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Indosat Ooredo to invest big in data push

The nation’s second-largest telecommunications operator, Indosat Ooredoo, owned by Qatar’s Ooredo Group, is allocating a large share of its revenue for expansion as it eyes a big leap in income from data in the next three years

Dylan Amirio and Esther Samboh (The Jakarta Post)
Jakarta
Thu, June 2, 2016

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Indosat Ooredo to invest big in data push

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he nation’s second-largest telecommunications operator, Indosat Ooredoo, owned by Qatar’s Ooredo Group, is allocating a large share of its revenue for expansion as it eyes a big leap in income from data in the next three years.

Indosat has an annual budget of Rp 7 trillion (US$511 million) to Rp 8 trillion for capital expenditure, representing around 30 percent of its revenue. That is the highest revenue proportion that parent company Ooredo allows its subsidiary to invest, compared with around 14 percent in other countries where it operates, said Waleed Mohamed Al-Sayed, deputy CEO for the Ooredoo Group.

“We’re spending more on Indonesia because of the size of the country. If things get better then hopefully we can spend more on increasing our network’s capacity and speed. These are the streams that we want to improve in, focusing on strengthening our data services,” said Al-Sayed, who is also Indosat Ooredo’s president commissioner.

The capital expenditure will be mostly spent on further expanding the coverage of Indosat’s 4G network, which currently covers 27 cities, and also increasing the rollout of its fiber optic service.

Indonesian telcos are riding a data consumption wave as the number of internet users in the country is expected to triple to 280 million by 2030, from 93.4 million in 2015. Internet penetration reached almost 40 percent last year from only 4 percent a decade ago.

Other telcos such as XL Axiata have begun to gradually decrease space for voice networks on broadcast spectrums to make way for 4G networks.

Indosat Ooredoo’s data revenue is expected to exceed 50 percent this year, from 46 percent of 2015’s revenue of Rp 26.76 trillion, president director Alexander Rusli said.

“It will reach 90 percent in no time, maybe in the next three to four years,” Al-Sayed added.

Indosat Ooredo, which was acquired by Ooredoo Group and rebranded from “Indosat” in November last year, saw a positive financial performance in the first quarter of this year, after suffering losses in the past few years over foreign exchange (forex) losses despite growth in revenues backed by a data boost.

The company booked Rp 217.2 billion net profit in the January-March period of this year, a significant reverse from Rp 455.6 billion losses in the same period last year as revenue grew 11.8 percent to Rp 6.8 trillion.

A 52.5 percent surge in data traffic to 60,814 terabytes in the first quarter year-on-year (yoy) explained the business growth, as well as a 54.7 percent drop in costs to Rp 477.3 billion. The company also made Rp 330 billion in forex gains in the first three months of this year, compared with Rp 717.6 billion forex loss in the same period last year.

Going forward, Indosat Ooredoo will also focus on cost efficiency measures to keep up its positive financial performance seen in the first quarter of 2016, with a partnership in the pipeline with XL Axiata on tower infrastructure sharing.

By doing so, it could potentially reduce Indosat Ooredoo’s usual cost allocation for tower renting, which currently takes up almost 80 percent of the company’s costs.

“Together we will build a business plan [with XL], but it’s still too early to talk about this yet. However, any reduction of that 80 percent is considered significant,” Waleed said.

Shares in Indosat Ooredoo, which has Rp 35.7 trillion market capitalization, traded at Rp 6,550 apiece on Wednesday. The stocks have risen 19 percent so far this year, outperforming the broader benchmark Jakarta Composite Index’s (JCI) 5 percent gain.

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