Fixed Mobile Convergence (FMC) Implementation Strategy in PT Telkom Indonesia

I have just finished Disruptive Strategy Course and got the certificate from Harvard Business School. I write a paper with the title "Fixed Mobile Convergence (FMC) Implementation Strategy in PT Telkom Indonesia", which is one of the requirements to earn certificate. Herewith, I publish the content of that paper.

Company Description 

PT Telkom Indonesia (Persero) Tbk (Telkom) is an Indonesian telecommunications company headquartered in Jakarta. This company operates in the telecommunications services sector, including fixed telephone, cellular, internet and data services. Telkom Indonesia is the largest telecommunications company in Indonesia, and is also one of the largest telecommunications companies in Southeast Asia.

Telkom is a state-owned information and communications technology enterprise and telecommunications network in Indonesia. The Government of Indonesia is the majority shareholder with 52.09 percent shares while the remaining 47.91 percent shares belong to public shareholders. Telkom’s shares are traded on the Indonesian Stock Exchange (IDX) where it is listed as “TLKM” and on the New York Stock Exchange (NYSE), which lists it as “TLK”.

Telkom categorizes its portfolio into 3 Digital Business Domains:

1. Digital Connectivity: Fiber to the x (FTTx), 5G, Software Defined Networking (SDN)/ Network Function Virtualization (NFV)/ Satellite
2. Digital Platform: Data Center, Cloud, Internet of Things (IoT), Big Data/ Artificial Intelligence (AI), Cybersecurity
3. Digital Services: Enterprise, Consumer

There are two revenue stream which contribute more than 90% of Telkom revenue: IndiHome (fixed broadband)  dan Telkomsel (wireless broadband).

IndiHome is a home internet service provided by Telkom Indonesia. This service offers high-speed internet access up to 300 Mbps, interactive television services (UseeTV), and landline telephone. IndiHome was launched in 2012 as a triple play service, namely a service that combines three services in one package. This service has become one of the most popular home internet services in Indonesia, with the number of subscribers reaching 15.26 million as of December 31, 2022.

IndiHome continues to be the country’s market leader for fixed broadband by securing 75.2% of the market. The number of IndiHome subscribers at the end of 2022 reached 9.2 million customers, an increase of 611.000 new customers compared to the previous year. As a result, the Consumer segment’s revenue increased significantly by 5.7% to Rp26.354 trillion, a substantial contribution to the increase of the consolidated revenue. The Consumer segment’s revenue performance reached 96.9% of the set target

Competition for fixed wireless broadband in Indonesia is also getting tighter. This is due to the rapid growth of the fixed broadband industry in Indonesia. In 2023, the number of fixed broadband subscribers in Indonesia will reach 15 million, with annual growth of 10%.

Competition for fixed wireless broadband in Indonesia is dominated by several large operators, namely IndiHome (Telkom), MyRepublic, Biznet, and First Media. These four operators have quite a large market share, with IndiHome as the market leader with a market share of 60%.

Telkomsel is a subsidiary of Telkom Indonesia which operates in the cellular services sector. Telkomsel is the largest cellular telecommunications company in Indonesia, with a market share of 50%.

As of June 2023, Telkomsel was able to maintain its position as the leading cellular operator in Indonesia with 156.8 million customers, of which 120.9 million are mobile data users. 

Cellular competition in Indonesia is very tight. This is due to the rapid growth of the cellular telecommunication industry in Indonesia. By 2023, the number of cellular subscribers in Indonesia will reach 185 million, with an annual growth of 5%.

Cellular competition in Indonesia is dominated by the four major operators, namely Telkomsel, XL Axiata, Indosat Ooredoo and Tri Indonesia. These four operators have a sizeable market share, with Telkomsel as the market leader with a market share of 50%.

The future market prospects are very challenging for Mobile Broadband and Fixed Broadband. There are 7 aspects that we will look at namely.

1. Mobile revenue growth is under considerable pressure.
2. The price of data/GB continues to decline.
3. Payload has grown significantly, but data/GB prices have decreased.
4. Fixed broadband growth is starting to slow down, 
5. The number of potential customers who can afford IndiHome services is decreasing.
6. More and more devices are connected to WIFI @Home
7. Integrated fixed-mobile telcos have better growth prospects than “mobile or fixed-only” operators.

Characterization of The Situation and  Theories 

Telkom has launched FMC (Fixed Mobile Convergence) on July 21, 2023. FMC is a product that combines fixed broadband (IndiHome) and mobile (Telkomsel) services in one package.

FMC is a technology that combines fixed-line and mobile networks into a single, seamless service. This means that users can make and receive calls, send and receive text messages, and use data services on either network, without having to switch between them.

The purpose of conducting FMC initiative is to provide a better customer experience, to have more efficient Capex, as well as to enjoy robust data integration. Both IndiHome and Telkomsel as the market leader in Fixed Broadband and mobile business are now in the process of finding the best business model that can bring the maximum value to the group. 

Telkom launched a new product under the brand "Telkomsel One" as commitment in continuing the implementation of FMC initiative that will further encourage equal distribution of digital connectivity for the community with a wide selection of customer-centric packages. 

Telkomsel One also offers broadband services with a variety of added values, reliable capabilities in one network, the convenience and advantages of Telkomsel Prepaid, Halo, Orbit and IndiHome services in one solution, one application and one bill, which further enhances customer experience for more seamless broadband connectivity access, to support the various needs and activities of digital lifestyle.

Telkom expect FMC to provide various services, technology, and pricing based on customers’ needs. We are convinced that the FMC strategy would increase Telkom Group's value proposition and distinguish our unique competitive advantage in the market.

Aligning with Innovation and Disruption, Telkom as incumbents and market leader used sustaining innovation to incremental improvements and advancements made within existing technologies, products, and services to maintain or enhance a company's market position. These innovations are essential to stay competitive, improve network performance, and meet evolving customer demands. 

Telkom give the solution for The Job to be Done “Help me stay connected to internet in the home and mobile with high-speed access and better experience”. With FMC, Telkom will ensure that customers are always connected, whether they are at home, in the office, or on the go. They can seamlessly switch between fixed-line broadband and mobile networks without interruption, ensuring a consistent and reliable connection.

FMC often leads to cost savings for customers. With integrated services, customers can take advantage of bundled plans, which may include discounts or reduced rates for combining fixed-line and mobile services into a single package. This can result in lower monthly bills compared to subscribing to these services separately.

FMC simplifies telecommunications for customers. They have a single point of contact for billing, customer support, and service management, making it easier to track usage, pay bills, and manage their services.

FMC enhances network coverage. When customers are at home or in a location with poor mobile network coverage, they can use their fixed-line broadband connection to make calls or use data services, improving call quality and data speed.

In term of managing the strategy development process, now Telkom is the efficiency phase which the mainstream business must be allowed to thrive through a deliberate strategy while new waves of disruptive growth are discovered through an emergent strategy.

In an effort to transform into a digital telecommunication company, Telkom implements a customer-oriented company business and operational strategy. This transformation will make the Telkom organization more lean and agile in adapting to the rapid changes in the telecommunication industry. The new organization is also expected to increase efficiency and effectiveness in creating a quality customer experience.

Beside managing the core business in broadband access, Telkom is committed to moving beyond expectations by providing cutting edge products and services to our customers and consistently developing various integrated innovative services that can accelerate sustainable and inclusive digital access.

Telkom committed to enhance product differentiation and digital capabilities to go beyond connectivity while expanding its current digital ecosystem, thus continue to focus on customer needs and long-term growth supported by network quality.

Here are the examples of creating features in Telkom in term of emergent strategy:

1. Build up positioning of MAXstream in the video streaming industry with around 6 million monthly active users and footprint in mobile gaming industry under Dunia Games brand with more than 17 million monthly active users.
2. Augmented the functionalities of by.U, a fully digital prepaid product offering integrated services based on fully customizable digital applications with positive growth of customer to reach 4.8 million customers. 
3. Developing Telkomsel Orbit, a home wireless internet service as an effort to leverage strong network capacity. 
4. Rehaul MyTelkomsel app & Telkomsel.com to improve their value proposition & to better support other corporate wide programs with around 33 million monthly active users of MyTelkomsel app.

Recommendations

Based on the company and analyzing the situation facing Telkom Indonesia, here are the some recommendations for a future course of action that is connected back to Disruptive Strategy theories. 

1. In term of sustaining innovation, Telkom should strive to continuously improve its FMC services, this could involve conducting customer surveys, testing new features, or making changes to existing services based on feedback. And also to mprove or maintain profit margins by exploiting the existing processes and cost structure and by making better use of current competitive advantages.
2. In term of the job to be done, Telkom should deliver the best quality of services with excellent customer experience, service quality and customer experience management are the main keys to gaining customer loyalty. Telkom should strive to comprehensively understand customer needs and behaviour. Furthermore, Telkom also should manage customer data in a systematic and sustainable manner by maximizing the implementation of data analytics at every stage of the customer journey.
3. In term of managing the strategy development process, Telkom should accelerate digitization and lean organization development for impactful operation, Telkom should continue to accelerate improvements to their operating and business models to become leaner by utilizing digital technology and artificial intelligence. Telkom also should ensure the readiness of various supporting talents, especially digital talent so that the company’s growth milestones can take place at the right momentum.