Indonesian telecommunications major Indosat Ooredoo Hutchison is developing a 4G network in the country’s future capital city now under construction on the island of Borneo, its CEO told Nikkei Asia, while also seizing growth opportunities in underserved rural areas.
The government plans to start moving some key functions to Nusantara, the name of the city, from the current capital Jakarta in August 2024. The relocation, with expected construction costs of IDR 466 trillion (USD 30 billion), is the pet project of President Joko Widodo. He sees it as relieving pressure on overcrowded Jakarta and also as a way to push his country into the ranks of developed nations represented by what is envisioned as a “green and smart global city.”
“[In Nusantara] we will be working very closely with the authorities to ensure that there is world-class digital infrastructure,” said Vikram Sinha, president director and CEO of Indosat Ooredoo Hutchison, in a recent interview.
Sinha said his company invested USD 10 million to add 30 to 40 new transmission sites in Nusantara to strengthen and improve its network there on top of an already installed 30 4G sites. In August last year, state-owned operator Telkom Indonesia announced plans to launch a data center to support digital ecosystem development in the new capital.
So far, Indosat Ooredoo Hutchison has launched 5G in eight cities across Indonesia, but in 4G, there are “still a lot of things which can be done. We don’t want to rush towards 5G,” Sinha said. “In rural areas, 4G device penetration is still much higher than for 5G, and so we are focusing on expanding and strengthening our 4G network.”
Sinha also said his company may build facilities in the new capital to promote development of artificial intelligence.
“I want to make sure we work closely with government authorities to collaborate and bring some of these latest technologies into Indonesia,” said Sinha, who hails from India. “Upskilling is also very important to develop human talent. I am personally very excited.”
In 2021, Qatari telecom Ooredoo and Hong Kong conglomerate CK Hutchison Holdings agreed to merge their Indonesian telecom businesses—Indosat Oredoo and Hutchison 3 Indonesia, respectively—to create Indosat Ooredoo Hutchison, the country’s second-largest mobile network operator.
The merged entity has made it easier to invest in network infrastructure and services, especially as the country looks to expand its telecom network further into remote parts of the sprawling archipelago.
Apart from Nusantara, Sinha stressed that he wants to focus on rural Indonesia to help drive future growth, and that the needs of rural Indonesia provide a unique opportunity. “We want to make sure we are able to serve villages and rural communities just as well as the cities,” he said.
“The last six months we invested close to USD 100 million in Lombok and Nusa Tenggara to strengthen our 4G network there,” he said. Lombok lies in West Nusa Tenggara province.
Each year the company pours around USD 800 million into capital expenditures. From this year onward, around 60% of that is being spent in rural Indonesia.
“For sure, Java is very important for us, but we are also focusing on east Indonesia,” such as the Kalimantan region and the provinces of Nusa Tenggara and Papua, he said.
The company hopes to achieve annualized pretax cost savings of USD 300 million to USD 400 million over two to three years on the back of increased efficiencies. “Now, we are more confident that we are heading towards the higher end which is USD 400 million [in synergy effects],” Sinha said.
Of that, 80% is coming from network integration to reduce redundant facilities. “We have realized quite a lot, but still there are opportunities,” he said.
With data demand expected to continue to rise, mobile network operators will need to boost infrastructure investment—a drag on companies given that Indonesia is a vast archipelago with some 17,000 islands.
The Indonesian government is promoting telecom mergers and Sinha said his company is a good example of the policy.
“Our merger itself has become a good case study,” he said, given that the industry is “very capex intensive.” Sectors such as telecommunications require large amounts of investment to produce a service and thus have a high percentage of fixed assets.
Sinha, however, does not think any further merger is needed for his company at this time.
“We will keep our heads down and keep executing our plan,” he said. “We are focused on doing our work. We have not fully completed … this integration yet.”