Bakrie Telecom proud to be a budget operator

Transcription

1

2 VOICE FROM OPERATORS Bakrie Telecom proud to be a budget operator Budget air travel usually implies a no-frills flight experience with little focus on comfort, and miscellaneous additional fees. Is the same true for a budget telecom operator? For Bakrie, the fastest growing CDMA operator in Indonesia, the answer is a decisive NO. So, how do they remain on top of their game? Mr. Muhamad Danny Buldansyah, Deputy President Director of Bakrie Telecom, reveals the wisdom of striking the perfect balance between best value services and an ultra-low cost structure. By Julia Yao A budget profile Founded in 2003, Bakrie Telecom is the fastest growing CDMA operator in Indonesia. Danny attributes the operator s exceptional performance to its budget operator business model, which consists of five main elements: simplicity, affordability, brand, a diverse customer mix, and efficient operating costs and capital expenditures. KISS principle While most operators are aware of the KISS principle (keep it simple, stupid), Bakrie has actually implemented this premise across its service and product portfolio. At Bakrie, we strive to keep services simple, easily understood, and easy to use, so they can be enjoyed by anyone. As a result of price wars, customers are faced with a variety of confusing tariff schemes, with rates constantly changing and valid only at certain hours. In contrast, our rate has remained virtually unchanged since its inception in 2005, and remains the same throughout the day. Such simplicity gives customers peace-of-mind. In addition to keeping its pricing structure simple, Bakrie created an easy way for customers to compare different operators tariffs with the launch of Esia Bispak in Subscribers can trial the tariffs of several GSM operators without replacing their Esia cards, so customers can find out for themselves which really is the cheapest. All they need to do is key in specific code or just call us, and we can switch them to another operators plan or back to our plan. Our system automatically adapts to the tariff changes when they are tested by Esia subscribers. We win either way; if the customer is happy with the tariffs in comparison, so are we, because he pays more to us. If he is not happy, he just moves back, but doesn t switch to another operator. Affordable prices As a budget operator, Bakrie s competitiveness derives from affordable prices and best value. Danny is proud of the numerous firsts Bakrie has brought to the domestic market, including the cheapest call at Rp1.000/hour (0.1USD); the cheapest phone at 20USD, and the cheapest color phone at just 30USD back in 2007 and However, we ve always been careful not to equate affordability with secondtier services and products. We give affordable prices for services that are simple to use and offer extra value. Brand power Brand equity is crucial for Bakrie s success as a budget operator. The company has received numerous awards including the Best Brand Award 2009 from the MARS Research Institute and SWA Magazine in recognition of its leading position in the CDMA field. Equally, Bakrie has a distinct approach to promoting the cost-efficient brand 11

3 concept. We campaign and convey our message in every possible way, but we don t put billboards everywhere. We act with more subtlety; for example, through the radio and blogs. Also, we emphasize product features and affordability, whether we re promoting a given tariff or handset. We make it easy to realize our potential through consumers perception of our brand, says Danny. Customer mix Bakrie targets three major market segments: switchers, dual-users, and first-time users. At the end of 2009, approximately 33% of its customers were first-time Esia users, while 67% were dual-users or switchers. The latter two markets are generally more profitable as usage levels are higher than with new users. In Indonesia, the churn rate is very high 15% per month on average. With 100 million subscribers, this translates to 15 million subscribers switching between operators each month. Our churn rate hovers at around 5% to 6%, much lower than average, which means that we are on the whole winning over the customers. Lighter or heavier From selecting technologies to controlling OPEX, each move Bakrie makes prioritizes cost efficiency. Shift the paradigm Just because we re a budget operator does not necessarily mean that we buy everything cheap. We choose the most sophisticated and reliable equipment for our networks as we cannot afford to lose through downtime and high OPEX in the long term. We very aggressively rolled our network during 2007 and Then, rapid rollout and service provisioning were the key factors for us. We shifted the paradigm in Mr. Muhamad Danny Buldansyah, Deputy President Director of Bakrie Telecom Just because we re a budget operator does not necessarily mean we buy everything cheap. We choose the most sophisticated and reliable equipment as we cannot afford to lose through downtime and high OPEX in the long term. 12

4 2009 by prioritizing quality and customer experience. We are not sacrificing customer satisfaction for the speed of rollout. Even the rollout should be delayed, so be it as long as we are not degrading customer experience. Asset-light strategy Driven by a budget operator philosophy but committed to quality and customer experience, how does Bakrie keep OPEX low? An asset-light strategy is the key. As we started to aggressively expand our network in 2007, we realized the best way was to limit our assets, which we began to do in mid By doing so, we can focus on the core business of providing quality telecom services for our customers. I don t think we can remain effective if we maintain our towers, paint them, cut the surrounding grass and so on this is not our core business. Towers, in fact, represent a key part of this strategy. After a sale and lease back transaction for 543 towers valued at 4.3 million USD, 94% of Bakrie s towers were co-located or leased from tower operators as of December The case is the same for its base stations; during 2009 Bakrie successfully expanded network coverage to 79 domestic cities, raising the number of BTSs to 3,677. Most of these are co-located or leased from third parties. The gains can be seen from many angles. Our cash flow, for example, is considerably better, partly because the ROI for building networks and towers is very low, particularly at the beginning. So, month to month leasing is far superior: when we receive income, we meet our costs. We re implementing this as much as possible, so now, when we need to add network elements or applications, we always calculate the best option: lease or buy. Danny explained how they decide the light and heavy network elements: For high risk assets, I prefer to outsource, making them lighter. Towers, for example, are high risk, because of regulation changes. Regulators may force us to combine and share towers, and we may lose our assets. So, leasing is less risky. The second criterion is asset life-cycle. I prefer NEs, such as BTSs, MSCs, or BSCs, to be light assets, as they have relatively short lifecycles from two to three years due to the rapid emergence of new technologies. Assets with long life-cycles are our preferred heavy assets, such as fiber optic networks, which have a life-cycle of 10 to 15 years. Disruptive innovation Disruptive innovation is our DNA. It is our way to change old paradigms in the telecommunications industry, says Danny Among the many forms of disruptive innovation which have become important stepping stones in the course of Barkie history, the Rp1 (0.0001USD) per character SMS service launched in 2008 unarguably tops the list, and represents a global first: We know users on average send 50 characters, and our traditional on-net charge for an SMS is Rp50, which makes the Rp1 per character charge viable. As we expected, SMS revenue dropped by 30% to 40% in the first 2 to 3 months as people shortened their texts. Between 4 and 5 months, it became break-even as the volume picked up. And since then, SMS revenues have continued to increase their contribution to total company revenue. 13

5 We believe that data is the way forward. This June, we officially launched our high speed Internet access service. Employing EVDO technology, the service has been dubbed AHA, to represent its simplicity and fun. Primarily aimed at heavy texters, such as students and teenagers, the service was so successful that it spawned a new text lingo in Indonesia: People now text Y for why, WRU for where are you. Our customers really have fun using this service. The success of the per character SMS model is the fruit of ingenuity and strong technical support from vendors. The number of characters of a sent text is actually on the protocol, but nobody was capturing it. We saw the opportunity, and began talks with our SMS providers, which include Huawei, and our IN provider, which is exclusively Huawei. Huawei understood our requirements, set up a research project, and then we commercialized the service in just five months. In 2009 alone, Bakrie launched 56 new products and services, over one per week. To support the tempo of new services and product diversification, Danny has prioritized an integrated charging system. Charging is a challenge, but we love challenge at Bakrie. We aim to develop a service-based approach for integrated charging and billing to support our disruptive innovation strategy. AHA data Despite its positioning as a budget operator, Bakrie knows that it cannot ignore various advances in the industry and always considers new product and service opportunities, including data. This June, Bakrie officially launched its high speed Internet access service. Employing EVDO technology, the service has been dubbed AHA, to represent its simplicity and fun. A challenging network design It was a challenging EVDO network design. We have three carriers, two for voice and a third for data. We decided to implement EVDO Rev. A from Huawei nationwide. Common practice is to overlay 1X and DO Rev. A using one vendor s equipment. Due to our legacy network in Jakarta (which is not Huawei), we have to overlay around 1500 of legacy 1X BTS with Huawei EVDO Rev. A BTS. So, we started in central Jakarta first, overlaying DO Rev. A on the legacy 1X network, which was supplied by two different vendors. Fortunately, the DO is provided by Huawei, and we worked together to overcome the technical challenges. We first tackled the common antenna issue, as our BTS A and BTS B are from different vendors. While this would normally require two antenna systems, we wanted a common antenna, which was very difficult to maintain. Huawei s subsequent R&D project resulted in the right solution. Our second challenge was to ensure the interoperability between our legacy equipment and Huawei equipment. Again, with a helping hand from Huawei, that went well, says Danny. Data is the way forward From a business point of view, Bakrie has already stated that data is the way forward. We re closely following the changing face of Indonesia s mobile communications, characterized by high speed access, social networking, and low cost smart phones. The latest statistics show that Indonesia is Facebook s third-largest country by monthly active users, and is likely to overtake Britain and move into second place in the near future. We are also Twitter s fourth largest source of traffic, behind America, Japan, and Brazil. The market for broadband definitely exists. Our competitors, especially operators with GSM technology, 3G, and HSPA, have begun the evolution to LTE, and we plan to do that as well. We ll consider timing regarding the path to LTE, whether it is Rev. B and then LTE, or Rev. B, DO Advanced, and then LTE. Now, we still have a long way to go. We need to firm up the details, and then clarify our implementation path. We re aiming to begin trials early next year. Editor: Gao Xianrui sally@huawei.com 14