Hasnul Suhaimi, President Director & CEO, XL Axiata: Interview

Hasnul Suhaimi, President Director & CEO, XL Axiata

Interview: Hasnul Suhaimi

What is your outlook for new mobile subscribers growth over the next 18 months, and how are operators competing for this new market?

HASNUL SUHAIMI: There are between 280m and 290m active SIM cards in Indonesia for a population of 250m, so penetration is nearly at 120%. Taking these statistics into consideration, we cannot expect significant growth under the present market’s conditions, at least when it comes to voice and SMS. In the past we got used to double-digit growth, but in 2014 it will be much more contained. Our subscriber base, for instance, grew by 10%, but it did not really affect our revenue and profitability as prices continue to be low and the market does not respond well to increases, even modest ones.

Given the increasingly high level of penetration, which mobile business segments offer the greatest potential for future growth?

SUHAIMI: Data transmission represents the future, but it is increasingly difficult to introduce new products in the domestic market as margins for derivatives are too low – 25% as opposed to 40% in the voice segment. Low revenue represents a challenge for operators and keeps the market stagnant. Prices will need to be revised to create a healthier environment for investments. Beyond data, other segments such as mobile commerce, mobile money, mobile advertising and mobile finance are growing, although they are still in an early stage. About 1% of total domestic trading is done through e-commerce, a figure that is below the regional average of 3-4% or even 10% in exceptional cases like South Korea. However, considering the size of the domestic market, it is an encouraging start. People are just beginning to realise the potential of e-commerce, so we are monitoring this segment closely and forecast that it will be taking off within three to five years. We also foresee consolidation happening soon as seven out of 10 operators compete in data transmission. A number of mergers and acquisitions will be inevitable in the future.

How well is investment in telecoms infrastructure keeping up with demand, and what sort of progress has been made in terms of infrastructure sharing?

SUHAIMI: Sharing existing infrastructure will be essential to streamlining the sector and increasing efficiency. On our side we have already cemented stronger ties with Indosat, especially when it comes to sharing transmission through towers, and I must say the agreement has proved to be successful. Moving forward, it will be crucial to also share the radio access network, something that has proven to be difficult as we need additional frequency to push forward the agreement. Each operator should receive a similar bandwidth, which is not always the case at the moment.

How are operators balancing capital expenditures between improving coverage and quality?

SUHAIMI: Considering Indonesia’s geography and physical characteristics, as well as the need to ensure a good experience for a growing customer base, IT investments in the past concentrated on coverage expansion. Currently though, the priority should be redirected toward creating a better balance between coverage and capacity, which is still inadequate especially for data transmission. I believe the sector as a whole is aware of the structural problem and soon we will be able to split investments equally between expanding coverage and improving the quality of the existing network.

What are the challenges facing the introduction of long-term evolution (LTE) networks in Indonesia?

SUHAIMI: The LTE network was designed to increase the capacity and speed of wireless data networks, and the greatest challenge that we will face is the availability of frequencies in the domestic market. The LTE standard covers a range of many different bands, each of which is designated by a frequency that varies from region to region. Ideally, we would want the 800 MHz, 1800 MHz or 2300 MHz available in Indonesia, as these are used in North America, Europe and Australia.

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Cover of The Report: Indonesia 2014

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