Challenges in technology – and capital – intensive industries

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TOWARD the end of 2006, Indonesia’s fast-growing cellular telecommunications sector introduced third generation (3G) technology. The new technology, which enables video calls, was launched by three operators, including PT Excelcomindo Pratama Tbk.

“The 3G service is a new experience for users of XL telecommunications services, for business as well as recreational and educational purposes,” said XL president director Hasnul Suhaimi.

For the company, which commemorated its 10th anniversary in 2006, it was a gift to users in general and its clients in particular. Hasnul said the launch of the new service demonstrated XL’s commitment to give the best service to its clients as the first provider of 3G services, with the widest scope and options of services, as well as the speediest data access supported by 3.5 G technology, the HSDPA (High Speed Downlink Packet Access).

XL is not the only operator to offer 3G services, but what makes it different from the others is that it offers special facilities. Users do not have to re-register. They are also provided with the facility to access the contents of a single media, the XL 3D web portal. In all, XL cooperates with 25 content providers, music labels and TV stations, both local and international. As if to illustrate its optimism about the bright future of this new telecommunication technology, XL has invested US$50-100 million in 3G services.

With such a substantial investment, XL has indeed taken a bold step. There is a reason behind this move — Hasnul has an ambition to make the company he directs the most reliable provider of information and communications technology in Indonesia, both for individual and business users.

“XL will remain committed to the four strategic pillars it has laid,” explained the man who was born in Bukittinggi, West Sumatra, on April 23, 1957 and elected the new XL president director during its annual general meeting at the Ritz-Carlton Hotel in Jakarta on Sept. 1, 2006.

The four XL strategic pillars Hasnul referred to include expansion of coverage, capacities and development of products; expansion of the corporate market; use of new technologies; and optimization of XL synergy with the Telekom Malaysia Group.

XL, which began operations in Indonesia on Oct. 8, 1996, is no longer a national company, since in 2005 it became a subsidiary of Telekom Malaysia, one of the biggest telecommunications companies in Asia. The Malaysian company is now a major share holder of XL, controlling 59.7 percent of the company.

Today XL business includes Consumer Solutions, a provider of dual-band cellular networking of prepaid Jempol and Bebas cards and post-paid Xplor cards, and Business Solutions, a provider of leased-lined corporate solution services, broad band and IP (Internet Protocol).

However, the task is by no means light for Hasnul to bring XL forward as the selected provider of information and communications technology services in Indonesia given that XL is still below the two other operators in terms of income.

But it is lucky that this graduate of the Electrical Engineering Department of the Bandung Institute of Technology and holder of an MBA from the University of Hawaii in Manoa, the U.S., is not a new face in the cellular telecommunications business. His career in telecommunication technology includes more than 23 years with Indosat, with his last position being president director of the company before he quit and moved to XL as its number one executive.

Hasnul humbly said he did not know exactly why he was chosen to be president director of XL, but he felt that he had given all his energy and resources to Indosat. “Meanwhile, there are still many things that can be explored and worked out at XL,” the father of two said.

When asked to compare the two giant companies, Hasnul said that both were good firms that could be called world-class companies. “It is the cultures that make them different. The leadership style at Indosat is more toward consensus, whereas decisions are made quicker at XL. Each style has its own weaknesses and advantages, but both are fun,” said the former director of development of the Indonesia Marketing Association (IMA).

It was the same fun that he felt when he plunged into and penetrated the 3G services. But since 3G technology is still in its infancy, XL — along with the other telecommunication technology providers, of course — has to constantly educate the public about it. For example, a series of promotional programs have been held at shopping centers and on campuses in several cities. In addition, XL has installed XL3G stands at nine XL centers which serve to electronically provide varied information about 3G and XL3G and even free XL3G services.

The work is not at all easy, just as it was not in advanced countries (Japan, U.S. and European countries) when they were marketing 3G services. Today, some 120,000 XL users use 3G, a success considering the amount of time set for the campaigns. But there is still a long way to go when compared against the nine million (cellular phone) XL users.

But Hasnul believes that it is just a matter of time before 3G proves to be popular, just as in the early days of cellular phones, which are now very common. Nationwide, the number of cellular phones in 2005 was registered at 47 million, or some 20 percent of Indonesia’s total population. And estimates by ABN Amro, IDC, Pyramid Research, Business Monitoring International Ltd., IMF and internal analyses indicate that the figure will increase to 63 million in 2006, 77 million in 2007, 89 million in 2008 and 122 million in 2011.

With wider use, growth is declining in percentage, 46 percent in 2005 and only 34 percent in 2006. And next, from 2007 to 2011, growth is estimated at 22 percent, 19 percent, 13 percent, 9 percent and 8 percent respectively. “We don’t have lofty ambitions. We only target growth above the average industries,” said Hasnul.

His expectations are not without basis because XL is not lagging behind in technological terms. Also in terms of capital and investment, which are crucial for such a capital-intensive company, XL is strong as it is a subsidiary of Telekom Malaysia Berhard (TM), a group of prominent regional information and communications companies, which has recorded operational returns of more than 13 billion Malaysian ringgit. Today, with investments and operations in 12 countries in Asia and worldwide, TM is focusing on sustainable growth in local and international markets.

For the past two years, XL has seen encouraging growth. During the first half of 2006, XL showed fast growth, recording gross income of Rp 1.7 trillion, an increase of more than 50 percent from the first half of 2005’s Rp 703 billion. Meanwhile, the net gain of XL for the first half of this year was Rp 358 billion, an astounding growth compared to the first half of 2005, when XL recorded a loss of Rp 53 billion. XL also booked 41 percent growth of pre-interest, depreciation and income, from Rp 854 billion in 2005 to Rp 1.2 trillion in 2006.

XL’s main challenge, Hasnul said, is the ever-keener competition among operators, old and new alike. In addition, the needs of the people for telecommunications solutions and services have become more varied and dynamic.

Apart from that, fast developments in telecommunications technologies is also a challenge for XL to always learn and implement any new technology in providing the best telecommunications solutions. “I believe XL will meet this challenge because we have a very reliable team, strong synergy with the Telekom Malaysia Group and adequate technological capability,” said Hasnul, who was awarded the prestigious Satyalencana Wira Karya Medal (2003) and Satyalencana Pembangunan Medal (2004) by the government. (Burhan Abe)

The Jakarta Post, January 10, 2007

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