By Syndicate 3:

NIENDY YUSFITASARI (TEAM LEADER)

ANGGORO INDRO PRADIPTO
DEDY SURYAWAN
WAHDANI HAKIM
PRANA SABDA PRABAWA


TELKOMSEL: TRANSFORMING AN
EMERGING-MARKET STATE ENTERPRISE
The Case Issue
POLITICAL, ECONOMIC, AND SOCIAL BACKGROUND

REGULATION AND DEREGULATION
TELKOMSELS STRATEGY REVIEW
INDONESIAS CELLULAR TELECOMMUNICATIONS MARKET

SPECIAL CHALLENGES OF DOING BUSINESS
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1997-1998 : Indonesia Monetary Crisis
1997 Indonesia was hit by the Asian financial crisis, accompanied by the worst
drought in 50 years as well as falling prices for oil, gas, and other commodity
exports.
The rupiah plummeted from 2,500 to 17,000 to the US dollar, inflation soared, and
capital fled.
The IMF and World Bank, agreeing in 1997 to help reconstruction, imposed
conditions for reform, including removing monopolies and setting up independent
regulatory agencies.
GDP growth was still very low at 0.8 percent in 1999, compared to 7.8 percent in
1996.
In 1999 there were 48 million poor people, or 24 percent of the total population.

POLITICAL, ECONOMIC, AND SOCIAL
BACKGROUND
INDONESIAS CELLULAR
TELECOMMUNICATIONS MARKET

Templates
Telco Industry In General

Nationwide
Service
Telkomsel
Satelindo
Regional Players
Excelcomindo
Komselindo
Metrosel
Mobisel
Telesera
Customer and Market Penetration
INDONESIAS CELLULAR
TELECOMMUNICATIONS MARKET

Telco market
Penetration 1999-2000
Customer Growth
1996-2000
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INDONESIAS CELLULAR
TELECOMMUNICATIONS MARKET

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Investor
Impact of monetary crisis :
1. Instability in politic made foreign investor didnt continue invest in
Indonesia.
2. Telkom & Indosat became among the cheapest telecom stocks in Asia.
3. Depreciation of the rupiah made it hard for operators to pay their US-dollar
denominated debts: Excelcomindo had US$400 million in debt, Satelindo
US$250 million, and Telkomsel US$150 million.


Nationwide Service Cellular
Ownership
1999-2000
Cross Shareholding Among
Telecom Companies (Exhibit 2)
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REGULATION
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Before crisis, foreign company involvement in
fixed-line services was limited and only 3549
%.

After crisis, Full foreign ownership of cellular,
paging, data and other value-added services
through foreign investment were allowed.
(although still limited insome case)

Government set maximum tariff limits
forinstallation fees, connection andactivation
fees, airtime rates, and monthly subscription
fee.


BUSINESS CHALLENGE
Nepotism & Collusion

o Telkomsel had access to install the antenna on top of the Telkoms building all over
Indonesia as to minimize the cost of rent

o Licenses to use the electromagnetic spectrum, without which cell phone companies
could not operate, were awarded not by open auction. Telkomsel benefited from its
government ties when spectrum licenses were awarded.

o Satelindo was given priority when the government initially gave out cellular service
licenses as has been known that PT. Satelindo part owned by PT. Bimantara Citra,
the holding company for ex-President Suharto's second son, Bambang
Trihatmodjo.


BUSINESS CHALLENGE
Corruption

In order to purchased 17% stake in Telkomsel, KPN had to guaranteed Sedtcos
bank loan to also buy 5% stake by granting a put option to the bank

Crime
Customers were giving fake names and addresses, and could not be tracked down
when it came time to collect on bills.


PROBLEM
Market Analysis
o Cellular market was set for rapid & sustained growth
Capabilities & Competitive Assestment
o Customer Service: customer perceived of bad service
o Marketing: lack of product & service innovation
o Mobile data service: preparation for upcoming increasing
demand of mobile data
o Network: poor network quality & perfomance
o Enabling Infrastructure: billing system not ready for service
growth
o Organization: individual performance not reflecting corporates
performance

Ensure investment in network capacity in order to guarantee quality service to
existing clients & to capture new clients and retain its dominant market share
Build a high-performance organization
Innovation in marketing
Invest in network ahead of growth in demand

Build a service culture
Set up data incubator

Build IT & billing system structures

Strategy Recommendations
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THANK YOU!
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