. In 2020, Indosat Ooredoo had an empowered regional structure in place to help drive a bottom-up approach for strategic planning. The operator’s capex spending decreased to 14.0% Y-o-Y, and capex intensity stood at 31.1% for 2020.

Table 1: Summary of financials, Indosat Ooredoo 2020 vs 2019

Revenue split for key services and customer segments

Figure 1: Revenue split and percentage change for 2020

Key highlights from 2020

Indosat Ooredoo gains revenue share in a challenging mobile market

High competition is a characteristic of the mobile market in Indonesia. The country is on a pathway for consolidation, especially with five players serving 300 million customers. Smaller operators have their ability to generate profits affected by the lack of scale in the market. Customers and their predominantly prepaid preferences have encouraged operators to retain competitive pricing as they scale the subscriber base.

For Indosat Ooredoo, total revenues grew 6.9% Y-o-Y during 2020, above the industry average for Indonesia. The above-average growth has helped the operator double its revenue gap with third placed XL Axiata.

In the cellular market, however, Indosat Ooredoo is the third-largest operator with over 16.8% revenue market share. The operator’s mobile revenue grew by 11.6% Y-o-Y and is second only to late entrant Smartfren. The latter has had success in grabbing market share from incumbent Telkomsel.

Table 2: Mobile revenue for Indonesian operators, 2020 vs 2019

Optimal pricing reflected in better data revenue growth

Data traffic on Indosat Ooredoo’s network increased by 52.8% Y-o-Y between 2019 and 2020. Its 5 million 4G data subscribers were a substantial addition and drove the Y-o-Y growth. The monthly data consumption per user also indicated a rise from 4.5GB in 2019 to 6.8GB in 2020, respectively. Indosat Ooredoo has primarily concentrated on strengthening its 4G capacity and coverage. It serves a base of 60 million subscribers with 62,100 4G base stations compared to XL Axiata and its 54,290 4G base stations. During the year, Indosat Ooredoo added 14,900 4G base stations to its network.

Among the competition, Indosat Ooredoo has managed to inch up on the average data usage. While growth in mobile data use has been on par with the competition, Indosat Ooredoo reported the highest increase in data revenues. The company grew 28.3% Y-o-Y in data revenues, leading its peers XL Axiata and Telkomsel. According to Indosat Ooredoo, its emphasis on service quality helped the operator evade the industry’s ongoing pricing war.

Figure 2: Average monthly data usage per subscriber, 2020 vs 2019

Figure 3: Data revenue growth, 2020 vs 2019

Simplistic pricing helped pivot growth to data services

The contribution of data services to total revenue is higher for Indonesian operators compared to many regional peers. In 2020, Indosat Ooredoo successfully pivoted to a digital business model. The contribution of data revenue increased to 78.2% by the end of 2020, with a rise of 12.8 percentage points.

Figure 4: Data vs non-data revenues

According to the operator, simplistic price plans and relevant product offers helped it improve data revenues. Indosat Ooredoo introduced a range of new product offerings particular addressing the needs of business and educational institutions.

• The company launched the IMPreneur package specifically for the SME segment. IMPreneur allows data sharing for up to 25 users, a 320GB-maximum quota limit and unlimited calls to Indosat customers.
• Indosat Ooredoo partnered with up to 60 online learning platform providers to offer specific data packages for study-from-home requirements. The packages offered a free 30GB quota to access the platforms.
• In addition to Viu and Vidio, Indosat has partnered with Amazon Prime Video to provide bundled data packs starting at IDR 50,000 ($3.6) per month.
• The operator also launched a digital lifestyle sub-brand MPWR (Empower) for its digital natives. The online-only brand allows users to pick basic data packs and a choice of lifestyle services. The MPWR app is designed to curate personalized service offers based on a customer’s preferences across various categories, including fashion, beauty, culinary, music and movies, health and sports, gaming, and gadgets. Ooredoo has partnered with several brands to curate its lifestyle offerings. The basic service plans come with free unlimited calls to other MPWR customers. Its data quota can also be used across popular communications, social, and streaming apps.

Indosat Ooredoo lowered capex intensity, supported by ongoing internal transformations

Capital intensity had declined for Indosat Ooredoo from 38.8% in 2019 to 31.1% in 2020. With the exception of Smartfren, all other operators had a decline in capex spending. While the operator has lowered its capital expenditure by 14.5% Y-o-Y, its capex intensity has remained higher than the industry average of 24.5% for 2020.

According to Indosat Ooredoo, internal transformations and its ability to adopt an analytics-driven network deployment strategy have helped it lower capex. With the revised approach, capex planning is performed at the site-level to drive regional and national estimates.

A focused approach towards upgrading existing 2G and 3G sites to 4G played a role as well by rationalizing any additional spending on legacy technologies.

Figure 5: Capital intensity for Indonesia mobile operators, 2020 vs 2019

Twimbit outlook

• The sustainable performance of Indosat Ooredoo during 2020 has set it for strong growth in the coming year. Focus on 4G will benefit the operator in a market that sees strong demand for mobile broadband services.
• In 2020, Indosat Ooredoo forged multiple partnerships as it took necessary steps towards focusing on growth markets, including hybrid cloud solutions, unified communications and collaboration services.
• With consolidation on the horizon, Indosat Ooredoo is having ongoing merger discussions with Hutchison that can ultimately benefit the two. A combined Indosat Ooredoo and Hutchison will build the required scale for rationalizing operating and capital expenses for both entities.