Proposed Business Strategy in OTT-Dominated Era to Counter the Declining Interconnection Business of PT. Telkom Indonesia
Authors: Lilin Lilin ,   School of Business and Management, Institute Technology Bandung, Indonesia, Rudito Priyantono , Sunitiyoso Yos ,   School of Business and Management, Institute Technology Bandung, Indonesia,   School of Business and Management, Institute Technology Bandung, Indonesia
Published: July 2024

The telecommunication industry in Indonesia has experienced significant changes, largely driven by the rapid growth of Over-the-Top (OTT) services such as WhatsApp, Facebook Messenger, and Telegram. These platforms have drastically impacted consumer behaviour, shifting preferences from traditional voice and SMS services to internet-based communication methods. PT Telkom Indonesia, a dominant player in the Indonesian telecommunications sector, has seen a decline in its interconnection business revenue, primarily due to this technological shift and the competition from OTT services. The primary objective of this research is to assess the current state of PT Telkom Indonesia’s interconnection business, identify the challenges and opportunities presented by the rise of OTT services, and propose effective business strategies to address the decline in traditional interconnection revenues. This study uses a qualitative research method, combining data from primary data which was gathered through in-depth interviews with key internal stakeholders. Secondary data came from industry reports, academic journals, financial statements, and regulatory documents. The research used various analytical tools like SWOT analysis, TOWS matrix, PESTEL analysis, Porter’s Five Forces framework, and VRIO analysis. PT Telkom Indonesia’s interconnection business has experienced a significant revenue decline of approximately 59.87%, dropping from IDR 4.76 trillion in 2018 to IDR 1.91 trillion in 2022. This decline is primarily due to the rise of OTT services, which offer cheaper and more flexible communication options than traditional interconnection services. External analysis using Porter’s Five Forces revealed high competition from the technology transition from Time Division Multiplexing (TDM) to Internet Protocol (IP) based interconnection, along with a strong threat from OTT substitutes. PESTEL analysis highlighted significant regulatory, technological, and social factors affecting the business. Internal analysis with the VRIO framework showed PT Telkom Indonesia’s strong infrastructure and large customer base but also identified a lack of innovation and agility in adapting to rapid market changes. The research concludes that PT Telkom Indonesia needs a comprehensive strategy to address the decline in its interconnection business. One of the initiative strategies for PT. Telkom Indonesia, due to the regulation about transition from Time-Division Multiplexing (TDM) to Internet Protocol (IP) based interconnection, is becoming an IP Hubber. By becoming IP Hubber, PT. Telkom Indonesia can leverage its existing infrastructure and expertise to maintain significant revenue from its interconnection business, especially in transit services, which are a major contributor to its current interconnection revenue. Investing in R&D is crucial to stay competitive, offer bundled services, and form partnerships with OTT providers to diversify revenue. Additionally, Telkom should implement a knowledge transfer program to retain expertise in TDM based interconnection and enhance skills in IP-based interconnection, ensuring Telkom maintains its competitive edge in Indonesia’s telecommunications industry.