National roaming helps Axis build prepay BlackBerry
Erik Aas: Axis's relationship with Saudi Telecom
it can serve the 800,000 Indonesian expatriates in Saudi
Arabia and the 300,000 annual Hajj pilgrims to
The last time Global Telecoms Business
interviewed Norwegian-born Erik Aas was at Telenor's booth
at Mobile World Congress in 2007, and he was CEO of the
company's Bangladesh operation, Grameenphone.
He was working there with Nobel Peace prizewinner Muhammad
Yunus - who founded the operator - on innovative ways to
develop internet access, along with mobile banking and
healthcare, in one of the world's poorest countries.
But after more than a decade at Telenor and its
subsidiaries, including operations in Thailand and Malaysia
before Bangladesh, he's become a challenger, running what is
effectively a start-up in Indonesia, a market with a number of
He's no longer with Telenor. Axis was originally a
subsidiary of Malaysia's Maxis, but in September 2007 Saudi
Telecom took a majority, though Maxis retained a substantial
"So now there are two industrial owners, which is great for
me - they understand what the industry's all about," says
While negotiations with Saudi Telecom were continuing, Aas
was being lined up as CEO, and the company announced his move
into the top role just weeks after the new shareholding was
"It was a pretty good move for me, coming out of Bangladesh
and also coming out of a leading operator and becoming a
challenger," he says. When you're the biggest, "you're used to
everything working properly and you can get it done in a day -
but suddenly you're in a start-up".
There was a team in place "but they had postponed the
launch", he recalls. "The big change was Saudi Telecom - and
Saudi Telecom also bought a share in Maxis." So today STC owns
51% of Axis and - in a deal valued at the time at $3 billion -
25% of Maxis.
What sort of shareholders are STC and Maxis? "They are
active," says Aas. "They are industrial shareholders, so we
have a lot to talk about. And both of them are leading
operators in their home countries. Both are the incumbents,
But they realise that a start-up in Indonesia has to do
things differently from an incumbent. "You have to be a bit
It means "I'm getting a lot of professional support - more
or less everything I ask for. On the other hand we have to
establish a lean and mean operation, fast moving, quick
thinking, trying to avoid too many levels of hierarchy and
So Axis is "trying to take the best out of the shareholders
but define what is best for a start-up".
The term "lean and mean" is commonly used in the telecoms
industry - often by long-established companies wishing to trim
their costs - so what does this mean for a start-up and a
"We have 600 employees and five million customers now," he
says. "We outsource call centres to professionals who know
better than us. We use outsourced services to a great degree.
We have to focus on certain big things that make impact -
instead of many smaller activities."
The network providers are Swedish and Chinese - Ericsson and
Huawei. And the IT comes from India, from Tech Mahindra,
covering both operational and administrative IT.
"We don't want to hire so many people, but we also want
speed. You can't build up a large IT organisation in a couple
Network maintenance is outsourced to vendors, "so Huawei and
Ericsson are managers of the network". Electricity supply is
the big challenge in Indonesia: "If I remember correctly, 80%
of our trouble tickets are related to power. If you go to
Sumatra and those islands, the average power outage for a base
station is six hours. They do power sharing, and cut the
electricity off region by region."
As a result Axis is taking part in one of the GSM
Association's green initiatives: "We are trying out some
hydrogen fuel cells and solar power. It's a little early to do
it in big volumes - it's difficult to scale up to 1,000 or
2,000 base stations, but we are working on it."
The main challenge for the company, as a newcomer, is
coverage. "We have signed a national roaming deal with one of
our competitors, XL."
This is not required by the regulator: "It's a business to
business deal we have done with them. We have a business deal
that makes sense for both parties. We have found something that
There are relatively few national roaming deals in Asia - "a
few in Malaysia and India, but they are mainly regional", says
There are examples in Europe, and sometimes regulators have
imposed national roaming on the incumbent "such as my
shareholder Saudi Telecom, which has to provide national
roaming in Saudi Arabia".
In Indonesia there was no pressure from the regulator,
"though in the early days the regulator encouraged operators to
share towers, on the passive side". Axis leases more than 50%
of its towers - some from specialist tower companies, but most
from other operators. "Another example of outsourcing," says
Indonesia is a crowded market, with five GSM operators -
Telkomsel, Indosat and Hutchison's 3 as well as Axis and XL -
and all are also 3G operators. The 3G service puts Indonesia
ahead of many surrounding countries: "The first 3G licence in
Indonesia was given in 2003, and now we all deliver 3G."
Pakistan, India and Thailand, for example, still haven't issued
"Many things in Indonesia are relatively early." But this is
now widely known, says Axis, who says it is a sort of
"shadowland", not understood by many outsiders. "Indonesia is
the fourth biggest nation in the world in terms of population,
with 244 million people, yet it doesn't seem to be on the radar
screen in the rest of the world."
It has a relatively high GDP of $2,000 per person, and that
grew by 6% in 2008: "They managed the crisis. This year we
expect 3% growth and next year 4%. Share prices this year are
up 70%. All in all they came through this - though they had a
very hard time in the last recession, at the end of the 1990s.
They learned a lot."
For an operator "that's promising", says Aas. "The real
penetration is roughly 90 million", though there are around 150
million SIM cards issued - so there is still room for
"The tariffs have gone down to the bare minimum - and that
means when you get more penetration the industry will grow. We
estimate the revenue for the industry will grow from $7 billion
in 2008 to roughly $12 billion in 2013, and we intend to take a
share of that additional growth."
Axis estimates that its current market share is only 3.5%,
some 18 months after a launch in April 2008. But coverage is
only 100 million of the population so far. The new national
roaming agreement will take coverage to 170 million people. "In
terms of subscribers I'm happy - it's a big country to
Axis will continue building network in the roaming area,
"because it makes sense to build", though he might focus on the
larger cities. And the company needs a distribution network to
"Our investment plan has not really changed much, but
national roaming means we can focus our investments more. We
want to work city by city and make it perfect. It improves the
risk in the total investment."
National coverage "is not just about reaching customers in
the new areas" but also affects the story for customers in the
existing area. "Suddenly I can go to customers and say that we
have you covered. So we get access to higher-end customers, to
business customers and travellers. A totally different segment.
It's building the business case not only in the roaming area
but in the existing area. It's a good opportunity for us."
The Indonesian market is "extremely messy", smiles Aas. As
well as the five GSM operators, there are five mainly regional
XL is the third in the GSM market - and "they have been very
business oriented" in agreeing to a national roaming deal. Aas
hopes that Axis will reach fourth place in the GSM market
Almost all customers are prepaid - though Axis is in the
process of launching postpay. "I've always liked prepaid.
There's no reason to say a prepaid customer is less good. It's
a much easier relationship - you don't need to send them
letters and tell them how much to pay."
Minimum reload of prepay is 1,000 rupiah - equivalent to
just $0.10. "The most common reload is 10,000 rupiah, which is
BlackBerry on prepay
Prepay includes data with 3G cards. "Indonesia is the
biggest BlackBerry market in the world." There's a
well-established middle class "and Facebook, Twitter and such
services are extremely popular in Malaysia and Indonesia."
BlackBerry growth is strong in the student market: "People who
pay their bills themselves."
Axis reached 70,000 BlackBerry customers on prepay four
months after launch, and Aas claims a 7% market share. "The
whole market is roughly 400,000," he says.
"It has been a good success for us." People can subscribe
for as little as a day and see if they like it. "Incumbents
would not offer a day," but the service is successful for Axis
- which also offers one-day tariffs for mobile broadband. In
this economy that's perfectly fine. People are conscious of how
much they spend in a day. It's a completely different
One of the biggest revenue sources for Axis is the huge
number of expatriate Indonesians, many of them in Saudi Arabia
and Malaysia - something which may help to explain the interest
in companies from those countries in investing in Axis.
Indonesia is the world's largest Muslim country - 90% are
Muslim - and about 800,000 of its citizens live in Saudi
Arabia, with another 300,000 heading there every year for the
Hajj pilgrimage to the holy city of Mecca - the biggest
contingent among an annual flow of two million people.
"We are trying to connect these 800,000 Indonesians living
in Saudi Arabia and to offer special services to the 300,000
travellers to Mecca. One of the most important things you do
when you go to Mecca is stay in touch with your family." And,
with STC as a shareholder, there is a natural synergy.
There are also many Indonesians in Malaysia - and Axis has
started a system to allow travellers and expatriates to top up
family members' phone accounts back home. It's not yet a
complete money transfer system, but Axis and its shareholders
are working on it. "It's still early days."
But it is still less than three years since Axis launched its
services into one of the world's biggest countries: there's
still a lot to do. Aas is confident that there's a lot of
opportunity - and he's clearly enjoying it.