Indosat Ooredoo Hutchison (Indosat or IOH) has transformed from a traditional telecommunications company to a technology-driven company, also known as a techco. This transition reflects Indosat’s commitment to embracing change and innovation in the rapidly evolving digital landscape. By integrating advanced technology and digital solutions into their core operations, Indosat aims to provide marvelous digital experiences and connectivity to their customers. This strategic shift has been successful, positioning Indosat as a pioneering player in the Indonesian telecommunications industry and boosting digitalization in the country.
A Three-Year Digital Transformation Journey
Indonesia's evolving economy and its impressive roster of more than 200,000 enterprise customers, as well as the highest number of unicorns in Southeast Asia, set the stage for Indosat’s ambitious goals. With the vision to deliver world-class digital experiences, connect and empower every Indonesian, Indosat initiated a three-year digital transformation journey in 2019.
Since the inception of this journey, Indosat has achieved remarkable success. Notably, the company has experienced seven times the growth of its competitors and boasts five times the EBITDA compared to average market standards. Indosat’s consistent, stellar, performance quarter after quarter indicates that the company is well on its way to becoming the leading digital telco in Indonesia.
In a noteworthy development, the company has achieved improved profitability, marked by a substantial 21.7% increase in EBITDA, which now stands at IDR 17,400 billion. This growth in EBITDA surpassing the rate of revenue increase highlights the company's ability to enhance its financial performance and stability.
Indosat also reported significant positive financial results, with a notable year-over-year (YoY) revenue increase of 8.5%. Furthermore, their net profit for the period reached IDR 2,215 billion, highlighting a continued strong generation of net profit. Furthermore, the net profit for the first quarter of 2023 amounted to IDR 287 billion, followed by IDR 986 billion in the second quarter and IDR 942 billion in the third quarter.
The Role of Network Automation in IOH’s Digital Evolution
A pivotal driver of Indosat’s digital evolution has been network automation. In today's hyper-connected world, network automation is a crucial component for addressing the growing complexity of networks, interoperability challenges between Original Equipment Manufacturer (OEM) partners, and the rising network issues. It has played a vital role in reducing network incidences and ensuring network stability and reliability, which are foundational for providing an exceptional customer experience.
The automated network operations at Indosat rest upon three key pillars:
- Strong Integration with Customer Interface Tools: Indosat has prioritized integration with customer interface tools to enhance the overall customer experience. This seamless connection allows for better communication and problem-solving, ensuring that customer needs are met efficiently.
- Best-in-Class Operations Supported by Automation Governance: A robust automation governance framework ensures that automation processes are efficient and effective, minimizing errors and maximizing the benefits of automation. This approach is essential for achieving high customer satisfaction.
- Smart Energy Management and Seamless Network Consolidation: Efficient energy management not only reduces costs but also contributes to environmental sustainability. Indosat’s commitment to energy savings aligns with its overall vision for responsible business operations.
Digitalization and Automation for Sustainable Operations
Digital transformation and automation serve as crucial foundations of Indosat’s network operations sustainability. These elements empower the company to address the increasing demands for connectivity while mitigating the impact of human-related issues. This approach aims to achieve zero incidents and elevate end-user experiences.
The incorporation of AI plays a pivotal role in Indosat’s strategy, facilitating the scalability and orchestration of agile, intelligent, and zero-touch networks to address everyday operational challenges. This approach positions Indosat as a leader in providing outstanding connectivity experiences to its customers, reinforcing its commitment to technological innovation and service excellence.
Tangible Value Delivered
In terms of customer metrics, there has been promising growth, with an increase of 8 million customers year on year. This demonstrates an upward trajectory in customer traction. Additionally, in the 3rd quarter of 2023, the Average Revenue Per User (ARPU) has experienced healthy growth, with a 2.5% YoY increase, indicating higher customer spending.
The usage of Indosat’s digital apps has notably surged, with a 9 million YoY increase in Monthly Active Users (MAU). This reflects a growing engagement with their digital services. Data traffic has also seen steady growth, with a notable 16.5% YoY increase, underlining the increasing demand for data services.
Additionally, Indosat’s is progressing toward realizing synergies at the upper end of the estimated range, reaching around USD 400 million within roughly three years, post-merger. This achievement stands as a significant milestone as of January 4, 2022. This progress reflects Indosat’s commitment to realizing the full potential of its merger and the value it can offer to its customers and stakeholders.
Indosat’s made improvements in its operating expenses (OPEX) and cost of services (COS) over the course of a year. In the period from 9M22 to 9M23, there was a reduction in COS by 2%, personnel expenses decreased by 5%, and general and administration expenses decreased slightly by 1%. However, marketing expenses increased by 8%.
Overall, OPEX expenses decreased by 2%, but depreciation and amortization expenses increased by 9%. Other operating income and expenses showed a significant improvement of 86%, resulting in a 14% increase in total expenses.
Moreover, Indosat has been steadily increasing its capital expenditure (CapEx) investments year over year, but at the same time, it has managed to maintain an efficient CapEx to Revenue ratio. In the third quarter of 2022, the capitalized CapEx was IDR 7,003 billion, which then increased by 11.0% to IDR 7,773 billion in the same period in 2023.
The CapEx to Revenue ratio was 20.3% in the first nine months of 2022, and it increased to 20.7% in the same period in 2023, marking a 0.5 percentage increase. In the second quarter of 2023, the ratio was 14.6%, and it climbed to 27.2% in the third quarter of 2023, showing a 12.6 percentage increase.
Overall, these figures demonstrate the company's dedication to investment and growth, as they have increased their CapEx investments while still maintaining a financially prudent CapEx to Revenue ratio.
Indosat’s journey toward a zero-touch network operations environment remains an ongoing commitment, with a focus on investing in infrastructure and embracing digitalization and automation to empower customers, drive industrial transformation, and propel Indonesia's digital economy.
