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Making a turnaround in Telco and Media businessStudentsxCEOs, Institut Teknologi Bandung, Bandung – 9 Desember 2012
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Agenda
From Ratelindo to Bakrie Telecom
Reinvigorating antv and establishing VIVA
Increasing Indonesia global competitiveness
Summary
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Agenda
From Ratelindo to Bakrie Telecom
Reinvigorating antv and establishing VIVA
Increasing Indonesia global competitiveness
Summary
Bakrie Group entered into Telco business with the establishment of Ratelindo, which then transformed into Bakrie Telecom
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0 20 130 192 487
1,548
3,821
7,305
10,607
13,026
14,635
1993 1996 2003 2004 2005 2006 2007 2008 2009 2010 FY11
Commenced FWA services in the JBJB Provinces(1) based on E-
TDMA technology
Launched “Esia” (soft launch) in the JBJB Provinces(1) based on
CDMA technology
Conferred nationwide FWA license Launched new product / service -“Wifone”
Launched Rp.605 billion initial public offering on IDX
Launched new product / service -“Wimode” Awarded “Best CDMA Operator 2007”Issued Rp.650 billion domestic bonds
Raised Rp.3.0 trillion via rights issueArranged USD 150 million in vendor financingInnovation- Rp.1 per character SMS charging
Introduced‘Talk Time’ Campaign Rapid commercial ramp up
• Transformation from a niche player with 130,000 subscribers in 2003 to 14.6 million subscribers as at December 31, 2011
• Awarded full mobility license (principal license) on November 2011
Roll out of ‘Esia’ brand with series of marketing campaigns
2,805
1,672
920
404290267
3,436
Total subscribers in thousands at end of period
Gross revenue in IDR billions at end of periodFigures refer to:
(1) JBJB Provinces comprise of Greater Jakarta, Banten and West Java area. .
Launched SLI Hemat 009 serviceObtained additional frequency for JBJB region
Finalized sale and leaseback transaction for 543 towersWon third place in the "2009 Investment Award
3,447
Issued US$250 million Senior Notes, rated “B” by S&P and Fitch Launched BWA service under the “AHA” brand
Entered into an MOU with respect to RMB 2 billion (approx. US$300 million) export credit facility with ICBC
Launched new Rp.1 per second / 2KB tariff scheme
Issued US$130 million Senior Notes, rated “B” by S&P and Fitch Awarded full mobility license
Ratelindo era Bakrie Telecom era
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Bakrie Telecom has gone through major transformation to get to where it is now
How to transform this?
Ratelindo
Into this?
Bakrie Telecom
Substitute to PT Telkom, sole player in fixed line telephony business
Focus only in Jakarta area where Telkom has difficulty accessing
130K subscribers within 10 years of its inception (1993 – 2003)
#4 largest mobile operator in Indonesia in terms of subscribers, revenue, EBITDA, and EBITDA margin
Coverage area within 82 cities in Indonesia which contribute to more than 50% of Indonesia GDP
14.6Mn subscribers within 8 years of its inception (2003 – 2011)
#1 player with 39.1% brand share in West Java – Jakarta – Banten area, which contributes for ~35% of Indonesia GDP and ~27% of Indonesia total population
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Bakrie Telecom implement a “budget telecom” business model…
Keep it simple
• Primarily voice & SMS services• Focus on prepaid retail consumers• Indirect distribution• “One brand, One plan”• Simple, flat tariff plans
Value for money• Low tariffs• Affordable handsets
Reduce churn• Strong branding• Build affinity with the masses
Address a larger consumer base
• Dual usage among non-roaming GSM subscribers
• Get new wireless users
Keep it simple
• Primarily voice & SMS services• Focus on prepaid retail consumers• Indirect distribution• “One brand, One plan”• Simple, flat tariff plans
Value for money• Low tariffs• Affordable handsets
Reduce churn• Strong branding• Build affinity with the masses
Address a larger consumer base
• Dual usage among non-roaming GSM subscribers
• Get new wireless users
BTEL’s “no frills” business model, combined with its simple tariffs and ultra low costs is a key differentiator vs. competitors
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… while driving growth through “disruptive innovation” strategy
2005 / 2006: Flat plan, rock bottom on-net pricing
2008: SMS pricing innovation
On-net tariff of Rp.50 per minute One simple plan valid for any day any
time Strong customer education
campaign to communicate the concept of Talktime Minutes as against market practice of Prepaid Voucher amount
The Rp.1 / character SMS is a global first innovation
Per character charging is like per second voice call charging - pay per use
2007: Breaking the price barrier of $25 for CDMA handsets
Introduced affordable and high-quality new handset package priced at Rp.199,000
2010: Rp.1 tariff scheme
Offers subscribers to enjoy on net at Rp.1 per second (with a minimum of one minute), SMS at Rp.1 per character and data at Rp.1 per 2kb
Simple, transparent and fair method of calculation for subscribers
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Result: in 2009 become the #1 player in JBJB1, the most important region in Indonesia
Source: Single Source, Roy Morgan.
BTEL is the No.1 player and has a brand share of over 39.1% in the JBJB area, which accounts for ~35% of Indonesia’s GDP and ~27% of total population in the country
“Esia” brand is the most recognized brand among users, is the most recommended brand by existing subscribers to their friends / family, and has the lowest tariff. Its brand share has long overtaken the “Big 3” players by significant margin
Subscriber brand share trends: JBJB
Spontaneous brand awareness among potential users
BTEL offers the cheapest tariffs in JBJB
Most recommended brand for friends and relatives
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
0%
10%
20%
30%
40%
50%
2Q08 2Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q110 3Q10 4Q10 1Q11 2Q11
0102030405060708090
100
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
0102030405060708090
100
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
0%
10%
20%
30%
40%
50%
2Q08 2Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q110 3Q10 4Q10 1Q11 2Q11
Source: Brand Health Tracking, TNS.
Notes:1. Jakarta, Banten, Jawa Barat
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The strong results encourage BTEL to expand its footprint during 2007 – 2011
• Network supported by 4k BTS.
• In line with the implementation of the asset light strategy, 94% of the BTS are collocated
BTS deployment trend
• Esia city coverage: 82 cities• We heavily invested in BWA business with EVDO technology 2010-2011.
Current EVDO services city coverage: 22 cities• We also expand our organization since 2007, from 743 employees in 2006 to
1900 in 2011.
FY05 FY06 FY07 FY08 FY09 FY10 FY11No. of Cities 17 17 34 64 79 82 82 BTS
JBJB 235 408 832 1,577 2,431 2,669 2,751Non JBJB 368 1,195 1,246 1,278 1,265TOTAL 235 408 1,200 2,772 3,677 3,947 4,016
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BTEL expanded high quality Network able to accommodate the 30% CAGR subscribers growth
Aggressive Network expansion but still maintain superior Network quality
BTEL subscribers has grown at 30% CAGR since 2006
2006 9M12
1.547
12.04
Subscribers
CAGR: 30%
* In million
* In IDR bn 9M12
Revenue 2,213
EBITDA 767
2012 Financial highlight
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BTEL launched esia max-d for BWA EVDO service in June 2012
• In 2011, Marketing cost spent for Aha is Rp47bn.
• We integrated our brand, in order to make the Marketing cost more efficient.
• After the relaunch, subscribers and revenues have grown steadily.
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Agenda
From Ratelindo to Bakrie Telecom
Reinvigorating antv and establishing VIVA
Increasing Indonesia global competitiveness
Summary
1999 2003 2005 2007 2008 2009
tvOne, previously known as Lativi and owned by the Latief family, obtained free-to-air (FTA) TV broadcasting license
Lativi focused on general entertainment for CDE segments mainly with acquired programs
Star TV bought a 20% stake in ANTV
ANTV shifted focus to general entertainment for a wider audience target (male, female and children), relying on acquired programs
Anindya Bakrie was appointed as President Director and CEO of VIVA
Rebranded and launched tvOne as a news and sports channel for ABC1 15+ segment
Repositioned ANTV as a family lifestyle channel with in-house programs and sports programs for ABCD segment
ANTV, which had been in operations since 1993 and initially focused on youth programs, re-launched a new logo and focused on women’s and children’s programs
Bakrie family bought Lativi, which had poor network management and debt problems
Lativi was subsequently renamed to tvOne
Restructured so that Star TV owns 7.5% of VIVA and VIVA owns 100% of tvOne and ANTV
Source: Company information
ANTV General entertainment with no distinctive positioning Relied on expensive acquired programs
Lativi General entertainment for CDE segment Mainly acquired programs
Before 2008
ANTV Family lifestyle and sports for ABCD 5+ segment Low cost in-house production
tvOne Focused news and sports channel for ABC1 15+ segment
with independent news content Successfully displaced Metro TV, which had been the #1
news channel for 9 years, within a year
Since 2008
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Bakrie Group focus to grow media business since the company repositioned ANTV and acquired Lativi back in 2007 – 2008
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VIVA group with its subsidiary has undergone major business turnaround to achieve where it is now
Condition Before 2008 Condition After 2008
Non-integrated two FTA terrestrial TV stations: ANTV and Lativi, with no clear differentiation between the two
Highly leveraged company with lower ratings
General entertainment, no focus on segmental targeting content
High operational cost
Two FTA terrestrial TV stations with clear differentiation: distinct segment as target market; plus an on-line news portal
ANTV by focusing on in-house production of local content (e.g. quiz shows, variety shows, and reality shows) which has proved to be more popular amongst Indonesian viewers has gained audience share from 4.9% in 2008 to 8.5% in 2010
TVOne emerged as the leader of news-focused channels by audience share (4.6% in 2008, 6.6% in 2009 and 5.9% in 2010)
Viva.co.id based on ALEXA is the #1 ranked Indonesian news portal based on page-views in September 2011; while based on Effective is the #1 ranked Indonesian news portal and #2 ranked South East Asia news portal
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VIVA’s management team has successfully demonstrated its ability to turn the Company around and achieve improved results
2008 2009 2010
4.3%
5.0% 5.0%
1.9% 2.0%2.5%
tvOne Metro TV
Source: Media Partners Asia.
5.8%5.0%
6.5%
2008 2009 2010
Successfully repositioned ANTV as a family lifestyle channel, resulting in higher audience share
tvOne displaced the long-standing news channel as the number one news-focused channel based on audience share
VIVAnews has successfully established itself as a leader among domestic Internet news portals, despite being present for only 2,5 years
Since the entry of VIVA’s new management team, the Company has achieved successin each of its three main businesses
Audience share of ANTV
Source: Media Partners Asia.
Audience share of tvOne vs Metro
1 2 3
1 VIVAnews 1 Detik
2 Detik 2 VIVAnews
3 Kompas 3 Kompas
4 Kapanlagi 4 Okezone
5 Okezone 5 Kapanlagi
Internet news portals by page views
Internet news portals by popularity
Source: Alexa
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Well thought initiative and robust execution are key success factors of Bakrie Group in managing its media businesses
Content: Segmented program
• Our success is driven by segment-focused program composition• Tailored programming for the special characterized viewer based on its demographic
condition• Segmental targeting for viewership to maximize audience share and program ratings• Content predominantly in-house programs
• Utilize strategic property assets available as production facilities
• Utilize infrastructure of affiliates as an alternative delivery platform for video content as well as data content
Capitalizing on Bakrie Group’s existing resources
Synergies across business units
• Centralized sales and marketing team• Program content sharing: Coordinated programming between ANTV and tvOne
minimizes viewership competition for any given time slot• Broadcast and IT Infrastructure sharing:
• Coordinated procurement activities between ANTV, tvOne and Vivanews provides knowledge sharing on available products and new technology
• Sharing of studio and broadcast equipment reduces rental costs• Sharing of transmission tower enables lower rental and labor costs
Key initiatives Business execution
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ANTV is featuring lifestyle and sports contents...
Family lifestyle channel targeting ABCD 5+ in Indonesia
Distinguishes itself in the Indonesian TV industry by providing a family-focused lifestyle programs, including but not limited to game shows, children’s shows, sports, movies, reality shows and documentaries
ABCD account for 84.5% of Indonesia’s viewing audience
Strong line up of programs that have contributed to increase in audience share from 5.5% in 2008 to 7.1% in 2010 based on ABCD 5+ SES
Strong Line-up of Programs
Audience Share
The “Super Family” game show ranked # 5 for the time slot between 6.30 PM to 7.30 PM, with TV rating of 3.1
Best Quiz & Game Show - Panasonic Gobel award 2011
“Super Deal 2 Milyar” ranked #2 amongst quiz shows for the Jan – Nov 2010 period with TVR and TVS of 2.7 and 10.0, respectively
Source: Company.
10 year contract until 2017 Accounted for 15 of 20 most
popular football matches among male aged 10 to 44
Exclusive rights to Liga Indonesia Best Sport Program – Panasonic
Gobel Award 2010
Source: AGB Nielsen.
In percentage (%)
2008 2009 2010
4.95.5
8.5
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...thus far the repositioning strategy has proven to be successful
Prime time programming has enjoyed improving audience ratings
ANTV ratings and audience share
Focus on in-house production of local content (e.g. quiz shows, variety shows, and reality shows) which has proved to be more popular amongst Indonesian viewers
A stable base of popular content with consistent ratings is the most effective wayto increase our share of advertising revenues
Slot RatingAudience share (%) Rating
Audience share (%) Rating
Audience share (%)
Early morning (5.30am to 8.00am) 0.6 7.2 0.7 8.6 0.7 7.9Morning (8.00am to 12.00pm) 0.6 5.2 0.5 4.2 0.5 4.6Afternoon (12.00pm to 5.30pm) 0.7 6.2 0.8 6.2 1.0 8.3Prime time (5.30pm to 9.30pm) 1.3 4.9 1.4 5.5 2.2 8.5Late night(9.30pm to 1.30am) 0.7 5.3 0.7 5.2 0.7 5.5
2008 2009 2010
Source: Nielsen.
57.4% of TV Population
Source: AGB Nielsen Media Research, 10 cities, TV share 15+ ABC1.
Note: (1) Metro TV has been known as the leading news station in Indonesia since 1999.
Amrozi execution
(Bali bombing terrorist)
Election and
Marriot bombing 2
Gaza Strip and
presidential campaign
Terrorist raid at
Temanggung
KPK vs POLRI
Bloody clashes in Tanjung Priok
Mentawal, Waslor, Merapi Disaster
Death of Dulmatin, Representative Plenary Trial, Tax Broker Case
24-hour channel focused on providing news and sports programs
Known as Lativi until February 2008 Emerged as the leader of news-focused channels by
audience share (4.6% in 2008, 6.6% in 2009 and 5.9% in 2010)
Received stable ratings from the middle to high disposable income segments in Indonesia, targeted primarily to young professionals
Hires and retains the most recognized news anchors in Indonesia
Leading Programs
Audience Share
Japan Tsunami
Royal wedding
Within one year after launching, tvOne has become the leading news channel with profitable operation
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Top Programs in 2011
Program Title Type TV rating Number of episodes Audience share
World Boxing Sports 2 10 13.5Jakarta Lawyers Club News (Talk show) 1.4 19 5.1Atas Nama Rakyat News (Talk show) 1.1 3 4.2Kabar Petang News (hard news) 1.1 149 5.1Damai Indonesiaku Religious programming 1 32 7.2Suara Keadilan News (news feature) 0.9 17 3.2Telusur News (news feature) 0.9 13 4.8Tokoh Information (Documenter) 0.9 21 3.6Voli Sports 0.8 13 5.4Apa Kabar Indonesia Malam News (Talk show) 0.8 149 5.4
Source: Company
Differentiated by delivering news and information in a lively and interactive manner
Tailored programming to appeal to ABC1 15+ demographic
Programs include news and current affairs, talk shows, documentaries and sports
— Pre-dominantly in-house programs
— Includes selectively licensed foreign news content from major international news providers
VIVA’s success is driven by segment-focused program composition
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Focused on providing national and international news, complemented by sports and lifestyle
Integrated with television business− Leverages off tvOne news content− Features live streaming news videos from tvOne
and certain popular programs from ANTV. Content
− Prepared through in-house writers and reporters, as well as third-party sources
− Monthly subscription to news feeds from international providers like Associated Press
− Written in Bahasa and English Targets Indonesian population who are switching from
reading print media− More interested in coverage of local events− 80-90% of content reserved for local news
(Sept 2011)
#1 Ranked Indonesian news portal
#2 ranked South East Asia news portal
(Sept 2011)
#1 Ranked Indonesian news portal based
on pageviews
Our domination in the news segment has been secured in the online segment as well through VIVAnews and transformed to viva.co.id
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Agenda
From Ratelindo to Bakrie Telecom
Reinvigorating antv and establishing VIVA
Increasing Indonesia global competitiveness
Summary
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Challenges of Indonesia: education and healthcare
Some facts on healthcare in Indonesia
• Indonesia only have 3 medical doctors out of every 10K population, compared to Malaysia at 9:10K, Vietnam (12:10K), and Singapore (18:10K)
• Every year, rich Indonesians spend far more than USD 1Bn for their medical expenses overseas (Singapore, Australia, Malaysia, and the US being the main destinations) big potential loss for the domestic healthcare business
Some facts on education in Indonesia
• Government has proposed a spending on education of IDR 332Tn (~USD 35Bn) for 2013, equal to 1.5x of Indonesia FDI
• However, between 2006 – 2010 Indonesia only spends 2.8% of its GDP for education, compared to India at 3.1%, Singapore (3.3%), and Malaysia (4.1%)
• Currently only 17% of Indonesia students that are going into tertiary education
• Indonesia graduates 80K engineers/year, compared to India at 120K and China (350K)
• Indonesia sends 7K students per year to the US, compared to India and China which are more than 100K each
• Indonesia still has a very low PhD compared to China and India, and 80% of Indonesia PhD is in the non-technological field (e.g. religion, philosophy, economy)
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The real issue: culture
• Indonesia has a culture that doesn’t accept failure (i.e. fear to fail culture)
• As long as the view toward failure doesn’t change, Indonesia will not be able to compete globally
• Example: fear to fail culture will make it difficult for Indonesia to drive up its number of entrepreneurs• Out of the 240Mn population, ideally Indonesia should have 4.8Mn entrepreneurs
(2% of population)• Currently Indonesia only have 0.2% entrepreneurs (~480K out of the total
population), very low compared to Singapore at 7%, USA (10%), and Japan (11%)
• Without the required entrepreneurs, it will be difficult for Indonesia to compete globally and contribute more to the world development
• To do this, academia, business community, and government should work together to develop “soft” infrastructure such as having culture change through coaching and mentorship
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The few who dare to take the challenge
KENDRO HENDRA(SETTING WIZARD & DATA MOVERS NOKIA)
SEHAT SUTARDJACEO MARVELL TECHNOLOGY
GROUP LTD
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Are you next?
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Agenda
From Ratelindo to Bakrie Telecom
Reinvigorating antv and establishing VIVA
Increasing Indonesia global competitiveness
Summary
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Summary
• Bakrie Group has long since engaged in the Telco and Media business
• The current achievement of Bakrie Group Telco and Media business is a result of carefully planned and executed turnaround
• To increase its global competitiveness, Indonesia must change its perception toward failure
• “Dare to fail” is a fundamental entrepreneurial mindset there is a lesson in every “failure”, do not forget to apply it in every future business endeavors
• Indonesia will need more entrepreneurs in the future to be able to compete globally and contribute more to the world development