VGI Global Media has formed a joint venture with Sinar Mas Group, one of the largest conglomerates in Indonesia, to operate an integrated media platform on the mass transit system, planning to pour some US$30 million (984 million baht) into the new company next year.
The joint venture was signed two weeks ago and sees VGI hold 40% and Sinar Mas Group with 60%, said Kavin Kanjanapas, chairman of the executive board and director of VGI Global Media Plc.
The new company, named VGI Maco Singapore, is registered in Singapore, and has initial capital of $5 million. The company is expected to invest some $20-30 million in the future.
"We will duplicate VGI's business model in Thailand," he said, referring to ad media, payment systems and logistics.
The market in Indonesia is large, said Mr Kavin, with an area of over 40,000 rai in Jakarta owned by Sinar Mas. There are almost 400,000 people in that area, with some 70,000 people in universities. VGI will work as an exclusive partner with Sinar Mas.
Sinar Mas Group has several businesses, including banking, online support, and telecom that fit VGI's model.
"This comparable to our work with AIS and Bangkok Bank," he said.
Sinar Mas is one of the largest conglomerates in Indonesia with several business pillars. It is the No.1 property developer in Indonesia, with a land bank of 62,500 rai. The company also has a major pulp and paper production capacity, and is the No.2 palm oil producer in the world. The other pillars include insurance, power generation (comprising coal mining and chemical trading), as well as multimedia, infrastructure and telecoms, being the first operator in Indonesia to provide 4G LTE network.
The new business model VGI is referring to involves sales, marketing and logistics, which VGI leverages through media ads, e-payment, and logistics (Kerry).
Mr Kavin said logistics is not a new thing, but the mobile app enables more efficient and faster delivery. VGI holds 23% of Kerry, which delivers 1.2 million parcels a day, compared with 800,000 per day five months ago. Next year the company expects to make 2 million deliveries a day.
Before setting up a joint venture with Sinar Mas Group, VGI signed a contact with AVA, a digital media operator in Indonesia that obtained a concession from PT Mass Rapid Transit Jakarta for 20 years to mange advertising space in the first-ever MRT system in Indonesia, which is expected to operate in the second quarter of next year.
With experience in mass rapid transit in Thailand, AVA also wants VGI's Rabbit Card technology to be used in Jakarta. The card and e-payment system will operate both online and offline.
"E-wallet and e-payment everywhere else is the same. They start from mass transit, buses and trains, then expand to convenience stores. Sinar Mas understands the trend and they understand our experience," said Mr Kavin.
He said the company will take some 3-4 months to form a business plan and in April next year, it will start out-of-home advertising followed by the Rabbit card and logistics in parallel.
"Line is the second largest application in Indonesia, and we will talk to Line as it will be good to have Line Pay services offered alongside," he said.
VGI expanded to Malaysia in 2016, starting with operating advertising on MRT stations only, and has since expanded to trains, billboard, out-of-home media, office buildings and airports.
"Malaysia is a good stepping stone for us to go overseas markets," he said.
Media is complete there, and the payment system will be the next step. Having operated for three years in Malaysia, the business has started to break even.
In Thailand, 100% of VGI revenue in last five years was from advertising, but this year the proportion has declined to 90% and the proportion of advertising will reduce to 60% by 2020-2021. The remaining 40% will be generated by new marketing solutions such as smart sampling.
VGI is in discussions with local companies that serve marketing and digital business and expect to make merger and acquisition deals soon.