National roaming helps Axis build prepay BlackBerry
Erik Aas: Axis’s relationship with
Saudi Telecom means
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
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
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 existing operators.
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 stake.
"So now there are two industrial owners, which is great for
me — they understand what the industry’s
all about," says Aas.
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 processes."
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 challenger?
"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 of months."
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 makes sense."
There are relatively few national roaming deals in Asia
— "a few in Malaysia and India, but they are mainly
regional", says Aas.
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 Aas.
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 licences.
"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 growth.
"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 cover."
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
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 exactly $1."
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 economy."
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
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.