Celebrating client successes

The digital economy in Indonesia is vibrant, dynamic and evolving. For telecommunication players to harness the opportunities this economy holds, they need to be forward thinking and agile with the ability to quickly pivot to remain competitive and capture market share. 

The merger of Indosat Ooredoo Hutchison is a visionary move in this regard. Indosat is now positioned as the second largest telecommunications (telco) operator in Indonesia with annual revenues of almost US$ 3 billion, and more than 100 million customers. 

To share their thoughts and insights into the Indonesia’s growing digital economy, Deloitte’s role in the successful merger and integration, and Indosat’s vision as a new force in Indonesia, Rob Hilliard, Deloitte Asia Pacific Consulting Leader, sat down with Vikram Sinha, President Director and Chief Executive Officer of Indosat, for a fireside chat.

Here is a summary of the conversation. Watch the full video to experience the full journey.

Indonesia’s digitalisation journey

Rob Hillard (RH): Could you share with us your thoughts on Indonesia’s digitalisation journey? What have you observed? Where are the opportunities? 

Vikram Sinha (VS): Indonesia is at the forefront. Everyone talks about Indonesia being the digital powerhouse of Southeast Asia, but, Indonesia is heading towards being one of the best digital powerhouses in the world.  

I say this as I observe Indonesia’s digital gross merchandise value. Today, it is around US$75-77 billion. By 2025, it will double to close to US$250 billion. Also, the country is heading towards being the 10th largest economy by GDP by 2030, and by 2050, if will be the fourth largest.  

These ingredients, together with forward-looking government policies, such as the omnibus law, is paving the way and laying the foundation amidst the uncertainty in Indonesia.  

RH: What do you think are the growth drivers for Indonesia’s digital economy? 

VS: The number one driver is the Small and Medium Enterprises (SMEs). Indonesia has close to 62 million SMEs, and a collective effort is needed to get SMEs into the digital fold. This has a direct impact -when the SMEs grow, Indonesia’s GDP will grow. We will also see the large enterprises follow closely behind. 

Of course, increasing the pool of digital talent is also a driver that will help build a stronger foundation for the digital economy to thrive.  

Opportunities in Indonesia

RH: In what areas do you see gaps that can present opportunities in Indonesia's digital economy in the future?

VS: Indonesia is a very big county – it is similar to the size of Europe in terms of land area – and this presents challenges for all the telco operators in terms of making sure that we deliver the same experience in Jakarta and Surabaya, and in areas like Nusa Tenggara and Papua.

This is where Indosat has a role to play. With Indosat’s scale, we want to serve the needs of every Indonesian.

Additionally, the level of digital literacy is still lacking. At a larger scale, this is a bottleneck for SMEs who want to digitalise their businesses. There is also untapped potential in the rural population, and a growing middle class.

The opportunities are endless.

Indosat supports Indonesia’s digitalisation success

RH: With such endless opportunities, how do you think Indosat can contribute to Indonesia’s digitalisation success?

VS: Indonesia is all set to become a Southeast Asia digital powerhouse. The drive this transformation, the Indonesia government has developed its Digital Indonesia roadmap to create a digital society. The plan is ambitious, and it covers a wide range of areas – for example digital financial services, digital entertainment, digital education and digital health.

For this plan to become a reality, Indonesian telco operators, including Indosat, play a vital role. By expanding and improving our network across the country; by brining outstanding online services to the communities that have traditionally been underserved; and by supporting the communities in which we operate through social initiatives and investments, we can move the needle and help Indonesia get there faster.

RH: That’s a really good point. In your view, how is the Indonesian telco landscape evolving?

VS: There have been significant market shifts that are changing the Indonesian telco landscape. For instance, the sector is facing supply chain pressure, rising inflation and tightening consumer spending, which means that there are challenges in the areas of services and product differentiation, and customer experience.

When we merged last year, we said that this merger is very good for Indonesia. We are now one year post-merger.

Previously, the sector was stagnant – some years we saw one percent growth, some years there were no growth. In 2022, we saw that the sector grew by five percent. I believe that this was a result of structural changes, with our merger being one of them.

Now, there is a lot of action happening among all the telco operators to ensure that the whole sector is more sustainable, and that it is playing a bigger role in the digital economy.

Empowering Indonesia through the merger

RH: Could you explain further why you thought there was a need to embark on this merger?
 
VS: From Day Zero, we said that firstly, this merger would be very good for Indonesia. Secondly, it would be good for our customers. Thirdly, it would be good for our shareholders.
 
We have seen from global examples that our business is a scale business, and usually, there are only top two or, at maximum, three telcos that are able to achieve economies of scale. This is especially the case in Indonesia – it has such a large topography, with so many islands. With the telco business being capital intensive, it is very important that we bring synergy.
 
One year after the merger, we are seeing better utilisation of the spectrum, our customers are benefitting, and the sector is doing much better. So, this merger has brought value to everyone.

RH: What is Indosat’s wider vision?
 
VS: Our larger purpose is to empower every Indonesian. Now that we have achieved scale with the merger, we want to connect and empower by being the real driving force. How can we be part of our customers’ journey? How can we work with our partner ecosystem to make sure we are adding value at every step? Are we getting good results through our efforts?
 
RH: Thank you. Let us zoom out a little. In the wider telco sector, how does M&A provide benefits?
 
VS: We have seen a lot of reports showing that telcos globally have not been able to give shareholder returns. The benefits of M&A are firstly, it helps uitlise important resources more effectively. Secondly, it drives the objective of creating the much-needed digital infrastructure in a country. And, it gives assurance to shareholders.
 
I strongly believe that many others will follow after us – we are seeing this already in Malaysia, and Thailand is preparing. I am happy that we are contributing to more positive and successful mergers, especially in the telco space.
 
RH: Of course, an organisation is anchored by its customers, how do you think this merger benefits your customers?
 
VS: I think this is an important question. For sure, the merger has given us the scale to deliver a better experience to our customers in terms of indoor experience, speed and latency. But more importantly, from a shareholder point of view, we have to keep in mind that a lot of investment is needed so that the benefits flow through.

Working with Deloitte

RH: I have to ask, why was Deloitte chosen to support the merger? What was your experience with the Deloitte team?

VS: When we were looking for someone that myself and my team to learn from, there was no one we knew who had worked on a merger of this scale. We wanted to find someone that can partner with us.
Deloitte has been a great growth partner. The team from Deloitte is very grounded, and we are aligned in terms of mindset and principles. The Deloitte team not only helped us with the integration; the team also helped us solve real challenges with great agility. It has been an impressive journey with Deloitte.

Rob, perhaps you could share the role Deloitte will play in helping us with this post-merger integration.

RH: I am delighted to do so. The team will deliver across three key modules. Firstly, we will support Indosat’s integration management office or IMO, by assuming Project Management Office responsibilities. Key activities we will perform include establishing the integration team with a governance structure designed to empower decision making. Underpinning these activities is Deloitte’s proprietary cloud-based M&A central platform, which has been configured to serve as a mission control to track milestones and risks across the entire post-merger integration journey. Secondly, the team will focus on the design of an integration master plan that will seek to translate Indosat’s integration strategy into execution. This will include, for example, functional blueprints and work plans to leverage existing spectrum assets to enhance in assets 5G market position relative to its competitors. Thirdly, the team will set the targets and put in place the best practices for Indosat to achieve and perhaps even exceed its planned synergies.

VS: As an overview, why is Deloitte’s support useful in post-merger integration for telcos?

RH: In a high-pressure post-merger integration environment, with little time or room for error, it can be a tall order for organisations to manage the complexities of an integration while tending to their business continuity needs. So, for this reason, our clients turned to us for support, so they can avoid the surprises and other common pitfalls that abound in these sorts of processes. By bringing a structured approach, and a discipline honed from our extensive experience, we can play an important role to help our clients maintain razor sharp focus on the execution timeline, and de-risk critical steps in the process. Ultimately, we want to help boost our clients’ chance of success across the entire merger and integration from strategy right through to execution.

Working with Deloitte

RH: Lastly, Vikram, what is your personal vision for the future? Both for Indosat and for Indonesia? And indeed, what is the passion that drives you?

VS: It is very clear on my mind, that in Indonesia, Indosat is a very strong brand name, and we are very committed to empowering every Indonesian. Not only myself, but all employees of Indosat, really connect to this mission and purpose.

In terms of personal mission, I think, between me and my management team, we have all agreed that we want to create history not become history. Our only focus is to make this merger a world-class case study that we can all be proud of.