Reports about Indonesian state-owned telco Telkom Group becoming an investor in tech giant gojek continues to circulate. According to an investigation by Tempo, Telkomsel –Telkom Group-backed mobile operator– is set to invest IDR2.2 trillion (US$150 million) and the process is close to being finalised. DailySocial has attempted to reach out to Telkomsel to confirm the news but has not received any response by the time this article was published. Even with the information openness on the Indonesia Stock Exchange (BEI), Telkom is yet to provide commentary regarding the report.
Rumours of the investment have begun circulating since 2018. By the time, the amount of the investment was said to double the reported number today at US$400 million, but this proposal was rejected by then minister of the state-owned enterprises (SOEs). It is said that the current minister gives the investment a green light as he has also been aiming for digital transformation among state-owned enterprises.
This corporate move is worth our attention as there is a great amount of public fund being at stake –Telkomsel is owned by two companies, Telkom (65 per cent) and Singtel Mobile (35 per cent).
High risks
In Indonesia, conglomerate groups that have taken part in gojek’s investment rounds are Astra and Djarum (through Blibli). With its decacorn status, gojek will continue to attract the attention of global investors. But as a startup with an emphasis on growth, the strategy that the company is implementing involves pumping its valuation in order to dominate the market.
In various opportunities, before the pandemic, gojek has revealed plans to execute corporate profit-making strategy through GoFood and GoPay. In 2019, GoFood is said to have made a revenue of US$2 billion, 50 million monthly transactions, and 2.5 growth. Meanwhile, GoPay contributed US$6.3 billion although the growth rate was not mentioned.
But these numbers do not guarantee that investing in gojek will generate profit for its investors. A highly dynamic market may contribute to various factors that can threaten the business.
First, there is still gojek’s greatest competitor –Grab. Both companies hold the decacorn status and are reaching out to the same target audience, with a similar product offering.
gojek also owns many business units that are operating independently: GoPay and GoPlay. In the Indonesian digital payments landscape, according to various reports, GoPay is competing with OVO, Dana, and even ShopeePay. Meanwhile, GoPlay has to compete directly with Netflix, iflix, Viu, and many more.
Second, there is the challenge of the never-ending validation process. gojek may have secured millions of users but they have to continue on making adjustments.
The company even had to shut down all the services under its GoLife business unit and laid off 430 employees. The pandemic has radically affected user behaviour, forcing startup founders to reconsider their business strategy.
When considering these two challenges, Telkom Group’s investment in gojek will likely focus on the opportunity for the two companies to collaborate. gojek will gain benefits from Telkomsel’s 172 million customers –which also includes merchants– and vice versa.
It is not easy to guess on the kind of collaboration that can happen between the two companies, as their core business differs greatly. The difference also lies in their business culture. Some of their business units are also competing directly.
By June, gojek’s valuation is predicted to reach IDR184 trillion (US$12.5 billion). If Telkomsel walks in with a US$150 million investment, there is a great possibility that they will own no more than one per cent. With this percentage, it is certainly unrealistic to expect great returns in the short run, especially since gojek’s IPO plan remains unclear.
Telkom in the Indonesian startup ecosystem
Telkom does not have a very bright history with managing digital businesses; several of its innovation had sunk with the latest being Blanja. As the result of its collaboration with eBay, Blanja failed to compete in the local market.
But the company remains eager to compete. Their latest move included the appointment of Bukalapak Co-Founder Fajrin Rasyid as its new Director of Digital Business.
The state regulation on SOEs (UU No. 19 2003) stated that the goal of an SOE is to contribute to the national economy by making profits. Considering the end goal, it is crucial for corporations to put profits first.
Telkom and Telkomsel have more luck in the startup investment sector through MDI Ventures and TMI. They have made a rather glorious achievement with five exits through M&A and IPO last year, according to DailySocial reports. It was the highest among local VC firms in that time frame.
Telkom has recently launched a US$500 million fund to invest in startups. MDI is managing a total of IDR 11.6 trillion (US$760 million) while Telkomsel’s TMI manages US$40 million.
Let us see how this potential collaboration with gojek is going to end up for Telkom Group.
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The article was written in Bahasa Indonesia by Randi Eka Yonida for DailySocial. English translation and editing by e27.
The post Rethinking Telkom Group’s plan to invest in gojek appeared first on e27.