Having set his mind on what he wanted to achieve from the onset of his professional career, Alexander Rusli went on to do some things that he says were not in the plan.
But it has been an interesting journey just the same for the former consultant and regulator who now finds himself, at only 42 years old, as the president and chief executive officer of Indosat, one of Indonesia’s leading telecommunication companies.
“I wanted to use government as the stepping stone to get connections, and that was a very clear goal,” Mr Rusli said of his experiences from 2001-10. “It was supposed to be for five years but I couldn’t leave in the middle of the cabinet term and had to wait for the cabinet’s tenure to end, which ended up being nine years.”
Although he had the option to leave his government position earlier, he was fearful that it would fuel rumours of a falling-out with ministers and others in charge, which would jeopardise his future.
“I quit after that cabinet and after a few years you say, that’s enough, because at that point you have built credibility and connections, and if you don’t leave, then when will you monetise those connections?”
The holder of a PhD in Information Systems from Curtin University of Technology in Australia, Mr Rusli has also lectured at various universities, managed a private equity firm, and served as a principal consultant for PricewaterhouseCoopers in Indonesia.
From 2001-07, he advised the Minister of Communications and Information Technology, formulating policy and regulations in the telecom, media and postal industries. From 2007-10 he advised the Minister of State-Owned Enterprises.
In 2010 he joined the board of Indosat and in November last year he became the CEO of a company that has been at the eye of the storm many times.
Indosat, the former government-owned long-distance operator similar to CAT Telecom in Thailand, was corporatised and listed on the Jakarta Stock Exchange in 1994. It now has three lines of business: landline/mobile, international long distance and satellite.
“The IDD (international direct dialling) model is now dead, dead, dead,” said Mr Rusli, adding that the telephony had a bright future while satellite generates stable income because adding capacity is not easy.
But operating in a market that has one the lowest average revenue per unit (ARPU) figures in Asia is not easy, and fear of another price war breaking out gives him sleepless nights he admits.
With nearly 60 million subscribers in a market of about 240 million people, Indosat is the country’s second largest operator, with nearly half the subscriber base of its former state-owned enterprise, PT Telekomunikasi Indonesia (Telkom Indonesia), and ahead of XL Axiata.
Telkom Indonesia got a head start as it was granted the backbone that helped it to switch to mobile telephony easily.
Indosat had its strength in satellite and IDD while its fixed-line network was limited to populated areas around Jakarta and only on Java island.
The main battlefront these days, though, is mobile data.
“We now have a new equilibrium and another price war on data will be painful,” he admits, adding that data usage by 2015 would be the highest revenue generating segment of the mobile telephone business in Indonesia.
The earlier price war over the past few years has brought down the ARPU of the mobile operators to about $3 a month with EBITDA (earnings before interest, tax, depreciation and amortisation) margins falling to around 40% from more than 70% previously.
The churn rate in the industry is in the range of 20%, even though Indonesia does not have number portability.
“We in Generation X were loyal to numbers but Gen Y is loyal to applications as the applications can function perfectly well once the numbers are switched,” says Mr Rusli.
“We don’t have number portability and guess what — when I was the regulator I was pushing for it, but now as an operator I don’t want it anymore.”
In any case, Indosat is preparing for growth, with a plan to lower its debt-to-equity ratio in the months ahead to give it more flexibility.
The company wants to raise capital to reduce its debt-to-equity to manageable levels in the near future of 1.4 or 1.5 times from two times currently, said Mr Rusli.
“We have not fixed our balance sheet and given the volatility in the market, it’s not the right time to fix the balance sheet yet, so we are trying to find ways to do it,” he admitted.
“We will raise capital, do a rights issue and all that.”
Indosat’s major shareholder is Ooredoo, formerly called Qatar Telecom, with 65%, while the Indonesian government owns 14% and the rest is held by other shareholders, with a small free float of 2% of the share base.
The shareholders, he said, were satisfied with the plan as long as it’s carried out at the right time and at the right price.
But while the company awaits the right timing, its investment needs remain high as it starts to expand its operations to more islands because of the stiff price competition.
With a mobile penetration rate now exceeding 100%, Indonesia remains a voice- and SMS-focused market. Operators were expecting an uptick in traffic during the elections next year, but they received a rude awakening about changing user behavior during the Eid festival just recently.
“The usage of SMS has gone down and it is on a downward trend,” said Mr Rusli. “We have just gone though Eid and usually that is the time of the year when SMS usage is the highest but this year it was not the case.”
The new trend is clear: everyone is shifting to using data services, such as WhatsApp or BBM or others, to send holiday greetings or daily messages.
Even the election campaign is just a short-term “national party” that might give operators a boost, and in any case the bulk of Indonesian users still don’t have smartphones.
So where is the future of the company with as many as 10 mobile licences issued?
“In five years we want this to be a leading wireless company and wireless may not mean mobile at that point,” said Mr Rusli. “It may be a combination of many things — cellular, WiFi and other things.”
WiFi is becoming a strong part Indosat’s business solely because of lack of capacity. WiFi complementing the cellular business is something that every company needs.
“The use of data is never enough and capacity will never be enough and you always have to be complemented by fixed line, and people are hungry like crazy for data,” he said.
Fortunately for Indosat, it has landlines across Jakarta, which are not copper but fibre-optic, capable of meeting the rising demand for high-speed data and ever increasing traffic. Fibre-optic is seen as the knight in the shining armour in the future, although some people believe that this is already a dead industry given the rise of mobile.
However, Indonesia’s mobile market faces spectrum allocation problems because there are too many operators, said Mr Rusli. Consolidation in the industry is to be expected but not yet as some of the players, backed by “someone’s lunch money”, as he put it, appear to have cash to burn.
This is one of the reasons why consolidation is not taking place as quickly as it should, with only XL Axiata having made a bid for Axis Telekom Indonesia which is valued at about $1 billion, according to media reports.
Indosat itself has through major changes in its shareholding from the government to Temasek Holdings of Singapore through various companies, and now Ooredoo.
Mr Rusli said the sale by Temasek was one of the best things for the Singapore-based fund because it sold to Ooredoo right before the price war started.
“The valuation today would not be as high as at that time. They sold a year before the price war started. They made good money exiting.”
As for the satellite business, the company has two satellites, one of which is nearing the end of its life cycle and will be replaced by one on order.
The satellite business, he says, is not highly profitable compared with mobile business, although it is far more stable as there continues to by big demand given the geography of the widespread archipelago.
“At this point we don’t have capacity to rent out as we are full flat-out. We are trying to rationalise the transponder capacity as new technology uses compression technology so we would be able to rent out more capacity,” he said, adding that satellite accounted for less than 10% of Indosat’s revenues.
After just nine months at the helm, Mr Rusli feels he has been receiving good cooperation from the company’s more than 3,000 staff and another 5,000 subcontractors despite his young age, especially in a part of the world where respect is usually dependent on the mileage one has run on the age clock.
He attributes this to his decision to join the national communication regulator after being a consultant at PricewaterhouseCoopers (PwC). The respect he gained as a regulator and opting to handle Telkom Indonesia has served him well.
A member of the Indosat board for nearly three years prior to being asked to move into the executive suite, he says it’s too early to list any achievements.
“I was offered this position a few times and I was hesitant to say ‘Yes’ because of my previous work, and after the nth time I was offered it, I started to think lot more and harder and deeper, and it was a different challenge to undertake,” he said.
“Apart from that I was sitting on the board and after making all that noise they must have said that I talk too much, now is the time to show the action,” he says with a hearty laugh.
But he has no regrets, adding: “Every time I make a decision it there is no turning back, so it’s a matter of getting the job done and enjoying things along the way.”
And he is undertaking a lot of changes at the company as he settles into his unfixed term as the CEO.
Given his experience handling the operations of Telkom Indonesia when he served as a regulator, did he not think at some point of joining the country’s biggest operator? Not really, he replies, because he could see how positions could shift with a change in ministers, and that was not a position he would want to be if he was on the operations side.
Any plans to move on in the near future?
“At no cost can I leave this position before five years as I want to be successful and it would not look good either,” he says. “And yes, I don’t want to get into politics for sure. This was something I realised while working as a regulator. I don’t like the endless nights.
“I decided [politics] was not for me unless politics changes, and in hundreds of years it has not changed.”