Indonesian major Global Mediacom is bringing together its distribution businesses into a new company, Sky Vision Networks, which will house Global Mediacom’s pay-TV, broadband and OTT assets, MSky, Play Media and Indovision Anywhere.
The restructuring should complete next month as Global Mediacom opens up a new competitive front around the delivery of high-speed internet and multiscreen services, explains Global Mediacom president and CEO Hary Tanoesoedibjo, in an interview with Media Business Asia.
Once set up, Hary plans to sell 20% of Sky Vision Networks to two unnamed strategic investors, helping pay off debt for MSky while providing funding for Play Media’s broadband rollout.
Broadband and pay-TV represent two major growth engines for Global Mediacom, which also houses a large free-to-air TV business as well as emerging online assets, notably including a fast-growing mobile games arm and a JV to operate WeChat, a popular mobile app.
While both pay-TV and broadband promise sizable long-term growth prospects in Southeast Asia’s largest growth market, broadband is at an earlier stage of development with fewer companies scrambling for customers.
So far, the battle for residential fixed line broadband has largely been waged between Telkom Indonesia, the incumbent telco, and Link Net, which is backed by local conglomerate Lippo Group and CVC Capital Partners, a private equity firm.
Telkom Indonesia, which operates a legacy copper network, has started to roll out a fiber network anchored to a new brand, IndiHome.
Link Net, meanwhile, has emerged as a highly profitable, largely Jakarta-based broadband and digital cable TV company.
Sky Vision has a long way to go in the broadband game but Hary is patient, while two strategic parties from Asia and the US could be interested in a minority stake to help boost fiber rollout plans.
Others such as Biznet, a strong enterprise segment player, and MyRepublic are also waiting in the wings, to play a bigger role in residential broadband.
Meanwhile, Indonesia’s pay-TV sector has been weathering a spell of intense competition from legal and illegal services as well as a more challenging economic environment, compressing growth and Ebitda margins for MSky.
At the same time, some of MSky’s rivals are in trouble or shutting down operations, heralding a potentially more benign climate with more rational pricing policies next year.
MSky’s subscriber growth was frozen over the first half of this year, but industry analysts Media Partners Asia (MPA) have cautiously guided for 60-70,000 net new adds in the second half.
Encouragingly, MSky has started to clamp down on agents signing up temporary subs in return for a commission.
It’s a gradual process that could impact 150,000 subs in total while adding an extra lift to Arpu, running through into next year.
In June, MSky also started piloting a free satellite service in two islands, Kalimantan and Sulawesi, where pay-TV penetration is relatively low, in a bid to further boost its base.
This is tackling rival freesat services head-on but the ultimate aim is to open up a gateway to upgrade these subs into pay-TV.
“It’s a pilot project first,” Hary says. “If it works, we will do more areas.”
The move is part of a broader push to drive MSky sales in smaller urban centers.
“Indonesia has 514 cities and districts,” Hary says. “We are going to push very hard to grow subs with our three brands: Indovision, Top TV and Okevision.”
LINK NET: TO BID OR NOT TO BID
Meanwhile, competition in broadband could also ratchet up, Hary notes, especially if the government issues more licences, although the costs of building out a network limits the players that can take part.
Hary also wants to leverage his content assets to give Sky Vision Networks an edge, offering bundled broadband and on-demand TV services to existing pay-TV subs.
High-speed broadband will also deliver an extra boost to Global Mediacom’s Arpu at a decent margin.
Consolidation could also tone down competition in this capital-intensive sector.
Global Mediacom is one company cited as a potential buyer of Link Net.
“The idea of acquisition is just to have scale, and minimize competition, at the right price of course,” Hary says.
“If the price is right, we are interested. If the price is not reasonable we are not interested, because it is cheaper to roll out our own network.”
At the same time, around half of Play Media's new broadband subscribers are from Link Net, Hary says.
Play Media has commenced a broader rollout of its fiber network in seven main metros this year, seeking to cover an ambitious 600-700,000 homes by year-end.
Hary hopes to convert a third of these to become bundled broadband and IPTV customers, while eyeing expansion into two to three more cities in 2016.
Execution takes time and capital however, especially in broadband, which Hary recognizes and hence the need for possible strategic investment.
At the same time, ongoing rollout of 4G mobile networks in Indonesia could open up an opportunity to develop Global Mediacom’s authenticated OTT offering into standalone mobile services next year too, as well as additional a la carte services for existing pay-TV subs.
“The connection quality for mobile broadband will be much better next year,” Hary explains.
“Once the quality is good, we will also launch OTT a la carte.”