Vikram Sinha, President Director and CEO of Indosat Ooredoo Hutchison, has revealed the strategies and growth plans for the future.
Indosat just announced its 9M23 results, can you give us a quick update on how the business is performing?
We announced our 9M23 result on 30th October and were pleased to report robust operational and financial performance, confirming the strength of the growth opportunity in Indonesia. We kept up our strong performance so far in the first nine months of 2023, where we saw revenue increasing by 8.5 percent to Rp37.5 trillion and importantly our normalized EBITDA is growing more than 2x of revenue increasing by 21.7 percent to Rp17.5 trillion. We have also managed to deliver a consistent net profit of Rp942bn this quarter bringing the 9M 23 normalized net profit to Rp2.2 trillion. This is our 11th consecutive quarter of generating a strong normalized net profit. Some of the other highlights for the first nine months of 2023, is our EBITDA margin which increased by 5.1 percentage points to 46.7 percent while we have added 0.8mn subscribers compared to last year with our ARPU growing 2.5 percent compared to the prior year. Our own app is also seeing good traction as we have seen the number of monthly active users increase by 9 million so far this year. Our continued growth momentum has been underpinned by our commitment to delivering a marvelous experience and simple, affordable products to customers, together with the expansion of our network into underserved rural communities, particularly in Eastern Indonesia.
2. Indosat Ooredoo merged with Hutchison 3 Indonesia in 2022, can you give us an update on progress since then?
We completed the landmark merger of Indosat Ooredoo and Hutchison 3 Indonesia in January 2022. The combined company, Indosat Ooredoo Hutchison (Indosat or IOH) now has close to 100 million customers, making us one of only 11 telcos worldwide with that number of subscribers. We are on track to reach $400mn in annualized synergies by year 3 postmerger as we have completed most of the big-ticket integration initiatives which is mainly around network integration. As of the 9M 2023, we have reached a synergy run rate of just above half or around $205mn in recurring synergies. We continue to focus on several initiatives which is completing the phased dismantling which would be done by year end as well as core integration as well as ICT systems and business process improvements. In the 20 months since the merger, we have successfully integrated the two companies, the networks, and our people. In parallel, we have continued to deliver world-class digital experiences to our customers, improve our network quality and performance, and deliver robust financial performance as seen in our 9M23 results. Importantly the merger has delivered huge benefits for the industry, for Indonesia’s digital economy and customers, and especially for our employees. And this was the plan from the start. We didn’t do this merger just because it was good for shareholders; we started by saying this is much bigger. We have seen the industry growth also increase after our merger, this proved that this merger is good for Indonesia and for everyone.
3. How has the merger positively impacted Indonesia and the growth of its digital economy?
First and foremost, we are focusing on getting connectivity right. This is the core of our business. It is through mobile internet connectively that we provide the backbone that enables Indonesia’s digital economy to thrive. Google e-Conomy SEA reported Indonesia’s digital economy is expected to grow from IDR1.4 trillion in 2022 to IDR3.2 trillion in 2027 driven by double digit growth in e-commerce, fintech, mobility and digital media. This is where we want to play by partnering and co-creating new products and services that solve the real problems and challenges of our people in Indonesia. Since the merger, we have harnessed our scale and resources to accelerate 4G network growth in rural areas and increase our network quality and speed. One of our biggest roles is to expand network infrastructure to meet latent demand among rural populations that are currently underserved. Over the next four years, we expect to create 23 million new internetconnected customers in rural areas as our network expands – this is the equivalent of the entire population of Australia. But we are also supporting Indonesia’s digital economy in other ways. We are empowering SMEs and large enterprises to accelerate their digital transformation through enhanced connectivity and by offering tailored solutions as part of our expanding enterprise business. Aside of that, we are partnering with over-the-top digital service providers to provide new services and experiences to our customers and deepen the pool of digital talent in Indonesia. Our scale is helping to attract investment from global technology partners, like Cisco and Google Cloud, which enable us to leverage cutting-edge technologies to support Indonesia’s digital transformation.
4. What is next for Indosat Ooredoo Hutchison and what are some of the initiatives you are employing to drive growth?
As I mentioned before that our focus is to deliver the synergy values to our shareholders and we are on track to deliver it ahead. Roughly 20 months after the completion of the merger, the integration has been largely completed. We are now embarking on the next chapter in our journey. This is our transformation from a traditional Telco focused on providing connectivity, to a TechCo that leverages new technologies and partnerships to offer services and experiences that ride on top of our connectivity. We are working to identify the right partners and operating models, and then roll out services at scale that add values to our customers. The move to a TechCo model is all about taking us to the next level in terms of being able to use new technologies – cloud, data, AI – to structure operations and create new services.
5. What is Indosat Ooredoo Hutchison doing to expand connectivity into rural areas of Indonesia?
We must grow in a manner where our Capex intensity is manageable. Indonesia is a large country, and its Capex intensity can be very high. We know we need to invest to connect the unconnected, and the focus is on rural Indonesia. In underserved rural and remote areas, we are investing in expanding our 4G network. We feel there is a lot more juice left, where 4G devices penetration is still much higher than for 5G in Indonesia. By expanding 4G coverage in rural areas, we will unlock infinite possibilities for a whole new group of digital consumers and potential entrepreneurs to drive Indonesia’s digital economy. Most of our investments in 2023 have been to expand our coverage outside of Java. Over the past 9M, we have significantly strengthened our 4G network in the Nusa Tenggara region of Eastern Indonesia. Our network now reaches more than 80 percent of the population in that region, with the addition of network transmitters (sites) that have doubled mobile internet capacity compared to last year. We are committed to improve our coverage in rural Indonesia as this is aligned with our mission, to connect and empower every Indonesian.
6. Indosat Ooredoo Hutchison has a purpose to “Empower Indonesia”, can you tell us a bit more about how you put this into action?
Indosat has a larger purpose to connect and empower the people of Indonesia by accelerating nation’s digital transformation. Central to this is our empowerment of the Indonesia’s digital economy through the delivery of mobile internet connectivity and especially its expansion into rural areas of Indonesia. We are also empowering Indonesia and Indonesians in other ways, we believe strongly in the spirit of ‘gotong royong’ or mutual cooperation. In May this year we hosted the “Empowering Indonesia Forum” to bring together our strategic partners to discuss how they could work together to contribute to Indonesia’s economic growth. This is part of our action in gotong royong, we ask our strategic partners to work hand-in-hand with us in empowering Indonesia. We have also launched the Indosat Marvelous Xperience (MX) Center, which is a collaboration hub for innovation, co-creation, and empowerment to build world-class products, services, and customer experiences. We want to showcase the best innovation use case that ready to be commercialized by our enterprise customers or can be a leading innovation example to every communities that visit our MX Center. We also have very active CSR programs that focus on three pillars – digital education, women empowerment, and environment. Our flagship IDCamp program, which develops Indonesia’s digital talents, has reached 180,000 participants since launched in 2019, and this year we have expanded the training through partnerships with the likes of Cisco and ITU. It is really exciting journey for us so far and we are really committed to support Indonesia government in accelerating the digital transformation to empower Indonesia.