Imagine trying to expand a mobile phone network across 17,000 islands spanning an area 5,100 km wide. This is the obstacle Indonesia and its telecommunications companies must overcome to expand Internet access to the country’s more than 270 million people. Despite investing hundreds of millions of dollars to expand access, the country still has a digital divide, particularly for those living in remote areas.
Twenty-two percent of Indonesians still do not have access to the Internet, Indonesian Communications Minister Budi Arie Setiadi said in October. According to the World Bank, most unattached Indonesians live in non-metropolitan urban areas.
But things are changing fast. Vikram Sinha, CEO of Indosat Ooredoo Hutchinson, the country’s second largest telecommunications company, estimates that 21 million Indonesians will go online between now and 2027. For comparison, this is a figure close to the population of the US state of Florida or Sri Lanka. – and represent approximately 8% of the entire Indonesian population.
“We need to make sure we take advantage of this opportunity,” Sinha said.
IOH spent about $829 million in capital expenditures last year, much of which went toward developing its cellular business and expanding network coverage in rural and remote areas. The company is also expanding its wireless coverage in Nusantara, the new capital still under construction on the island of Borneo.
Sinha hopes that being the service provider for rural Indonesians will create opportunities for sticky income. Providing access to data in turn provides connection to other digital services; this means more time spent on phones and, consequently, higher data consumption, and therefore revenue per user.
Indonesians spend about five hours a day on their phones, Sinha says, but they still lag behind other Southeast Asian countries such as Thailand and the Philippines.
Sinha does not want IOH to remain just a telecom company. The company is making a long-term bid to become a technology company, generating $15 million last year from selling data on user habits to banks and credit rating firms. The company is also expanding into services such as artificial intelligence and cloud computing.
In 2021, Qatari telecommunications company Ooredoo and Hong Kong’s CK Hutchinson Holdings agreed to merge their Indonesian operations to form Indosat Ooredoo Hutchinson, creating the country’s second-largest telecommunications provider. IOH has around 100 million subscribers, behind Telkomsel’s 156 million.
The newly formed entity has chosen Sinha as CEO of the newly formed entity, following his tenure as COO of Indonesian telecom firm Ooredoo. He spent time at Bharti Airtel in India and Airtel Seychelles in Seychelles before moving to Ooredoo.
Credit rating agencies were not confident about the success of the merger. “Fitch put us on a negative watch list based on historical data from other mergers,” Sinha recalls. The ratings agency suggested that Ooredoo may reduce its support for the merged entity. But “within a year they put us in the stable,” Sinha says.
Fitch has since revised IOH’s outlook positively, listing improvements in margins and average revenue per user.
IOH’s full-year revenue increased 10% in 2023 to reach $3.3 billion. Last year, data traffic also increased by 14.8% and the company increased its 4G transceiver stations by 30.7%.
Fortune will host the first Fortune Innovation Forum in Hong Kong from March 27-28. Experts, investors and leaders of the world’s largest companies will meet to discuss “New strategies for growth”, that is, how companies can best seize opportunities in a rapidly evolving world.