Indosat Ooredoo Chooses to Return to Khitah, Reduced Digital Business Division

Indosat Ooredoo will focus on its main business, cellular, as a khitah, reducing the digital business division through announcements service closure Cipika e-commerce, Cipika Bookmate e-book application, and e-money application my wallet this year. This was stated directly by President Director & CEO of Indosat Ooredoo Alexander (Alex) Rusli in front of the media, yesterday (12/6).

Alex assessed that the digital business that he started doing since he was elected as CEO at Indosat five years ago, did not produce any results for the company. According to him, the various digital lines that Indosat has invested in do generate revenue, but the growth is not running sustainable.

"There's nothing wrong with this, it only damages EBITDA. Usage only increases when it's given a promotion. I have to stop when I have to stop, right? If I was outside doing digital outside, maybe I'll do it. But the matrix is ​​not the same as the telko, where there are four matrices. Namely EBITDA, revenue, EBITDA margin, and profit. I don't get value at all while growing digital business," he explained.

According to Alex, five years is enough time to simply try out new services outside of the cellular business. During that time, his party has disbursed many injections to support digital businesses. However, he is reluctant to reveal the value of the investment that has been disbursed by the company.

"Everytime I want to make it grow, I have to sacrifice something else. For example, the money I should be able to use for marketing, sales, build network. In the end this doesn't happen self-sustained, can not live it himself."

The closure of Indosat's various digital businesses, he continued, was the company's most feared thing. Moreover, many digital innovations are disruptive to the market, it is feared that they will become the master's weapon for telecommunication operators.

Indosat itself has a power that cannot be shifted, namely the license as an operator. There is an allocation of network frequency from the government which is the main force for Indosat's existence in the market. This, in the end, forces the company to perform various efficiencies because the room for making profits is shrinking.

"Yes, really afraid [of innovation] disruptive], but we have a license with a frequency allocation from the government. That's the one that no one can take away from us. Either way, digital is the future but telko as network provider will always have a place in that ecosystem. Maybe the profit margin is not as big as it used to be, it's actually getting harder for us. So the key is becoming more efficient."

In Indosat's financial report in the first quarter of 2017, the company's profit was depressed by 19,9% ​​compared to the same period, worth Rp. 173,9 billion from the previous Rp. 217,2 billion. The company's total revenue grew 7% to Rp7,28 trillion, the contribution from the cellular business amounted to Rp6 trillion and the rest from non-cellular (MIDI and fixed telecommunications) of Rp1,23 trillion.

Find a business partner for Artajasa

As part of its support for its subsidiaries or perhaps the realization of efficiency measures, Indosat is preparing to find a business partner for PT Artajasa Electronic Payments (Artajasa), a joint ATM network management company, which is under the auspices of PT Applicationnusa Lintasarta.

Later the business partners will enter through the issuance of new shares with a maximum ownership of 25%. Indosat does not plan to participate by injecting fresh funds to increase its share ownership. Automatically makes the shares diluted.

Alexander revealed that there were four partners who had expressed their interest in joining Artajasa. All of them come from foreign financial institution companies. It's just that he is reluctant to reveal his names and ensure that the process of determining the winner will continue for the next two months.

"We are looking for partners, there has never been any talk of selling [Artajasa] issue new shares with a maximum share ownership of 25%. That's a mature study. The execution is still on, there are four candidates. It will be decided in the next two months."

Indosat owns 72,36% stake in Lintasarta. This subsidiary is specifically playing in the data communication and information technology sector.

In total, Indosat has six subsidiaries, namely Indosat Singapore Pte. Ltd., Indosat Mega Media, Interactive Vision Media, Starone Mitra Telecommunications, Digital Exchange Portal, and Lintasarta.