Indosat: Empowering Indonesia Through Gotong Royong

Since the merger of Indosat Ooredoo and Hutchison 3 Indonesia in January 2022, the newly combined operator, known as Indosat Ooredoo Hutchison (Indosat or IOH) has demonstrated impressive performance. Vikram Sinha, a thought leader in telecom industry and President Director & CEO of Indosat, the second-largest mobile network operator in Indonesia, shares insights into telecom trends and key learnings from this merger. Vikram also delves into the company’s commitment to empowering Indonesia and its journey towards becoming a TechCo. Throughout the interview, he emphasizes the significance of collaboration or “Gotong Royong” in Indonesia.

With rich experience in the telecom industry across different countries, what key changes have you observed in the sector?

Having been in the industry for two decades, I think COVID has been a silver lining for the industry. It made not only us but also policy makers and governments realize the importance of the whole industry when it comes to working, studying or even getting entertained from home. For me, that was a complete turning point.

What COVID has done is that customers are seeking a better experience rather than a cheap product. Data, which is our core connectivity, is not just a consumption. Even during times of inflation, our industry is least impacted because data is primary, helping both B2C and B2B customers do a lot of productive work at a fraction of the cost. For example, ride-hailing drivers in Indonesia who spend $5 per month are my high ARPU customers, compared to the average customer spending $2.5. That $5 per month helps them earn $500, making it a primary necessity rather than a mere consumption.

Similarly, if you look at SMEs, the moment when COVID happened, they realized that they had to go online and do business. The role of the telecom industry, along with partners like ZTE, has come to the forefront. The challenge is how to grow our core business while also building adjacent revenues. Telcos like us want to transition from being a pure Telco to being a TechCo. Indosat aspires to be an AI-native TechCo, and we see the importance of IoT and data in achieving this. Leveraging data with proper AI allows us to do a lot of things such as enhancing security for both our enterprise and B2C customers. We are getting more serious with these areas, and we want to do it with partners. We strongly believe that the next decade is all about collaboration to solve real problems. This is the infinite journey we are on.

Consolidation is also a big trend. As a newly combined operator, how do you plan to project the Indosat image in Indonesia?

I think this is a very good question. You are right because our business is CAPEX intensive. What was happening was that with governments and policymakers understanding the important role of the telecom industry, it was getting very important for the telecom industry to be more sustainable. Consolidation is a move towards sustainable growth and it benefits everyone.  

Our case is a clear case study. When our merger happened on January 4th, 2022, I was asked a lot of questions by analysts and investors, and even rating agencies had put us on negative watch. I don’t blame them because historically, most of the in-country mergers struggle in the first two years. We started the journey by saying that this merger is good for the country first, and good for our customers and our shareholders.

I’m happy to share with you that we are heading towards one of the most successful mergers and the numbers speak for themselves. Our market cap, which was $2.3 billion when the merger happened, is over $5 billion today. We now have 100 million customers, and we have seen the benefit for our customers.

My message to the industry is the role we play is very important. It is very important that we work closely with partners and government agencies on carving out a path in this digital era, where infrastructure is data.

What operations & management philosophy have you brought to Indosat?

The biggest learning I have had is about culture and people. When integrating two different sets of culture, you need to decide how to set a culture and ensure that you are able to integrate people. Do whatever is needed if it is difficult, and do it in a fair, transparent and timely manner. Over the last 21 months, 80 percent of my time has been spent on culture and people. We always say that culture and people are soft aspects but they are the real hard aspects. Other things will follow if we get these right.

Another big learning was looking at the merger with a maximizing mindset—how we can make 1 plus 1 equal 11. Rather than focusing only from an optimized synergy value, which is my job to deliver, we galvanize the whole organization around the idea of maximizing. The second principle which greatly helped us was prioritizing customer experience over cost. Customers care more about how their experience improves rather than the merger itself. If we can deliver on that, they will support us.  

Under your leadership, Indosat has achieved a robust financial performance. What is your strategy to navigate the fast-paced digital landscape?

We are moving from integration towards more of a transformation mindset. Now, we are looking at all those things from a transformation mindset—how we can leapfrog and set regional and global benchmarks. Our center of focus is delivering marvelous experience, be it for employees, customers or even partners. We work very closely with partners like ZTE. We have close to 900+ vendors, shortlisting 22 as strategic partners. Our principle around working with partners and solving real problems is really something we are excited about.  

Secondly, Indonesia’s digital gross merchandise value (GMV) is more than $80 billion today and will grow to $110 billion by 2025. We have a role to play there, and that is where we believe we cannot do it alone. We need a partner ecosystem and that is the agenda we are driving.

In what ways does Indosat accelerate Indonesia’s digital transformation?

Indosat, a 56-year-old brand, was the first company that connected Indonesia to the world. The brand is very strong. People in small cities and even in villages expect much more from Indosat. With our expanded scale of 100 million customers, we want to focus more on rural areas. There are close to 25 million first-time internet users coming from rural Indonesia. From an opportunity size point of view, it’s like a new Australia getting born in rural Indonesia.

We are investing more to give a good network and connectivity, but we don’t want to stop there. Our purpose of empowering Indonesia starts with connecting, and then we want to be a part of their journey. For instance, in rural areas or cities, if they need micro lending, we help them through our partner. If they need other solutions for small and medium enterprises, we strive to provide plug-and-play options to help them earn $10. If they earn $10 through our support, for sure they will give us $2. That is the approach we are taking.

Another big piece of digital Indonesia is skill development. Without skill development, there is a shortage of close to 10 million skilled digital talents. Through our CSR initiative, Indosat Ooredoo Hutchison Digital Camp, we have developed more than 250,000 digital talents. We believe that every dollar spent on technology needs to be backed up with money spent on skill development. Again, we can't do it alone. We keep encouraging all our partners to come in.  

How does ZTE contribute to Indosat’s digital transformation journey?

ZTE has been one of the fastest-growing partners in my ecosystem. When I arrived in Indonesia in 2019, they had some small piece. Their big entry came with IP. They were the first to deploy SRv6. We are very happy with their performance. They also help us on DWDM and transport. Most importantly, I see that ZTE now is more focused on customer experience because that is paramount for us. The most important thing is how we can deliver the best customer experience, and we cannot do it without our partners.

How are you doing in the aspect of the transition from Telco to TechCo?

In the first two years after the merger, our focus was on getting the integration right and enhancing the customer experience. Now, we feel that we have the skills and are in a good shape to move to the TechCo journey. Our TechCo journey has five pillars.

The first pillar is the purpose of empowering Indonesia. Another significant aspect is the creation of an innovation stack. That innovation stack is not about conducting R&D but about working with like-minded partners to solve real problems. We have put aside some budgets on trying products and solutions that help solve real problems. Our approach with partners, known as “Gotong Royong” in Indonesia, is all about collaboration. We have our Indosat Marvelous Xperience Center in Jakarta, where ZTE is a key partner showcasing a lot of use cases. The whole principle is innovation and co-creation to solve real challenges. We are fast-tracking this culture, and we have seen some good results.  

Moving forward, what are your priorities, and what can we look forward to in Indosat's future?

The top priority is to continue growing our core business. We believe that if we perform well in our core business, we can achieve much more in adjacent revenues. We want to record close to double-digit growth in our core business in both ToC and ToB. A key thing in 2024 will be more investments in the rural areas. With around $800 million CAPEX deployed annually, we want to ensure that at least 55 percent of this investment goes to rural Indonesia.         

The second priority involves adjacent revenue and the transition to TechCo. We have started a project called Meranti that focuses on three verticals: fintech, TechCo, and home broadband. We have set an ambitious target to increase the adjacent revenue, currently only 3 percent of our total revenue, to up to 20 percent. This year, we are doing around $45 million, and we want to take it to $1 billion by 2026. As we get into this infinite journey, the real focus will be on execution, and that is where we are building our capabilities.