'MOCN' the secret to telecom merger success
Real Conversations podcast | S5 E18 | September 21, 2023
Sanjay Vaghasia was appointed Chief Integration Officer at Indosat Ooredoo Hutchison in January 2022. He is an experienced telecoms professional with over 28+ years of strong international exposure and assignments ranging geographically from APAC, Australia, Czech Republic, Kuwait, India, Maldives, Bangladesh, Myanmar, and now Indonesia. He is a Techno-Commercial Senior Executive with solid business and technical understanding coupled with strong transformational expertise.
A successful merger in the telecom world requires MOCN: Multi-Operator Core Networks. And for Sanjay Vaghasia, the Chief Integration Officer at Indosat Ooredoo Hutchison in Indonesia, the local custom of "Gotong Royong" played a critical role in adding new subscribers while cutting costs by 30%.
Below is a transcript of this podcast. Some parts have been edited for clarity.
Michael Hainsworth: Multi-Operator Core Networks (MOCN). It's a transformational technology for communications service providers who have two or more networks that must work together to leverage the spectrum and the infrastructure that supports it. MOCN is just one linchpin to the successful merger at Indosat Ooredoo Hutchison in Indonesia. Sanjay Vaghasia, the Chief Integration Officer at IOH, had a big job and he couldn't have done it without MOCN - and the Indonesian cultural mindset of "Gotong Royong."
Sanjay Vaghasia: One partner came in with two spectrum holdings, and the other operator had three spectrum holdings. When we combined those spectrums, we went from two to three. Number two, the physical number of sites. Combined we had about 60,000 sites across Indonesia, and that's a huge number. Now, when we combine the spectrums, we combine the sites together. Obviously, there were some overlaps. We had to drop about 17,000 sites and keep about 43-45 thousand sites.
Now, what does this mean in terms of MOCN with the incremental spectrum? With the combined optimized positioning of the 43 thousand sites, it not only gives additional capacity to our existing customers, but it also gives us larger coverage to the population of Indonesia. We were starting to cover areas where we were not covered before, and we started providing services to consumers that we could not reach before. So, net/net, was a massive growth of capacity, reach, and accessibility for the consumers into the entire integration.
MH: And as part of that, there was some benefit on a cost basis, too. If you're dropping 17 thousand sites, 30% of the sites, because they're overlapping, that certainly helps the bottom line.
SV: It does. But one thing I have to say upfront is that the whole idea of the merger was not to drive cost optimization. That was, obviously, an outcome as part of the integration. Its main purpose was to collaborate with two large telco operators in Indonesia, coming together, joining forces, and bringing the best services it can to the people of Indonesia. Now, if this results in some savings moving forward at the end of the day, so be it. But ultimately, it was about how we can be relevant post-COVID when capital outlay demand for operators increased significantly. The competition against over-the-top (OTT) [services] is getting tougher and is getting tougher as we speak, and the demand for data is increasing. So, how do mobile operators in today's world continue to support that and be relevant?
MH: So again, back to your point that this is all about optimizing the available spectrum that the combined entities had.
MH: So, what were the results of this project one year later?
SV: One year later? To be honest with you, we started with a plan of 24 months, and somehow, we managed to do that in a year. And I'll come to that on how we did that in a year. So, we did that in a year. We increased our customer base to 100 million within the first year itself. We did not lose any customers, unlike any other mergers that took place around the globe. And the confidence of the consumers increased significantly because they understood that we were not just doing it for the sake of benefiting the shareholders, but we were there as serious partners to enable the digital agenda for not only the country but also for IOH for that matter.
MH: I'm just fascinated by the idea that you went in expecting this to take two years; it only took one year. It sort of reminds me of Star Trek's engineer Scotty always telling Captain Kirk he would take twice as long as he did. You must have walked away looking like a rockstar. Or a chief engineer of a Starship.
SV: When we first started this, and we pitched this to the shareholders, saying... The shareholders believed that this was a 24-month exercise. The partners thought 24 months was way, way too short. We came back and said, "You know what? Let's try doing it in a year." It's never been done. It's not tested. There's no textbook that you can get that says this is how MOCN integration needs to be done. These are the dos and don'ts, and this is what you need to do for you to complete it in half the time.
I think the approach that we took was very, very different. We brought the partners together. We didn't treat them as suppliers, as many operators do with partners. We brought them in. We brought in their subcontractors even though we had no relationship with their subcontractors. We brought them in as well because they were party to ensuring that we could deliver this. And the approach we took was, we said, "You know what? If we were going to benefit from this, everybody else in the system should benefit from it," i.e., instead of a carrot and stick, we said, "You know what? Everyone deserves a reward."
And the turning point was when we said that we're going to put a sizable amount of reward on the table for everyone, and this is not just the employees of the partner and the ecosystem, but it's also the subcontractors and their employees. The amount that we put aside was sizable because it could potentially equate to an annual operating profit (AOP) of a small operator globally. Many skeptics came across it. The shareholders turned around and said, "Has this been done?" We said, "No. 'Can you give us a track record of anybody else who has done this before?'" We said, "No. But what is there to lose?" I mean, what worse can come out of it? Instead of 24 months, we do it in 20 months. We got it four months earlier. But lo and behold, we did it in a year. And now, when we look back, it was a mammoth task that we accomplished with not just IOH but also with partners like Nokia.
MH: It feels like a lot of the success of the deployment of a MOCN came down to a philosophy. I understand there's the Indonesian philosophy of Gotong Royong, and that played a big role in why you managed to accomplish this task in such a short time.
SV: Yes, before I answer that, let me shed some light on what Gotong Royong means. It's engrained in the lives and system of Indonesia. Gotong Royong basically means communal service, communal assistance. Back in the day, in a village, if there is an occasion, whether good or bad, everyone comes out and chips in. Regardless of whether it's money, everyone chips in for the good of the village. So, that's what Gotong Royong means. Basically, it means collaboration.
Hence, in today's modern world, the word Gotong Royong, i.e., collaboration, has been synonymous in terms of the way we operate. And we can embrace that and say, "You know what? This must be a Gotong Royong. This must be a collaboration moving forward because this is not a one-man show. This is not a one-team show kind of thing. Everybody has to come together." And when we brought everybody in, we said, "This is our greater mission. And this is what we're trying to achieve," yes, there were skeptics. Moody's, for that matter, downgraded our ratings when we told them we were going to merge. But two years later, now they've ranked us AA-plus. So, things have changed from south to north. And this whole Gotong Royong concept has basically been the major catalyst to where we are today.
MH: So, I can imagine when you apply that, you must start that integration journey by asking how you get everyone behind a common agenda. How did you do that?
SV: Well, it wasn't easy trying to get everyone to look north. When you put ten people in a room, you'll get a few looking south, east, and west. But I guess when we brought partners like Nokia in, we said, "Okay guys, this is what we're going to do, and this is the greater purpose. It is not about the development and the growth of Indosat, but it is the growth of the country. We are here to develop Indonesia. We are here to assist the digital Indonesia agenda, and we can only do this by embarking and delivering the blueprint of the integration we have put forward."
And everyone around the table said, "Okay, fine. Let's put our best foot forward. And we take one step at a time and see how we get there. And eventually, if we find any event or a time that we are struggling, we have to come together and find solutions to the problems. Because a problem is not somebody else's problem, it's everybody's problem." I think we agreed that we had one mission and one agenda, which was to enable the digital agenda for Indonesia. It was a bigger and greater purpose.
MH: I can imagine that if one were to look at a map, they would understand just how incredible a one-year turnaround is on a project of this size. The geography is complex, with thousands of islands. And on top of that, you've got these extreme weather conditions. How did you stay on track?
SV: We had not just weather, geography, and thousands of islands. The language was also different from one island to the other. So, that was also a challenging part. So, we had to break the islands into many countries by itself. And each of these segments, as we call it, or small countries, we had an independent team with independent goals they needed to deliver. So, it was cascaded down to the point that the country was divided into regions. Regions were divided into sub-regions, sub-regions into smaller and smaller regions to the point that it just became a massive production line that delivered all of this.
We couldn't bring contractors from Java to Sumatra, Sumatra to Nostra because not only were they not willing to operate in those parts of the island, but the language barrier was also another problem. Hence, we had to get the local contractors from those islands who could deliver and had the size of teams that we were demanding. So, that was also challenging. But eventually, we came around and we found a solution to it.
MH: Tell me about the unexpected lesson that came with the approach of breaking a large geographical area into smaller regions. Because then, I can imagine you run the risk of groups being isolated, working just within themselves, not collaborating with their colleagues. How did you overcome that?
SV: Initially, it was a nightmare. We thought that was the winning formula, but it wasn't. It came to a point that we had to put the brakes on and say, "Hang on, guys, we are not moving anywhere." And just quoting the book by Peter Thiel, Zero to One, we were not able to break the zero-to-one cycle. We were going and chasing our own tails.
One of the biggest things that I can take away from this and share openly is to bring every single partner into the single room. And unless you don't bring everyone who is a party to deliver the project that you have into one room, regardless of the color of the badge they're wearing, you will always face this problem. And the minute we brought everyone together, and the lessons that were learned and problems that were overcome by one partner were immediately shared to the other partner and vice versa. That became the biggest lesson learned for us. And that was, basically, the unlocking of the problem for us. And that's when we went from zero to one and one to a hundred.
MH: So then, if that was one of the hardest lessons you had to learn, tell me about your favorite deployment story.
SV: When we celebrated the first thousand sites, I mean, we had 43 thousand sites to do, right? So, we said, "Okay, fine. You know what, guys? Let's celebrate every small step in achievement." And we said, "A thousand is a sizable number." It's a drop in the ocean when you talk about 43,000 sites. But, when we had a thousand sites and we celebrated, the look on everyone's faces in the room clearly said, "You know what? We made it. The sky's the limit. We have done it. Nothing's holding us back now. And the machine is just running from now on, right? The train's loose, and put on your seat belts, we are just going to rock this." That's what happened after that.
MH: So, did you have 47 separate celebrations or was there just one big one at the end?
SV: No, no, no. We had celebrations at every thousand sites. So, I mean, we literally had 43 celebrations. But it was amazing. And we had screens on every floor. We had screens on every elevator that projected every single minute of the day or every single hour of the day in terms of the achievement that the team was bringing to the table. And that was not just the technology team or the partner team, but this is across the organization, every single vertical.
MH: What I'm learning from our conversation here is that while this was a remarkable technical feat and there was a
lot involved, the real success had less to do with the tech and more about the people and the relationships.
SV: Exactly. People are the greatest assets in any organization. The bigger assets are the partners. And this is where I think, as corporations, we fail to understand that the value the partners can bring to the table is enormous. And the day you stop treating your partners as vendors and start treating them as partners, you are on a winning streak. And that was one of the steps that we took in the integration journey that we said, "They are not our vendors. They are partners, i.e., Nokia is our trusted partner. We are on a long-term journey here. We are not on a short-term gain. We are not here for the short haul. The sky's the limit after that."
MH: Tell me about that sky. Technically, now that you've accomplished this, what does this mean for IOH on that technical level for its next phase?
SV: So, the confidence of the consumers in the market has increased significantly. That's number one. Number two, we are now embarking on our greater main purpose, which we started off, which was basically to enable digital Indonesia. The biggest ambition that we have is to be the catalyst and the operator of choice for every Indonesian when it comes to digital. We are increasing digital literacy. We are ensuring that digital is enabled for every Indonesian, regardless of whether they are consumers. We are here to enable Indonesia, and we are here to ensure that we are the vehicle to deliver this for the government of Indonesia. We have a larger and greater purpose.
Even though you have the interest of shareholders in terms of what they require, operationally, you have a slightly different, not a difference of opinion, but a slightly different view, because, obviously, the shareholders are looking at profitability, lower cost of operations, and so on. But, from an operational perspective, we have a larger and greater purpose. If we can deliver what we need from a vision and mission, and the synergy comes in slightly later, that's fine.
But the minute you put synergy before your greater vision and mission, that's when it convolutes. And that's when you end up becoming what the other mergers have ended up being themselves, whereby most of the mergers globally have failed. Because the first thing that I had in mind was to bring the synergy as fast as possible and to the upfront phase, which defeats the purpose of the mission and vision.
MH: So now that you've deployed a multi-operator core network under 4G, how does this set the stage for advancing Indonesia's demand for digital in 5G?
SV: It's just a stepping stone because, with this work on 2G and 4G that we have done, it just becomes much easier for us to enable this on 5G. And everyone knows that 5G capital outlay is significantly higher than the 4G and 3G technologies. We are just ready for that. And like I said, once 5G spectrum is made available, we will enable 5G. The use cases will be made available to the larger masses in Indonesia. There were 60 million small-medium size businesses (SMBs) in rural Indonesia that have not had digital access at all. They're just waiting for access. And the minute you have this given to them, imagine the growth of Indonesia. Indonesia is going to be one of the largest and fastest-growing economies in ASEAN in the next 24 to 36 months. It's just waiting to rocket.
MH: Sounds like a brighter future.
SV: Nothing is going to hold us back.