Axiata executes multi-pronged digital strategy

• Focusing on five verticals with organic and non-organic approach
• CEO Jamaludin Ibrahim feels telco is one year off the ideal pace

ONE of the media’s favourite themes in the rising digitisation of life is about how the nimble, hungry Internet companies are going to eat away at the revenues of the lumbering, comfortable telecommunications companies, especially the mobile players.
 
Apparently nothing exemplifies this theme better than the over-the-top (OTT) trend where consumers are bypassing the telcos and using apps for their communications and various other daily needs.
 
This accelerating speed of digitisation, ironically, best reflected in the sharp rise of smartphone usage, has tilted the competitive landscape to benefit the Internet companies, both established giants and startups, to compete against the telcos and beat them in the race to deliver customer value.
 
After all, if even the group chief executive officer of one of the largest telcos, measured by total customers, can acknowledge that “telcos are supposed to be boring and hardly creative,” who is to argue with that?
 
But one suspects that Axiata Group Bhd chief executive officer Jamaludin Ibrahim (pic) is happy to play along until the time the group’s various digital initiatives start to bear fruit. He expects that to be in 2016, declaring, “You will start seeing me talk about them then.”
 
But until Axiata has executed on its digital strategy, Jamaludin has been reluctant to say anything, bar this exclusive interview with Digital News Asia (DNA), as he feels “mobile telcos don’t have credibility yet” when talking about their digital and Internet related strategies.
 
READ ALSO: Margins are misleading indicators, says Axiata CEO
 
Yet, in the process of building this credibility, Jamaludin is confident enough to declare, “In the digital space, we are doing so much more compared with most telcos in the world.”
 
And much of this has an almost R&D (research and development) feel to it, Jamaludin reflects, as Axiata experiments with various digital initiatives to learn what will work and what won’t with its 230 million subscribers.
 
Three-pronged strategy
 
It has focused on three broad strategies. The first is to make direct or indirect investments into digital companies.
 
Which is why, it has quietly launched or announced a number of them since its digital strategy started taking shape towards the end of 2011, including making two acquisitions, and launching two Internet commerce joint ventures – one in Indonesia in 2013 and one in Malaysia just last month.
 
And while from the onset, the group decided not to go down the path of making big investments in Internet companies, such as think SingTel has done, it has been spending on its digital initiatives.
 
For instance, Jamaludin shares, for the first time, that it is investing US$40 million (RM137 million) in each of its Indonesian and Malaysian digital commerce initiatives.
 
Both those initiatives are 50:50 ventures with South Korea’s SK Telecom’s e-commerce subsidiary, SK Planet, which is matching the Axiata investments, via its subsidiaries PT XL Axiata Tbk and Celcom Axiata respectively.
 
At least for Malaysia, Jamaludin concedes that an organic strategy was the least preferred route, “It was the backup plan,” he says and hints that Axiata could not agree on pricing with an established e-commerce company already in the marketplace space.
 
Within this strategy, Axiata is focusing on five verticals: Mobile payments; mobile advertisements; digital entertainment; digital commerce (commerce via mobile and desktops); and machine-to-machine and the Internet of Things (IoT).
 
“Which vertical we adopt in the various countries depends totally on the readiness of that market and the capacity of the people on the ground to plan and execute the verticals,” says Jamaludin.
 
Aside from these direct investments, Axiata has also taken the funding route by recently launching a US$30-million (RM100-million) venture fund in its home market of Malaysia. At least one more fund is expected to be launched next year.
 
The third part of the strategy is to use its current 230 million customer base as the hook to partner with Internet companies which may want to reach out to them. “This is really about OTT enablement,” Jamaludin stresses.
 
The platform Axiata has built in Sri Lanka for Dialog contains a billing system, provides authentication, analytics and location-based services. It can also provide the OTT owner with specific app coverage if it is willing to pay for it.
 
The plan is to scale to the other markets it has a mobile network in (in Pakistan, it operates a fibre backbone).
 
In many ways, this plan to build a platform that easily allows any app to work across its different countries is exactly what Telenor Digital is doing right now for its markets and subscriber base of close to 170 million.
 
As the OTT enablement platform starts to roll out to more of its seven markets next year and its venture fund starts to make investments as its various organic initiatives gear up, it is no surprise that Jamaludin expects to have more to share on its digital strategy in 2016.
 
And while there was some industry speculation that Axiata was not doing enough to embrace digital, Jamaludin is happy to dispel that notion – although he feels that Axiata’s execution of its digital strategy has not been at the pace he would have liked.
 
“We are one year behind the time frame I would have liked,” is his frank assessment.
 
That may be so, but at least it has not committed the worst sin in his eyes, which is “watching others [as they execute].”
 
Related Stories:
 
Axiata starts its ‘digital company’ reinvention
 
Margins are misleading indicators, says Axiata CEO
 
Axiata gets into startup game via US$30mil fund with Mavcap
 
Celcom forms JV with SK Telecom’s e-commerce subsidiary
 
 
For more technology news and the latest updates, follow @dnewsasia on Twitter or Like us on Facebook.